“I am deeply stirred by the word which Ulrich Hutten wrote the last time he seized his pen: — Germany.”
January 30th, 1937
The Case for Germany
A Study of Modern Germany
A. P. Laurie
M. A. Cantab., D. Sc., LL. D. Edin., F. C. S., F. R. S. E.
With a Preface by Admiral Sir Barry Domvile
K. B. E., C. B., C. M. G.
Berlin W 15
FIRST EDITION ………… JUNE 1939
SECOND EDITION ……. JULY 1939
ALL RIGHTS RESERVED
PRINTED IN GERMANY
It is with admiration and gratitude for the great work he has done for the German people that I dedicate this book to the Fuhrer.
A. P. L.
TO THE READER
There are two sides to every question. You have read one side in our Press for six years.
This book gives the other side.
A. P. L.
It is a great pleasure to me to introduce the public to Dr. Laurie’s valuable book on modern Germany. He is best known to the world as a brilliant scientist, but he has found time in the intervals of his work to pursue with ardour the task upon which every sensible member of the British and German races should be engaged — namely the establishment of good relations and a better understanding between these two great nations.
Dr Laurie knows full well that this friendship is the keystone to peace in Europe — nay, in the whole world.
He is one of the small group who founded the Association known as “The Link”, whose sole aim is to get Britons and Germans to know and understand one another better. He is one of the most zealous workers in this good cause in the country.
He writes of the National Socialist movement with knowledge and great sympathy.
The particular value of this book lies in the fact that it is written by a foreigner, who cannot be accused of patriotic excess in his interpretation of the great work done by Herr Hitler and his associates. I recommend this volume with confidence to all people who are genuinely impressed with the desire to understand one of the greatest — and most bloodless — revolutions in history.
8th May 1939.
“As we advance in our social knowledge, we shall endeavour to make our governments paternal as well as judicial; that is, to establish such laws and authorities as may at once direct us in our occupations, protect us against our follies, and visit us in our distresses; a government which shall repress dishonesty, as now it punishes theft; which shall show how the discipline of the masses may be brought to aid the toils of peace, as the discipline of the masses has hitherto knit the sinews of battle; a government which shall have its soldiers of the ploughshare as well as its soldiers of the sword, and which shall distribute more proudly its golden crosses of industry — golden as the glow of the harvest — than it now grants its bronze crosses of honour — bronzed with the crimson of blood.”
RUSKIN. Political Economy of Art.
“All front fighters fought side by side and went through an inferno. They are all comparable to the heroes of the ancient world. It was the manhood of the nations in their prime who fought and experienced the horrors of modern war.
In another war the flower of the nations’ men and women will have to fight. Europe will be destroyed if the best in all of the nations are wiped out. A new conflict will exceed even the ghastly tragedies of the Great War.
I believe that those who rattle the sabres have not participated in war. I know that war veterans speak and think differently.
They energetically desire to prevent another conflict. I hope that the men who are standing before me can contribute to preserve the peace of the world — a peace of honour and equality for all.
Let us not talk of prestige as between the victors and the defeated. This is my one request: Forget what has divided the nations before and remember that history has advanced.”
Field Marshal GOERING addressing the British
and German war veterans.
CHAPTER ……………………………………………………………. PAGE
To the Reader
Field Marshall Goering’s Address
I. DER FUHRER ……………………………………………………….. 11
II. THE BELEAGUERED CITY ……………………………………. 21
III. NATIONAL SOCIALISM ……………………………………… 25
IV. THE NAZI RALLYS AT NUREMBERG ……………………. 34
V. THE FOREIGN POLICY OF GERMANY ……………………. 41
VI. ENGLAND AND GERMANY ………………………………….. 49
VII. MARCH 7th, A MOST IMPORTANT DATE …………… 54
VIII. THE REAL ENEMY OF EUROPE ……………………….. 58
IX. COMMUNISM VERSUS NATIONAL SOCIALISM …… 62
X. THE UNION OF THE GERMAN PEOPLE …………………. 68
XI. ACTS OF “AGGRESSION” BY GERMANY ……………… 79
XII. THE DANCE OF DEATH ……………………………………… 85
XIII. OUR FUTURE POLICY TOWARDS GERMANY ……. 93
XIV. THE HITLER YOUTH MOVEMENT ……………………… 100
XV. THE WINTER HELP ORGANIZATION ………………….. 104
XVI. NATIONAL SOCIALISM AND THE PROTESTANT
CHURCH ……………………………………………………………………… 109
XVII. ECONOMICS …………………………………………………….. 118
XVIII. THE FOUR YEARS PLAN …………………………………… 138
XIX. THE GERMAN COLONIES …………………………………. 141
XX. THE LABOUR FRONT ………………………………………….. 146
XXI. AGRICULTURE …………………………………………………. 155
XXII. MUNICH AND AFTER ………………………………………… 167
“Why kill Germans when we can starve them.”
The post war period is one in which economics have gone mad and the most extraordinary things are done by Governments. In Brazil the Government throws thousands of tons of coffee beans into the sea while the consumer in this country is paying 2/6 to 3/- a lb. for beans which merely require to be brought to his door; and the Government of the USA. has paid farmers large subsidies not to grow food and let the land go derelict, while millions of unemployed are starving. In this country while it is admitted that one third of the population is underfed, the farmer is ploughing his potatoes into the land, and millions of fish are being thrown into the sea to keep up prices in the Billingsgate market. Last summer in the south of England the magnificent plum crop was left to rot on the trees, and in Cambridgeshire where the smallholder was getting 1/2 for 12 lbs. of carefully picked and packed Victoria plums, the retail shopkeeper in London 40 miles away was getting 8d. a lb.
We are told in the papers that the chicken farmer is being ruined, yet a chicken costs 1/- to 1/2 per lb. in London with all the offal weighed in and charged for at the same rate.
Not only does Nature give us of her abundance as never before in the history of mankind owing to improvements in agriculture, but the engineer has invented marvellous means of transport, — and yet the people are not fed.
Just as it is abhorrent to the German Government and the German people to see an idle man on the dole, so the modern economics which destroys food to keep up prices and fines heavily the man who grows more than his quota, is contrary to their economic principle.
Hitler has said, “I am no student of modern economics, and I must believe that the German who by his labour produces an article of use, such as food, has enriched and not impoverished the Reich”. The implication is that what is needed to secure the food supply of a Nation is direction not destruction, and the first essential is to use the middle man for his proper function for which his experience fits him, — the distribution of food at a modest percentage to pay for his services. He can no longer rig the market in Germany, and force down prices for the farmer and force up prices for the consumer.
It is said, I know not with what truth, that a cabbage passes through the hands of twelve merchants between the farmer and the consumer in this country.
The problem of the proper distribution of food is no easy one and I discussed it with Germans over there, but they are satisfied that while adjustments may be necessary they are working on the right lines. The peasant farmer is as satisfied as any farmer would ever be, and the men, women and children in every quarter of Nuremberg, which is a small German Birmingham, look far better fed than in this country.
To give the farmer a sufficient living and feed the people is the first duty of the modern State.
There is another modern economic delusion which is not accepted in Germany, that work especially manual work is a curse, and that modern inventions should enable men to idle for 20 hours out of 24. Germany has not found it so. It is by hard work that she has been lifted out of the economic pit. Ask the boys in the Labour Camps if they would change the struggle with Nature, the use of pick and shovel, for sitting in a cinema watching a film, or packed in a crowd watching paid athletes play football, and they will laugh at you. Compare him, hardy and brown with the sun, marching singing through the streets, with our anaemic physically undeveloped city youth loafing with a fag in his mouth.
In dealing with the problem of the staple articles of food the German Government has fixed a price for the farmer, and a price for the consumer, and while the middle man distributes, the State supervises and arranges to deal with the distribution when there is a shortage in one part of the country and an excess in another. The importation of food is regulated according to demand, and the duty paid equalizes the price with the internal price. Owing to the fact that so large a proportion of the land is in the hands of the peasant proprietor, they are not faced with our problem that any increase of profit to the farmer soon leaves his pocket in the form of rent or excessive interest to the Bank. The assistance of extra labour for seasons when labour is short on the land is arranged, and many of the temporary assistants become permanent land workers. When land has been reclaimed or formerly unfarmed land is being broken up for cultivation the State provides the new settler with capital.
They have found it impossible to fix prices for perishable foodstuffs, and have divided Germany into districts, the perishable foodstuffs being collected at a centre and redistributed from there.
They claim that this has proved a success, securing the consumer from’ excessive prices and protecting the producer from a loss. The handling of perishable foodstuffs is one of our most serious economic problems, the grower frequently selling at a loss, while the price of perishable foodstuffs in our cities is much too high for the poor man’s family to eat the quota of vegetables and fruit which is necessary for health. As I have said elsewhere, in devising the four years plan the Government is not satisfied even with this organization, putting the wastage of food at 1,500 million marks a year, one half of which takes place during distribution.
With our haphazard method of collecting and distributing and utterly inadequate markets and myriads of small greengrocers, with no proper methods of storage anywhere, the wastage must be enormous, and largely accounts for the excessive price to the consumer.
In Germany every encouragement is given to the allotment holder, with a view to the people in towns growing their own supplies. I have mentioned elsewhere the cheapness and excellence of the food in German restaurants.
The system of magnificent motor roads, the construction of which is being vigorously pushed on, will help the matter of perishable food distribution still further. One of the absurd falsehoods which is repeated at intervals is that these roads are being built solely for military purposes. They are being built for sound economic reasons, but would doubtless prove very useful in a defensive war enabling troops to be quickly concentrated on any frontier. It is unnecessary to enlarge on the economic problem raised by fixed prices which is a complete departure from the economic principle of supply and demand and an open market, but they claim in Germany that they have found — as we have found — that the open market fails as a method of food distribution, and they seem to have been much more successful than our Milk, Potato and Bacon Boards. The probable reason is that owing to our love of compromise, we have combined the evils of a competitive system with the evils of a socialistic experiment, without getting the benefits of either. Either have a free market, or fix prices right through from producer to consumer.
It must be remembered that Germany has the advantage of having educated the people to a new ideal of service upon which they can call, which makes all the difference between failure and success. The desire is to assist these experiments and not try and find how to use them for private aggrandizement. To say that all the German people have grasped the idea of social service would be absurd, but their education in a new conception of social order is being vigorously carried on, and behind all is the stem necessity of making both ends meet for the whole Nation. We are so overflowing with the wealth of the world, though we share it round so unequally, that we think we can afford to be extravagant.
Their method of organizing the distribution of perishable food is well worth the study of the Ministry of Agriculture as it is one of our most serious economic problems to-day.
A series of articles attacking different aspects of National Socialism were published in The Banker two years ago. One is on the finance of the National Socialist Government, based on certain official figures. These articles are the only detailed examination of German finance by an expert, and therefore is made the basis of this chapter.
This article reveals a strong bias against Germany, a bias which is still more reflected in the introduction to the series of hostile articles in The Banker, an introduction which consists of a most ignorant and violent attack on the National Socialist Government.
In spite of the bias the actual figures given in the article prove an excellent defence of National Socialist Finance, and I propose to discuss them in this chapter.
The Two Problems
When the National Socialist Government came into power they were faced with two problems, which required for their solution a large capital expenditure — namely, the necessity for reducing to reasonable figures the huge number of unemployed, amounting to 6,000,000, and the pressing necessity of arming the German people for defence, surrounded as they are by nations spending larger and larger sums on armaments and increasing the number of soldiers on a peace footing.
A government has two sources of money: increased taxation and borrowing. In this country the Government adopts two methods of borrowing, Treasury Bills and loans over long periods. From time to time a portion of the indebtedness under Treasury Bills is converted into a permanent loan.
We have found it necessary in order to bring our armaments up to the standard set in France and Russia to face an expenditure of £1,500,000,000. France claims to day to have the most powerful and best equipped army in Europe, the Soviet have 2,000,000 men on a peace footing and 6,000 bombing planes, and Germany by tremendous efforts can claim to have an army to-day sufficient for defence, which is all that she aims at having.
When we find it necessary to expend £1,500 millions merely to bring our existing armaments up to the modern level, it is evident that beginning from nothing, Germany had a tremendous task.
The most urgent problem before the German Government was the unemployed, and before plunging into armament expenditure she tried to persuade France to accept a reduced number of men on.a peace footing. Her proposals to do this were rejected.
There are two ways of dealing with the unemployed problem. One, the easier, is to pay them out of taxation a dole sufficient to keep them alive.
This has been our method since the War and has cost us hundreds of millions with nothing to show for it.
We have occasionally undertaken public works in a sporadic and inefficient manner, resulting in wastage of public money with nothing to show for it commensurate with the expenditure.
The other method is to carry out public works which will increase the capital wealth of the nation on a well-thought out plan.
There is a great deal of capital expenditure which can be undertaken only by the State, as it would yield a doubtful profit to private enterprise and would require a vast capital. It is impossible to assess exactly the increase in wealth due to such expenditure.
It has from earliest times been the task of the State to make and maintain roads and to carry out vast schemes of land drainage, irrigation and land reclamation.
From the first clearances made by primitive man in the primeval forest, land reclamation has never paid on a strict accountant basis, but it has paid the people a thousand fold through the centuries.
One man in this country, Mr. Lloyd George, has advocated for years expenditure on public works. He pointed out among other things the necessity of up-to-date arterial roads, and the danger of the long neglect of land drainage in this country.
The recent disastrous floods in the Fens involving an expenditure of many millions if the Fen country is to be saved, is due to this neglect, and we are just beginning to deal with the question of arterial roads.
The little country of Sweden adopted the plan of public works and is to-day the most prosperous country in Europe.
The German Government decided on a bold policy of public works. They are constructing throughout Germany magnificent arterial roads for motor traffic; they have reclaimed vast areas of land; they have undertaken great schemes of building and reconstruction; and have spent money in various other ways of permanent benefit to the German people.
In five years they have reduced unemployment from 6,000,000 to nothing and have set up and equipped an army on a peace footing of 500,000 men. They are now proceeding to develop still further the internal resources of Germany under the four year’ plan, and to-day they are hiring labour from Italy and Holland.
Let me now return, from this long digression, to the financial problem.
In Great Britain, owing to the vast reserves of capital a Government can always float a permanent loan.
Germany, bled white by reparations and the vast confiscations after the War by the victorious allies, and heavily indebted by outside borrowing at exorbitant rates of interest, could not do that, although her internal war debt had been wiped out under the Socialist regime by a vast depreciation of currency.
The bold device adopted by the German Government was for the State to finance this large expenditure trusting to the economic recovery of Germany to take over this expenditure. This device has been fully justified by results, the expenditure being gradually converted into short term loans, corresponding to our Treasury Bills, followed by long term loans. The plan adopted is regarded as somewhat unorthodox by the writer of the article in The Banker, but he admits that owing to the control exercised over the banking system and finance in Germany it has been possible to do this without the consequences that usually follow such a policy — a rise in prices, and that the talk of approaching bankruptcy is absurd.
Taking as a reference figure the Budget of the year 1932, the expenditure was 6,700 million marks, the figures for:
1933-4 are 9,700 million marks
1934-5 are 12,200 million marks
1935-6 are 16,700 million marks
1936-7 are 18,800 million marks
showing a net increase of 31,100 million marks for these four years or £2,500 millions.
The yield of taxation during the period has been 9,800 million marks above that of 1932, rising steadily and progressively from year to year, and owing to other sources of income less than half this amount had to be raised by loans, a total indebtedness which is not large for a country of the population of Germany, and may be compared with our figure of over £8,000 million sterling.
In order to make as impressive a figure as possible, the writer of the article in The Banker charges the whole of the sum of 31,000 million marks to the armaments account alone, and draws an entirely fictitious budget for 1936-7.
He ignores the large expenditure on public works which comes out of this total, the fact that the Government has not only met the interest on external debt but paid off one-third of the external debt and the increase of annual expenditure required for the civil service, the maintenance of the army on a peace footing and the extension of the social services.
The National Socialist Government has resisted the easy way out of their economic and exchange difficulties by borrowing abroad after the manner of other European countries. France has just borrowed £50 millions from us and proposes to borrow more.
This policy of self-sufficiency, or, as our Press call it, “economic isolation”, is, perhaps, a reason of the unpopularity of Germany in the City, the world’s biggest moneylender, an unpopularity which is reflected in our Press and in The Banker.
When our Government announced an expenditure of £1,500 millions to bring our armaments up to the level of other European countries, the public were astounded at the enormous cost of the equipment of a modern army and navy.
In the light of these figures the total expenditure by the German Government under all heads of £2,500 millions is not excessive even though the whole had been devoted to rebuilding a navy and equipping an army of 500,000 men up to the standard of the armies of France and Russia.
As an actual fact, 15,000 million marks have been spent on other purposes than on armaments.
The total amount borrowed is not excessive and the success of the capital expenditure is proved by the growing internal prosperity of Germany and the elimination of unemployment.
In fact the figures confirm the conclusion come to by other observers that Germany has been satisfied to create and equip an army sufficient for defence, and has no projects of foreign conquest.
Since this date Germany has been compelled most unwillingly to fresh expenditure on armaments owing to the vast sums being spent by Great Britain and France as it is impossible to trust the foreign policies of Democracies. Daladier has just been saved by 9 votes and if at the next election here the Labour Party came in they would probably take the first opportunity to force war on Germany.
The difficult position in which Germany is placed by the heavy reparations she had to pay, forcing her to borrow money outside at high rates of interest, has never been properly appreciated in this country. When she had been bled to the last sixpence, and her economic ruin completed by the occupation of the Ruhr, she was left with a heavy external debt which had to be repaid some time and on which the interest was due.
In spite of her economic distress she has never adopted the facile expedient of repudiating her debt, and has paid off one third of the capital sum. We cancelled a thousand millions of the debt France owed to us, and also cancelled large sums due from Italy and Belgium, and we still owe four hundred millions to the United States and are neither repaying the capital nor paying the interest. The Soviet not only repudiated the debt of the former government, but confiscated wholesale the property of companies in Russia financed by foreign capital. It has been usual for countries after a revolution to repudiate the debts of the former government, and the Nazi government might well have followed this practice; on the contrary they assumed the whole burden, have done their best to pay the interest due, and have also taken over the Austrian debt on a reduction of interest of their own debt being agreed to. Other countries besides those mentioned have failed to meet either capital or interest since the war, and Germany is one of the very few countries who faced financial ruin as a result of the war and who are honestly meeting their obligations to the best of their ability.
They have also not adopted the device of depreciating their currency which has been done by so many other countries, having restored the gold mark after the disastrous financial crash.
Having to meet their foreign commitments, and having been deprived of their last ounce of gold by their foreign creditors, they have to control very strictly exports and imports and to prevent any capital leaving Germany. They have also been compelled by their financial position to enter bargains with foreign countries by which they exchange goods directly for goods, and in order to make the plan workable the bargain has to be made to cover several years. This has been described by Mr. Hudson in the House of Commons as an unfair method of trading and he has advised an economic war against Germany to compel them to abandon this method of trading which is forced upon them by their creditors in the city of London and in New York. Dr. Schacht has himself told us that he considers this method of trading “horrible”, and said that if Germany could come to some arrangement with her creditors she would adopt unrestricted trading like other countries. It is surely obvious that a buyer and seller have a right to make any bargain they choose, and that no method of trading can be described as unfair. Mr. Hudson was also mistaken in saying that the German government was subsidising the sale of their goods abroad and was by her policy lowering the standard of living in Germany, — the attempt to calculate the values of this exchange of goods for goods by converting into sterling being quite misleading.
Germany has not only had a political revolution but has carried out an economic revolution in her method of calculating wealth. All other countries still adopt gold as their standard but Germany deprived of gold is calculating wealth in terms of labour production, a new method which is worthy of the study of economists.
When the Nazi party came into power they adopted the very bold policy of putting everyone to work by means of government credits. The result of this policy has been very remarkable.
The government money being used to promote vast schemes of road building and land reclamation, the demand of these men for food and other products stimulated other industries and the national income increased so rapidly, that it has been possible to convert this government credit into loans based upon savings, and today far from having any unemployed, Germany has had to import labour, while by every figure by which the prosperity of a country can be tested the national wealth is steadily rising.
When they first proposed to provide work by means of government credit, they were told by the economists that this would result in an immediate rise of prices, but owing to the control of prices exercised by the government no such rise in prices has taken place. At every stage in these bold and new economic experiments the economists have prophesied disaster, and have been proved to be wrong. Dr. Schacht has told us that this economic policy would have been quite impossible unless the German people had first been converted to the Nazi doctrine, and were therefore willing to help the government by loyally carrying out their wishes, instead of making private profit out of the difficulties of the government.
Moreover, while other nations are spending more and more on armaments, Germany is directing her efforts to increasing the productivity of her soil, and the development of new and valuable products which the genius of her chemists is extracting synthetically from her two raw materials — coal and wood.
We find therefore that, after the author of the article in The Banker has written his worst against the German government, he has made out an excellent case for her financial policy and dispelled the wild rumours of an excessive expenditure on armaments.
The most recent figures for Germany reveal an increasing prosperity and increasing revenue from taxation. Borrowing by the Government is strictly limited by the amount required to pay interest out of taxation.
The Monopoly of Raw Materials
The graph on the opposite page makes it possible to see at a glance the monopoly of raw materials which is held by the British and French and Dutch Empires, the U.S.A. and the U.S.S.R.
Striking as this diagram is, it does not tell the whole story, because countries outside these are largely financed by British and American capital.
The Argentine, for instance, is at present largely in the hands of British and U.S.A. capitalists.
The columns give the percentages of the world’s raw materials produced by the British, French and Dutch Empires, the U.S.S.R. and the U.S.A. The black [pink] portions represent the percentages produced in the British Empire.
Other nations wishing to buy raw materials are therefore faced by several difficulties.
In the first place they find a barrier of hostile tariffs against the sale of the goods with which they wish to buy raw materials.
In the second place they find preferential agreements like the Ottawa Agreement.
In the third place they find combines to limit supplies.
These combines are of two kinds. There are government combines, like the tin combine arranged by our government with the governments of the tin producing countries. And there are commercial combines, like that of the copper producers, for the limitation of output.
The world’s oil supplies are in the hands of some three or four big companies which arrange together the price of petrol and of other oils they produce.
We own practically the whole of the world’s output of nickel, which is worked by one financial organization with British and American capital.
We, Russia and the U.S.A. possess practically the whole of the world’s production of gold.
It may be argued that, for example with tin, the German buyer and the British buyer both have to pay a monopoly price. But, as the British seller lives across the street, what we lose on the swings we make on the roundabouts. We are transferring money from one pocket to another.
Nations like Germany are not in that position.
The conference on raw materials is a meeting of monopolists to discuss their monopoly and is of as much practical value as the disarmament conferences.
The question of raw materials is an international question, in that there are monopolies held by some nations to the impoverishment of other nations.
Monopolies within a nation can be dealt with by the people of that nation, but world-wide monopolies in which groups of nations are plundering other nations is a policy of modern world-wide finance for which no solution has been suggested, or rather the obvious solution will be passed unanimously as a pious opinion but will have no possible practical result, the nations owning the monopolies having not only enormous capital reserves, but overwhelming military forces.
The main business of politicians is to create false issues to deceive the people and President Roosevelt did so the other day when referring to the China-Japanese war, when he proclaimed that the World issue is between Peace loving Democracies and aggressive nations who are in favour of war.
The main issue in the World to-day is the old primitive issue — the need for food.
The World monopoly of raw materials, controlled principally by the British Empire and international financial interests, which are held principally in Great Britain and the U.S.A., is creating a serious economic problem in many nations of which three are most prominent to-day-Japan, Germany and Italy — but France and Russia naturally stand in with us. I have already mentioned the attempt of Italy to find an open door by the conquest of Abyssinia forced upon her by England and France.
Japan is fighting in China to obtain extended markets for her manufactures.
The problem is, as I have said, the primitive one of food, and Japan, Germany and Italy are the three nations of the first rank who form the triple spearhead for a world demand for free trade in raw materials.
For the possessing nations to meet and reprove Japan is pure hypocrisy. The Abyssinian war was forced on Italy, and the Chinese war forced on Japan by the Empires and by international financial control of necessary supplies, and unless a World war is to come, their reasonable demands will have to be met.
The monetary system existing in the world before the war was simple. All money was based on gold and paper or token coinage in every country in the world except China, was interchangeable for a certain weight of gold, and the amount of paper notes issued had a certain fixed ratio to gold reserve.
The reasons for selecting gold are the durability of the metal, the large gold reserve — the accumulation of centuries — and the scarcity of the metal as an ore and cost of extracting, the result being that the output each year did not increase by a large amount the quantity of gold in use. The Mint bought all the gold offered them and converted it into gold coins which were freely used.
It had been possible to handle the increasing trade of the world partly by the printing of paper money, and partly by the increasing use of promises to pay or cheques.
During the war the whole system was abandoned, and the war financed by the creation of credit and the printing of paper notes as required. Since the war the coinage of gold has never been resumed, and there is no necessary connection between gold reserves and the number of notes issued, we having just abandoned the last residue of such a control. Vast quantities of gold are being accumulated by the U.S.A., France and Great Britain, gold is being mined in larger quantities than ever before and the price of gold measured in sterling is always rising.
In the case of the paper franc and the paper dollar, they have a fixed value in terms of gold but they cannot be exchanged for gold at the national bank. There is no fixed ratio in terms of gold for the pound sterling. The French Government has had repeatedly to alter the ratio between the paper franc and gold, depreciating their currency more and more.
Gold reserves have some value to a country as the gold can be sold in small quantities at the current price to another country to settle debts, and is still used in that way; but obviously if a large quantity of the gold reserves were thrown on the market gold would drop rapidly in price and the “gold is wealth” delusion would vanish never to return; consequently Great Britain, France, and the U.S.A. cannot part with their vast stores of gold which has merely a fictitious value which is not realisable. In case of war involving the three democracies, if they tried to utilise the gold it would lose its value.
To return to paper money, if we imagine an entirely self contained country with no external trade the amount of paper money in circulation is a matter of indifference as far as prices are concerned, as earnings would have to be at once adjusted to change of prices. It would also obviously be necessary to adjust interest and rent. If before inflation one pound bought twenty loaves of bread and after inflation one pound bought only ten loaves of bread, wages, salaries, interest and rent would have to be adjusted accordingly.
As far as it is possible to discover any intelligible policy on the part of our Government the aim has been, since we abandoned our attempt to return to gold, to keep the cost of living fairly level. The abandonment of gold and the drop of the pound from twenty to fourteen shillings measured against gold produced no change in our economic life.
The problems arise when the self contained country begins to trade with other countries. Trade consists of the exchange of goods for goods and their price in terms of a fixed standard roughly approximates to the cost of production in each country, and if there is a common measure of money such as existed before the war, the process of barter settles the amount of an article to be exchanged for so much gold, but since the war as the value of money in terms of gold fluctuates in different countries, the exchange of goods is no longer a simple matter. If for instance owing to printing paper money it now takes two pounds instead of one pound to buy twenty loaves, while in the other country it takes twenty frances which were equivalent to one pound before the inflation, the franc is now worth two shillings instead of one shilling in the new currency.
As the money of each country is only legal tender in that country, trade involves two transactions, — the exchange of goods and the purchase of the money in the one country with the money in the other country to settle the account, and the relative value of money in the two countries is constantly fluctuating.
In order to obtain some approach to stability in prices France, Great Britain and the U.S.A. have entered into an arrangement to try and keep the value ratios of the pound sterling, franc and dollar approximately the same, and the British Government has put aside £500 millions which is used to buy and sell gold, pounds sterling, and the money of other countries in an attempt to keep the ratios fairly stable. Their transactions are secret and: of course might end in disaster if a big world slump took place or war broke out.
It is not too much to say that those responsible for finance in the various countries in the world have no longer any clear understanding of what they are doing in a mass of complicated transactions in values which are purely fictitious. To take an example, the Bank of England buying gold at the current price, entered it in the books at the old value of the sovereign. The Bank has now decided to write up the value of the gold they hold to the market price, and seem to think that by a book entry they have raised the wealth stored in the Bank by some hundreds of millions.
Another big war would bring the whole fictitious system crashing down.
The result of these fictitious systems of currency and the piling up of tariffs, quotas and restrictions on trade, has been a series of financial crises in France, the two million unemployed in this country, the eleven million unemployed in the U.S.A., and distress in more distant parts of the world like Burma where the peasants are starving.
Each economist has a new theory of money more elaborate than the last which all his fellow economists attack.
Germany, when the Nazi party came into power, was in the position of having been stripped of all outside investments, of all gold, and in addition being heavily in debt to the financiers in outside countries for money borrowed to pay reparations.
The new Government would have been quite justified in doing what other revolutionaries had done and repudiated the external debt, and it might have been better for Germany and the outside world if she had done so. Other war debts have been repudiated right and left. France has never attempted to pay what she was owing after we had let her off a thousand millions, and we are not even paying the interest on our debt to America. Germany alone had been an honest debtor and is paying for it.
With no gold, no foreign exchange, six million unemployed and starving farmers she determined to go back to the fundamental principles of economics which have been lost sight of by the financiers of other countries. One thing she was determined on. Not to go into the world financial market and borrow money ever again.
This is the real quarrel that we and the U.S.A., the two big moneylenders, have with her. If she came to the “city” to borrow £100 millions all the attacks in the Press, the denunciations on platforms, the utilization of the fugitive Jew as a political stunt would stop. The City pulls the strings and the Press obey.
The fundamental principles are that wealth is the product of labour applied to raw materials to make articles of utility. Labour may be employed to make goods for immediate consumption, or to increase capital values by carrying out work which will enable more articles of utility to be produced at a lower cost. The building of motor roads is an excellent example of the second application of labour as it facilitates and cheapens the transport of goods. The German Government decided to introduce a new method of measuring the value of the mark, discarding gold and making the mark represent a labour unit. Taking the total output of labour in the country the number of marks in circulation is limited to that output, and so prices are kept very level, only small fluctuations taking place.
They also proceeded to make a very bold experiment by creating credit through the State to set everyone to work on some useful employment. They were under no delusion as to this fictitious capital. They realised it would have to be replaced by the only real capital, savings from the product of labour, and they took care that every penny was utilised as far as possible to increase the capital wealth of the country. Unfortunately it could not all be utilised for this purpose, because France and Great Britain having refused to consider Hitler’s offer to limit standing armies and carry disarmament as far as they were willing to go. People in this country including members of Parliament and newspaper editors are under the delusion that making guns is a legitimate employment of labour and are astonished that the more they spend in this way the larger the number of unemployed. Making guns makes the country poorer not richer as it is labour misdirected from increasing capital value.
The building of motor roads, the reclamation of land, the improvement of land already under cultivation and forests, the remodelling of factories, the capital expenditure necessary to utilise more fully Germany’s raw materials was all useful expenditure increasing the national wealth. When the Nazi Government proceeded by the creation of credit to set everyone to work, the economists here said that inflation and a rise in prices must follow.
No rise in prices took place. This was due in the first place to the centralised control and the willingness of the German people to obey orders, and the fact that no speculative cornering of raw materials and gambling on the stock exchange was allowed, and in the second place to the utilization of the money to produce capital goods of real value. There were no strikes for shorter hours and higher wages. The German workman knowing that he is not being utilized to pile up huge profits for the capitalists, plays the game. Gradually but steadily this created credit was replaced by real capital, savings obtained from industry.
The interesting result of the calculation of the mark in terms of labour, is that while the other capitalistic countries have millions of unemployed Germany has had to import foreign labour. It is true that most unwillingly she is spending money on munitions owing to the colossal expenditure in munitions here and in France but that is only a fraction of her expenditure which is going to increase the economic strength of Germany.
The mark stands today practically at its value in gold of the old gold mark.
As other countries are busy depreciating their currency, a depreciation which is shown in the rising value of gold, it is necessary to prevent money being taken out of Germany and to make the taking of money out of the country a severely punishable offence. In spite of every care smuggling does go on and there is a market for marks in London where they increase in value as the money of other countries is depreciated more and more.
Germany in trading with other countries is faced by the difficulty that she has no gold, no reserves of foreign exchange and no outside investments the interest on which is paid in goods. She has the further difficulty that she is faced everywhere by high tariffs, quotas and restrictions of output. These restrictions of output and artificial prices for raw materials do not affect us and the U.S.A. who own directly or indirectly most of the world’s raw materials which are not owned by France, Holland and Russia.
The English buyer has to pay an artificial price for tin but the owner of the tin mine across the street reaps the advantage. It is money from one English pocket into another English pocket. Germany buys the tin at our artificial price and the same applies to practically all raw materials. She needs colonies especially for semi-tropical products, palm oil, cocoa and so on. It would pay us a thousand times to give back her colonies. The £2,000 millions we are spending on armaments is because we refuse to give them back.
It cost us £8,000 millions to destroy her export trade which existed before the war. How much is it going to cost us to crush her again if we can succeed in doing so?
When trying to develop her export trade Germany could not do it on the plan followed by us with reserves of gold, and foreign exchange, and vast sums from investments abroad, so she applied the same principle that she had applied to her internal economic problem.
She knows the real labour value of her goods in marks, and going to a foreign country she proceeds to barter an exchange of goods for goods which is advantageous to both sides of the bargain. To do this she had obviously to arrange the exchange for a period of several years and give the other country credit to the extent of her immediate purchase of raw materials to be paid in manufactured goods. She has therefore brought trade to its ultimate real basis and cut out the complications of varying currencies.
This is called over here “unfair” method of trading. Every buyer and seller has the right to make such a bargain as suits them both and no one has a right to interfere. Germany is accused of subsidizing exports. This is not peculiar to Germany. We subsidize our coal exports, and this is not a new accusation. It was made after the War and caused Lloyd George to pass the Safeguarding of Industries Act. I believe no action was ever taken under this Act which is still open to anyone who can prove Germany is selling below cost of manufacture.
The real reason for the ferocity of Fleet Street against Germany is that the German Government has determined to work out its own economic problems and avoid international finance like the plague. If Germany came to the City for a loan the financial syndicates that control our “free” press would call off the journalists.
THE FOUR YEARS’ PLAN
Extraordinary misconceptions of the nature and purpose of the four years’ plan have become common in this country.
According to the Daily Express our Foreign Office have made it a condition of more friendly relations with Germany that the four years’ plan be withdrawn, a most remarkable request as my readers will agree when I have explained what the plan is.
The economic position of Germany, with no gold reserves, heavily indebted abroad and with no colonies and foreign investments, has been dealt with already. Evidently under these circumstances she is thrown entirely on her own resources, and must find what possibilities of development are to be found within her own country.
It is also necessary for her to consider what would happen in case of an attack by the allied powers of Europe. In the last war she was starved out and had in addition a serious shortage of materials required for munitions. She must therefore be prepared for this eventuality.
These considerations are not absent from the councils of other Nations. We are taxing all users of petrol to enable the I.C.I. to make petrol from coal without a loss and are heavily subsidizing agriculture without, it must be admitted, much success.
It is also obvious that increased use of imported raw materials for purposes of manufacture will not do anything to relieve the situation. She must seek to utilize the land to its highest capacity to produce food, and in addition call upon the ingenuity of her chemists to utilize fully her two raw materials — coal and wood.
In order to carry out this task in a comprehensive manner Field Marshall Goering has been appointed as the head of the four years’ plan and an organization has been created divided into six offices.
The Board for the production of raw materials has undertaken;
a) to increase the production of natural raw materials,
b) the prevention of waste through the use of raw materials for purposes not absolutely necessary,
c) the production of certain synthetic raw materials such as petrol, mineral oils, rubber and artificial wool which are made from coal or wood,
d) the encouragement of relevant research including a complex examination of the German subsoil,
e) the organization and direction of the production of industrial fats.
The section dealing with agriculture has to aim at producing raw materials which are scarce in Germany wherever there is a possibility of agriculture being able to do so.
The cultivation of the Soya bean to obtain a supply of vegetable fats is an excellent example, the production of vegetable fibres and an increase in sheep farming to add. to the supply of wool.
It is also the duty of this department to take all possible steps to increase the production of food.
In connection with food an interesting enquiry is to be made into the loss and deterioration of foodstuffs in transit and in the home.
The estimated loss from these two causes is put at 1,500 million marks a year. When we consider how careful and economical the German housewife is, the loss in this country is probably much greater. The savings in this direction involve correct storage of perishable foods and the collection and classification of refuse.
This household refuse is to be used for feeding pigs. Some 4,000 pigs are fed in this way on State property in Magdeburg. A similar arrangement prevails in other cities.
Powers are given in connection with the whole plan for the control of prices.
The difference between the position of Germany before the war and to-day is well illustrated by the following figures. Before the war she had 30,000 million marks invested abroad; to-day she has foreign debts of 13,000 million marks.
Her export trade has now improved sufficiently to show a surplus which is sufficient but no more than sufficient to pay the interest on her foreign debts. The aim of the whole plan is not self-sufficiency, which is both undesirable and impossible, but the making of an economically sound Germany which will lead to a natural development of her export and import trade.
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