Evening star., 1916-04-30

anger and unrest. and even incipient
Germany's Foreign Trade.
In the case of Germany we have an
example of a people seemingly united
and willing to make extraordinary sac
rif1ces to carry on the war. but whose
foreign trade and shipping have been
practically wiped out-with the excep-
tion of trade with Switzerland, the Bal
kans. Holland. Denmark, Norway and
sweden. and some Illicit trade with
Russia. Without doubt Russian wheat
mas entered Rumania and thence has
oeen sold to the central empires. How
ever much production may go on to
supply the reduced demands Of domes-
tic trade-1eaving out of account war
supplies--production for export must
small amounts. Hence Germany, with
the exceptions noted. must rely on
what can be produced within her own
boundaries
The fundamental thing is always the
ouantum OF tangible wealth, in the
form OF needed goods. on which the
country can draw. These can be pro-
duced only by the required labor, capt.
tai ana resources in the form of ma
terials at home. As regards most arti-
cles of food. clothing and housing, un-
der the present practically communis-
tic system in Germany produced by
martial law Cor its eQuivalent) non
eombatants and soldiers can doubtless
be provided for Indefinitely: and while
fats are scarce. starvation is not like
ly: but there must clearly be a serious
reduction in the use Of unnecessaries
Destroying Capital.
The destruction of wealth in Europe,
we all know. is going on to frightfui
extent. Great as it is. however. it is
not SO important as the destruction of
capital. The distinction between the
destruction of wealth and the destruc-
tion Of capital is Of the first impor-
tance. The destruction Of wealth, hurt
ful as 1t is. is like the loss of farm
ers yearly crop OF apples: he may get
on without apples for a season. But
one of the factors by which wealth is
produced, is like the entire loss of the
apple tree itself: the farmer can never
again have apples of his own until a
new tree has been grown. The pivotal
thing to know, then, is whether il Is
wealth or capital which is being de-
stroyed in Europe.
At the outset we are met with the
fact that very large part of the
wealth produced in a country in times
without bringing other wealth into its
place. Indeed, the destruction of ac-
tual wealth by extravaganza in times
of peace is probably nearly as great
as the amount destroyed in times of
war. But in normal conditions, in spite
of the waste of wealth in unnecessary
consumption and extravaganza, the
thing important to the growth of in
dustry Is the steady increase of capi-
tai. Capital is normally increased by
saving through the annual accretions
of those who turn their wealth into
production and trade.
But the fact central to our study IL
that capital used up in production must
be replaced. Suppose producer, A, by
an outlay of so, brought forth goods to
the amount of 100. Another producer
B, in another field. may similarly pro-
duce 100 by an outlay of so. A and B.
finished goods with each other. When
A gets back 100 of new goods he must.
of course, use so out of his gross re-
turns to replace the so used up in the
production Of his original 100. If so.
on producing another 100 in the fu-
ture. So with B. The replacement OF
80 in each case is essential to the main
tenance of capital and industry on its
present scale
Early in the present war, it is to be
observed. there was violent jislo-
cation of capital and labor in Europe.
The consumption of war supplies has
been unparalleled and at an expense
struction of wealth? Or is capital be-
Ing destroyed to an enormous amount?
Wars Destruction Of Wealth.
If A transfers his capital from peace
full industry to manufacturing muni-
tions of war his outlay of so yields 100
,v,
destroys them on the battlefield-with-
out. of course, reproducing any of the
goods in their place. The government.
unlike B. does not return goods to A
by which he can replace his so and
thereby go on producing in the future.
firing line AS 100. and so his so. are
destroyed forever. A is able to go on
producing, because for his 100 he gets
from the government a promise to pay
based upon future production after the
war, or bank notes. which are forms of
credit dependent upon future exigen-
cies Quite apart from the external
means of payment to A. the fact which
emerges and has a sinister portent is
the destruction of AS capital of so and
its non-repla cement.
Borrowings by the state and issues
of bank notes to unheard-of sums do
not change this fundamental fact The
capital of the country has been re-
Britain and France. whose foreign in
tercourse is practically unimpaired lost
capital goods can be replaced by credit
operations and imports from other ma
tions. In the case of Germany and
Hungary. in the degree that
they are cut of from foreign trade they
are unable to replace destroyed capital
goods. except in SO far as articles can
be made within their own boundaries
1t should be kept in mind. however
that the analysis made above is con-
cerned only with what is known as
or circulating capital-which
Is obviously very large. Such capital
stands opposed to fixed capital in the
form of ships, bridges, docks, factories,
and the like. In Belgium,
Poland, Galicia, Serbia and northeast
ern France there has been a serious
destruction of fixed capital In Ger
many. Great Britain. Italy and most of
France, where enemies have not en-
tered, fixed capital is intact, and at the
close of the war IL could be imme-
diately used, provided there is supplied
the necessary labor force and enough
capital to provide mate
rials, wages and the like.
In order to reach any conclusion rs
to the continuance of the war it is
necessary to have before US the fun
damental analysis above given. Then
1t will be possible in the next paper
to make applications of these results
to the belligerents like Germany.
France and Great Britain.
mAD pIcY pATEc IT'D