Mr. BARUCH. That is what it would appear to me to say; but I would prefer that you ask men more familiar with it than I am. Senator KNOX. Who would be likely to throw the greatest light on that subject?

Mr. BARUCH. It would be Mr. Davis or Mr. Lamont; or I will furnish to you the name of the man who wrote these particular clauses. Senator BRANDEGEE. I would like to ask Mr. Baruch a question. Before doing so I would like to ask Senator McCumber whether this little tabulation which he has here has been inserted in the record? Senator MCCUMBER. No.

Senator BRANDEGEE. It is very short, and I will ask the stenographer to put this in the record. This paper brought before the committee by Senator McCumber appears to have been prepared by the legislative reference service of the Library of Congress, and is entitled "Relative rates of taxation for certain countries."

(Senator Brandegee here read the table referred to, which is printed in the record, as follows:)

Ayers, Leonard P. The War with Germany, 1919, p. 148.

To Mar. 31, 1919. (Fiscal year ending Mar. 31, 1919. This gives rate November, 1918.) Commerce Reporis, Apr. 30, 1919, p. 610.

Current Opinion, January, 1919, p. 63, quoting Londen Economist. (Estimate)

Business igest and Investment Weekly, Feb. 18, 1919, p. 239.

For United States estimated collections of 1918. revenue laws are given.

Senator BRANDEGEE. Now, Mr. Baruch, I understood you to say that Germany had paid only 9 per cent of her war debt-only raised 9 per cent of her war debt-by taxation.

Mr. BARUCH. Those are the figures that have been prevalent. Senator MCCUMBER. Does that mean war debt or war expenses? Mr. BARUCH. Those are expenses of the war.

Senator BRANDEGEE. That is what I mean.

Mr. BARUCH. Yes.

Senator BRANDEGEE. That means, then, that 91 per cent of the war expense of Germany has been financed by the issuance of Government securities?

Mr. BARUCH. These figures are the ones that I believe are correct, but we have had no way of checking it up from Germany.

Senator BRANDEGEE. I am not, of course, asking you to be exactly accurate, but substantially.

Mr. BARUCH. Yes.

Senator BRANDEGEE. Now, if the estimated national wealth of Germany was $78,000,000,000, and that of Great Britain was $85,000,000,000, and the tax imposed upon Germany was 2.2 per cent and upon Great Britain 4.5 per cent, I wanted to ask you, first, did Germany pay the interest on this 91 per cent of securities issued for the expenses of the war.

Mr. BARUCH. There was no default on her bonds, so that she must have paid it.

Senator BRANDEGEE. So that 2.2 per cent in tax on the national wealth of Germany in 1918 paid the interest on the entire expenses of the war to Germany?

Mr. BARUCH. That would not necessarily follow, Senator, because she might not have raised enough money in that way for that purpose. She might have raised it out of the sale of bonds.

The CHAIRMAN. She might have borrowed the money to pay it. Senator BRANDEGEE. What I am trying to find out is whether Germany, out of the avails of the imposition of a 2.2 per cent tax rate, was able to pay the interest on her debt incurred in behalf of the expenses of the war or not.

Mr. BARUCH. We can figure that out from what figures you have here.

Senator BRANDEGEE. No; I mean as a fact.

Mr. BARUCH. What?

Senator BRANDEGEE. I mean as a matter of fact, do you know whether in that way they paid the interest on all the obligations they incurred for the expenses of the war?

Mr. BARUCH. I imagine they must have, because there was no default in payment of interest on their bonds. They must have paid it. Senator BRANDEGEE. All right. Then, by the imposition of onehalf of the taxation rate upon the Germans which is paid now by the citizens and the United Kingdom, they are able to pay all the interest on their obligations incurred on account of the war. Now, if that is so and their per capita tax is only one-fourth of that of Great Britain, and their estimated national wealth is $78,000,000,000 while that of Great Britain is only $85,000,000,000, why is it that they can not pay more in the way of reparation?

Mr. BARUCH. More than what?

Senator BRANDEGEE. More than the treaty provides.

Mr. BARUCH. The treaty does not provide any definite amount, Senator.

Senator BRANDEGEE. I thought it did.

Mr. BARUCH. No, sir. The treaty does not provide for any amount, because the reparation commission wants to have an opportunity to study this before deciding upon it. Probably the questions that arose in your minds are the ones that arose in the minds of the ones who made this.

Senator BRANDEGEE. Why is it, if the facts and figures that I have just read are correct, that the Germans are in such a bad way as compared with the inhabitants of the United Kingdom?

Mr. BARUCH. I think I can explain that to you, Senator.
Senator BRANDEGEE. I wish you would.

Mr. BARUCH. Practically every bit of private property owned by the German nationals that is in allied or associated countries has been seized and is going to be used for a specific purpose. Germany is going to lose that. She loses a million and a half of spindles in AlsaceLorraine, 70 per cent of her iron, 30 per cent of her coal, all of her great contracts for bauxite in France, and for phosphate in Algeria and the Pacific Islands; and all the raw materials and similar contracts have been lost. I do not think the world realizes what a severe and harsh though eminently just treaty has been put upon Germany. They do

not realize the conditions that Germany has been put in. So it was impossible to determine, on prewar conditions, what Germany could pay, because we did not know what the conditions, will be after the war and the peace treaty. Does that answer your question?

Senator BRANDEGEE. Yes. I did not know to what extent Germany was crippled. I heard what you said, and it bears on the question.

Mr. BARUCH. She loses valuable zinc concentrates in Australia, which gave her practically domination of the zinc trade of the world. I could put in a long list which would show you generally how much crippled Germany has been made by this treaty in the very clauses that are spread out before you, and it was that that I had in mind. Perhaps it may have been unduly impressed upon me. I had that in mind when I made the statement that she would be unable to pay the sums of money that would probably be assessed against her under these categories.

Senator MCCUMBER. As bearing upon that same subject, I think another little table which I have prepared ought to go into the record at this time, showing each of these three countries and the per capita debt on June 30, 1918, which I obtained from the Statistical Abstract for 1918.

The United States, exclusive of the Philippines, has a public debt of $17,005,431,000. The debt per capita was $159.45.

The United Kingdom, exclusive of colonies, had a public debt of $36,391,132,000, with a per capita debt of $789.58.

Germany, exclusive of colonies, had a debt of $34,807,337,000, with a per capita debt of $514.81.

Thus it will be seen that our per capita debt was practically onefifth of that of Great Britain, and that Great Britain's was 50 per cent greater than that of Germany, and that while Germany paid most of the expenses of the war through borrowings rather than heavy taxes upon her people, yet at the same time she has but $34,807,337,000 of indebtedness against her.

Senator POMERENE. Do those figures include not only the national debt, but State and municipal debts as well?

Senator McCUMBER. No; I do not so understand.

The CHAIRMAN. These are national debts.

Senator POMERENE. What was the date of the figures that you just gave?

Senator MCCUMBER. June 30, 1918. That was just a little before the close of the war.

Senator POMERENE. I had in mind 1914.

Senator MCCUMBER. I thought it was proper to put that in as bearing upon the burden of Germany.

Mr. BARUCH. I do not know whether I made it clear, and I would like to have the opportunity of making a statement in reference to the terms of this treaty.

Senator JOHNSON of California. I am very anxious to hear you. You were indulging in general terms, and I thought you might elaborate. I thought it would be interesting.

Mr. BARUCH. The terms are harsh and severe, but I think are very just, and I would go on record as saying that this commission is workable. It is a workable arrangement.

Senator JOHNSON of California. Do you express that with some doubt?

Mr. BARUCH. No, sir.

Senator JOHNSON of California. There is much of it left to the future, however, is there not?

Mr. BARUCH. I have no fear of the future.

Senator JOHNSON of California. Not of the future of our Nation. Mr. BARUCH. No; because I could name hundreds of men in America-thousands of them-that would carry out that. The CHAIRMAN. Carry out what?

Mr. BARUCH. That would make this a workable treaty, that could sit on this commission and make it work. I am talking about the reparation commission.

The CHAIRMAN. You would have no difficulty in filling the places. You need not assure us of that.

Mr. BARUCH. I thought the Senator was disposed to doubt as to the reparation commission working.

Senator JOHNSON of California. Not a bit. I have some serious doubts about our work in connection with it, but I was not expressing any doubt at all; but I was in hopes you would elaborate the theme which you were discussing with Senator Brandegee. You said the treaty is very severe and harsh, but just. Now, I would like you in general terms to go on and elaborate what you were speaking about. Let us take the coal situation, for instance. How much coal did you take from Germany?

Mr. BARUCH. We took enough to make up all the losses that she caused the Belgian and French mines.

Senator JOHNSON of California. But how much in proportion?

Mr. BARUCH. Let us say there are 26,000,000 tons. It is about 30 per cent, but that would include the Silesian fields, of which she will get her proportionate share that she has been accustomed to have.

Senator JOHNSON of California. And your answer is, I take it, that you take enough to make up for her wanton destruction?

Mr. BARUCH. Provided it does not interfere with her economic life. Senator JOHNSON of California. That is all you take enough to make up for her wanton destruction.

Mr. BARUCH. And to make it sure that Germany will continue to sell the coal that had formerly been under contract, for instance, to France for a number of years.

Senator JOHNSON of California. Has that anything to do with the question of destruction?

Mr. BARUCH. I think so, sir.

Senator JOHNSON of California. Is it likewise in respect to the coal that is directed to be delivered to Italy?

Mr. BARUCH. Yes; a protection to Italy for coal that she has to

have.

Senator JOHNSON of California. The point of it is that you said very well and eloquently that you took from Germany enough coal to make up for her wanton destruction. Does Italian coal come within that?

Mr. BARUCH. I think I added-if I did not, I should like to-and to prevent the disturbance of the whole coal situation in Europe which resulted from that, and so as to give to France and to Belgium and these other countries the same amount of coal that they had

gotten in peace conditions, so as not to put Germany in the position of taking this coal away and delivering it to anyone that she cared to. She might ruin Belgian, Italian, and French industries in that way. Senator JOHNSON of California. Unless you compelled her to give them a certain amount of coal.

Mr. BARUCH. Under this she is not to be compelled to deliver coal if it is to interfere with her economic and industrial life.

Senator JOHNSON of California. That which is taken from her, does that interfere with her industrial life?

Mr. BARUCH. If it does, they will not take any.

Senator JOHNSON of California. Does it? Pardon me. Are there any specific amounts to be delivered, any minimums?

Mr. BARUCH. Let me turn to the clause and read it to you. It is on page 291.

Senator JOHNSON of California. You are familiar with the coal situation, are you?

Mr. BARUCH. I am familiar with this part of the treaty.

Senator JOHNSON of California. It is page 295, Annex V.

Mr. BARUCH. The last clause in Annex V is the one that we want to look at, the very last clause.

Senator McCUMBER. It is on page 295.

Mr. BARUCH. The last clause of the annex, paragraph 10, reads:

If the commission shall determine that the full exercise of the foregoing options would interfere unduly with the industrial requirements of Germany, the commission is authorized to postpone or to cancel deliveries, and in so doing to settle all questions of priority; but the coal to replace coal from destroyed mines shall receive priority over other deliveries.

I wrote that clause myself, Senator.

Senator JOHNSON of Claifornia. That is, the last sentence you just read?

Mr. BARUCH. Yes, sir.

Senator JOHNSON of California. So that it is left with the commission to determine whether the options interfere and whether they shall be fulfilled.

Mr. BARUCH. Yes, sir. The intent of this was that Germany should pay what she ought to pay and could pay, and to give her an opportunity to pay it, without any undue interference in the working out of payments.

Senator JOHNSON of California. Wherein is the severity and harshness of that?

Mr. BARUCH. Well, that is not so, taken by itself. I refer not to one particular thing, but to the general thing. If you take into consideration that she is obliged to pay all that she can pay, and in addition that she has lost her colonies and her territories contiguous to her, that the property of her citizens has been taken from her, that these contracts that she had have been broken, that these vast interlaced commercial relations all over the world of a financial and commercial nature which she had established for many years have been destroyed and taken away and abrogated, and all raw materials and supplies have been cut off, and that the great commercial houses that gathered together the raw materials and sent them into Germany and brought them back in manufactured articles are taken away from her, I think my adjectives are quite correct. Also her merchant marine has been taken.