France may partially control German industry in return for financial assistance
THE NEW REPUBLIC
SINCE it is believed by many economists that the recovery of world prosperity is largely dependent upon how France and Germany manage to settle their financial differences in the near future, the relations of these two countries are being commented upon to a considerable extent. The New Republic says:
“A decision must be reached on Germany’s financial future by February, 1932, when Germany’s foreign short-term credits, now frozen under the Wiggin ‘standstill’ agreement, will fall due. The French have, consequently, a little more than two months in which to carry through their plans.
“The first step is to be the appointment of an experts’ committee under the Young Plan to re-examine Germany’s capacity to make reparations payments. This committee, according to French plans, is to bring in a report stating that German nationals have huge resources abroad, possibly as much as four or five billion dollars, and that before Germany can justly plead insolvency, these funds must be repatriated. The French hope that such a report will destroy al-1 sympathy for Germany, especially among Americans. It is, of course, entirely true that German capitalists have large sums abroad. However, it is equally true that there is no conceivable way for the Bruening Cabinet to force the recall of these balances. No government, including the French government itself in 1924-26, has ever been able to prevent the secret flight of capital.
“The experts’ committee will be mostly for show. While it unearths Germany’s financial sins, the French will undertake direct negotiations with Berlin. They are said to have formulated two distinct sets of demands, one economic and the other political. On the economic side, they will demand representation on the directorates of certain of Germany’s most important industrial and business enterprises. In return, French commercial banks will grant these corporations generous long-term loans. This is the meaning of the Franco-German economic ‘co-operation’ committee set up last August, at the time of the Laval-Briand visit to Berlin. France, in other words, intends to use her present financial strength to muscle into German business and industry, much as Capone used his gunmen to muscle into the Chicago beer trade.
“The Laval government has already proposed the creation of a Franco-German shipping cartel. French banks, according to the reputed terms of this offer, are to advance fresh capital to German shipping and, in return, will receive a certain measure of control. Similar offers will be made to the German electrical and railroad-equipment industries, which have large orders from Soviet Russia. The French are willing to finance this Russian business providing they are given a share in its direction.
“It is obvious that if French capitalists and French banks succeed in gaining control of any considerable portion of Germany’s
economic machine, the French government will be in a position to bring greatpressure upon every succeeding German government for years to come. This is the classic pattern of economic imperialism. France will be able to influence Germany’s domestic politics in something the same way that our State Department, because of American investments in Mexico, has been able to dominate each Mexican administration.
“Among the political concessions which France will probably demand of Germany will be a definitive acceptance of the present German-Polish frontier, and a final renunciation of Germany’s long cherished hopes for Anschluss with Austria.
“Germany is badly frightened today. Government officials, native and foreign journalists, casual conversations with all sorts of people, the whole tone of the press, all bear witness to it.
“What do they fear? Most immediately, of course, the suffering which they foresee for many of their people during the coming winter. Next, perhaps, the possibility of an attempted revolution by the Right or the Left, the Nazis or the Communists—though this fear is less lively than it was a few weeks earlier. They dread, more vividly than anyone in any other country can possibly do, the possibility of another financial collapse and a repetition of that wild, unlimited inflation of the currency which once before brought such suffering. In the past, the Germans have clung to a belief that if only France, England and the United States would experience a unanimous change of heart, the troubles of the Fatherland would soon be over. They no longer believe so today. As matters stand this autumn, they feel that England and America have troubles of their own so serious that
even if they had the will, they have not the power to be of substantial aid to Germany. They consider that they must in reality deal with France alone, and that she will drive a desperately hard bargain.
“Germany’s banking system is operating on the narrowest margin of reserve capital; her people are hard up and able to buy but little ; her foreign trade is suffering from the competition of England and the Scandinavian countries—which now have an advantage in costs because of their depreciated currencies.
“It was fear which, in the opinion of competent observers here, was responsible for the victory of Chancellor Bruening and his government on the last day of the Reichstag session, in the middle of October. It wasn’t that very many people had faith in him, although he is generally considered Germany’s strongest leader and just now almost her only one. It was merely that there seemed no hope of doing any better with anyone else. The Reichstag will not meet again until the end of February, and the present government will therefore presumably last until then—unless there is a Communist or Nazi revolution in the meantime. And at the moment, as I have said, there seems somewhat less likelihood of either than there was a few weeks ago.
“Despite their blustering oratory, the Nazi have no real programme; their counsels are those of despair. As for the Communists, it is generally believed in Berlin that they are held in check by Moscow. The U. S. S. R. is so hard hit by the worldwide depression that it cannot afford to give a Communist revolution in Germany the aid which would be expected; and it cannot risk the war which would probably be started if a Red government in Berlin became a reality. The Soviets cannot even afford the temporary interruption which would ensue in the German manufacture of machinery to go to Russia and help in carrying out the Five Year Plan.
“Germany is talking today, and very seriously, of two sorts of inflation. The first is involuntary, the result of being forced partly or completely off the gold standard. The second is ‘limited and controlled’ inflation for the purpose of stimulating industry by an automatic reduction of wages, and the better to compete in foreign markets with the countries which have lately devaluated their currency. Very few people at present seem to believe that Germany will be able to remain on the gold standard, unless perhaps the situation is saved by a sudden and drastic improvement in world business conditions. The flight from the mark continues, and despite every sort of new rule in regard to it, the leaks go on. Actual gold and jewels are smuggled out of the country. German securities owned abroad are sold there and the proceeds do not come back. ‘Dollar bonds,’ of which there are large amounts outstanding in Germany, are sent abroad to be sold. Perhaps most important of all, exporters leave their profits in the countries where they have been earned.”
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