Swindling Admired

October 28, 1957

Free West Germany and Communist East Germany each had a currency called the mark. East Germany had insisted on an official exchange rate of 1 to 1. But in the free market one West mark exchanged for 4½ East marks.

On Oct. 13, without preliminary announcement, Communist East Germany declared all its old currency worthless and called it in. The holders were allowed to turn in 300 old East marks (the purchasing equivalent of about $16) for new East marks. They were told they would receive credit in newly opened (government) bank accounts for anything they held above that amount—but all funds found to have been made in “speculative” ways would be confiscated. As the Grotewohl regime decides what “speculation” means, it can confiscate anything it wants from anybody it suspects or dislikes.

It is said that the East German Government did this to “halt inflation.” But the value put upon a country’s currency unit depends on the confidence in it. A fast overnight trick like this does not build confidence. East Germans will want to make sure not to get caught holding much currency in the future. They will get rid of it as fast as they can. But this will mean currency depreciation and inflation.

No doubt one purpose of the switch was to force every citizen to account for his holdings and to put a final squeeze on what little private business remained. In this sadistic aim the Communist regime should be successful. It has doubtless also succeeded in fleecing West Berlin banks and exchange offices of the 20 million or so East marks they had on hand. But the exchange value of these was only about $1 million—less than the U.S. Government spends every ten minutes. This seems a cheap price for a government to throw away what remains of any reputation for good faith. It has swindled most the very people who trusted it most.

Yet the “democratic” nations are in no position to throw stones. The East-mark swindle is more cynical and ruthless, but no different in principle from the New Deal gold-clause repudiation and gold seizure in 1933 and the steady erosion since then of the dollar, the pound sterling, the French franc, and 50 other currencies. What has happened morally even to the West is revealed in one sentence in a dispatch from Berlin: “Even among West Berliners there was grudging admiration for the surprise achieved.”

A LESSON FOR THE EDUCATORS

Some of the American responses to Sputnik have not been edifying. Several politicians now hysterically demand more spending on everything. Others are using the earth satellite as an argument for more appropriations for their own pet projects, no matter how dubiously relevant. Thus at the closing session of the American Council on Education in Washington the speakers declared that the Soviet satellite had shattered the nation’s “smug complacency” about its schools and colleges, and it was no longer possible to maintain a topnotch school system on a “starved” budget.

The United States is already spending far more on education than any other nation on the face of the globe. It is a little hard to see how the earth satellite calls for still more courses in sociology, medieval history, business English, French, or folk dancing, however worthy such subjects may otherwise be. It is true, of course, that because of the kind of competition in weapons of wholesale destruction that Russian Communist fanaticism has forced on us, it may be advisable for the Federal government to grant scholarships to a certain number of exceptionally brilliant students, chosen by competitive examination, in, say, physics, chemistry, mathematics, and engineering. The whole of these scholarship funds might be charged against the defense budget.

Perhaps even more important, physics and mathematics might be made part of the required high-school curriculum, in place of some of the easy and trivial “elective” subjects that have been displacing them in the last half century. But this local reform would not require any added governmental appropriations, and so presumably does not interest the educationist pressure group.