War is, of course, economically, purely destructive. The men employed
produce nothing; the engines prepared are useless, except for killing;
the money expended is most of it consumed on objects which can yield
no direct return. Enormous quantities of food are wasted in transport,
domestic animals are used-up in unproductive labor, and the men slain
are necessarily among the strongest in the nation. Nevertheless, the
economic loss of war is often not felt for a time; and it is probable
that in the war supposed to be coming with Russia this will be the
case to an unusual degree. Almost all the possessing classes, to begin
with, will at first feel as if the war had made them less poor. Those
of them who are lucky enough always to save, find all investments
cheaper, which is to them as if their money had directly increased in
power. Only six weeks ago you could not buy a solid security to pay
quite four per cent., and to-day there are twenty to choose among. The
possessing classes have been suffering from the fall in prices, and
the fall in prices will cease. Already the owners of land are relieved
of apprehension by a rise in the price of wheat which may be taken
as equivalent in effect to a five-shilling protective duty; and the
farmers, possibly misled by the tradition of former wars, look forward
to a rise of at least double that. As the American supply will not be
affected, and the Indian supply will be as good as ever, and every
rise in price draws new supplies, they may possibly be disappointed;
but imagination is a factor in trade, as in all other things governed
by human minds, and the prices of things to eat will undoubtedly
stiffen. The mere increase in the cost of sea-carriage will secure
that; and this increase will be considerable, for a Government at war
draws heavily on the surplus shipping for transport; and while freight
rises, so also do rates of insurance and competent seamen’s wages.
Large as the seafaring class is, the demand made on it in war-time by
a great Power sensibly diminishes it, and so increases the value of
the remaining seamen. All sea-borne goods must rise perceptibly in
price, and so, though the reason is not so apparent, do all metals;
and owing to the law which tends to equalise all profits, so in
smaller proportion do all other vendible things. The phenomenon called
by housewives “dearness” appears at once; and as the possessing and
trading classes, distributors excepted, fret under cheapness, this is
for the time a satisfaction to them. Landlords, shipowners, planters
abroad, farmers at home, mineowners, and manufacturers with large
stocks, classes which greatly influence opinion, deem themselves to
be, and in some instances are, decidedly better-off. Nor are the
distributing classes at first injured. Much of the enormous expenditure
of war goes into their pockets; war is recognised as full excuse for
heavier prices; and the demand from the well-to-do which so often
makes the difference between profit and loss increases rather than
diminishes. The currency, too, tends to become inflated by the issue
of Government paper, not in the form of bank-notes, but of obligations
of all kinds, signed by a firm—the Government—known to be solvent,
and passing in large transactions from hand to hand, and inflation
always produces the appearance of prosperity. The enormous mass of
expense, again, based on borrowed money,—that is, practically, on
future earnings,—swells the volume of available money in circulation,
and enlarges, sometimes enormously, the profits of certain men, _e.g._,
army contractors, who immediately spend on their own objects till
the veins of the community seem full of blood. Even wages rise, and
especially the wages of the poorest class, the half-skilled laborers.
It is often supposed that this is not the case; but the truth would
seem to be that the withdrawal of laborers from production caused by
war, falling as it does, not on the whole people, but on a limited
section of them,—namely, those who are at once poor, specially
able-bodied, and under thirty-five,—greatly diminishes the total
supply, and at once raises wages. This is thoroughly recognised on the
Continent, where mobilisation affects such a huge mass of men, and
even in England the numbers taken away are very serious. In a war of
two years at least 100,000 men will require to be replaced, another
100,000 will be hired for garrison duty of all kinds, and a further
contingent of unknown numbers will be employed in dockyards, transport
services, and the endless forms of hard labor necessary to send armies
to the field. If we remember that the half-skilled laborers are only a
division of the people, and that agricultural laborers, in particular,
upon whom much of the pressure falls, are only 600,000, we shall see
that war seriously reduces the available supply of hands, and so sends
up one class of wages. In truth, in the beginning of a war in a country
not liable to invasion, and not harassed from the first by financial
distress, it is difficult to see what class—unless it be soldiers’
wives—suffers economically from the very beginning, and does not
rather feel as if it were prospering. Something of this is, no doubt,
imaginary, and due to the bustle and interest created by war, and the
sense it causes of a necessity for harder work; but most of it has a
true economic source. The expenditure is greater, the competition is
less, and one new career, rapidly consuming men, has been opened to
the discontented. There is more room for those who are not engaged,
and more to get, and they therefore feel well-off. So strong is this
impression, that in countries where the well-off classes govern—as was
the case in England’s war with Napoleon—war is often protracted by
their reluctance to lose the advantages which they think, often with
reason, they are enjoying, though at the expense of the whole community.
It is by degrees that the economic effect of war comes to be felt,
through the agency, usually, of taxation. No nation can throw away
perhaps two years’ revenue in one on unproductive effort without
becoming gradually poorer,—that is, without having less to spend in
giving good wages to great multitudes of men. Suppose a war to cost
fifty millions a year—and the American war cost £120,000,000—though
much of that is spent in wages, the whole is loss, for even the wages
are paid, from the economic point of view, for doing nothing. In the
best case, that of a country which is annually heaping-up a reserve in
the shape of savings, this reserve must be diminished to an appreciable
degree; and the effect, _pro tanto_, is as if the community were making
less profit, or were fractionally less industrious, or were more
addicted to consumable luxuries like tobacco or wine. If the process
continues long, or the war is excessively expensive, all saving-power
is consumed, and the community sinks gradually to the position of a
man who is living from hand to mouth, and making nothing to provide
against the future. The process, of course, may be slow; it may be
retarded, as in England in the Great War, by the sudden rise of new
and profitable industries, and it may be diminished in its effect by
thrift; but it is inevitable. No nation could expend a second year’s
revenue on war continuously for a century without being beggared; and
each separate year must of necessity involve some approach towards
beggary. Borrowing distributes the loss over future years; but it
does not diminish the loss itself, which is positive, and not to be
diminished by any financial arrangement. Borrowing involves taxation,
and the effect of taxation in the gross is to impoverish. It is often
said, for instance, that England could borrow a hundred millions, and
then pay for it by a twopenny tax on sugar; and that, as a financial
statement, is correct. But then this also is correct, that the three
and a half millions a year raised to pay for a loan of that amount
expended in a past war, means a loss equivalent to an obligation to
keep 100,000 unskilled laborers at £35 a year each in idleness for
ever. An unskilled laborer does not earn more than that; and that,
therefore, is one expression of what the community gives away through
such a tax, without real benefit to its producing-power. It is true
that three and a half millions is not an amount sufficient to hurt
England; but it is a fresh burden on England, and it begins to fall
just when it is hardest, that is, when war expenditure and consequent
borrowing ceases. It is on the top of the loss of the great customer
who has been throwing away, say, £100,000,000 a year, that the new
taxation comes, and is, therefore, often so cruelly felt. We have
been told, on high financial authority—that of the late Mr. James
Wilson—that after Waterloo, when the era of war ended, and the war
expenditure ceased, the people found that just when their mighty
customer, the Government, ceased to buy everything, and prices suddenly
sank, everybody was paying seven-and-sixpence in the pound of his
earnings to the State. The reaction was terrible; every man felt nearly
ruined, and for at least four years a spirit of economic dishonesty
spread among the people, till the ominous words, “the sponge,” began
to be uttered aloud. As it happened, the distress did not matter. An
enormous development of industry, the result of new inventions and
mechanical appliances, rapidly made England rich again; and, followed
as it was by a new system of communication, rebuilt the national
fortune; but the economic danger for a few years was terrible. Nothing
like that is likely to occur again; but still, a great war will touch
every household with its consequences before it is done. A shilling
income-tax will be felt even by the rich, and will directly deplete the
reservoir out of which those who provide the comforts of life are paid.
Duties on edible luxuries or necessaries will be felt by the poor in
proportion to their poverty, and this the more because they will come
on the back of the general “dearness,” especially of eatables, which is
the inevitable consequence of war. When the war stops, therefore, there
will be distress, great or little, in proportion to the expenditure;
but, great or little, equally inevitable, not to be kept-off by any
financial arrangement. It may be rendered short, of course, or even
innocuous, by other causes, such as a sudden discovery of a new and
cheaper motor which, by reducing the energy to be expended on producing
a result, positively adds to the national force, and, therefore, to
the national producing-power, or by the opening-up of new channels of
industry; but, apart from these, there is no avoiding the economic
consequence of war. War is waste; the nation pays for the waste by
taxation, and, therefore, every individual in the nation must, _pro
tanto_, suffer. The particular war may be right, or unavoidable, or
purely self-defensive, but one of its consequences must be this; and it
is never wise to conceal what inevitably must happen.—_Spectator._