We repudiate, of course, the view that Germany’s full domestic demands constitute a first charge on her resources and that what is available for her treaty obligations is merely the surplus revenue that she may be willing to realize, but at the same time, if the prior obligation for reparation that is fixed for Germany to pay, together with an irreducible minimum for her own domestic expenditure, make up in a given year a sum beyond her taxable capacity, then budget instability at once ensues and currency stability is also probably involved. In that event an adjustment of treaty obligations of years is obviously the only course possible. The amount that can safely be fixed for reparation purposes tends, therefore, to be the difference between the maximum revenue and the minimum expenditure for Germany’s own needs.
[ . . . ]
We fully recognize both the necessity and justice of maintaining the principle embodied in the treaty that Germany’s payments should increase with what may prove to be the increase of her future capacity. We also recognize that the estimate now made once for all might well underestimate this and that it is both just and practicable that the Allies should share any increased prosperity. All that we regard as essential as a condition of stabilization is that any such increased demands to correspond with increasing capacity should be determined by a method which is clearly defined in the original settlement and which is capable of automatic or at least professional, impartial and practically indisputable application.
[ . . . ]
We have done our utmost to apply the principle of commensurate taxation.
It is not open to dispute as a simple principle of justice, and it is contemplated by the treaty that the German people should be placed under a burden of taxation at least as heavy as that borne by the peoples of the allied countries. No single person in Germany, whether speaking as an individual or representing any section of the nation, has failed to accept that principle when it has been squarely put to him. Any limitation upon it, if there is one, must be a limitation of practicability and general economy expediency in the interest of the Allies themselves. Obviously it is morally sound and it would be clearly repugnant to all sense of natural justice that the taxpayers of the countries with large important regions devastated by the war should bear the burden of restoring them while the taxpayers of Germany, on whose territory the war caused no comparable devastation, escape with a lighter burden.
[ . . . ]
There has been a tendency in the past to confuse two distinct though related questions, viz.: First, the amount of revenue Germany can raise available for the reparation account, and, second, the amount which can be transferred to foreign countries. The funds raised and transferred to the Allies on the reparation account cannot in the long run exceed the sums which the balance of payments makes it possible to transfer without currency and budget instability ensuing. But it is quite obvious that the amount of the budget surplus which can be raised by taxation is not limited by the entirely distinct question of conditions of external transfer. We propose to distinguish sharply between the two problems, and first deal with the problem of the maximum budget surplus and afterward with the problem of payment to the Allies. In the past the varying conclusions formed as to Germany’s capacity have often depended upon which of these two methods has been chosen.
[ . . . ]
print version
return to list
previous document