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