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about one-third of this total. It is also estimated that the present daily cost of the war to the Entente Allies is $105,000,000, Great Britain's share being $25,000,000, that of France $18,000,000, and of Russia $16,000,000. The balance is divided among Italy and the lesser powers.

Here is a table showing the approximate public debt of the principal belligerents before the war and their estimated debts at this time. For the sake of simplicity the figures are given in round millions: Public Debts of the Belligerent Nations

Aug. 1, 1914. Present.

(Approximated.) (Estimated.) United Kingdom. $3,485,000,000 †$18,000,000,000 France

6,607,000,000 *18,500,000.000 Russia

4,537,000,000 13,000,000,000 Italy

2,836,000,000 4,600,000,000

$17,465,000,000 $54,100,000,000 Germany

$5,198,000,000 $12,000,000,000 Austria-Hung'y. 3,970,000,000 4,230,000,000 Turkey

640,000,000 360,000,000

$9,808,000,000 $16,590,000,000 *Includes advances from the Bank of France.

On Dec. 13 Chancellor Law asked Parliament for a new war credit of $2,000,000,000.

From the above table it will be seen that, even should the war end immediately, the belligerent nations of Europe must pay interest on a combined public debt of something like seventy billions of dollars. It is futile to estimate what this total may grow to before the war actually does come to an end, but some statisticians, taking Aug. 1, 1917, as an arbitrary date upon which to base their calculations, have placed the figure at $86,500,000,000.

Debt Too Vast to Comprehend These figures are so vast that one finds it difficult to comprehend their meaning,

Such a sum, for instance, would be more than twice the estimated value of all the farm lands in the United

It would be more than three times the total outstanding capital of all the railroads in the United States, and over seventy-five times the capital of all the national banks in the United States. The United States Steel Corporation, the largest corporation in the world, with its

$1,300,000,000 of capital, loses much of its impressiveness when mentioned in connection with such a sum.

At this writing the direct loans made in this country to Great Britain total above $1,100,000,000, which, of course, includes Great Britain's half share of the Anglo-French loan of $500,000,000. This, it must be remembered, is an external debt, and therefore it takes precedence of all internal borrowings, not only in a legal or diplomatic sense, but also from the point of view of the economist.

The external indebtedness of a nation differs from its internal indebtedness in the same manner as the debts of an individual in his own household differ from those which he has contracted among comparative strangers. If you owe a sum of money to a member of your own household the chances are the indebtedness does not rest very heavily upon you. In all probability your creditor will not push you for payment, or is likely to incur some obligation to you in the future which will square the account.

To carry the simile a little further, suppose this member of your household should charge you a rather high rate of interest on the debt. In such a case, in order to help us with the comparison, let us suppose that you are in a position to increase the rent of your creditor, and thus prevent his interest charges from running up to unwieldy proportions. The comparison is far-fetched, perhaps, but it illustrates, to some extent, the position of a nation which has a large indebtedness among its own people. If it must pay out vast sums in interest charges it must necessarily increase its taxation proportionately. Of course the holders of its bonds and therefore the recipents of its interest are not literally the same people as those which will be taxed to meet the interest charges, but although the money is collected and paid out by the Government, it does not go out of the country. It is kept in circulation by a sort of endless chain, a far heavier chain perhaps in war times than normally, and one requiring much more skillful handling by financiers than the ordinary chain of peace times.

States.

or its equivalent, while the higher classes waxed wealthier as wars were waged. It is not saying too much to declare that these conditions are directly reversed to

The present struggle is not only costing the upper classes of Europe dearly

in blood but the cost of the war is falling

So much for the internal loans of a Government on March 31, 1914, which is Government. It is only by the process the end of the British fiscal year, stood of some such homely simile that we can at £707,654,101, or $3,500,000,000. Durconceive of the ability of any Govern ing the first two years of the war the ment to pay interest on its war debts, United Kingdom alone, without taking even those of previous wars, which will British colonies into account, borrowed be far eclipsed by the war debts in for war purposes about $12,000,000,000. curred during the present one.

By August 1, 1917, the public debt of War Bonds in America

Great Britain will in all probability have

progressed to approximately twenty Now, the external debt is a different

billions of dollars. Obligations conmatter. The nation which incurs one

tracted by the entire British Empire, knows that no sentiment enters into it.

which includes Canadian, Australian, and It is like a note discounted at the bank; it

Indian loans placed since the war began, must be met at maturity. Moreover, un

are rapidly reaching the imposing total less the debtor nation can sell sufficient

of fifteen billions. goods to the creditor nation to create a

It is obvious that the cost of this trade balance in its favor, it must meet

gigantic struggle is going to superimits obligations in cash, which means gold. Not to do so would mean national dis

pose enormous sums to the present nor

mal national indebtedness of the bellighonor, loss of credit, and most likely war.

erent powers. But it must not be supIn a sense, however, and this point

posed that the entire cost of the war will seems to me to be an important one, a

be financed by increasing the national large proportion of Europe's borrowings

debts. in this country are not, strictly speaking,

England, especially, is making

every endeavor to “ external debts. In the case of the United

pay as she goes."

Taxation is meeting a very large proKingdom, for instance, the only real ex

portion of the cost of the war, the internal debt is Britain's share of the

come tax alone ranging from about 1 Anglo-French loan, $250,000,000. Her

per cent. on small incomes to 4142 per other loans are on collateral borrowed

cent. on large ones. Besides this there from her own people. If I borrow a

are various taxes on business profits, thousand-dollar bond from you to use as collateral for a loan of eight hundred

corporations, &c., and especially the tax

on munitions profits, which must, in the dollars at my bank, I am technically the

end, prove very remunerative. debtor of the bank, but my real debt is to you. Similarly, the British Govern Shifting Burden to the Rich ment's real creditors, in the matter of

Viewing the entire matter from a its secured notes, are those who have

somewhat academic position, it is well loaned their stocks and bonds for col

worthy of note that as civilization has lateral. As a matter of fact the owners

progressed a very perceptible shifting thereof hold the obligations of the Brit

has taken place as regards the burden ish Government, which is obligated to

of warmaking. It is quite evident from pay interest in addition to that which

the study of ancient history, and even of accrues to the various securities. In

feudal history, that the cost of war in the sense that American bankers may

earlier days fell almost entirely upon demand payment of the United Kingdom

the people of the lower social strata. notes when they mature, they constitute

They paid not only in blood but in money an external obligation, but viewing the owners of the collateral upon which they are based as the real lenders to the Government, they are internal. Great Britain's Total Debt

day. Apart from certain so-called contingent liabilities which need hardly be considered here, the total debt of the British

more

it

is

war.

far

heavily upon these classes than such an extent that they may never reUpon the people. For at least a cover, Certain classes of people must decade previous to the war the whole lose financially that other classes may trend of British taxation has been in gain. But all the vast sums which are favor of the people, and this tendency being reckoned on as the cost of war are has been greatly emphasized since the by no means total losses. Much of the

This is in accordance with the money so spent goes back to the people. modern spirit. European democracy is England, be it remembered, has had her willing to fight, but it will not pay. war brides ” and her war-time prosEuropean aristocracy must not only fight perity. We are apt to picture England in but it must pay as well.

our mind's eye as making war so vigorIt would appear that the burden of ously that she has no time for anything future taxation in Great Britain is bound else. It is exceedingly interesting, thereto fall upon the wealthier classes. Under fore, to study the comparison of Great Lloyd George and his associates the Britain's imports and exports for the wealthy had been taught that it is its first nine months of 1915 and 1916, reduty and privilege to obey the rhythmic spectively. These figures are culled from injunction of Mr. Kipling and “Pay! The London Economist of Oct. 14, 1916, Pay! Pay!” During the present con and they do not, of course, include imflict no murmur of dissent has reached

portations of war materials for the use these shores at least, and in the present of British armies in the field. It should wave of patriotism, engendered by the be noted also that the figures given are national crisis, it is scarcely conceivable in pounds sterling, and not in dollars. that any wealthy Englishman would

NINE MONTHS ENDED SEPT. 30. venture to complain when nearly 50 per

1915.

1916. Inc. or Dec. P.C.

Imports. £643,812.337 £704,044,617 +£60,232,280 9.3 cent. of his income is demanded of him

Exports.. 283,091,686 379,328,938 +96,237,252 22.9 in taxes, while his brothers are yielding Re-exp'ts. 75,619,886 76,865,079 +1,255,193 1.6 their life blood in the trenches.

Import The enormous expenditures of a coun

balance.£285,100,765 £247,840,600 – £37,260,163 13.0 try at war may be rather aptly compared

It is natural that we should consider to the losses of a group of friends who

the financial future of the United King“sit in " to a friendly game of poker

dom as the key to the situation so far as with each other one night a week all the

the other two great powers of the Entente year round. If all their losses at these

are concerned. As regards France, there friendly games were added up, the re

is an undercurrent of confidence as well, sult would be rather terrifying to people

based on the known frugality of the of moderate means, but such a compila

French people, the strength of the tion is rarely made. Moreover, the half

French banking system, and the remarkdozen friends who play poker with each

able achievements of that nation in disother weekly usually end the year without

charging the enormous burdens imposed serious financial catastrophes on the part

upon it by the Franco-German war. of a ny of them, and the secret is that they play with each other regularly. The

The Finances of France money which A wins from B and C one The Bank of France, founded by Nanight will, in all probability, find its way poleon in 1800, has long been regarded by back to B and C a week later; and so it financial students as the model national goes.

The chief winner of the season, banking institution. It is, like the Bank perhaps, gives a dinner to his friends, of England, privately owned, though difand th us equalizes matters. No one is fering somewhat from the English bank very much better off for the season's in its relations with the State. playing, and no one very much worse. During the Franco-Prussian war the The Losses Not Nel

bank advanced to the State about $300,is, to a certain extent, in the case of

000,000. This necessitated an increase in a country at war. Certain lines its note issues of some 1,300,000,000 stry must suffer, it is true, to francs. By 1879 the advances of the

So it

of indu

bank had all been repaid, having been funded by the sale of French Government securities.

The manner in which the enormous burdens of the war of 1870, to which must be added the staggering war indemnities imposed by Germany, were met, will always serve to inspire confidence in the financial resources of the French people. The increase which followed in the public debt of France was about eighteen billion francs, bringing it up to about thirty-one billions. On Aug. 1, 1914, the public debt of France was 32,787,000,000 francs.

As in the case of the Franco-Prussian war, the war expenditures of the French Government have been met primarily through advances from the Bank of France. In both cases the bank was authorized to increase its note circulation.

That French industry and commerce is regaining rapidly any ground which it may have lost in the midst of its time of trial may be seen from the following report of its imports and exports for nine months to Sept. 1, 1916, which parallels the table of British imports and exports quoted above: FOREIGN COMMERCE OF FRANCE DURING THE FIRST NINE MONTHS OF 1916 (From L'Economiste Francais, Oct. 21, 1916.)

IMPORTS
First Nine First Nine Difference
Months, 1916. Months, 1915, in 1916.
Francs. Francs.

Francs. Articles of

food ......2,152,793,000 1,793,735,000 +359,058,000 Material needed for

manuf't'e.2,987,613,000 2,280,538,000 +707,075,000 Manufact'a articles ..2,241,002,000 1,733,118,000 +507.881,000

an

The Situation of Russia Russia presents to us the greatest mystery of all the warring powers because we know so little of her normal methods of financiering. We know, of course, that, unlike either Great Britain or France, she has been unable to continue her normal export business, and that, consequently, the trade balances have been heavily against her during the last two years. In normal times her excess of exports greatly exceeds her imports. In 1912, for instance, this excess was over $179,000,000. In 1913, it was over $75,000,000. In 1915 the balance against her was over $369,000,000, and for the first eight months of 1916 it was more than $520,000,000. But Russia's resources are great. With an estimated population of 174,099,600; with an area of 8,417,115 square miles; estimated national wealth of between fifty and sixty billions, and annual production approximating $7,725,000,000; with its vast areas of uncut forests; with its agricultural resources, as yet scarcely developed to a fraction of their possibilities—it would seem that the Russian Empire can face the future with confidence, even though confronted with the payment of interest on an abnormal public debt.

The estimated present debt of the empire is about one and two-thirds the normal annual production, and the amount per capita equals about $75, which is small when compared with the per capita debt which the other great powers will have to face.

Russia has made two loans of $50,000,000 each in the United States, and large advances have been made to her by both the British and French Governments and by bankers of both of those powers. Only a small proportion of her war debt has been funded as yet, the expenses of the war being met by advances from the Bank of Russia, Treasury bills, and the loans mentioned above. Some idea of the tremendous resources of Russia may be gained from the following figures, which show the revenue and expenditure of the Government, not including the extraordinary expenditures of war, for the last four years, together with the esti

Total....7,381,408,000 5,807,391,000 +1,574,017,000

EXPORTS
First Nine First Nine Difference
Months, 1916. Months, 1915. in 1916.
Francs. Francs.

Francs. Articles of food

311,772,000 405,400,000 93,628,000 Material

needed for

manuf't'e. 505,881,000 470,032,000 + 35,849,000 Manufact'd

articles ..1,519,438,000 1,184,171,000 +335,267,000 Parcel post. 178,972,000 119,828,000 + 59.144,000

Total.....2,516,063,000 2,179,431,000 +336,632,000 of which 6,640 francs were for parcel post containing silk fabric and silk floss. The corresponding figure for 1915 was 4,884,000 francs.

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