The Contribution of Foreign Capital to Stabilization (1918–25)

Abstract

The governments of the newly established “Successor States” immediately faced the problem of leading their countries out of the economic chaos. At the close of the war, these countries found themselves in a state of inflation which precluded normal exchange of goods, discouraged new investment, and prevented a revival of international trade. The lack of funds to finance government activities led to inflationary printing of notes.¹ Such disguised taxation was limited in Czechoslovakia, and short-lived in the Baltic States; these countries were able to introduce without delay effective tax systems and balanced state budgets.² But not so Poland and Hungary. Understandably, price stabilization and stabilization of the external values of the currencies were matters of national prestige for the debutant nations. It will be instructive to investigate, therefore, in what way and to what extent foreign capital was instrumental in the process of internal and external stabilizations.