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Senator Moses. On page 101 and page 103 you will find a reference to the central Rhine commission.
Mr. Baruch. What did you say about appointments?
Senator Moses. The central Rhine commission, as I have always understood, was an international body established by convention prior to the war, and had fimctions then. Now, according to the dispatches from Paris, which appeared in the morning paper yesterday, that commission is functioning with an American representative on it. I was wondering whether you knew anything about it.
Mr. Baruch. I am not qualified to give any explanation upon that, Senator.
Senator Mccumber. Mr. Baruch, I should like to ask you a question or two. It was at least suggested in some of the answers of yesterday that it would be extremely difficult for Germany to respond to the damages assessed by the allied powers against her. Let me ask you first if there is not a provision in the treaty that Germany shall at least be required to pay as heavy a tax as the other nations?
Mr. Baruch. Yes; that is correct.
Senator Mccumber. And she probably could pay as heavy a tax as other nations engaged in this war, could she not?
Mr. Baruch. Yes.
Senator Mccumber. Now I call your attention to the fact that in the year 1919, ending June 30, the per capita tax in Great Britain was $86.13, while the per capita tax in Germany was only $22.88, or only about one-fourth as much as in Great Britain.
Senator Pomerene. Will you please give those figures again, Senator?
Senator Mccumber. Tn Great Britain the per capita tax for the year ending June 30, 1919, was $86.13, while that of Germany was S22.S8, or about one-fourth the per capita tax of the people of Great Britain; and the per capita tax of the United States was $39.13. or nearly double the per capita tax of Germany. Now with the German industries in such a position that they can be immediately put in operation the moment that she gets over her Bolshevik fever, is she not in a pretty fair condition to pay such additional tax, equivalent to that of other nations, and thereby take care of this sum of about $24,000,000,000 that is assessed against her?
Mr. Baruch. 1 will answer that question in a moment. First I wish to say that the impression that 824,000,000.000 is the total sum is incorrect, because that is only the first issue of securities. But if you will notice, if goes on to say "shall forthwith issue any further'obligations" so that the 824,000,000,000 is not the.limit of what Germany may be assessed to pay, but the amount is unlimited.
Senator Mccumber. That is a sort of indemnity; and then she is to pay reparations in addition.
Mr. Baruch. No; the whole matter is all reparation, but the $5,000,000,000 bonds and the two succeeding amounts of $10,000,000,000 each are amounts that will be issued under certain conditions; but they can issue further amounts if it is found that she is able to pay and that the bill calls for the amount. So tho $24,000,000,000 is not the limit of what can be called for under the clauses of the reparation. Then, no doubt your figures as to taxes are correct; but Germany did not pay the costs of the war in the same manner, for instance, as did England and the United States. If my memory serves me correctly, Germany paid only about 9 per cent of the cost of the war by taxation. Most of her costs of the war were paid through issues of securities.
Senator Mccumber. She paid only 9 per cent by taxation.
Mr. Baruch. Yes. That accounts for her small amount of taxes. The other nations paid varying percentages. The United States stands, I believe, at the head of the list in the amount of money that we have actually paid, by taxation, to defray the costs of the war.
The Chairman. The United States has raised much more by taxation in proportion to the total expenditure, than any other country?
Mr. Baruch. Yes. I would not be certain about the figures, but the amount raised by taxation by the United States is somewhere between 35 and 40 per cent of her total expense. Those figures may be wrong, but we stand at the top of the list on the amount of the cost which we have paid by taxation.
Senator Mccumber. It is higher than England. England had paid about 28 per cent and we stand a good deal higher than that.
Mr. Baruch. I believe that is correct, Senator. Now, as to the ability of Germany to increase those taxes, there is no doubt that she can do so; but I would like to call your attention to this fact, that although her plants in themselves, the physical plants, are intact, and she saw to it through a systematic and wanton destruction of her neighbors that they would be so—she not alone destroyed those plants but took things out of the Belgian and French and Italian plants and increased her own facilities in that way—she is not in a position to take advantage of that unless the reparation commission permits her to do so through the purchase of raw material. She has got to have raw material, cotton, copper, wool, jute, and so on, to put into her factories, in order to enable them to have something to manufacture.
Senator Mccumber. But the authority is vested in the commission to do that.
Mr. Baruch. If she had a world market, and was not restricted as to the amount of money she could spend for these things, your statement would be absolutely correct. I have answered the question indirectly. She can not go ahead and do what it appears she can do unless the reparation commission permits her to do so.
Senator Mccumber. And if the reparation commission act with judgment, they will permit her to do so?
Mr. Baruch. As an act of good judgment, they will. _ Senator Mccumber. And we must assume that they will do that. Now I again call your attention to the fact that in the matter of determining whether Germany can pay a greater assessment of taxes, the debt of Germany is to her own nationals for the most part, and under the treaty this debt must be subrogated to the interest of the assessment made by the Allies against Germany.
Mr. Baruch. Quite correct.
Senator Mccumber. So at present she will not have to look after that debt unless it be for the purpose of strengthening her own credit in order to raise money; and secondly, that while the United Kingdom at the date I have mentioned, June 30, 1919, had an estimated national wealth of about $85,000,000,000, Germany had $78,000,000,000, or nearly as much, while her taxation was only about one-fourth as much. Therefore, with a wealth nearly equal to that of Great Britain, including Ireland—the United Kingdom—do you not think that without destroying her industries she could reach an amount of taxation equivalent to what is imposed upon the British subjects and thereby meet these obligations, with the proper assistance given by the reparation commission?
Mr. Baruch. 1 do not think she can, for this reason, Senator, that England has a free supply of raw materials. Germany has lost a large percentage of her coal. She has certain obligations under the treaty for the delivery of coal. If I mistake not she has lost something like 70 per cent of her iron ore.
Senator Mcctjmber. Can that be remedied to any extent by the reparation commission?
Mr. Baruch. No, sir; because she has got to go out into the open market and buy in competition. The delivery of her coal can be ameliorated to the extent that it must not interfere with the economic and industrial life of Germany.
Senator Mccumber. Yes; but let me ask you right there, is not the coal condition in Great Britain practically as bad as it is in Germany to-day or nearly so? Are not conditions extremely bad?
Mr. Baruch. I should say they are very grave.
Senator Mccumber. I wish you would explain to the committee what you mean by "very grave."
Mr. Baruch. Well, I would not want to qualify as an expert upon this subject, but the production of coal in England has been very seriously hampered from Various causes with which you gentlemen are familiar, and that has resulted in very high prices for coal. The production has decreased and the costs have gone up, and it is of very serious moment to England, because coal, of course, is one of the bases of manufacturing, and the cheap production of coal is one of the great causes of England's supremacy both in her manufacturing and in her bunkering of ships all over the world; and of course it is a matter of very serious moment to England that she should be able to continue to have a large and constant and cheap source of supply of coal; and from the present appearances it looks as though this was very seriously menaced.
Senator Johnson of California. That arises out of internal differences, does it not?
Mr. Baruch. Yes. I did not want to convey any other impression.
Senator Johnson of California. It is not because she has not sufficient supply or because that supply can not be mined, but it is because of differences that exist.
Mr. Baruch. Yes; internal social and labor conditions.
Senator Johnson of California. Exactly.
Mr. Baruch. There has been considerable talk regarding the lessening of her coal mines, but that may be only gossip and rumor. because those things always appear.
Senator Johnson of California. As I gather, the supply exists and is easy to be had, but the internal differences which exist have resulted in recent investigations, and these differences, and the question of the nationalization of coal mines which is now being discussed, are the reasons for the existing situation, are they not?
Mr. Baruch. Precisely.
Senator Mccumber. But nevertheless the condition is there?
Mr. Baruch. Oh, yes.
Senator Mccumber. And it is a serious condition.
Mr. Baruch. A very serious one.
Senator Mccumber. As a matter of fact, do you not think that the United States will be equally interested in bringing about a condition in which all the industries of Europe can be again put into operation, for our own financial gain?
Mr. Baruch. Unquestionably so.
Senator Mccumber. For instance, Great Britain up to the time of the war bought from the United States about one-half of all of our exports. She was our greatest customer. Our trade with Great Britain was more than double our trade with Germany prior to the war, on an average.
Senator Johnson of California. Did the Senator mention textiles?
Senator Mccumber. No; I say our commercial trade with Great Britain was about double our trade with Germany, and the balance of trade in our favor, of course, was about double. Take the year ending June 30, 1914. We sold to Great Britain nearly $600,000,000 worth of goods and bought back from Great Britain less than $300,000,000, giving us over $300,500,000 in our favor.
Mr. Baruch. That was in 1914?
Senator Mccumber. In 1914; while to Germany we sold $344,000,000 and purchased $189,000,000, leaving but $154,000,000 in our favor. Now, inasmuch as Great Britain as well as Germany is a heavy purchaser of our goods—and Italy likewise—should not our policy be to assist all those nations to be put on their feet as soon as possible?
Mr. Baruch. Unquestionably.
Senator Mccumber. And that assistance should not be given any more to one nation of the Old World than another?
Mr. Baruch. I think they all ought to be assisted, but I think good judgment should be used in the way they should be assisted, and to whom assistance should be given.
Senator Mccumber. But our allies at least have an equal claim with our enemies upon our generosity?
Mr. Baruch. Oh, unquestionably.
Senator Johnson of California. Does that apply to China?
Senator Mccumber. I think so.
Mr. Baruch. I think so.
Senator Swanson. To get my own mind clear. There is nothing in this treaty that prohibits the nationals of Germany individually from buying all the raw material that they see proper, in order to develop their own factories, is there?
Mr. Baruch. Yes; there is.
Senator Swanson. Do you mean that an individual factory in Germany can not make purchases of raw materials except through the reparation commission?
Mr. Baruch. No, sir; they can not.
Senator Swanson. Where is that clause?
Mr. Baruch. Article 235. Mr. Norman Davis is more familiar with that than I am, but article 235 provides that—
Out of this sum the expenses of the armies of occupation subsequent to the armistice f November IT a may be judg to be essential
«3 may be judged by the governments of the principal allied and associated powers 'al to enable Germany to meet her obligations for reparation may also,
of November 11, 1918, shall first be met, and such supplies of food and raw materials
10 oe essential to enable tiermany to meet ner obligations lor repa
Senator Swanson. That refers to the first $5,000,000,000?
Senator Swanson. That is applicable to the reparation fund, isitnot?
Mr. Baruch. Yes; but out of that the amount of cash that Germany could pay in the first few years is limited, and in order to give her an opportunity to buy raw materials they said she shall have so much out of this as is necessary to buy them. Now, a man can not go and buy copper or jute or some other raw material and send credit out of the country unless the reparation commission let him do so, because it might "affect the payment of this first $5,000,000,000 in cash.
Senator Swanson. Do you mean that individuals can not do it?
Mr. Baruch. They can not if it conflicts with the first cash payment.
Senator Swanson. I do not catch that. I had an idea that there was a reparation commission provided, but that a concern in Germany could buy raw material if it had the money or credit individually, and then, in addition to that, that the reparation commission could make loans to enable them to get raw material if they could not get it on their own individual credit.
Mr. Baruch. No, sir; no plans for the reparation commission to make loans.
Senator Swanson. I wanted to get my mind clear on that.
Mr. Baruch. It says here—
And such supplies of food and raw materials as may be judged by the governments of the principal allied and associated powers to be essential to enable Germany to meet her obligations for reparation may also, with the approval of the said governments, be paid for out of the above sum.
That is the reason why it is necessary for us to have a man to represent us on that commission. Senator Swanson. It says—
Out of this sum the expenses of the armies of occupation subsequent to the armistice of November 11, 1918, shall first be met.
That is the reparation sum?
Mr. Baruch. Yes.
tjenator Swanson. Further it says:
And such supplies of food and raw materials as may be judged by the Governments of the principal allied and associated powers to be essential to enable Germany to meet her obligations for reparation may also, with the approval of the said Governments, be paid for out of the above sum.
Mr. Baruch. If she can put up more than $5,000,000,000 then there will be cash available to individuals.
Senator Swanson. What I want to get clear in my mind is this: Here is a manufacturing concern in Germany that has money or credit, and it wants copper or it wants cotton. It can buy it individually without asking any credit from the reparation commission, without borrowing any of this money. Can that concern come here and buy cotton or buy copper, or must it get it through the reparation commission?
Mr. Baruch. Not through it, but the reparation commission must be satisfied that it is going to get this sum of money. Germany has no right to go outside and get these materials for cash unless the reparation commission are satisfied that Germany is going to pay them this first cash sum of $5,000,000,000. If they are satisfied that Germany can pay that first cash sum, that will permit them to let