Reparations by A. J. P. Taylor

By 1921 much of the peace-treaty was being enforced. It was reasonable to assume that it would gradually lose its contentious character. Men cannot go on wrangling over a settled question year after year, however embittered they may feel at first. The French forgot Waterloo; they even tended to forget Alsace and Lorraine, despite repeated resolves not to do so. The Germans, too, might have been expected to forget,  or at any rate to acquiesce, after a time. The problem of German power would remain; but it would not be aggravated by an acute determination to destroy the settlement of 1919 at the first opportunity. The reverse happened: resentment against the treaty increased with every year. For one part of the treaty remain unsettled; and disputes over this put the rest of the treaty in constant question. The unsettled issue was the payment of reparations- a striking example of good intentions, or to be correct, good ingenuity, gone wrong.

In 1919 the French wished to lay down uncompromisingly the principle that Germany must pay the full bill for war damage – an indeterminate liability that would swell in the future with every step of German economic recovery. The Americans, more sensibly, proposed to state a fixed sum. Lloyd George appreciated that, in the heated atmosphere of 1919, this sum, too, would be far beyond German capacity. He hoped  that in time men (himself included) would come to their senses: the Allies would make a reasonable demand, the Germans would make a reasonable offer,, and the two figures would more or less coincide. He therefore swung around behind the French, though exactly for the opposite reason: they wanted to make the bill fantastically large, he wanted to scale it down. The Americans gave way. The peace treaty merely stated the principle of reparations: their amount was to be settled at some time into future.

Lloyd George had meant to make reconciliation with Germany easier; he made it almost impossible. For the divergence between the British and French views which had been covered over in 1919  rose again to the surface as soon as they tried to fix a figure: the French still trying to push it up, the British impatiently scaling it down. Nor did the Germans show any  willingness to co-operate. Far from attempting to estimate their capacity to pay, they deliberately kept their economic affairs in confusion, well knowing that, if they once got things straight, the bill for reparations would follow. In 1920 there were angry meetings between the Allies, then conference with the Germans; more conferences in 1921; still more in 1922. In 1923 the French tried to enforce payment by occupying the Ruhr. The Germans first answered with passive resistance; then surrendered at discretion, under the catastrophe of inflation. The French, almost as exhausted as the Germans, agreed to a compromise: the Dawes plan, drafted – largely at British prompting – under an American chairman. Though this temporary settlement was resented by both French and Germans, reparations were in  fact paid for the next five years. Then there was another conference – more wrangling, more accusations, more demands, and more evasions. The Young plan, again under an American chairman, emerged. It had hardly begun to operate before the great depression struck Europe. The Germans claimed they could not go on paying In 1931 the Hoover moratorium suspended reparations for twelve months. In 1932 a last conference at Lausanne wiped the slate clean. Agreement was at last reached; but it has taken thirteen years, years of mounting suspicion and grievance on all sides. At the end the French felt swindled; and the German felt robbed. Reparations had kept the passions of war alive.


Reparations would, no doubt, have been a grievance in any case. It was the uncertainty and argument over them which made the grievance chronic. In 1919 many people believed that payment of reparations would reduce Germany to a state of Asiatic poverty. J. M. Keynes held this view, as did all Germans and probably many Frenchmen did also, though without regretting the consequence. During the second World  war an ingenious young Frenchman, Etienne Mantoux, demonstrated that the Germans could have paid reparations, without impoverishment, if they had wished to do so; and Hitler gave a practical demonstration of this when he extracted vast sums from the Vichy government of France. The question only has an academic interest. No doubt the apprehensions of Keynes and the Germans were grotesquely exaggerated. No doubt that the impoverishment of Germany was caused by war, not by reparations. No doubt the Germans could have paid reparations, if they had regarded them an obligation of honor, honestly incurred. In actual fact, as everyone now knows, Germany was a net gainer by the financial transactions of the nineteen-twenties: she borrowed far more from private American investors ( and failed to pay back) than she paid in reparations. This was of course little consolation to the German taxpayer, who was not at all the same person as the German borrower. For that matter, reparations gave little consolation to the taxpayers of allied countries, who immediately saw the proceeds transferred to the United States in repayment of war debts. Setting one thing against another, the only economic effect of reparations was to give employment to a large number of bookkeepers. But the economic facts about reparations are of little importance. Reparations counted as a symbol. They created resentment, suspicion, and international hostility. More than anything else, they cleared the way for the second World war.

Reparations fixed the French in an attitude of sullen, but rather hopeless resistance. They had, after all, a not unjustified claim. Northeast France had been devastated during the war; and, whatever the rights and wrongs of war guilt, it was reasonable that the Germans should help restore the damage. But the French soon cheated on reparations, as everyone else did. Some Frenchmen wanted to ruin Germany forever. Others hoped that reparations would not be paid, so that the armies of occupation should stay in the Rhineland. French taxpayers had been told that Germany would pay for the war; and were indignant against the Germans when their own taxers went up. In the end, the French cheated in their turn; they got virtually nothing except the moral blame for having demanded reparations at all. As the French saw it, they had made a series of concessions over reparations to please the Germans. Finally they had they had to abandon all claim to reparations. The Germans emerged more dissatisfied than ever. The French concluded from this experience that concessions in other fields – over disarmament or frontiers – would be equally futile. They also concluded, though less consciously, that concessions would be made. The French were distinguished, in the years before the second World war, by lack of faith in their leaders and in themselves. This despairing cynicism had a long and complicated origin which has often been dissected by historians. But the record of reparations was its immediate, practical cause. Here the French had certainly lost; and their leaders had as certainly displayed a singular incapacity, or at least a singular failure, to fulfil their promises. Reparations did almost as much to damage to democracy in France as in Germany itself.

Reparations had also a critical influence on the relations between France and Great Britain. In the last days of the war, the British – both politicians a and public – had shared the French enthusiasm for reparations. It was a British statesman of high competence, not a Frenchman, who proposed to squeeze the German orange till the pips squeaked; and even Lloyd George had been more clamorous for reparations than he subsequently like to imagine. Soon however the British changed round. They began to denounce the folly of reparations once they had themselves carried off the German merchant navy. Perhaps they were influenced by the writings of Keynes. Their more practical motive was to restore the economic life of Europe so as to promote the recovery of their own export industries. They listened readily to the German stories of the endless woes which would follow the payment of reparations; and, once they had condemned reparations, they soon condemned other clauses of the peace treaty. Reparations were wicked. Therefore the disarmament of Germany was wicked; the frontier with Poland was wicked, the new national states were wicked. And not only wicked: they were a justified German grievance, and the Germans would be neither content nor prosperous until they were undone. The British grew indignant at French logic, at French anxiety about German recovery, and particularly indignant at French insistence that treaties should be honored once they had been signed. French claims to reparations were pernicious and dangerous nonsense; therefore their claim for security s pernicious and dangerous nonsense also. The British had some plausible ground for complaint. In 1931 they were forced off the gold-standard. The French, who had claimed to be ruined by the war, had a stable currency and the largest gold-reserve in Europe. It was a bad beginning for the years of danger. The disagreements over reparations in the years after the first World war made it almost impossible for the British and French to agree over security  in the years before the second.

The most catastrophic effect of reparations was on the Germans themselves.  Of course they would have been aggrieved in any case. They had not only lost the war. They had lost territory; they had been compelled to disarm; they had been saddled with a war-guilt which they did not feel. But these were intellectual grievances: things to grumble over in the evenings, not the cause of suffering in everyday life. Reparations hit every German, or seemed to, at each moment of his existence. It would be useless to discuss whether reparations in fact impoverished Germany; and it was equally useless to argue the point in 1919. No German was likely to accept the proposition that Norman Angell had advanced in The Great Illusion that the payment of the indemnity by the French in 1871 benefited France and injured Germany. The common sense of mankind says that a man is the poorer for paying out money; and what is true for an individual appears to be true for a nation. Germany was paying reparations; and therefore was the poorer for it. By an easy transition reparations became the sole cause of German poverty. The businessman in difficulties; the underpaid schoolteacher; the unemployed worker all blamed their troubles on reparations. The cry of a hungry  child was a cry against reparations. Old men stumbled into the grave because of reparations. The great inflation of 1923 was attributed to reparations; so was the great depression of 1929. These views were not just held merely by the German man-in-the-street. They were held  just as strongly by the most distinguished financial and political experts. The campaign against ‘the slave-treaty’ hardly needed the promptings of extremist agitators. Every touch of economic hardship stirred the Germans to shake off ‘the shackles of Versailles’.

Once men reject a treaty, they cannot be expected to remember precisely which clause they reject. The Germans began with the more or less rational belief that they were being ruined by reparations. They soon proceeded to the less rational belief that they were being ruined by the treaty as a whole. Finally, retracing their steps, they concluded that they were being ruined by clauses of the treaty which had nothing to do with reparations. German disarmament, for instance, may have been humiliating; it may have exposed Germany to invasion by Poland or France. But economically it was to the good so far as it had any effect at all [with remarkable, though not unique ingenuity, however, the German generals managed to make disarmament more expensive than armament had been. It cost the German taxpayers less to maintain the great army and navy of 1914 than to maintain a small army and no navy after 1919]. This is not what the ordinary German felt. He assumed that, since reparations made him poorer, disarmament did also. It was the same with the territorial clauses of the treaty. There were defects, of course, in the settlement. The eastern front put too many Germans in Poland- though it also put too many Poles in Germany. It could have been improved by some redrawing and by an exchange of populations – an expedient not contemplated in those civilized days. But an impartial judge, if such existed, would have found little fault with the territorial settlement once the principle of national states was accepted. The so-called Polish corridor was inhabited predominantly by Poles; and the arrangement of free railway-communication with East Prussia were adequate. Danzig would actually have been better off economically if it had been included in Poland.  As to the former German colonies – also a fertile cause of grievance – they had always been an expense, not a source of profit.

All this was lost sight of, thanks to the link between reparations and the rest of the treaty. The German believed he was ill-dressed, hungry, or out-of-work, because  Danzig was a Free City, because the corridor cut off East Prussia from the Reich; or because Germany had no colonies. Even the highly intelligent banker Schacht attributed Germany’s financial difficulties to the loss of her colonies – a view which he continued to hold, sincerely no doubt, even after the second World war. The Germans were not being self-centered or uniquely stupid in holding such views. This outlook was shared by enlightened liberal Englishmen such as Keynes; by nearly all the leaders of the British Labor party, and by all Americans who thought about European affairs. Yet it is difficult to see why the loss of colonies and land in Europe should have crippled Germany economically. After the second World war Germany had much greater territorial losses, yet became more prosperous than at any time in her history. There could be no clearer demonstration that the economic difficulties of Germany between the wars were due to defects in her domestic policies, not to unjust frontiers. The demonstration has been in vain; every textbook continues to attribute Germany’s difficulties to the treaty of Versailles. The myth went further, and still does. First, the economic problems of Germany were blamed on the treaty. Then it was observed that these problems continued. From this it was held to follow that nothing was done to conciliate Germany and to modify the system set up in 1919. ‘Appeasement’ was supposed to have been attempted only in 1938; and by that time it was too late.

This was far from the truth. Even reparations were constantly revised, and always downward; though no doubt the revision dragged out tiresomely long. In other ways appeasement was attempted sooner, and with success. . .

 

 [And so on - the issue of disarmament proved as difficult to resolve as that of reparations - perhaps the most complex historical narrative I have ever encountered,  diplomatic fiascos lasting decades, only really comparable to what’s going on today]

Rearmament

The first World war shattered all the Great Powers involved, with the exception of the United States, who took virtually no part in it; maybe they were all foolish to go on trying to be Great Powers afterwards. Total war is probably beyond the strength of any Great Power. Now even preparations for such a war threaten to ruin the Great Powers who attempt them. Nor is this new. In the eighteenth century Frederick the Great led Prussia to the point of collapse in the effort to be a Great Power. The Napoleonic wars brought France down from her high estate in Europe, and she never recovered her former greatness. This is an odd, inescapable dilemma. Though the object of being a Great Power is to be able to fight a great war, the only way of remaining a Great Power is not to fight one, or to fight it on a limited scale. This was the secret of Great Britain’s greatness so long as she stuck to naval warfare and did not try to become a military power on a continental pattern. Hitler did not need instruction from a historian in order to appreciate this. The inability of Germany to fight a long war was a constant theme of his; and so was the danger which threatened Germany if the other Great Powers combined against her. In talking like this, Hitler was more sensible than the German generals who imagined all would be well if they got Germany back to the position she occupied before Ludendorff’s offense in March 1918. Hitler did not draw the moral that it was silly for Germany to be a Great Power. Instead he proposed to dodge the problem by ingenuity, much as the British had once done. Where they relied on sea power, he relied on guile. Far from wanting war, a general war was the last thing he wanted. He wanted the fruits of total victory without total war; and thanks to the stupidity of others he nearly got them. Other Powers thought that they were faced with the choice between total war and surrender. At first they chose surrender; then they chose total war, to Hitler’s ultimate ruin.

This is not guesswork. It is demonstrated beyond peradventure by the record of German armament before the second World war and even during it. It would have been obvious long ago if men had not been blinded by two mistakes. Before the war they listened to what Hitler said instead of looking at what he did. After the war they wanted to pin on him the guilt for everything which happened, regardless of the evidence.  The record, however, is there for anyone that wishes to use it: until the spring of 1936 German rearmament was largely a myth. This does not mean merely that the preliminary stages of rearmament were not producing increase strength, as always happens. Even the preliminary stages were not being undertaken at all seriously. Hitler  cheated foreign powers and the German people in exactly the opposite sense from that which is usually supposed. He, or rather Goering, announced: ‘Guns before butter’. In fact, he put butter before guns.

In 1936, according to Churchill, two independent estimates placed German rearmament expenditure at an annual rate of 12 thousand million marks. The actual rate was under 5 thousand million. Hitler himself asserted that the Nazi government had spent 90 thousand million marks on armaments before the outbreak of war. In fact the German government expenditure, war and non-war, did not amount to much more than this between 1933 and 1938. Rearmament cost about forty thousand million marks in the six fiscal years ending 31  Mach 1939, and about 50 thousand millions up to the out break of war.

Why was German rearmament on such a limited scale? For one thing, Hitler was anxious not to weaken his popularity by reducing the standard of civilian life in Germany. The most rearmament did was to prevent its rising faster than it otherwise would have done. Even so the Germans were better off than they had ever been before. Then the Nazi system was inefficient, corrupt and muddle. More important, Hitler would not increase taxes but was terrified of inflation. Even the overthrown of Schacht did not really shake the financial limitations, though it was supposed to do so. Most important of all, Hitler did not make large war preparations simply because his concept of warfare did not require them. Rather he planned to solve Germany’s living space problem in piecemeal fashion – by a series of small wars. One even suspects Hitler hoped to get by without any war at all. The one thing he did not plan for was the great war often attributed to him.

Pretending to prepare for a great war and not in fact doing it was an essential part of Hitler’s strategy; and those who sounded the alarm against him, such as Churchill, unwittingly did his work for him. This device was new and took everyone in. Previously governments spent more on armaments than they admitted, as most do to the present day. This was sometimes to deceive their own people, sometimes to deceive a potential enemy. In 1909, for instance, the German government were accused by many British people of secretly accelerating naval building without the approval of the Reichstag. This accusation was probably untrue. But it left a permanent legacy of suspicion that the German would d it again; and this suspicion was strengthened by the evasions of the disarmament imposed by the treaty of Versailles, which successive German governments practiced, though to little advantage, after 1919. Hitler encouraged this suspicion and exploited it. There is a very good illustration. On 28 November 1934 Baldwin denied Churchill’s statement tat German air strength was equal to that of Great Britain’s. Baldwin’s figures were right; Churchill’s were wrong. On 24 March 1935 Sir John Simon and Anthony Eden visited Hitler. He told them that the German air force was already equal to that of Great Britain, if not indeed superior. He was at one believed, and has been believed ever since. Baldwin was discredited. Panic was created. How was it possible that a statesman could exaggerate his armaments instead of concealing them? Yet this is what Hitler had done.

German rearmament was largely a myth until the spring of 1936. Ten Hitler put some reality in it. His motive was principally fear of the Red Army, and of course Great Britain and France had begun to rearm also. Hitler raced along with the others, and not much faster.  In October 1936 he told Goering to prepare the German army for war within four years, though he did not lay down any detailed requirements. In 1938-39, the last peacetime year, Germany spent about 15% of her gross national product. The British proportion was almost exactly the same. German expenditure on armaments was actually cut down after Munich and remained at this lower level, so that British production of airplanes, for example, was way ahead of the German by 1940. When the wat broke out in 1939, Germany had 1450 modern fighter planes and 800 bombers’ Great Britain and France had 950 fighters and 1300 bombers. The Germans had 3500 tanks, Great Britain and France had 3850. In each case Allied intelligence estimated German strength at more than twice the true figure. As usual, Hitler was thought to have planned and prepared for a great war. In fact, he had not.

It may be objected that these figures are irrelevant. Whatever the deficiencies of German armaments on paper, Hitler won a war against two European Great Powers when the test came.  However, though Hitler won, he won by mistake – a mistake he shared. Of course the Germans were confident that they could defeat Poland if they were left undisturbed in the west. Here Hitler’s judgment that the French could do nothing proved more accurate than the apprehensions of the German generals. But he had no idea that he could knock France out of the war when he invaded Belgium and Holland on 10 May 1940. This was a defensive move: to secure the Ruhr from Allied invasion. The conquest of France was an unforeseen bonus. Even after this Hitler did not prepare for a great war. He imagined he could defeat Soviet Russia without serious effort as he had defeated France. German production of armaments was not reduced merely during the winter of 1940-41; it was reduced still more in the autumn of 1941 when the war against Russia had already begun. No serious change took place after the initial setback in Russia nor even after the catastrophe at Stalingrad. Germany remained with ‘a peace-like war economy” Only British bombing attacks on German cities stimulated Hitler and the Germans to take war seriously. German war production reached its height just when Allied bombing did: in July 1944. From the first to last, ingenuity, not military strength, was Hitler’s secret of success. He was done for when military strength became decisive, as he had always know he would be.