kets for one another, and that as a result the international disruptions of industry in each country have reciprocal consequences. In similar fashion domestic business relations become largely shattered in consequence of the dislocations of industry. Ordinary trade channels are disarranged, and business relationships that had been gradually developed in normal. times are disrupted. Modern business depends largely upon established connections, which will assure an adequate supply of raw materials or stocks of goods and an adequate market for the sale of goods. That business is most profitable which can develop the largest measure of assured control over the factors incident to its organization. Now, a protracted war such as the present breaks down these organized connections. At the conclusion of peace, therefore, the obtaining of an adequate supply of basic raw materials will in many lines be attended by great uncertainty, and erstwhile markets for finished product, except in staple lines, will have to be developed anew. It goes without saying that recuperation must be relatively slow and uncertain.

In connection with the foregoing illustrations the reader must bear in mind that we are speaking not of what would happen in this country if peace were declared now, for the United States has not yet become fully mobilized for war. We are speaking of the condition of affairs that already obtains in most of the countries of Europe and of the condition of affairs that will obtain in this country if the war continues for several years. It should be borne in mind also that we have not been endeavoring to make an exhaustive study of the situation; we have merely been suggesting a few of the problems of industrial readjustment and the nature of the task which will confront us at the end of the war.

The inference from the foregoing is that the close of the war may well be followed by business stagnation. The argument has no doubt been in the mind of the reader, however, that in consequence of the great destruction of capital during

the war there will be an enormous demand for labor after the war to be used in the reconstruction of industry. There is a prevailing opinion, in fact, that for several years after the conclusion of peace there will be a great release of pent-up industrial energy that will mean a period of booming times and great prosperity. The danger of depression and unemployment would appear, therefore, not as a problem immediately following the war, but after a few years, when reconstruction has been completed.

Now, there is no more dangerous fallacy than the notion that a need for the rebuilding of the capital equipment of the nation is a certain guaranty that it will be promptly undertaken. As business is at present organized, individual gain is the incentive or motive force to industrial activity. Since the prospect of gain is linked with sales quite as much as with cost of production, the business manager must look to the demand side of his problem; he must be sure that the demand for his produce will be adequate to warrant the additional output that is contemplated. This applies not merely to the production of goods by existing establishments; it applies equally to the building of new factories, machinery, etc. What reason have we to expect that business managers, speaking generally, will find an effective demand for the produce not only of existing factories, but also of the additional factories which are in contemplation after the war? The demand for produce comes from the purchasing power of the people. If this purchasing power has been reduced as a result of the war, it is obvious that the effective demand for a rapid rebuilding of industrial establishments will be wanting. It must not be forgotten that the question that the business manager asks is always, Will it pay? In facing the question whether the purchasing power of society will have been reduced as a result of the war, it is only necessary to refer to the preceding analysis showing the enormous destruction of capital goods that has taken place. The costs of war are always of a material sort,

and an enormous reduction in the capital equipment and the producing power of society inevitably carries with it a reduction of the purchasing power of society en masse. To argue that society as a whole will have as large a purchasing power at the conclusion of peace as before the war would be to argue that the diversion of the industrial energy of the world for a long period of years to the work of destruction rather than to the work of construction does not involve any social

consequences.

The notion that the war will be followed by a rapid business revival reflects the fact that former wars have often been succeeded by periods of great industrial activity. As indicated earlier in this paper, however, the present war is essentially different from such wars as the Franco-Prussian War and our own Civil

War. The history of the South after 1865, nevertheless, gives us a different story. The Civil War, so far as the South was concerned, was like the present in that importations of war materials were inconsiderable owing to the effective blockade maintained by the Northern fleet; and that in consequence the materials for fighting had to be almost exclusively produced by the Confederate States themselves. The end of the war showed the Confederacy industrially paralyzed, and despite the fact that the Southern States were not organized on a highly specialized and complex industrial basis, and notwithstanding the fact that there was only a sparse population spread over a large agricultural area, it was many years before the South recuperated from the effects of the war.

Is there, then, no escape from a period of unemployment and of industrial depression in the years which follow the war? If the system of private enterprise conducted for profit results in a retarded industrial recuperation; if the dislocations of industry and business relationship, coupled with the reduction of purchasing power on the part of the masses of society, lead business men to hesitate and delay reconstruction through fear that it will not pay, we shall find ourselves enmeshed

in an industrial dilemma, a tremendous need for industrial reconstruction on the one hand, and a lack of effective incentive thereto on the other.

It would appear that if we are to avoid a period of industrial stagnation and of great industrial unrest and agitation after the war, some other incentive than that of private pecuniary profit must be resorted to for the reconstruction of industry. We have seen that the risks that private industry must take are so heavy as to prove a serious deterrent. Some means must be found whereby the Government will act as an underwriter of risks incident to rehabilitation for peace. There are various ways in which the Government might act as the directing agency in reconstruction. The Government might give employment directly to laborers by putting them to work in the construction of public works, railroads, factories, what not. The war is developing a precedent for governmental activities which might well be used, at least for a time after the conclusion of peace, in an endeavor to minimize the dislocation attending demobilization. Or the Government might guarantee reasonable profits to business men who will build factories for peace purposes, just as they have guaranteed during the war reasonable profits to those who will undertake the production of war supplies. This is not the place to discuss in any detail the merits of these or other proposals that might be made. The purpose here is merely to direct attention to the possibility, if not necessity, of supplanting at least in considerable measure during the period of reconstruction the private profit method by a method of social control.

In the preceding pages we have been considering only one phase of the problem of reconstruction after the war, and even with this phase the aim has not been to present conclusions of a positive nature, but merely to suggest what seems to the writer a not improbable state of industry at the conclusion of peace, and to raise the question as to the need of a national policy

of reconstruction. Possibly the tentative. analysis of the industrial situation that has been made is faulty. But whether it is or not, it would appear that the problems of industrial rehabilitation must be given the most thoroughgoing study if we are to minimize the difficulties and evils attending demobilization.

The problem of replacing destroyed capital, moreover, is only one of the innumerable new problems that the war will have ushered in. Among these problems, to mention only a few, are the following: the position of women in industry, the training and placing of disabled soldiers, wage standards, hours of work, restriction of output, arbitration of labor disputes, copartnership, profit-sharing, social insurance, scientific management in relation to labor, the great problem of industrial relations, industrial education, technical training for managerial positions as well as for the vastly extended field of governmental activities, training and experimentation in research work, the development of a constructive foreign trade. policy and the elimination of needless duplication and waste both in production and marketing. The list might be indefinitely extended. The solution of these problems will require the development of a trained body of men who will come to their tasks with an appreciation of the complex nature of the modern industrial world and who at the same time will endeavor to work out their problems with a view to promoting national, as distinguished from sectional, group, or individual interests.

Thus far the United States has given scarcely a thought to the problems of reconstruction. This is in part due to a certain timidity lest any mention of "after the war" be construed as a species of proGermanism. But we may as well accept

the fact that the war is to terminate sometime, just as all wars, have eventually ended, and we may as well face the issue that unless the United States begins now to develop a program for demobilization, the close of the struggle will find us unable to cope successfully with the delicate problems of transition from war to peace as the outbreak of the war found us ill prepared for the responsibilities of war.

It is significant to note that England, Germany, and France have not been letting the grass grow under their feet, even though bearing the enormous strain of the war itself; they are laying now the corner-stones for the economic structure of the future. In England alone a large number of volumes and literally scores of articles and pamphlets have appeared in the last two years dealing with problems of reconstruction in their manifold aspects. The Government itself very early in the war looked ahead to the task of reconstruction and appointed a reconstruction committee to devote itself to a study of the problems of the future.

One can excuse the shortsightedness of the American nation in not having given any advance thought to the problems involved in mobilizing the nation's resources for war, because it was not generally believed that war was inevitable, and because preparation in advance could easily have been politically misconstrued. But there can now be no excuse if the United States does not at once prepare to meet the problems of demobilization and reconstruction; every one knows that eventually peace is inevitable.

"The tumult and the shouting diesThe captains and the kings depart

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