LAND AND WATER 
August 28, 1915. 
FINANCIAL EFFECTS OF THE WAR. 
By a Financial 
(Concluded from Land and Water, August 21.) 
[In the previous article our Correspondent pointed out 
that war brings us down to the realities of life, and 
asks of every nation: What is the real basts of 
your finance? The financial problems which the 
cncmv nations have to face were explained, and our 
own position was briefly discussed. It was remarked 
that, owing to circumstances, Britain's part of the 
programme had to be expanded considerably.] 
THE hackneyed cry of " Business as Usual, "- 
which sounds so stupid now as we recall it, 
might have had sense in it if all we had to do 
was (as we thought a year ago) to keep the 
seas open and a force of a few hundred 
thousand men on the Continent. Of course we 
had no difficulty in raising the necessary money 
—900 millions in two War Loans, 31 millions (net) 
in Lxchequer Bonds, and over 200 millions in 
Treasury Bills have rolled into the lap of the 
Treasury as fast as shelling peas, and we do not 
know yet iiow many more millions the last War Loan 
will rake in. But the provision of goods and ser\'ices 
necessary for the war is made more difficult for us 
because it is so easy. Having the world open to us to 
buy what we want, we have not been compelled to 
provide for the war out of our own resources, in other 
words, to economise. From a military point of view we 
have a great advantage, for all the food-growing lands 
of the earth are sending us grain and beef, and the 
wonderful industrial resources of America are helping 
us to solve the problem of munitions. Financially this 
advantage is ruinous if we contrive to wallow in its 
alluremenls. 
Productive Power. 
As tlie productive power of the country has 
been reduced by the transfer of so many men into 
the fighting forces, and as on the whole we are con- 
suming much as usual, the result is that we export 
less and import more, and are very rapidly impoverish- 
ing ourselves. Now we are trying to stop this rake's 
progress by preaching economy. If this campaign is 
very successful it may reduce our consumption by 5 or 
even 10 per cent., but that is not nearly enough. We 
have to reduce by something more like 40 per cent. 
[We have to find 900 millions a year for the war (i.ioo 
is the Government's total expenditure, but that includes 
some 200 of normal peace spending), and our normal 
expenditure as a nation is not much over 2,000 millions. 
The only way to find this sum without weakening our- 
selves is to save 900 millions, or as much of it as we can, 
so that the Government's expenditure takes the place 
of individual spending; because, since the supply of 
goods and services is limited, those required by the 
Government can only be found if we go without some 
that we used to enjoy. If we do not do this we are bound 
to increase our debt to foreigners and reduce our own 
financial staying power. 
Hitherto we have been selling our American bonds 
and securities and calling in our loans all over tlie 
iworld, and so enabling ourselves to consume as usual 
bt the expense of our financial reserves. It is a fatal 
policy, and we ought to be taxed out of it. Long ago— 
las soon as it was seen what a big problem we had to 
tackle— we ought to have been taxed really heavily so 
that Ave were forced to consume less and hand over our 
buying power to the Government. As it is we have been 
taxed to the extent of a paltry 70 millions a year for the 
war and we have done the rest by borrowing. Of course, 
bur case is different from Germany's. We are on the 
road to victory, and they are facing defeat. We also 
have greater stores of accumulated wealth. Nevertheless, 
Hace staying power is everything, the sooner we are 
Correspondent, 
taxed out of our spendthrift policy the better. For when 
we lend and take up Government stock we feel just as 
well off as before, though in fact we shall be taxed to 
pay ourselves interest. When our money is taken by 
the tax-gatherer we know that we are poorer, and so we 
are made to save. 
Case of our Allies. 
In the case of our Allies, also, it is true that the 
command of the sea secured by our Fleet and theirs 
gives them a militarv advantage which is a source ot 
financial danger if they use it too freely. France has 
reduced her imports, but not nearly as fast as her exports 
have fallen off, and lately the tendency has been towards 
an actual increase in her purchases abroad. 
Russia's position is especially uncomfortable;, 
because owing to the closing of the Baltic and the Dar- 
danelles she cannot ship her produce, while she has to 
buy freelv in America goods that she needs for her Army, 
The result is eloquently expressed by the value of the 
Russian currencv. Before the war the Russian rouble 
was worth about' 25id. Now it is about i7d., shorn of 
roughly one third of its value. 
Italy again has a special cause of loss in financial 
strength because the golden stream that in ordinary 
times passes into her year by year through the spending 
of tourists has been largely lost to her. 
One of the most interesting problems of war is its 
effect on neutrals. At first they were all financially and 
commercially prostrate, because we were calling in our 
credits from'them and there were no ships to be found to 
send goods or gold and they could not buy a Bill on 
London for a time at any price. Now the wind is on the 
other cheek, especially in America. America is about to 
reap a bumper harvest and sell it at a bumper price, and"' 
her factories are working full speed to supply the bar- 
barians of the Old World with shot and shell, and boots 
and clothes, and copper and motor-lorries and railway 
wagons. Moreover, she is saving about 50 millions 
this year througli enforced economy in Continental 
travelling. New York is so full of Bills on London tiiat 
the English sovereign is at a discount of 2 per cent., and 
America is piling up profits at Europe's expense which 
she will lend to Europe. If the war goes on long enough 
and we continue to outrun the constable as we are at 
present, one effect of the war will be to place the sceptre 
of financial power in the hands of the goddess who rules 
in Wall Street. The only things that can stop it are eitlier 
an early peace, or self-denial and iiard work on our part 
that will check our consumption and increase our home 
production so that we can keep down our purcliases of 
American stuff. 
Other neutral countries that are making hay in war's 
murky sunshine are Scandinavia, Denmark, Holland, 
and Argentina. Norway, with the biggest mer- 
cantile fleet in the world in proportion to population, 
and plenty of timber and metals, must be coining money. 
Contrariwise, poor little Switzerland, with its hotel 
business shut down, its army mobilised, and its in- 
dustries unable to get lubricating oil (because, so say 
the Swiss, we are afraid they will sell it to Germany), is 
suffering cruelly from this curious economic earthquake, 
so capricious in its rumblings and shocks and so 
incalculable in its effects. 
Til© September volume of the Round Table deals, as 
usual, with the " Politics of the British Empire," ranging 
from an article on New Zealand and its part in the war to 
American public opinion in connection with the great 
struggle. Able analyses of " England's Financial Task " and 
" The Industrial Situation " in this number are also worthy 
of remark, while a distinct point of view is emphasised in 
" National Duty in the War," which asserts and deprecate* 
a decline in the sense of public duty. The Round Table has 
won a definite place among the quarterlies, and the present 
number is one that will command attention. 
14 
