"REAL COST OF THE WAR"

Dominion, Volume 13, Issue 290, 1 September 1920, Page 7

"REAL COST OF THE WAR"

BRITISH LOSS 3,500 MILLIONS

A HOPEFUL SURVEY

Mr. Edgar Crammond read a paper before tho Bankers' Institute, London, recently, on "The Eeal Cost of the War."

Mr. Crammond said that tho vast economic disturbances of the past five years had brought into existence a large number of economic fallacies and misconceptions. The nominal war debt of a belli-; gerent did not necessarily form tho main: part of the real cost of tho war, because, in so far as the debt was an internal one, it only represented a transfer of wealth from one group of the inhabitants of a country to another. The principal losses of the United Kingdom through tho war weye:— Millions The capitalised value of -war pensions £1,300 Moneys borrowed abroad by the British Government „.. 1,300 Sales of British holdings in foreign investments ' 1,000 Losses of shipning with cargoes, and losses through suspension of renewal of railways, ports, machinery, works, houses, buildings 1,000 -£5,200 Against these might be set:—(l) The erection and equipment of new works and re-equipment of a largo number of old' works with -up-to-date plant; (2) invest- i ments of capital abroad dnrinp the wnr in the shape of loans to the Allies and Dominions; and (3) the valuo of the nosets already received from Germany and tho value of the territories taken over under the Peace Treaty, These assets together accounted for about 42.000,000,000, leaving the net loss of wealth' owing to the war at -C 3,200,000,000 to .£3,500,000,000 It was impossible to sav at what point prices would liecome stabilised, but he assumed that the real value of money today for the whole of the United Kingdom was 40 per cent, less than it was in 1914. Taking Jus own estimate of the pre-war national wealth at .£10.500,000,000, Mr. Crammond said this would represent in post-war money ,£27,500,000,000. He had estimated our net loss to the war at .£3,500.000.000, leaving a net balance of <£24,000,000.000 as representing the national wealth at the present time. The real cost of the war to tho United Kingdom might, therefore, "be snid to represent a sum which' was equal to 12.7 per cent,, or rather more than one-eighth or the national wealth.. British Empire, The war had exercised a profound influence on the economic develonment of the Empire, particularly Canada, SouthAfrica, Australia, New Zealand, India, Malaya, and Egypt. and he cave the following estimate of the national wealth and the national income in 191!). together with the relative figures for 1910:—

These figures, said 'Mr. Crammond, not strictly comparable, owing to the changes which, had taken place in the value of money. Moreover, the extent of the devaluation had not been uniform in the different parts of the Empire. It might, however, be confidently affirmed- that the war had greatly increased the economic strength of the Empire as_a whole, and the prospects of its economic development in the future were particularly hopeful.

France, Mr, Crammond estimated the total losses of France as under:—

Millions. „ . • Pensions and allowances 2,150 Damages to property, shipping, etc 2,200 •Monoys borrowed abroad and sales of foreign investments .... 1,400 Arrears of upkeep of houses, buildings, etc 500 - .26,250 Against these might be 6et the capital value of Alsace-Lorraine, which might be provisionally estimated at <£800,000,000, leaving a net loss of .£5,450,000,000. The national wealth of France before the war was estimated at ,£12,000,000,000, and if it bo assumed that the value of the frano would ultimately becomo stabilised at 50 per cent, of its pre-war value, the national wealth of France before the war in terms of post-war money would amount to >£24,000,000,000. Deducting the estimated loss of ,£5,450,000,000, the national wealth of France to-day would bo about .£18,500,000,000. That was to say, France had lost aljout one-fourth of her national wealth, subject to the indemnity to bo received from Germany. France was still very rich, far richer than was generally believed, and he felt assured that her economic recovery would be as striking as it was after 1870.

Italy. The war loss of Italy might be estimated as underlie Pensions, etc 600,000,000 Destruction of property, shipping, etc 300,000,000 Foreign debt and moneys borrowed abroad 1,000,000,000 Arrears of depreciation and maintenance 200,000,000 .£2,100,000,000 The capitalised value of the territories allocated to Italy under the Peace Treaty might l>e estimated at .£2oo,OOflffib, leaving thei net cost of the war to Italy at J51.90Q,000,000. The national wealth of Italy before the war was estimated at M,480,000,000. that the value of t"e lire would ultimately settle nt afiout 50 per cent, of its pre-war value, the national wealth, in terms of the postwar valuo .of money, would l>e approximately 3!8,'960,000,000. Deducting the net cost of the war as estimated above, this would leave the national wealth to-day nbout ,£7.100,000,000; and that was to say, Italy had lost about 20 per cent, of her pre-war wealth. .

Belgium, Tho total losses of Belgium due to the war might be estimated at .£550,000,000. Her national wraith before tho ivnr waa officially estimated at .£1,200,000,000, and assuming that the post-war valuation of the franc was 50 per cent, of it.? pre-war value the national wealth might be estimated at .£2,400,000,000. The Allies had transferred to Germany tho debt in respect of the loans made to Belgium, say, >£240.000,000, and in addition she was to receivo the first <£100,000,000 payable by Germany. This left a balanco of .£210,000,000 to bo recovered out of the general indemnity. After deducting tho proportion of her war expenditure taken over by Great Britain and France, and transferred to Germany, it might be very seriously questioned whether Belgium had lost more than 10 per cent, of her total national wealth. Belgium had emerged from the war with a smaller relative increase in the amount of her national debt than any other belligerent, with the exception of Japan. She was making a romarkably quick economic recovery, and it seemed not improbable that within a few years Belgium would not only have made good tho losses caused by the war, but she would bo much richer than she was in 1913. • Japan. Tho war had brought a very large measure of prosperity to Japan. Her ship- ! ping had been increased from 1,708,000 tons to 2,325,000 tons. Her gold reserves had been increased from «£35,000,000 to j8150.000.000, and he estimated that the national wealth had been doubled, and was now in the neighbourhood of .£4,700,000. . The United States. J The war had produced an extraordinary chango in the economic relations of the United States with Europe. Whereas in 1914 America owed Europe .82,000,- ' .K

000,000, at present Europe owed America .£2.000,000,000. It wa6 not suggested b* fore the war that the United States was a bankrupt country, and, as a matter of fact, Europe found it to lier advantage to continue to lend this large Hum of money to America _ until tho war compelled her to call it in." The American investors showed, said Mr. Crammond, an extraordinary incapacity to realiso the great advantages which would accrue to their country through tho intelligent investment of capital ~ abroad. In 1914 tho national wea.ltn of/' tho United States was computed are* .£12,000,000,000. To-day it was in* tho •; neighbourhood of jC70,000,000,000 to .£80.000,000,000. Assuming that the post- j war purchasing power of the dollar for ■# internal purposes was 70 per cent, of j its pre-war value, it might be 6aid that during the past five years there, had : been an actual increase in the national j wealth of tho United States of'.approxi- j rnately 30 per cent. j Germany. n The losses.of Germany mighty be ©3tii- i manted as follows:— -<.■■■- .: A £ Capitalised value of terriTories ceded under the Peace Treaty 3,500,000,000 .; Loss of shipping, goods, 'i metallic money, railway ; j rolling stock, and other > properties 600,000,000 Depreciation of factories, workshops, • railways, houses, buildings, etc \ 600,000,000 Capitalized value of war ' pensions 2,500,000,000 : Loss on investments in fornicr German colonies and •- investments in foreign countries 1,500,000,000 '.£8,700,000,000 "! In 1913 the national wealth of Germany was estimated at .£16,500,000,000. In order to compare the post-war economic position of Germany with her position in 1914, it was necessary to assign some relative valuation to the mark. For that purpose it would be assumed thn'j the post-war mark would ultimately possess an intrinsic value of 50 per cent, of its pre-war value. It should bo emphasised that that valuation.. was only used in the relative sense. The pre-war wealth of Gernianv would then be expressed as about ,£337500,000,000, in terms of post-war money. On that baas iho German people would have lo6t. apart from the war indemnity, about J 26 per cent, of theilr national wealth; ij including the whole of their mercantile if marine, tho whole of their colonial possessions, and practically the whole of their investments abroad. If the fig- - ures suggested at tho Hythe Conference, that was, should be : finally adopted as the amount of the German war indemnity, iilio total losses of the German people arising out of the war would be equivalent to. about - <£15,000,000,000; that was to say, Ger- \ many would have lost nearly one-half - of her national wealth. It was difficult to belie re that Uie new Germany would be in a position to remit abroad., .£365,000,000 million per annum In .gagfer ment of interest on an indemnity or' 4 * £6,250,000,000. General Survey. The world' survey of economio cendi- • lions did not present a picture of unrelieved gloom. Just as in the case of the United Kingdom the war had 0 brought about great redistribution of ;! wealth, so throughout tho world 1 thers-\«l had been a great redistribution. So \'j far as the British Empire waa : j concerned there had been a i largo actual increase of wealth ri in tho Overseas Dominions and possess- j ions, and a moderate decrease of wealth i m the case of the United King- j uom, giving on balance a substantial ini- i crease of real wealth for the Empire as j a whole. They must bear in mind tho,-v, fact that the Empire had assumed fresh ;i respons'bilfciies or unknown magnitude I under the. Peace Treaty, responsibilities ] which could not fail to, make the developnient of the EmpiJre .a far greater strain on the economic resources of those islands than it was before the war. In the case of Europe several important countries—Spain, Holland, Switzerland, Greece, and Scandinavia—had undoubted- i ly befiome wealthier during the war, bufcy' on balance Europe was the great loser.! So far as the world as a whole was concerned, the principal loss was in the fact 1 that Europe was not yet a "going concern," but the underlying ecomonic forceß which made her the great centre of ] the world's commercial activities • were i still At work, and they would rapidly j transform tho cconomfc situation in Europe. i The war terminated an era of W years { of intensive economio development. The period witnessed the great development of the international financial 6ystem with London as its centre. It wa6 also marked by a great development of railways and shipping and manufacturing, produo- i tion, and a great increase of wealth, j There was no finality in economic development, and they were at the beginning of a new era which, in his opinion, would greatly surpass the expansion during the 44 years preceding the war. ' This development would depend in the ' ! main on transport, and it was a inisfor- " tune that, tho peoples of the world hadbecome'so shortsighted as to allow their railways to become practically bankrupt by enforcing uneconomic rates, and in - this way discouraging the provision of eapitaLi Demand for Capital. . The British Empire was destined, continued Mr. Crammond, to fulfil a great ; part in this economic era. They had re- j stocked themselves with raw materials and manufactured goods, and were now In a position to supply a large part .of . tho needs of the world. They had a surplus of production over consumption, ) and in a. short time they would have to face the problem of the investment of capital abroad. _ TEe dominant characteristic of international trade in the next ten years would be the tremendous world demand for capital, and their internal financial policy should be framed with due regard to world conditions. ' Before the war the fund of mobils capital available for the financing of tho , trade .of the world was an extremely ; limited one. It fulfilled its functions admirably* but it only did so by means i of the high development of the intern#/tional monetary system, of which Lon- • don was the centre. This delicate ana j highly organised machinery enabled the instantaneous transmission of capital •; from any part of the world to London, where it was redistributed with the samo rapidity and economy to tho centres in which it could be most efficiently utilised. To-day wo had a state of affairs in which ; it required three times as much capital i to financo trade as it did before tho war, Moreover, the liquid capital of the world ■ was now distributed in centres which' , were unaccustomed to the exercise of their, new powers. London was slowly and surely re-establishing its position as tho money oentro of the world, and it should be the policy of their Government to do everything in its power to assist to this direction, particularly to eneonrage th# : deposit of foreign money in London. The dellation of the currenoy and the reduction of the national debt were admirable measures in themselves, but a, negative policy of that charaoter was. unedited to the needs of the international situation. If 1 that policy was unduly ; pressed, it might result in the fallingoff of profits, a reduction of the national income, and a reduction of wnges and unemployment.

Million £. 1919. 1910. In- InWealth, come. TTcalth. onme. United Kingdom 2-4.000 4364. 15.SS2 2M6 Cana'do 5.000 V.W 2.072 259 Australia 2.900 450 1312 164 TTnlon S. Africa 1,200 200 600 75 .New Zealand 4M 80 320 4) Tndia 6.M0 1200 3,600 608 Keypf, 1,300 220 Crown Colonies. JPo?twsions & 1,200 170 Protectorates... 3.200 450 44,080 ,7650 24.9E6 3332