# The New York Times/1925/12/14/Year of Dawes Plan Puts Reich on Road to Full Recovery

YEAR OF DAWES PLAN PUTS REICH ON ROAD TO FULL RECOVERY
Gilbert Reports the Budget Balanced and Currency Stabilized as its First Effects.
FORMER FOES FRIENDLY
Reparations of 1,000,000,000 Marks Distributed, but No Cash Has Left Germany.
1926 PAYMENTS ASSURED
Press Clamor of Commercial Crisis is Minimized—Extravagance of Federal States Criticized.
By LINCOLN EYRE.
Copyright, 1925, by The New York Times Company. By Wireless to The New York Times.
BERLIN, Dec. 13.—Germany's progress along the path toward economic normalcy is painted in hopeful colors by Seymour Parker Gilbert, Agent General for Reparations Payments, in a voluminous report on the first year's workings of the Dawes plan, addressed to the Reparations Commission under date of Nov. 30 and issued here for publication today.
Mr. Gilbert's optimism about the Reich's future is tempered with caution, however. Nowhere in the eighty-one printed pages comprising the report and its annexed "exhibits" does one find anything like a direct prophecy about the ultimate fulfillment of the "plan of the First Committee of Experts." The Agent General implies a large measure of faith in the capacity and willingness of Germany to carry out her obligations, but he refrains from definitely predicting that she will do so.
German application of the experts' recommendations, he finds, has produced two beneficial results: It has lifted this country out of the slough of monetary and economic despond and restored stable currency and budgetary equilibrium to the German State; and it has cleared the way for Germany's recovery of her pre-war prosperity, while at the same time permitting her to bear her reparations burden.
Press Alarmists Controverted.
Mr. Gilbert, in effect, controverts the clamor of a commercial crisis resounding throughout the German press. He admits that in certain quarters "conditions are approaching a crisis." but deems these to signify merely a "further stage of readjustment." Germany's adverse balance of foreign trade is not as bad as it is described in official statistics, he intimates, and her credit troubles are being overcome slowly but surely.
In his view, tariff and other barriers against German invasion of foreign markets constitute perhaps the greatest immediate obstacle to the Reich's wellbeing; but these, too, are being gradually leveled, and the Agent General's conclusions formulated as the final section of his report are as follows.
"The adoption of the experts' plan by agreement between Germany and the allied powers represented a decision in favor of a rational sentiment on the reparations problem and an election at the same time in favor of the peaceful reconstruction of Europe. The experts themselves in concluding their report have said that the 'reconstruction of Germany is not an end in itself; it is only part of the larger problem of the reconstruction of Europe.' In considering, therefore, the progress of the plan it is appropriate to think of it in relation to the general problem of European reconstruction, as well as in terms of the rehabilitation of Germany.
"From the point of view of German reconstruction it is already clear that the plan marked the determining point in the recovery from the disorder and disorganization of inflation, and that developments since its adoption are to be estimated in terms of the part they have played in readjustment to stable conditions and the restoration of German economy to a productive state.
Many Difficulties Yet to Face.
"It is clear, also, from the review that has been given of business and credit conditions that the road to recovery has not been fully traveled and that many difficulties remain to be overcome. At the same time it would be wrong to overlook the progress that has already been made under the plan. To appreciate this sufficiently one must think back to conditions as they were before its adoption and remember that fog that enveloped the whole situation before the plan went into effect.
"The plan realized during the first year its two essential preliminary objects; that is to say, a balanced budget and stable currency. Without these it was impossible to look forward to the recovery of German business and industry. The budget, in fact, has been rather more than balanced, and for the time being at least the Government has instead, and on a unique scale, the reverse problem of the wise management of public funds. As for the currency, its stability has been fully maintained according to both internal and external standards, and buyers and sellers alike have again been able to do business with the assurance that stability implies.
"Side by side with the achievement of these two objects, the output and distribution of goods, according to available figures, have considerably exceeded the experience of the immediately preceding ​ years and begun to resemble those before the war. At the same time German business and industry have found themselves confronting the double problem of replenishing their working capital and remoulding their organization along lines that the changed conditions require.
"In some industries this has meant conditions approaching a crisis, which must properly be regarded as the inevitable basis of the return to stable conditions and as marking a further stage of readjustment.
"From the point of view of reparation payment the plan has brought order into the management of the problem and assured determination by actual experience of the reparations that can be safely paid and transferred. Under it payments and deliveries are moving regularly to the creditor powers and in accordance with expectation.
"From its beginning, moreover, the administration of the plans has gone forward on the basis of mutual faith and confidence, and the Allied Governments, the German Government and all the various agencies concerned in its execution have worked together to carry out the plan in the spirit in which it was concieved.
The present report is the second of a general character sent to the Reparation Commission by Mr. Gilbert, the first having been issued on May 30 last and having concerned the plans for the first eight months of operation. The Dawes program started functioning officially on Sept. 1. 1924, but attained "full force and effect" only two months later.
Real Test That of Adjustment.
Emphasizing the wholly satisfactory results of the first year, Mr. Gilbert says this period has been "not so much a test of German capacity to pay as a test of the ability of German economy to adjust itself to a return to stable conditions."
Recalling that the initial annuity of 1,000,000,000 gold marks payable up to Sept. 1 last was paid in full and divided among the creditor countries according to allied agreement, the Agent General paints out that the second annuity year, now in progress, involves for the first time a possible charge on the German budget totaling 500,000,000 marks. This amount, however, is expected to be covered, he remarks, through the transfer to the Reich of German railway bonds of equivalent value. Hence, in his opinion, the annual payment to the Allies, aggregating 1,220,000,000 marks during the coming ten months, is assured. Interest on its bonds is being met monthly by the railway company. 50,000,000 marks having been paid into the Agent General's account in October and November. The German Government is also paying 20,000,000 marks monthly out of its budgetary funds.
Dealing with the distribution of the first annuity, Mr. Gilbert observes that the bulk of the payments has been made in reichsmarks within Germany, chiefly for deliveries in kind. Discussing the share assigned to the United States for "American claims on account of the American Army of Occupation and awards of the Mixed Claims Commission," he states:
"The share of the United States in the first annuity amounted to about 15,328,000 gold marks. Up to this time no part of this share has been utilized by the United States Government and it remains to the credit of the United States on the books of the Agent General."
Under the Spa convention percentage the lion's share of the year's receipts, 454,000,000 marks, went to France. Of this sum France gets 136,000,000, or about 30 per cent., for her Rhine Army alone. The French balance with the Agent General amounts to 23,000,000 marks. Britain and Belgium devoted only about one-sixth of their respective shares to their occupational forces.
The report affirms that "it has been possible from the outset to administer the annuity in accordance with business principles" and adds that the system of monthly adjustments will be continued as far as possible in the second year, the Reich's installments totaling at least 90,000,000 marks.
The Agent General prides himself that the administrative expenses of his organization have been only 3,700,000 marks, or four-tenths of 1 per cent. of the fund administered.
No Cash Transfers Made.
Discussing the Transfer Committee, whose function it is to guard against reparational deliveries harmfully affecting foreign exchange, Mr. Gilbert observes that the committee authorized no cash transfers during the first year. The payments either have taken the form of deliveries in kind or cash supplied to the armies of occupation and other allied bodies within the Reich. The principal deliveries consisted of coal, coke and lignite. Deliveries of gold and certain food stuffs have been barred absolutely.
Through the operation of their Reparation Recovery acts Great Britain collected about 155,000,000 and France about 25,000,000 marks of their respective annual shares, the report shows.
Mr. Gilbert devotes considerable attention to the flourishing condition of the German railways organized as a private corporation, as the Dawes plan stipulates. The company's profits for the eleven months ending Aug. 31 were 765,000,000 gold marks, of which 200,000,000 was turned in to the Agent General as interest on bonds and more than 200,000,000 more was set aside for future service of these obligations. Thus, Mr. Gilbert affirms, the company will have no difficulty in meeting the charge of 845,000,000 marks imposed on it during the second year. He adds that "it is still too early to make definite plans" about the marketing of railway bonds to the value of 11,000,000,000 marks issued to the Dawes trustee.
Stressing a surplus of nearly 900,000,000 gold marks recorded at the end of the last fiscal year, Mr. Gilbert evinces complete satisfaction with the German budget. He points out that the actual excess of revenues over the budgetary estimate during 1924-1925 was more than 2,000,000,000 marks and deduces that while the final estimates for the current year's budget have not been submitted to the Reichstag "it seems reasonable to expect the final accounts to show the budget balanced by a safe margin."
The Government, however, he declares, must practice rigid economy and "accomplish further reform in the field of taxation." Certain German States and municipalities, he says, have found themselves so unexpectedly affluent that they have embarked on extravagant non-productive enterprises.
The Revalorisation Process.
Dismissing Germany's present public debt as virtually non-existent as a result of inflation, Mr. Gilbert says of the revalorization process that it is contingent on the discharge of the Reich's reparations liabilities and cannot affect the Dawes program. The total sum ultimately due to the holders of revalorized State bonds may reach 1,00,000,000 marks, he thinks.
Great weight is laid in the report on the stable character of the new German reichsmark, as the present currency is officially called. There are 5,083,000,000 of these marks in circulation, backed by a gold reserve or its equivalent in foreign notes of 1,555,000,000. The gold cover has steadily increased since the plan began to function.
Turning to credit conditions in Germany, the Agent General observes that since the end of inflation the country has passed through three stages: first, when any form of credit was obtainable only at prohibitive rates; second, when short-term credits of an emergency character were available, and, third, when strong industrial concerns have been able to get some long-term loans and the weak have succumbed altogether. This transnational stage, he says, still prevails and he adds:
"In so far as the business crisis is attributable to credit conditions. It may be said that the situation which developed in the Spring and to some extent still remains was precipitated by dependence upon short-term credits for capital purposes. Since the placing of the German external loan, which yielded about 800,000,000 reichsmarks, long-term loans to rather more than an equivalent amount have been made to German States, municipalities and industry."
The comparative opulence of the German Government, Mr. Gilbert avers, has produced a "public banking structure not only exceptionally complicated but more elaborate than the volume of business justifies."
"Instead of being borrowers," he says, "the Reich and its agencies are very large lenders. An expert view of this credit policy is that it is manifestly important to bring the administration of public funds more under control of the Reichsbank as the central bank of Germany and guardian of its credit and currency reserves."
Foreign Trade Balance
In dealing with German foreign trade the Agent General quotes from Government figures showing that the daily average excess of imports over exports at the end of October was 7,000,000 marks, compared with less than 2,000,000 in 1913. He observes, however, that it is possible that the official figures err on the side of conservatism and that the excess of imports is not so large.
Among factors adversely affecting the trade balance he cites the extension credits from aboard,, arising chiefly from the "general need of replenishment," the necessity of finding markets for German exports and the effort to overcome trade barriers abroad. Germany, in Mr. Gilbert's view, has many difficulties of this last nature to surmount and "much will depend upon the extent to which next year she is able to lower the barriers to trade that now exist."
His report shows that the United States to be by far the biggest purveyor to the Reich, American imports being valued at more than 1,500,000,000 marks in 1925. Britain comes second with 570,000,000.
German industry Mr. Gilbert describes as passing through an adjustment period "approaching a crisis," but by no means desperate. Human business enterprises built up on inflations, he says, have had to go and the famous vertical trusts have been found to be economically inferior to consolidating competitors in "a less closely knit trust."
He shows the coal and iron industries to be in reasonably good shape, the production of steel indeed being somewhat greater than in 1913. Business in general, as demonstrated by the volume of bank clearings, is about one-third below the pre-war turnover. Unemployment, while growing, is less than it was a year ago, some 500,000 persons now receiving State aid. Commercial failures are less numerous than in 1913.
Prices of basic commodities declines slightly during the year, but the margins between wholesale and retail prices, in Mr. Gilbert's opinion, remains unduly wide.