Reply to the Memorandum of the Economic Councillor of the Polish Ministry of Foreign Affairs

Michal Glazer

It is true that there is some analogy between the financial aspect of the transfer scheme proposed by me and the procedure followed with regard to 'frozen' funds. But it should be borne in mind that the 'thawing out' of foreign assets or liabilities is contingent on the level of the reciprocal balances of payments under the conditions of their present normal development; under my plan it is proposed to create conditions for a considerable increase of exports over and above their present volume, whereby fresh sources of foreign exchange would be opened up on a scale not encountered heretofore.

The export trade of Poland would be expanded far beyond its present dimensions by factors and elements which have never before been applied for this purpose, even disregarding any political and psychological considerations. Namely: the stimulation of Jewish solidarity and its guidance into these clear-cut channels so as to provide specially prepared sales markets for Polish goods as an outcome of the present Plan; the primary advantage is the gaining of special financial means which will make possible broadly conceived capital investment activities both for the extension of existing undertakings and for the establishment of new ones - virtually impossible under the financial conditions now current in Poland. The planned increased export, as a means of financing Jewish emigration, can in such wise assume quite concrete form. The cost of adapting exports to the market prices abroad has in the past been covered by export bounties: it will, under the scheme outlined herein, be covered by the marginal liquidation loss of the monied emigrants according to a schedule fixed in advance (20%-30% of the sum yielded by the realization of the property belonging to these emigrants). Such transfers of capital hence find their origin in absolutely new sources and cannot be identified with the generally accepted model for releasing 'frozen' funds. There appears to be no good reason for the fear that this export will necessarily impair the normal development of Poland's export trade in any way.

The development of Poland's export is from its very nature cramped by the need for bounties which may not exceed the relevant budgetary possibilities of the State or the ability of the home market to bear the loss on export.

The additional export will not disorganize Poland's present outgoing trade. It will, on the contrary, popularize it abroad and bring out into higher relief the heterogeneity and inherent strength of the country's economy which should in fact gain and benefit by the realization of the Plan. Let us imagine that a ten-year agreement with the Jews is concluded. When its validity expires, there can be no doubt that the export trade, following the paths prepared under the stipulation of the understanding, will not immediately vanish; it will retain much of its impetus and Polish goods will remain in demand on those markets which have become accustomed to them; it may decline in greater or lesser measure but the tendency should be to preserve a net gain.

It should be quite simple to identify the increment over the export heretofore: the present level of the trade would be fixed as the basic index of 100, weighted by the addition of, say, 10 points to allow for normal development; the difference between 110 and the index of actual export would represent increment for the purposes of the transfer.

The same criteria cannot apply to the liquidation of Jewish capital in Poland under the present scheme as to the 'thawing out' of foreign capital, for the simple reason that the criteria presented by the equivalents of new exports and clearing accounts are of a different character. Moreover, such liquidation is to be based on acceptable economic and financial postulates and is fully justified not only economically but also politically, and that in exceedingly great measure, as the mobilization of this capital will implement the large-scale emigration of the poverty-stricken Jewish population. Provided the scheme is carried out rationally and systematically as planned, there is no ground for fear that the limits of purposeful action will be exceeded in the liquidation of Jewish capital in Poland. The complementary and supplementary elements of the scheme must hence naturally be reciprocally adapted to each other if the optimal volume of Jewish capital is to be transferred without impairing Poland's economic and, still more important, foreign exchange position.

It is difficult in general, and particularly during the first stage of the Plan, to deal exhaustively with all the financial, banking, commercial, and other technical details; these matters can be settled in future negotiations and conversations, which may quite possibly bring about various modifications. Thus, for instance, Polish commodity deliveries may be financed by foreign banking institutions gained over the cause we have at heart. In this connexion, not only the United States is envisaged: sales to other markets which require long-term goods credits would also need support as the Polish exporter can rarely grant such terms under current conditions. This is only one of the many auxiliary means which may help to facilitate the working of the proposed scheme of transfer.

It is hence inadvisable to single out, as has been done, only two of the means for liquidating Jewish property in Poland from among the general theses of my memorandum (as the Economic Councillor has done). In fact, it should rather be expected that the establishment of a systematic, cautiously directed, regulated supply of Jewish property offered for sale will arouse the interest of much Polish capital, now hoarded unproductively or engaged in operations abroad. There seems to be no reason, too, why foreign capital should not in certain cases supplant Jewish owners, particularly where industrial undertakings with an established reputation abroad are concerned. Such nationally unproductive Polish and such foreign capital would find an additional inducement in the very moderate prices demanded for Jewish undertakings as an outcome of the marginal liquidation loss envisaged, and this would in turn assure higher profitableness and net returns for the capital invested.

In the present phase of the Plan, it is obviously difficult and even premature quantitatively and qualitatively to enumerate and classify all the sources of foreign exchange which may serve to advance its execution. There can be absolutely no doubt that there are other, additional possibilities in this domain; they cannot be presented in concrete form, but they will appear in measure as the movement develops according to plan and as the relevant financial quarters take a positive interest in it. The arousing of this interest will be the object of the first stage of the efforts made for the realization of this Plan.
Warsaw, April 9, l937.

AUTHOR'S NOTE 1 In further references to Palestine, that country is not cited so much as the sole settlement area available to the Jews, although sight must not be lost of its historical and sentimental significance in this connection, but rather as an example for planned emigration to other areas.

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