The Great Results of the War PART I I—ECONOMIC RESULTS OF THE WAR

Striking Changes Made by the European Conflict Upon the Economic Life of the Great Nations

The paramount position of War Finance was brought vividly and continuously before the whole people of the United States by the Liberty Loan campaigns. This lesson was an old one though it was enforced by all the improved methods of modern publicity. To Napoleon Bonaparte is attributed the statement that three things are necessary to wage a successful war: money, more money, and still more money.

FINDING THE MONEY FOR WAR

It has been well said that:

"Perhaps the greatest surprise of the war to most people, even to those who had studied political economy, has been the enormous expenditure of money which a nation can incur, and the length of time which it can go on fighting without complete exhaustion. This should not have been in reality a surprise to anyone who had studied past history, for all experience shows that lack of money itself has never prevented a nation from continuing to fight, if it were determined to fight. The financial condition of Revolutionary France at the commencement of Napoleon's career was wretched in the extreme, yet France went on fighting for nearly twenty years after that. The Balkan States can hardly be said ever to have had great financial resources, and yet they fought, one after the other, two severe wars, and are now fighting a third still more severe and prolonged. The Boers in South Africa found no difficulty in fighting the British Empire for three years with practically no financial resources. The Mexicans recently managed to fight one another for a good many years in the same way. Lastly, the Southern states in our own Civil War fought for years a desperate and losing fight and were ultimately beaten to the ground, not so much by a lack of money, as by an actual lack of things to live on and fight with. In fact, all history proves, and this war proves over again, that if what the Germans call 'the will to fight' exists lack of money will never stop a nation's fighting, provided it possesses or can obtain its absolutely minimum requirements of food, clothing, and munitions of war. It was Bismarck who said: 'If you will give me a printing press, I will find you the money.' In finding the money required for an exhausting war a nation is driven to all sorts of desperate financial expedients which may very seriously affect its economic life, but if a nation wants to continue fighting and can produce, or be induced to produce, the things that are absolutely necessary for life and warfare, the government will get hold of those things somehow. If it cannot get them in any other way, ultimately it will take them."

STRONG POSITION OF UNITED STATES

When the war opened England was in the strongest position of any of the Allies. She was the greatest creditor nation in the world. That is, she was able to purchase goods from foreign countries on easier terms than her associates. Russia and Italy were debtor nations and had to borrow even before the war in order to balance their foreign accounts. So these members of the Entente had to be assisted in making purchases abroad. England was able for a long time to keep up her exchange rate in New York. This was done by the shipment of gold and by inducing the holders of American securities in England to sell or lend such securities to their government.

England was forced to act as the agent of other Powers who were fighting with her. Until the United States came in, it was the greatest industrial arsenal among the Allies. Large imports were naturally a feature of this policy. The United States soon began to feel the result of the changes in international credit. Exports almost doubled between 1912 and 1917, the figures being in millions, $2,399,000,000 and $6,231,000,000, respectively.

Another side of the United States trade account to the world is indicated by the following classified list of loans to January, 1917:

"Between August 1, 1914, and December 31, 1916, the loans raised in the United States by foreign countries were estimated to reach $2,325,900,000, of which $175,000,000 had been repaid. The net indebtedness on January 1, 1917, was therefore $2,150,900,000. The loans may be classified geographically as follows:

Europe$1,893,400,000

Canada270,500,000

Latin America157,000,000

China5,000,000

———————

Total foreign loans$2,325,900,000

Less amount paid,175,000,000

———————

Net foreign indebtedness$2,150,900,000

"The loans of the belligerent countries which were floated in the United States up to the close of 1916 are divided as follows:

Great Britain$908,400,000

France695,000,000

Russia160,000,000

Germany45,000,000 [1]

Canada270,500,000

————————

Total$2,078,900,000 [2]

NEW PACE IN WAR FINANCE

A new pace in war finance was set by the United States when it became a belligerent. It had to provide for an increase of taxation ascending from the point of $3,000,000,000 in 1917 to over $8,000,000,000 in 1918. The largest source of estimated revenue was from taxes on excess profits, including war profits of $3,100,000,000, and the next was from taxes on incomes, $1,482,186,000 from individuals, and $828,000,000 from corporations. The New York Journal of Commerce shows by the following table the difference between the old and the new system of taxation. Exemptions under the new law were the same as under the old: $1,000 for single persons and $2,000 for married, $200 additional allowed for each dependent child under eighteen years of age:

IncomesTax Under

OldNew

LawLaw

$2,500$10$30

3,0002060

3,5003090

4,00040120

4,50060150

5,00080180

5,500105220

6,000130260

6,500155330

7,000180400

7,500205470

8,000235545

8,500265620

9,000295695

9,500325770

10,000355845

12,5005301,320

15,0007301,795

20,0001,1802,895

25,0001,7804,240

30,0002,3805,595

35,0002,9807,195

40,0003,5808,795

45,0004,38010,645

50,0005,18012,495

55,0005,98014,695

60,0006,78016,895

70,0008,88021,895

80,00010,98027,295

100,00016,18039,095

150,00031,68070,095

200,00049,180101,095

300,00092,680165,095

500,000192,680207,095

1,000,000475,180647,095

5,000,0003,140,1803,527,095

The following estimated yield from other sources is given by the same authority:

"Transportation—Freight, $75,000,000; express, $20,000,000; passenger fares, $60,000,000; seats and berths, $5,000,000; oil by pipe lines, $4,550,000.

"Beverages (liquors and soft drinks), $1,137,600,000; stamp taxes, $32,000,000; tobacco cigars, $61,364,000; cigarettes, $165,240,000; tobacco, 104,000,000; snuff, $9,100,000; papers and tubes, $1,500,000.

"Special Taxes.—Capital stock, $70,000,000; brokers, $1,765,000; theaters, etc., $2,143,000; mail order sales, $5,000,000; bowling alleys, billiard and pool tables, $2,200,000; shooting galleries, $400,000; riding academies, $50,000; business license tax, $10,000,000; manufacturers of tobacco, $69,000; manufacturers of cigars, $850,000; manufacturers of cigarettes, $240,000; use of automobiles and motor cycles, $72,920,000.

"Telegraph and telephone messages, $15,000,000; insurance, $12,000,000; admissions (theaters, circuses, etc.), $100,000,000; club dues, $9,000,000.

"Excise Taxes.—Automobiles, etc., $123,750,000; jewelry, sporting goods, etc., $80,000,000; other taxes on luxuries at 10 percent., $88,760,000; other taxes on luxuries (apparel, etc., above certain prescribed prices), at 20 percent., $181,095,000.

"Gasoline, $40,000,000; yachts and pleasure boats, $1,000,000."

"The income tax law levies on all citizens or residents of the United States a normal tax of 12 percent. upon the amount of income in excess of exemptions, except that on the first $4,000 of the taxable amount the rate shall be 6 percent. The law also increases the surtaxes all along the line. The advances by grades compared with the percentage under the old law are: $5,000 to $7,500 incomes, increased from 1 to 2 percent.; $7,500 to $10,000, from 2 to 3 percent.; $10,000 to $12,500, from 3 to 7 percent.; $12,500 to $15,000, from 4 to 7 percent.; $15,000 to $20,000, from 5 to 10 percent.; $20,000 to $30,000, from 8 to 15 percent.; $30,000 to $40,000, from 8 to 20 percent.; $40,000 to $50,000, from 12 to 25 percent.; $50,000 to $60,000, from 12 to 32 percent.; $60,000 to $70,000, from 17 to 38 percent.; $70,000 to $80,000, from 17 to 42 percent.; $80,000 to $90,000, from 22 to 46 percent.; $90,000 to $100,000, from 22 to 46 percent.; $100,000 to $150,000, from 27 to 50 percent.; $150,000 to $200,000, from 31 to 50 percent.; $200,000 to $250,000, from 37 to 52 percent.; $250,000 to $300,000, from 42 to 55 percent. The rate continues to increase, but on incomes of over $5,000,000 the increase is only from 63 percent., under former law to 65 percent."

Copyright by International Film Service

Women Munition Workers in the International Fuse and Arms Works

Before entering the war, the United States was the great arsenal of the Allies. After our entry, production of munitions increased, while the man power in the industry diminished through enlistments and the draft. Women took up the work and showed surprising ability.

Click for a larger image.

MEANING OF NEW TAXATION

According to a calculation published in the New York World the war revenue bill imposed a war tax of $80 on every man, woman and child in the United States, or approximately $400 for each family. The amount expected to be derived from each item is given in the following table:

Individual income tax$1,482,186,000

Corporation income tax894,000,000

Excess and war profits3,200,000,000

Estate tax110,000,000

Transportation164,550,000

Telegraph and telephone16,000,000

Insurance12,000,000

Admissions100,000,000

Club dues9,000,000

Excise, luxury, and semi-luxury518,305,000

Beverages1,137,600,000

Stamp taxes—chiefly documentary32,000,000

Tobacco and products341,204,000

Special business and automobile-user's Taxes 165,607,000

———————

Total$8,182,452,000

With the operation of this tax the people of the United States found it no longer possible to speak in terms of opprobrium of the tax-ridden people of Europe. The American income tax has a higher rate on large incomes than that provided for under the English system. A man in the United States with an income of $5,000,000 is taxed nearly 50 percent., more than in England. The New York Tribune published tables printed below comparing the income tax rates of the United States with those existing in France and in Great Britain.

INCOME TAX COMPARISON

A compilation made for the Wall Street Journal shows that the United States income tax even with the increases made in 1918 was still far lower than the English income tax:

"The great bulk, numerically, of incomes taxed in 1917 was in the field reached by the lowering of the exemption in the 1917 law.... It is a fact, however, that no one of these new taxpayers was called on to contribute more than $40 to the government, as the rate was only 2 percent., while all other incomes paid a basic normal tax of 4 percent. The lowest rate for normal tax in Great Britain is 2 shillings and 3 pence on the pound, or 11¼ percent., and the exemption is only $600. The basic normal tax under the new English law is 6 shillings on the pound, or 30 percent., on all incomes over $25,000.

"Actual rate, allowing for deductions, normal tax, and surtaxes, based on taxes on incomes of heads of families. Persons with no dependents pay more; those with more than one pay less. $2,000 is exempted for heads of families, $1,000 for bachelors. Below $4,000, 6 per cent. is the normal tax; above, 12 per cent. Surtaxes begin at $5,000."

————— United States————— United KingdomFrance

Old LawNew Law Rate (per cent.)

IncomeAmountRate (per cent.)AmountRate (per cent.)UnearnedEarnedRate (per cent.)

$2,500$10.40$301.20 11.258.441.25

3,00020.67602.00 14.8411.871.67

3,50030.86902.57 16.2412.962.07

4,000461.001203.00 18.1614.532.44

4,500601.331503.33 18.7515.002.86

5,000801.601803.60 18.7515.003.20

5,5001051.912204.00 22.5018.753.48

6,0001302.162604.33 22.5018.753.71

6,5001552.38330 5.0822.5018.753.90

7,0001802.57400 5.7122.5018.754.07

7,5002052.73470 6.2722.5018.754.21

8,0002352.93545 6.8126.2522.504.34

8,5002653.12620 7.2926.2522.504.53

9,0002953.28695 7.7226.2522.504.69

9,5003253.427708.11 26.2522.504.84

10,0003553.55845 8.4526.2522.504.98

12,5005304.241,320 10.5630.0026.255.53

15,0007304.871,795 11.9732.0832.086.07

20,0001,1805.902,895 14.4834.0634.066.99

25,0001,7807.124,245 16.9835.7535.757.84

30,0002,3807.935,595 18.6537.2937.298.41

35,0002,9808.517,195 20.5638.7538.758.99

40,0003,5808.958,795 21.9939.8439.849.43

45,0004,3809.7310,645 23.6640.9740.979.77

50,0005,18010.3612,495 24.9941.8841.8810.05

55,0005,98010.8714,695 26.7242.8442.8410.27

60,0006,78011.3016,895 28.1643.6543.6510.45

70,0008,88012.6921,895 31.2644.9144.9110.75

80,00010,98013.7227,295 34.1245.8645.8610.96

100,00016,18016.1839,095 39.1047.1947.1911.27

150,00031,68021.1270,095 46.7348.9648.9611.68

200,00049,18024.59101,095 50.5549.8449.8411.89

300,00092,68030.89165,095 55.0350.7350.7312.09

500,000192,68038.54297,095 59.4251.4451.4412.25

1,000,000475,18047.52647,095 64.7151.9751.9712.38

5,000,0003,140,00062.80 3,527,09570.5452.3952.3912.48

"If the new normal tax in the United States were made uniformly 12 percent.—wiping out the 2 percent. discrimination of the 1917 law—a single man in this country with a salary of $1,500 a year would be called on to pay $60 in income tax, as against an English tax of $101.25. Assuming that the normal tax were raised to 12 percent. and the surtax and excess tax were left as at present, an unmarried American with a salary of $10,000 would pay $1,430.20, while the unmarried Englishman would pay $2,250. If the Englishman derived his $10,000 income from rentals, his tax would be increased to $2,625, while the American tax would be reduced to $1,165—an Irish dividend on effort.

"According to a level where the British surtax becomes effective, take a salary of $20,000. The English normal tax on this would be $6,000 and the surtax $812.50 (figuring $5 to the pound), a total of $6,812.50. At the suggested rate of 12 percent., the American's normal tax would be $2,145.60 (rate applying to $20,000, less $1,000 exemption and $1,120 excess tax); the surtax would be $444 and the excess tax $1,120; a total of $3,709.60. If the American cut non-tax-free coupons for his income instead of working for it, his tax would be reduced to $2,780, making it more than $600, less than one-half the English tax. This, be it remembered, is figuring the American normal tax at the supposititious rate of 12 percent.

"Going abruptly to an income of $1,000,000, the American normal tax at 12 percent., would be $119,880, against an English normal tax of $300,000. The increase in the American normal tax would be $79,960 over present rates. The American surtax at present rates would be $435,300, as against a British surtax of $217,915; total American, $555,180, English, $519,687.50. No account is taken in this computation of any excess tax on the American income. With an income of $3,000,000. the American normal tax at 12 percent. would be $359,880, an increase of $239,960 over present rates. The surtax at present rates would be $1,680,300, a total of $2,040,180, or nearly 70 percent., the rate on the last $1,000,000 being at 75 percent. The corresponding British tax is, normal, $900,000, and surtax $669,685; total, $1,569,685, or nearly 52 percent., the actual maximum rate being 52½ percent. on all excess over $50,000.

"Expressed in tabular form, comparative results from a normal tax of 12 percent., combined with present surtax rates and assuming all income up to $50,000 to be earned income for a single man, would be as follows:

IncomeU.S. Tax Per Cent.British Tax Per Cent.

$1,500$60.00 4.00$101.25 6.75

3,000240.00 8.00375.00 12.50

5,000480.00 9.60750.00 15.00

7,500789.40 10.521,406.25 18.75

10,0001,430.20 14.302,250.00 22.50

15,0002,534.80 16.904,812.50 32.08

20,0003,709.60 18.556,812.50 34.06

30,0006,336.00 21.1211,187.50 37.29

40,0008,956.00 22.3915,937.50 39.84

50,00011,855.20 23.7120,937.50 40.18

75,00018,605.20 24.8134,062.50 45.42

100,00026,855.20 26.8047,187.50 47.19

150,00046,355.20 30.9073,437.50 48.96

250,00092,355.20 36.94125,937.50 50.37

500,000235,355.20 47.07257,187.50 51.44

700,000359,355.20 51.33362,187.50 51.74

750,000390,355.20 52.05388,437.50 51.79

1,000,000557,855.20 55.78519,687.50 51.97

3,000,0002,042,855.20 68.091,569,687.50 52.32

10,000,0007,292,855.20 72.935,244,687.50 52.45

"With additional exemption of $1,000 for heads of families and $200 each for dependent children, the United States figures in the table would be reduced by $120 for the $1,000 exemption and $24 for each child. There are similar deductions to be made in the English figures. Furthermore, for incomes above $50,000, deduction for the excess tax has not been figured exactly in order to avoid long computations. This would slightly reduce the figure on the large incomes. But for demonstrative purposes, the table gives a fairly accurate general comparison of the range of taxes under the proposed English law and a tentative 12 percent. normal rate under our law.

"It will be noticed that the rates would come together just below $750,000. It is in the range between $5,000 and $500,000 incomes that greatest divergence in rates occurs. The British tax takes its largest jump between $10,000 and $15,000, where the surtax begins to operate. The United States gradations are erratic and irregular, showing the haphazard manner in which the steps of the surtax were applied."

ATTITUDE TOWARD WAR TAX BILL

The passing of the war tax bill was not altogether easy sailing; there was plenty of criticism from the press throughout the country. Republican editors and congressmen wondered why the bill did not contain a tax on cotton, and one Pennsylvania congressman thought that the tax levy should be at the rate of three dollars a bale. Senator Smoot of Utah attacked the bill as a bunglesome measure.

The New York Jourial Journal of Commerce called attention to the discrimination between those whose income is in the form of services or property and those who get it in cash:

"Take the case, for instance, of the salaried employee of a bank or factory who receives $5,000 a year, out of which he pays his house rent and his usual costs of living; contrast him with the case of a farmer who owns his land and obtains the bulk of what he needs, both in food, fuel, and other essentials, for himself and family in produce or in goods obtained by trade at the neighboring village; the situation becomes clear and shows why it is that the farming class pays only a microscopic proportion of the income tax at the present time."

And the Democratic New York World agreed that the farmer "is not carrying his share of the load of war taxation," and observes:

"An analysis of income tax returns for the fiscal year 1916, recently published, shows that, although farmers are the most numerous class of Americans engaged in gainful occupations, they were at the foot of the list proportionately among income tax payers. Outside of the notorious war profiteers, no element of our population has advantaged so greatly by war as agriculturists; yet in the year of which we speak only one farmer in four hundred paid a farthing's tax upon income. In this respect preachers and teachers showed a higher percentage."

There was some demand for extending the income tax downwards to cover smaller incomes, for example, we find the Council Bluffs' Nonpareil contending:

"The men of more moderate income should be required to pay at least a nominal income tax. This is a common country. It belongs to common people. And common people will esteem it a privilege to contribute their mites. One dollar per hundred on a thousand-dollar income would be both reasonable and just."

CRITICISM OF THE TAX

The attitude of the New York press is indicated by the Evening Sun and the Times. The New York Evening Sun (Rep.) said the committee "left so many rough edges upon their work." In the opinion of this newspaper, Mr. Kitchin "has given us a measure of class-taxation highly accentuated, and yet has failed to suit the McAdoo group, the most clear-minded adherents of the conscription-of-wealth idea. He has produced a confused series of taxes beyond the practical power of the ordinary busy citizen to master or comprehend, but has not combined these into a harmonious system." The morning Sun even went so far as to remark that "nothing that the Senate could do could make the Kitchin measure worse than it is." Yet it by no means criticized all the features of the bill. It objected to the proposed taxes on oil producers as discouraging the production of oil, and styled the plan to tax distributed corporation earnings at twelve percent. and undistributed earnings at eighteen percent. "simply a fool tax," which "will help to lock the wheels of every great industry in this country."

The foundation mistake of the bill, in the opinion of the New York Times (Ind. Dem.) was the "attempt to assess taxes upon the smallest possible number of persons and businesses, leaving a great majority of the people free from a levy direct or indirect." The Times thought that this policy was dictated by the desire "to leave the mass of voters free from grounds of complaint against the party in power." It insisted that there should be a consumption tax levying "upon the breakfast table and upon the purchases of a great mass of people." Such necessities as tea, coffee, cocoa, sugar, should bear a tax, in the opinion of this and other newspapers. The number of those taxed was also kept comparatively small by the retention of the old income exemption limits, namely, $1,000 for bachelors and $2,000 for married men, with the normal tax rate placed at only six percent. on incomes up to $5,000.

WILSON'S TAX PROGRAM

An outline of what was expected from the people of the country as a financial contribution was given by Mr. Wilson in his May (1918) address to Congress, when he decided to ask its members to remain in Washington and prepare a new revenue bill. Mr. Wilson's call for immediate action in behalf of both the public and the Treasury Department was a summons to a universal duty in language which, it is remarked, "was never before used in a tax speech." He said in part:

"We can not in fairness wait until the end of the fiscal year is at hand to apprize our people of the taxes they must pay on their earnings of the present calendar year, whose accountings and expenditures will then be closed.

"We can not get increased taxes unless the country knows what they are to be and practices the necessary economy to make them available. Definiteness, early definiteness, as to what its tasks are to be is absolutely necessary for the successful administration of the treasury....

"The present tax laws are marred, moreover, by inequities which ought to be remedied....

"Only fair, equitably distributed taxation of the widest incidence, drawing chiefly from the sources which would be likely to demoralize credit by their very abundance, can prevent inflation and keep our industrial system free of speculation and waste.

Poster for Boy Scouts Who Worked for the Victory Loan

"We shall naturally turn, therefore, I suppose, to war profits and incomes and luxuries for the additional taxes. But the war profits and incomes upon which the increased taxes will be levied will be the profits and incomes of the calendar year 1918. It would be manifestly unfair to wait until the early months of 1919 to say what they are to be....

"Moreover, taxes of that sort will not be paid until the June of next year, and the treasury must anticipate them....

"In the autumn a much larger sale of long-time bonds must be effected than has yet been attempted....

"And how are investors to approach the purchase of bonds with any sort of confidence or knowledge of their own affairs if they do not know what taxes they are to pay and what economies and adjustments of their business they must effect? I can not assure the country of a successful administration of the treasury in 1918 if the question of further taxation is to be left undecided until 1919."

Mr. Wilson's appeal for the practice of personal economy met with widespread approval in England, as it did in the United States. The Economist considered that his manifesto to the American people on this subject was among the greatest documents that the war has produced. National self-sacrifice had gone far, but not far enough. To attain Mr. Wilson's standard of individual patriotism much was still needed, the Economist says:

"We still have a very long way to go before we can attain to President Wilson's standard of individual patriotism. From the outbreak of war to the end of last year the small investor in this country has lent £118,179,000 to the government. Moreover, in the first two months of 1917 as much as £40,000,000 was contributed to war loans in one form or another in the shape of small savings. That result represents a great deal of patriotic saving, and reflects the highest credit on the committee, as well as upon the Montagu committee, which devised so suitable a form of investment as the 15s 6d certificate. But far more is required. During the war loan campaign, war savings certificates brought in £3,000,000 in a single week. That effort was, perhaps, too great to be kept up; but it is hardly satisfactory that, in spite of the hard work of the committee, and an enormous growth in the number of active war savings associations all over the country, the weekly receipts from the 15s 6d certificates have fallen back to the £800,000 to £900,000 level which was reached last December. This relapse may be partially accounted for by the late increase in the cost of living, but there can be no doubt that much more might yet be done by the masses of people of moderate means to whom the small certificates appeal. Nor is there any evidence that the wealthier classes, generally speaking, have done nearly as much, in the matter of war self denial, as they might have done."

LUXURY TAXES

When it came to a question of taxing luxuries, the difficulty was to decide what was a luxury. The situation perplexed Congress, for we find one congressman in Pennsylvania who held that collar buttons and cuff buttons were a necessity, while a representative from Texas asserted that Texas could get along without either collar buttons and cuff buttons and still be patriotic. A congressman from Oklahoma thought that all kinds of buttons could be done away with, adding, "Before I came to Congress I could use nails for my suspenders." Congressman from agricultural states considered that automobiles and gasoline were not luxuries but were really necessities, especially for farmers.

Many newspapers opposed anything like a luxury tax. We find the New York Times advising the imposition of taxes on tea, sugar, coffee and cocoa. These are good revenue producers but few politicians care to interfere with the free breakfast table. The Wall Street Journal approved of luxury taxes because they would be a means of enforcing thrift. The Treasury's plan for imposing these taxes may be gathered from the following condensed summary:

"Fifty percent. on the retail price of jewelry, including watches and clocks, except those sold to army officers.

"Twenty percent. on automobiles, trailers and truck units, motor cycles, bicycles automobile, motor cycle, and bicycle tires, and musical instruments.

"A tax on all men's suits selling for more than $30, hats over $4, shirts over $2, pajamas over $2, hosiery over 35 cents, shoes over $5, gloves over $2, underwear over $3, and all neckwear and canes.

"On women's suits over $40, coats over $30, ready-made dresses over $35, skirts over $15, hats over $10, shoes over $6, lingerie over $5, corsets over $5. Dress goods—silk over $1.50 a square yard; cotton over 50 cents a square yard, and wool over $2 per square yard. All furs, boas and fans.

"On children's clothing—on children's suits over $15, cotton dresses over $3, linen dresses over $5, silk and wool dresses over $8, hats $5, shoes $4, and gloves $2.

"On house furnishings, all ornamental lamps and fixtures, all table linen, cutlery and silverware, china and cut glass; all furniture in sets for which $5 or more is paid for each piece; on curtains over $2 per yard, and on tapestries, rugs, and carpets over $5 per square yard.

"On all purses, pocketbooks, handbags, brushes, combs and toilet articles, and all mirrors over $2.

"Ten percent. on the collections from the sales of vending machines.

"Ten percent. on all hotel bills amounting to more than $2.50 per person per day. Also the present 10 percent. tax on cabaret bills is made to apply to the entire restaurant or café bill.

TAXES OF MANUFACTURER OR PRODUCER

"Ten cents a gallon on all gasoline to be paid by the wholesale dealers.

"Ten percent. tax on wire leases.

"Graduated taxes on soft drinks. Mineral now taxed 1 cent a gallon to pay 16 cents. Chewing gum now taxed 2 percent. of the selling price, to pay 1 cent on each 5-cent package.

"Motion-picture shows and films: abolish the foot tax of ¼ and ½-cent a foot and substitute a tax of 5 percent. on the rentals received by the producer, and double the tax rate on admissions.

"Double the present taxes on alcoholic beverages, tobacco and cigarettes.

"Automobiles—a license tax on passenger automobiles graduated according to horsepower.

"Double club membership dues.

"Household servants, made 25 percent. of the wages of one servant up to 100 percent. of the combined wages of four or more. Female servants, each family exempted from tax on one servant. All additional servants (female) from 10 to 100 percent. on all over four."

LUXURIES IMPORTED

Heavy taxes on luxuries were anticipated but until these taxes were considered it was hardly realized how much of the consumption in America was concerned with articles that could be considered luxuries; for example, the country imported $6,000,000 worth of foreign cigarette papers. Pictures, statuary and other works of art were brought into the country to the extent of $17,000,000. Over $2,000,000 worth of ivory was imported every year; over $2,000,000 worth of mother-of-pearl and more than $2,500,000 worth of bulbs and roots. Higher taxes were urged by the financial experts, so we see a writer in Financial America emphasizing the connection between the importation of luxuries and the need of shipping:

"America can not spare ships to bring costly garments and furnishings thousands of miles across the sea. For the war period these articles can be replaced at home with materials that cost less labor and less money. The money spent for domestic goods remains in America and maintains our working population and our business and banking resources.

"We lack a sufficient market for our cotton crop, owing to the lack of ships. Americans should wear more cotton. The money spent upon it maintains the Southern planter and his family. Modern processes give it the appearance of silk. It serves very well as carpets, curtains, hangings, and furniture coverings. It should answer present needs for such fabrics. A heavier tax on imports of these goods is indicated as a means of revenue and war economy.

"Imported wearing apparel of silk pays 60 percent. duty and of wool 44 cents a pound and 60 percent. ad valorem. There is a graduated rate on dress goods of these materials. Despite the tax, America spent more on imported manufactures of silk in 1917 than ever, the total being nearly $40,000,000. The same was true of woolen goods, amounting to $23,000,000.

"Our imports of woolen carpets and rugs, most of them brought half way round the world from oriental lands, were also larger. They cost us $3,740,000, though America is a large producer of carpets and rugs, fine as well as coarse. These imports paid ten cents a square foot and 40 percent. ad valorem. Evidently, it was not enough.

"We also spent $53,000,000 for imported cotton manufactures, including cloth, laces, curtains, handkerchiefs, veils, and wearing apparel, though America is the world's chief producer of cotton. A higher tariff is indicated as a tax on those who insist on the foreign product.

TAXES ON TOBACCO

"America has a large tobacco industry at home. We import tobacco in vast quantities from every producing land to satisfy the whimsical and varying tastes of connoisseurs. Our own tobacco is discouraged by those who smoke it under the name of Turkish, Egyptian, Cuban, Dutch, Spanish, and other foreign products, and pay a heavy price for the critical taste which their vanity causes them to imagine they possess. Last year these imports of leaf tobacco alone were valued at $26,000,000, or $10,000,000 more than in 1915. The war tax is five cents a pound added to eight cents paid under the internal revenue act, or thirteen cents altogether. There is also a duty of $1.85 to $2.50 a pound. To increase the tax would encourage the industry in Kentucky, Virginia, Pennsylvania, Connecticut, and other states, while saving our resources in ships and keeping our money at home.

"In addition, America spent $7,000,000 for foreign-made cigars and cigarettes last year. These purchases support foreign factories, although our own factories use the same raw material which they import. They have jumped nearly $3,000,000 in two years. Until the war is ended, Americans should be satisfied with cigars 'made in America.' The present war tax ranges from one tenth of a cent to one cent on each cigar, according to value, in addition to a duty of $4.50 a pound and 25 percent. ad valorem. A higher tax would deprive the smoker of nothing but a craving for the foreign label on his cigar box, unless he chose to pay well for it. He can even get a Spanish name on his American-made cigar.

DIAMONDS, LEATHER AND MILLINERY

"America spent $41,000,000 in 1917 to import diamonds, pearls, and other precious stones and imitations, not set. They paid a war tax of only 3 percent. when made into jewelry. America could be content with beauty less adorned to keep this $40,000,000 at home, or those who insist on sending their money to African mine owners and Dutch cutters should pay a larger tax.

"America last year had a tremendous bill for hides and skins of $209,000,000, nearly two and a half times that of 1915. Much of it was for the great necessities of the army. A good proportion of the rest was unnecessary. These imports of raw material are free of duty and there is no war tax on leather goods. Substitutes have been devised for many of them. These should be encouraged by a tax on the unnecessary use of leather in furnishings, decorations, toilet articles, hand bags, trunks, high shoes, belts, hatbands, and many small articles. Substitutes for these will be provided quickly enough if leather is lacking. A heavy tax would help the movement. The tremendous military and other legitimate demands for leather goods will keep the industry in thriving condition without so much waste.

"For imported millinery materials America spent nearly $13,000,000 last year, and we also spent $3,000,000 for mere feathers, tributes to feminine vanity that filled up many ships needed for war use. The greater part of this stuff came 10,000 miles from China and Japan. There are plenty of substitutes that a high war tax would encourage, including those provided by the American hen.

"Our imported glassware, on which there is no war tax, cost nearly $2,000,000. It occupies large space aboard ship, owing to voluminous packing that is necessary. Imported china, porcelain, earthenware, and crockery cost America nearly $6,500,000."

BEARING THE BURDEN

In spite of the enormous cost of war operations, roseate views were taken of the ability of the country to surmount the unusual difficulties. Unprecedented taxes were being paid, heavy subscriptions to the Liberty Loans were being collected and yet the business of the country seemed to show a high degree of prosperity. This optimistic outlook marks the following comment found in a circular published by the First National Bank in Boston, after it had called attention to the small number of failures reported throughout the country for August, 1918. No such low record had been reached since July, 1901:

"The steps that have been taken to curtail credits have resulted in greater conservatism, and have had a beneficent effect, which is likely to continue for some time after the present necessity disappears. The business foundation is extremely sound. Figures of resources of savings banks show that the subscriptions to the Liberty Loans have brought only a trifling decrease in savings deposits. Evidently subscribers are buying bonds with their current income rather than with their savings. In other words, the Liberty Loans represent additions to the savings of the country, and not merely transfers of investments."

It was prophesied that in spite of the enormous financial obligations assumed by the United States normal conditions would soon be restored. History shows, the circular goes on to say, that financial recovery from devastation has been prompt and complete. Even the railway conditions at this time were viewed optimistically. Such a competent authority as the Wall Street Journal did not anticipate the financial troubles that soon overtook railway administration under government control. It thought that, by the end of the year, the existing debits on current operations would probably be wiped out:

"Aggregate railroad earnings and expenses for July of all the important roads in the country are in line with the individual statements of the different roads already published in showing large increases in both gross and net revenues. They also indicate, so far as one month's operating results may be used to generalize from, that the railroads are now on a self-supporting basis, if they are not actually returning a profit to the government on current operation.

"Net operating income of these roads for the month of July (1918) was $137,845,425 as compared with $92,599,620 in the same month of 1917. In a recent statement from the Director-General's office the compensation payable to the railroad companies for the use of their property by the government was estimated at $650,000,000 for the first eight months of the year, or at the rate of $81,250,000 a month. The net operating income of the Class 1 roads as mentioned above exceeds this monthly rental figure by $56,595,000."

THE FIRST GOVERNMENT LOAN, 1789

Although called by other names, the United States has had issues of Liberty Bonds on several occasions during a period of one hundred and twenty-nine years, notably in the first years of the Republic and in the Civil War. The first was floated in 1789, the year when the Federal Government was established. Alexander Hamilton was Secretary of the Treasury and on him devolved the duty of raising funds for the government.

"Conditions being pressing, Hamilton, in raising the necessary money, at first did not wait even for the approval of Congress, but went to the Bank of New York, which he had helped to found in 1784—the second bank in the United States and the first in New York City—to raise the first necessary money. At a meeting of the board of directors the new secretary of the treasury asked for a loan of $200,000. It was promptly and unanimously granted, the money to be advanced in five installments of $20,000 each and ten of $10,000 each, at 6 percent. On the following day Hamilton sent to the bank the first bond ever issued by the United States Treasury—a bond of $20,000—on receipt of which the money was paid over, so that the United States Treasury could show $20,000 cash on hand. In The Investor's Magazine, where these facts were recently brought to light, we are further told that the bond then issued is still carefully preserved by the bank which bought it. Quite unlike the now familiar Liberty Bonds of 1917 and 1918, it was executed with an ordinary quill pen, such as was in use in those times, and signed in ink by the secretary. With its seal somewhat yellow with age, the bond is still in an excellent state of preservation."

Richards in the Phila. North American

Dropping the First Bomb

POPULARITY OF THE LIBERTY LOANS

America's financial reputation stood at a fairly high level after the close of the Civil War. An era of unexampled production ensued for more than five decades, yet there were many timorous souls who were frightened at the thought of the United States being called upon to bear the burden of the colossal loans. The surprising feature of the Liberty Loans was the elasticity of the subscriptions. The subscribers for the first three loans numbered respectively 4,500,000, 10,020,000, 17,000,000; in every case the records show over subscription. A graphic statement of the nation's riches was presented by S. L. Frazier in the Northwestern Banker, Des Moines, October, 1918:

"Our resources are well up toward $300,000,000,000, or about equal to the combined resources of France, England, and Germany. Our annual production is close to $50,000,000,00, amounts that stagger the imagination. Why it would take ten thousand years to count the dollars representing out our country's resources counting one each second, and working day and night and Sundays."

The New York Tribune remarked, "If any learned professor of economics had predicted that on top of ten billions of government loans in one year a fourth Liberty Loan would reach nearly seven billions we know what we all would have thought."

HOW EUROPE WILL PAY US BACK

An official in the National City Bank of New York, Mr. G. E. Roberts, is quoted by the New York Times as saying that the wealth-producing equipment of the country had become greater than ever during the war. He did not believe either that there would be any difficulty of the United States being paid back for the money it had loaned foreign governments.

"We are going to be peculiarly situated in our foreign relations after the war. We have paid off the greater part of what we owe abroad, and we have lent to foreign governments some $7,000,000,000 or $8,000,000,000. Including all loans by the time the war is over, probably there will be annual interest payments coming to us amounting to $400,000,000 or $500,000,000. How are we going to receive our pay? I am not questioning the ability of our debtors to raise this amount from their people. I have no doubt they can do it, but in what manner are they going to make payment to us? They can't pay it in gold; they haven't the gold to do it, and the total production of gold in the world outside of the United States wouldn't be enough to do it. We won't want them to pay it in goods, for that would interfere seriously with our home industries....

"There is only one way out, and that is by extending more credit to them. We will have to capitalize the interest payments and reinvest them abroad. And if we want to sell goods to them we will have to take their bonds and stocks. In short, we will have to play the part that England has played in the past, of steadily increasing our foreign investments."

While the great sums subscribed for the Fourth Loan by banks, corporations, and individuals had a spectacular interest, observed the New York World, it was the plain people who made the loan a conspicuous success, and the twenty-one million subscribers mean in effect the purchase of a new Liberty Bond by "every American family."

THE LOAN PERIODS

There were very good reasons on the part of the government for selecting the definite periods at which the Liberty Loans were to be issued. There were also very good reasons derived from experience by which the government was guided in preparing for the loans. Prior to the fourth loan Secretary McAdoo believed that it could be made to reach fully one-fourth of the population of the country. Preparation for it was made through publicity on a scale hitherto unprecedented. The Washington correspondent of the New York Journal of Commerce, writing on July 31, 1918, said:

"The country will be appealed to, with new and striking film arguments, with a great variety of poster slogans, and with a use of the press and the platform such as has never been witnessed before in this country.

"There are to be nineteen days of actual campaign work. The great task of organization and preparation is now going on. Artists have been making posters, writers have been preparing arguments, and printing presses in all parts of the country have been turning out many millions of mottoes, cartoons, and slogans."

He added interesting data as to outstanding treasury certificates and war expenses. The time chosen for the loan was probably as good, it thought, as could have been selected, inasmuch as it would fall just after the bulk of the crops had been harvested and when much of them had been sold at good figures.

"War expenses for July were somewhat less than for June and May, amounting to about $1,482,000,000 as compared with $1,512,000,000, the record for June, and $1,508,000,000 for May, the Treasury Department announced. The outlay for July, however, was approximately the amount estimated in advance by the treasury, and expenses for August probably will be higher, it was said.

"During July the government's daily outlay was about $48,000,000, an average of $38,000,000 daily was for ordinary expenses of the army, navy, shipping board, and other agencies, and $10,000,000 daily in loans to the Allies. Total ordinary expenditures for the month were about $1,157,000,000 and loans to the Allies $325,000,000.

"Receipts from sale of War Savings Stamps July 3rd passed the half-billion dollar mark, of which $200,000,000 came in this month as a result of the campaign on Thrift Day, June 28th.

"The government now is financing itself mainly through the sale of certificates of indebtedness, in anticipation of the Fourth Liberty Loan. More than $1,600,000,000 came in from this source in July. In addition, the government received $491,000,000 from belated income and excess profits taxes, and $97,000,000 from miscellaneous internal revenue. Customs duties yielded only $14,000,000.

"Payments on the Third Liberty Loan now amount to $3,652,000,000, leaving $524,000,000 to come in from the next installment payment."

Included in the Third Loan subscription total is $17,917,750 subscribed by the United States Treasury. War Savings Stamps subscriptions totalled $879,330,000 up to November 20, 1918.

THE LIBERTY LOANS—BY FEDERAL RESERVE DISTRICTS

FIRST LOAN (June, 1917— 3½ Per Cent.) SECOND LOAN (Oct., 1917— 4 Per Cent.)THIRD LOAN (1918— 4¼ Per Cent.) FOURTH LOAN (1918— 4¼ Per Cent.)

Boston$332,447,600$476,950,050$354,537,250$632,221,850

New York1,186,788,4001,550,453,4501,115,243,6502,044,778,000

Philadelphia232,309,250380,350,250361,963,500598,763,650

Cleveland286,148,700486,106,800405,051,150702,059,800

Richmond109,737,100201,212,500186,259,050352,688,200

Atlanta57,878,55090,695,750137,649,450213,885,200

Chicago357,195,950585,853,350608,878,600969,209,000

St. Louis86,134,700184,280,750199,835,900296,388,550

Minneapolis70,255,500140,932,650180,892,100241,028,300

Kansas City91,758,850150,125,750204,092,800294,646,450

Dallas48,948,35077,899,850116,220,650145,944,450

San Francisco175,623,900292,671,150287,975,000459,000,000

Total subscriptions$3,035,226,850$4,617,532,300$4,176,516,850$6,989,047,000

Total quotas$2,000,000,000$3,000,000,000$3,000,000,000$6,000,000,000

Total allotments2,000,000,0003,808,766,1504,176,516,8506,989,047,000

Total number of subscribers4,500,00010,020,00017,000,00021,000,000

NEW YORK CITY SUBSCRIPTIONS

Manhattan$960,417,050$1,095,189,000$702,577,750$1,353,449,550

Bronx404,7001,015,5005,112,3505,751,800

Brooklyn30,312,00044,424,20052,427,600100,469,650

Queens2,202,6004,136,15010,137,35017,331,900

Richmond679,6001,373,7003,386,8005,075,750

Total city subscriptions$994,015,950$1,146,139,150$773,641,859$1,482,078,650

THE INDIVIDUAL INVESTOR

Some curious facts were brought out in the effort of the Liberty Campaign propaganda to reach the individual investor. In the large cities the organization was remarkably successful. In the smaller communities it was a greater difficulty. In a suburb or a small town everybody knows everybody else and the Liberty Loan Committee had hard work in getting subscribers. Mr. A. W. Atwood of Princeton thinks that the occupational and vocational classification of possible investors was not tried. Widows and maiden ladies who had inherited $50,000 or $75,000 were not reached. Some of them who were patriotic came forward of their own accord. The little town of Kircunkson in New York State exceeded its quota many times and there was an item in the papers about it. The success of the Liberty Loan in that town was due to the fact that it contained a large sanitarium patronized by millionaires. Yet there were no banks in the town and if their banking resources were used as a basis their quota would have been very small indeed.

As to the assignment of quotas Mr. Atwood makes the point that it was sometimes based on population, sometimes based on the amount of bank resources. He thought that in small places it would be better to post up a list of those who had subscribed and he even thought that if the country made the effort it could ultimately raise a loan of $100,000,000,000, his reason being the following:

"This country is approaching, as England has long ago, the position of being a possessor of great accumulated wealth. One broker after another is really nothing but a family investment agent. That is what it amounts to. There are railroad magnates, bankers, steel kings, copper kings and so on indefinitely. Hundreds of firms in the New York Stock Exchange are nothing but channels for the investment of accumulated wealth and I do not think we realize how much there is of that in this country."

LIBERTY LOANS AND THRIFT

One of the best methods of testing the influence of Liberty Loan activities on the thrift of the country is used by Bradstreet's in its examination of the annual report of the United States League of Building and Loan Associations. These Associations, be it remembered, are not patronized by capitalists but almost wholly by wage earners. During the past fifteen years the membership of building and loan associations has increased 150 percent. and since the war broke in 1914, the number of members has extended 52 percent. The latest report shows a gain in assets of 30 percent. over the amount indicated in 1914. The following tables taken from Bradstreet's give detailed items of the financial situation of these important organizations:

The following table gives membership and total assets of building and loan associations for a fifteen-year period:

MembershipAssets

1902—031,530,707$577,228,014

1903—041,566,700579,556,112

1904—051,631,046600,342,586

1905—061,642,127629,344,257

1906—071,699,714673,129,198

1907—081,839,119731,508,446

1908—091,920,257784,175,753

1909—102,016,651856,332,719

1910—112,169,893931,867,175

1911—122,332,8291,030,687,031

1912—132,518,4421,136,949,465

1914—153,103,9351,357,707,900

1915—163,334,8991,484,205,875

1916—173,568,3421,696,707,041

1917—183,838,6121,769,142,175

The following table shows total membership and total assets for States in which accurate statistics are compiled by state supervisors. The data for other States are consolidated under the heading, "Other States," and the figures given are estimated:

1917—18

MembersAssetsIncrease

Pennsylvania677,911$324,265,393$25,438,326

Ohio767,100321,741,52951,188,940

New Jersey329,063168,215,91313,088,951

Massachusetts247,725126,695,03713,389,130

Illinois246,800113,528,5258,050,122

New York199,57186,072,8296,442,948

Indiana202,40978,112,9175,818,661

Nebraska101,92954,545,6306,627,783

California42,22735,928,4473,134,429

Michigan69,04135,659,3604,279,888

Kentucky62,84627,085,2821,272,372

Missouri56,11626,770,1443,226,311

Kansas66,44226,000,1672,446,058

Louisiana47,79325,911,9281,362,683

Dist. Columbia37,07522,399,995255,115

Wisconsin50,61219,887,3683,013,526

North Carolina37,40017,608,0001,703,230

Washington46,31814,444,1772,366,450

Arkansas21,05310,583,447409,439

Iowa[3]33,0359,638,852........

Minnesota22,0208,979,642626,537

West Virginia21,5008,119,131369,564

Colorado[3]10,2006,688,983........

Maine14,9596,671,239233,961

Oklahoma18,1426,554,1752,354,175

Rhode Island11,4995,938,436577,906

Connecticut14,9004,869,748610,423

South Dakota5,8573,603,83689,286

N. Hampshire8,5543,336,072322,812

Tennessee5,1663,207,754[4]112,865

North Dakota5,7852,837,11890,308

Texas7,1562,314,927372,489

Montana4,2391,849,935209,906

New Mexico3,5451,469,27672,660

Vermont749287,79152,079

Other States341,875157,319,17210,975,756

——————————————

Total3,838,612$1,769,142,175$170,514,039

A Poster Used During the Fourth Liberty Loan Campaign

Click for a larger image.

THE THRIFT HABIT

Such was the success of the Liberty Loan campaign in appealing to all classes of private investors, that it became an interesting speculation whether the popular thrift habit would survive war conditions. It was the general belief in finanical financial centers that the habit of saving had been promoted. Perhaps no better illustration of the thrift habit could be presented than returns made by the savings banks of Boston in October, 1918. At that date these banks had $321,000,000 against $319,000,000 at the same date in 1917, the previous banner total for the end of a banking year. It was estimated by Mr. Ingalls Kimball, the New York Times annalist, that twenty million separate individuals were saving by the method of subscribing to the Liberty Loans, and, as more than $800,000,000 worth of War Saving stamps had been sold, it was probable that nearly half the population of the country was saving money in one of these new ways. As to the method of continuing to encourage thrift, Mr. Kimball pointed out the value of the experience derived from the Liberty Bond Campaign:

"The thrift machine set up by the Treasury was as follows: 1. small unit government bonds; 2. non-interest-bearing Thrift Stamps; 3. War Savings Stamps—a short-term obligation paying interest at maturity.

"This was the mechanism. What was the power that actuated the machine to such wonderful effect? 1. salesmanship, including every modern device of advertising; 2. distribution: (a) through retail stores; (b) through employers, by partial payments (usually pay-roll deduction).

"From these simple elements was built up a campaign that induced the people to save in a new and unaccustomed way at least twenty times as much as they had ever before saved in the same time. None of the elements was unimportant, but salesmanship, probably, contributed most. The selling campaigns of the Liberty Loans and War Savings Stamps were carried on by the largest and most effective selling organization ever put together, under the direction of the ablest men in the United States, and with an energy and devotion that were unimaginable. This selling force was irresistible. Everybody bought because everybody was asked, or begged, or told, to buy. Under the same stimulus almost anything would have sold.

"SAVING AT THE SOURCE"

"Next in importance to the direct selling effort came distribution. For the first time in the history of finance it has been made easy to save; for the first time the great retail channels of distribution have been thrown open to saving; for the first time millions of wage-earners have learned the value and ease of 'Saving at the Source' by pay-envelope deduction of a dollar or so a week toward a Liberty Bond."

Mr. Kimball questioned whether or not we are to lose the benefit of the great lesson of thrift and whether some plan could be devised to make us keep on saving. No problem of reconstruction seemed to him more important than this, "yet in no one of the announced conferences on reconstruction do I find mention of it." He then goes on to say:

"The greatest thrift lesson in the world is thrift, no matter what its motive. A great many hundred thousand persons in this country have found themselves this year possessed of $100 or more in one piece for the first time in their lives; often without realization of how they got it. Will that lesson last? Will the wage-earner, now that loan drives are over, keep on saving, going weekly to the bank to put in his dollar. The answer to these questions is, unfortunately, 'no.'

"It would be perfectly possible to continue the issue of War Savings Stamps, and there are many advocates of this plan, but it is doubtful if distribution could be permanently maintained on anything like its present scale. Merchants and banks, with rare exceptions, would scarcely continue to handle them, for the cost is not inconsiderable, and there is no compensating commercial gain. In the postoffices alone their continued sale would set up competition with the present postal savings system, which would serve no good purpose and would be highly confusing.

"Can the savings banks successfully undertake this great task? I believe they could. I believe a national savings bank, operating through commercial banks, stores, and employers all over the United States, making its investments through a small compact, very highly paid and very efficient and very stringently supervised board of executives in one city, supporting a vigorous, numerous, and far-flung selling organization, similar in many respects to the industrial life insurance organizations, could undertake this work and, were it possible to act quickly enough, could keep the thrift movement going without losing the amazing momentum which it has now acquired."

SPENDING THE MONEY

For a period of twenty-five months, from April, 1917, through April, 1919, the United States spent for war purposes more than $1,000,000 an hour. All sorts of comparisons are used to make this figure seizable by the imagination. For example, the whole sum, nearly $22,000,000,000, was twenty times the whole of the pre-war debt. Indeed, it was nearly large enough to pay the entire cost of our Government from 1791 up to the outbreak of the European War. In addition to the actual war cost of our own Government Congress paid to various associated governments the sum of $8,850,000,000. As to how this enormous sum of money was spent, two-thirds of the amount practically was spent upon the Army, and the rate of expenditure for the Army was constantly advancing period by period. Even after the termination of hostilities there was a very high daily average owing to the building of ships for the Emergency Fleet Corporation, the construction and operation of naval vessels, food, clothing, pay and transportation of the Army. The Quartermaster's Department had the largest proportion of expenditure.

The amount spent about equals the value of all the gold produced in the whole world from the discovery of America up to the outbreak of the European War. The pay for the Army during the period of warfare was larger than the combined salaries of all of the public school principals and teachers in the United States for five years, from 1912 to 1916. Some of the money spent represents permanent assets. At the end of the war there were large stocks of clothing on hand and large supplies of standardized trucks. There were thousands of Liberty motors and service planes that were available for other uses. Engineer, signal and medical equipment still continued to have a value, but if the race for militarism is maintained it is hard to see how the quantities of war munitions can fail to escape the scrap heap in a few years' time.

Comparing the individual estimates of war expenditure, it is noteworthy that the Austro-Hungarian Empire spent almost as much as the United States. Of all the powers Germany spent the largest sum, $39,000,000,000—one billion more than England.

MONEY LOANED TO ASSOCIATE NATIONS

The following is quoted from the Annalist for December, 1918:

"Money owed to a government by the nations of the world, with whom it is in active commercial competition, is another line of fortifications in defense of the frontier. Let us, then consider our debts and our debtors, and how we both propose to pay. Our long-time loans may be scheduled as follows:

First Loan$2,000,000,000

Second Loan3,808,766,000

Third Loan4,170,019,650

Fourth Loan6,989,047,000

————————

$16,967,832,650

"The totals of each of the above loans have changed substantially since allotment, through conversions with a correspondingly increasing charge on the service. However, the gross amount is substantially unchanged. Of the old loans the Treasury statement of March 31 showed the following totals:

Consol. 2's of 1930$599,724,050

4's of 1925118,489,900

Panama Canal 2's, 190648,954,180

Panama Canal 2's, 19085,947,400

Panama Canal 3's, 191150,000,000

Conversion 3's, 1946—728,894,500

Postal Savings 2½'s, 1931—710,758,560

Postal Savings 2½'s, 1938302,140,000

———————

$1,184,908,590

"The short-term loans in the shape of certificates of indebtedness and War Savings Stamps at the present writing are as follows:

4½% certificates, Series E$639,493,000

4½% certificates, Series 4F625,216,500

4½% certificates, Series 4G614,069,000

———————

$1,878,778,500

"In addition to the above a series of certificates of indebtedness, designated as TA, bearing interest at four per cent. and maturing July 15, 1919, was issued to a small amount in anticipation of next year's income taxes. The sale proved to be slow, and further issuance was discontinued and a new issue for the same purpose and of a similar maturity bearing interest at 4½% per cent. was substituted. The sale of these securities through the agency of the Federal Reserve Banks is in the nature of a continuous operation, and no totals so far have been announced.

Detroit—City of Automobiles

Many thousands of standardized trucks were made in Detroit during the war rush, the automobile having proved to the be indispensable to be the fighting forces overseas.

Click for a larger image.

"The sale of War Savings Stamps and certificates has increased the national debt by $1,257,000,000, or within 400 million of the maximum under the first authorization. A second series, however, amounting to two billion dollars, has been authorized, so that the operation will probably continue into the coming year. The Treasury for the fiscal year 1917—18 estimated receipts of $663,200,000 from this source and about a billion for 1918—19. The first estimate was out of line, owing to the difficulty in getting the plan into smooth operation. Subsequent results have, however, justified the average of expectations.

"The pre-war debt, in the light of recent figures, is almost negligible, and the outstanding certificates in anticipation of taxes and the Fourth Liberty Loan will be redeemed in due course by the flow of funds owing to the Government in taxes and subscription payments. The problem of how to deal with the eighteen-billion-dollar war debt is the vital question. How much of this sum represents a charge on the coming generation and how much an invaluable national asset?

WHAT IS OWED THE AMERICAN PEOPLE.

"We have loaned abroad the following items:

Great Britain$3,745,000,000

France2,445,000,000

Italy1,160,000,000

Russia325,000,000

Belgium183,520,000

Greece15,790,000

Cuba15,000,000

Serbia12,000,000

Rumania6,666,666

Liberia5,000,000

Czechoslovak Republic7,000,000

———————

[5]$7,919,976,666

"Here, then, are figures totaling nearly half of our war debts that are not only self-supporting but also a double-edged weapon in the international market. In the first place, they represent money spent at home on American goods, from which the American manufacturer has taken his toll of profit; and in the second place, they have put the world in our debt to an extent that will be difficult to pay in the exchange of goods.

"Imports of foreign commodities or even gold will take a decade to halve the debt, for the gold can not be spared, nor do we wish it, and our creditors will find it difficult to increase their exports to a point capable of bringing about a balance in their favor. The imports from Europe are bound to be offset by our own exports, some able economists predicting a balance of a billion dollars in our favor for the next five years. Regardless of the demands to be made upon us from this source, it is probable that the peak-load of expenditure has been reached and the period of readjustment and redemption set in.

"Charging off, then, our loans to the Allies as an asset, let us then consider how we may best meet the bill due the American people. Vague discussions of the creation of a huge sinking fund have been heard, although for some reason or other, in history these operations have not been entirely successful. Fortunately the bulk of our debt has an early callable date, and the Treasury has recently come in for much applause by advocating no more loans unless they be in the nature of a one-to five-year currency. Experience teaches that the full benefit and effect of war taxes are rarely felt until after the war. England, after the Napoleonic wars, came back with a rapidity that astonished the Exchequer itself. Taxes rolled up in such a volume and expenses dropped with demobilization to such an extent that the Government found itself anticipating the callable date in national debts by market purchases, and even then it was found convenient gradually to reduce the scale of taxation.

"Our experience after the Civil War was very similar to England's, and the Treasury's surplus annually accumulated to a point that forced the Government to buy back at high premiums the bonds it was not privileged to call. This was true, though to a lesser degree, with the Spanish war loan.

"It seems as though the two operations of liquidating our own debts and the debt of Europe to the United States dovetailed perfectly into one gradual and stupendous task. While Europe is paying her indebtedness to us without interfering with the development of international trade by the sale of foreign securities in our home market our buyers here must receive the tools to operate with through the redemption and repurchase of their Liberty Bonds. In this half of the deal safety, as usual, lies in the middle course. It is hoped that taxes will be maintained at a level that will infallibly provide funds for fixed redemptions with a sufficient surplus to get a flying start by purchase around the present low levels."

FINANCIAL STATUS OF ENGLAND IN 1914

One year before the war England's position in regard to the balance of trade was most favorable. Her imports were valued at $3,210,000,000 and her exports at $2,560,000,000. But it was usually estimated that foreign countries owed England about $1,610,000,000 annually for interest on capital lent for shipping freights and for banking insurance and other commissions. The total amount owed her, therefore was $4,170,000,000 as against $3,210,000,000 which she owed for her imports. She had therefore a favorable balance of about $960,000,000 which was lent abroad. The war brought an enormous decrease in tonnage, and the excess of imports over exports attained the figure of $1,950,000,000 a year.

Exceptional measures had to be taken to maintain the exchange rates with the United States from whom the chief purchases were made. Large amounts of gold were exported, but by June, 1915, there was a collapse in American exchange. Drastic measures were used to induce the holders of American securities in England to sell or lend those securities to the Government. In this way exchange was kept up practically to the gold point. This question of exchange and the position of England as the director of the financial campaign of the Allies is illustrated from an address given by Mr. R. H. Brand to the American Bankers Association, in September, 1917:

"Of course no nation could permanently tolerate such unfavorable trade balances as those from which the Allies in Europe are now suffering. They can only do so now and keep their exchanges with the United States steady by borrowing immense sums here. But the war itself is not permanent, and the question is merely whether the present state of affairs can be continued long enough to enable all the enemies of the Central Powers to exert their full strength and win a final victory.

"You will no doubt all have noticed that the credits granted Great Britain have been greater than those granted to any other Ally. The reasons are simple, though they are not, I think, generally understood. We have, in the first place, the largest war and munition program of any Ally; in the second place, as I have shown above, we are, with the exception of the United States, the greatest industrial arsenal among the Allies; that necessarily involves large imports. We send a great deal of steel from England to our Allies; we have to replace it by steel from here. We make rifles for Russia; we have to import the steel to make them. We send boots to Russia; we have to import the leather needed. These examples might be multiplied many times. Thirdly, we extend large credits in England to our Allies, some part of which they may use anywhere in the world, and this part may ultimately come back on the sterling exchange in New York. Lastly, it is well known that neutrals who are owed money by England unfortunately find it convenient to utilize the sterling exchange in New York in order to recoup themselves in dollars. But so also do neutrals who are owed money by the other Allies. So long as we maintain the sterling exchange this appears to be inevitable, and the burden of financing both our own and our Allies' trade tends to fall on that exchange. It is by our maintenance of this sterling exchange that the continuance of our Allies' trade is rendered possible. The maintenance of the sterling exchange means the maintenance of the allied exchanges. All these factors together exert an immense influence. If England had had only herself to finance since the beginning of the war, and indeed even if she had only herself to finance now, it is quite possible she would not have needed to borrow at all abroad."

LOSS IN PRODUCTIVE POWER

The extent of the withdrawal of productive power can only be judged by figures. Of the 7,500,000 men serving in the British Army, 4,530,000 were contributed by Great Britain, 900,000 by the British dominions and colonies; and the remaining 1,000,000 by India and the various British African dependencies. Production went on to a remarkable degree, but this production was largely for war purposes. It was secured by recruiting female labor to an unheard of extent in the munition factories. According to the London Economist, the financial side of the British administration was anything but satisfactory. It speaks of waste and faulty methods:

"On the financial side our record is by no means so satisfactory. We have, it is true, poured out money like water, but much of it has been raised by faulty methods, and the amount of it that has been wasted is appalling to consider. In the matter of borrowing, our methods have lately been greatly improved; and the recommendation of the Committee on National Expenditure, that the system of raising money by bank credits should be checked as far as possible, is being brought within the bounds of practical politics by the great success of the War Savings Committee's energetic and ingenious campaign for prompting the sale of National War Bonds. Perhaps also we may claim some small share in that success through the adoption of the principle so long advocated in these columns of a lower rate for money at home combined with special terms for money left here by foreigners. But successful borrowing, direct from the investor, instead of in the shape of money manufactured by banks, is a welcome, but not sufficient, improvement. We have to raise much more money by taxation. We have also to do much more than has yet been done to reduce the wicked waste of public money and support the efforts of the Committee on National Expenditure to husband the resources of the nation. A correspondent in a provincial town in which a Tank has lately been busy asks: 'Is it not pathetic to see widows and children scraping together their shillings and pennies to help the Government, while we have tens of thousands of pounds being squandered by a profligate Ministry of Munitions!'"

Copyright Underwood & Underwood

A Woman Doing Road Construction Work

Of the 7,500,000 men serving in the British Army, 4,530,000 were contributed by Great Britain. Yet production was speeded up by recruiting and training the labor of women.

Click for a larger image.

EQUALIZING LOANS AND TAXATION

A thorny problem of all war finance is how to equalize as far as possible the amount of money furnished by taxation with the amounts borrowed. The proportion indicated in the last English war budget of 1918 was that between £842,000,000 raised by taxes and 2,000,000,000 sterling by fresh borrowing. Besides, war experience shows that the parliamentary estimates in each year were always far below the amount spent. In 1917 in Great Britain the shortage was upwards of £400,000,000. According to the London Economist, no effective steps were taken to stop the profligate extravagance by which public money was poured out through the sieves of the war spending departments into the pockets of innumerable manufacturers, middlemen and traders, not to mention the ever growing sums allocated to the privy purses of countless new bodies of officials. Each year, it says, there is a new debt charge of some £120,000,000 and each year there is a constant rise of prices in wages that enhances the cost of governmental goods and services.

The amount raised by taxation, £842,000,000, seems enormously large, but as the London Nation states:

"The enormous rise of prices only makes it represent half that amount in actual purchasing power. Before the war our expenditure was 200 millions. If money had kept the same value, the taxation and other public income for this year would only have been 420 millions, a little more than twice the pre-war level. Would that have seemed so heroic an effort for a patriotic nation? No. It can never be repeated too often that a really rigorous taxation, begun in 1914 and carried on till now, would have left us in a far sounder condition both for conducting the war and for facing the peace finance. The money and the goods are there. We get them. But we get them by crooked and expensive methods of borrowing which inflate prices, oppress the poorer purchasers, put huge war loot into the pockets of contractors and financiers, and fail to restrain expenditure in luxuries."

GERMANY'S ECONOMIC PREPARATION FOR WAR

There is much evidence to show that long before the war began financial preparations were made in Germany for the great struggle. For a considerable period prior to 1914, Germany and Russia had been engaged in a contest to accumulate a gold supply. Russia, it is known, had begun to withdraw the large balances which she kept in German, French and English banks. In Germany the story was circulated that in 1913 the Kaiser inquired of the governor of the Imperial Bank if the German banks were equipped for war. Being told that they were not ready he is said to have replied: "When I ask that question again I want a different answer." The Imperial Bank of Germany became an active bidder at the London gold auctions for the gold which arrived weekly from South Africa, and its activity along these lines was shown by the increasing of the German gold reserve in the bank vaults from $184,000,000 on December 31, 1912, to $336,000,000, the amount it stood at a month before the war began. In addition, the Imperial Bank collected for the Government a sum of about thirty million dollars to be added to the same amount said to be stored in the vaults of the Julius Thurm at Spandau, and to be used as a war chest. Other European countries were increasing their gold supplies, so it was not surprising that the New York markets were called upon to export eighty-four million dollars of gold for six months before the outbreak of the war. The entire gold production of the world during the eighteen months ending on June 30, 1914, was approximately $705,000,000. Of this amount, about two million dollars was required for the arts, and one hundred and fifty million dollars went to British India. This left about $350,000,000 to be applied to monetary uses and the whole of this amount was absorbed by the four great central banks of Germany, France, Russia and Austria-Hungary.

In order to resist raids on the German gold reserve a policy of note issuing was adopted. The situation, as forecast by Mr. C. A. Conant in September, 1914, in the New York Times, can be gathered from the following extract:

"With the general suspension of gold payments at the central banks of Europe, except at the Bank of England, the banks are in a position to resist raids upon their gold and to lend their resources, as far as sound banking policy permits, to the struggle of their Governments to maintain national independence. In England, while the bank is still paying gold for notes, the policy of keeping gold in circulation has been abandoned, and the old limit of note issue, which was £5 ($24.40), has been lowered to 10 shillings ($2.44) and £1 ($4.88).

"It is not the purpose of any of the European Powers, however, to carry on the war by issues of paper money. The suspension of gold payments at the banks and the issue of notes for small denominations, which are legal tender in domestic transactions, is for the purpose of husbanding the gold stock against needless runs and keeping it as a guaranty fund of national solvency. It is the course which was adopted by France at the time of the Franco-German War in 1870, but so prudently were the affairs of the Bank of France conducted that the paper never fell more than 2½ per cent. below its value in gold.

"A similar policy of reserve will probably be pursued by the banks of France, Germany, and Russia in the present contest. The Government of France has raised the maximum limit of the note circulation of the bank by nearly $1,000,000,000, but the increase will not be used except as additional currency may be required, owing to the restriction in other forms of credit and the special demand for notes in the districts where the armies are gathered.

"The suspension of specie payments does not convey to the banking community quite the same doleful warning of the unlimited issue of paper and its steady depreciation in gold which were conveyed by specie suspension in the United States in 1861 or by Austria-Hungary and Russia in the desperate contest of the Napoleonic wars. Monetary science is better understood at the present time than in those days."

GERMAN WAR FINANCE

Among all the belligerent powers Germany occupied the unique position of using the war as an excuse for not publishing national accounts. The sole guide to her expenditure must be looked for in the credit votes passed by the Reichstag. Using this method, it is estimated that Germany spent about $30,000,000 a day. To cover this expenditure there was a regular plan of national loan—in March and September. This was the method followed in all the four years of the war. During the intervening six months there was an issue of Treasury bills. The German people were, apparently, schooled to these regular demands with commendable promptness, but the Imperial Government adopted a policy of inflation in the hope that a speedy victory would bring fruits in the shape of an indemnity, and so the German people would avoid being called upon to bear war burdens. Taxation was introduced only reluctantly and at a later period, and merely for the purpose of meeting so-called normal civil expenditure and interest on war debt. The plan followed was to spare the middle classes as far as possible from additional taxation charges.

THE LOAN BUREAU SCHEME

The war loans have been, on paper, most successful. For example, the seventh loan of September, 1917, yielded $3,000,000,000; the eighth loan nearly $4,000,000,000. There was a large amount of ready money in the country and besides this all stocks of raw material have been realized. Large as the loans have been they have not been able to keep pace with the increase of expenditure. Out of the total amount of $30,000,000,000 about $20,000,000,000 have been covered by long-term loans. Of course, owing to the peculiar situation of Germany in relation to her allies, which were dependent upon her financial support, these loans have been raised by the German people themselves. The German Loan Bureaus were criticized at the beginning of the war, and German figures show that only about ten percent. of the national loans were involved in the Loan Bureau scheme. These Loan Bureaus, it was announced, would continue after the declaration of peace. According to the London Economist, Germany followed an easy and sure policy of war finance, although the same authority does not hesitate to use the terms "complete financial ruin" in connection with German post-war finance.

The whole subject of German inflation is difficult to analyze. The Economist works out a post-war expenditure of $5,000,000,000 a year against a revenue of a billion and a half. Its estimate of German inflation is contained in the following passage:

"To take note circulation alone is obviously misleading, particularly in view of the violent efforts that have been made, especially during the last year, to extend the use of the check, and in other ways to limit as far as possible the use of notes. For what these figures are worth, it may be said that the total note circulation of the country at the end of June (1918), including Reichsbank notes, State Bank notes, Treasury notes, and loan notes, stood at £1,030,000,000, as compared with £109,300,000 on July 23, 1914. Reichbank Reichsbank deposits, again, stood on June 30, at £459,100,000, as compared with £47,600,000 on July 23, 1914, while the deposits of the eight 'great' banks, even at the end of 1917, stood at £800,000,000, as compared with £250,000,000 at the end of 1914, £362,000,000 at the end of 1915, and £500,000,000 at the end of 1916."

In this connection it is interesting to give a summary of Germany's war expenses as reported in the London Economist:

"In his comparison of German war finance with ours, the Chancellor, in his Budget speech, made the following points: First, that German war expenditure is now £6,250,000—almost the same as ours—though our expenditure includes items (such as separation allowances) which are not included in the German figures. Second, that the whole amount of the German Votes of Credit (£6,200 millions) has been added to their war debt, 'because their taxation has not covered their peace expenditure in addition to their debt charge.' Third, the total amount of new taxation levied by them since the beginning of the war comes to £365 millions, against our £1,044 millions. Fourth, in a year's time they will have a deficit, comparing the revenue with the expenditure, of £385 millions at least. 'If that were our position,' the Chancellor added, 'I should certainly think that bankruptcy was not far from the British Government.' Fifth, with the exception of the war increment tax, 'scarcely any of the additional revenue has been obtained from the wealthier classes in Germany'."

GERMAN WAR PROFITS

An extraordinary list of the gigantic war profits collected by Germany was drawn up by A. Cheraband, the well known French critic. He estimated that in three years Germany had spent $322.50 per head, France $444.00, Great Britain $559.75. He presents a list of war profits made by Germany. The "booty" he divided into movable and immovable property. In the former category he includes the 212,000 square miles of territory that had fallen into German clutches, and this he values at $32,000,000,000, which, he says, is a conservative estimate. Turning to the movable booty, he classifies it as follows:

"Capture of 'Human Material.'—This consists of the 46,000,000 Allied subjects from whom the Germans obtain free labor.

"Capture of War Material.—Guns, rifles, munitions, vehicles, locomotives, railway trucks, and thousands of miles of railway. The Belgian railway system alone is worth nearly $600,000,000.

"Capture of Foodstuffs.—Everywhere the Germans have stolen horses, cattle, corn, potatoes, sugar, alcohol, foodstuffs of every kind, and crops grown by the forced labor drawn from the 46,000,000 Allied subjects whom they have enslaved.

"Theft of Raw Materials.—Throughout the occupied territories the Germans have appropriated coal, petroleum, iron, copper, bronze, zinc, lead, etc., either in the mines or from private individuals; textile materials, such as woolen and cotton. In the towns of northern France alone the Germans stole $110,000,000 worth of wool.

"Theft of Industrial Plant.—On a methodical plan throughout the occupied territories, the motors, engines, machine-tools, steam and electric hammers, steel-rolling mills, looms, models, and industrial plant of all kinds have been carried off to Germany.

"Thefts of Furniture.—The way in which furniture and household goods were stolen and carried off is confessed by implication in the following advertisement published in the Kölnische Zeitung at the beginning of April, 1917: "'Furniture moved from the zones of military operations in all directions by Rettenmayer at Wiesbaden.' "It is impossible to estimate the money value of the goods thus removed. "Seizure of Works of Art.—The works of art collected for centuries in museums, churches, and by private individuals in Poland, Italy, Belgium, and France have been carried off by the Germans.

"War Levies.—Scores of millions in money have been secured by the Germans in the form of requisitions, fines, war levies, war taxes, and forced loans.

"Thefts of Coin, Jewels, and Securities.—In the occupied regions, and especially wherever they have been obliged to evacuate those regions, as, for instance, at Noyon, the Germans have emptied, by order, the safes and strong boxes of private persons and of banks and have carried off securities, jewels, and silver. In September and October, 1917, they seized at one stroke the deposits of Allied subjects in the Belgian banks amounting to $120,000,000. "In view of the high prices of foodstuffs, coal, metals, petroleum, war materials and machines, it is clear that the booty thus secured by the Germans during the last three years in the occupied territories is certainly worth several billion dollars."

Photo by James M. Beck

A Woman Operating a Multiple Spindle Drill in an English Shell Factory

"Since the war broke out," said M. Barriol, a French celebrated actuary, "no less than 1,500,000 women have been added to the ranks of wage earners in England, an increase of fully 25 per cent."

GERMAN MONEY INDEMNITY

It became commonplace after Germany's defeat was evident that her war cost must include the cost of the destruction she had caused her enemies. To estimate this was no easy matter. The attitude of the Germans on the subject was indicated by their constantly expressed hope that trade would recommence as usual and that they would be able to start economic relations in a favorable position. So we find the Cologne Chamber of Commerce beginning to prepare for peace by adopting a resolution expressing the hope that the destruction of French and Belgian industries would allow the rapid recovery of German power.

The Wall Street Journal used this statement as a guide to the Allied Powers for measuring the kind of indemnity that would be imposed upon Germany.

"One of the departments of the Government at Washington has in its files a report of a German commission on industry after the war. Reading this, one can understand the motive for what at one time looked like pure vandalism. Vandalism it was, by descendants of the Vandals, but it was a deliberate destruction of international competitors, killing the workmen—and workwomen—and destroying plants and machinery for the one purpose of removing competition. A physical injury to a child helped to weaken future competition in the world's trade; and it was upon the power gained thereby that Germany hoped to launch another war for world domination....

"A peace that gives the cold-blooded perpetrators of these crimes an advantage over their victims would not be equitable. If any must suffer, let it be those who are guilty, but don't give them a start ahead of their victims.

"In substance, that point should declare that Germany shall not profit through the wrecking of any Allied industry. Except to admit necessary foodstuffs, the blockade should not be lifted until every Allied country from England to Serbia has been industrially rebuilt. One object of the wholesale murder of civilians was to weaken industrially the enemy countries. The greater proportionate loss of man-power in the Allied countries should be met by restrictions on the entry of raw materials into Germany. Every piece of stolen machinery should be returned before her own industries are allowed to resume."

The soft plan of dealing with Germany's war cost was championed by Secretary Daniels. The Springfield Republican and the New Republic seemed to agree with the Manchester Guardian that Germany ought to to to be helped rather than punished, that the main thing was to set her on her feet again.

"Representative papers like the New York Times, Syracuse Post-Standard, Buffalo Express, and Sacramento Bee all insist that while we might or perhaps should claim no war-expenses from Germany, 'we must exact payment,' in the words of the Syracuse daily, 'to the last penny for losses suffered through illegal warfare.' Germany's submarine campaign cost us, according to this paper's figures, 375,000 tons of shipping and 775 civilian lives. If we take the burden of payment for this property and these lives from the guilty shoulders of Germany it would only be to 'pass it on to the innocent shoulders of the American taxpayer,' which, the New York Times declares, would be 'rank injustice'."

FORECASTING THE TOTAL COST OF WAR

It is interesting also to note an attempt made by one of the expert statiticians statisticians attached to the Guaranty Trust Company of New York to estimate the total cost of the war at the close of the four-year period. The five main Allies possessed, before the war, $406,000,000,000 for national work, a sum nearly four times as great as the national wealth of the two Central Powers. In four years the seven leading belligerents had spent $134,000,000,000. The only way to grasp the meaning of this enormous sum is to contrast the cost of the World War with all former wars. The total cost of wars that had taken place since the American Revolution was $23,000,000,000; the World War costs therefore, are six times greater. In these figures, staggering as they are, it was comparatively easy to figure out the costs, debts and interests of actual war expenditures. Much more complicated is the problem of estimating the property value destroyed through military operations on land and sea:

LOSS FROM DESTRUCTION OF PROPERTY

"The total area of the war zone is 174,000 square miles, of which the Western theater of the war, in France and Belgium, stretches over an area of 19,500 square miles, and it contains over 3,000 cities, villages, and hamlets, great manufacturing and agricultural districts, of which some have been totally annihilated and some heavily affected. The estimate by the National Foreign Trade Council of the war losses, which unfortunately does not go beyond 1916, is as follows:

"'Destruction of buildings and industrial machinery in Belgium, $1,000,000,000, and in France $700,000,000. The destruction of agricultural buildings and implements, of raw materials, of crops and live stock, has been estimated at a sum of $780,000,000 in Belgium and $680,000,000 in France. Roads were destroyed frequently by the retreating troops and have been seriously damaged by heavy gun fire and excessive use. The losses from destruction of railway bridges, etc., have been estimated in Belgium at $275,000,000 and in France at $300,000,000.

"'In the Eastern theater of the War Germany has been invaded only in eastern Prussia, where the agricultural population has been seriously impaired. Heavy damage was inflicted upon bridges, roads, and governmental property, including railroads. The direct cost to Germany through the loss of agricultural products, of manufacturing products, as well as in interest on investments abroad, of earnings from shipping and banking houses, and profits of insurance and mercantile houses engaged in business abroad has been enormous'."

ECONOMIC LOSS OF MAN-POWER

The same expert goes on to figure out the economic value of the loss of human life:

"Mr. M. Barriol, the celebrated actuary, gives the following figures as the capital value of man: in the United States, $4,100; in Great Britain, $4,140; in Germany, $3,380; in France, $2,900; in Russia, $2,020; in Austria-Hungary, $2,020 or an average capital value for the five foreign nations of $2,892.

"The number of men already lost is 8,509,000 killed and 7,175,000 permanently wounded, or a total of 15,684,000. Thus society has been impoverished through the death and permanent disability of a part of its productive man-power to the extent of $45,000,000,000.

"The loss of men, measured in terms of the capital value of the workers withdrawn from industry, is offset in some degree by the enhancement of the capital value of the remaining producers.... This loss of man-power is also partly offset by the large contingents of women drawn into industries. In England, out of a female population of 23,000,000, about 6,000,000 were engaged before the outbreak of the war in gainful occupations. Since the war broke out no less than 1,500,000 women have been added to the ranks of wage-earners, an increase of fully 25 per cent. Moreover, about 400,000 women have shifted from non-essential occupations to men's work. In the United States, approximately 1,266,000 women are now engaged in industrial work, either directly or indirectly necessary to carry on the war.

EFFECTS ON POPULATION

"The physical and moral effects of the war, the moral strain to which the nations have been subjected, the 'shell-shock' which has reacted upon the population at home as well as upon the soliders soldiers on the battlefield, the undernourishment and starvation of children as well as adults, all have resulted in a lowered vitality, the ill effects of which, especially in the countries of the Central Powers, are already seen in an increase of the death rate, in a spread of epidemics and diseases that have taxed the medical resources of all countries.

The lowered vitality of the race, which is still further aggravated by the millions of incapacitated soldiers and the premature and excessive employment of children and women in the industries, will eventually make for a lower standard of efficiency in all human activities, or a retardation of human progress. Authoritative statements are to the effect that in Belgium in the earlier period of the war, the deaths of women and children far outnumbered those of men. Annual deaths among the German civilian population have increased by a million above the normal.

"Besides the loss in actual population there is a loss of potential population. Carefully compiled figures show that by 1919 the population of Germany will be 7,500,000 less than it would have been under ordinary circumstances. The people in Austria in 1919 will be 8 per cent. less in numbers than in the year before the war. Hungary will be still worse off; it will have a population of 9 per cent. lower than in pre-war days."

CARNEGIE ENDOWMENT'S ESTIMATES

The Carnegie Endowment for International Peace made public in November, 1919, an elaborate report on the cost of the World War in human life and in property and the consequent economic losses. The chief conclusions derived from this intensive study of all the conditions may be summarized as follows:

All the wars of the nineteenth century from the Napoleonic down to the Balkan wars of 1912—1913, show a loss of life of 4,449,300, according to the report, while the known and presumed dead of the World War reached 9,998,771. (See Vol. III, pp. 403-5.) The monetary value of the individuals lost to each country is estimated, the highest value on human life being given to the United States, where each individual's economic worth is placed at $4,720, with England next at $4,140; Germany third, at $3,380; France and Belgium, each $2,900; Austria-Hungary at $2,720, and Russia, Italy, Serbia, Greece, and the other countries at $2,020.

With a loss of more than 4,000,000 the estimate puts Russia in the lead in human economic loss, the total being more than $8,000,000,000; Germany is next with $6,750,000,000; France, $4,800,000,000; England, $3,500,000,000; Austria-Hungary, $3,000,000,000; Italy, $2,384,000,000; Serbia, $1,500,000,000; Turkey, almost $1,000,000,000; Rumania, $800,000,000; Belgium, almost $800,000,000; the United States slightly more than $500,000,000; Bulgaria, a little more than $200,000,000; Greece, $75,000,000; Portugal, $8,300,000, and Japan, $600,000. On this basis the total in human life lost cost the world $33,551,276,280, and the loss to the world in civilian population is placed at an equal figure.

The attempt to determine property losses is the least satisfactory, as it is the most difficult. The destruction and devastation in the invaded areas of Belgium, France, Russian Poland, Serbia, Italy and parts of Austria are probably incapable of exact determination, and it may well be doubted if the exact losses will ever be known.

The total property loss on land is put at $29,960,000,000, one-third of which was suffered by France alone, its loss being given as $10,000,000,000, with Belgium next at $7,000,000,000, and the other countries following as follows:

Italy, $2,710,000,000; Serbia, Albania, and Montenegro, $2,000,000,000; The British Empire and Germany, each, $1,750,000,000; Poland, $1,500,000,000; Russia, $1,250,000,000; Rumania, $1,000,000,000, and East Prussia, Austria, and Ukraine together, the same amount.

Copyright by Central News Service

Launching the Quistconck at Hog Island

According to the report of the Carnegie Endowment the cargo loss at sea was $3,800,000,000, the total tonnage and cargo loss being $6,800,000,000. To offset the Allied loss in shipping, ship-building in the United States was rushed at topmost speed.

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In the property losses on sea, that is, to shipping and cargo, the report estimates that "the construction cost of the tonnage loss can scarcely be estimated at less than $200 a ton, and the monetary loss involved in the sinking of this 15,398,392 gross tons may, therefore, be placed at about $3,000,000,000." To this is added loss of cargo, which is estimated at $250 a ton, giving a cargo loss of $3,800,000,000, and a total tonnage and cargo loss of $6,800,000,000.

Among the indirect costs of the war, loss of production is placed at $45,000,000,000. In arriving at this figure an average of 20,000,000 men are counted as having been withdrawn from production during the whole period of the war, and their average yearly productive capacity is placed at $500. War relief is another indirect cost which totalled up to $1,000,000,000; and the loss to the neutral nations is given as $1,750,000,000.

With the total direct costs of the war amounting to $186,336,637,097 and the indirect costs to $151,612,542,560, the stupendous total of $337,946,179,657 is reached. Finally, the report says:

"The figures presented in this summary are both incomprehensible and appalling, yet even these do not take into account the effect of the war on life, human vitality, economic well-being, ethics, morality, or other phases of human relationships and activities which have been disorganized and injured. It is evident from the present disturbances in Europe that the real costs of the war cannot be measured by the direct money outlays of the belligerents during the five years of its duration, but that the very breakdown of modern economic society might be the price exacted."

THE WAR AS A PRODUCT OF HIGH PRICES