GERMAN FINANCE.

Hawera Star, Volume XLVIII, 11 January 1929, Page 8

GERMAN FINANCE.

OPERATION OF DAWES PLAN. THE PROBLEM OE TRANSFERS. Some interesting observations QU the German reparations problem were made in a. lecture in London -by Sir Josiab Stamp, who wa® the British representative on the Dawes Committee. The latter, which evolved the Dawes Plan, was appointed in 1924 by the Reparations Commission to report on German currency and finance. Sir Josiah Stamp said some people would perhaps describe the Dawes Plan as a scheme for getting German reparation®, but that was expressly what it was not allowed to be at the time when it was set up. The Dawes Committee was appointed to deal with two- other problems, but found the problem. of German reparations right in the middle of its task. The Treaty of Versailles- and subsequent agreements dealt with the question of what Germany had to pay the Allies for war reparations, and the matter was dealt with without any close examination. When paper money increased in Germany till it broke up the whole fabric of civilisation in that country it was agreed by the chief nations to set up a committee to devise means of stabilising the German currency -and a way of -balancing the German" budget. It was impossible, however, to effect those objects -without dealing with reparations. PRINCIPAL OR INTEREST. If it had been proposed that _ the amount of -reparations should be altered several of the Governments would not at that time have accepted the situation. Therefore all that could be done by the Dawes Plan was to- say in wliat way the- currency could be stabilised and the Budget balanced, but that this could only be done if the amount payable fox - I'eparations dur-in-o- the next four or -five years, during which Germany was recovering, was limited to- specified sums. . As to whether it was principal or interest Germany was paying the -report was silent. The" report merely -said wliat was the utmost German economic life could stand under that particular head. Whether Germany paid the full sum under the treaty was no concern of theirs.

So had was the condition of Germany at the time, -and so dependent were the Allies- on receiving something from Germany to balance their budgets, • that an international loan to Germany quickly became a necessary part of the plan. Schemes were set up- relating to the currency and the hank, and] that side of the plan had -achieved! all] that it held out. Germany’,9 budgetary finance had proved) better even, than the -authors' of the Dawes Plan baa dared to hope.

The Dawes scheme worked absolutely according to plain for the first four years. There was no precedent tor * judging how long it would take Germany to get on heir feet. The, committee decided that the normal year should be reckoned some five years ahead, and said: “Let us reckon what Germany will he able to do when she has recovered.” What had to he bred, was a isoirt of bogey fixture for the course The amount was ultimately fixed at £125,000.000. That was just about the interest on the- amount under the treaty. It looked as if the settlement- on the Dawes Plan would mean that the debt would never he paid off. But it was -said Germany would get more prosperous and there must be some- wav in which that normal figure- should increase proportionately with Germany’s increased prosperity If the capacity of Germany to nroduce became some 20 ner cent greater the figure should "Be 20 per centgreater.

PAYMENTS BALANCED BY LOANS

The obligations of Germany had been faithfully met, iso fair as sums received by the "different Governments were concerned. The curious fact was that not only as fast as. but much faster than, the sums had been due from Germany. The necessity for Germany, actually to transfer in a physical sense her reparation obligations had therefore not arisen. People said wtei did! not know any more than we did four or five years ago what Germany could afford! to transfer; but we did know a great deal more as to what Gen-many couilld afford to pay. The productivity of German taxation had to be guessed' at the time of the Dawes Popart, These things were now no longer guesses, but estimates. We now know how fast German recuperation had taken .pHa;o© and how much Germany could afford to pay in taxation. Germany had. shown a taxable capacity greater than the Dawes Peport had dared to estimate for, it having been necessary to set a figure which Germany was practically certain to be able to reach. The national income of Germany was now about £3,000,000,000 ‘a year. Considering her population that was still a very low standard of life for large numbers of her people. The rale of German recuperation had been extraordinary, though it had not been even. If they expressed national production in figures and took the average 1924-5-6 as a sort of base, Germany was in 1927 and 1928 doing 25 per cent better than that.

GERMAN DEBT AND TAXATION

In spite of this recuperation the absolute standard attained was a low one, judged by pre-war British and American standards of a reasonable standard of life for ■ vast masses of people, and therefore Germany’s taxable capacity was still mot an overwhelmingly great one. But the task of finding" £120,000,000 when her own internal debt had) practically ceased to exist was not a. tremendously difficult one. Britain had a Budget of nearly £800,000,000. This particular item, which in the British Budget would he equal to 2s 6d on the income tax, was hy no means an impossible task for Germany to meet from the point of view of budgetary finance in an ordinary year, and there was no ground for the suggestion that it was an overwhelming burden.

As Germany’s hunger for new capital became satisfied the flow of capital into Germany should! be less and less. There might come a point when people did not want to invest there. Then the necessity for the export of this sum of money, or rather, amount of goods, to other countries would he without any counterpoise, and the problem would arise whether the world wanted to take more goods to the value of £125,000,000 or more from Germany. The Dawes Plan had worked according to plan so far as budgetary anticipations for the Allies or Germany were concerned; it hadi worked entirely according to plan for the stabilisation of the currency; but it had not been put to the full test from the point of view of settling how the debts were finally to* be received in the form of goods. The matter was entering a new stage. The Germans wanted to know what their total liability was.