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Economic Consequences of the Peace

<h4>III. Germany's Capacity to pay</h4> The forms in which Germany can discharge the sum which she has engaged herself to pay are three in number— 1. Immediately transferable wealth in the form of gold, ships, and foreign securities; 2. The value of property in ceded territory, or surrendered under the Armistice; 3. Annual payments spread over a term of years, partly in cash and partly in materials such as coal products, potash, and dyes. There is excluded from the above the actual restitution of property removed from territory occupied by the enemy, as, for example, Russian gold, Belgian and French securities, cattle, machinery, and works of art. In so far as the actual goods taken can be identified and restored, they must clearly be returned to their rightful owners, and cannot be brought into the general reparation pool. This is expressly provided for in Article 238 of the Treaty. <h4>1. Immediately Transferable Wealth</h4> (a) Gold.—After deduction of the gold to be returned to Russia, the official holding of gold as shown in the Reichsbank's return of the 30th November, 1918, amounted to $577,089,500. This was a very much larger amount than had appeared in the Reichsbank's return prior to the war,[117] and was the result of the vigorous campaign carried on in Germany during the war for the surrender to the Reichsbank not only of gold coin but of gold ornaments of every kind. Private hoards doubtless still exist, but, in view of the great efforts already made, it is unlikely that either the German Government or the Allies will be able to unearth them. The return can therefore be taken as probably representing the maximum amount which the German Government are able to extract from their people. In addition to gold there was in the Reichsbank a sum of about $5,000,000 in silver. There must be, however, a further substantial amount in circulation, for the holdings of the Reichsbank were as high as $45,500,000 on the 31st December, 1917, and stood at about $30,000,000 up to the latter part of October, 1918, when the internal run began on currency of every kind.[118] We may, therefore, take a total of (say) $625,000,000 for gold and silver together at the date of the Armistice. These reserves, however, are no longer intact. During the long period which elapsed between the Armistice and the Peace it became necessary for the Allies to facilitate the provisioning of Germany from abroad. The political condition of Germany at that time and the serious menace of Spartacism rendered this step necessary in the interests of the Allies themselves if they desired the continuance in Germany of a stable Government to treat with. The question of how such provisions were to be paid for presented, however, the gravest difficulties. A series of Conferences was held at Trèves, at Spa, at Brussels, and subsequently at Château Villette and Versailles, between representatives of the Allies and of Germany, with the object of finding some method of payment as little injurious as possible to the future prospects of Reparation payments. The German representatives maintained from the outset that the financial exhaustion of their country was for the time being so complete that a temporary loan from the Allies was the only possible expedient. This the Allies could hardly admit at a time when they were preparing demands for the immediate payment by Germany of immeasurably larger sums. But, apart from this, the German claim could not be accepted as strictly accurate so long as their gold was still untapped and their remaining foreign securities unmarketed. In any case, it was out of the question to suppose that in the spring of 1919 public opinion in the Allied countries or in America would have allowed the grant of a substantial loan to Germany. On the other hand, the Allies were naturally reluctant to exhaust on the provisioning of Germany the gold which seemed to afford one of the few obvious and certain sources for Reparation. Much time was expended in the exploration of all possible alternatives; but it was evident at last that, even if German exports and saleable foreign securities had been available to a sufficient value, they could not be liquidated in time, and that the financial exhaustion of Germany was so complete that nothing whatever was immediately available in substantial amounts except the gold in the Reichsbank. Accordingly a sum exceeding $250,000,000 in all out of the Reichsbank gold was transferred by Germany to the Allies (chiefly to the United States, Great Britain, however, also receiving a substantial sum) during the first six months of 1919 in payment for foodstuffs. But this was not all. Although Germany agreed, under the first extension of the Armistice, not to export gold without Allied permission, this permission could not be always withheld. There were liabilities of the Reichsbank accruing in the neighboring neutral countries, which could not be met otherwise than in gold. The failure of the Reichsbank to meet its liabilities would have caused a depreciation of the exchange so injurious to Germany's credit as to react on the future prospects of Reparation. In some cases, therefore, permission to export gold was accorded to the Reichsbank by the Supreme Economic Council of the Allies. The net result of these various measures was to reduce the gold reserve of the Reichsbank by more than half, the figures falling from $575,000,000 to $275,000,000 in September, 1919. It would be possible under the Treaty to take the whole of this latter sum for Reparation purposes. It amounts, however, as it is, to less than 4 per cent of the Reichsbank's Note Issue, and the psychological effect of its total confiscation might be expected (having regard to the very large volume of mark notes held abroad) to destroy the exchange value of the mark almost entirely. A sum of $25,000,000, $50,000,000, or even $100,000,000 might be taken for a special purpose. But we may assume that the Reparation Commission will judge it imprudent, having regard to the reaction on their future prospects of securing payment, to ruin the German currency system altogether, more particularly because the French and Belgian Governments, being holders of a very large volume of mark notes formerly circulating in the occupied or ceded territory, have a great interest in maintaining some exchange value for the mark, quite apart from Reparation prospects. It follows, therefore, that no sum worth speaking of can be expected in the form of gold or silver towards the initial payment of $5,000,000,000 due by 1921. (b) Shipping.—Germany has engaged, as we have seen above, to surrender to the Allies virtually the whole of her merchant shipping. A considerable part of it, indeed, was already in the hands of the Allies prior to the conclusion of Peace, either by detention in their ports or by the provisional transfer of tonnage under the Brussels Agreement in connection with the supply of foodstuffs.[119] Estimating the tonnage of German shipping to be taken over under the Treaty at 4,000,000 gross tons, and the average value per ton at $150 per ton, the total money value involved is $600,000,000.[120] (c) Foreign Securities.—Prior to the census of foreign securities carried out by the German Government in September, 1916,[121] of which the exact results have not been made public, no official return of such investments was ever called for in Germany, and the various unofficial estimates are confessedly based on insufficient data, such as the admission of foreign securities to the German Stock Exchanges, the receipts of the stamp duties, consular reports, etc. The principal German estimates current before the war are given in the appended footnote.[122] This shows a general consensus of opinion among German authorities that their net foreign investments were upwards of $6,250,000,000. I take this figure as the basis of my calculations, although I believe it to be an exaggeration; $5,000,000,000 would probably be a safer figure. Deductions from this aggregate total have to be made under four heads. (i.) Investments in Allied countries and in the United States, which between them constitute a considerable part of the world, have been sequestrated by Public Trustees, Custodians of Enemy Property, and similar officials, and are not available for Reparation except in so far as they show a surplus over various private claims. Under the scheme for dealing with enemy debts outlined in Chapter IV., the first charge on these assets is the private claims of Allied against German nationals. It is unlikely, except in the United States, that there will be any appreciable surplus for any other purpose. (ii.) Germany's most important fields of foreign investment before the war were not, like ours, oversea, but in Russia, Austria-Hungary, Turkey, Roumania, and Bulgaria. A great part of these has now become almost valueless, at any rate for the time being; especially those in Russia and Austria-Hungary. If present market value is to be taken as the test, none of these investments are now saleable above a nominal figure. Unless the Allies are prepared to take over these securities much above their nominal market valuation, and hold them for future realization, there is no substantial source of funds for immediate payment in the form of investments in these countries. (iii.) While Germany was not in a position to realize her foreign investments during the war to the degree that we were, she did so nevertheless in the case of certain countries and to the extent that she was able. Before the United States came into the war, she is believed to have resold a large part of the pick of her investments in American securities, although some current estimates of these sales (a figure of $300,000,000 has been mentioned) are probably exaggerated. But throughout the war and particularly in its later stages, when her exchanges were weak and her credit in the neighboring neutral countries was becoming very low, she was disposing of such securities as Holland, Switzerland, and Scandinavia would buy or would accept as collateral. It is reasonably certain that by June, 1919, her investments in these countries had been reduced to a negligible figure and were far exceeded by her liabilities in them. Germany has also sold certain overseas securities, such as Argentine cedulas, for which a market could be found. (iv.) It is certain that since the Armistice there has been a great flight abroad of the foreign securities still remaining in private hands. This is exceedingly difficult to prevent. German foreign investments are as a rule in the form of bearer securities and are not registered. They are easily smuggled abroad across Germany's extensive land frontiers, and for some months before the conclusion of peace it was certain that their owners would not be allowed to retain them if the Allied Governments could discover any method of getting hold of them. These factors combined to stimulate human ingenuity, and the efforts both of the Allied and of the German Governments to interfere effectively with the outflow are believed to have been largely futile. In face of all these considerations, it will be a miracle if much remains for Reparation. The countries of the Allies and of the United States, the countries of Germany's own allies, and the neutral countries adjacent to Germany exhaust between them almost the whole of the civilized world; and, as we have seen, we cannot expect much to be available for Reparation from investments in any of these quarters. Indeed there remain no countries of importance for investments except those of South America. To convert the significance of these deductions into figures involves much guesswork. I give the reader the best personal estimate I can form after pondering the matter in the light of the available figures and other relevant data. I put the deduction under (i.) at $1,500,000,000, of which $500,000,000 may be ultimately available after meeting private debts, etc. As regards (ii.)—according to a census taken by the Austrian Ministry of Finance on the 31st December, 1912, the nominal value of the Austro-Hungarian securities held by Germans was $986,500,000. Germany's pre-war investments in Russia outside Government securities have been estimated at $475,000,000, which is much lower than would be expected, and in 1906 Sartorius v. Waltershausen estimated her investments in Russian Government securities at $750,000,000. This gives a total of $1,225,000,000, which is to some extent borne out by the figure of $1,000,000,000 given in 1911 by Dr. Ischchanian as a deliberately modest estimate. A Roumanian estimate, published at the time of that country's entry in the war, gave the value of Germany's investments in Roumania at $20,000,000 to $22,000,000, of which $14,000,000 to $16,000,000 were in Government securities. An association for the defense of French interests in Turkey, as reported in the Temps (Sept. 8, 1919), has estimated the total amount of German capital invested in Turkey at about $295,000,000, of which, according to the latest Report of the Council of Foreign Bondholders, $162,500,000 was held by German nationals in the Turkish External Debt. No estimates are available to me of Germany's investments in Bulgaria. Altogether I venture a deduction of $2,500,000,000 in respect of this group of countries as a whole. Resales and the pledging as collateral of securities during the war under (iii.) I put at $500,000,000 to $750,000,000, comprising practically all Germany's holding of Scandinavian, Dutch, and Swiss securities, a part of her South American securities, and a substantial proportion of her North American securities sold prior to the entry of the United States into the war. As to the proper deduction under (iv.) there are naturally no available figures. For months past the European press has been full of sensational stories of the expedients adopted. But if we put the value of securities which have already left Germany or have been safely secreted within Germany itself beyond discovery by the most inquisitorial and powerful methods at $500,000,000, we are not likely to overstate it. These various items lead, therefore, in all to a deduction of a round figure of about $5,000,000,000, and leave us with an amount of $1,250,000,000 theoretically still available.[123] To some readers this figure may seem low, but let them remember that it purports to represent the remnant of saleable securities upon which the German Government might be able to lay hands for public purposes. In my own opinion it is much too high, and considering the problem by a different method of attack I arrive at a lower figure. For leaving out of account sequestered Allied securities and investments in Austria, Russia, etc., what blocks of securities, specified by countries and enterprises, can Germany possibly still have which could amount to as much as $1,250,000,000? I cannot answer the question. She has some Chinese Government securities which have not been sequestered, a few Japanese perhaps, and a more substantial value of first-class South American properties. But there are very few enterprises of this class still in German hands, and even their value is measured by one or two tens of millions, not by fifties or hundreds. He would be a rash man, in my judgment, who joined a syndicate to pay $500,000,000 in cash for the unsequestered remnant of Germany's overseas investments. If the Reparation Commission is to realize even this lower figure, it is probable that they will have to nurse, for some years, the assets which they take over, not attempting their disposal at the present time. We have, therefore, a figure of from $500,000,000 to $1,250,000,000 as the maximum contribution from Germany's foreign securities. Her immediately transferable wealth is composed, then, of— (a) Gold and silver—say $300,000,000. (b) Ships—$600,000,000. (c) Foreign securities—$500,000,000 to $1,250,000,000. Of the gold and silver, it is not, in fact, practicable to take any substantial part without consequences to the German currency system injurious to the interests of the Allies themselves. The contribution from all these sources together which the Reparation Commission can hope to secure by May, 1921, may be put, therefore, at from $1,250,000,000 to $1,750,000,000 as a maximum.[124] <h4>2. Property in ceded Territory or surrendered under the Armistice</h4> As the Treaty has been drafted Germany will not receive important credits available towards meeting reparation in respect of her property in ceded territory. Private property in most of the ceded territory is utilized towards discharging private German debts to Allied nationals, and only the surplus, if any, is available towards Reparation. The value of such property in Poland and the other new States is payable direct to the owners. Government property in Alsace-Lorraine, in territory ceded to Belgium, and in Germany's former colonies transferred to a Mandatory, is to be forfeited without credit given. Buildings, forests, and other State property which belonged to the former Kingdom of Poland are also to be surrendered without credit. There remain, therefore, Government properties, other than the above, surrendered to Poland, Government properties in Schleswig surrendered to Denmark,[125] the value of the Saar coalfields, the value of certain river craft, etc., to be surrendered under the Ports, Waterways, and Railways Chapter, and the value of the German submarine cables transferred under Annex VII. of the Reparation Chapter. Whatever the Treaty may say, the Reparation Commission will not secure any cash payments from Poland. I believe that the Saar coalfields have been valued at from $75,000,000 to $100,000,000. A round figure of $150,000,000 for all the above items, excluding any surplus available in respect of private property, is probably a liberal estimate. Then remains the value of material surrendered under the Armistice. Article 250 provides that a credit shall be assessed by the Reparation Commission for rolling-stock surrendered under the Armistice as well as for certain other specified items, and generally for any material so surrendered for which the Reparation Commission think that credit should be given, "as having non-military value." The rolling-stock (150,000 wagons and 5,000 locomotives) is the only very valuable item. A round figure of $250,000,000, for all the Armistice surrenders, is probably again a liberal estimate. We have, therefore, $400,000,000 to add in respect of this heading to our figure of $1,250,000,000 to $1,750,000,000 under the previous heading. This figure differs from the preceding in that it does not represent cash capable of benefiting the financial situation of the Allies, but is only a book credit between themselves or between them and Germany. The total of $1,650,000,000 to $2,150,000,000 now reached is not, however, available for Reparation. The first charge upon it, under Article 251 of the Treaty, is the cost of the Armies of Occupation both during the Armistice and after the conclusion of Peace. The aggregate of this figure up to May, 1921, cannot be calculated until the rate of withdrawal is known which is to reduce the monthly cost from the figure exceeding $100,000,000, which prevailed during the first part of 1919, to that of $5,000,000, which is to be the normal figure eventually. I estimate, however, that this aggregate may be about $1,000,000,000. This leaves us with from $500,000,000 to $1,000,000,000 still in hand. Out of this, and out of exports of goods, and payments in kind under the Treaty prior to May, 1921 (for which I have not as yet made any allowance), the Allies have held out the hope that they will allow Germany to receive back such sums for the purchase of necessary food and raw materials as the former deem it essential for her to have. It is not possible at the present time to form an accurate judgment either as to the money-value of the goods which Germany will require to purchase from abroad in order to re-establish her economic life, or as to the degree of liberality with which the Allies will exercise their discretion. If her stocks of raw materials and food were to be restored to anything approaching their normal level by May, 1921, Germany would probably require foreign purchasing power of from $500,000,000 to $1,000,000,000 at least, in addition to the value of her current exports. While this is not likely to be permitted, I venture to assert as a matter beyond reasonable dispute that the social and economic condition of Germany cannot possibly permit a surplus of exports over imports during the period prior to May, 1921, and that the value of any payments in kind with which she may be able to furnish the Allies under the Treaty in the form of coal, dyes, timber, or other materials will have to be returned to her to enable her to pay for imports essential to her existence.[126] The Reparation Commission can, therefore, expect no addition from other sources to the sum of from $500,000,000 to $1,000,000,000 with which we have hypothetically credited it after the realization of Germany's immediately transferable wealth, the calculation of the credits due to Germany under the Treaty, and the discharge of the cost of the Armies of Occupation. As Belgium has secured a private agreement with France, the United States, and Great Britain, outside the Treaty, by which she is to receive, towards satisfaction of her claims, the first $500,000,000 available for Reparation, the upshot of the whole matter is that Belgium may possibly get her $500,000,000 by May, 1921, but none of the other Allies are likely to secure by that date any contribution worth speaking of. At any rate, it would be very imprudent for Finance Ministers to lay their plans on any other hypothesis. <h4>3. Annual Payments spread over a Term of Years</h4> It is evident that Germany's pre-war capacity to pay an annual foreign tribute has not been unaffected by the almost total loss of her colonies, her overseas connections, her mercantile marine, and her foreign properties, by the cession of ten per cent of her territory and population, of one-third of her coal and of three-quarters of her iron ore, by two million casualties amongst men in the prime of life, by the starvation of her people for four years, by the burden of a vast war debt, by the depreciation of her currency to less than one-seventh its former value, by the disruption of her allies and their territories, by Revolution at home and Bolshevism on her borders, and by all the unmeasured ruin in strength and hope of four years of all-swallowing war and final defeat. All this, one would have supposed, is evident. Yet most estimates of a great indemnity from Germany depend on the assumption that she is in a position to conduct in the future a vastly greater trade than ever she has had in the past. For the purpose of arriving at a figure it is of no great consequence whether payment takes the form of cash (or rather of foreign exchange) or is partly effected in kind (coal, dyes, timber, etc.), as contemplated by the Treaty. In any event, it is only by the export of specific commodities that Germany can pay, and the method of turning the value of these exports to account for Reparation purposes is, comparatively, a matter of detail. We shall lose ourselves in mere hypothesis unless we return in some degree to first principles, and, whenever we can, to such statistics as there are. It is certain that an annual payment can only be made by Germany over a series of years by diminishing her imports and increasing her exports, thus enlarging the balance in her favor which is available for effecting payments abroad. Germany can pay in the long-run in goods, and in goods only, whether these goods are furnished direct to the Allies, or whether they are sold to neutrals and the neutral credits so arising are then made over to the Allies. The most solid basis for estimating the extent to which this process can be carried is to be found, therefore, in an analysis of her trade returns before the war. Only on the basis of such an analysis, supplemented by some general data as to the aggregate wealth-producing capacity of the country, can a rational guess be made as to the maximum degree to which the exports of Germany could be brought to exceed her imports. In the year 1913 Germany's imports amounted to $2,690,000,000, and her exports to $2,525,000,000, exclusive of transit trade and bullion. That is to say, imports exceeded exports by about $165,000,000. On the average of the five years ending 1913, however, her imports exceeded her exports by a substantially larger amount, namely, $370,000,000. It follows, therefore, that more than the whole of Germany's pre-war balance for new foreign investment was derived from the interest on her existing foreign securities, and from the profits of her shipping, foreign banking, etc. As her foreign properties and her mercantile marine are now to be taken from her, and as her foreign banking and other miscellaneous sources of revenue from abroad have been largely destroyed, it appears that, on the pre-war basis of exports and imports, Germany, so far from having a surplus wherewith to make a foreign payment, would be not nearly self-supporting. Her first task, therefore, must be to effect a readjustment of consumption and production to cover this deficit. Any further economy she can effect in the use of imported commodities, and any further stimulation of exports will then be available for Reparation. Two-thirds of Germany's import and export trade is enumerated under separate headings in the following tables. The considerations applying to the enumerated portions may be assumed to apply more or less to the remaining one-third, which is composed of commodities of minor importance individually. <div class="ctr"> <table border="0" cellpadding="0" cellspacing="0" summary=""> <tr> <td align="center" class="topbottom">German Exports, 1913</td> <td align="center" class="all">Amount: Million Dollars</td> <td align="center" class="topbottom">Percentage of Total Exports</td> </tr> <tr> <td>Iron goods (including tin plates, etc.)</td> <td align="right" valign="bottom" class="leftright">330.65</td> <td align="right" valign="bottom">13.2</td> </tr> <tr> <td>Machinery and parts (including motor-cars)</td> <td align="right" valign="bottom" class="leftright">187.75</td> <td align="right" valign="bottom">7.5</td> </tr> <tr> <td>Coal, coke, and briquettes</td> <td align="right" valign="bottom" class="leftright">176.70</td> <td align="right" valign="bottom">7.0</td> </tr> <tr> <td>Woolen goods (including raw and combed wool and clothing)</td> <td align="right" valign="bottom" class="leftright">147.00</td> <td align="right" valign="bottom">5.9</td> </tr> <tr> <td>Cotton goods (including raw cotton, yarn, and thread)</td> <td align="right" valign="bottom" class="leftright">140.75</td> <td align="right" valign="bottom">5.6</td> </tr> <tr> <td></td> <td align="right" valign="bottom" class="all">982.85</td> <td align="right" valign="bottom" class="topbottom">39.2</td> </tr> <tr> <td>Cereals, etc. (including rye, oats, wheat, hops)</td> <td align="right" valign="bottom" class="leftright">105.90</td> <td align="right" valign="bottom">4.1</td> </tr> <tr> <td>Leather and leather goods</td> <td align="right" valign="bottom" class="leftright">77.35</td> <td align="right" valign="bottom">3.0</td> </tr> <tr> <td>Sugar</td> <td align="right" valign="bottom" class="leftright">66.00</td> <td align="right" valign="bottom">2.6</td> </tr> <tr> <td>Paper, etc.</td> <td align="right" valign="bottom" class="leftright">65.50</td> <td align="right" valign="bottom">2.6</td> </tr> <tr> <td>Furs</td> <td align="right" valign="bottom" class="leftright">58.75</td> <td align="right" valign="bottom">2.2</td> </tr> <tr> <td>Electrical goods (installations, ma- chinery, lamps, cables)</td> <td align="right" valign="bottom" class="leftright">54.40</td> <td align="right" valign="bottom">2.2</td> </tr> <tr> <td>Silk goods</td> <td align="right" valign="bottom" class="leftright">50.50</td> <td align="right" valign="bottom">2.0</td> </tr> <tr> <td>Dyes</td> <td align="right" valign="bottom" class="leftright">48.80</td> <td align="right" valign="bottom">1.9</td> </tr> <tr> <td>Copper goods</td> <td align="right" valign="bottom" class="leftright">32.50</td> <td align="right" valign="bottom">1.3</td> </tr> <tr> <td>Toys</td> <td align="right" valign="bottom" class="leftright">25.75</td> <td align="right" valign="bottom">1.0</td> </tr> <tr> <td>Rubber and rubber goods</td> <td align="right" valign="bottom" class="leftright">21.35</td> <td align="right" valign="bottom">0.9</td> </tr> <tr> <td>Books, maps, and music</td> <td align="right" valign="bottom" class="leftright">18.55</td> <td align="right" valign="bottom">0.8</td> </tr> <tr> <td>Potash</td> <td align="right" valign="bottom" class="leftright">15.90</td> <td align="right" valign="bottom">0.6</td> </tr> <tr> <td>Glass</td> <td align="right" valign="bottom" class="leftright">15.70</td> <td align="right" valign="bottom">0.6</td> </tr> <tr> <td>Potassium chloride</td> <td align="right" valign="bottom" class="leftright">14.55</td> <td align="right" valign="bottom">0.6</td> </tr> <tr> <td>Pianos, organs, and parts</td> <td align="right" valign="bottom" class="leftright">13.85</td> <td align="right" valign="bottom">0.6</td> </tr> <tr> <td>Raw zinc</td> <td align="right" valign="bottom" class="leftright">13.70</td> <td align="right" valign="bottom">0.5</td> </tr> <tr> <td>Porcelain</td> <td align="right" valign="bottom" class="leftright">12.65</td> <td align="right" valign="bottom">0.5</td> </tr> <tr> <td></td> <td align="right" valign="bottom" class="all">711.70</td> <td align="right" valign="bottom" class="topbottom">67.2</td> </tr> <tr> <td>Other goods, unenumerated</td> <td align="right" valign="bottom" class="leftright">829.69</td> <td align="right" valign="bottom">32.8</td> </tr> <tr> <td class="bottom">Total</td> <td align="right" valign="bottom" class="all">2,524.15</td> <td align="right" valign="bottom" class="topbottom">100.0</td> </tr> </table></div> <div class="ctr"> <table border="0" cellpadding="0" cellspacing="0" summary=""> <tr> <td align="center" class="topbottom">German Imports, 1913</td> <td align="center" class="all">Amount: Million Dollars</td> <td align="center" class="topbottom">Percentage of Total Exports</td> </tr> <tr> <td>I. Raw materials:—</td> <td class="leftright"> </td> <td> </td> </tr> <tr> <td>Cotton</td> <td align="right" valign="bottom" class="leftright">151.75</td> <td align="right" valign="bottom">5.6</td> </tr> <tr> <td>Hides and skins</td> <td align="right" valign="bottom" class="leftright">124.30</td> <td align="right" valign="bottom">4.6</td> </tr> <tr> <td>Wool</td> <td align="right" valign="bottom" class="leftright">118.35</td> <td align="right" valign="bottom">4.4</td> </tr> <tr> <td>Copper</td> <td align="right" valign="bottom" class="leftright">83.75</td> <td align="right" valign="bottom">3.1</td> </tr> <tr> <td>Coal</td> <td align="right" valign="bottom" class="leftright">68.30</td> <td align="right" valign="bottom">2.5</td> </tr> <tr> <td>Timber</td> <td align="right" valign="bottom" class="leftright">58.00</td> <td align="right" valign="bottom">2.2</td> </tr> <tr> <td>Iron ore</td> <td align="right" valign="bottom" class="leftright">56.75</td> <td align="right" valign="bottom">2.1</td> </tr> <tr> <td>Furs</td> <td align="right" valign="bottom" class="leftright">46.75</td> <td align="right" valign="bottom">1.7</td> </tr> <tr> <td>Flax and flaxseed</td> <td align="right" valign="bottom" class="leftright">46.65</td> <td align="right" valign="bottom">1.7</td> </tr> <tr> <td>Saltpetre</td> <td align="right" valign="bottom" class="leftright">42.75</td> <td align="right" valign="bottom">1.6</td> </tr> <tr> <td>Silk</td> <td align="right" valign="bottom" class="leftright">39.50</td> <td align="right" valign="bottom">1.5</td> </tr> <tr> <td>Rubber</td> <td align="right" valign="bottom" class="leftright">36.50</td> <td align="right" valign="bottom">1.4</td> </tr> <tr> <td>Jute</td> <td align="right" valign="bottom" class="leftright">23.50</td> <td align="right" valign="bottom">0.9</td> </tr> <tr> <td>Petroleum</td> <td align="right" valign="bottom" class="leftright">17.45</td> <td align="right" valign="bottom">0.7</td> </tr> <tr> <td>Tin</td> <td align="right" valign="bottom" class="leftright">14.55</td> <td align="right" valign="bottom">0.5</td> </tr> <tr> <td>Phosphorus chalk</td> <td align="right" valign="bottom" class="leftright">11.60</td> <td align="right" valign="bottom">0.4</td> </tr> <tr> <td>Lubricating oil</td> <td align="right" valign="bottom" class="leftright">11.45</td> <td align="right" valign="bottom">0.4</td> </tr> <tr> <td></td> <td align="right" valign="bottom" class="all">951.90</td> <td align="right" valign="bottom" class="topbottom">35.3</td> </tr> <tr> <td>II. Food, tobacco, etc.:—</td> <td class="leftright"> </td> <td> </td> </tr> <tr> <td>Cereals, etc. (wheat, barley, bran, rice, maize, oats, rye, clover)</td> <td align="right" valign="bottom" class="leftright">327.55</td> <td align="right" valign="bottom">12.2</td> </tr> <tr> <td>Oil seeds and cake, etc. (in- cluding palm kernels, copra, cocoa beans)</td> <td align="right" valign="bottom" class="leftright">102.65</td> <td align="right" valign="bottom">3.8</td> </tr> <tr> <td>Cattle, lamb fat, bladders</td> <td align="right" valign="bottom" class="leftright">73.10</td> <td align="right" valign="bottom">2.8</td> </tr> <tr> <td>Coffee</td> <td align="right" valign="bottom" class="leftright">54.75</td> <td align="right" valign="bottom">2.0</td> </tr> <tr> <td>Eggs</td> <td align="right" valign="bottom" class="leftright">48.50</td> <td align="right" valign="bottom">1.8</td> </tr> <tr> <td>Tobacco</td> <td align="right" valign="bottom" class="leftright">33.50</td> <td align="right" valign="bottom">1.2</td> </tr> <tr> <td>Butter</td> <td align="right" valign="bottom" class="leftright">29.65</td> <td align="right" valign="bottom">1.1</td> </tr> <tr> <td>Horses</td> <td align="right" valign="bottom" class="leftright">29.05</td> <td align="right" valign="bottom">1.1</td> </tr> <tr> <td>Fruit</td> <td align="right" valign="bottom" class="leftright">18.25</td> <td align="right" valign="bottom">0.7</td> </tr> <tr> <td>Fish</td> <td align="right" valign="bottom" class="leftright">14.95</td> <td align="right" valign="bottom">0.6</td> </tr> <tr> <td>Poultry</td> <td align="right" valign="bottom" class="leftright">14.00</td> <td align="right" valign="bottom">0.6</td> </tr> <tr> <td>Wine</td> <td align="right" valign="bottom" class="leftright">13.35</td> <td align="right" valign="bottom">0.5</td> </tr> <tr> <td></td> <td align="right" valign="bottom" class="all">759.30</td> <td align="right" valign="bottom" class="topbottom">28.3</td> </tr> <tr> <td>III. Manufactures:—</td> <td class="leftright"> </td> <td> </td> </tr> <tr> <td>Cotton yarn and thread and cotton goods </td> <td align="right" valign="bottom" class="leftright">47.05</td> <td align="right" valign="bottom">1.8</td> </tr> <tr> <td>Woolen yarn and woolen goods </td> <td align="right" valign="bottom" class="leftright">37.85</td> <td align="right" valign="bottom">1.4</td> </tr> <tr> <td>Machinery</td> <td align="right" valign="bottom" class="leftright">20.10</td> <td align="right" valign="bottom">0.7</td> </tr> <tr> <td></td> <td align="right" valign="bottom" class="all">105.00</td> <td align="right" valign="bottom" class="topbottom">3.9</td> </tr> <tr> <td>IV. Unenumerated</td> <td align="right" valign="bottom" class="leftright">876.40</td> <td align="right" valign="bottom">32.5</td> </tr> <tr> <td class="bottom">Total</td> <td align="right" valign="bottom" class="all">2,692.60</td> <td align="right" valign="bottom" class="topbottom">100.0</td> </tr> </table></div> These tables show that the most important exports consisted of:— <ol> <li>Iron Goods, including tin plates (13.2 per cent),</li> <li>Machinery, etc. (7.5 per cent),</li> <li>Coal, coke, and briquettes (7 per cent),</li> <li>Woolen goods, including raw and combed wool (5.9 per cent), and</li> <li>Cotton goods, including cotton yarn and thread and raw cotton (5.6 per cent),</li> </ol> these five classes between them accounting for 39.2 per cent. of the total exports. It will be observed that all these goods are of a kind in which before the war competition between Germany and the United Kingdom was very severe. If, therefore, the volume of such exports to overseas or European destinations is very largely increased the effect upon British export trade must be correspondingly serious. As regards two of the categories, namely, cotton and woolen goods, the increase of an export trade is dependent upon an increase of the import of the raw material, since Germany produces no cotton and practically no wool. These trades are therefore incapable of expansion unless Germany is given facilities for securing these raw materials (which can only be at the expense of the Allies) in excess of the pre-war standard of consumption, and even then the effective increase is not the gross value of the exports, but only the difference between the value of the manufactured exports and of the imported raw material. As regards the other three categories, namely, machinery, iron goods, and coal, Germany's capacity to increase her exports will have been taken from her by the cessions of territory in Poland, Upper Silesia, and Alsace-Lorraine. As has been pointed out already, these districts accounted for nearly one-third of Germany's production of coal. But they also supplied no less than three-quarters of her iron-ore production, 38 per cent of her blast furnaces, and 9.5 per cent of her iron and steel foundries. Unless, therefore, Alsace-Lorraine and Upper Silesia send their iron ore to Germany proper, to be worked up, which will involve an increase in the imports for which she will have to find payment, so far from any increase in export trade being possible, a decrease is inevitable.[127] Next on the list come cereals, leather goods, sugar, paper, furs, electrical goods, silk goods, and dyes. Cereals are not a net export and are far more than balanced by imports of the same commodities. As regards sugar, nearly 90 per cent of Germany's pre-war exports came to the United Kingdom.[128] An increase in this trade might be stimulated by a grant of a preference in this country to German sugar or by an arrangement by which sugar was taken in part payment for the indemnity on the same lines as has been proposed for coal, dyes, etc. Paper exports also might be capable of some increase. Leather goods, furs, and silks depend upon corresponding imports on the other side of the account. Silk goods are largely in competition with the trade of France and Italy. The remaining items are individually very small. I have heard it suggested that the indemnity might be paid to a great extent in potash and the like. But potash before the war represented 0.6 per cent of Germany's export trade, and about $15,000,000 in aggregate value. Besides, France, having secured a potash field in the territory which has been restored to her, will not welcome a great stimulation of the German exports of this material. An examination of the import list shows that 63.6 per cent are raw materials and food. The chief items of the former class, namely, cotton, wool, copper, hides, iron-ore, furs, silk, rubber, and tin, could not be much reduced without reacting on the export trade, and might have to be increased if the export trade was to be increased. Imports of food, namely, wheat, barley, coffee, eggs, rice, maize, and the like, present a different problem. It is unlikely that, apart from certain comforts, the consumption of food by the German laboring classes before the war was in excess of what was required for maximum efficiency; indeed, it probably fell short of that amount. Any substantial decrease in the imports of food would therefore react on the efficiency of the industrial population, and consequently on the volume of surplus exports which they could be forced to produce. It is hardly possible to insist on a greatly increased productivity of German industry if the workmen are to be underfed. But this may not be equally true of barley, coffee, eggs, and tobacco. If it were possible to enforce a régime in which for the future no German drank beer or coffee, or smoked any tobacco, a substantial saving could be effected. Otherwise there seems little room for any significant reduction. The following analysis of German exports and imports, according to destination and origin, is also relevant. From this it appears that of Germany's exports in 1913, 18 per cent went to the British Empire, 17 per cent to France, Italy, and Belgium, 10 per cent to Russia and Roumania, and 7 per cent to the United States; that is to say, more than half of the exports found their market in the countries of the Entente nations. Of the balance, 12 per cent went to Austria-Hungary, Turkey, and Bulgaria, and 35 per cent elsewhere. Unless, therefore, the present Allies are prepared to encourage the importation of German products, a substantial increase in total volume can only be effected by the wholesale swamping of neutral markets. <div class="ctr"> <table border="0" cellpadding="0" cellspacing="0" summary=""> <tr> <td colspan="10" align="center">German Trade (1913) According to Destination and Origin</td> </tr> <tr> <td class="topbottom"> </td> <td colspan="5" align="center" class="all">Destination of Germany's Exports</td> <td colspan="4" align="center" class="topbottom">Origin of Germany's Imports</td> </tr> <tr> <td> </td> <td class="left">  </td> <td align="center">Million Dollars</td> <td>  </td> <td align="center">Per cent</td> <td class="right">  </td> <td>  </td> <td align="center">Million Dollars</td> <td>  </td> <td align="center">Per cent</td> </tr> <tr> <td>Great Britain</td> <td class="left">  </td> <td align="right">359.65</td> <td>  </td> <td align="right">14.2</td> <td class="right">  </td> <td>  </td> <td align="right">219.00</td> <td>  </td> <td align="right">8.1</td> </tr> <tr> <td>India</td> <td class="left">  </td> <td align="right">37.65</td> <td>  </td> <td align="right">1.5</td> <td class="right">  </td> <td>  </td> <td align="right">135.20</td> <td>  </td> <td align="right">5.0</td> </tr> <tr> <td>Egypt</td> <td class="left">  </td> <td align="right">10.85</td> <td>  </td> <td align="right">0.4</td> <td class="right">  </td> <td>  </td> <td align="right">29.60</td> <td>  </td> <td align="right">1.1</td> </tr> <tr> <td>Canada</td> <td class="left">  </td> <td align="right">15.10</td> <td>  </td> <td align="right">0.6</td> <td class="right">  </td> <td>  </td> <td align="right">16.00</td> <td>  </td> <td align="right">0.6</td> </tr> <tr> <td>Australia</td> <td class="left">  </td> <td align="right">22.10</td> <td>  </td> <td align="right">0.9</td> <td class="right">  </td> <td>  </td> <td align="right">74.00</td> <td>  </td> <td align="right">2.8</td> </tr> <tr> <td>South Africa</td> <td class="left">  </td> <td align="right">11.70</td> <td>  </td> <td align="right">0.5</td> <td class="right">  </td> <td>  </td> <td align="right">17.40</td> <td>  </td> <td align="right">0.6</td> </tr> <tr> <td>Total: British Empire</td> <td class="left">  </td> <td align="right" class="top">456.95</td> <td>  </td> <td align="right" class="top">18.1</td> <td class="right">  </td> <td>  </td> <td align="right" class="top">491.20</td> <td>  </td> <td align="right" class="top">18.2</td> </tr> <tr> <td> </td> <td class="left"> </td> <td> </td> <td> </td> <td> </td> <td class="right"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td>France</td> <td class="left">  </td> <td align="right">197.45</td> <td>  </td> <td align="right">7.8</td> <td class="right">  </td> <td>  </td> <td align="right">146.65</td> <td>  </td> <td align="right">5.4</td> </tr> <tr> <td>Belgium</td> <td class="left">  </td> <td align="right">137.75</td> <td>  </td> <td align="right">5.5</td> <td class="right">  </td> <td>  </td> <td align="right">86.15</td> <td>  </td> <td align="right">3.2</td> </tr> <tr> <td>Italy</td> <td class="left">  </td> <td align="right">98.35</td> <td>  </td> <td align="right">3.9</td> <td class="right">  </td> <td>  </td> <td align="right">79.40</td> <td>  </td> <td align="right">3.0</td> </tr> <tr> <td>U. S. A.</td> <td class="left">  </td> <td align="right">178.30</td> <td>  </td> <td align="right">7.1</td> <td class="right">  </td> <td>  </td> <td align="right">427.80</td> <td>  </td> <td align="right">15.9</td> </tr> <tr> <td>Russia</td> <td class="left">  </td> <td align="right">220.00</td> <td>  </td> <td align="right">8.7</td> <td class="right">  </td> <td>  </td> <td align="right">356.15</td> <td>  </td> <td align="right">13.2</td> </tr> <tr> <td>Roumania</td> <td class="left">  </td> <td align="right">35.00</td> <td>  </td> <td align="right">1.4</td> <td class="right">  </td> <td>  </td> <td align="right">19.95</td> <td>  </td> <td align="right">0.7</td> </tr> <tr> <td>Austria-Hungary</td> <td class="left">  </td> <td align="right">276.20</td> <td>  </td> <td align="right">10.9</td> <td class="right">  </td> <td>  </td> <td align="right">206.80</td> <td>  </td> <td align="right">7.7</td> </tr> <tr> <td>Turkey</td> <td class="left">  </td> <td align="right">24.60</td> <td>  </td> <td align="right">1.0</td> <td class="right">  </td> <td>  </td> <td align="right">18.40</td> <td>  </td> <td align="right">0.7</td> </tr> <tr> <td>Bulgaria</td> <td class="left">  </td> <td align="right">7.55</td> <td>  </td> <td align="right">0.3</td> <td class="right">  </td> <td>  </td> <td align="right">2.00</td> <td>  </td> <td align="right">...</td> </tr> <tr> <td>Other countries</td> <td class="left">  </td> <td align="right">800.20</td> <td>  </td> <td align="right">35.3</td> <td class="right">  </td> <td>  </td> <td align="right">858.70</td> <td>  </td> <td align="right">32.0</td> </tr> <tr> <td class="bottom"> </td> <td class="leftbottom">  </td> <td align="right" class="topbottom">2,522.35</td> <td class="bottom">  </td> <td align="right" class="topbottom">100.0</td> <td class="rightbottom">  </td> <td class="bottom">  </td> <td align="right" class="topbottom">2,692.60</td> <td class="bottom">  </td> <td align="right" class="topbottom">100.0</td> </tr> </table></div> The above analysis affords some indication of the possible magnitude of the maximum modification of Germany's export balance under the conditions which will prevail after the Peace. On the assumptions (1) that we do not specially favor Germany over ourselves in supplies of such raw materials as cotton and wool (the world's supply of which is limited), (2) that France, having secured the iron-ore deposits, makes a serious attempt to secure the blast-furnaces and the steel trade also, (3) that Germany is not encouraged and assisted to undercut the iron and other trades of the Allies in overseas market, and (4) that a substantial preference is not given to German goods in the British Empire, it is evident by examination of the specific items that not much is practicable. Let us run over the chief items again: (1) Iron goods. In view of Germany's loss of resources, an increased net export seems impossible and a large decrease probable. (2) Machinery. Some increase is possible. (3) Coal and coke. The value of Germany's net export before the war was $110,000,000; the Allies have agreed that for the time being 20,000,000 tons is the maximum possible export with a problematic (and in fact) impossible increase to 40,000,000 tons at some future time; even on the basis of 20,000,000 tons we have virtually no increase of value, measured in pre-war prices;[129] whilst, if this amount is exacted, there must be a decrease of far greater value in the export of manufactured articles requiring coal for their production. (4) Woolen goods. An increase is impossible without the raw wool, and, having regard to the other claims on supplies of raw wool, a decrease is likely. (5) Cotton goods. The same considerations apply as to wool. (6) Cereals. There never was and never can be a net export. (7) Leather goods. The same considerations apply as to wool. We have now covered nearly half of Germany's pre-war exports, and there is no other commodity which formerly represented as much as 3 per cent of her exports. In what commodity is she to pay? Dyes?—their total value in 1913 was $50,000,000. Toys? Potash?—1913 exports were worth $15,000,000. And even if the commodities could be specified, in what markets are they to be sold?—remembering that we have in mind goods to the value not of tens of millions annually, but of hundreds of millions. On the side of imports, rather more is possible. By lowering the standard of life, an appreciable reduction of expenditure on imported commodities may be possible. But, as we have already seen, many large items are incapable of reduction without reacting on the volume of exports. Let us put our guess as high as we can without being foolish, and suppose that after a time Germany will be able, in spite of the reduction of her resources, her facilities, her markets, and her productive power, to increase her exports and diminish her imports so as to improve her trade balance altogether by $500,000,000 annually, measured in pre-war prices. This adjustment is first required to liquidate the adverse trade balance, which in the five years before the war averaged $370,000,000; but we will assume that after allowing for this, she is left with a favorable trade balance of $250,000,000 a year. Doubling this to allow for the rise in pre-war prices, we have a figure of $500,000,000. Having regard to the political, social, and human factors, as well as to the purely economic, I doubt if Germany could be made to pay this sum annually over a period of 30 years; but it would not be foolish to assert or to hope that she could. Such a figure, allowing 5 per cent for interest, and 1 per cent for repayment of capital, represents a capital sum having a present value of about $8,500,000,000.[130] I reach, therefore, the final conclusion that, including all methods of payment—immediately transferable wealth, ceded property, and an annual tribute—$10,000,000,000 is a safe maximum figure of Germany's capacity to pay. In all the actual circumstances, I do not believe that she can pay as much. Let those who consider this a very low figure, bear in mind the following remarkable comparison. The wealth of France in 1871 was estimated at a little less than half that of Germany in 1913. Apart from changes in the value of money, an indemnity from Germany of $2,500,000,000 would, therefore, be about comparable to the sum paid by France in 1871; and as the real burden of an indemnity increases more than in proportion to its amount, the payment of $10,000,000,000 by Germany would have far severer consequences than the $1,000,000,000 paid by France in 1871. There is only one head under which I see a possibility of adding to the figure reached on the line of argument adopted above; that is, if German labor is actually transported to the devastated areas and there engaged in the work of reconstruction. I have heard that a limited scheme of this kind is actually in view. The additional contribution thus obtainable depends on the number of laborers which the German Government could contrive to maintain in this way and also on the number which, over a period of years, the Belgian and French inhabitants would tolerate in their midst. In any case, it would seem very difficult to employ on the actual work of reconstruction, even over a number of years, imported labor having a net present value exceeding (say) $1,250,000,000; and even this would not prove in practice a net addition to the annual contributions obtainable in other ways. A capacity of $40,000,000,000 or even of $25,000,000,000 is, therefore, not within the limits of reasonable possibility. It is for those who believe that Germany can make an annual payment amounting to hundreds of millions sterling to say in what specific commodities they intend this payment to be made and in what markets the goods are to be sold. Until they proceed to some degree of detail, and are able to produce some tangible argument in favor of their conclusions, they do not deserve to be believed.[131] I make three provisos only, none of which affect the force of my argument for immediate practical purposes. First: if the Allies were to "nurse" the trade and industry of Germany for a period of five or ten years, supplying her with large loans, and with ample shipping, food, and raw materials during that period, building up markets for her, and deliberately applying all their resources and goodwill to making her the greatest industrial nation in Europe, if not in the world, a substantially larger sum could probably be extracted thereafter; for Germany is capable of very great productivity. Second: whilst I estimate in terms of money, I assume that there is no revolutionary change in the purchasing power of our unit of value. If the value of gold were to sink to a half or a tenth of its present value, the real burden of a payment fixed in terms of gold would be reduced proportionately. If a sovereign comes to be worth what a shilling is worth now, then, of course, Germany can pay a larger sum than I have named, measured in gold sovereigns. Third: I assume that there is no revolutionary change in the yield of Nature and material to man's labor. It is not impossible that the progress of science should bring within our reach methods and devices by which the whole standard of life would be raised immeasurably, and a given volume of products would represent but a portion of the human effort which it represents now. In this case all standards of "capacity" would be changed everywhere. But the fact that all things are possible is no excuse for talking foolishly. It is true that in 1870 no man could have predicted Germany's capacity in 1910. We cannot expect to legislate for a generation or more. The secular changes in man's economic condition and the liability of human forecast to error are as likely to lead to mistake in one direction as in another. We cannot as reasonable men do better than base our policy on the evidence we have and adapt it to the five or ten years over which we may suppose ourselves to have some measure of prevision; and we are not at fault if we leave on one side the extreme chances of human existence and of revolutionary changes in the order of Nature or of man's relations to her. The fact that we have no adequate knowledge of Germany's capacity to pay over a long period of years is no justification (as I have heard some people claim that, it is) for the statement that she can pay $50,000,000,000. Why has the world been so credulous of the unveracities of politicians? If an explanation is needed, I attribute this particular credulity to the following influences in part. In the first place, the vast expenditures of the war, the inflation of prices, and the depreciation of currency, leading up to a complete instability of the unit of value, have made us lose all sense of number and magnitude in matters of finance. What we believed to be the limits of possibility have been so enormously exceeded, and those who founded their expectations on the past have been so often wrong, that the man in the street is now prepared to believe anything which is told him with some show of authority, and the larger the figure the more readily he swallows it. But those who look into the matter more deeply are sometimes misled by a fallacy, much more plausible to reasonableness. Such a one might base his conclusions on Germany's total surplus of annual productivity as distinct from her export surplus. Helfferich's estimate of Germany's annual increment of wealth in 1913 was $2,000,000,000 to $2,125,000,000 (exclusive of increased money value of existing land and property). Before the war, Germany spent between $250,000,000 and $500,000,000 on armaments, with which she can now dispense. Why, therefore, should she not pay over to the Allies an annual sum of $2,500,000,000? This puts the crude argument in its strongest and most plausible form. But there are two errors in it. First of all, Germany's annual savings, after what she has suffered in the war and by the Peace, will fall far short of what they were before, and, if they are taken from her year by year in future, they cannot again reach their previous level. The loss of Alsace-Lorraine, Poland, and Upper Silesia could not be assessed in terms of surplus productivity at less than $250,000,000 annually. Germany is supposed to have profited about $500,000,000 per annum from her ships, her foreign investments, and her foreign banking and connections, all of which have now been taken from her. Her saving on armaments is far more than balanced by her annual charge for pensions now estimated at $1,250,000,000,[132] which represents a real loss of productive capacity. And even if we put on one side the burden of the internal debt, which amounts to 24 milliards of marks, as being a question of internal distribution rather than of productivity, we must still allow for the foreign debt incurred by Germany during the war, the exhaustion of her stock of raw materials, the depletion of her live-stock, the impaired productivity of her soil from lack of manures and of labor, and the diminution in her wealth from the failure to keep up many repairs and renewals over a period of nearly five years. Germany is not as rich as she was before the war, and the diminution in her future savings for these reasons, quite apart from the factors previously allowed for, could hardly be put at less than ten per cent, that is $200,000,000 annually. These factors have already reduced Germany's annual surplus to less than the $500,000,000 at which we arrived on other grounds as the maximum of her annual payments. But even if the rejoinder be made, that we have not yet allowed for the lowering of the standard of life and comfort in Germany which may reasonably be imposed on a defeated enemy,[133] there is still a fundamental fallacy in the method of calculation. An annual surplus available for home investment can only be converted into a surplus available for export abroad by a radical change in the kind of work performed. Labor, while it may be available and efficient for domestic services in Germany, may yet be able to find no outlet in foreign trade. We are back on the same question which faced us in our examination of the export trade—in what export trade is German labor going to find a greatly increased outlet? Labor can only he diverted into new channels with loss of efficiency, and a large expenditure of capital. The annual surplus which German labor can produce for capital improvements at home is no measure, either theoretically or practically, of the annual tribute which she can pay abroad. <div style="break-after:column;"></div>

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