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EFFECTS OF THE WAR ON CREDIT. CURRENCY, AND FINANCE. 319 



The Effects of the War on Credit, Currency, Finance, 

 and Foreign Exchanges. — Report of Committee (Professor 

 W. E. Scott, Chairman; Mr. J. E. Allen, Hon. Secretary; 

 Professor C. P. Bastable, Sir E. Br.\brook, Dr. J. H. Clapiiam, 

 Dr. Hugh Dalton, Mr. B. Ellixger, Sir D. Drummond Eraser, 

 Mr. A. H. Gibson, Mr. C. W. Guillebaid, M\\ F. W. Hirst, 

 Professor A. W. Kirkalby, Mr. F. Lavington, Mr. D. H. 

 EoBERTSON, Mr. E. Sykes, Sir J. C. Stamp). 



Last year the Committee discussed thirteen questions which proved controversial. 

 We were unable to make unanimous recommendations, and presented a Report 

 which was largely a symposium of individual opinions. This year we have 

 discussed only seven questions, and have aimed at the greatest common measure 

 of agreement. 



Question 1. — What are the 'principal differences in the ecoriomic inpience 

 of Inter-Ally Debts or German Reparations and Indemnities in the late War as 

 compared with precious Wars? What would he the result of cancelling or 

 reducin(]—{a) Inter-Alh/ Debts? (b) German Reparations and Indemnities.' 



The most obvious difference is that of the amount of the obligations com- 

 pared with tlie productive power and resources of the debtor countries. Tn 

 some cases something might turn on the datum taken, as, for instance, should 

 it be the pre-War capacity (in the case of a country which has sustained much 

 war damage) or the present capacity (which is in most cases uncertain) or the 

 calculated future capacity (which is much more uncertain) ? Further, as their 

 size is also extremely great in relation to the productivity of the recipient 

 countries, the disturbance to those countries' industries at the initiation and 

 termination of the period of receipt of the annual payments of goods, etc., is 

 correspondingly great. Moreover, so far as Germany and Great Britain are 

 concerned, the industries of these countries are competitirc and not complemen- 

 tary to an unusual extent. A further difference may be found in the extension 

 'of credit; the greater commercial interdependence of nations in the pre-War 

 system tends to accentuate the initial effects of the disturbance caused by pay- 

 ments of indemnities, of interest and of principal : at the same time it is 

 probable, or at least possiljle, that the credit system is capable of developing 

 compensatory action liy whicii such consequences would be counteracted. If 

 we turn back to the nearest parallels which history offers and compare the late 

 War with the cognate balance-of-povver wars against Louis XIV. and Napoleon. 

 we find that Louis XIV. was never left at the mercy of the Allies as Germany 

 has been, and that in the case of Napoleon the consummation of the war was 

 a restoration of the French monarchy, which had then to be treated as a 

 friendly Power. 



Although more than three and a-lialf years have passed since the Armistice, 

 the amounts to be paid by Germany in respect of reparations and indemnities 

 are still indefinite. Questions which ought to have been considered and decided 

 in accordance with common-sense and economic law have been confused by 

 electioneering and political exigencies. No unbiassed observer imagines that 

 the enormous sums imposed by the Peace Treaty can ever be paid by Germany, 

 especially a Germany which has lost overseas possessions as well as territory 

 containing great mineral wealth both on the eastern and western frontiers. Up 

 to the present it is uncertain how far the actual money pa^Tnents made by the 

 German Government exceed (if they do exceed) the cost of the Armies of 

 Occupation. 



Note. — Sir Drummond Fraser dissents, holding tliat Germany h able to 

 pay her full reparations ' if a genuine business proposition were placed before 

 her drafted by business men and not politicians, qilus academicians. Had the case 

 been reversed Germany would not only have put a sound business proposal 

 before the Allies, but she would also have exacted the uttermost farthing 

 for reparations.' 



1022 Z 



