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E. Varga

Economics

Survey of the World Economic Situation
in the 1st Quarter of 1923

(May 1923)

From International Press Correspondence, Vol. 3 No. 39 [21], 24 May 1923, pp. 360–363.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

IV. German Austria

In one of his articles Lloyd George names the settlement of Austria’s affairs by the League of Nations a “successful effort in; the line of artificial respiration”. This designation seems to us to hit the mark exactly. The loan now actually received has enabled the crown to be stabilized m Austria; there even seems to be a tendency to a rise in its value during the last few weeks.

But the prices are not stabilized. According to the official index figures the rise in prices was as follows:

That the price level will rise again in the near future is almost certain, as a result of the newly introduced turnover tax. The amount of paper money in circulation remains fairly constant. In March there was a certain increase, but this was not due to state needs, but to real requirements in economic life.

A slight improvement in economic conditions has lately been observable in Austria, partially due to the revision of wages (reducing the real wage ot the workers), and partially to the Ruhr occupation, which has led to an increase in the export of iron and iron products.

Until the middle of March the number of unemployed changed but little; in Vienna there were approximately 100,000 unemployed, in the whole of Austria about 170,000. In March there was a slight drop, caused in part by agricultural and building seasonal work. Despite rising prices, an almost uniform 5% reduction of wages took place in all trades at the beginning of February. Improved economic conditions however, aroused the resistance of the workers again and at the end of March the bourgeoisie was forced to grant £5 % rise in wages.

The measures prescribed by the League of Nations, above all the discharge of superfluous civil servants, and the depolitization and reduction of the army, have not been fully carried out, owing to the resistance of the Social Democrats and of some sections of the bourgeoisie. The result is the very interesting fact that the Entente ruler of Austria, the financial controller Zimmermann, will enter a formal complaint against Austria at the impending conference of the League of Nations Council, Austria not having adhered to the conditions under which the loan was granted.
 

Hungary

The 1st quarter of 1923 has demonstrated that the counter-revolutionary white government is totally incompetent – despite the ruthless Suppression of the working class, carried through by all and every means – to assist the country out of the economic crisis. We may take the rapid fall of the crown as the external symbol of Hungary’s decline. During the second half of 1922 the rate of exchange was kept fairly stable by artificial support. This took place against the will of the industrial bourgeoisie, which hoped that Hungarian industry would be rendered more capable of competition in the Balkan markets by a policy cf inflation. Whether it was that the industrialists succeeded in asserting their will, or whether it was – and this is more probable – that the state treasury was no longer able to support the crown, in any case there was a considerable depreciation in the currency during the period of this report. The quotations for an English pound were as follows:

The depreciation in the rate of exchange is due to the passive, trade balance of the year 1922, and to the deficit in state finances.

The budget for 1922/23, submitted in the eighth month of the budget year, shows a deficit of 40 milliard crowns. The deficit has been covered by increased issue of paper money. Within the first eight months fresh notes to the value of 12 milliards were issued. In order to cover the further deficit, the ministry has now decided to issue notes to the value of 30 milliards. But this fresh issue will have to be much greater, as the budget draft was calculated in crowns then possessing double their present value. Moreover, the budget does not take into consideration the new, far-reaching, and justified claims of the state officials. Further, it provides the sum of 16 milliards only for the army, a most improbably low figure, less than the expenditure required by the Austrian national army.

As in Poland, the state of industrial markets is here much better than that of state finances and of the rate of exchange. The extremely low wages paid the working class induces foreign capital to invest; there are very many Slovakian and Czech undertakings which have removed their works to Hungary, in order to profit by the low wages. It is interesting to note that here French capital, represented by Schneider-Creusot, is working peacefully hand in hand with Stinnes, through the agency of the Hungarian Credit-Bank, and that English capital is doing the same through the agency of the Anglo-Hungarian-Bank. This speculation in the low wages of the Hungarian workers is clearly expressed in an article published by the Times:

“Compared with the cost of living, the wages are lower than in any country in Europe. Since the war the standard of living has sunk in all classes and occupations. Before the war the average wage was 50 hellers per hou, for which sum the worker could buy 2 kgs of bread. The hourly wage is now 110 to 120 crowns, and a kg of bread costs 160 crowns.”

The wages of the agricultural laborer are lower than ever, and unemployment is great.

The following data from the Nepszava give an idea of how low the standard of living has sunk:

The Hungarian workman was able to buy the following goods with his daily wages:

Since the end of last year conditions have become worse. At the end of January the weekly minimum living wage had already reached 13,323 crowns. But the average hourly wage in Budapest and environs at the beginning of February was 123 crowns for skilled workers, unskilled workers 102, other factory workers 75. By the end of February the prices had risen 380 times, the wages 175 times, as compared with pre-war figures. Prices rise unceasingly; during the first three weeks of March alone prices rose by 35%. These facts explain the obstinacy and bitterness with which the Hungarian working class has fought its recent wage battles, and demonstrate at the same time the bankruptcy of the White Terror régime.
 

Poland

We have insufficient data at our disposal with respect to the economic situation of Poland during the period of our report. It may be said in general that economic life has undergone but little change. The great contradiction between the obvious improvement of production and the further depreciation of the currency has been continued during this quarter of a year. At about New Year 80,000 Polish Marks were paid for an English pound; at the beginning of April 200,000. Poland’s incorporation into France’s sphere of economic power also continues. In the course ot these last three months Poland has received 400 million French francs in -state credits, and is also said to have received credits from large French banks.

The. following figures, culled from the Bergwerks-Zeitung show the participation of French capital in Polish petroleum undertakings (10. April):

“A few weeks ago French companies founded a Syndicat des Petroles Français de Pologne, with headquarters in Paris. To this syndicate belong:

The “Silva Plana” Co., with its capital of 68 million francs, does not belong to this syndicate.

Another very interesting point is the co-operation of France and Poland in the international coal business, as reported in the Bergwerks-Zeitung of the 13th February. The allotment of Upper Silesia has made Poland into the second greatest possessor of coal; production however, is still comparatively small. The above named paper writes as follows:

“Poland’s economic co-operation with France is also to be presently expressed in a re-division of coal export. Poland has received instructions from France to examine into its system of coal export with a view to making it correspond in every respect to France’s economic plans. The confidence men of the French government in Poland (Korfanty and his companions) have agreed among themselves that, in case of a further decline in the coal market, a further organization of foreign markets is to be undertaken. Germany is to receive Polish Upper Silesian coal to the same extent as before. Poland is to exert every endeavor to extend its coal markets towards the East. Polish deliveries of coal to Czecho-Slovakia, Austria, Hungary, Yugoslavia, etc. are to be continued in the future, but on the other hand the projected extension of Polish coal export to Switzerland is not to be carried out on such a large scale as originally intended, for France desires to supply Switzerland herself. France and Belgium will also supply the Northern States to a greater extent than before; hence, Poland will not increase its coal export in this direction.”

We are of course unable to vouch for the correctness of these statements; but they seem to bear out the’ general trend of Polish-French relations.

The situation of industry has suffered a general decline. According to official figures, the number of unemployed exceeded 75,000 at the beginning of January.

With regard to separate branches of industry, the production of petroleum is still receding. In 1922 the output was 44,500 barrels as compared with 50,000 in the year 1921. This is explained by the circumstance that the petroleum strata near the surface are now exhausted, and borings to a depth of 1,600 metres are now required to reach new sources. This demands extensive technical equipment, which has to be imported from abroad, and for which the undertakings do not possess sufficient capital. This explains the constant penetration of French capital into the Polish petroleum industry, the politico-military motives overcoming the economic difficulties. Petroleum imported from America is cheaper than native petroleum.

The Polish textile industry is just passing through a severe crisis; production has ceased to a considerable extent.

Transport is still suffering severely from shortage of tolling stock. 34% of the locomotives are in need of repairs. The shortage of locomotives is estimated at 1,500, of trucks at 43,000.

Foreign trade has improved in so far as the import surplus has diminished; this is estimated at about 20%, but there are no exact data to be had.

Now as ever, state finances are the worst point. There have been innumerable expert conferences, and it is hoped that the deficit will be removed in three years. But in reality the taxation revenues of the state – as in Germany – are quite insignificant, owing to the rapid depreciation of the mark and retarded payment of the taxes.

The taxes per capita, reckoned in gold francs, are:

The deficit in state finances continues to be covered by the issue of fresh notes. Total value of notes in circulation, in milliard marks:

The amounts invested in savings, which totalled 1,772 million gold francs before the war, now scarcely amount to 50 millions. It would thus appear that, despite the improvement in production, the production balance of the country continues to be adverse, and there is still no thought of accumulation.
 

Czecho-Slovakia

After the protracted crisis of 1922, economic life in Czecho-Slovakia has shown the first signs of improvement within the period of this report. This improvement is in part due to the Ruhr occupation, as orders were received by Czechoslovakia for coal, coke, iron, and steel, from Germany and from other countries generally supplied by Germany. The sorry condition of Czecho-Slovakian industry at the beginning of the year is described in the report of the General Council of Czech industrialists:

“In the textile industry:

• 7/32 of the workers are working 48 hours weekly;
   
• 10/32 of the workers are working 27 hours weekly;
   
• 6/32 of the workers are not working at all.

In the glass industry 12,000 workers are working out of 30,000. The china industry counts 20% unemployed, 35% part timers and 45% fully employed. Only 10% are at work in the ceramic and the stocking industries. The breweries are only producing 40%, the malt factories only 25%, the cabinet making industry 10% of their normal output. The linen spinners are not working at all.”

The total number of unemployed is not stated; a correspondent of the Economist, in March, still estimates them at 400,000. In all probability this estimate is still too low. In December 220,000 were in receipt of unemployed benefit, in January 250,000.

The improvement shown during the 1st quarter of 1923 is very slight and unequal. Some factories are taking up work again, others are just closing down, or working part time, especially in the textile industry.

The Ruhr occupation has greatly improved the position of heavy industry. At the end of December 3 blast furnaces were working, at the beginning of March 7 new ones were blown in. In the coal industry the position is satisfactory; all reserves are sold out, and the mines have orders for a long time to come. The coal export to Germany and France is fairly brisk.

The situation has improved in the iron industry as well.

The improved state of the markets is also partly due to the orders for military supplies received from various countries, above all from Yugoslavia and Roumania.

It remains to be seen, however, whether this improvement is only transient, a result of the Ruhr occupation, or the commencement of a more permanent boom in business. It is a fact that a great deal of industrial capital leaves the country. The textile industrialists, who close down their factories in Czecho-Slovakia, buy large quantities of shares in textile undertakings in Saxony with the working capital thus released.

The extreme duration of the crisis has evert shaken enterprises possessing large capital. Two large banks, the Bohemia Bank and the Bodenbank, collapsed in the course of the last few weeks, involving more than 20 other undertakings in their ruin. Both of these institutions were founded by the agrarians, who attribute the breakdown of their enterprises to the competition of finance capital, the Zivnostenska-Banka. This bank collapse has caused extremely strained relations in the government coalition, between the Agrarian Party and the National-Democrats.

The high rate of exchange of the Czech crown is the cause of unending difficulty to the export trade of Czecho-Slovakia. The export of sugar and machinery jeceded in particular last year, it is interesting to remark, that the high rate of exchange of the Czech crown has the effect of diverting export from Czecho-Slovakia’s natural markets – Austria, Hungary, Poland, Yugoslavia, Italy – and directing it to countries whose currencies are also high in value – France, Switzerland, England, Holland. It is also noteworthy that Hotovetz, the former minister of trade and general secretary of the Prague Board of Trade, declared in one of his lectures that the sole means of escape from the Czecho-Slovakian industrial crisis is to win the markets of Russia.

Despite the many obstacles which the high value of the crown has thrown in the path of Czech industry, the government still dings to Raschin’s policy. At the beginning of the year the crown sank abruptly, but the banking office sacrificed a great deal in order to stabilize the crown again, throwing great quantities of foreign securities on the market. The quotations per English pound have been as follows:

A great part of the foreign securities thus put on the market m support of the crown were Yugoslavian dinars. This measure on the part of the Prague banking office led to the depreciation of the dinar. This caused much bad blood in Yugoslavia, and the Yugoslavian press interpreted it as a breach of the alliance.

We see from the above that Raschin’s death has not affected the financial policy of the government at all. His successor is also one of the directors of the Zivnostenska Bank, as Raschin was, and represents the interests of financial capital in the same manner. Every means is to be employed to maintain the high rate of exchange of the crown. On the other hand, it is not likely that the banking office will attempt to drive the rate of exchange still higher, for such an attempt might be disastrous to the weak beginnings of improved economic conditions above described. Prices have risen somewhat since the beginning of the Year, chiefly those of agricultural products. The agrarian parties now in power are utilizing the opportunity for the introduction of com and flour duties, and an agreement on this point has already been reached by the parties of the coalition.

The attempt made by the employers to reduce wages, and at the came time to lengthen working hours – despite the higher prices, – led to extensive labor conflicts during the period of this report. Such conflicts are likely to become more numerous in the immediate future, in view of the improved economic conditions. The pasting of the Anti-Communist law “for the protection of the republic”, is intended to strengthen the position of the capitalists in this struggle.

*

The neutral countries

During the period of this report, economic life has changed but little in the neutral countries. The economic development of these states resembles that of England.
 

Switzerland

The crisis in Swiss economics continues. Unemployment has increased since October. The number of those completely out of work has been as follows:

This growing unemployment is probably due to the standstill in agricultural work. The branches still suffering most are the metal, machine, and textile industries. The slow depreciation of the Swiss franc, which began at the dose of last year, still continues. Following are the quotations for 100 francs, in dollars:

Prices are very stable. The fluctuation in the index figures does not amount to more than 2 to 3% since August of last year. Basing their demauds on the bad industrial conditions, the employers are trying to reduce wages. The state itself has set the example by reducing the salaries of its employees.

The reduction of state expenditures is based on the financial situation of the state. The budget for 1923 shows a deficit of 84 million francs. The deficit originates in railway and mobilization debts. Fairly large sums ate used in the payment of unemployment doles. The deficit will be covered by loans; in 1922, 20% of the capital issue was required by the state, and the national debt rose by 400 millions, to 4½ milliard francs.
 

Holland

Holland’s economic condition also shows no improvement during the past quarter. Unemployment has increased. We append the number of unemployed:

The industrialists complain loudly of German competition, and demand protective duties. This movement has been crowned by a certain amount of success. A high protective duty was introduced on tobacco manufactures, and the import of foreign footgear was prohibited until the 1st of January 1924. The occupation of the Ruhr, and the accommodation of German prices to those of the world market, have weakened Germany’s competitive capacity, and the situation of Dutch industry has unproved correspondingly. On the other hand, the Ruhr occupation has been a great source of trouble to Dutch shipping.

The shipping crisis has gradually become less acute. In 1922 the traffic of the port of Amsterdam had reached its pre-war level, that of Rotterdam approached its old standard. The last quarter of 1922 showed a revival of foreign trade. The foreign trade balance for 1922 is quite favorable. This, and the consolidation of public finances, nave resulted in the Dutch florin almost attaining dollar parity.
 

Denmark

The crisis in Danish economics – after improving somewhat last year – has remained practically unaltered during the last three months. The number of unemployed continues to increase:

The unfavorable economic situation is also mirrored by the course of exchange of the crown. The following prices were quoted for the English pound:

Prices show a corresponding upward tendency. The wholesale index figure has risen from 192 to 199.

The crisis has brought about the collapse of a number of undertakings. The greatest shock was that caused by the bankruptcy of the Landmanns Bank, whose total tosses amount to about 232 million crowns. The state was obliged to give assistance to the bank, and has paid out 111 million crowns up to the present. This sum will cause a serious deficit in the state budget.

Taken all round, the position of Danish economics is not favorable. The capitalists have endeavored to render themselves competitive at the expense of the workers; wages were greatly reduced last year. The industrialists are now bent on the abolition of the eight hour day above everything else. The employers have given notice of withdrawal from the 1919 agreement on working hours, the notice expiring on April 1, 1923. The majority of wage contracts however do not expire until the Spring of 1924. But preliminary friction will soon be felt, for the employers are using the tactics of fighting the working class separately, in groups.

During the period of this report, Sweden’s economy has improved slowly but constantly. Some sections of industry are already working at their normal rate, but the metal and machine industries are still in a difficult position. The total production of iron industry last year did not reach even one half of the 1915 output.

Unemployment is still rife. Data on this point are unfortunately published very late. In October 15% of the trade union members were out of work, in November – 17%. During the winter months unemployment increased still more.

Sweden’s trade and payment balance has developed very favorably. In 1922 the import surplus amounted to 12½ million crowns only, that is, about ½ of that of 1913. This import surplus is amply covered by revenues derived from shipping, and by the profits on foreign capital.

State finances are also balanced. The deficit is insignificant. This explains the fact that the Swedish crown is above dollar parity. As we mentioned in our last report, the Reichsbank undertook an “action in support of the dollar”, by increasing the number of bank notes in circulation and buying up dollars; but this attempt was given up after a few weeks, and the paper money in circulation diminished again.

The high prices have come down slightly of late. The period of acutest economic crisis was utilized by the employers for reducing wages to an extent far exceeding the lowering of the cost of living. At the present time, now that economic conditions are improving, the working class is beginning to put in claims for wage increases. The struggle between capitalists and workers led to the recent fall of the social democratic Brant mg government. The bourgeois parties – conservative and liberal – combined to pass a vote of censure in order to defeat Branting’s plan of giving state unemployment benefit to locked-out workers.
 

Norway

Norway’s economic condition appears to be improving at sa greater speed than that of any other neutral country. Many branches of industry are already fully occupied, and the most important industry, paper making, is undoubtedly flourishing. The merchant marine is also well occupied. On tne other hand the fishing trade, another very important branch of industry, is in a very disadvantageous position. Unemployment data are as follows:

At the present time about 15,000 persons are occupied with emergency work. The improved state of the market is shown by the fact that the price level began to rise in February, after a long standstill. The paper money in circulation is being slowly reduced.

Foreign trade, calculated by the prices of 1913, has developed as follows:

The trade balance deficit is chiefly covered by the revenue accruing from the merchant marine. The gross freight takings of Norwegian shipping in 1922 is estimated at something over 400 million crowns.

In the sphere of political economy, the conclusion of the customs and commercial war with Spain and Portugal is of interest. These two countries combined with France to take measures against the sale of Norwegian fish and against Norwegian shipping, in order to force the import of heavy wines, which had been prohibited for three years. It is characteristic for capitalist economics that Norway has been forced, by special commercial agreements, to buy 1.75 million of heavy wines and brandies from the above named wine countries, although the Norwegian prohibition laws forbade this being sold in the country itself, and the contracts forbade its being re-exported.

The liberal government was overthrown on the alcohol question, and the new conservative government is now laying a bill before parliament once more allowing the export and sale of wines containing 24% of alcohol. In this manner the prohibition of alcohol in Norway is being undermined by the wine producing countries.

 
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