Iii the Dawes Report

III. THE DAWES REPORT The Dawes Committee began its meetings in Paris on Jan. 1924, and reported on April 9, 1924. Although neither the evacu ation of the Ruhr nor the question of reparations was mentioned in the terms of reference they really were in the forefront of the task. In the first place, so long as the occupation of the Ruhr continued and Germany was not a complete fiscal unit, she had not entire control of her receipts and expenditure, and there could be no guarantee of a balanced budget. In the second place, the reparation liabilities under the treaty figured amongst the budgetary expenses, and if in excess of budgetary possibilities, made it impossible to guarantee that steps taken for the stability of the currency would be permanent and effective. The question of reparations, therefore, figured prominently in the report.

General Principles.

The report adopted a business attitude and considered political factors only in so far as they affect the practicability of the plan. It sought the recovery of debt, not the imposition of penalties, regarding the payment of that debt by Germany as her necessary contribution to repairing the dam age of the war. The committee recommended it as in the interest of all parties to carry out this plan in good faith, these assur ances being paramount having regard to the temper ruling at that time, and the suspicion of motives. They avoided the political guarantees which had been so prominent hitherto and proposed only economic ones. They were emphatic that for suc cess in stabilizing currency and balancing budgets, Germany needed the resources of German territory as defined by the Treaty of Versailles, and free economic activity therein. On the vexed question of military "sanctions" and occupation which were strictly beyond their terms of reference, they confined themselves to stating "within the unified territory, the plan requires that, when it is in effective operation : I. If any military organization exists, it must not impede the free exercise of economic activities; 2. There shall be no foreign economic control or interference other than that proposed by the plan." The report treated stabilization of currency and the balancing of budgets as interdependent, though provisionally separable for examination, and insisted that currency stability could only be maintained if the budget were normally balanced; while the budget could only be balanced if a stable and reliable currency existed. Both were needed to enable Germany to meet her in ternal requirements and treaty payments. They laid stress upon Germany's economic future as indicated by her productive power, plant capacity, increasing population, technical skill, material re sources and eminence in industrial science.

Organization of the Reichsbank.—In their proposal for the stabilizing of the currency they suggested that a new bank be set up or the Reichsbank reorganized. The main characteristics of the bank were given : I. To issue notes on a basis stable in relation to gold, with an exclusive privilege; 2. To serve as a bankers' bank, establishing the official rate of

discount; 3. To act as the Government banker, but free of Government control; 4. Advances to Government to be strictly limited; 5. To hold on deposit reparation payments; 6. The capital of the bank will be 400 million gold marks; 7. It will be directed by a German president and managing board, who can be assisted by a German consultative committee ; 8. The due observance of its statutes will be further safeguarded by a General Board, of which half of the members, including a commissioner, will be foreign.

They were emphatic that even granted full economic and fiscal sovereignty, balancing the budget would necessitate a period of relief from reparation payments, though the pressure of political interests was too great to allow of a complete suspension of de liveries in kind.

A lthough.the budget might be balanced without the total capital debt of Germany being fixed, they maintained it could not be continuously balanced if there were any uncertainty as to the maximum annual charge that would fall upon it for some years, on a basis clearly prescribed in advance. The report deferred to the principle that the German people ought to bear a burden corn mensurate with that in the Allied countries, and they claimed to apply the principle "to the full limit of practicability." The Transfer Committee.—A transfer committee of an inter national constitution was set up to control the "delivery" pro gramme, to receive the payments in marks in Germany, and to be responsible for the extent to which, and the way in which, these sums were transferred abroad in foreign currencies. Thus the mistake of forcing Germany beyond the economic point in the purchase of foreign currencies, which had been made in the past, was guarded against for the future. No attempt was made, as it was outside the terms of reference, to assess the length of time during which these payments should be made, or the total amount of the Reparation debt, but it was clear that the amount to be paid in the standard year, viz., milliards, would not do more than pay the interest on a portion of the liability imputed under the treaty. It was provided, however, that the payments in the standard year should be increased with the increasing prosperity of Germany, the measure to be determined by an "Index of Prosperity" based upon comparative statistics of imports, exports, public revenues, population, consumption of sugar, etc. In this way it was at least possible that the sums ultimately payable annually would be greatly in excess of the 24 milliards in the standard year. In the event of the economic circumstances of Germany's foreign trade being such that the transfer committee could not succeed in transferring the whole sum to the Allies, it was provided that there should be an accumulation in Germany up to a limit of 5 milliards, at which point, if necessary, the pay ment should be reduced.