Not Just Another Recession
Why the Global Economy May Never Be the Same
THE accompanying table represents an attempt to draw up a balance-sheet of all intergovernmental obligations resulting from the World War, as they stood on July 1, 1931, the date when the Hoover moratorium went into effect. It is also the way they stand today, unless the Lausanne agreement is ratified. The table indicates the aggregate amounts of interest and amortization payments which each country is obligated to make to all other countries or is entitled to receive from all other countries, in accordance with the schedules of payments still nominally in force, relating to war, relief, reconstruction, and various miscellaneous accounts, as well as reparation obligations.
Only intergovernmental debts are dealt with in this table, and, so far as the author can determine, all such obligations are included. The sole exception consists of the debts owed to Great Britain by the British Dominions; but Australia and Canada are brought into the picture to the extent to which their governments have extra-Imperial debts. On the other hand, no account is taken of obligations of governments to banks, individual investors, or other private parties in foreign countries, or of obligations which are intergovernmental merely in form. Accordingly, payments by Germany on the Dawes loan of 1924 and the "mobilization" loan of 1930 are omitted, as well as the instalments due the United States from that country in liquidation of the mixed claims awards. Similarly, such payments as those which Greece is obligated to make to Bulgaria under the refugee agreements and those representing the contributions of various countries to the Hungarian Agrarian Funds are also excluded. Nor are the domestic public debts resulting from the war taken into account. The table thus deals only with debts owed by governments to governments.
Of the 28 countries involved, five are debtors only; ten are creditors only; while thirteen are both creditors and debtors. Ten are net debtors, and eighteen are net creditors. The table necessarily obscures the complex nature of the debt relations among these countries. Most of them have a number of creditors and debtors. For example, the United States is scheduled to receive payments from sixteen countries; Great Britain, from seventeen; and France, from ten. Similarly, Germany has eleven creditors, and even such smaller nations as Hungary, Bulgaria, Rumania and Czechoslovakia have as many as nine or ten creditors each. Moreover, in some cases a country has to make payments to another country on several distinct accounts.
In order to secure a basis of comparison, all payments have been converted into dollars at the par of exchange. This method of conversion is open to criticism in view of the fact that some of the currencies involved, notably the British and the Scandinavian, are now at a discount with respect to their nominal gold values. But since the payments cover a long future period, it is believed that conversion at par gives a more useful set of data than conversion at the rates of exchange prevailing at the moment the table was prepared.
It will be seen that an amount of wealth equivalent to the vast sum of nearly 53 billion dollars would eventually have to move across national frontiers if the obligations stated in the table were to be liquidated in full. It will also be seen that payments by Germany and receipts by the United States constitute overwhelmingly important elements in the situation. Were these two items subtracted the whole balance-sheet would shrink to small proportions.
The Lausanne agreement (if ratified), by practically wiping out all reparation payments, will reduce the aggregate payments, and consequently the aggregate receipts, to approximately one-half of the amounts indicated in the table. If the remaining obligations undergo no modification, then receipts by the United States will become about four-fifths of the new aggregate; while in the final column of the table the position of eight countries -- Belgium, France, Great Britain, Greece, Italy, Portugal, Rumania and Jugoslavia -- will change from a substantial plus to a much more substantial minus.
BALANCE-SHEET OF INTERGOVERNMENTAL WAR DEBTS [i]
Aggregate Amounts of Principal and Interest Scheduled to Be Received or Paid under Debt Agreements in Force on July 1, 1931
(In millions of dollars)
|Total||Total||Net Receipts (+)|
|Country||Receipts||Payments||Net Payments (-)|
[i] For original schedules of payments and other data on which this table is based see the new study of the Brookings Institution, Washington, D. C., entitled "War Debts and World Prosperity," by H. G. Moulton and the present author.