502 TRANSACTIONS OF SECTION P. 



external credit. It recoils with crushing force on the nation whose good faith 

 has become suspect, and it produces a feeling of doubt and insecurity throughout 

 the money-markets of the world. When one remembers Belgium, it is not a 

 little remarkable that one of the best analyses of the causes which determine 

 foreign estimation of a nation's credit has been written by a German. I quote 

 the concluding summary : ' These causes are to be found in the opinion which 

 the world holds of a nation's political standards, of the soundness of her institu- 

 tions, the inviolability of her pledged word, in the last resort of the moral 

 principles which inspire and the intellectual faculties which direct her people's 

 activities.' " 



Further, from the economic standpoint this war is one which, provided it 

 ends decisively in favour of ourselves and our Allies, should free us from a 

 menace which has faced this country for a generation. At each great epoch in 

 our history, it has been our duty to prevent the wreck of civilisation through 

 the appearance of a new Iron Age with its doctrine that wealth is the prey of the 

 stronger. And so England resisted Spain, Great Britain Napoleon, and now the 

 British Empire confronts Germany in defence of the principle that force must 

 not triumph over law. Indeed, the present strife is perhaps the only issue from 

 a situation in Europe that was becoming intolerable. Year after year the nations 

 on the Continent were proving their devotion to peace by arming to excess, as 

 they said, to defend peace. The burden grew heavier and heavier, diverting 

 national resources from the improvement of the condition of the people and 

 the growth of commerce. Before the war the annual expenditure of the 

 Powers of Europe on their armies alone had increased to about 290,000,000^. 

 There can be little doubt that much of this outlay, as well as that on navies, 

 could be saved. It is to be hoped that, when a durable peace has been signed, 

 a very large saving in this type of expenditure will be effected. _ Moreover, an 

 abatement of military preparations should have another effect in diminishing 

 the drain on productive processes through compulsory military service. Thus, 

 on the whole, while the losses of the war will be enormous, there are some gains, 

 largely of an immaterial kind, to be placed on the other side of the account. — 

 namely, security and the re-establishing of international contract, and, of a 

 material kind, in a possible diminution of the burden of armaments, both direct 

 and indirect. 



A special aspect of the problems under discussion is the provision of capital 

 for the re-starting of trades contracted by the war and for the restoration of 

 Belgium and other regions desolated during the progress of hostilities. Chalmers, 

 writing a hundred years ago, supposed that in cases of this kind ' in a very 

 few years the recovery both of population and labour would be completed.'" 

 The explanation he gave was far from satisfactory even for the time at which 

 it was written, and it is still more deficient as applied to the present circum- 

 stances, when in industrial countries fixed capital is much more important 

 than in Chalmers' day. In the last quarter of a century any great catastrophe, 

 such for instance as the partial destruction of San Francisco by earthquake and 

 fire, has been repaired with comparative ease by bringing capital from outside. 

 But the waste of war renders capital exceedingly scarce ; in fact, a famine of 

 capital after the war has been predicted. Such an anticipation is over-pessi- 

 mistic, but capital is likely to be obtainable for a time only with some difficulty. 

 It is to be feared that after the war Europe will experience very considerable 

 straits for several years to come. Not only must the waste of war be made 

 good, but its evil legacy in inflated funded and floating debts must be gradually 

 dealt with, lessening by reason of increased taxation! the normal margin for 

 new savings. Increased work and greater economy are the only remedies, 

 aided by improved methods of production. 



It is to be hoped that some of the inevitable loss will be repaired in time 

 by better methods of organisation! and by an accelerated rate of invention. 

 The waging of a just war results in a quickening of the national spirit. It 

 forces a nation out of the easy and well-worn paths of custom and convention. 

 Thus, out of all the suffering and all the loss, some good will come. The large 

 proportion of our young manhood which has gone to serve the country on the 



" On Some Unsettled Questions of Public Credit, by Prof. G. Cohn, in 

 Econ. Journal, xxi. p. 217. ii Works, xix. p. 141. 



