218 ECONOMIC ESSAYS IN HONOR OF JOHN BATES CLARK 
II 
1 he economic mechanism of indemnity payment has been s0 
fully described in recent years that the tribe, once numerous, who 
imagine that the Germans have only to send out cash or checks 
is virtually extinct. Everyone knows now that an indemnity 
must be paid in goods. Year by year—when the Dawes plan is 
in full operation—the German people will have to send across 
the national borders iron wares, textiles, chemicals, coal, potash 
and a thousand and one varieties of other goods, to the value of 
$625,000,000, and will receive in return nothing but receipts 
applicable to the indemnity account. Year by year the American 
farmer sends to the cities wheat and meat, milk and eggs and 
vegetables, cotton and tobacco, wool and sugar, to the value of 
more than $700,000,000, and he receives in return nothing but 
interest receipts, 
In order to keep up this commerce of goods against receipts 
he Germans have to lower their standard of living; extend their 
hours of labor; do without extensions of plant from which only 
remote, if rich, returns are to be had; avoid “unproductive” 
expenditures, such as new churches, schools, museums, scientific 
laboratories. In order to keep up his interest payments the 
American farmer likewise has to consume less, work longer hours; 
avoid improvements such as orchards and forest tree plantations 
that cannot yield prompt returns; cut his contributions to the 
rural church; vote against good roads and other public 
improvements. - = 
The natural effect of the German indemnity is to stimulate 
overproduction of export commodities. Markets that would 
otherwise have been sufficiently supplied at remunerative prices 
now receive a plethora, to force prices to a lower level. At lower 
prices the Germans have to send out more goods. They are 
forced to whirl round faster and faster in a vicious circle of 
production and prices. The case of the farmer is similar. To 
make his interest payments he is forced to put every available 
acre into cash crops. If his wheat land is not altogether worn 
out he puts it into wheat, although under the canons of good 
illage it ought to rest for a year or two under clover. If all his 
land is fit for cotton, he plants it to cotton, though a part of it, 
set aside for grass and fodder, would supply his household with