The End of Reparations

THE MAN of the MONTH

[Cape and Smith, $3.00]

DR. SCHACHT’S book on reparations, which has been ably translated by Lewis Gannett, is by no means a calm, objective discussion of that tangled problem It is a truculent defense of his record at the Reichsbank and at the Young Conference at Paris. It is also an arraignment of the attitude and conduct of the French at that Conference; and a condemnation of the internal economic policy of the German Government from the Dawes Plan to the present. The author does not mince words, and he tells some tales which have never been revealed before. In the course of his rather headlong narrative he hits almost every head in sight. Owen D. Young and Sir Josiah Stamp are the notable exceptions. So it is an entertaining and diverting book.

His conclusions concerning reparations are not at all vague. It is Germany’s duty to cease her payments until the obligations which the Allies assumed in the Young Plan are carried out. Schacht consented to sign that plan as chairman of the German delegation, because it provided that ’the new Plan rests on the principle that the complete and final settlement of the Reparations question is of common interest to all the countries . . . and that the Plan requires the collaboration of all these countries. Without mutual good will and confidence the object of the Plan would not be attained.

Collaboration is the heart of the obligations assumed by the Allies. Schacht insists that this fundamental requirement has been neglected and violated. Tariff barriers have been raised against Germany’s exports. The Bank for International Settlements, he insists has thus far done nothing to promote world trade in Germany’s interest. Since the Allied governments have failed in their covenants, the only course for Germany is to stop paying.

Indeed, he insists that the final act of the Hague Conference already undid the spirit of the experts’ report by providing that the creditor powers should resume their full liberty of action in case it was found that the German Government had committed acts revealing its determination to destroy the plan. This injection of political sanctions into the Hague settlement he considers utterly intolerable. So strongly did he feel this that he resigned his post as President of the Reichsbank in the spring of 1930. He holds that this ’sanctions clause’ is a deathblow to the basic idea that the reparations problem must be treated as an economic problem. The book is an extended argument lor this thesis.

At the time of his resignation many thought that he was making a mountain out of a molehill, and that his emphasis on this point of reintroducing politics into the problem was a mere subterfuge. He has the support, of no less a person than Owen D. Young. Two weeks after Schacht’s resignation, Mr. Young said, in an address at the University of California: ‘At The Hague, politics again appeared. At the second Hague Conference politics again made an effort to substitute military sanctions for Germany’s non-performance, and in a most attenuated form such sanctions were provided.’ Dr. Schacht quotes this statement. Mr. Young uttered some further words which Schaeht does not quote, but which are pertinent here. ’Economics does not like military sanctions. Dr. Schacht protested, and has recently resigned the presidency of the Reichsbank because he was unwilling to assume responsibility for the execution of a plan which carried burdens additional to those imposed at Paris, and which had any color of military sanction. Dr. Schacht has been accused in taking this action of having domestic political ambitions. It is fair to him to say that his protest arose, not because there were polities in Dr. Schacht, but because politics had again crept into the Plan.'

The action of the last few months has fulfilled his worst fears. The flight of capital from Germany was exactly the sort of thing which political uncertainty generates People in Germany have not forgotten the Ruhr invasion of 1921, nor have foreign investors forgotten it.

Schacht had been given a severe object lesson in the use of political pressure during the Paris Conference. It had taught him how disturbing such pressure was to economic planning and control. During that conference there was nothing less than a concerted French manœuvre to attach the German currency in order to intimidate that country’s experts and its government. The story is told in The End of Repartitions for the first time, although everyone who was in Paris and followed the conferences closely was aware of it.

Schacht, who was personally charged, as President of the Reichsbank, with the responsibility of maintaining the integrity of the mark, was filled with resentment at such underhanded tactics. Much of the bitterness which he displays in the present volume is traceable to this episode. The book is worth reading, if only for the restrained account which he gives of this occurrence.

But Schacht does not confine his criticisms to the creditors of Germany. He always protested vigorously against the financial policies of the German Government, and made himself unpopular by doing so. He pays his respects to the shortcomings of that system in violent terms. To the Socialists he attributes the principal share of the blame for the muddle in which the government found itself in 1929. Its financial straits were so dire that his hand was weakened, and he chose as the lesser evil to accept any settlement which would reduce the reparations payments materially below those of the Dawes Plan.

He was always an uncompromising opponent of short-time foreign loans. Here, again, the events of recent months show that his instinct in financial matters was unerring.

The book is well written and excellently translated. During the coming months the subject of reparations will be to the fore in public discussions. Dr. Sehacht’s book will be a veritable storm centre wherever the topic is raised.

DAVID FRIDAY