General. In concluding his report to the Reparation Commission, the Agent General thus recapitulates:

"This review . . . is sufficient to show that much has been accomplished. Much, however, remains to be done. . . . The Plan has realized its two essential preliminary objects. The German budget... has shown a safe balance. . . . Germany has also succeeded in providing and maintaining a stable currency."

The Experts Plan itself contained the thought, "the reconstruction of Germany is not an end in itself. It is only part of the larger problem of the reconstruction of Europe." So, in enabling "Germany to satisfy her own essential requirements and meet her treaty commitments," the Dawes Plan has thus far been successful.

Looking to the future the report strikes a hopeful note, but admonishes: "The Experts Plan proposed in effect an international experiment in good will . . . to remove from the field of controversy a subject . . . largely economic in character, and to give a fair trial to methods of patient inquiry and quiet administration. In carrying it out . . . all the agencies concerned . . . have worked together loyally. . . . Its further progress will depend upon the continuance of that mutual faith and confidence which have made possible a satisfactory beginning."

REMAINING PROBLEMS

The greatest remaining problem in connection with reparations is that of the transfer of future maximum gold mark surpluses into creditor currencies, a trust placed in the hands of the Transfer Committee. All economists seem to agree that in the final analysis, the externalization of gold marks can only be accomplished in the form of surplus German goods and services which the creditor countries must be able and willing to absorb. At a recent meeting of the International Chamber of Commerce this problem was considered thoroughly by some of the best European and American minds. Several principal modes of externalization were considered:

1. German export balances of trade.

2. Deliveries in kind.

3. "Assisted schemes" of development in backward colonies of the Allies, and

4. Reinvestment in Germany of sums not thus transferable. Third General Meeting International Chamber of Commerce, Brussels, June, 1925. Resolution on Economic Restoration.

The first two of these represent normal means of transferring wealth across national frontiers. With a balance of trade in favor of her exports, Germany would obviously have credits to that extent in foreign hands, which could be placed to the reparation account. Similarly, deliveries in kind apply directly to the reparations account and thus escape the necessity of transfer. Deliveries in kind, to be acceptable, however, may have to be strictly limited to such commodities as will not compete with home resources. The Agent General of Reparations recently called attention to the extension of this practice into manufactured commodities, and raw materials, which to a certain extent could be produced by creditor nations themselves. Naturally there has been a loud protest from the nations affected and this has acted as a slight deterrent. There is a second limitation on the practice of deliveries in kind, if it is arbitrarily extended too far into the field of individual consumer's foods, it will adversely affect world trade by depressing price levels. Even in the field of capital goods, which if delivered to corporate municipal and similar bodies in creditor countries will not so much affect prices, the practice must not be extended so far as to strain Germany's economic unity nor to deflect Germany's productive activity into abnormal channels. Within these limits deliveries in kind, particularly of capital goods which can be used in the further creation of wealth, and delivered to corporate and public bodies where price psychology is stable, are to be encouraged.

By developing these two methods the amounts of gold mark surpluses to be transferred into foreign cash values would be greatly reduced. The remaining sums untransferable could be invested, in Germany, which is the fourth item mentioned above. This last is obviously not a permanent solution, for it only postpones the immediate transfer problem by turning present untransferable surpluses into the status of funded debts. The future then would have to be relied on to develop ways and means of ultimate settlement, probably along the lines suggested by the "assisted scheme" idea. But before turning to item three, attention should be called to the various possibilities opened up by the fourth item, i. e. investment

• Report of Agent General for Reparation Payments, May 30, 1925, pp. 16, 17. Le Temps (Paris) on May 4, 1925, published a vigorous protest of the Chamber of Commerce of Lille, France, against importation of manufactured goods from Germany, under the heading of Deliveries in Kind. See also Le Temps of May 24,

1925.

of non-transferable funds in Germany. The obvious way of accomplishing this would be permanent investment in Germany. That is to say, the sale of claims against the Dawes gold mark annuities to non-German private investors who desire to make permanent investments in Germany. But an equivalent method is the sale of German securities in foreign markets, which creates an immediate offer of foreign exchanges for German marks. Present indications are that this sort of borrowing may well be capable of relieving the difficulties of the transfer situation over the early years of payment. There can be little doubt but that foreign markets will continue to develop not only for German private securities, but perhaps also for the railway and industrial securities now in the hands of the Trustees created by the Dawes Plan, in which latter case the reparation obligation would be shifted from official to private hands, and thus into much more manageable form.

The third item, called "assisted schemes," represents a practicable form of German export which may be acceptable to ally creditors. It is really the export of German industrial skill and materials in the development of backward ally colonies, such as port and railroad construction in French Morocco, the Belgian Congo, etc. There is one obvious objection to this: it is in direct competition with creditor industrials. But this objection seems to be met by two facts: first, that development will only be undertaken at points which are so retarded as to discourage the immediate investment of private capital; and second, that of any given project, the Germans would perform, say, the first 30 per cent. of the work, whereafter national industrials would complete the work, using the German-constructed part as a margin of security on which to borrow privately for the completion. Such a plan, then, is feasible and would inure to the benefit of creditor peoples as a whole, but its wide exploitation may be blocked by that section of industrial interests in the creditor countries with which exported German skill would compete. In brief, there is, as Sir Josiah Stamp recently put it: “ a contest going on between sectional or industrial interests, and national or financial interests, almost before the real problem of reparations payments is begun."

At this point it is well to call attention to a growing belief in the United States that the coming years will see a startling economic Address before Third General Meeting International Chamber of Commerce, Brussels, June 25, 1925.

growth in sections of the world at present far behind the standard of the few leading nations, and that this development itself, by increasing the world's wealth and economic capacity, and thus proportionately reducing the incidence of present debt burdens, will give a new aspect to current economic problems and disclose new alternatives in the processes of solution. If the late war has created unnatural burdens and benefits between nations, conditions which may seem to militate for the moment against smooth international economic relations, it must not be forgotten that similar situations have existed in the past, and history records that the genius of men has hitherto been equal to the task of adjustment. Only a small portion of the globe is productive of economic wealth at the rate and in the degree which the Western nations enjoy, and if the greater portion should be suddenly stimulated by the achievement of the West and guided by the lessons of modern experience, untold sources of economic strength would be revealed which would be mobilized for the solution of general problems. This is particularly in point in the matter of transfers, a principal solution of which problem is said to lie in triangular and more complex relationships between nations in the fields of industry, commerce and finance. Potential new fields for German exports of goods and services, for example, are hidden in every people whose standard of living is below and may be raised to the average, and herein lies the possibility of revamping the routes of international trade and finance into schemes which may well be equal to the task of externalizing reparation payments, if not to straightening out all the dislocation caused by the war.

The economic world is in a constant state of change, and the last word in adjustment cannot yet be accurately foretold. Considerable American opinion leans toward a hopeful attitude for the future of the transfer and other related problems and is inclined to shy away from the immediate reshaping of tariff walls, meddling with trade, and other forced expedients of a like nature. Many believe, in a general way, that the science of capitalist economics looks constantly to equilibrium and itself sets up automatic correctives, wherever unbalancing excesses appear.

The Brussels Meeting finally agreed that, "It seems hardly probable that the (transfer) problem will be solved by any one means; but the result will be accomplished by various methods." Hope was expressed: "We are convinced that the evident difficulties can be over

come, but only by actual experience and the continual study of events to which governments and the business interests of the world must give their most serious thought."

This seems to be a fair thought with which to leave the transfer problem. It was first mentioned in the report of the First Committee of the Dawes Experts, who recognized the problem at the outset: "Experience, and experience alone, can show what transfers into foreign currencies can in practice be made." It has recently been pointed out that there is a wide divergence of views on the subject. But it is clear that Germany has been put on the road to health and the ability to produce surpluses of wealth applicable to the reparation debt, that the reparations problem has thus been started on the road to solution, and that all parties interested found in the Dawes settlement a common meeting ground for discussion of the practical difficulties to be encountered in making and receiving reparation payments.

INTER-ALLY DEBTS

It has already been noted that the inter-government debts arising out of advances made between the Allies in furtherance of the Great War have contributed a good share of the post-war confusion hindering economic restoration. Debtor countries on the whole have paid little attention to either the principal or interest of the demand notes held by the United States Government. There, was always the possibility of general cancellation such as Great Britain proposed in the Balfour Note. There was the excuse that since reparations from the defeated enemy were not forthcoming, as planned at Versailles, allies in the great struggle should not press or be pressed for settlement of war loans made to each other. But once the reparation question was put on the road to solution by operation of the Dawes Plan, the excuse broke down. The United States straightway put to rout the hope of cancellation, and serious consideration by America's debtors of ways and means of settlement was the almost immediate result.

SETTLEMENT LONG URGED

That some sort of settlement was prerequisite to setting in motion agencies of rehabilitation has long been foreseen. It was urged at "The Transfer Problem, etc.," by George P. Auld, The Annalist, Vol. 25, No. 647. p. 773.