nomic after-consequences of war-as had seemed to be the picture in 1921-the case would be simple enough. But why should the United States have subsequently entered on an era of industrial prosperity surpassing any precedent of pre-war days, while all other countries (not excepting states that were neutral from 1914 to 1918) were laboring with the problem of trade depression? The British Commission's Report THE British Government sent an industrial commission to study the question by investigating American trade and industry on the spot. Its members, highly expert representatives of both capital and labor in Great Britain's industry, after spending three months in personal examination of our manufacturing plants, reported to the British Government their conclusions as to the reasons for our quite exceptional prosperity. Briefly summarized, their report cited "mass production," concentration of manufacturing plant, the country's vast natural resources, a great home market not handicapped by internal tariffs but segregated from competing foreign manufactures by a high external protective tariff, cheap electric power, the Prohibition Act, and the excellent relations between capital and labor. Most, if not all, of these conclusions will be recognized by Americans as correctly describing certain visible advantages of our industry, and perhaps as presenting the contrast between that industry and England's. Yet it could hardly be so readily conceded that the conditions cited were adequate explanation of the present era of American prosperity, as compared, for instance, with 1921 and 1922, or with our numerous industrial vicissitudes before the war. The home market and the country's natural resources existed long before this industrial generation; so did free trade between the States and protective tariffs against the outside world; but we were not thereby guaranteed against pre-war periods of prolonged industrial depression, in which we had to be helped out by a more prosperous Europe. Industrial concentration and mass production came into full-fledged activity in 1901 without interrupting frequent and severe reaction in the subsequent decade and a half. AS Views of American Experts S against this English point of view, the same question came up for discussion by certain high American experts in the retrospect invited by the tenth anniversary of our entry into the war. The question then arose, what had been the influence of the war itself, and of our participation in it, on American prosperity since the war was ended. Secretary Hoover took very positive ground. The war against Germany, he believed, was a just war and it was right and necessary that the United States should have joined it. But, so far as concerned the direct influence of the war in creating prosperity for the United States or any other nation, "everybody lost economically from it." Modern war, he proceeded, "has no economic assets, it is all liabilities." The American people have, to be sure, "made the most remarkable recovery of all nations engaged in the war," but we also "lost fearfully by it, and we are still paying the penalties of it." This judgment would appear, on the face of things, to be based on the period of our own belligerent activities; for it would be difficult to prove that the United States lost ground economically during its (Financial Situation, continued on page 59) Announcing GRAHAM BROTHERS CORPORATION NEW YORK A financial organization of broad GRAHAM BROTHERS CORPORATION ONE EAST FORTY-FOURTH STREET NEW YORK (Financial Situation, continued from page 57) period of neutrality. Every test indicated the immense economic power and fortune which accrued to us because of our peculiar position at that time. We know now, on the testimony of industrial and banking statistics, that the great and lasting change in the American position, from that of a debtor nation largely tributary to Europe to that of the whole world's creditor, occurred not only (as used sometimes to be asserted) because of our manufacture of war munitions for the Entente Allies, but because we captured a wholly unprecedented trade in goods for ordinary uses with neutral nations for whose needs England and France and Germany could no longer provide; also because, as the only nation in the world which had retained gold payments and a non-depreciated currency, the United States had become the banking depository for the surplus funds of the outside world. We were not able to maintain that position unshaken after our own declaration of war. It is possible, despite evidence of individual prosperity in many directions (notably with labor, for which demand vastly exceeded supply), to argue that in 1917 and 1918 the country lost ground economically. It certainly had to suffer terrific readjustment two years after the war ended. more powerful." This cumulative power, he believed, was enough to have insured very great postwar prosperity despite "the thirty or forty millions of dollars which were poured into the pit of war expenditure and lost forever." The theory embodies the assumption that the United States would in due course have attained in any case the commanding economic position which it now occupies, and would possibly have gained it all the more quickly if there had been no war. There is something to say for this idea. America's place in international finance and industry had changed very rapidly in the two decades before the war. As long ago as 1898 European manufacturers were talking of the "American invasion"; in 1900 and 1901 the American markets were redeeming foreign holdings of their own securities and making large loans to Europe. The possibility of New York's eventually disputing London's place as the world's money-centre was then entertained by many minds, not only in America but in Europe. The incalculable natural resources of the United States, its absolute command of raw material for the world's cotton trade and what was then believed to be its command of the grain trade also, its successful entry into the field of mass production in iron and steel, its thrifty and rapidly increasing population and, therefore, its accumulating wealth, might readily have been assigned as pointing, even a quarter of a century ago, to capture of the leadership in both finance and industry. It is true that, during and after that period, the gravely defective American banking and currency system was commonly assigned as the barrier to such achievement. But in 1913, when no one thought of the European War, the defects in that system had been completely and (Financial Situation, continued on page 61) Puritan 6% Bonds Have always had and always will have ONE Security, an absolute, closed first mort- TWO- Independent, conservative appraisals by THREE-Independent Corporate Trustee: a strong FOUR- Independent guarantee of completion by FIVE- Independent architectural and engineer- PURITAN BONDS ARE SOLD THROUGH Full Information on Request THE PURITAN CORPORATION GRAYBAR BUILDING, Lexington Ave. at 43rd St., NEW YORK finally eradicated by the Federal Reserve Law. From 1914 to 1927 that law would have been exerting its beneficent influence on American finance, even if the period had been marked by world-wide peace. The Position in 1914 THE question, what would have been our own economic history during that period had there been no European war, cannot be confidently answered. All that we positively know is that American trade and industry were not prospering on the eve of the European War, and that the aspirations of international achievement, so confidently expressed in 1901, had been almost entirely relinquished. The American market was not only still indebted to foreign countries on $2,500,000,000 American securities held by foreign investors, but it was increasing its foreign borrowings. The New York Central Railway in 1913 had to go to London to raise a $10,000,000 short-term loan, for which the home market was not receptive; the city of New York borrowed $80,000,000 from London and Paris bankers. So far from occupying a dominant position in foreign trade, our imports of merchandise during the first half of 1914 exceeded exports for the first time in twenty years, the import surplus in five months reaching $39,000,000. So far from controlling the foreign exchange market, we sent abroad in the twelve months ending with June, 1914, $45,000,000 more gold than we received. When the war itself broke out in August, the consternation which seized upon the American business community was based not only on the prospective destruction of our export trade, but on our helpless position as a debtor nation whose obligations to Europe, enforced by the creditor, might mean economic bankruptcy. The first consideration to observe is that the American market even then stood up against the storm. Its banks arranged to provide gold against all legitimate demands by foreign creditors. It refused to resort to moratoriums or to government guaranty of private credit, and it met all maturing liabilities as they accrued. Let us observe that this was done not only before the huge European war-munition orders were placed in the American market (which occurred only toward the middle of 1915), but before the new Federal Reserve system was in operation. There must certainly have been an unsuspected accumulation of economic power which no other community possessed, which was not at the moment imagined even by most Americans to exist, and which was called into action only by an extreme emergency. IT is possible, therefore, to picture an eventual rise of the United States to a dominant position in the world's finance and trade, even without the abnormal demands on our resources created by the war. The process would have been gradual; the country might not even now be far on the road The Actual to a commanding international position, Result but the logic of our own economic development pointed in that direction. The abnormal circumstances of the war so far intensified the underlying forces making for such a change as to remove all obstacles to quick achievement. The foreign indebtedness, whose redemption might in the ordinary course have occupied decades, was extinguished in two years with the proceeds of Europe's war-munitions purchases, and, with the unprecedented demand on our productive facilities, the resources of American capital came into full play. (Financial Situation, continued on page 64) Milestones T HE history of the Common- Representing this company and other utility UTILITY SECURITIES 72 W. Adams St., Chicago |