PAYING FOR THE WAR

Dominion, Volume 34, Issue 119, 13 February 1941, Page 7

PAYING FOR THE WAR

Position In Germany HUGE EXPENDITURE ON ARMS

(British official Wireless.) (Received February 12, 7.5 pan.)

RUGBY. February 11.

The question of bow Germany is managing to pay for the war was discussed in an address by Mr. Colin Coote. who recalled Mr. Winston Churchill’s pre-war estimate that, beginning from 1935, Germany spent £800,000,000 annually on armaments. The speaker gave it as his own opinion that the Reich was now spending at the rate of at least £4, 500,000.000 a year. The prevailing impression that Germany had been crushed by reparations in the period 1924-1930 was wrong Germany paid in cash 7,091,000,090 gold marks, but she borrowed on long term and short term all the time she was paying. In fact she borrowed more than two and a half times as much as she paid, and her total borrowings between 1924 and 1930 wete 18,200,000,000 Reichmarks. As to payment in goods, no one outside Germany had maintained that these equalled the difference between what was paid in cash and what was borrowed. Though the reparations did Britain no good, they did Germany no harm, and in any case, as they were 'cancelled before Hitler came into power, lie was not embarrassed by them. Inflationary Period. The other black post-war memory in Germany was inflation, which utterly destroyed everybody who lived on fixed income, wiped out all savings, reduced social services to chaos and brought misery to millions in every class. But in Germany inflation was not a sheer loss. It completely wiped out the public debt and only a tiny fraction was subsequently revalorized. The position of German industry at the end of the inflationary period was, therefore, not wholly unfavourable, for certain heavy charges upon it had been eliminated. Provided it could get working capital, its productive and competitive capacity was unimpaired. It got working capital very largely from abroad. “I do uot think, therefore, that Hitler came into power in a Germany ruined by the rest of the world," Mr. Coote said. “It seems to me that Germany was suffering in 1933, not from any consequences of the Treaty of Versailles, but from the consequences of the world-wide economic depression which hit all countries in 1929. “The immediate cause of that depression was a sudden and general disinclination in creditor countries to continue lending abroad. Every country was thrown back on its own resources. Every country struggled to get out of the mess by spending within its own borders. It was rather difficult for most countries to find objects for spending. But not for Hitler. He spent on armaments. Paying For Armaments. “The first way the Germans were induced to pay for armaments was by keeping them iu ignorance of what armaments cost. In the second place, Hitler found masses of unemployed—five or six millions of them—and a mass of unused productive capacity. He set them to work mostly on armaments or things ancillary to armaments, such as roads, and every sort of device was adopted to claw back in taxes and virtually compulsory loans a great part of the vast new expenditure. 1 ‘The system worked well enough inside Germany, for the basis on which it rested—the issue of paper against goods produced and even against the power to produce them —endured so long as nobody except the Germans were asked to accept the paper and so long as the measures to control prices and private demand were effective. Germany produces a great deal of what she needs, but for rearmament on this scale and for her prospective war she needed pretty large imports also, which had to be paid for in something which foreigners would accept, such as their own money or goods.

“So all Germans had to surrender all their foreign mouey and securities. Next, when the foreigner sold goods to Germany, Germany arranged to pay in goods. The credit of the foreigner was blocked in Germany, and he could only get his money out by ordering German goods. Her financial policy lasted Germany long enough for her to complete war preparations. Perhaps the strain had reached breaking point; perhaps this is why Hitler started his war.”