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‘ gree.
208
pected that any belligerent would round up men who were
not part of the army and who were willing to follow their
peaceful occupations. This happened first in England.
And nobody foresaw that naturalized citizens, whose an-
cestors had acquired citizenship a hundred and more years
ago, would be deprived of their property, as happened in
Russia, and that more recently naturalized citizens, as hap-
pened in England, would be greatly interfered with in their
businessrelations. Nor was it expected that the citizens of
belligerent states living in neutral countries would not be
permitted to return to their own countries, even if they were
in no way connected with the army.
A great part of international trade was based upon invest-
ments in foreign countries. It has always been assumed that
the selling of foreign securities would be an excellent way
of providing funds in time of war. Here, too, expectations
were disappointed. The closing of the stock exchanges made
many millions of securities unsaleable. The relative weak-
ness of French finance during the war is due to that circum-
stance.
It was found, moreover, that the owners of first-class se-
curities were unwilling to part with them, despite the extra
profits offered by a falling exchange. It is true that large
blocks of foreign securities were sold. But even this does
not contribute a tightening of international credit ties; it
means a wiping out of existing debts, and with it the curtail-
ment of that share of international trade which was due to
payment of interest. , ' . g
We are about to observe that “nationalization of capital"
which before the war was advocated strongly in France and
to a lesser degree in Germany. For the breakdown of stock
exchanges at the beginning of the war is not the only argu-
ment against foreign investment. Many securities in the
London and in the Paris stock exchanges, some of them Eng-
lish, but many foreign, were the property of foreigners. To-
day all such property belonging to “alien enemies" is with-
held from its owners.
Blow to Investors.
The interest in American or Brazilian railway bonds listed
in London is paid to a trustee, but not to the owners. On
the other hand, the non-payment of Turkish and to a certain
extent of Austrian coupons is a very severe blow to French
investors. It seems to me that the war has shown the dan-
ger of international interdependence to an unexpected de-
European economists discussed this problem long be-
fore the war. I think they underrated it. They reckoned
with a war of short duration, and they expected the neu-
trals to be strong enough to prevent the disturbance of neu-
tral trade. In both respects, they have been mistaken.
Part of that interference is no doubt illegal, as put on rec-
ord by the United States government. Though these rec-
ords state the facts, they do not alter them. If we cannot
prove to ourselves and to the world that this war is the last
war possible, resumption of normal trade relations will be
possible only if nations take these experiences into account.‘
The danger of dependence to-day is felt by all nations,
though not to the same degree. The strain is the least heavy
in England, though even she feels it. If the index number
for grain and meat, which was about 580 in 1913, has risen
to 834 last October, that fact was due partly to a shortage
of tonnage and partly to the absence of Russian and Rou-
maitiian supplies, which no control of the sea could make
up or.
England draws a great many of her supplies from abroad.
So long as the war goes on she cannot pay for them in goods.
She must part with gold, or with securities, or contract loans
which will nullify the benefits of former foreign investments.
She cannot commandeer these goods in foreign countries and
she is obliged to pay exploitation prices for them. The con-
tinuation of these supplies depends upon the good will of for-
eign nations. .
Moreover, her present immunity from interruption of com-
munications depends only partly upon the strength of her
navy; it depends partly upon her geographical position with
relation to Germany. Britain's freedom from serious attacks
and her opportunity for an attempt to enforce a policy of
starvation is due to an alliance. In a purely Anglo-German
confiict, England could never have adopted such a policy.
And alliances between ambitious world powers are no basis
for permanent security.
England, however, has no choice; she must rely upon over-
sea supplies. She is an island accessible from all parts of
the ocean. Even a superior navy hardly could blockade all
her coasts. She cannot hope to maintain a growing popula-
tion, which even to-day is almost the densest in Europe, on
two small islands. She will have to rely upon the continua-
tion of outside supplies. But she will have to lessen those
dangers by shifting her base of supplies to her colonies.
Why should she again in the future become dependent
upon Russian grain supplies or German sugar, or upon the
good will of neutrals in furnishing supplies to her, while
ISSUES AND EVENTS
she hampers their trade? To have achieved such a feat once,
without being punished for it, is enough for any wise na-
tion. And she rather severely feels the strain of having to
continue an export trade with neutrals, for fear of losing mar-
kets at ,a time when she ought to be using all energy at home.
Imperial ‘Federation. ' .
Some of these dangers can be lessened by bringing about
a form of imperial federation, as outlined by the late Mr.
Chamberlain. In the British dominions a nationalization of
British labor and capital may be brought about to a degree
approaching the ideal of a self-sufficient state. Financial and
political reasons, which hitherto have worked against that
scheme, will favor it now. Of course, the inter-imperial com-
munications are sea communications, too, and open to hostile
attacks.
It may suit England, when peace is established, to adopt
the principle of free seas. But even if she does not do so she
has learned from her own experiences that the legitimate
connections between neutrals and belligerents may be cut
without any risks of punishment. That being so, inter-
imperial trade is not more subject to foreign interruption
than international trade.
The most severe consequences of the war's influence upon
international relations have been borne by Germany. Three
of hr neighbors have closed their land frontiers against her.
Her unfavorable geographical position, with no really open
outlet to the sea, put her oversea trade at England's mercy.
Her neutral neighbors are too weak to be able to enforce
their neutral trading rights. Until lately she has been cut
off from most of her foreign sources of supply. She was,
of course, less dependent upon foreign supplies than England.
Her territory and that of her Austrian ally is almost four
times the area of the United Kingdom, while her population
is not quite three times as large.
She has been able to go on, notwithstanding all pressure;
but her present achievement does not give any guarantee that
she will be able to stand a similar ordeal in later times, when
her population may be double its present numbers. Perhaps
the terms of peace will establish the principle of the open
sea, making the policy of starvation more illegal than -it
is to-day.
Will the guarantee obtainable do away with all danger?
If such is not the case, Germany must achieve economic
security on a broad continental basis. A commercial federa-
tion between Germany, Austria, the Balkan states and Tur-
key can lay the territorial foundation upon which a policy of
self-sufficiency or a broad continental basis will be possible.
Co-operative Federation.
This was an old idea, pronounced many years ago by Fried-
rich List, in the days when Austria and Turkey were contigu-
ous neighbors. But even such a broad territorial expansion,
based not upon domination, but upon co-operation, will not
bring about complete self-sufficiency. Self-sufficiency is pos-
sible only when all goods essential to a nation's life can be
found within its confines, and that in suliicient quantities.
No territorial expansion fulfills this condition. Even a com-
rnercial federation reaching from the North sea to the Per-
sian gulf would not produce all commodities in the quan-
tities wanted.
But. a new movement has been gathering speed-a sys-
tematic substitution of national goods for imported com-
modities. It began more than a hundred years ago, when
beetroot sugar took the place of cane sugar; it achieved a
significant triumph when synthetic indigo took the place of
the natural product. During the war great progress has
been made. Nitrate made from the nitrogen of the air, and
later on from ammonia, has taken the place of imported
nitrate. A nitrate monopoly is prevented by the German
government to prevent the swamping of the industry after
peace is made. Natural rubber is being supplanted by artifi-
cial rubber. This movement will go on after peace is made.
Moreover, the war has given the warring nations a statisti-
cal knowledge of their business life which they never pos-
sessed before. This knowledge has developed socialization
to an unexpected degree. Production and consumption are
brought to a common level, no longer by marketing, but by
organization.
Capital and labor will ‘be. directed toward the industries
where.they are needed; limitation of quantities will be ap-
plied in coiiiunction with the old-established machinery of
custom tariffs and railway rates. A system of differential
taxation, such as that imposed by Germany's levy on war
profits, will make it impossible for the nation's necessities
to be exploited as the source of unjustifiable gains.
For essential articles which cannot be produced at home
the. government will create importation monopolies, such as
Switzerland has.established in grams, and government store-
houses may again be the order of the day. Labor and capi-
Ealfgvill be nation'alized to a much greater, degree than ever
e re.
These movements cannot be restricted to one nation. If