Full text of "The solvency of the allies; Great Britain-France-Belgium-Italy"

See other formats

Gift

MAY gpiQOp

The Solvency of the AUies

Great Britain ~ France
Belgium — Italy

COMPLIMENTS

FRANK KENNEDY

REPRESENTATIVE

907 KOHL BLHLDING

SAN FRANCISCO, GAL.

Guaranty Trust Company
of New York

The Solvency of the AUies

Great Britain — France
Belgium — Italy

Guaranty Trust Company of New York
140 Broadway

FirrH AVENUi; okiicf:

Fifth Avenue and tSrd Street

LONDON O F F I C K
32 Lombard Street, E. C.

LIVEKPOOL
27 Cotton Lxchai

O I' F I C E
ye Buildings

MAUISON AVENUE OFFICE
Madison Avenue and 60th Street

PARIS OFFICF,
Rue des Italiens, 1 and 3

BRUSSELS OFFICE
158 Rue Royale

Foreword

WHEN the Armistice brought to an
end a period of unequalled de-
struction of lives and property and nations
confronted the tasks of readjusting indus-
try and trade toa peace basis, almost every-
where there was manifest — and quite
naturally — a disposition to magnify the
losses which had been sustained. Admit-
tedly, many of the losses are irreparable;
but the time has come to take account
of what remains and of what the future
promises.

A survey of the present resources and
producing power of the principal Euro-
pean Allies cannot fail to impress one with
their ability to reestablish their economic
Hfe. Already, in fact, there is ample evi-
dence of gratifying progress in the work
of rehabilitation. Yet it is imperative
for all of us, especially our leaders in
finance and industry, to gauge the present
situation and its probable consequences as
accurately as possible.

We have, in a large sense, the welfare of
the whole world in our keeping today,
iind upon the wisdom and farsightedness
which we show now in discharging this
obligation will depend, in considerable
measure, not only the progress of other
nations but our own future as well. I
believe absolutely that if the established
countries of Europe are given the coopera-
tion which we are capable of extending
at this time, there will be no question
that they will be able to revive their indus-
tries and normal trade conditions, which
should i)rovide a stable l)asis for credit.

The needs of European countries are
for food, raw materials, coal, and machin-
ery, which can be supjjlied to them in
adequate quantities only through extension
of credit on our part, as they have neither
the gold nor sufficient goods with which
to make immediate payment. Food for
the hungry and work for the idle must be
provided if the peoples of Europe are to
maintain stable political conditions and
resume peace-time production.

It is certain that American banking in-
stitutions cannot handle the credit de-
mands presented without cooperation.
Such cooperation must be accorded by
our Government, our manufacturers, and
producers. By team-play between these
important factors in the situation, Europe
can be put on its feet financially and in-
dustrially, and this country can be placed
in a position of unchallenged leadership in
the business affairs of the world.

This is a time when all thought of
profits should be forgotten, and the simple
necessities of the situation faced. Our
first and single duty now is to help restore
the world to normal conditions. If we
do our part in bringing that about, the
question of j)rofits will be cared for in the
future.

This country is facing its greatest op-
portunity and its greatest obligation, and
if the sacrifices which have been made in
the war are not to be in vain, we must rise
to meet that opportunity and that obliga-
tion fully.

Charles H. Sabin.

i/50116

Introduction

NOTHING is gained either by mag-
nifying the losses or by minimizing
the (hfficulties and problems that must be
faced as a result of the World War. Ac-
cordingly, it is the purpose of this book to
make a brief, impartial survey and
analysis, from the information available,
of the essential facts upon which judgment
may be based as to the ability of the prin-
cipal European Allies to meet their obli-
gations and at the same time regain a nor-
mal place in the work of the world.

In considering the ability of the Allies
to reestablish their industrial life, an ab-
solutely essential prerequisite of solvency,
it is well to keep in mind certain funda-
mentals of war finance which will enable
one to understand more fully the ability
of these Nations to make the necessary
readjustments.

Wars are fought with present goods,
and their utilization for war purposes does
not necessarily impair the producing
power of belligerents, because the basic
factors in the production of consumable
goods — natural resources, tools, machinery,
labor — remain when hostilities cease, and
in many instances there is a material in-
crease in manufacturing capacity. The de-
velopment of new and improved methods
of production and the substitution of
automatic machinery for skilled labor,
have unquestionably increased the pro-
ducing power of the Allies during the war.

Coincident with war financing there
has been an increase of prices, due to
scarcity of materials, interruption in
distributing processes, and, in part, to
monetary inflation. But, in considering
the problems created by the debt of any
belligerent coimtry, it nuist be recognized

that high prices and inflation increase the
monetary value of the wealth of that
country and the monetary value of its
national income, which, relatively, reduces
the burden of the debt.

The larger portion of the war debt of
the Allies is internal. The ability to meet
an internal debt is purely a fiscal problem,
because there are no additions or sub-
tractions to the national wealth and the
payment of interest on the debt implies
the taxation of the people as a whole,
interest being paid to present holders of
the bonds, which effects only a partial
redistribution of the national wealtli.

The {)roblem of meeting external debts
is of vital significance to the national
wealth of the country. It means the ac-
tual shipping out of products, and does
not add to the wealth of the country.
However, during the period of war finance,
the creation of an external debt is of ma-
terial benefit, because it increases the
power of a warring nation to obtain sup-
plies of materials produced by other
peoples, thereby adding to its war-making
power. This is a burden rightly to be
borne by future generations.

One of the interesting points in regard
to the external debt of the Allies is that
our own Government is their largest
creditor. Making these advances was a
part of our war policy, and there is no
immediate pressure upon the finances of
the respective debtor countries to meet
the payments on them. If necessary, the
debtors can fund the interest on the.se
obligations until they have reestablished
their industrial life and trade activities.
This leaves these countries in a favorable
condition to meet the limited amount of

external obligations that have been floated
through private channels, and which will
have to be paid in the immediate future.
In considering the situation which con-
fronts Europe now, it is necessary to take
account of the specific conditions of par-
ticular nations, of their past experience,
their natural resources, and their eco-
nomic possibilities. These conditions in
each case must be studied, of course, in
their relation to conditions outside the

particular nation. There is a wide range
to the community of interests among all
the nations. And one of the tasks in peace
will be to secure a wider appreciation of
these common interests of mankind.

With the hope that in some degree our
interpretation of the outlook in Europe
today may help to define America's obli-
gations and opportunities in the period of
reconstruction, we turn to a consideration
of four of the Allied nations.

CONTENTS

Page

Great Britain 7

France 12

Belgium 22

Italy 29

The Outlook in Europe Generally . 35

Great Britain

As one of the principal belligerents, en-
gaged in the war from the beginning
of hostilities, Great Britain has made ex-
penditures growing directly and indirectly
out of the war which are far greater than
those of any other Allied nation.

For convenience, in considering the
financial status of Great Britain, monetary
values will be rendered in American dollars
at the par of exchange, $4,866 to the
pound sterling.

Briefly stated, the major facts respect-
ing the finances of the United Kingdom as
of ISIarch 31, 1919, the end of the last
fiscal year, are as follows :

The gross debt was $36,746,650,056, of
which sum only $6,569,100,000 represented
external obligations, repayable in foreign
currency, while advances to Allies and
Dominions amounted to $8,580,000,000.

The estimated debt service of the
United Kingdom for the fiscal year 1919-
19*20, as presented in the Chancellor of the
Exchequer's budget proposals, will be
$1,751,760,000, or 30 per cent, of revenue
receipts. And the normal peace budget
of the British Government, as estimated
by the Chancellor, will be $3,727,356,000,
of which the debt service, including amor-
tizations of one-half per cent., will con-
stitute about 52 per cent. The post-war
budget, as foreseen by the Chancellor,
will be approximately four times that of
the fiscal year 1913-1914.

Paying the Bill

The war, through increase of debt,
pensions and relief payments, and increase
of normal civil expenditures, has placed a
very large tax burden upon the British
people. It appears that in a normal post-
war year their taxes will have to yield about
$3,400,000,000, or 19.4 per cent, of their
national annual income, which is conserv-

atively estimated to be $17,517,600,000.
But already the policy of the Govern-
ment in the administration of war finances
has quite properly included heavy taxa-
tion. Of the total money raised for the
Government's own expenses during the
last five years, 36 per cent, was supplied
by means other than loans. And the fact
that the taxing machinery has been
organized for raising such enormous sums
will be very advantageous in planning
the after-war administration of Govern-
ment finances.

Ultimate Offsets to Debt

Furthermore, it will be noted, no allow-
ance has been made here for the indemni-
ties which eventually will be collected
from the Central Powers nor for the debts
owed to the British Government by the
Dominions and the Allies. While they
should be considered as ultimate offsets
to the British debt, in what degree re-
ceipts from these sources may be available
in the near future is a matter of specula-
tion. Eventually, however, they will re-
duce the burdens of English taxpayers, so
that the ratio between taxation and in-
come will gradually be reduced.

As regards the internal debt, which is
82 per cent, of the total, there is involved
no transfer of wealth to other countries.
The payment of interest and principal, it
is true, involves a transfer of wealth from
taxpayer to debt holder which may seri-
ously burden the individual taxpayer.
How well such a load may be adjusted to
the ability to bear it will depend upon the
equitableness of the taxing system. And
certainly there can be few . holders of
Government bonds who will not be called
upon to pay in some part, at least, the
taxes which they will in turn receive as
interest or principal of the obligations.

THe ib teres* and amortization of the
other ^8. -per. cent, of the debt, which is
owed abroad, will amo'int to approxi-
mately $360,000,000. As an oflFset, the
interest due Great Britain on advances
made to Allies and Dominions amounts
approximately to 1 .3 times the total i nterest
on the external debt. Payments, in the
main, will have to be made in the form of
commodities or services, which, in inter-
national trade accounts, contribute to the
credit or export side of the ledger. To
what extent England's export trade will
be stimulated by this situation is problem-
atic. For many years the United King-
dom has imported more goods than it has
exported, but this so-called unfavorable
balance of trade has been offset by in-
ternational payments which do not enter
into the reports of foreign trade.

Foreign Investments

Chief among these counter-balancing
items in the case of Britain have been the
returns from investments abroad and the
receipts of British owned ocean-carriers.

It is estimated that British foreign in-
vestments before the war amounted to
$19,464,000,000, and that they now ap-
proximate $14,500,000,000. Broadly
speaking, then, the returns from foreign
investments that may be relied upon in
balancing the international account have
been reduced by about one-fourth during
the war. Nevertheless, the remaining
foreign investments exceed the external
debt by about $8,000,000,000, and the
yield from these investments at normal
rates would not only pay the interest on
that debt but also leave a large margin
to England's credit.

Productive Capacity

Nevertheless, the prosperity of the na-
tion will be measured largely by its ability
to produce marketable commodities for
sale abroad.

The experience of Great Britain in the

war is a most illuminating example of the
way in which war induces a rapid expan-
sion of the capacity to produce consum-
able goods. Edgar Crammond estimates
that the nation's power of production has
been increased by about 50 per cent, since
1914.

Great Britain's industrial position has
rested heretofore upon the ability to
gather in raw materials from abroad and
resell them as manufactures. In 1913,
69.5 per cent, of the merchandise exports
were classed as manufactures, while of
the imports only 25.2 per cent, were so
classed. The expanded physical equip-
ment has enhanced the nation's power to
serve as a world's workshop.

Labor Force

The number of men killed and those
who died of disease in the armed forces of
the United Kingdom during the war was
approximately 900,000. The population
numbered 45,516,259 in 1911. The in-
crease in subsequent years, estimated on a
basis of the excess of births over deaths in
the civihan population, added 2,057,121.
Deducting 900,000 from the total thus
obtained leaves an estimated population
at the end of 1918 of 46,673,380.

But even if the population is larger than
at the beginning of the war, it does not
necessarily follow that the actual product-
ive labor force has been augmented.
There has been a substitution of hitherto
unemployed women, for men withdrawn
from civilian tasks, however, and it is
reasonable to expect that such substitu-
tion will be operative in some measure
in the future.

Industrial Organization
The manifold improvements in Eng-
land's industrial organizat'on during the
war have constituted the most durable
offset to the loss of man-power.

It is estimated that, whereas in 1872
Great Britain produced 57 per cent, of
the total food consumed in the country,

The Royal Exchange, in the heart of London, toith the Bank of England on the left

m 1913 only 42 per cent, was of domestic
production. During the war agricultural
production was greatly increased, some
4,000,000 acres being added to the area
under cultivation, and this will make the
country less dependent upon foreign
sources of food supplies than before the

war.

Standardization

It was in manufactures that the most
significant increases in output were ef-
fected. How this expansion was accom-
plished is explained in part by Professor
A. W. Kirkaldy as follows: "At Lord
Kitchener's instance, the whole world
was searched for the best machinery; new
factories were built, old factories were
stripped and re-equipped; and the new
machinery was automatic, semi-automatic,
fool-proof, such as unskilled workers could

very quickly be taught to handle

We had scrapped all our old-fashioned
ideas, our old machines that could do very

beautiful work with a skilled man behind,
and we replaced them with fool-proof
tools, whose steel brain did the work, with
an unskilled worker to pull the lever."

Other Industrial Gains

In other respects the gains to the indus-
trial organization of the country have been
important. Workers have been taught as
never before to work with gauge and
micrometer. The resulting gains in ac-
curacy of workmanship will be lasting.

Again, manufacturers have learned
much about the advantages of standardi-
zation of processes and operations in their
plants. This was brought about in part
by the Government in its efiForts to bring
to the maximum the output of all the
plants working for the Government. Un-
der Governmental guidance there was a
pooling of experience that has been of
great educational value to those directing
the production of goods.

There has been a tendency toward com-
bination in industry, for export trade and
for production. A notable example is the
recent dyestuffs combination. Employers,
too, have learned to work together more
readily than hitherto. Cooperation in un-
usual degree for a common cause of such
magnitude as winning the war is bound
to have its lasting effects.

Preparation of Banks

One evidence of the foresight of finan-
cial leaders in England is found in the
amalgamations of large commercial banks
which have brought together huge aggre-
gations of banking resources.

Whereas in 1902 there were 115 banks
in the United Kingdom publishing ac-
counts, and in 1914, 70, in 1918 amalga-
mations had reduced the number to 57,
with assets of approximately $12,700,000,-
000, or an average of about $223,000,000
per bank. No such concentration of bank-
ing resources has been effected in the
United States. Here, in June, 1918, the
State, private, and national banking in-
stitutions numbered 28,880, with aggre-
gate resources of $40,726,400,000, or an
average per bank of $1,410,000.

The recent amalgamation movement
owes its chief impetus to the contem-
plated after-war demands that in-
creased business would make upon the
banks. With the principal banking re-
sources already combined into larger units,
English bankers are better prepared than
ever to assist in the development of Eng-
lish industry and commerce.

The war occasioned a large increase
in paper money, chiefly through currency
notes issued directly by the British
Government. On July 29, 1914, the
Bank of England had issued $267,000,-
000 of notes secured by a gold reserve of
69 per cent. This had increased by June
18, 1919, to $505,000,000, with an 84 per

cent gold reserve. On June 18, 1919, the
amount of currency notes in circulation
totalled $1,677,000,000, with a gold re-
serve of 8.5 per cent. These were emer-
gency notes, and the whole amount was,
therefore, a net addition to the paper
circulation.

The national wealth, valued at $82,-
500,000,000 in 1914, is now estimated by
Crammond at $116,000,000,000, repre-
senting a war-time increase of 39 per cent.

After the Napoleonic Wars

England's recovery and industrial ex-
pansion following the Napoleonic Wars
furnish an object lesson that may well be
recalled in connection with the present
situation. It is very difficult, of course,
to institute a comparison between condi-
tions obtaining a century ago and those of
today. The applications of steam and
electricity in industry, and other trans-
formations and developments in the equip-
ment for supplying goods and services
make ours an industrial age markedly
different from that of 1815. Never-
theless, without pressing the analogy un-
duly, it is possible to find interesting and
suggestive similarities between conditions
and problems in Great Britain in the two
periods.

England took part in a series of wars
that continued, with brief interruptions,
from 1793 to 1815. The population of
Great Britain in 1816 was about 20,000,000.
The wealth of the United Kingdom at that
time was not more than $12,500,000,000,
and the national income was not more
than $1,500,000,000. Nevertheless, the
country had incurred an aggregate debt of
$4,475,000,000, the annual interest charge
on which was $165,000,000. Thus, approx-
imately 11 per cent, of the national income
was paid in support of the debt. At the
same time, the total annual expenditure of
the Government was more than 25 per
cent, of the national income.

10^

It is interesting to note that the esti-
mate of the ratio between debt service
and national income for the present after-
war period is almost identical with that
just cited. The ratio between the total
expenditures in the coming budget and the
national income is 21 per cent., or some-
what less than the estimated ratio in 1816.

Moreover, heavy taxation during the
Napoleonic Wars had borne much the
greater part of the British Government ex-
penditures. Taxes yielded $9,732,000,000
and loans $2,189,700,000.

In spite of the heavy expenditures, the
wealth of Great Britain increased year by
year during the wars. The steam engine
was brought into general use, and spinning
mills in the cotton and woolen trades un-
derwent great development. The output
of coal and iron rose rapidly. Both internal
and foreign trade multiplied. Exports,
which in 1811 were valued at $155,712,000,
were valued at $248,166,000 in 1815.

During the Napoleonic wars there had
been issued a great volume of paper cur-
rency, and prices rose to great heights.
After 1797, when the Bank of England sus-
pended cash payments, the country's cir-
culating media consisted entirely of paper
money.

Shortly after the signing of the peace
treaty there was a great slump in prices,
and the years 1816 and 1817 were marked
by a considerable business depression.
Poor crops in England contributed much
to this result, and another cause seems to
have been a misjudgment of the after-war
Continental demand for English manu-
factures, and a consequent speculation
in commodities at prices which proved
disastrous to English traders. Whether
the Continent's inability to offer goods in
exchange outweighed the influence of Eng-
lish tariff restrictions aimed at the Con-
tinent, it is impossible to say. In either
event the result was the same. The Con-
tinent had need of English goods but was

not prepared under the handicaps existing
to pay for them.

But in 1818, despite the temporary set-
back, British industry and commerce
made noticeable gains. By 1820 a period
of rapid industrial growth had begun.
What had seemed an unbearable burden
of debt in 1815 was borne with compara-
tive ease.

The Outlook

All in all, the outlook for industrial
progress in England is favorable. The
manufacturing capacity of the country
has been greatly increased during the war.
Even more notable have been the im-
provements in port and warehouse facili-
ties. Ships are being turned out rapidly,
and the British merchant marine still ex-
ceeds in tonnage that of any other nation.
A system of preferences which unites the
various parts of the Empire commercially
more closely than ever before will give the
vast colonial resources a new significance
for the development of British industry
and trade. The position of London as a
world financial center, still is an excep-
tionally important asset for the period of
rehabilitation.

The recent removal of restrictions on
the exportation of capital for investment
will naturally result in an expansion of the
export trade and a stimulation of domestic
production.

Much depends upon the spirit and tem-
per of a people. Their record of achieve-
ments in industry and finance has amply
demonstrated the capacity of the English
for doing big things in a big way, and for
meeting emergencies with the requisite
energy and ability.

In view of the advantages accruing
from a century of progress in the realms
of industry and finance, it may be ex-
pected that Great Britain will again re-
cover from the effects of' war no less
quickly than it did a century ago.

France

THE surprising military achievements
of France in the World War attested
not only the fortitude and morale of a
great people, but the strength and adapt-
ability of the country's industrial and
financial organization before the war. Be-
cause of the sacrifices in men and wealth
which France made in support of the com-
mon cause of the Allies, all the world is in-
terested in the re-
construction and re-
adjustment of
French industry
and finance.

Area, Population
and Debt

In area, conti-
nental France is
more than four
times as large as
New York State.
The population in
1911 was 39,601,-
509. But in think-
ing of France as an
economic unit its
must be included.

vast colonial empire
In addition, France
now regains the lost provinces of Alsace-
Lorraine, with an area of 5,605 square
miles and a population numbering 1,874,-
000 in 1910.

The war losses of France in killed are
estimated at approximately 1,385,000
men. In the 77 uninvaded departments
there was, from 1914 to 1918 inclusive, a
loss in population of about 1,070,000, cal-
culated on the basis of reported births
and deaths.

The national wealth of France before
the war was estimated at $67,000,000,000.
But in computing the value of national
wealth at present the changed level of
prices should" be taken into account, and
inasmuch as prices rose from July, 1914, to

March, 1919, approximately 289 percent.,
it may be assumed that a revaluation of
France's national wealth in terms of
money values today would give a figure
well beyond $100,000,000,000.

The total debt of France on July 31,
1914, was 34,186,147,969 francs, or, at par
of exchange, $6,593,278,296. The debt in
March, 1919, was approximately $34,-
908,000,000. Some
$1,388,600,000,
however, had been
advanced to the
Allies. Taking no
account of other
offsets, the net debt,
computed by de-
ducting from the
gross total the ad-
vances to Allies,
amounts to approx-
imately 173,000,-
000,000 francs, or
$33,389,000,000.
The paper money
of the Bank of
France, on June 5, 1919, amounted to
$6,628,905,000, backed by a gold reserve
equalling 14.7 per cent, of the face value
of the notes. On July 30, 1914, the note
circulation was $1,290,000,000, and the
gold reserve was 61.9 per cent.

Of the total debt, about $5,785,000,000
is external. As offsets to the external
debt, there are French investments abroad
estimated at $8,100,000,000.

Ability to Carry the Debt
As estimated by Ribot, the peace bud-
get of France will require approximately
16,000,000,000 or 17,000,000,000 francs,
which is three times the budget of 1914.
The service of the debt, which he esti-
mates will be 200,000,000,000 francs in
1920, is placed at 10,000,000,000 francs.

The Bank of France

in circulation, notes

In view of the foreign investments and
the expected payments of indemnities by
Germany, it appears that no great diflS-
culty will be experienced by France in car-
ing for the external obligations after the
resumption of normal peace activities.

The internal debt is so large that only
by means of heavy taxation can the neces-
sary revenues for its service be obtained.
In view of the sudden invasion and the
overrunning of a large portion of French
territory, it was deemed expedient to rely
during the war mainly upon borrowing.
Until the taxing machinery can be reor-
ganized, it is probable that considerable
further borrowing on the part of France
will be necessary. Ultimately, taxation
sufficient to meet the expenses will have
to be levied. The exceedingly wide dis-
tribution of the holdings of the Govern-
ment debt by the French people should
facilitate the raising of sufficient revenue
from taxation.

The key to the solution of the fiscal
problems confronting the French Govern-

ment is industrial. It is important, there-
fore, to note the degree of preparation al-
ready made for the present industrial
tasks and the development and utilization
of latent resources.

Reconstruction During the War

The really wonderful efficiency of the
French nation as a fighting organization
was in itself a guarantee that the national
equipment for production was highly de-
veloped. Nor was this magnificent equip-
ment for the production of the materials
required in war used up in a single supreme
effort. France was not exhausted at the
close of the war, as was abundantly shown
by its power of offense to the very end.
It was not necessary to adopt, and France
did not adopt, the slogan "business as
usual" in order to preserve intact the
capacity for peace-time production. Ef-
ficiency in a long war necessarily requires
a high degree of provision for industrial
production in peace.

This scene affords an idea of how transportation facilities were ruined in the
sections of France occupied by the enemy

fl3l

Before the war this factory at St. Qumtin, France, was known as "the factory of a thousand trades."
It is now in ruins and its machinery is fit only for the junk pile

The Departments of Nord and Pas de
Calais, which were overrun in the early
weeks of the war, were among the most
highly - developed industrial sections of
France. The districts occupied by the
enemy represented more than 50 per cent,
of the nation's coal production, 80 per
cent, of the total iron ore production, 66
per cent, of the steel output, and 68 per
cent, of the pig iron output. The textile,
beet sugar, and other important industries
also suffered greatly.

However, production was not paralyzed.
So resolutely was the provision of food
undertaken that by the spring of 1916
the agricultural situation was almost as
satisfactory as it had been two years be-
fore. It is significant that between June,
1915, and June, 1917, the number of
cattle in France increased appreciably.
Industrial Expansion

In various lines of industry there was
expansion of the capital equipment as the

war progressed. New plants were con-
structed and old ones were enlarged. In
addition to the construction by the French,
many new works and improvements were
made by the British and the Americans,
chiefly transport facilities.

The rapidity with which the French
put new plants into operation is indi-
cated by the results of an investigation
made by the Department of Labor in
July, 1917. Mines, quarries, railways,
tramways and establishments which were
under the supervision of the Ministries
of War and Marine were not included in
the investigation. In the 52,278 plants
investigated, which were engaged in what
may be called civilian production, it was
found that the number of employes at
work in July, 1917, was larger than before
the war; the figures being respectively
1,559,393 and 1,524,959.

The construction of new plants and en-
largement of old ones was widely distri-

buted among the several branches of in-
dustry. The chemical industries neces-
sarily were greatly stimulated. Before
the signing of the Armistice the pro-
duction of sulphuric acid had almost
doubled the pre-war volume, and the out-
put of nitric acid had been increased to
30 or 40 times the former production.

In the field of mechanical construction
the war occasioned the renewal in large
part of the tool equipment of the French
factories. Much of this equipment was
obsolete, and its replacement with more
modern machine tools marked a perma-
nent gain. The scarcity of workers in many
cases was largely offset by the introduc-
tion of labor-saving machines. In fact, the
utilization of machinery did not merely
replace former workers, it carried produc-
tion to levels never before attained.

Coal and Water Power

New coal fields helped to replace the out-
put of the mines that had been seized. The
iron deposits of Normandy gave rise to an
important smelting industry in that region.

One of the most significant of all the
industrial developments during the
war was the expansion of hydro-electric
installations. Of the estimated 6,000,000
horse-power available in the country, only
about 650,000 horse-power had been

brought into use in 1913. At the end of
1917 there had been added some 374,000
horse-power, or more than half as much
as all the developed waterpower in 1913.
These new power installations have pro-
foundly influenced the metallurgical indus-
tries. Before the Armistice about fifty
electric furnaces were producing steel,
with an estimated capacity of 800,000 tons
annually. A beginning has been made in
the electrification of railways, and it is ex-
pected that the work of further electrifi-
cation will be pushed vigorously. A full
utilization of waterpower resources would
result in a saving of approximately 30,-
000,000 tons of coal annually.

The principal sources of hydro-electric
energy are in the sections of France least
exposed to invasion. This fact and the
development of transportation in central,
southern, and western France during the
war, including an enormous expansion of
port and terminal works, combine to make
relatively permanent the new center of
French industry. And this means that in
many cases the destroyed factories in
northeastern France will not be rebuilt on
the old sites.

Recovery of Alsace-Lorraine

In addition to this reconstruction be-
hind the lines in France, the productive
equipment of the country has been greatly

Once a powerhouse in France
fl5l

A potash mine in Alsace

enlarged as a result of the restoration of
Alsace-Lorraine and the control of the
coal mines in the Saar Basin.

Throughout the period of German con-
trol, agriculture and manufacturing in
Alsace-Lorraine, already important, con-
tinued to develop.

The recovery of the provinces is espe-
cially important for France, however, be-
cause of their mineral resources. The iron
deposits in Lorraine, it is estimated,
amount to 1,800,000,000 tons. They oc-
cupy an area of approximately 1,660
square miles. The output in 1913 was
21,000,000 tons. While the coal resources
of Alsace Lorraine do not correspond in
volume to the iron, the control of the Saar
Valley mines will offset the relative short-
age of coal in the recovered provinces.

Coal Resources

The coal production in the Saar Basin
before the war amounted to about
16,500,000 tons annually. According to the
terms of the Treaty of Peace, Germany
undertakes to deliver to France 7,000,000

tons of coal a year for ten years, and, in
addition, an amount of coal equal to the
difference between the annual production
before the war of the mines of the Nord and
Pas de Calais, which were destroyed as a
result of the war, and the production of
the mines of the same area for a period
not exceeding ten years . Apparently, then,
the coal resources at the disposal of France
in the reconstruction period are to be in
excess of the coal produced before the war
and the iron resources will be greatly
superior to those of the pre-war period.
Potash Deposits

The potash deposits of Alsace also are
important. The output in 1913 was
350,000 tons, although the Germans had
never found it necessary to work these
deposits intensively under a policy of arti-
ficially restricted production. In the com-
ing years unusual emphasis will be placed
upon the enlargement of agricultural pro-
duction in France. And every domestic
source of fertilizer will facilitate the ex-
pansion of agriculture.

Alsace-Lorraine was the chief seat of

[16]

the German cotton manufacturing indus-
try and was also an important center of
the woolen industry. The number of cot-
ton spindles in the returned provinces be-
fore the war was one-fourth the number in
France. Other important manufacturing
industries in Alsace-Lorraine include glass,
chemicals, and paper.

Will Develop Manufactures
The indications are that France will not
revert to the pre-war industrial position,
characterized so largely by small scale
production of fine quality manufactures.
Doubtless there will be sufficient hand
production and concentration upon luxury
articles, but the main development prom-
ises to be the building up of a great manu-
facturing center in line with pre-war de-
velopments in England and Germany.
Fundamental bases for such a develop-
ment are found in the coal and iron which
will be available in the reconstruction
period, the large resources in waterpower
and the improved port facilities. With a
vast colonial empire supplying raw mate-
rials and absorbing manufactures and,
with other markets
open to French
trade throughout
the world, it is rea-
sonable to expect
that France will
eventually become
a much more power-
ful manufacturing
nation than it was
before the war.
French Colonies

The importance
of the French colo-
nial possessions for
the future of French
industry should not
be overlooked.

The total area of
the French colonial
possessions is more
than twenty - two

A French coal m
[171

times that of continental France. The
population of these colonies is greater by
18 per cent, than the population of
continental France. The extent of the
industrial development of these outlying
regions is best reflected in the statistics of
trade. In 1913 the total foreign trade of
the colonies was valued at $608,800,000.
The trade, therefore, was approximately
one-fourth that of France proper. It is
important to note that France supplied
55 per cent, of the imports of the
colonies and of the exports from the colo-
nies 48 per cent, was sent to France.

This vast colonial empire of France
contains valuable resources — agricultural,
forest, and mineral. Time will be required
for the further development of these out-
lying regions, but the indications are that
their development in the near future
will progress much more rapidly than
in the years immediately before the
war. France has need of the raw
materials which the colonies can sup-
ply, and the manufacturing capacity of
France will need new outlets. The logical
line of development,
therefore, embodies
a concentration
upon the exploita-
tion of what is al-
ready in control of
France. The recent
extension of credit
by French bankers
to a Brazilian rail-
way enterprise is
suggestive of the
temper and outlook
of French industrial
interests at the
present time. It is
to be expected that
French capital will
be invested more
heavily than ever
before, not only in

French colonies but also in other unde-
veloped lands.

Prospective Agricultural Development

As a necessary part of the industrial de-
velopment of France in the reconstruction
period, much emphasis is to be placed
upon agriculture. There was a noticeable
extension of the use of agricultural ma-
chinery before the war, particularly in
northern France. The stinmlus to the use
of machinery which has been occasioned
by the war will not be dissipated at once.
The enormous capacity of the French
metallurgical industries will find one of
its natural outlets in the production of
farm machinery.

In view of the importance that the
development of the export trade of France
will assume in the reconstruction period.

it is significant to note that the losses
suffered by the French merchant marine
during the war have been offset by new
construction and purchases. Other con-
struction is under way, and a portion of
the indemnity exacted of Germany will
be paid to France in the form of merchant
ships. Lloyd's Register of Shipping, June,
1919, shows that the tonnage of France's
merchant fleet exceeds the pre-war figure.

Speedy Recuperation

The French peojile have made surpris-
ing progress since the Armistice in
readjusting industry to a peace basis.
As early as February, 1919, the Min-
ister of Industrial Reconstruction re-
ported that out of a total of 1,700,000
employes occupied on November 11, 1918,
in a group of Government and private

Copyrlgbl by Underwood & Underwood

A vineyard in Champagne
[18]

plants, 1,300,000 were then engaged in
peaceful pursuits. An investigation by
the Department of Labor in April revealed
the fact that the re-employment of the
war workers in peace activities had pro-
gressed remarkably well.

One of the most striking develop-
ments of the reconstruction period is
found in the rapidity with which the
means of communication, destroyed or
impaired during the war, have been re-
stored. It is reported that 90 per
cent, of the destroyed railways have been
reconstructed and that approximately
one-third of the highways damaged during
the war have been repaired. The ]\Iin-
ister of Liberated Regions reported in
June that 70,000 houses had already been
repaired, that 10,000 new houses had been
completed, and that between 55,000 and
70,000 houses were under construction.

Able To Supply Much Equipment

^Yhile a great volume of raw materials
from abroad will be required in the work
of rehabilitation, for the most part
French industries are themselves able to
supply the necessary equipment. The
great need is not foreign machines and
tools, but materials with which to operate
idle equipment. The country is handi-
capped somewhat at the present time in
its purchase of materials abroad by the
unfavorable exchange rates. As an offset,
however, the depreciation of the franc in
foreign markets tends to restrict the im-
portation of goods which are not essential
in the necessary work of reconstruction.

Morever, it does not follow that French
industry cannot proceed successfully on a
large scale until the franc is restored to par
in international exchange. It is possible
that a measure of stability can be ob-
tained which will enable the French peo-
ple to conduct their trade advantageously
with outsiders although the franc may re-
main for a long time at a discount in other

[

markets; and especially in the trade with
other nations whose exchanges are not at
par the difficulties will not be insuper-
able.

The Recovery of France After 1870

After the decisive defeat at the hands of
the Germans, France agreed in the Treaty
of 1871 to surrender Alsace-Lorraine and
to pay in addition an indemnity of
5,000,000,000 francs within a period of
approximately three years. It is well-
known that France displayed remarkable
recuperative powers in the face of such
tremendous obstacles. The indemnity was
paid in a shorter time than had been
allotted. For some years after 1871 the
industry and trade of France gave evi-
dence of unusual prosperity. It is note-
worthy that approximately four-fifths of
all indemnity payments were in bills of
exchange, and not in money.

There are, of course, marked differences
between the problems which confronted
France in 1871 and those of today. But,
if after an overwhelming defeat and the
loss of an important portion of French
territory the nation was able to recover so
rapidly in the 70's, now heartened by vic-
tory and with productive equipment
enlarged, it may be expected that
recovery in the present period of re-
construction will be no less phenomenal
than in the earlier period. France is
in a favorable situation with reference
to the expansion of the nation's trade
with the Near East and the French
colonies in particular. The fundamental
economic situation appears to be on a
sound basis. With some outside assist-
ance in the form of capital and labor,
there may be built up a great industrial
nation — the New France, sharing in the
expanding world trade on a scale com-
mensurate with the country's resources
and advantageous location.
19]

Mining coal with steam shovels. More than half
the world's coal reserves are ours

'>»?**!.:

Pff'

A Montana wheat field. One-fourth of the world's wheat is
raised in the United States

These Texas cattle av «
40,000,000 head

Train of lO.OOO-gnllon tanh curs. Two-thirdft the
(/•or/r/'.v piirnlenni com e.-^ from America

I'liutui^iuplis Copyri^lileJ by Underwood & Underwood and Publishers' Photo Service

Sixty per cent, of (he trorWs co

Products of Mines, Fields and Factories T

'm^

country shows more than
) sheep

me of the more than
ie United States

^*^

'=*^S*=»3Si

Ore conveyor and leaching tanks at an Arizona copper mine.
We refine 80 per cent, of the world's output

Timber for ships. The forests in the United States cover
more than 550,000,000 acres unsuited for agriculture

i is grown in the United States

\ y V /

Huge magnets stacking steel rails. We produce
40 per cent, of the world's iron and steel

X Will Help Win the Victories of Peace

Belgium

THE case of Belgium is in some re-
spects unique. The country was all
but completely overrun by the enemy,
and because it was a manufacturing cen-
ter the bulk of its wealth was of a sort
readily destroyed or impaired.
Debt

The Peace Treaty provides that Ger-
many shall reimburse Belgium in the
form of gold bonds for advances made by
the Allies before the Armistice. Heads of
delegations at the Peace Conference are
said to have agreed to recommend to their
respective parliamentary bodies that Ger-
man reparation bonds be substituted for
advances made by the Allies to Belgium,
thus canceling this debt.

The debt of Belgium — exclusive of war
loans from the United States and Allies
prior to the signing of the Armistice, is
equivalent, at par of exchange, to approxi-
mately $2,000,000,-
000. This is a little
more than twice the
debt in July, 1914.
Of the $294,000,000
external debt,
$227,000,000 rep-
resents advances by
Allies since the Ar-
mistice, which is to
be repaid from first
German reparation
payments.

The best ap-
proach, perhaps, to
an estimate of Bel-
gium's ability to
cope with the debt,
is a consideration of
the pre-war indus-
trial situation and
how the nation's

The National Bank of Belgium
[221

capacity for the production of wealth has
been modified by the war.

On the eve of the war Belgium was one
of the busiest countries of the world. Al-
though in area only a little larger than
Vermont, it nevertheless supported a pop-
ulation of more than 7,500,000.

Agricultural Resources

Belgium's prosperity and high position
among the industrial nations before the
war had an especially sound basis in the
country's highly developed agriculture.
About three-fifths of the total area was
under cultivation. The average value of
the produce per acre was approximately
$100,ayield equalled by no other country.
Land owning in small units by workers
has been encouraged. The intensive cul-
tivation of small farms, a certain tradi-
tional apitude for agriculture, an excellent
system of agricul-
tural education, low
railroad rates, good
roads, and a spirit
of mutual helpful-
ness as shown by
the more than 1,300
cooperative soci-
eties have all con-
tributed to the pros-
perity of the farm-
ing element.

Important as has
been the unparal-
leled development
of Belgium's agri-
culture, it is the
manufacturing and
related industries,
diversified and in-
tensivelydevel-
oped, that have

Copyrl^'ht by Underwood & ,Undernood

The magnificent Palace of Justice in Bnissels. This is considered one of the finest buildings in all

Europe. Brussels was occupied by the Germans in September, 1914, when the city surrendered to save

its beautiful buildings from bombardment

given the country so prominent a place
among the commercial nations.

Coal and Iron Deposits

An important key to a nation's indus-
trial progress and possibilities is its coal
supply. For some years before the war the
output averaged about 23,000,000 tons,
and until 1907 Belgium exported more
coal than it imported. Since 1907, how-
ever, increased domestic consumption, due
primarily to the very rapid growth of in-
dustries, has brought about a reversal of
this condition. Two years before the
war, Belgium was consuming 12 per cent,
more coal than the domestic production,
the imported coal coming principally from
Germany.

Along with the coal resources in the
southern provinces are rich deposits of

iron ore, but owing in part to legal restric-
tions governing the extraction of these
deposits, the production of ore has been
small for a long time. However, Belgium's
fifty blast furnaces produced in 1912,
chiefly from Luxemburg ores, 2,300,000
tons of pig iron. This output of iron was
reflected in the country's prosperous steel
industry. Although the steel business is
an old and well-established one, it has
recently experienced a remarkable ex-
pansion. In the decade before the war
Belgium increased its production 160 per
cent.— the total production in 1912 being,
in round numbers, 2,500,000 tons. The
output of finished iron and steel was
greatly in excess of the domestic needs and
there was a growing market for the high
grade Belgian steels, famous the world

over.

In keeping with the development of the
iron and steel industry, there has been a
significant expansion of various related
lines of manufacturing, especially machine
and engine works, and the construction of
railway equipment and automobiles. The
zinc, lead, chemical, glass, and textile in-
dustries are among the other more im-
portant enterprises.

There are more miles of railway in Bel-
gium in proportion to area than in any
other country. Practically all the stand-
ard gauge roads are owned by the State.

The operation of the State railways
since 1835 has been financially successful.
The capital invested in the roads in 1912,
$520,000,000, was equal to two-thirds of
the State debt.

The Belgians have for a long time held
a prominent position in international
finance, the estimated volume of foreign
investments in 1911 being $540,000,000,
almost twice the present external debt.

Belgian capital is found in a great variety
of enterprises almost all over the world.
There are Belgian banks, mines, railways,
etc., in South America, China, Spain, and
Italy, and more than 100 tramway and
electrical power enterprises in various
parts of Europe have been financed with
Belgian capital. The greater part of Rus-
sia's pig iron output before the war was
produced by Belgian companies recently
established, or by firms in which Belgian
capital was invested. Belgian companies
supplied equipment for numerous tram-
ways in our western cities, and many
American utility securities are still owned
by Belgians.

Destruction of Property During
the War

The national wealth of Belgium was
estimated in 1912 at 29,803,000,000 francs,
or approximately $6,000,000,000. In con-
sidering the ratio of the debt to the value

M\ho^-A'^ A i

'M^i^uuiii

British OSicial Photograph from Underwood & Underwood

King Albert and Queen Elizabeth reentering Bruges, which had been occupied
by the Germans for four years

24'

Copyrighted by Underwood A I'li^lerwooii

A steel and concrete bridge across the Meuse, dynamited by the Belgians to hamper
the advance of the Germans

of the wealth at the present time it must
be recognized that both are expressed in
terms of a money whose value is greatly
below that of pre-war times.

It is well known that the Germans de-
stroyed and carried away great quantities
of wealth. How much of this was in the
form of relatively fixed capital equipment,
as compared with consumption goods, it is
impossible to say.

By the terms of the Peace Treaty, Bel-
gium is to be compensated for all the de-
struction or appropriation of property in-
cidental to the war. But the indemnities
cannot be immediately available in full;
Qor, if they were immediately collectible,
could they be transformed at once into
buildings, machinery, etc. In any event,
the country is confronted with a situation
characterized chiefly by a shortage both
of consumable goods and the means of
producing them.

Reconstruction Activities

A report made early in 1919 after investi-
gation by the Central Industrial Com-
mittee of Belgium showed that the condi-

tion of Belgian industries was not so un-
favorable as had generally been supposed.
It was found that most of the industries
could resume operation in part, at least,
immediately. Belts and other accessories
of the industrial plants had in many cases
been removed, but the deliberate wrecking
of plants was shown to have been nar-
rowly confined. The Germans had need
of the output of various industries during
the occupation and these had been care-
fully preserved. The greatest handicap
was found in the inability to resume
adequate operations promptly in the basic
metallurgical industries.

Transp ortation

The main Belgian railways were com-
pletely Germanized during the war. The
rolling stock which fell into enemy hands
was in general worked almost to the point
of destruction. Rapid progress has been
made in restoring the roads to a workable
condition. Considerable replacement of
equipment from German stocks has been
eflfected, and practically all the stationary
equipment has been so far restored as to

provide slow transportation of freight
about as in normal times.

An interesting project in connection
with the reconstruction of Belgian rail-
ways is the proposed electrification of the
whole system, the power to be supplied by
generating stations in the coal-producing
areas. The project has recently received
official sanction and work is expected to
proceed promptly.

Light Railways

For its size, Belgium had a larger and
more eflScient system of narrow gauge
local railways than any other European
country before the war. In many sections
rails were taken from the lines and relaid
by the Germans.
Rolling stock was
also comman-
deered.

However, the
business of the light
railways, as meas-
ured by the receipts
of the company op-
erating practically
all the lines, con-
tinued to grow
throughout the war
period. The receipts

An example of the industrial deslruclion which
occurred in Belgium during the war

were $4,543,000 in 1914, and $8,198,000 in
1918. Dividends grew year by year from
$1,172,600 in 1914 to $1,691,750 in 1918,
while appropriations to reserve increased
proportionately even more in this period
than did dividends.

Ports

The port facilities of Belgium were dam-
aged in varying degree by the Germans.
Their repair was no less urgent than that
of the railways. The work of clearing ob-
structions was undertaken immediately
upon the signing of the Armistice. Within
a few weeks navigation between the sea
and Antwerp was completely reestab-

lished, with all buoys and lights relaid.
The cargo-handling facilities of this port
are in good condition. Work at the port
of Ostend has been pushed vigorously, and
by April the harbor could accommodate
vessels of fourteen feet draft.

These examples are indicative of the
rapidity with which the transport system
of Belgium is being restored. It is char-
acteristic of Belgian enterprise that, in ad-
dition to repairs to ports and waterways,
certain improvements planned before the
war are being made at the same time.

Resumption of Industrial Activity

Inasmuch as Belgian steel and iron man-
ufactures and other allied iron and steel
products comprised
over 12 per cent, of
the total pre-war
export trade of Bel-
gium, it is necessary
for these industries
to resume opera-
tions as soon as
possible. Further-
more, as textile and
other manufactur-
ing plants have been
stripped of machin-
ery, it will be neces-
sary for new ma-
chines to be installed, and it is desirable
that the Belgian steel works should assist
as much as possible in refitting these plants.
Although the Belgian steel companies
were in a very bad way, due to the de-
struction of most of their property, several
mills could operate at the time of the
Armistice, and others have since been put
in order.

Some 10 or 12 of the largest steel com-
panies in Belgium have undertaken the
formation of a large steel corporation simi-
lar in plan to the United States Steel Cor-
poration. Each of the plants, it is under-
stood, will specialize in some particular
branch of the steel industry.

r -.^T «

iji|4H>j.f'f>'t/iv//^'«L</i'ai*«' «w»'<>%>f 't''^^'ii-'iri^fmiyjivF'<i*^iM >\i* '>^^

J35ol

^TT;

In the valley of the Lys, Belgium

There are multiplying evidences that
Belgian industrial life in general is steadily
and surely resuming a more normal appear-
ance. German prisoners have been used
to advantage in clearing away the debris
of ruined buildings and in other work.
Many carloads of machinery and fixtures
taken away by the Germans have been
returned and set in operation. And reem-
ployment of the workers at high wages has
resulted in the withdrawal of public aid
from nearly all of the 800,000 persons who
were being assisted in November, 1918.

And official reports indicate that the
yield of this year's crops will not be much
below that of normal pre-war years.

Congo

In the Belgian Congo there is an asset
which will prove of increasing importance
in the future development of Belgium's
industries. In area the colony is eighty
times as large as Belgium itself. Although
situated in equatorial Africa, its climate
is, on the whole, much more salubrious
than that of most tropical countries,
because the greater part of the country
is a comparatively high plateau.

Since the annexation of the Congo by
the Kingdom of Belgium in 1908, indus-
trial enterprise there has been concerned
chiefly with preparation for a compre-
hensive and well rounded development
of the colony through the exploitation of
its enormous resources — agricultural, for-
est, and mineral.

Among the surest evidences of a wise
preparation for the future development of
the Congo is the official recognition of the
fact that the foundation of a stable eco-
nomic life and of enduring general pros-
perity there, must be found in agriculture.
In 1910 the Government began a compre-
hensive program of agricultural educa-
tion and experimentation.

Quite naturally, the development of the
transportation system of the colony be-
gan with the utilization of the Congo
River and its tributaries, the world's sec-
ond largest river system, with about
10,000 miles of navigable water. In Jan-
uary, 1916, there were 1,165 miles of
Congo railways in operation. Important
additions to this mileage have since been
made. From the navigable Upper Congo
River it is now possible to go by train to

Coiiyieht hy Underwood & Underwood

A steamer taking on rubber at a plantation in the Belgian Congo

Cape Town in the South, and to Beira on
the coast of Portuguese East Africa, and
by train and steamboat across German
East Africa to the Indian Ocean.

The vast mineral wealth of the Congo
includes copper, tin, gold, diamonds, iron,
and coal. The chief mining interests are
the copper properties in Katanga, the
southeastern section of the colony. Only
a small proportion of the total deposits
are being worked, but the estimated out-
put in 1918 was 40,000 tons.

The colony's exports and imports in
1913 had a value of approximately
$25,000,000, and in 1916 the foreign trade
exceeded $38,000,000.

Belgium's Chief Assets
The depletion of man-power in Belgium
during the war was not as great propor-
tionately as was experienced by most of
the belligerent nations, for the sudden
rush of the invasion made it impossible to
mobilize a large number of the men of
military age.

The proved industrial capacity and de-
pendable character of the masses of the
Belgian workers are the nation's best as-
sets in the present emergency. The record
of the nation's achievements in the past
and its quiet and confident grappling with
present difficulties are the surest guaran-
tees that the Belgians can and will conquer
in peace as they conquered in war.

28]

Italy

THE definite completion of Italian
unity as a result of the recent war
affords Italy the first opportunity to use
the country's economic resources freely
in the creation of a modern industrial sys-
tem. This achievement has been made
at great cost to the Italian people, of
course. While the national debt has been
greatly increased, at the same time the
country's economic power has been en-
hanced.

The estimated vahie of the national
wealth before the war was $16,200,000,-
000; according to the estimate of the
Finance Commission for Reconstruction
in Italy, the wealth at present has a value
of 110,000,000,000 hre, equivalent, at the
par of exchange, to $21,230,000,000.

The debt of Italy on March 31, 1919,
including paper money, was 67,667,454,-
963 hre, or $13,079,918,807, of which
about three-fourths was internal. The
external debt, amounting to $3,330,141,-
784, consisted entirely of credits extended
during the war by the United States Gov-
ernment and Allies. The pre-war debt
was approximately $2,631,748,000. The
annual interest on the entire debt as
of March 31, 1919, is approximately
$577,234,230.

Currency and Financial Policy

In July, 1914, State notes outstanding
totalled $96,307,000, and banknotes $421,-
319,000. On November 30, 1918, the
State notes outstanding amounted to
$403,177,000, and bank notes to $2,238,-
221,000. At the earlier date the ratio of
metallic reserve to State notes was 26.5
per cent. The corresponding figure for
bank notes was 68.1 per cent. At the lat-
ter date these ratios were respectively 13
and 10.9 per cent.

The adverse effects of this inflation
have been greatly tempered by the adop-
tion of a sound taxation policy on the part
of the Italian Government. Additional
war taxes were imposed to meet added ex-
penditures. The success of this taxation
policy is indicated by the fact that the
ratio of debt service to revenue receipts,
which in the fiscal year 1912-13 was 23.6
per cent, fell below this figure only once
during the war; in 1917-18 the ratio was
25.5 per cent.

Signor Nitti has estimated the peace
budget of Italy at approximately 6,000,-
000,000 lire, or $1,158,000,000, which is
considerably less than the total revenue
receipts for the fiscal year 1917-18, and is
about two and one half times the pre-war
revenue receipts. In this estimated peace
budget the debt service will consume
about 50 per cent, of the revenues.

Location, Area, and Population
Italy is situated within easy access of
the Atlantic and Indian Oceans and has,
therefore, special advantages for com-
merce. Moreover, the Italian Peninsula
forms part of the shortest route from
European industrial centers to the Suez
Canal, and transportation across the Alps
is facilitated by four or five lines of rail-
way, and by well constructed roads.

The total area of Italy, without the new
accessions of territory, is approximately
110,632 square miles; the estimated popu-
lation in 1915 was, 36,120,000 people.
The war losses totalled 462,000 men.

Italy has been handicapped by its lack
of coal and iron. While there is consider-
able agricultural wealth, Italy's greatest
asset has been its population. The growth

of population was such as to give rise to
heavy annual migration, and one of the
country's principal means of increasing
the national wealth has been the receipt
of money from Italians living in other
lands.

Industrial Expansion

Italy has had a long, hard struggle to
recover lost ground in her industrial activ-
ity, in comparison with the countries of
northern Europe. Up to 1860 the best of
her energy and the lives of her sons were
sacrificed to obtain national unity. Since
1860, however, Italy has striven to regain
the lost ground, and up to the outbreak
of the war, she had succeeded in no small
measure.

Although Italy is primarily an agricul-
tural country, considerable progress has
been made in manufacturing.

The continuous economic development
of Italy is illustrated by the following
figures reflecting the first half century of
Italian unity, from 1860 to 1910. During
this period, the value of agricultural pro-
duction increased from $340,000,000 to
$1,740,000,000. Thirty years ago, the in-
dustries of Italy were but little developed,
whereas there are now approximately
150,000 establishments and factories whose
production amounts to several billions of
lire.

Between 1880 and 1913 the value of
Italian manufactures rose from $120,-
000,000 to $600,000,000. According to the
census of 1911, there were 3,000,000 Ital-
ians employed in manufacturing industries
and 11,000,000 in agriculture.

Iron Industry

The Italian iron industry is new. The
output of pig iron from the Elba mines
was 112,000 tons in 1909. In 1913 the
output was 426,000 tons. Before the war,
approximately 200,000 tons of pig iron
were imported every year, principally
from the United Kingdom. The output

of steel increased from 350,000 tons in
1909 to 1,000,000 tons in 1913.

The Italian engineering industry has
made considerable progress in recent years,
particularly in the decade before the war.
In 1913 Italy was producing all rolling
stock needed for the railways and had
begun to supply French railways with
equipment. Italian works had a capacity
for turning out 1,500 engines and 12,000
freight and passenger cars a year. De-
spite the energetic competition of Ger-
mans, the Italians had made great prog-
ress before the war in the production of
electrical machinery.

Silk and Chemical Industries

Silk manufacture has been one of the
most important Italian industries. Before
the war 175,000 people were engaged in
this industry. Exports of silk accounted
for one-quarter of the average value of
Italian exports. In the years preceding
the war the Italian woolen industry had
reached a considerable development grad-
ually emancipating itself from foreign
control and seeking new outlets for ex-
portation. About four-fifths of the raw
material was imported from South America
and Australia. Although the prices for
raw material increased about threefold
after the outbreak of the war, and color-
ing materials for dyeing became constant-
ly more scarce, the remarkable progress
achieved from 1880 to 1913 has been admir-
ably maintained during the war period.

Agricultural Production

Wheat is easily the most important
agricultural product of Italy, both as re-
gards area sown and the amount of crop
produced. It is estimated that about 34
million acres are devoted to agriculture,
and of this amount 11,700,000 are sown
with wheat. The total value of the crops
and products of Italian agriculture as a
whole is placed at $1,360,000,000, while

the value of wheat at a normal price is
estimated to be $235,000,000. As regards
other cereals, about 4,000,000 acres are
planted with maize and 2,000,000 with
rye, barley, rice and oats. Sugar beets,
hemp, flax, and tobacco take up about
one-sixth of the total agricultural area.
Another important branch of Italian

agriculture is the production of grapes and
wine. The statistics for the last five years
before the war, when Italian agriculture
was flourishing under normal conditions,
show that there were 11,000,000 acres of
vineyards, producing 979,000,000 gallons
of wine. There are also more than
3,000,000 acres planted with olives, from

One of the famous marble yards at Carrara, Italy. Carrara marble is exported
to, many countries

[311

which are obtained nearly 50,000,000 gal-
lons of oil.

Italy also raises an appreciable crop of
oranges and lemons, which are grown
extensively in southern Italy and Sicily,
and amount to about 780,000 tons a year.
Nearly 100,000 tons of oranges and about
300,000 tons of lemons are exported.
Approximately 250,000 tons are manufac-
tured into citric acid and similar products,
for which Austria -Hungary has been
Italy's most important customer, and
Great Britain the second best. For some
years before the war, there existed in
Italy a fruit-growing organization found-
ed by the Government, which has been an
important factor in the promotion of this
industry.

Undoubtedly silk-growing holds a place
next to that of wheat-growing in Italian
agriculture. The amount of raw silk pro-
duced in Italy during the years just prior
to the war was between 10,000,000 and
12,000,000 pounds, the greater part of
which was exported.

Economic Changes

During the war period, industrial
growth in many directions has been
manifest.

In June, 1914, the total normal capital
of all the limited companies registered in
Italy was approximately $1,254,500,000.
This capital had risen before the end of
1918 to $3,088,000,000, or by about 146
per cent. During the last year, alone, 540
new companies were registered, having a
capital of about $164,000,000, the greater
part of which has been invested in the
iron, steel, and engineering industries. Be-
sides, the capitalization of old companies
has also grown. Iron and steel companies,
for instance, have acquired not less than
$193,000,000 of additional capital.

Technical improvements have been
various. In 1913 the electric furnace was
virtually unknown in the production of
Italian pig iron. Today electric furnaces

are used extensively and have a capacity
of 200,000 tons.

Prior to 1914, Italy imported most of
the machinery used in the textile, beet
sugar, and paper industries, as well as
agricultural machinery, Italian concerns
are now able to supply a large part of this
equipment.

In common with other countries, Italy
experienced a marked growth in the chem-
ical industry during the last five years,
and the development of electrical power
will afford opportunity for a still further
expansion in these lines.

Engineering Skill Developed

Italy has derived another gain from her
supreme economic efiFort put forth during
the war; a gain which is less tangible than
those set forth in the foregoing paragraphs,
but one no less valuable in the future in-
dustrial expansion of the country. This is
an enhanced valuation in the eyes of the
remainder of the world of the talent and
skill which has been demonstrated by the
engineering ability displayed by the Ital-
ians in dealing with all sorts of complex
and difficult problems presented to them
in their vast war program. The produc-
tion of munitions of war, the manufacture
of aeroplanes, and the development of
shipbuilding, all in the face of great diffi-
culties, have proved that the skill and
ability of the Italians is not a thing of
tradition, but a dynamic power that can
be turned to account in any crisis. In
view of the very palpable gains in the in-
dustries of the country, together with the
newly awakened consciousness of power
on the part of the Italians, and the recog-
nition of this power by other countries,
it seems safe to assume that in the future
Italy will prove to be a forceful factor in
the world's industrial and commercial life.

Since the signing of the Armistice, Ital-
ians have been especially aggressive in
restoring trade, particularly with the Bal-
kans and the near East.

Copyriffht t>y t'nderwood & Underwood

A It limit iji'Dlt til Stctlji

Water Power

The hydro-electric power already in
use and still to be developed will be the
most important factor in the industrial
future of Italy. During the year 1917,
Italian authorities granted 54 requests for
concessions for the use of waterpower.
These concessions included 17 sources in
Piedmont, with a capacity of 62,000 horse-
power; 8 in Umbria, with 34,500 horse-
power; 6 in Lombardy, with 37,000 horse-
power; and several in Calabria, with a
capacity of 26,880 horse-power.

It has been estimated that Italian
waterpower is capable of supplying a total

of over 6,000,000 horse-power; there is in
use at present more than 1,200,000 horse-
power. Works under construction and
those definitely planned for the immediate
future will have a capacity of 800,000
horse-power. It is expected, therefore,
that in a short time 2,000,000 horse-power
of electrical energy will be employed.
More than 200 miles of railway have al-
ready been electrified.

The agricultural resources of Italy are
of far greater importance than its mineral
wealth. In any future adjustment Italy
will not need assistance in developing her
agriculture but will require good openings

and profitable markets having quick and
easy communication with the centers of
production.

Trade Expansion

While an expansion of agricultural pro-
duction will be sought, principally through
improvements in methods, rather than by
extension of the area under cultivation,
the greatest development is to be expected
in manufacturing. The abundant and
relatively cheap and efficient labor supply,
coupled with remarkable engineering skill,
will facilitate the intensive utilization of
the nation's resources for manufacturing.

During the six years from 1908 to 1913,
inclusive, the visible trade balance of Italy
showed an excess of imports averaging
about $230,000,000. This so-called ad-
verse visible balance was offset by in-
visible items. The principal invisible
items, with estimated average amounts,
were the following: return on Italian in-
vestments abroad, $15,500,000; net remit-
tances of emigrants and expenditures of
travelers in Italy, $170,000,000; and re-
ceipts of the Italian merchant marine,
$20,000,000.

During the war, the adverse visible
balance has increased, and the offsetting

invisible balance has decreased. This fact,
together with currency inflation, has been
reflected in the depreciation of the lira in
outside markets. With the restoration of
normal conditions in industry and com-
merce, however, the balancing of the na-
tion's trade account will be effected.
Tourists' expenditures and remittances of
emigrants, no doubt, will both surpass
previous records.

The continued emigration of laborers
and settlers to other countries will help
to create markets for Italian products.
Southern France and South American
countries especially will be inviting fields
for Italian emigrants. The overseas posses-
sions have an area about four times that of
Italy proper, including the accessions of
territory gained in consequence of the re-
cent war. These offer important industrial
and trade possibilities making for the de-
velopment of a great industrial nation.

Italy is well situated to serve as the
principal entre-p6t between the Far East
and Central and Southern Europe. Ital-
ians with their historic legacy of maritime
supremacy and their proved initiative will
not fail to avail themselves of the oppor-
tunity to develop Italian industry and
commerce.

The Outlook in Europe Generally

HAVING noted in some detail the
conditions now obtaining in the coun-
tries of the four chief Alhes, we may turn
again to elements in the general outlook
for these countries as a whole.

In its broadest outlines the essential
economic task of reconstruction is that of
utilizing effectively the capacity of peo-
ples of these countries to produce market-
able commodities.

One of the chief problems confronting
many of the industries grows out of the
shortage of the raw materials of manufac-
ture, and the necessity of buying some of
these abroad at a time when exchange
rates constitute a special handicap. And
the same holds true with respect to pur-
chases of materials that are needed in
order to round out the industrial plant,
by construction in some cases and repairs
in others.

We have noted that in nearly all the
countries studied there is promise even-
tually of a much reduced dependence upon
outside sources for food supplies. Raw
materials will ultimately be provided in
greater volume from domestic sources.
At present, however, Europe must look
to the outside largely for raw materials
and for markets for its manufactures.

Development of World's Frontiers

It is fortunate that there is promise of a
development in the relatively unoccupied
regions of the world which may be ex-
pected to play an important part in the
further progress of the more highly in-
dustrialized nations.

Some notable preparations were being
made for industrial expansion before the
war. Some individual undertakings, in
themselves, were of world-wide signifi-
cance. One must see these various and.

in a sense, isolated enterprises in their
interrelations to appreciate their full sig-
nificance at the present time.

Taken together they were merely the
logical outgrowth of conditions in the
leading industrial nations. The United
States, Japan, and Germany exemplified
the industrial development which char-
acterized the latter years of the nineteenth
century; and because of their relative in-
dustrial progress these countries, natur-
ally, were looking increasingly for oppor-
tunities to expand, chiefly by the exten-
sion of foreign trade and investments.
And, as a further consequence, toward
the end of this period it became necessary
also for the surplus capital of other coun-
tries, which had contributed to this indus-
trial growth, to seek opportunities in new
areas.

As a result of the war there will be an
even greater stimulus to the settlement of
new countries than was felt prior to 1914.
The war, it should be remembered, was
mainly between the most highly indus-
trialized nations, peoples whose manufac-
turing had been most extensively devel-
oped. Such nations rely largely upon out-
side sources for raw materials of manu-
facture and for foodstuffs. The extraordi-
nary pressure which will be put upon these
countries for the fullest possible output
from their factories in the period of recon-
struction should encourage the exploita-
tion of natural resources throughout the
world.

If complete recovery from the war had to
be accomplished immediately, it would be
illogical to rely extensively upon the ex-
ploitation of virgin resources in distant
places, for time is required to reap the
full results of the fundamental outlay of
capital and energy in making these re-
sources accessible. But the work of recov-

ery is to be a matter of years, not months,
and meanwhile the newer countries will be
able to assist increasingly, not merely by
producing raw materials but by providing
markets for the products of Europe's
workshops.

Industrial Expansion in the United
States After the Civil War

In this connection, it may be interest-
ing to recall the course of economic events
in this country following the Civil War.

Apparently the situation at the close of
that war might have foreshadowed a period
of serious industrial depression in the
United States. Hundreds of thousands of
soldiers had to be re-absorbed into indus-
try ; the economic and social system of the
southern half of the Republic was dis-
rupted, with most of its people literally in
poverty; the nation's money was, for the
most part, a mass of depreciated, irre-
deemable notes; prices were abnormally
high, but rapidly falling; and there was
a public debt of more than $2,500,000,000.

Instead of industrial prostration, how-
ever, there followed a remarkably prompt
restoration of apparently normal prosper-
ity. The explanation is found in the pre-
war foundations, for the expansion which
came as a sequel to the war was along the
lines previously projected — expansion
which was the natural outgrowth of the
spread of transportation agencies.

The gross volume of the country's busi-
ness multiplied threefold in the twenty-
year period between 1860 and 1880. With
the exception of a slight recession in 1869,
there was an uninterrupted gain until the
credit machinery collapsed under the
strain of the crisis of 1873, precipitating a
period of depression. But after three
years the recovery began and was exceed-
ingly rapid.

Fortunately, conditions prevailing on
the eve of the Civil War, especially in the
provision of essential transportation lines,
formed a substantial basis for continued

growth of business, and the war did not
prevent, or in great measure retard, such
development. In the crucial test of the
reconstruction period, neither currency
inflation, nor the shifting from war to
peace bases, nor the long downward trend
in prices, nor the rising cost of labor — in-
deed, not even the combination of all four
factors — proved able to stay a remarkable
industrial expansion.

Economic Possibilities of the New
Political Order

The new world political order growing
out of the war which has just ended em-
bodies economic possibilities which prom-
ise to contribute greatly to the industrial
progress of Europe in the coming years.

The burden of supporting costly mili-
tary and naval establishments has long
been recognized as a tremendous economic
sacrifice. We are not here presuming to
say they were needless sacrifices. How
many wars a high degree of so-called pre-
paredness has spared the world can never
be known. That, in some measure, it has
been responsible for a number of actual
wars has been maintained with a formid-
able array of facts.

No sort of political machinery, however,
can succeed in preserving peace indefi-
nitely if the economic influences which have
been the chief provocation of war in the
past are left unmodified. And one of the
most promising signs of the time is the
world-wide desire to eliminate these eco-
nomic causes of armed strife.

There is more universal appreciation
than ever before of the fact that the prop-
erty of a weaker people must effectively be
guaranteed against seizure by a covetous
neighbor. Once it can be established that
small and weak nations are secure, it will
no longer be necessary to play the game of
power politics in order to maintain nation-
al existence or a respected place in the
family of nations. In accomplishing this
result there will be released for expression

in appropriate directions an enormous
fund of national energy. All too often
economic birthrights have had to be bar-
tered for protection against designing
neighbors. If peace, which is impossible
without security, can be maintained, then
economic development may proceed along
natural lines. And the freedom to develop
national resources in accordance with
economic law, unhampered by the re-
quirements of power politics, would l)e a
gain of inestimable value.

While these prospective benefits, which
the new political order is expected to jiro-
vide, cannot all be immediately available,
nevertheless the mere promise of such
benefits should be eft'ective in shaping the
reconstruction programs in Europe.

Econoinic Benefits from Regrouping
of Population

Closely associated with these promised
economic benefits is the regrouping along
racial lines of portions of Europe's popu-
lation. The subjugation of peoples in the
interest of dynastic ambitions and power
politics in general inevitably curtails their
economic value to the world. The prom-
ise of an opportunity to realize national
ambitions in resi)ect of culture and ma-
terial civilization without undue restraint
will inevitably result in a fuller utilization
of the ability and resources of the liber-
ated peoples.

There are, then, for Europe, in the try-
ing period of reconstruction upon which
it is entering, mitigating circumstances of
vast significance.

But it is believed in certain quarters
that social unrest threatens disaster for
the industrial life of some European na-
tions. In part of Russia, at any rate, it
will probably require a comparatively long
time to restore order. And there may be
prolonged disorder in other parts of Eu-
rope. Food and employment have ap-
parently offered the surest safeguards
against certain classes of ,unrest, particu-

larly the unrest that is most threatening
today.

The way to protect social order in Eu-
rope, therefore, would seem to be to get
industries going and peoj)le employed,
and to increase the opportunity for free-
dom of economic action on the part of
individuals, as well as to accord to the
individual a larger share in tlie ])n)fits of
industry.

America's Part in the Reconstruction
of Europe

Our conclusions respecting the general
solvency of Europe today and the con-
fidence with which we contemplate their
future does not blind us to the fact that
the tasks which lie ahead are not easy.

But we should not forget the struggle
of the human race against the obstacles of
progress, against the powers of destruc-
tion, which have harassed it since the
dawn of time, and fall into the error of
believing that, after four and a half years
of the most heroic fighting in the world's
history, the peoples of Europe may now
succumb to the lesser danger of peace.
Such reasoning is not in accord with the
fundamental facts of human nature.

America stands in a position of peculiar
responsibility respecting the work of re-
construction in Europe.

The situation there, without reference
to our national interests as involved in
the recent war, calls for America's help.
We have a great fund of loanable wealth,
and Europe has need of the credits and
materials which we can supply. Our pro-
ductive equipment is much greater than
before the war and its proper utilization
will involve a distinct recognition of the
present needs of the peoples who sacrificed
more than we in winning the common
victory.

Revival of Industrial Will-Power
Needed

Stupendous as are Europe's financial
burdens, titanic as are its economic tasks.

.S7

one ot" its paraiiKtiiiit i)r(»lil('iiis is essen-
tially psychological. In order lo recoxcr
rapidly from the ett'ects of tlie war, Knropc
needs, (piite as urgently as it rcfpiircs
machinery and raw materials, a revival of
indn.siriaJ \riU-po\rer. We should remem-
ber that, in the final analysis, the products
of the mines, fields, and factories won the
war, and that they alone can win the
greater victory of peace. It is for the pur-
pose of enabling Europe to obtain suffi-
cient quantities of these vital products
and to regain her industrial will-power
that we must do our full duty iji the pres-
ent world crisis.

As a result of the war, we have changed
from a debtor to a creditor nation. And
having loaned to belligerents before Amer-
ica became a party to the war, when those
nations were using this credit for destruc-
ti\'e purposes, we can scarcely refuse
credits that are to be used for purposes of
construction and restoration.

The United States is abundantly
equipped to perform its proper function in

I he peace cia. Tins coiiiilry |)ro(lnccs '•JO
pcf (•♦•nt . nl" I lie world's siipplx of gold ; ^J.")
per cent, of the world's supply of wheal;
40 per cent, of the world's iron and steel;
40 per cent, of the world's silver; .50 j)er
cent, of the world's zinc; .)'-2 j)er cent, of
the world's alumimim; (50 per cent, of the
world's cotton; (>(> per cent, of the world's
supply of oil; and 1~) ])er cent, of the
world's corn. This country refines 80 per
cent, of the world's copper, and oper-
ates 40 per cent, of the worhl's rail-
roads.

Hut most valual)le of all, I lie slinmlus
which the dire necessities of war supplied
to American inventiveness, resourceful-
ness, productiveness, courage, and spirit
of adventure constitutes a national asset
which not only transcends the bounds of
material computation but challenges the
boldest imagination.

In brief, American genius, efficiency, and
common sense must aid our gallant Allies in
achieving the still greater victory of jieace.

;58

', Pamphlet ;

< Binder

', Gaylord Bros., Inc.
' Stockton, Calif.

YD 20663

M50116

THE UNIVERSITY OF CALIFORNIA LIBRARY

Internet Archive Audio

Featured

Top

Images

Featured

Top

Software

Featured

Top

Books

Featured

Top

Video

Featured

Top

Mobile Apps

Browser Extensions

Archive-It Subscription

Save Page Now

Full text of "The solvency of the allies; Great Britain-France-Belgium-Italy"

See other formats