The Washington herald., 1915-03-20
The War and Political Economy.

KNOW, d magazine wholly devoted to financial and
economic matters, there is renewal of the dis
cussion started last year regarding the effect OF
the great war in Europe upon permanent financial
and business conditions in this country. Prof. S.
y. Patten, who holds the chair of political
economy at the University OF Pennsylvania, main
taIns as he did in similar article written for the
magazine several weeks ago, that the is bound
to do not ONLY great harm to the finances and in
ldustrles OF Europe, but that country can
not escape great injury and that the net result
must be practically lower prices for our securities
1t is true that after the fearful Napoleonic wars
! England grew rich and that likewise the North
prospered during civil war. The cause OF this
| prosperity, however. not the war; but the
industrial inventions which then introduced
The cost OF the Napolconic wars to England was
less than 500 900 ooo and it time when there
were many inventions revolutionizing in
dustry which, together with her commercial
supremacy, gave hex an income many times this
amount
Our civil tells the same story. Agricul-
tural inventions made the West prosperous while
the tariff raised profits in the East. The cost OF
the present IS not less than ST 5000 100000
year and the destruction OF private property and
the loss OF profits will create additional deficit
OF $5,oooooo,ooo. Does anybody know of an in
ycnton or series of inventions replacing these
losses? AlSo business kept up in the North
during the civil war and in England during the
Napolconic wars by system OF monetary infia-
uon. although this sometimes assumed disguised
forms But when there is monetary initiation due
as IS almost always the case, to large issues OF
paper money, there is great difference between
money rates and the interest on real capital \
low rate Tor the OF paper money docs not midi
cate 4 low return capital goods and does show
ovcrstock OF paper money which is really, |
although perhaps not noninally a discount !
ar, commercial disaster any indirect cause OF
risk checks the growth OF capital goods and forces
a corresponding rise in the real rate OF interest.
This rate may be concealed for time by initiation, !
but in the end it will assert itself While this in !
fation is in progress Prof Patten warns our mer-
chants against exchanging goods with foreign ma !
tons for mere promises to pay for anything
except actual gold and actual goods. Goods for
goods is his rule Securities arc on fictitious
level and even paper promises to pay OF govern
mentS that have been indulging in initiation will
become deprecated.
Mr.. George L. Hoxie, practical and consult
ing engineer OF the first rank and one who has :
given much careful thought to ecoromic Problems .
takes issue with Prof Patten in an article entitled
Some Economic Aspects OF the War" Mr. Hoxie i
admits that the conditions which Prof. Patten out
lines may perhaps hold true regards the coun-
tries engaged in the present struggle but in the
main he declares that the professor bases his dis
cuSslon to too great an extent upon John Stuart
Mill whose "Principles of Political Economy were
brought in 1913 and were formulated by Mill
during twenty-five years study previous to that
time when he looked upon a very different world
from the VIC know today. I:ach important
nation then sclf-contaned and possibilities OF II
credit then explored as they arc now
As regards England. that the wealth and resources
ri the country lie largely outside its own borders
and that with an army OF millions OF men and
capital to keep going and with large civil popula-
lion to maintain, England must buy her supplies
in other countries. II
How is She going TO obtain these supplies?
Obviously she must either exchange for them the
title deeds to property that she owns in America
and elsewhere, or She is going to send here T
her securities that is TO say, chiefly her cvi-
fences OF Indebtedness. She i, going to make this
exchange in both cases upon such terms as our
people willing to accept. Prof. Patterns argu-
uent that this exchange will ruin is not we'll
ounded. The ultimate result of an exchange by
Is OF food and supplies an inflated basis for the :
pest kind OF securities 4 deprecated basis can
not be anything but the greatest material pros
oerity. As regards any possible injury to the
5thcr goods, the country be relied upon to see
hat these not carried to an excess Guns and =.
ammunition are now forming large share OF our r
exports. 1t certainly is not anything else than t
great gain for country that in place OF these
guns and ammunition, which will soon be de-
rOyed, the country has received from England v
certificates of shares of ownership in our mines f
,ur railroads and factories The United States
; making the most profitable exchange OF !.
commodities that has been made in the his +
DRY OF the world. a
Mr.. lloxie does not apprchcnd any perils from !
he exhaustion OF capital" in America which Prof i
'atten fears. There is dimnuton in the volume i
II gold in the country in progress. Food, cloth t
ng and shelter exist in ample volume and there j
nothing to prevent the people from working as
sual in order to supply their major wants 1t is
veil known that at present there is undersupply 4
# manufactured goods and OF certain raw ma v
crials available for normal rate of consumption
he question OF the supply of these materials is
lerely question of labor and tho employment =
labor therein is only another way of saying that
vast amount OF potential business awaits immedi- n
te release. Mr. Hoxie's final conclusion is that :
he United States has already endured the worst