Oskar Morgenstern · 1926
Oskar Morgenstern’s review of George Peel’s 1925 book presents France’s financial crisis as the cumulative result of antiquated fiscal institutions, borrowing-led war finance, and unresolved debt obligations. His strongly favorable assessment rests on Peel’s ability to make an opaque financial system intelligible without reducing its crisis to recent events. The book proceeds through three periods: 1789–1914, the war and its aftermath through 1924, and the acute crisis of 1925. Morgenstern praises this increasingly detailed treatment of the present because it preserves the explanatory weight of inherited conditions.
His endorsement includes a methodological reservation about estimates of national wealth and income and comparisons of tax burdens:
Nun soll den dabei verwendeten Ziffern und den gewonnenen Erkenntnissen nicht jeder Wert abgesprochen werden, aber es möge doch viel Vorsicht gewahrt werden.
English translation: Now, the figures employed in this and the insights obtained are not to be denied all value, but much caution should nevertheless be preserved.
Morgenstern does not reject quantitative comparison; he questions the confidence placed in figures whose comparability remains inadequately examined. The Dawes Committee’s use of international tax comparisons makes this a practical issue for reparations policy as well as an unresolved problem in fiscal theory. Even comparisons across different periods within one country, he argues, encounter substantial obstacles.
The substantive diagnosis begins before the war. France’s fragmented budget, supplemented by four or five additional budgets, obscured the public accounts, while its outdated taxes lacked a genuinely modern income tax in 1914. Reform came only in 1917, under exceptionally unfavorable conditions. Wartime reliance on loans then increased public debt from 35 billion to 145 billion francs between 1913 and 1919. Morgenstern interprets this policy as postponing, rather than reducing, the burden of war: avoiding immediate taxation made the eventual reckoning more severe. Subsequent revenue increases and American assistance delayed the crisis without removing its causes. Inflation offered no effective escape, since short-term borrowing exposed the state to rising interest rates and foreign-currency obligations remained payable in pounds and dollars.
Die Lage ist also sehr kompliziert, aber trotzdem ist sie nicht unrettbar.
English translation: The situation is thus very complicated, but in spite of this it is not beyond saving.
This distinction between complexity and hopelessness organizes the review’s turn toward remedies. Morgenstern regards the necessary measures as identifiable, although their implementation faces social and political obstacles that neither he nor Peel examines here. A lasting settlement of debts to Britain and the United States is essential. He also exposes the double edge of French claims that international transfers are impossible: such reasoning would undermine the assumption that Germany could make the larger transfers required under the Dawes Plan.
Die Stabilisierung des Franken ist das erste, was getan werden muß; sie ist aber nur möglich, wenn jede Inflationsquelle verstopft wird, die schwebende Schuld fundiert und ein Tilgungsdienst eingerichtet wird und Ordnung in den Staatshaushalt kommt, was letzteres aber bedeutet, daß zu einfachen und klaren Formen der Budgetierung übergegangen werden muß.
English translation: The stabilization of the franc is the first thing that must be done; it is possible, however, only if every source of inflation is stopped up, the floating debt is funded and a sinking-fund service established, and order is brought into the state budget — which last means that one must pass over to simple and clear forms of budgeting.
Stabilization therefore requires fiscal reconstruction, not merely a monetary declaration: closing sources of inflation, funding floating debt, arranging amortization, and restoring budgetary clarity. Morgenstern notes that the 1926 budget had not yet satisfactorily achieved the last requirement. He agrees with Peel that an immediate return to gold is impossible because sound finance must precede it, while recent British experience makes him more skeptical of treating gold as the culmination of monetary order.
The review closes by identifying both Peel’s scope and its broader implications. Although the book concentrates on state finance rather than its effects on industry and trade, Morgenstern emphasizes that these spheres cannot remain insulated from one another—a point he directs against German and Austrian defenders of inflation. His final praise of the book as political history as well as financial history follows from this interdependence. The review’s significance lies in joining a historical explanation of fiscal breakdown to methodological caution about international comparisons and a clear ordering of the conditions for stabilization.
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