Keynes and Reparations

There has been a marked revival of interest in the post First World War German reparation question mainly as a result of the accumulation of short-term balances due to the non-requitable and unrequited oil surpluses. The approach which has been adopted (including the article included in this volume) represents one more aspect of the slippage into pre-1932/34 economics. The problem of ‘collection’ (Aufbringung) becomes the central problem. The outcome is determined by, (a) the elasticity of demand and supply in the receiving and paying countries respectively, and (b) the assumption of the maintenance in the system as a whole of the incomes (and demand) with a shift from the paying to the receiving country. In as much as the problem of ‘paying’ for the oil surpluses has close affinity with the German reparations problem a second look seems important. There is a grave danger that in seriatim efforts to eliminate the deficits the oil-consuming countries will propel the world economy onto a downward spiral with vast losses of production and welfare—achieving nothing.