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of bonds and mortgages, 30 per cent; and of rents and roy- 

 alties, 15 per cent. If direct taxes had been included, the de- 

 crease in the civilian standard of living would have been even 

 more. But this is not all; the collective standard of living 

 was also reduced. The purchasing power of municipal and 

 state taxes declined 20 per cent ; state, municipal, and school 

 bond issues, about 50 per cent. 



Since the purchasing power of a considerable part of the 

 population declined, people were forced to reduce expend- 

 itures. This took the form of cheaper types of food and cloth- 

 ing, less travel, entertainment, and education, less expendi- 

 ture for housing, and so on. Since the bare necessities of life, 

 food and clothing, can be reduced by only a limited amount, 

 the first and greatest reduction must come in other types of 

 expenditures. With decreased purchasing power, individuals 

 cannot afford to maintain their homes in as good condition 

 as formerly. They cannot afford to make improvements, let 

 alone to build new homes. 



During World War I the depletion of capital took the form 

 of failure to repair dwellings, churches, hospitals, factories, 

 power plants, railroads, and the like. It also took the form of 

 the postponed construction of new homes, churches, hospi- 

 tals, power plants, telephone lines, sewers, streets, high- 

 ways, universities, schools, and the like. These sacrifices 

 released huge amounts of materials for tanks, guns, airplanes, 

 ships, and other fighting equipment. 



Most people think that major wars are fought with arma- 

 ment created by expanding the total production of the coun- 

 try. The most important source of material for war, however, 

 is obtained by reducing the production of civilian goods, and 

 depleting capital. World War I cost the nation about $32 

 billion of which $3 to $4 billion came from increased pro- 

 duction; $8 to $10 billion from decreased consumption; $18 

 to $21 billion from depreciation of capital. 



