no ECONOMICS OF THE WAR. 



employment cannot be found for the labourers. Taxation in 

 some countries will, of necessity, have to be so abnormal as to 

 become almost impossible to meet, and even those countries 

 where towns and factories have not been destroyed will be in 

 the position of a tirm re-starting business with very largely 

 diminished capital. A country, after all, like an individual or 

 a firm, cannot trade without adequate capital. One serious 

 efl:ect of the war, as concerns the wealth of individuals, is likely 

 to be the serious loss in the value of securities. I am afraid 

 that some countries must of necessity default after the war ; 

 that is, they will be unable to bear the burden of paying interest 

 on the huge loans they are now contracting. Some smaller 

 States must also keenly feel the pinch, because of the diminished 

 spending powers of larger countries who were formerly their 

 best customers, and to whose markets they chiefly looked for 

 the sale of their products. All this must react severely upon 

 the value of many investment stocks, and the individual investor 

 will suffer in loss of capital and revenue. 



Just after peace, it is true, there must inevitably be a strong 

 demand for capital wherewith to make good the ravages of 

 war. Reinstatement of property on a large scale will be under- 

 taken and interest in consequence may be high, but when this 

 artificial activity has subsided I fear we shall see an era of 

 considerable depression. 



The great loss of capital brought about by the war must, 

 on the cessation of abnormal expenditure, reflect itself in 

 diminished volume of trade and lesser spending power of the 

 people. Not all countries will, of course, suft'er alike, for to 

 son^e — not directly penalised by the war — will have come oppor- 

 tunities for capturing and retaining trade of which the present 

 conflagration has deprived others. 



It is difficult to express an opinion as to the probable cost 

 of living after the war. Reverting to our argument that practi- 

 cally all expenditure on war means the total destruction of a 

 corresponding amount of capital, this line of reasoning should 

 lead to the conclusion that living costs will be greater after the 

 upheaval. 



Taxation, in the belligerent countries, must be greatly 

 increased, and drastic economies will have to be practised, not 

 only by Governments, but by individuals. 



There would appear to be no question that what is termed 

 the leisured class, Avhich is dependent on revenue from invest- 

 ments, Avill find its income seriously curtailed. This depletion 

 maynot only be caused by taxation, but also by reason of the 

 possible default of certain Governments to pay interest on 

 their loans. The capital of this section of the community will 

 thus shrink as a consequence of the fall in the value of some 

 of the securities in which it is invested. On the other hand, 

 those who are fortunate enough to have cash capital in hand 

 may be able to employ it profitably. As concerns the working 



