1930s >> 1931 >> no-324-august-1931

Editorial: The German Crisis

The present situation in Germany, and the international financial crisis springing from it, brings into clear light some of the contradictions bound up with the capitalist system of production.

Germany was defeated in the war and the victors hastened to collect the fruits of victory, but there were a host of obstacles in the way. The fruits could only be obtained from the surplus value (unpaid labour) wrung from the German workmen. In order that German workmen should be able to labour German industries must flourish. This fact, and the international nature of capitalist investments and banking operations, along with the international complications of buyers and sellers, frustrated any attempt to ruin German national capitalists. The victors dared not kill the goose that they hoped would lay the golden eggs. Germany was like the debtor with “expectations” who had to be kept alive and well.

Since the war German industries have developed and German industrial competition has been keenly felt in all direction. When attempts have been made to curb their industrial aspirations, or press for reparation settlements they just pointed to probable ruin as the result. Their plan of campaign has been aided by the mutual distrust and jealousy of the erstwhile allied nations. France, in particular, whose position looked to be most promising, has constantly felt the pressure of its allies in thwarting its industrial designs.

Although France has undergone a rapid and thorough industrial revolution in recent years, the progress of its industrial magnates is hindered by the intrigues and jealous activities of their rivals in other nations who have suddenly discovered an altruistic interest in Germany’s welfare. These other nations frequently call upon France to make concessions to Germany and foster the idea that France is the thorn in the rosebud. In the meantime, German capitalists pile up their fortunes and their debts, grin, and groan about the burden of the peace terms—which deprives them of a portion of the fruits of the German workman’s labour.

In particular, the growing gold reserve of France has been the subject of much feeling to outside capitalists. The present German crisis has been seized upon at once to try to induce France to disgorge some of it. The “News Chronicle” for July 14th in an editorial article under the heading “France’s great opportunity,” puts the matter bluntly as follows:

  The world is face to face to-day with an economic situation more sinister than any with which it has ever been confronted. Unless from some source credit and confidence can be promptly restored in Germany, Germany will collapse.
The situation thus created places France in a position which is really decisive. On the one hand she is the only European nation which possesses the financial resources necessary to meet the case, and, on the other hand, she alone can create the atmosphere of goodwill and confidence, without which no outside financial help is likely to be forthcoming.

Conferences of international financial advisers and political “heads” have been held and, at the moment of writing, France appears to have been induced to do her share in backing a loan.

The “Sunday Express” for July 19th printed a long article setting forth the financial details of the situation, from which the following points are taken :—

  • Germany owes America £650 millions; America also has £300 millions invested in German industrial securities and real estate.
  • Germany owes England £150 millions, and about £100 millions to France, Switzerland, Holland and Sweden, but not much of it to France.
  • Included in the above totals is £300 millions of short term loans to Germany repayable in October. It is this money that has caused the crisis as Germany is unable to find it.
  • £150 millions of this short term money is due to America and £100 millions to England.

France’s interest in the above is negligible. On the other hand she has a large amount on short term loans in Roumania, Hungary and Poland—which goes if Germany collapses. Apart from this, France’s main interest is in the £50 millions reparations money guaranteed annually under the reparations agreement. The fall of the German government, which seems certain if they either accept conditions for a loan or fail to surmount the crisis, will probably ruin English and American merchant banking houses and compel France to say good-bye to the £50 millions a year.

The “Daily Express” article contains one statement to which we must call attention, although it is really outside the subject of this article. There has been an almost unanimous moan about the shortness of money in this country, and an attempt to trace industrial troubles to this source. It is therefore useful to note the following from the above mentioned article:

“Meanwhile,” what about Great Britain? She is in a good position. If it were necessary for her to meet her foreign obligations we could mobilise from all sources—we could send out of the country —as much as £100,000,000 in gold, without disturbing the necessary cover for the note issue of the Bank of England.”

The real crisis in Germany, however, is political rather than financial. It is a fight for life on the part of the coalition Government parties. The Hitler Party and the Communists repudiate the reparation terms and seek to blame reparations for the present situation, and with them the Government and also the Social Democrats, whose votes have more than once saved the Government from defeat. These parties are on the horns of a dilemma. If they repudiate the reparations agreement and Germany crashes, they will go down too. If they stand by the terms of it Hitler and his group (now the second largest party in Germany, the Social Democrats being the largest) will probably swoop into power. There is a third way out for them—to invite Hitler into a coalition Government, in which case they would all stand or fall together. At the moment the interested parties outside of Germany are anxious that the coalition parties should retain control on account of the risk of debt repudiation in general.

At the moment the Social Democrats are using their votes to prevent the defeat of the Government. On the 17th July the Reich and State Governments were given power to confiscate or suppress at discretion any periodical in the country. They can compel any periodical to insert in the position, in the type, and with the headings they demand, and without any comment, any statement or declaration whatsoever. (“Sunday Times,” July 19th.)

That such steps should be deemed necessary is an indication of how frail is the Government’s hold upon power.

There is one lesson the last few days should make plain once again. Socialism cannot gradually arise in a capitalist world. The German S.D.P. has professed to be aiming at Socialism and believes it possible to introduce it gradually while still assisting in the administration of capitalism in association with capitalist parties. But the running of capitalism demands so much (quite apart from corruption and the like), and its financial operations are so complicated, that there is neither the time nor the means left to do other than make the machinery run smoothly. When the machine gets out of gear those at the head of affairs and all parties supporting them get their due—the antagonism of the masses.

The reparations question, and the financial crisis generally, is occupying the whole of the attention both of the German Social Democrats and of the British Labour Government. Mr. MacDonald told the London Conference on Monday, July 20th, what was the issue. He said (”Daily Herald,” 21st July) :—

Our position, therefore, in a word, is to restore the confidence of the foreign investor in Germany.

What a spectacle for laughter! The English and German Labour leaders struggling to avert the ruin of the bankers and to restore the confidence of the investing class in the stability of German capitalism !