Felix Somary: Discussion Intervention on the One-Time Wealth Levy

Felix Somary’s intervention, published in 1918 and preserved here as a complete stenographic contribution spanning pages 29–37 of proceedings, defends a one-time wealth levy as a means of stabilizing Germany’s postwar finances. Its occasion shapes its argument: Somary responds to objections raised in the discussion, extending beyond the financial implementation addressed in his written report. He moves from the justification of the levy to banking liquidity and inflation, then examines foreign investment, mortgage finance, capital flight, and corporate creditworthiness. His central contention is that a decisive reduction of accumulated financial claims would restore monetary and fiscal confidence more effectively than permanent wealth taxation.

Somary first rejects the description of the levy as “heroic.” War has already consumed a substantial portion of national wealth; taxation would acknowledge that loss rather than create it. The relevant choice is therefore between two ways of distributing an existing burden:

Heroisch ist dieser Entschluß nicht, zumal es sich nur um die Wahl zwischen der einmaligen Vermögensabgabe und einer dauernden Vermögenssteuer handeln kann.

English translation: This decision is not heroic, especially since the choice can only be between a one-time wealth levy and a permanent wealth tax.

This accounting perspective also underlies his dismissal of emotional objections. The depletion of a fund established for a child’s education is a genuine hardship, but must be judged against the destruction already inflicted by a prolonged world war. Somary does not promise painless adjustment. Nor does he claim that the levy could extinguish the entire war burden, which he estimates at approximately 150 billion marks and still increasing. Its more limited purpose is to address the gap between war expenditure and funded borrowing while preventing the transition to peace from producing further inflation.

The argument’s core is a diagnosis of apparent liquidity. Businesses restarting production and trade will seek to sell or borrow against war bonds and withdraw bank deposits. Yet banks’ enlarged balance sheets do not represent independent reserves available to meet those demands. Much of their nominally liquid wealth consists of claims on the state:

Die Banken, nicht bloß die Notenbanken, sondern alle Kreditbanken — ich habe das schon vor längerer Zeit betont — sind auf dem ganzen Kontinent Staatsbanken geworden; sie sind nur soweit liquide, als der Staat liquide ist, denn die Wechsel sind zum großen Teil Schatzwechsel; eigene Liquidität besitzen sie nur in ganz verschwindendem Maße.

English translation: The banks, not merely the banks of issue but all credit banks—I emphasized this some time ago—have become state banks throughout the continent; they are liquid only insofar as the state is liquid, for the bills are largely Treasury bills; they possess independent liquidity only to a quite negligible extent.

“State banks” here describes financial dependence, not a proposal for legal nationalization. Mobilizing private claims would place fresh demands on an already strained public monetary system. Meanwhile, Germany would need to finance raw-material imports, settle accounts with occupied countries, and resume international payments. Without corrective action, even modest withdrawals and borrowing against war bonds would require additional inflation. Somary presents the levy as the only effective means of reducing note circulation and bank deposits, protecting the Reichsbank, and preserving competitiveness against countries with less inflation.

He consequently distinguishes his financing scheme from a sudden cash repayment of public debt. Obligations issued in connection with the levy might cover the remaining financing gap or, under more favorable conditions, be exchanged for war bonds. They would not release large cash balances into private hands. This distinction answers the analogy with the French indemnity and the speculative expansion surrounding the German founding boom: the proposed operation would not reproduce the same injection of disposable capital.

Foreign investors, Somary argues, should value a settled fiscal position more than untouched nominal wealth accompanied by unresolved deficits:

Nichts schafft mehr Vertrauen, als eine klare Situation — mögen auch die zur Erreichung dieses Zieles nötigen Maßnahmen noch so drückend sein.

English translation: Nothing creates more confidence than a clear situation—however burdensome the measures necessary to achieve this goal may be.

Confidence thus depends on making the public burden definite and intelligible. He acknowledges that inspection of securities deposits and safes could deter investors, but argues that permanent wealth taxation would require such supervision continuously rather than once.

The remaining objections test the levy against particular assets and institutions. A priority mortgage securing payment would worsen existing mortgage creditors’ positions, yet Somary expects forced sales to be exceptional and possible increases in land values to offset much of the deterioration. A debt repayable over a long period would also burden landowners less than a high annual wealth tax. New secured bonds might compete with established mortgage bonds, but continued war-loan issuance would likewise crowd the capital market.

Timing becomes decisive in his treatment of capital flight. An immediate postwar assessment could briefly use surviving wartime exchange and border controls. Permanent taxation, by contrast, would create continuing incentives for merchants to relocate to Rotterdam or Copenhagen, while requiring restrictions that he considers impossible to maintain. His confidence in the one-time levy therefore depends on a narrow administrative opportunity, whose availability he explicitly qualifies.

Finally, Somary confronts a serious objection to his own proposal to tax companies while exempting shareholders: depleted reserves might weaken corporate credit. His answer returns to the dependence of private finance on public credibility. Enlarged nominal capital and reserves offer little assurance when their liquidity is uncertain; foreign lenders will principally judge the Reich’s finances. The intervention’s lasting conceptual force lies in this connection between sovereign solvency, banking liquidity, and private credit. For Somary, accepting a defined capital loss is the prerequisite for restoring confidence, rather than merely a sacrifice imposed upon an otherwise intact economy.