In Cæsar's time the pound of beef at Rome cost 1¼ American cents. At the
end of the thirteenth century it was 2½ cents, due largely to the
influence of the Crusades. In a Vienna library there is an old economic
work which contains a decree of the Imperial German government at Vienna
fixing the price of a pound of beef, in 1645, at 10 pfennige, or 2¼
American cents. When peace followed the Seven Years' War the pound of
beef at Berlin was sold at 4 cents American. During the Napoleonic wars
it went up to 6½ cents, and when the Franco-Prussian War was terminated
beef in Germany was 9 cents the pound. The price of bread, meanwhile,
had always been from one-tenth to one-quarter that of beef. In Central
Europe to-day the price of beef is from 60 to 75 cents a pound, while
bread costs about 5¼ cents a pound. The cost of other foods is in
proportion to these prices, provided it is bought in the legitimate
market. As I have shown, almost any price is paid in the illicit trade.
I know of cases when as much as 40 cents was paid for a pound of wheat
flour, $2.70 for a pound of butter, $2.20 for a pound of lard, and 50
cents for a pound of sugar. I have bought sugar for that price myself.
These figures show that there has been a steady upward tendency in food
prices ever since the days of imperial Rome, and we have no reason to
believe that it was different in the days of Numa Pompilius.
Looking at the thing from that angle, we must arrive at a period when
food, in terms of currency, cost nothing at all. Such, indeed, is the
fact. When man produced himself whatever he and his needed, money was
not a factor in the cost of living. The tiller of the soil, wishing to
vary his diet, exchanged some of his grain for the catch of the
fisherman, the first industrial, who could not live by fish alone. The
exchange was made in kind and neither of the traders found it necessary
to make use of a medium of exchange--money. The necessity for such a
medium came when exchange in kind was not possible--when food and the
like began to have time, place, and tool value, when, in other words,
they were no longer traded in by the producer-consumers, but were bought
and sold in markets.
But the question that occupies us here principally is, Why has food
become dearer?
Actually food is not dearer to-day than it was in Rome under Cæsar. The
fact is that money is cheaper, and money is cheaper because it is more
plentiful. Let me quote a case that is somewhat abstract, but very
applicable here.
Why should the farmer sell food when the money he gets for it will
purchase little by virtue of having no longer its former purchasing
power? He can be induced to sell such food if he is given enough dollars
and cents to buy again for the proceeds of his soil and labor what he
obtained through them before. That means that he must be given more
money for his wares. But that he is given more money does not leave him
better off. What difference does it make to him if for the bushel of
wheat he gets one dollar or two dollars when the price of an article he
must buy also jumps from one to two dollars? The result is a naught in
both cases. To be sure, he could save more, apparently, from two than he
could from one dollar. That, however, is fiction, for the reason that
the twenty cents he may save of two dollars will in the new economic era
buy no more than the ten cents he saved from the one dollar.
It is clear now that the farmer has not profited by the increase in food
prices. All others are in the same position. Money has ceased to buy as
much as before. The worker who is getting twice the wages he received
before the outbreak of a war is obliged to pay twice as much for food.
Like the farmer, he is no better off than he was. He, too, sees nothing
but zero when expenditures are subtracted from income.
The body politic is a living organism for the reason that it is composed
of living organisms--men and women. As a living organism this body has
the inherent quality to repair or heal the wounds it has received. The
men lost in war are replaced by the birth of others. In our time, at
least, the women are no longer killed off, and since the remaining males
are able to fertilize them a decade or two generally suffices to make
good this loss which the body politic has sustained. It is a well-known
fact that the average man is able to produce many times the number of
children to which monogamy limits him. At the conclusion of the Thirty
Years' War, when polygamy had to be legalized in southern Germany,
Nuremberg boasted of a citizen who had thirty-seven children by six
women.
But even the economic wounds of the body politic heal rapidly. They
begin to heal in war almost with the first day on which they are
inflicted. Over them spreads the protecting scab of cheap money and high
prices.
The German mark buys to-day about one-third of what it bought in July,
1914; this means that it is worth no more in comparison with its former
value as a lien against the wealth of the German nation. The several
German governments, however, will continue to pay on their public debts
the old rate of interest, and when the loans are called in the
depreciated mark will take the place of a mark that had full value. The
gain for the state is that it has reduced automatically its old public
debt by 66 per cent. in interest and capital.
The same applies to the first war loans. The German war loans up to the
middle of 1915 were made with a mark that still bought 90 per cent. of
what it had bought before. Interest on them will be paid and the loan
redeemed with a mark which to-day has a purchasing power of only 33
pfennige. If nothing is done to interfere with this relation of currency
values, the German governments will actually pay interest and return the
loan with money cheaper by 62.97 per cent. than what it was when the
loans were made. The fifth war loan was made at a time when the
purchasing power of the mark was down to about 50 points, so that on
this the "economic" saving, as established with the present purchasing
power of the mark, would be only 33.34 per cent. On the seventh war
loan, made with the mark down to roughly one-third of its former
purchasing power, nothing could be saved by the government if redemption
of the loan should be undertaken with a mark buying no more than what it
buys to-day.
We are dealing here with the mark as a thing that will procure in the
market to-day the thing needed to live. In its time the mark that made
up the public debt and the war loans served the same purpose, in a
better manner, as it were. But that mark is no more. The several
governments of Germany will pay interest and redeem loans in the mark of
to-day, without paying the slightest heed to the value of the mark
turned over to them when the loans were made.
The result of this is that the older investments, be they in government
securities or commercial paper, have lost in value. We must take a look
at an investor in order to understand that fully. Let us say a man owns
in government bonds and industrial stocks the sum of 200,000 marks. At
4 per cent. that would give him an annual income of 8,000 marks, a sum
which in 1914 would have kept him in Germany very comfortably, if his
demands were modest. To-day that income would go about a third as far.
His 8,000 marks would buy no more than what four years ago 2,666 marks
would have bought. His lien against the wealth of the community, in
other words, is 2,666 marks to-day instead of 8,000 marks. Those who had
to produce what the man consumed in 1914 have to produce to-day only a
third of that. They would have to produce as before if the government
returned to the old value of the mark, and since such a production is
impossible to-day, with over two million able-bodied men dead and
permanently incapacitated, with the same number of women and their
offspring to be cared for, and with the losses from deterioration to be
made good, the German government cannot take measures that would restore
the pre-war value of the mark, especially since it would have to pay
interest on war loans with a mark having more purchasing power than had
the mark turned over to the government in these loans.
In adopting the policy of cheaper money Central Europe is doing exactly
what the Roman government did more than two thousand years ago and what
every other government has since then done when wars had made the
expenditure of much of the state's wealth necessary. Capital is the
loser, of course. That cannot be avoided, however, for the reason that
capital is nothing but the surplus of labor--that part of production
which is not consumed. During the European War there was no such actual
surplus. The increase in capital, as this increase appeared on the books
of the state treasury and the investors, was nothing but an
inflation--an inflation which now must be assimilated in figures, since
its influence upon actual production is _nil_.
I have already mentioned that the bankers of Central Europe are well
disposed toward a partial cancelation of the public debts. They agree
not because of patriotic motives, but for the reason that such a
cancelation would better the purchasing value of the currency. A partial
repudiation of the war loans would immediately force down prices of food
and necessities, in which event the mark or crown would again buy more
or less than it bought in 1915, let us assume. For the exigencies
incident to foreign trade the step has merits of its own. It should not
be necessary to point out that a Germany living on an American-dollar
basis, as it is now doing with its depreciated mark, would find it hard
to undersell the American competitor. German industrial and commercial
interests must bear this in mind, and on that account will do their best
to preserve the margin which has favored them in the past. Cheap money
and high prices do not make for cheap labor, naturally. Even to-day
labor in Central Europe has risen in price to within 70 per cent. of its
cost in the United States, while food is about 15 per cent. dearer than
in the American cities.
Central Europe, all of Europe, for that matter, will live on what may be
called the pre-war American basis when the war is over. The advantages
enjoyed by the American dollar in Europe in the past are no more. Gone
are the days when an American school-mistress could spend her vacation
in Germany or Austria-Hungary and live so cheaply that the cost of the
trip would be covered by the difference in the price of board and
lodging. The cheap tour of Central Europe is a thing of the past--unless
the public debt of the United States should increase so much that some
slight advantage accrue therefrom. For what has taken place, or will
take place in Europe, will happen in the United States when economic
readjustment must be undertaken.
Aside from some damage done to buildings in East Prussia,
Alsace-Lorraine, Galicia, and along the Isonzo, the Central states have
not suffered directly from the war. The losses sustained in the
districts mentioned are relatively small, and much of them has already
been repaired. Reconstruction of that sort will not be so great a task,
therefore.
Much labor and huge expenditures will be required, however, in the
rehabilitation of the railroads and the highroads. It will be necessary
to relay at least a quarter of the bed mileage with new ties and rails,
and fully one-half of the rolling stock and motive power now in use will
have to be discarded before rail transportation in Central Europe can
be brought to its former high standard.
Pressing as this work is, the people of the Central states must first of
all increase the production of their soil and bring their animal
industry into better condition. For the first of these labors two or
three years will suffice; for the second a decade is the least that will
be needed. It will be necessary for many years to come to restrict meat
consumption. With the exception of South America nobody has meat to
sell, and since all will draw on that market high prices are bound to
limit the quantities any state in Europe can buy.
On the whole, the damage done by the war to the Central Europeans is not
so catastrophic as one would be inclined to believe. In fact, the damage
is great only when seen in the light of pre-war standards. In Central
Europe, and, for that matter, in all of Europe, nobody expects trains to
run a hundred kilometers per hour any more. The masses have forgotten
the fleshpots of Egypt, and will be glad to get pork and poultry when no
beef is to be had. Enough bread, with a little butter or some cheese on
it, will seem a godsend to them for many a year. The wooden shoe has not
proved so bad a piece of footgear, and the patched suit is no longer the
hallmark of low caste. Enough fuel will go far in making everybody
forget that there was a war.
Viewed from that angle, reconstruction in Central Europe is not the
impossible undertaking some have painted it. The case reminds somewhat
of the habitual drunkard who has reformed and feels well now despite the
fact that he has irretrievably damaged his health.
The assertion has been made that the mechanical improvements and
innovations made during the war would in a large measure balance the
material damage done. I have tried hard to discover on what such claims
are founded. The instance that would support such a contention has yet
to be discovered, so far as I know. The little improvements made in
gasolene and other internal-combustion engines are hardly worth anything
to the social aggregate. I hope that nobody will take as an improvement
the great strides made in the making of guns and ammunition. The stuff
that has been written on the development of the aeroplane in war as a
means of communication in peace is interesting, but not convincing.
From that angle the world has not been benefited by the great
conflagration that has swept it.
But great hopes may be placed in the mental reconstruction that has been
going on since the war entered upon its downward curve. Men and women in
the countries at war have become more tolerant--newspaper editors and
writers excepted, perhaps. As the war developed into a struggle between
populations rather than between armies, the psychology of the
firing-line spread to those in the rear. I have met few soldiers and no
officers who spoke slightingly of their enemies. They did not love their
enemies, as some idealists demand, but they respected them. There is no
hatred in the trenches. Passions will rise, of course, as they must rise
if killing on the battle-field is not to be plain murder. But I have
seen strong men sob because half an hour ago they had driven the bayonet
into the body of some antagonist. I have also noticed often that there
was no exultation in the troops that had defeated an enemy. It seemed to
be all in the day's march.
In the course of time that feeling reached the men and women home. The
men from the front were to educate the population in that direction. It
may have taken three years of reiteration to accomplish the banishment
of the war spirit. When I left Central Europe it had totally vanished.
The thing had settled down to mere business.
There is also a socio-political aftermath.
That socialism will rule Central Europe after the war is believed by
many. I am not of that opinion. But there is no doubt that the several
governments will steal much of the thunder of the Social-Democrats. Some
of it they have purloined already. The later phases of food control
showed usually a fine regard for the masses. That they did this was
never more than the result of making virtue of necessity. Endless
hair-splitting in political theories and tendency would result, however,
if we were to examine the interest in the masses shown by the several
governments. What the socialist wishes to do for the masses for their
own good the government did for the good of the state. Since the masses
are the state, and since I am not interested in political propaganda of
any sort, mere quibbling would result from the attempt to draw
distinctions. Politics have never been more than the struggle between
the masses that wanted to control the government and the government that
wanted to control the masses.
[Illustration: Photograph by Underwood & Underwood, N. Y.