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tax calculated at 5% on the first 10,000 marks of the taxable surplus income, up to 50% if the difference in income amounted to over 201,000 marks. Then came the property-tax beginning with one per mille on the first 200,000 marks, rising to 5 per mille on a fortune of over 2 million marks. Thirdly, came a consider- able increase of the tax on companies: it was based on a fixed rate of 80% on the surplus profit, which obtained a reduction of 10 to 50% only when the surplus profit did not exceed a very moderate amount or where it did not exceed a very moderate return on the capital. The final extension of the war-profit tax took place in 1919. It again hit the individual with a tax on the surplus income, commencing with 5% and rising to 70% on a surplus income of only 400,000 marks. The war-tax on com- panies was also repeated. More particularly a tax was levied on total increase of fortune between Dec. 31 1913 and July 30 1919 and that at an extraordinarily high rate. Exemption from the tax was allowed only up to an increase of 5,000 marks, from which amount the tax began with 10%, increasing to such an extent that an increase in fortune of 376,000 marks was taken in full and in no case could the taxpayer keep more than 172,000 marks of the increase. All that individuals gained during the war and the first period of transition over an increase of 172,000 marks was claimed by the State under this last extension.

The revenue from the war- tax of 1919 was estimated at 12 milliards, when it became law. In the years of the war the de- fence-tax, war-profits tax of 1916, and surplus-income tax of 1918 brought in the following amounts: 637-4 millions in 1914, 307-8 millions in 1915, 65-1 millions in 1916, 4,853-1 millions in 1917, 2,410-3 millions in 1918, and 1,136-4 million marks in 1919. The total yield of the defence-tax was 976-9 million marks; of the 1916 war-tax, with its increases, 5,777-1 millions; and of the 1918 war-tax 2, 686- 2 millions, a total of 9-4 milliards of marks.

Nothwithstanding these considerable amounts, and the in- creased revenue obtained through other forms of taxation, the German war budget was a most unfavourable one. The appended table gives the total revenue and expenditure of the Empire for the years 1914 to 1918, and, as already stated, a great part of the actual war costs are not included in the expenditure, as it only appears in the accounts for the years following:

Revenue and Expenditure 1914-8 (in millions of marks).

Revenue

Expenditure

1914 .... 1915 ....

1916 ....

1917 .... 1918 ....

2,350-8 1-735-2 2,029-4

7,830-3 6,795-0

8,653-8 25,708-4

27,740-9 52,015-4 44,030-7

The war was financed, almost entirely, by an enormous increase in indebtedness, at first through issues of loans, and later, in ever-growing measure, through increasing the floating debt. The taxes and levies introduced during the war were barely sufficient to meet the current requirements, greatly in- creased through the interest on the debt as well as through decrease of revenue from peace-time sources. As far as the property and income-tax is concerned these were not perma- nent sources of income but were only available once, and ter- minated as soon as their result was obtained. But the expenses remained, and necessitated imperatively the replacement of the single levies through regular sources of revenue.

After the War. It was in this desperate situation financially that the war came to an end. The collapse which followed it, together with the crushing conditions of the Armistice and the Peace Treaty, disorganized the whole economic and financial life of the country. The effect of the war appeared after the defeat with frightful clearness. Of the German population 1,700,000 were killed, 1,500,000 injured and thus had their capacity to gain a livelihood impaired. And the civil population, through the physical and moral strain of the war, showed a greatly increased mortality; more especially, countless children and old people were victims of the privations imposed by the blockade. The increased mortality of the civil population in 1914-9 is estimated at 800,000 souls. A still heavier blow was

the fall iri births through the separation of the sexes in conse- quence of the war. For the period of six years this reduction amounted to 3,700,000. Besides, actual losses in numbers, there was also exhaustion of those who remained alive and the de- struction of the means of productivity.

Superficial critics have been apt to observe that Germany itself was saved from the ravages of the war, since it was fought, with the exception of a short incursion of the Russians in East Prussia, outside its frontiers. Herein lies a fallacy. The German industrial works were not indeed destroyed, but the greater part of the machinery and plant was used up to the utmost by war production without there being a possibility of seeing to repairs and renewals. Similarly, the agricultural areas were exhausted. Industry and commerce had lost the materials that were used up in the war; cattle had gone from the stalls; transport undertak- ings were crippled to an incredible extent. At the end of March 1920 only 45-9% of the existing locomotives were usable, whereas at the end of July 1914 the number under repair was only 19-1%. Germany in the late autumn of 1918 was not only in a state of military defeat and political chaos; financially and economically it was at its last gasp. What was needed was help from abroad, through importation of foodstuffs and raw mate- rials, which alone could facilitate a transition from war to peace conditions. A complete change in the direction of its productive energies was required. During the years of war production was solely for war requirements, the Government being the sole big buyer, always eager for goods; when the demand for war require- ments stopped suddenly it was necessary again to produce for peace requirements, and to find a market for them. First and foremost there was the task of again taking into the labour market the millions of people released from the army and of find- ing places for them in agricultural and industrial undertakings, in the works and factories and offices. Elaborate plans for this demobilization of the army had already been made during the war. They were, as so many other schemes, rendered useless by the destructive conditions of the Armistice. The periods fixed for the return and release of the army were too short, and all organization in that direction collapsed. The enormous supplies taken for the army, the value of which was estimated at several milliards of gold marks, and the return of whJch was imperative for the use and nourishment of the people during the first part of the period of transition, could not be stored in the given time. Moreover, Germany had to deliver up to the Allies 5,000 engines and 1 50,000 wagons, and the transport crisis already threatened was thereby rendered complete. In accordance with the supple- mentary conditions of March 1919 Germany had to hand over the biggest part of its commercial snipping, and this again greatly increased the difficulties of distribution. Worse still, the blockade still continued for months, and thus there was the severest re- striction of imports of necessary provisions and raw materials, for which also only inadequate means of payment were available. Terrible were the results of these regulations. Not only was the political and social crisis rendered more acute, but the German economic position was disordered to such an extent that repeat- edly a total collapse seemed unavoidable. The result was the loss of hundreds of thousands of lives among the civilian population, whose weakened condition was unable to withstand the continued privations. According to an estimate based on 375 German towns of 15,000 inhabitants and over, as against 140 deaths per 10,000 in 1913 there were 175 deaths in 1919 and 158 in 1920. The mortality from tuberculosis alone was increased from 15-7 in 1917 to 27-1 in 1919, and in 1920 it was still as high as 18-4. That was not all. With the Armistice began the Allied occupation of the left bank of the Rhine and the bridgeheads on the right bank. A difficult economic situation was thus produced, which again became peculiarly acute in the spring of 1921 through the London " sanctions," for Germany lost control of her most important customs frontier; the " hole in the west " was torn open, and a flood of foreign goods, to the value of milliards of marks, poured without regulation or control into the starved country, aching for commodities of all descriptions. Whilst the German population was without the means to satisfy its re-