Historical Outlook Reprints, No. 8 Economic Aspects of the War Selected Source Material Dealing with the Economic Aspects of the War ARRANGED BY PROFESSOR WILLIAM E. LINGELBACH Effect of the War on the Supply of Labor and Capital BY PROFESSOR ERNEST L. BOGART PHILADELPHIA McKINL.EY PUBLISHING COMPANY 1919 HISTORICAL OUTLOOK REPRINTS, NO. 8. Historical Outlook Reprints These pamphlets are of great value to teachers, students and general readers who wish to become familiar with the antecedents of the Great War, its progress, and also the foundations for reconstruction. ALREADY ISSUED: No. I. The Study of the Great War. By Prof. S. B. Harding. Price, 20 ceuts each. No. 2. War Curiosities and the Belgium Secret Press. By Prof. Christian Gauss. Price, 10 cents each. No. 3. A Bibliography of the Great War. By Prof. George M. Dutchee. Price, 25 cents each. No. 4. ^Va^ Geography, with Many Maps. By Prof. S. B. Harding and Prof. W. E. LiXGELBACii. Price, 20 cents eacli. No. 5. Syllabus of a Course of Study in the Preliminaries of the World Conflict. By Halford L. Hoskins. Price, 20 ceuts each. No. 6. A Selection from the Addresses of President Wilson. Price, 20 cents each. No. 7. Important Statutes and Executive Proclamations Issued in the United States from April, 1917, to May, 1918. Price, 25 cents each. No. 8. Economic Materials Bearing upon the ^Vo^ld War. Arranged by Prof. W. E. LiNGELBACii. Price, 20 cents each. No. 9. Economic Mobilization of the United States for the War of 1917. Price, 20 cents each. Liberal discounts when ordered in quantities. FORTHCOMING REPRINTS WILL INCLUDE: Peace Proposals of All the Countries at ^A^a^ Bibliography of Recent War Books Problems of Reconstruction, etc., etc. Nearly all the above reprints and much additional matter, bringing the docu- ments down to November 11, 1918, will be found in Collected Materials for the Study of the War Reviaed Ed'd'wn. By Alburt E. McKinley PRICE, 80 CENTS NET. Bound in boards, 220 pages, equivalent to an ordinary book of over 600 pages McKlNLEY PUBLISHING COMPANY 1619 Ranstead Street Philadelphia SOl'RCE >rATF,RIAT,.S ON F.CONO!VriC ASPECTS OF THE WAR. Selected Source Material Dealingwith the Economic Aspects of the War ARRANGED BY PKOFESSOR WILLIAM E. LINGELBACH. German Industry and Commerce in the Imperial Plan of Conquest. In a remarkable book on Economic Germany, Pro- fessor Henri Hauser, of the University of Dijon, discusses German industry as a factor making for war. He points out how, in the opinion of the lead- ers of German thouglit, Germany had definitively passed from the type of the agricultural state to that of the industrial state — a " tentacular " state. The needs and problems of this new German state are then set forth, among them the fact that twenty mil- lions of the sixty-seven million inhabitants of the Empire depend for their maintenance on foreign harvests and foreign cattle, that raw materials, espe- cially cotton from abroad, are essential, and that both capital and markets are a necessity. It is plain that the interests of the proletariat are in this mat- ter identical with those of capital and its interests, and Germany's aggressive war policy is therefore much more deeply rooted in the minds of the German jicople than those who are inclined to put all blame on the Junkers and military leaders have been will- ing to admit. The insidious trade nuthods and world policy of the tentacular German state is grapiiically described in the following extract from Mr. Hauser's book: Its first business is to find means to develop its policy of export. The first means adopted is the system of bounties. As German industry is working less for the home market than for foreign markets it is logical to sell cheap, some- times even to sell at a loss beyond the frontier in order to win new markets and to discourage all competition. Thanks to the system by which the chief economic forces aie grouped in cartels, the process is easy enough. In 1!>02 the cdke-syndicate compelled the German consumer to pay los. a ton while at the same time it agreed to sell large quantities abroad at lis. In the second half of 1000 the iron-wire syndicate had sold abroad at 14s. per 100 kg., while the home price was 2.')s. It thus made a minus profit on the foreign market, that is, a loss of £42.050, and on the home market a profit of .€.')S,8.i0. Tliis gave a balance on the right side. But tliis time the trick was overdone, for the result was that (Jernian iron was bought up abroad to lie re-exijorted to Germany at a profit. Next to the sys- tem of bounties comes that of treaties of commerce, which favor the importation of provisions and of laborers (Slavs, for example ) , and which secure a moderate tariff for Ger- man goods abroad. .Such is the basis of the Russo-German Treaty of 1004, the tendency of which was to make Russia an economic colony of Germany. In order to meet the want of iron, Germany had to con- quer new supplies of iron ore. Peaceful conquest to begin «i(li. nie expert adviser atfciched to the commissioncra of delimitation in 1871 allowed the iron-ore strata of the Woi-vre to escape, from ignorance of their real importance HISTORICAL OUTLOOK REPRINTS, NO. 8. and also because he thought them inaccessible by reason of their depth, unworkable because of their high percentage of phosphorus. But the application of the Tliomas process in 1878 converted the Briey basin into the most important iron-field at present being worked in the world. 'ITiat is why Tliyssen made his waj' into this region at Batilly, Jouaville and Bouligny, under fictitious names. At the same time he sent his divers to Dielette to search for ore under the sea; he planted his agents in the mining and metallurgical company at Calvados, started under some- one else's name the company of mines and quarries at Fla- manville, and then the powerful company of smelting and steel-works at Caen. By these operations he gained the double advantage of buying ore from us and selling coke to us. With the iron of Lorraine and Normandy and the coal of Westphalia, Germany would he the mistress of the world. To make sure of this supremacy it was of importance to remove all competition and establish German industry in the very heart of the country of her rivals. A description was given before the war of the extraordinary control ac- quired by German manufacturers over French works pro- ducing chemical materials, electricity, etc. At Neuville- 8ur-Saone it was the Badische Sodafabrik which, under a French name, provided the madder-dye for tlie red trousers of the French army, and possibly it even inspired the Press campaign, conducted with the support of sentimental argu- ments, in favor of a color which was dangerous from a mili- tary point of view. The Parisian Aniline Dye Company {Compagnie parisienne des eouleurs d'aniline) was nothing but a branch of Meister, Lucius and Bruning, of Hoeehst. We have been told how a Darmstadt company for produc- ing pharmaceutical goods came and established a branch at Montereau in order to destroy a French factory which was there before, and how the AUgemeine Elektri- zitdtsgesellschaft got hold of Rouen, Nantes, Algiers, Oran and Chateauroux. The same conquests were won at Seville, Granada, Buenos Aires, Montevideo, Mendoza, Santiago and Valparaiso, while the other great electric company of Germany, the Siemens-Schuckert, established itself at Creil. Turkey, Russia, Italy and Switzerland shared the fate of France. Some weeks ago a Swiss journal gave tlie following figures: SocU'ti anonyme pour I'industrie de I'aluminium (Neu- chatel) : staff, 8 Germans, 1 Austrian, 6 Swiss; Banque des chemins de fer orientaux (Zurich) : 8 Germans, 1 French- man, 1 Belgian, 1 Austrian, 5 Swiss; Banque pour entre- prises ilectrv{ues (Zurich): 15 Germans, 9 Swiss; BociM des valeurs de mftaux (Bale), 10 Germans, 5 Swiss. It is to iie noticed that the share-capital is held by Germans, while the debentures, the moderate interest on which does not attract the Germans, are placed in Switzerland. Thus, as the Gazette de Lausanne summed it up, " The money of the Swiss debenture-holder serves to support German un- dertakings competing with Swiss manufacturers in our own country." A remarkable study of the same subject in Italy has been made by M. Giovanni Preziosi in some articles which ap- peared in 1914 in the Vita italinna all' estero, and were collected in pamphlet form in 1915 under the significant title. ■' Germany's Plan for the Conquest of Italy" (La Gerniania alia conquista dell' Italia). It was indeed a war of conquest, conducted with admirable organizing fac- ulty. At its centre was a financial staff, constituted by the "Banca commerciale . . . italiana," which naturally is called " Italian," just as the companies in France are called " French " or " Parisian." This product of German finance is described as a " Germanic octopus," the very image of the " tentacular State " before described. Establishing itself within the directing boards, and, by means of a system of secret cards, employing a regular system of commercial espionage to ruin all who resist it, it succeeded in gradu- ally absorbing the economic energies of an entire people — establishments of credit, shipping companies, manufactur- ing firms; it was even able to corrupt political life, over- throw ministries and control elections. Here, as in Switzer- land, the pseudo-Italian German banks " act as a pump which pumps out of Italy and pumps into Germany." Italy, which is considered a poor country, provides capital for rich Germany. To back up this policy of economic conquest the prestige and the strength of the Empire must be put at the service of the manufacturers. To make the State, as the Germans understand it, the instrument of German expansion — this is the meaning of what the Germans have well named the policy of " business and power " Handels und Machtpolitik. Nowhere is the confusion of the two ideas more clearly ex- hibited than in the report forwarded to London in Febru- ary, 1914, by Sir Edward Goschen, on "An Official German Organization for Influencing the Press of Other Countries." Tliis important document is too little known in France, perhaps because, outside the Blue Book, it has not appeared in England except as an ordinary " White Paper." But how instructive it is! The Norddeutscher Lloyd, the Hamburg-Amerika, the Deutsche Bank, the Disconto Gesellschaft, the A. E. G. (AUgemeine Elektrizitatsgesellschaft), the Siemens- Schuckert, Krupp, and Gruson Companies, etc., form a pri- vate society, subsidized by the Imperial Office for Foreign Affairs. The object of this company, in co-operation with the Wolfl Bureau, is to promote the manufacturing pres- tige of Germany abroad. It will supply full information gratuitously or at a low price to foreign journals in their own language concerning Germany and favorable to Ger- many. It will withhold the service from those who show themselves deaf to instruction. " To reply to news meant to influence opinion on Germany and to meet attacks upon her, and to make the true situation of German industry widely kno%vn " — such is the program. In a word, the object is the organization of a spy-system for industry — I use the phrase of Signor Preziosi — under the control of the Empire. And, as is fitting in such a system, the work of Germanizing the Press of the world will not be done by publicists sent for the purpose: they would very soon be burnt. In an article so naively transparent that its publi- cation was thought inopportune and orders came from above not to reproduce it or make any allusion to it, the Deutsche Export Revue crudely remarked: "It is better to choose men already connected with the various journals, who will serve German interests without attracting so much atten- tion." This fusion of Weltpolitik and business policy was pecu- liarly dangerous for the peace of the world. If Imperial- ism, if " the tentacular State " puts its strength at the dis- posal of manufacturing interests, the temptation is strong and constant to use this strength to break down any resist- ance which stands in the way of the triumph of these in- terests. If a crisis comes which causes a stoppage of work (there are sometimes 100,000 unemployed in Berlin) the neighboring nation which may be held responsible for the crisis has reason to be on its guard. " Be my customer or I will kill you " seems to be the motto of this industrial system, continually revolving in its diabolical circle; al- ways producing more in order to sell more, always selling more in order to meet the necessities of a production al- ways growing more intensive. SOURCE MATERIALS OX ECOXOMIC ASPECTS OE 'J'l fi: W \U. Russia is for Germany both a reservoir of labor and a market. Should Russia in 1917 refuse to renew the disas- trous treaty forced upon her in the unlucky days of the Japanese war, should she i)ut an end to the system of pass- ports for agricultural laborers, what will become of Ger- man capitalist agriculture, which has been more and more industrialized and is more and more in the hands of the banks: the farming of the great estates of Brandenburg, Pomerania and Prussia? France is for Germany a bank and a purveyor of min- erals. What a temptation to dip deep into the jealously guarded stocking and fill both hands! What a temjitatiou, too, to repair the blunder made in the delimitation of 1871! Even in 1911 the Ga:.ette dii Rhin et dc Westphalie put forward the view that the iron ores of Lorraine and Luxem- bourg ought to be under the same control as those of West- phalia and the Saar. And I am told that the great jour- nals of Paris, when informed of this campaign, refused to take tills " provincial journal " seriously, being blind to the fact that it was the organ of the great manufacturers of the Rhineland and of the Prussian staff. What a temptation again to take the ])ort of Cherbourg in the rear from UiOlette ! As for England, the direct competitor of Germany in all the markets of the workl, and manufacturing the same goods, she is the enemy to be crushed. Has she not ac- quired the habit, and has she not taught it to France, of refusing to lend money to poor States except in return for good orders? Tlie time is beginning to go by when it was possible to do German business in Turkey with French or English gold. Germany's rivals have learnt from her the lesson of Handels und Machtpolitik. But what is to become of Essen, Gelsenkirchen, and all that immense industrial city of which Westphalia consists, if Roumanians, Greeks, Serbians order their guns and their ironclads, their rails or their locomotives at Glasgow or at Le Creusot? Germany thought war preferable to this economic encirclement, and the velvet glove gave place to the mailed gauntlet. Little by little the idea of war as necessary, of war as almost a thing to wish for, laid hold on the industrial classes. The proof is to be found as early as 1908 in a popular book by Professor Paul Arndt, one of those small shilling books which served to instruct the German mind. All of us, even the best informed, must reproach ourselves for not having studied or studied closely enough these small books, which would have made the danger clear to us. In this volume the author, after a pa;an to German great- ness, begins a chapter " On the dangers of Germany's par- ticipation in world-wide trade." He shows that this par- ticipation increases (iermany's dependence on the foreigner and makes her vulnerable by sea as well as by land. If in- ternational relations are disturbed there will be " many workmen without food, and much depreciation of capital," and that from causes " in great measure beyond tlie control of Germany " in countries which may seize the opportu- nity to weaken Germany. And in a hypothesis which is prophetic he describes the effects of the blockade. But he accepts without hesitation these risks of the World-Policy. " Xo doubt, if we wish to be and to re- main a great people, a world power, we expose ourselves to serious struggles. But this must not alarm us. There is profound truth in the dictum that man degenerates in peace times. Tlie call to arms is often needed to rouse a world henumbed with apathy and indolence. Tliosc who can look far and deeply into tlii.igs see that warfare is often a bless- ing to humanity." Tliis German is a disciple of Joseph de Maistre. i have shown how the over-rapid industrialization ot Ger- many has led by a mechanical and fatal process to the Ger- man war. If any doubt were felt on the part played by economic causes in this war it would be enough to look at the picture of German victory as imagined by the Germans in their dreams during the last seven months. It is au industrial victory, a forced marriage between German coal and foreign iron, the reduction of nations into vassals who are to play the part of perpetual customers of the German workshops. '■ The metalliferous strata of French Lorraine and Rus- sian Poland," wrote Baron Zedlitz-Neukirch three weeks ago, " supplement in some degree our own mining works." If we ask the impetuous Max Harden what is to become ot martyred Belgium, he replies, in October, 1914, "Ant- werp not against Hamljurg and Bremen, but with them; Liege, working side by side with the arms factories of Hesse, Berlin and Suabia; CockeriU in alliance with Krupp; Belgian and German iron, coal and textiles under one control. . . . From Calais to Antwerp, Flanders, Lim- bourg and Brabant, up to and beyond the line of fortresses on tlie Meuse, all Prussian." The German dream is the dream of a conquering man of business, a counting-house romance founded on Frcy tag's iioll und llahcn (" liebit and Credit"). The war they thought would be the solution of colonial questions. In the tragic days at the end of July, 1914, Bethmann-HoUweg offered England to maintain the conti- nental integrity of France (German industry would be con- tent with the economic annexation of France), but refused any pledge to respect French colonies, and especially North Africa. In September they had the audacity to offer, as the price of a desertion of which they thought us capable, to divide with us the Belgian Congo, towards which the treaty of 1911 had allowed them to put out two feelers. A German used this candid language: "We have need of France, because we cannot claim the government of the whole non-English colonial world." At the same time they attempted by stirring up revolt among the Boers and by attacks on Portuguese colonies to build up a German Em- pire in South Africa. Tlie victory of Germany meant for tlieni security of iron-supply and enlarged nnirkets; it meant Bricy, Oucnza, Casablanca, Bagdad. Tlie vision has faded and the building of tlieir dreams has crumbled away. But the dream has left its lessons for us, which demand attention not only in the future but to- day. Let us cherish no illusions. Germany, though con- quered and curtailed, will not cease to exist. It is idle to siqipose, as some publicists write, that we arc going to sup- press a whole people. Even if we had the military power to do it, policy and morality would forbid us! ."^fter our victory there will once more be a Germany which will pa- tiently and persistently resume its labors. The great war will no sooner be ended than the other war, the economic war, will begin again. If we do not wish to be crushed we must to-day begin to prepare our mobilization for this new war. I Grk.at BiuTAix's Oi'EN Door Policy. That England was even more an industrial state than Germany is well known. But at no time in her jiistory a.s an indu.slrial .state has there been any at- tempt to establish a monopoly of coal, iron or other raw materiahs. Instead she adopted a free trade pol- 1 M. Henri Hauser, Economic Onmnnji. Translated hy P. E. Matheson. Bulletin, Mav-June, 191.5. HISTORICAL OUTLOOK REPRINTS, NO. 8. icy which not only opened her markets to all the world, but made impossible any such insidious par- ticipation by the British government in commerce as that practiced by Germany. Men of all nations could trade in her markets and harbors on the same footing as her own subjects. There were no cartels, under- selling and " dumping," with the backing of an Im- perial TariiT manipulated by an upper group (" so- ciety ") of unscrupulous financiers and imperialists practically in control of the entire capital wealth of the land. There was no mushroom growth of Welt- politik fused with big business to force economic penetration at Antwerp, Milan, Zurich, Petrograd, etc. The War and Commerce. German vs. British Methods. It was to be expected, therefore, that the policy of the two Powers with regard to the overseas supply of food and raw materials would differ radically. The German policy is illustrated in the infamous sub- marine order of February 4, 1915. It reads: German Submarine Order. Proclamation. 1. The waters of Great Britain and Ireland, including the whole English Channel, are hereby declared to be war zone. On and after the 18th of February, 1915, every enemy mer- chant ship found in the said war zone will be destroyed without its being always possible to avert the dangers threatening crews and passengers on that account. 2. Even neutral ships are exposed to danger in the war zone, as in view of the misuse of neutral flags ordered on January 31 by the British Government and of the accidents of naval war, it can not always be avoided to strike even neutral ships in attacks that are directed at enemy ships. .3. Northward navigation around the Shetland Islands, in the eastern waters of the North Sea. and in a strip of not less than 30 miles width along the Netherlands coast, is in no danger. Von Pohl, Chief of the Admiral Staff of the Navy. Berlin, February 4, 1915. Comment is unnecessary. The proclamation has in it all the possibilities of the tragic sinking of the Lusitania, the Sussex and other vessels, and should be contrasted with the recognized rules of maritime warfare in regard to neutral or belligerent ships sus- pected of carrying contraband. The proclamation should also be read in connection with President Wilson's "Address on Germany's Renewal of Sub- marine War against Merchant Ships " two years later. For tlie extension of tin- submarine .area see subsequent submarine orders. Great Britain replied in an Order in Council of March 15, 1915, which is in strict conformity with the Rules of Maritime Warfare. It reads in part: Whereas, the German Government has issued certain orders which in violation of the usages of war, purport to declare the waters surrounding the United Kingdom a mili- tary area, in which all British and allied merchant vessels will be destroyed, irrespective of the safety of the lives of passengers and crew, and in which neutral shipping will be exposed to similar danger in view of the uncertainties of naval warfare; . . . His Majesty is therefore pleased, by and with the advice of his Privy Council, to order and it is hereby ordered as follows: 1. No merchant vessel which sailed from her port of de- parture after the first of March, 1915, shall be allowed to proceed on her voyage to any German port. Unless the vessel receives a pass . . . 2. No merchant vessel which sailed from any German port after the first of March, 1915, shall be allowed to pro- ceed on her voyage with any goods on board laden at such port. All goods laden at such port must be discharged in a British or allied port. . . . 3. Every merchant vessel which sailed from her port of departure after the first of March, 1915, on her way to a port other than a German port, carrying goods with an enemy destination, or which are enemy property, may be required to discharge such goods in a British or allied port. 4. Every merchant vessel which sailed from a port other than a German port after the first of March, 1915, having on board goods which are of enemy origin or are enemy property may be required to discharge such goods in a Brit- ish or allied port. . . . Here, too, are found the seeds of much of the allied policy of trade control developed to such a high degree of efficiency later through the co-operation of the United States. The matter of contraband trade was taken up in subsequent Orders in Council, and the list of contraband articles rapidly extended. The question should be studied in connection with the Declaration of London, February 26, 1909. The most serious problems from the point of view of the Allies, however, was not the direct enemy trade, but trade with enemy destination through neutral terri- tory. The faltering steps by which an effective method of control over this was finally reached can- not be illustrated here. In principle the program rested on the right of search and of blockade. In practice, it depended on a virtual blockade main- tained across the North Sea from Scotland to Nor- way, of the Channel and the Straits of Gibraltar against all commerce with the enemy. Neutral rights as they had been formulated since the days of the Napoleonic wars were slightly in- fringed, but these were minor ills by the side of the ravages of the submarine. Besides, evidence of an increasing trade with the enemy through the neutral ports of Holland, Sweden, Denmark and Italy soon appeared, and Sir Edward Grey's stand before Par- liament seemed well taken. " There is here a trade which almost every kind of Ger- man commerce can pass almost as easily as through the ports of her own territory. ... If the blockade can only be- come effective by extending it to the enemy commerce iiass- ing through neutral ports, such an extension is defensible." In accordance with the suggestion more rigorous plans to suppress the trade were adopted. Not only were neutrals asked to report at alien ports for examination of the cargo, but a plan was finally evolved by which the neutral nations behind the lines of allied trade control were induced to conduct all SOURCE ^[ATERIALS OX ECONOMIC ASPECTS OE THE W \l! their overseas trade through organizations in London or under direct allied control. But there continued to be a great many difficulties, till the entry into the war by the United States with the participation of this country in the control and direction of overseas trade, practically all difficulties were met. The Allies now had absolute control of raw products, coal bunkers and coaling stations. The vigor and promptness with which this new advan- tage was brought into play appears in the steps taken by tliis country not only against neutral trade, but also towards its own. The United States Takes a Hand in Trade Control. In October, 1917, President Wilson created the War Trade Board, which, co-operating with the In- terallied Chartering Executive, rapidly brougiit the commerce of the world under control. The Board was created and operates under the Espionage Act (approved June 15, 1917). " To punish acts of interference with the foreign relations, the neutrality, and the foreign commerce of the United States to punish espionage, and better to enforce the criminal law of the United States, and for other purposes." Title VII of Section 1 of the act reads: Whenever during the present war the President shall find that the public safety shall so require, and shall make pro- clamation thereof, it shall be unlawful to export from or ship or take out of the United States to any country named in such proclamation any article or articles mentioned in such proclamation, except at such time or times, and un- der such regulations and orders, and subject to such limita- tions and exceptions as tlie President shall prescribe, until otherwise ordered by the President or by Congress. Pro- vided, however, that no preference shall be given to the ports of one State over those of another. To carry out the policy, a system of licensing ex- ports and imports was adopted. The first proclama- tion was issued on July 9, 1917, and is entitled Proclamation Prohibiting Exports of Coal, Food CJrains, Meats, Steel, and other Products except by License." (Cp. also the later proclamations of Feb- ruary I K Ii)l8.) In connection with these proclamations, the War Trade Board issued the following statement: " Tlie purpose and efloct of these proclamations are to subject to control by license the entire foreign commcrco of the United States, and from and after February 10, 191H, no commodities may be exported from this country or im- ported into this country except under license. The President has heretofore issued several proclamations controlling certain exports under the provisions of I'iile VII of the Espionage Act, and one proclamation control- ling the importation of certain commodities under the pro- visions of section 11 of the Trading with the Enemy Act. Tlie military situation and the tonnage situation have made increasingly apparent the necessity of instituting a com- plete and thoroughgoing control of all our exports and im- ports. The transportation of our armies to France and the main- tenance of a continued flow of the supplies and munitions needed to maintain them in fighting trim require the use of every ton of shipping which can possibly be devoted to these purposes. This demand must be met, and if it be- comes necessary to curtail our exports or imports, these are measures which are forced upon us by the critical tonnage situation and the necessity of availing ourselves of every possil)le means of maintaining our armies in France. The limitation of exports is necessivry also to conserve the prod- ucts of tliis country for the use of our own people and the peoples of the nations associated with us in the war; wa must dispose of tiiis surjilus in such a way as to aid, as far as possible, those countries to the south which have al- ways depended upon us; we must also dispose of our sur- plus in such a way that Germany and her allies will derive no benefit therefrom; and we must secure for ourselves in return shipping and supplies urgently needed. The promulgation of these two proclamations does not mean an embargo on exports or a prohibition of imports, but places in the hands of the President the power to reg- ulate, which will exercise through the War Trade BoanI and the Treasury Department. This power will be exercised with the single purpose of winning the war, and every effort will be made to avoid unnecessary interference with our foreign trade and to impose upon our exporters and im- porters no restrictions except those involved in the accom- plishment of definite and necessary objects. As heretofore, licenses for the export or import of coin, bullion, currency, evidences of debt or of ownership of property, and transfers of credit will be issued by the Treas- ury Department; licenses for all other exports and imports, including merchandise, bunkers, ships' supplies, etc., will be issued by the War Trade Board. - .Minute regulations in regard to the licenses have also been issued from time to time, and the list of commodities subject to license was rapidly enlarged. Authority for this was vested in the Board by the Executive Order winch brought it into existence. Thus the first articles read: I. I hereby establish a War Trade Board to be composed of representatives, respectively, of the Secretary of State, of the Treasury, of the Secretary of Agricult\irc, of the Secretary of Commerce, of the Food Administrator and of the United States Shipping Board. II. I hereby vest in said Board the ]iower and authority to issue licenses under such terms and conditions as are not inconsistent with law, or to withhold or refuse licenses, for the exportation of all articles, except coin, bullion or cur- rency, 3 the exportation or faking of wliich out of the United .States may be restricted by proclamations heretofore or hereafter issued by me under said Title VII of the espionage act. lit. I further hereby vest in said War Trade Board the power and authority to issue, upon such terms and condi- tions as are not inconsistent with law, or to withhold or refuse, licenses for the importation of all articles the im- portation of which may be restricted by any proclamation hereafter issued by me under section II of the trading with the enemy act. That the War Trade Board, like all the other War Boards created by tlic President, lias exercised the broad powers conferred upon it with extraordinary boldness and efficiency, the following excerpts from its General Rules show. Thus: - Rules and Regulations of the War Trade Board, No. 2, p. 9. ^ On the prol)lcm of coin and bullion, see proclamation of September 7, i'M7 HISTORICAL OUTLOOK REPRINTS, NO. 8. No vessel shall be allowed to clear from any port of the United States, or any United States possession, without having secured a license or licenses from the War Trade Board, through its Bureau of Transportation, covering all the bunker fuel aboard the vessel at the time of sailing (including coal, coke, oil, kerosene, and gasoline), and port, sea, and ship's stores and supplies. Stores and supplies are for convenience hereafter included with bunker fuel under the general designation of " bunkers." . . . II. No application for bunkers by any vessel which has disobeyed any order of the United States Navy or of the United States Shipping Board, hereinafter called " Ship- ping Board," shall be approved. \'. 1. No vessel shall proceed on any voyage or be char- tered on trip or time charter without the previous consent of the War Trade Board or the Interallied Chartering Ex- ecutive. y. o. No vessel shall be bought or sold without the pre- vious approval of the United States Shipping Board, War Trade Board or of the Interallied Chartering Executive. V. p. No vessel shall be laid up in port without the ap- proval of the War Trade Board or the Interallied Charter- ing Executive. Equally stringent and unprecedented are the regu- lations governing neutral trade quite outside the United States and the Allies. Thus General Rules V. f.: No vessel shall carry from a port outside the United States to any European port cargo which has not been pre- viously approved by the Wnv Trade Board or the Interallied Chartering Executive. V. e. Every vessel which proceeds from or to the United States, to or from Norway, Sweden, Denmark (including Iceland and the Faroe Islands), Holland, Spain, or to or from any neutral port in the Mediterranean Sea, shall call for examination as may be directed by the War Trade Board.* Control atsib Mobilization of Industry. This rigorous trade control represents one phase, a very important phase, of the economic warfare waged by the Allies against the Central Powers. Quite as complete has been tlie control and mobiliza- tion of industry and transportation. Immediately upon her entry into the war Great Britain took over the control and direction of her railroads. Slie en- tered the markets of the world as a buyer of raw sugar, grain, cotton, rubber and other necessities. Wlicn difficulties over the beef situation developed and the price began to soar, the government, through the president of the Board of Trade, commandeered the ships with refrigerating space, whereupon the packers were obliged to negotiate on even terms. With the example of the Allies before her, the United States advanced with phenomenal rapidity in matters of governmental control. A typical phase of the process is illustrated by the action of the government in the matter of food. This is clearly brought out by the United States statute of August 10, 1917, entitled an Act authorising Con- ■1 War Trade Board Journal, No. V. Tlie general policies of the War Trade Board are set forth in its first annual report published in its oflicial organ, the ITrtr Trade Hoard Journal, No. VII, pp. 15-10. S: irul of Food and Coal, and the President's proclama- tion " Calling for a Reduction of Consumption of Wheat and Meat," January 18, 1918. Essential in- dustries, like shipbuilding, the railroads, express com- ]ianies, the telegraph and telephone lines, labor em- ployment, etc., were one after another taken over. On tlic subject of the railroads compare the Act to Authorize Control of Transportation and the Presi- dents proclamation "Announcing the Taking Over of Railroads," December 26, 1917. On the mobilizing of American labor and the effort at solving the labor problem, compare the President's proclamation " Concerning the National War Labor Board " and the following interesting letter from the Secretary of Labor: To THE Thikty-five Thousand Foub Minute Men : America's man power is needed to its utmost. We can- not afford to waste another ounce of energy. Hence the Government's program to mobilize American industry; to induce employers to get their help and em- ployees to get their jobs through a central governmental agency — the United States Employment Service of the De- partment of Labor. This sweeping plan is a war measure. It is necessary, urgent. If you want America to win, then support the pro- gram with full zeal. Cooperation of industry is to-day necessary. Furthermore, this step marks, in indirect ways, a stride forward in the relations of man to man. We are laying new foundation stones for democracy. Feeling the vital need of explaining the plan to the American people, I have asked and secured the services of the Four Minute Men. I have seen the remarkable results you have accomplished for other departments of the Gov- ernment. I realize the effectiveness of the simultaneous messages delivered by this great army of earnest speakers. When you now take up the question of labor, explaining to all men who work, whether they work with a shovel, or at the lathe, or in the office, the need of co-operation at this time, I feel that you are delivering a message second to none in immediate and in permanent importance. Cordially yours, W. B. Wilson. Problems of Reconstruction. It merits attention not only because of the evi- dence of the extension of government control, and of at least one of the many ways it developed to edu- cate the American people as to its aims and policies in the conduct of the war, but also because of the deep- seated social problems it suggests. How significant the latter will be in the great task of reconstruction after the war is already apparent from many signs and events. To the problem of the adjustment of labor has been added the enormous question of millions of women workers ; to the questions of social or private control and ownership, the hard facts of the sweeping extension of the former under war conditions, while Bolshevikism has added itself to the phases of social and political anarchy. In view of this, the main points of the proposed program for the British Labor Party, which has received wide circulation, may be SOLRCE MATERIALS ON ECONOMIC ASPECTS OF THE WAR. quoted in part as expressing the ideas on reconstruc- tion of many Laborites and Socialists. It says: What we now promulgate as our policy, whether for op- position or for ollice, is not merely this or that specific re- form, but a deliberately thought out, systematic, and com- prehensive plan for the immediate social rebuilding which any ministry, whether or not it desires to grapple with the problem, will be driven to undertake. The four pillars of the house that we propose to erect, resting upon a common foundation of the democratic control of society in all its activities, may be termed: (a) The Universal Enforcement of the National Mini- mum; (b) The Democratic Control of Industry; (c) The Revolution in National Finance; and (d) The Surplus Wealth for the Common Good. British and American Government Agencies for Economic Mobilization. The extraordinary role played in this war by the economic life of the belligerent nations and the de- termined steps by all to mobilize agriculture, indus- try, commerce, and labor (both of men and women), not to speak of education for war ends, is graphically illustrated by the following diagrams showing the new departments created by Great Britain and the United States to meet this need. It is a matter of considerable interest to the stu- dent of comparative government to note how difFer- tntly the machinery of government has been adapted to the great economic needs of the war. In Great Britain the Cabinet has been expanded by the crea- tion of new cabinet posts, the incumbents of which become regular members of that body. With us, on the contrary, the new posts have been established in connection with one or other of the Cabi!U't secre- taryships already in existence, and their work is car- ried under the direction of the members of the Presi- dent's Cabinet. In making this comparison, how- ever, the fact that there is in Great Britain a very powerful Inner War Cabinet, would indicate that in England the development has gone in both direc- tions. In both cases the willingness of democracies to confer almost unlimited power on tiieir great lead- ers is altogether unprecedented, a point to be kept in mind in the study of the Overman Bill of May 20, 1918, An Act authoriz'vKj the President to co-ordi- nate or consolidule e.rccutive bureaus, arienries, and offices, and for other purposes, in the interest of economy, and the more efficient concentration of the f/overnjnent. Enemy and United States War Aims Contrasted. I'"inally. it is worth whih' to pl.-icc side by sU\r with the iitt.erances of tiu' Pnsiihnt upcui ll'ar .■Urns and Peace Terms in his mi uioralili- addresses on tlir subject some of the exitrcssioiis made bv tlie leaders of the enemy aiul of the economic rx.ic- tions wrested from Russi:i and Roum.ini:i. Con trast. for example. President Wilson's cliampion ship of tlie cause of sin.all nationalitiis and the eloquent ))lea for little Belgium with tlie rutiilcss confession of materialism and the gospel of power revealed in the testament of von Bissing, Governor General at Belgium, during the first years of the war: It is, therefore, absolutely necessary to prevent Belgian industry from serving the armament policy of our enemies. 'J'hc advantages ichich we luive been able during the present irar to obtain from lielgian industry, by the removal of ■mnehinery and so on, are as important as the disadvan- tages which our enemies have sutl'ered through lack of this addition to their fighting strength. . . . No, our frontier — in the interest also of our sea power — must be pushed to the sea. The immediate importance of the Belgian industrial dis- tricts for our conduct of the war by no means exhausts the subject. The war of weapons will in the future be accom- panied by a harder economic war than is the case to-day. Without coal what would have become of our policy of in- dustrial exchange, not only with Holland, but also with far distant northern countries? The annual Belgian produc- tion of 23.000,000 tons of coal has given us a monopoly on the continent, which has helped to maintain our vital- ity. . . . .Just as was the case before the war, a neutral Belgium, or an independent Belgium, based upon treaties of a differ- ent kind, will succumb to the disastrous influence of Eng- land and France, and to the effort of America to exploit Belgian resources. Against all this our only weapon is the policy of power, and this policy must see to it that the Bel- gian population, now still hostile to us, shall adapt itself and subordinate itself, if only gradually, to German domi- nation. It is also necessary that, by a peace which will secure the linking up of Belgium with Germany, we shall be able to give the necessary protection to the Germans who have settled in the country. Tliis protection will be of quite special importance to us for the future battle of the world markets. In the same way it is only by complete domination of Belgium that we can utilize for German in- terests the capital created by Belgian savings and the Bel- gian companies which already exist in large luimbers in the countries of our enemies. We must keep under our control the considerable Belgian a<'cumulations of capital in Turkey, the Balkans and China. . . . Tt is true that we must protect the Flemish movement, but never must we lend a hand to make the Flemings com- ])letely independent. . . . Belgium must be seized and held, as it now is. and as it must be in the future. . . . If only on account of the necessary bases for our fleet, and in order not to cut off .Xntwerp from the Belgian trade area, it is necessary to have the adjacent hinterland. Were these the words of an isolated extremist, they would have no pl.ice in this collection. That they are not can be readily ascertained by compar- ing von Hissing's ideas willi the utterances of tlie Pan-Cierman group both before the war and since, .'ind with the statements of her men in power from Betiimanii-Hollweg's " Scrap of P.iper " to Kuelil- inann's latest idea that ' Belgium must be held as a pawn." Economic E.vactioxs irom Rcssia and Rou.mania. Such. then, are the peace purposes of Germany, both expressed and actually imposed upon those states over which she has been temporarily victor- ious. They cannot be too often contrasted with those of the United States as formulated by Presi- dent Wilson in the proclamation referred to above. 10 HISTORICAL OUTLOOK REPRINTS, NO. 8. — ^ -iirfN-i- C r-. -^^ ^^ ^^ ^li» if- , '0 USBD lir»tOIAniHI"'COIICILMIOM o o, • ■ * iaCMfto>n3coMPi^xSAno>ia>t^Misiiii.'iL<^ fCaCRAL so POD VOCA noHAL CauCA 71 OH % "5, .^-3 BOAMOf/IOADCOKMIiiAlVPRS ALASKA *^ ^_ vTt^^J^^^ fT70t/ALADi/isopycoMraAiROftAurics 'J'-'T^ /^ WrJ^'?i BOARD Of in 01 AN COAfM/S5/OA/£/>S , — "^JZ^^ if^S<>^f ^»£ COKMISSIOV OP P/HE ARTS 'ATlS^'^'i JPifjfV.V.f UM/TCDSTArPS OPOSRAPMIC BOARD 'EX^'^"*'^ K'.V*<'JxT< PCCUMIAHrCiA/MSARBITPIAnOMCOMSM ^^t5,<^t»^ IMTCRMn JOWr HIGH.S eOUMDAUr OOM'S'NS -Ot''' -» SOLDICPy HOI^CRCCOLAP ARMY "^<"**C.ti, A/AT/OAIAL HOMCiPOR yOLUUTPCR SOLDICR^ <^L^y^ ARUN6 TON MEMORIAL AnPHITRlATRE COMSM %%\«? #^* # DISTRICT OF COLUMBIA ARCRITfCT CNGINCeR S£iV£RS ASSPSiOR FIRCOPP'T STREETS AUDITOR HEALTH ST CLEARIM6 CRARITteS INSPECTION SURVETOR COUNSEL ROUGE TREES S PARKS' COLLECTOR SCHOOLS WATER OER^ P'UBUC UTIUTies COMMISSION THIS CHART INDICATES THE REUTIONS AND ORGANIZATION EXISTING within THE VARIOUS DIVISIONS OF THE FEDERAL EXECUTIVE COMPILED FOR THE COMMITTEE ON PUBLIC INFORMATION 8V WALTER I. SWANTON WASHINGTON. C DECEMBER 1 1917 SOURCE MATERIALS ON ECONOMIC ASPECTS OF THE WAR. 11 CHART SHOWING The Administrative Organization of the British Government and Its Development during the War Members of supreme Wvr Council Great Britain France Italy United States .// y/ ^.- /■ s/ C-/-S, 4^- ^•#/^^ This Chart ahows the formation of the Government during 1917, with the War Cabinet sitting as a permanent body, the Imperial Cabinet meeting periodically, and the Ministers with Portfolio. -Ministers with Portfolio previous to 1914 Ministers with Portfolio created since 1014 HISTORICAL OUTLOOK REPRINTS, NO. 8. Russia and Roumania have been forced to conclude peace on terms that leave no room for doubt as to Germany's determination to exploit the economic possibilities of her conquests to the utmost limit. The main supplementary treaty of Brest-Litovsk between the Central Powers and the Bolsheviki throws a lurid light on this lust for conquest. Article I practically provides for the absorption of Esthonia and Livonia, for after establishing the eastern frontier of these provinces, it says: " Germany will evacuate without delay the territory oc- cupied by her to the east of the frontier." 'I'lie evacuation of other Bolshevist territory was to take place gradually in proportion as the Bolsheviki paid tlie installments on the indemnity of 6,000,000,- 000 marks. Article III says: " Germany will even before the conclusion of a general peace evacuate the territory occupied by her to the east of the Beresiua according to the measure of cash payments which Russia has to make; the further provisions about this, and especially the determination of the various sectors to be evacuated, are left to the demarcation commission. Tlie contracting parties will make further agreements con- cerning evacuation, before the conclusion of a general peace, of the occupied territory to the east of the Beresina, ac- cording to the measure of cash payments which Russia has to make; the further povisions about this, and especially the determination of the various sectors to be evacuated, are left to the demarcation commission. The contracting parties will make further agreements concerning evacua- tion, before the conclusion of a general peace, of the occu- pied territory to the west of the Beresina, according to the measure of the fulfillment of the other [sic] finan- cial [arrangements] of one billion marks in value. A further sum of two and a half billion marks the Bolshevists were to issue as a loan at six per cent, and secured by spe- cial State revenues, especially by the revenue from " certain economic concessions which are to be granted the Germans." A further billion marks was to be wrung from the Ukraine and Finland through the Bolsheviki, and if this was impossible some other arrangement with the latter. Article XIV makes a German enclave of Baku, the great petroleum center of Russia, and provides that at least a quarter of the production be for Germany. 5 The articles dealing with economic matters in the Roumanian treaty and the treaty with the Ukraine show the same disposition at distraint and levy. Among the economic problems in the establish- ment of an enduring peace, the distribution of Eu- rope's coal and iron and the control of raw materials generally will be of the utmost importance. The semi-official Vossische Zeitung and other journals in s These excerpts from the Brest-Litovsk Treaty are quoted in the London Times, Saturday, September 14, 1918, and based, so the article says, upon the published text of the treaties in the German press. commenting on the creation of the new ministry called the " Imperial Department of Economics," lay great stress on this phase of its functions. They say in substance: ■• Economic reconstruction after the war can be effected only by the rapid acquisition by Germany of all essential raw materials. Access to the raw materials of the world is, therefore, the first and most determined aim of the pres- ent reconstruction preparations. The grouping amalgama- tion and consolidation of tlie greater industries under a central control and the foundation of import and export companies are being undertaken in order to speed up and facilitate the buying and selling of raw materials, and ulti- mately to provide an organization for mass — and whenever possible — standardized production." Does this mean that the trade methods described by Professor Hauser are to be revived and intensi- fied } The nationalistic economic philosophy preached by German economists from List to Wagner that war is a by-product of economic rivalry, not between in- dividuals, but between sovereign social groups, is ap- parently still dominant in the minds of the leaders of Germany. In view of this it is of interest to learn from Sir Robert Cecil that the economic conference of Paris between eight powers has been expanded into an al- liance of twenty-four allied nations, the great and primary object of which is no longer some narrow defensive alliance, but the determination and laying down of the economic principles of the Association of Nations which is already in existence. ° Similarly President Wilson's statement in his an- nual address before Congress on December 4, 1917, in which he says: " If the German people continue to be obliged to live un- der ambitious and intriguing masters interested in disturb- ing the peace of the world, men or classes of men whom the other peoples of the world could not trust, it might be im- possible to admit them to the partnership of nations which henceforth must guarantee the world's peace ... or to free economic intercourse. . . . " ' On the other hand, it should not be overlooked that President Wilson has been consistently opposed to a peace involving the necessity of a continuation of the war in an economic form. Thus in the same address he says: " You catch with me the voices of humanity that are in the air. . . . They insist that the war shall not end in vin- dictive action of any kind; that no nations or peoples shall be robbed or punished because the irresponsible rulers of a single country have themselves done deep wrong. . . . The wrongs, the very deep wrongs committed in this war will have to be righted. That, of course. But they cannot be righted by the commission of similar wrongs against Ger- manv and her allies." 6 Statement by Sir Robert Cecil of July 14 as reported in the public press. f President Wilson's Annual Message, December 4, 1917. SOURCE MATERIALS ON ECONOMIC ASPECTS OF THE WAR. 13 Effect of the War on the Supply of Labor and Capital BY PROFESSOR ERNEST L. BOGART, UNIVERSITY OF ILLINOIS. Such a subject as this is of course largely one of prediction. The problem is to determine, on the basis of known facts, what may reasonably be ex- pected to happen on the return of peace. But by limiting the inquiry to the larger aspects of two phases only of the vast problem of economic readjust- ment after the war, it is possible to draw a few con- clusions. 1. Population and the labor supply. During the nineteenth century the population of Europe doubled, tlie rate of growth being somewhat more rapid in Russia and Germany, which trebled their population, while France lagged behind the other countries with only a thirty-five per cent, increase. The war has now stopped this population growth, and has substi- tuted for it the destruction of human life. If the war lasts five years, we shall be safe in estimating the loss of human life, on the basis of known fatalities, at 25,000,000. This is the direct war loss. In ad- dition we must calculate the deaths of children and old people from ill-treatment, malnutrition, and ex- posure. It is stated, for instance, that not a child born in Poland since the outbreak of the war has sur- vived ; there has been a grave increase in tuberculosis and other pulmonary diseases, and in dysentery, typhoid, and cholera in most of the belligerent coun- tries. Europe will emerge from the war with a seri- ous loss of population and a shortage of the labor supply. Not only will there be an actual shortage in num- bers, but a curious distortion in the existing labor force will have taken place. There have been more women than men in Europe for many years, owing to emigration. In 19I0-19I1 the excess of females in the seven leading belligerent countries in Europe was 5,600,000.' Add to this the estimated war loss of 25,000,000 men, and an excess of women in Europe by some 30,000,000 will be created. In the United States the situation has always been the opposite of that prevailing in Europe. It has al- ways been the land of opportunity, to which has been attracted a steady stream of immigrants, especially of men in the productive ages between 15 and 45 years. During the past hundred years the net addi- tion to our population, through immigration, has been over 30,000,000. In 1910 there was an excess of males in this country of 2,692.000. or about six per cent.- This disproportion will be reduced somewhat by the loss of American soldiers and by the return to their homes in Europe of many men of alien birth. But even after these allowances have been made, there will still be more men than women in the United States after the W!.r. 1 W. S. Rossiter, in American Economic Review, March, 1917, page 107. 2 Thirtcpiith Census of the United States (1910), I, 247. What effect will the war have upon immigration from Europe to the United States.'' Will it return to the same channels as before the war.' There will be two sets of counteracting forces at work. The countries of Europe will need to repair the wastes and losses of war, and there will be a great demand for labor. At the same time the labor force will be smaller. Under such circumstances one would expect wages to be high. And they undoubt> edly will be higher than before the war, though the disbandment of the armies may lead to their tem- porary depression at first. On the other hand, the debts of the belligerent countries will be enormous and taxation will be heavy, while prices will remain high for a long time owing to the universal inflation of the currency. There will thus be many induce- ments to emigration from Europe. This will be es- jjecially true of the agricultural sections of eastern Europe, Russia, and southern Italy, where tliere will be no such industrial expansion as will occur in western Europe and where conditions will probably be hardest. In the United States a period of prosperity may be expected after the war. Wages will be higher and taxes lower than in Europe. Immigration will con- sequently be renewed to this country. But it will differ in some respects from the pre-war immigration. There will probably be more women relatively than men. The inequality in this respect between the Old World and the New, enormously heightened by the war, will be in part corrected. The new immigration will, moreover, be subjected to a sifting process which has never been applied before by virtue of the law providing for an educational qualification, passed over the President's veto in February, 1917, and since almost forgotten because of the changed conditions. This will keep out some of the elements which previously made up a large proportion of our immigration. How will the labor situation in the United States be affected.'' One change has already occurred, and is now working itself out. This is the great increase in the number of women employed. These will be exposed to a double competition after the war — of immigrants from I'"uroi)c, especially women; and of men returning from the armies. The former will compete most severely in lines of domestic service, where the present shortage will probably be changed to one of ovcr-suiiply, and to a lesser extent in the textile and clothing industries.' The struggle be- tween the men and women will be for tiie positions in the manufacturing and meciianical industries and in trades wliich were formerly held by men and have now been invaded bv women. It may be that the in- ' Cf., Statistics of Ocoupatinns. Thirteenth Census of the United States (1010), pages .'iKf, 421, 4.T1. 14 HISTORICAL OUTLOOK REPRINTS, NO. 8. dustrial expansion will be so great that all will be needed to do the work of our factories and work- shops, especially in view of the smaller immigratiou and losses among our own men. In any case read- justments are bound to occur which will influence our whole social development. There is indeed little likelihood that women will wish, or be able, to keep their positions in emergency lines, as conductors on the surface cars, but there will undoubtedly remain as a permanent heritage of the changes introduced by the war not only an increase in the number of women engaged in gainful occupations, but an in- crease in the variety of occupations opened to women. Not only will the composition of the labor force be affected, but the position of labor will be altered. One of the first effects of the war has been a great increase in the demand for labor and a rise in wages, especially among the skilled workers in the mechani- cal trades. The advantages thus obtained will not easily be relinquished after the war. There has also been a growth in the power of labor organizations, and a larger influence in shop management. To be sure, the government has insisted upon the open shop, but labor will be better organized after the war than before it, and will undoubtedly use its power to obtain and hold gains along many lines. Many improvements have already been made in the conditions of labor in order to attract the necessary workers. In order to insure an adequate supply as well as to protect the unskilled and unorganized laborers from exploitation, the government and pri- vate firms have extended, on a hitherto unknown scale, improved housing, welfare supervision, and betterment work along many lines. More care is be- ing taken of the health and morals of the workers by direct administrative action and supervision. This movement will undoubtedly persist after the war, and probably be enlarged. 2. Capital. By capital or capital goods must be understood the fixed forms in which capital appears — railways, ships, factories, houses, machinery, stores of goods, farm animals and food supplies. A good deal of this existing capital has been destroyed dur- ing the war, notably in the case of ships, but prob- ablv not so much as has been supposed. The actual destruction is limited to the area of military and naval operations, where ships have been sunk, houses have been burned or demolished, trees cut down, land upturned, cattle killed, and all sorts of improvements destroyed, like roads, railways, telegraph and tele- f)hone systems, etc. It is impossible to say liow much tliis lias amounted to. About a year ago the loss of public and private property was estimated at $t>.000,000.000.* The additional destruction since that time would probably bring this figure up to be- twppn nine and ten billion dollars. If to this there is added the loss of ships, amounting to not less than $2,500,000,000, the total may be estimated at the end of four years of war at about $12,000,000,000. * World's Work, April, 1917, page 588. The losses in capital have not been confined to the outright destruction of ships and other instruments of production. There has also been a steady de- terioration of the plant by means of which production is carried on. The normal additions to the national industrial plant, except for war purposes, have been stopped;, that is, no more houses, factories, railways, roads, public buildings, etc., are being constructed for usual purposes. These items have almost absolutely disappeared from the budgets of the belligerent coun- tries, as England, France, and Germany. England expended on such items in 1907 about $950,000,000; * a decade later practically nothing. Professor Alfred Marshall has estimated that one-fifth of the existing capital invested in plants, machines, tools, and simi- lar things must be replaced if we are to keep even; more if we are to progress. It is evident that during the war the world is slipping back economically. Not even the waste and deterioration from natural wear and tear has been made good. Railways have run down, obsolete machines have not been replaced, repairs have not been made except in so far as they have been absolutely necessary to keep things run- ning. This expenditure in England amounted a de- cade ago to $900,000,000 a year; to-day it is a frac- tion of that sum. In the United States the railways had been permitted to run down physically ; the pro- duction of domestic freight cars declined from the high-water mark during the last five years of 234,768 cars in 1912 to 79,367 in 1917, and it is estimated that there is at present a shortage of 120,000 freight cars. The record has undoubtedly been much worse in England, France, Russia, Germany, and the other belligerent countries, where moreover the roadbed and track and bridges have probably suffered equally with the rolling stock. In most of tliese countries new corporations for non-military purposes have been forbidden, and issues of new stock prohibited. Thus in England the issues of industrial securities were cut down from $168,000,000 in the first half of 1914 to $11,000,000 in the same period of 1917. In the United States new promotions have been placed under the supervision of the capital issues committee, which has been very conservative in permitting any issues of securities which might compete with the Liberty Loans or absorb capital needed for war industries. The main economic waste of the war has not been so much the outriglit destruction of existing goods and commodities as it has been the diversion of labor and capital from the production of useful things and the replacement of wasting capital and improvements in the material equipment and plant, to the making of munitions and cannon and similar articles. These are not only used up quickly, sometimes in a single act, but they are agents of destruction to destroy otiier things. And while the world is making these it has not time or energy to produce and replace the other things. Along some lines we have already used = Brand, in Bankers' Magazine (New York), November, 1017, page 608. SOURCE MATERIALS ON ECONOMIC ASPECTS OF THE WAR 15 up the accumulated stores of years, as in the case of such articles as food, copper, ships, wool, etc., and it will be years before we can catch up again with ])re-war conditions. It was estimated about a year ago that the imme- diate needs of the world for the first year after the war would be about $^,200,000,000. The Federal Trade Council estimated the needs of Belgium and France for industrial buildings, for machinery of all kinds, for railroad repairs, bridges, roads, and other government property at $1,316,000,000. Germany's reeds for food supplies and raw materials were cal- culated at $1,890,000,000, Austria-Hungary would want $400,000,000. and Russia $600.000,000l All of these figures would be much higher now as existing stocks of capital have been further depleted. But the amounts needed to provide for immediate needs and to start the industrial machinery going again does not begin to measure the cost of the war or the economic burdens imposed upon future genera- tions. The money cost of the first four years of war may be estimated at $150,000,000,000," of which the entente allies have borne about two-thirds and the central powers one-third. This is an incomprehensi- ble figure, and it is still growing. The war is costing over $100,000,000 a day, or about $2,000 every sec- ond. The present cost of the war exceeds the total wealth of the United States, which represents the accumulations of three hundred years. But from this sum certain deductions may be made which reduce somewhat the actual burden. In the « Cf., my " Direct Costs of the War." Carnegie Endow- ment for International Peace (Washington, March, 1918). first place not all of the war expenditures are pure loss. Many of them would have to be made in any case. Soldiers are fed, clothed, and housed at gov- ernment expense, and the bill is paid out of taxes or loans instead of appearing in the family budget. Secondly, some expenditures represent a productive investment, such as the building of nitrate plants or merchant vessels. After the war is over these will be left as an asset, which will to that extent offset the increase in indebtedness. So munitions plants, navy yards, additions to steel mills and other indus- trial establishments arc not all to be regarded as capi- tal irretrievably lost in the wastes of war. Most of them can and will be used for peaceful production after the war is over, although they now are charged as part of the cost of the war. The editor of the London Statist ' has estimated that about half of the gross costs can be thus salvaged, so that the net money cost would be about $75,000,000,000 for four years of war. Even after all allowances are made, however, there will remain an enormous burden of indebtedness, the interest charges on which alone will constitute a crushing load. In Germany the interest on the new debt now created amounts to more than double the total imperial budget before the war; in England the interest charge is one and one-quarter times the for- mer budget. This will entail enormous taxes which must continue for an indefinite time. There is here involved, however, not a question of loss of capital, but rather of the distribution of wealth and the trans- fer of income from one class to another. ^ The Statist, October 23, 1915, page 181. 16 HISTORICAL OUTLOOK REPRINTS, NO. 8. LIBRARY OF CONGRESS 020 915 869 3 PROBLEMS OF WAR AND OF PEACE To understand the problems confronting the nations represented at the peace con- ference, the teacher and student should possess, among other things, President Wil- son's addresses and peace notes, maps of Europe showing racial and economic facts, material illustrating German trade methods, and war-time statutes of the United States. All of this matter, and much more, is contained in the NEW ENLARGED EDITION OF Collected Materials for the Study of the War Edited by Albert E. McKinley ^^ This work in its first form has been very widely used in schools and colleges. The additional matter now inserted brings down President Wilson's state papers to November, 1918; it includes the Armistice terms of November 11; and economic material bearing upon England, France, United States, and Germany. Price of Enlarged Edition, 80 Cents Net Bound in boards, about 220 pages, equivalent to an ordinary book of over 600 pages. McKINLEY PUBLISHING COMPANY 1619 Ranstead Street Philadelphia