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place in which loans are negotiated as the "money market" instead of the "credit market." There is not enough gold in the world to pay the expenses of the war, and, if it were possible to insist that payment should be so made, no intervention in behalf of peace would be necessary.
What is happening is that those who have or can establish bank credits on the basis cf the property they own or can pledge are transferring those credits to the borrowing governments in exchange for the promises of those governments to retransfer the credits, plus interest, back at some future day.
The governments, in turn, transfer the credits to those from whom they buy the things that the armies and the navies require, and so the process will go on until some one of them finds that people will no longer take its promises in exchange for their property. Then that government, whichever it may be, will be forced to maintain itself upon the property it can commandeer or capture, and the war will be near an end.
It will perhaps be clearer that the payment of the war's expenses will not compel the sale of European investments in the securities of countries oversea if we take a concrete illustration.
Let us assume that an Englishman owning a million dollars in bonds of some American railway that pays five per cent desires from motives of patriotism or gain to lend his Government a like sum at four per cent, which is the basis upon which the great British loan has just been brought out.
He can, of course, sell his American bonds at a probable loss and reinvest the proceeds in the obligations of his Government; but this is quite unnecessary.
Two other courses are open to him:
1. He can hypothecate the bonds with some English bank against a loan or credit of, say, $800,000, upon which he would pay at present not over three per cent, and with the proceeds, plus $200,000 to be borrowed upon $300,000 of his Government's bonds to be acquired, he could pay for the $1,000,000 of the British debt that he desired to buy. Or,
2. He could, under the arrangement that the British Government has made with the Bank of England, borrow from that bank the entire cost of the British bonds acquired, at a rate of interest which is now four per cent, and which is guaranteed not to exceed the "bank rate " less one per cent for the next
three years, during which time the loan may continue.
That self-interest will lead him to keep his American bonds is plain when we consider the financial results of each of the three lines of action possible.
(a) If he sold his American bonds on a five per cent basis and bought the English bonds on a four per cent basis, it is plain that he would be sacrificing an income of $50,000 a year for one of $40,000. He would hardly do that.
(b) If he borrowed $1,000,000 at three per cent on the combined security of $1,000,000 American bonds and $300,000 British Government securities, he would pay in interest annually $30,000. He would receive in income on $1,000,000 American bonds $50,000, and on $1,000,000 British securities $40,000, a total of $90,000. would leave him a net income of $60,000 and the physical possession of $700,000 of the British securities. Or,
(c) If he borrowed from the Bank of England at four per cent the entire cost of the $1,000,000 Government securities purchased, he would pay in interest exactly the amount received from the Government, his income would be unaffected, he would retain possession of his American bonds and he would be able to profit by the advance in British securities which all Englishmen expect will occur when the war ends.
It is not hard to believe that under these circumstances our Englishman would choose to keep his American investments and help his Government also; and, as a matter of fact, this is what most foreign investors are doing. In so doing they are enormously increasing both the loans and deposits of the great European banks, and the banks are trying to increase their gold reserves against these deposit liabilities, assured, however, that if they fail to do so a government guarantee can be invoked that will preserve confidence until the present emergency has passed and the proceeds of increased taxation can be applied to the reduction of the national debts.
This lengthy explanation has been attempted in the hope that it may disabuse the American mind of the idea that Europe must sell its American investments, a fear which, more than anything else, restrains financial enterprise in the United States to-day.
The law of self-interest can be relied upon to keep Europeans from selling their Ameri
COMMERCE AND FINANCE
things we cannot sell except as we produce them; and as we produce them we can and should be glad to accept our own obligations in exchange for them.
As to the immediate or proximate effect upon the world's business of the enormous expansion of credit now in progress on the other side of the Atlantic, it may be said that the European nations are very much in the case of a man who, having spent all of his disengaged capital, proceeds to mortgage his homestead and squander the proceeds. His action may be uneconomic and unmoral, but for a time at least it greatly increases the profits of those among whom he spends the proceeds of the mortgage, and the resurgency of his expenditures will be felt in increased activity throughout a circumference that may be greater than at first seemed possible.
If our spendthrift friend should be a great money-earner and possess withal the selfrestraint necessary, it might be that he could save and reaccumulate the sum necessary to discharge the mortgage, in which case it is not apparent that he or the world would be much the worse off for his financial debauch, and it is conceivable that his strength of character might be improved by the practice of economy.
This analogy reduced to terms of personal experience will enable us to understand why the enormous European borrowing now in progress is likely, for the present at least, to increase the profits and activities of business throughout the world even among the belligerent peoples themselves. Europe is spend ing the accumulations of the centuries, and in doing this must sooner or later give employment to all the industrial armies of the world; and some of them, whose ranks have been depleted to recruit the fighting armies, may indeed have to work a double shift.
This expenditure will give an impulse to
activity that may last longer than we suppose, and create a supply of credit that will reduce interest rates and stimulate sound, and afterward unsound, investment to a degree that now seems impossible.
When the fall of Fort Sumter precipitated civil war in the United States, the first shock produced a panic, but within twelve months American expenditures for war commenced to accelerate the wheels of industry and commerce, and they continued to move with increasing speed until the panic of 1873 broke upon us eight years after Appomattox and ten years after Gettysburg. During that interval the Union Pacific and Central Pacific Railways were built, the Atlantic cable became a commercial agency, and, despite the waste of the Franco-Prussian War in 1870, American and European prosperity was followed by advancing prices for land, securities, and almost everything that humanity has use for.
In so far, therefore, as the opportunist. may apply precedents to a situation which, in its immensity, is unprecedented, the conclusion must be that, for the next few years at least, commerce and industry are likely to be increased and values advanced rather than diminished by the velocity with which an expanded volume of credit will probably be transferred from one account to another in payment for the goods by the production and distribution of which the agricultural, industrial, and commercial forces of the world earn their livelihood and profit. Beyond a few years, which in this case may, and probably will, be at least a decade, no one may see even darkly; but in the hope that the Christmas season revives, despite the prevailing gloom to-day, we may at least feel safe in assuming that in the future as in the past man will be preserved against complete selfdestruction and emerge from the present murderous and financial debauch still possessed of a self-restraint and ambition that will enable him to pay his debts and again struggle up the hill of difficulty toward the summit of constructive achievement.
"The omission of the architect's name in connection with reference to notable buildings is not infrequent," says a correspondent in inquiring for the name of the designer of the Beecher Memorial Buildings, recently described in The Outlook. "Is the creative imagination of the cultured architect of a lesser order of merit than that of sculptor, painter, author, or composer?" Surely not, though his art is usually more dependent than theirs upon the co-operation of others. Mr. Woodruff Leeming is the architect to whom credit for the handsome new additions to Plymouth Church was inadvertently omitted.
An architect, of course, as a rule, shares the credit for the construction of a fine building with the owner thereof, who usually has many ideas of his own as to plans; sometimes these may be to the advantage of the architect, sometimes they are a hindrance to him. It may be worth noting that in a recent competition for a prize offered for the most notable country house erected in 1913 $1,000 was given to the owner and only $500 to the architect of the successful house. Many, doubtless, would feel that this was inverting the order of merit.
A stirring experience was that of a British sailing vessel, the Medway, which escaped from a German steamer off Cape Horn not long ago. The wind was blowing half a gale when the Medway was signaled to stop, but her captain crowded on every stitch of canvas, topsails and all, and the good ship roared through the sea, in cataracts of foam, till nightfall enabled her to escape. The Medway, says the despatch, made at least sixteen knots an hour through the storm.
Under the heading " Timely Tips "about new fashions a New York newspaper prints this paragraph: "The little hats, to be worn correctly, should droop low over one eye." The effect, it is to be feared, will make fair faces resemble that of the man with a green "eyepatch" which suggests a black eye beneath.
That repository of odd announcements, the "Personal" column of the London "Times," has seldom seen a more unusual request than this in a recent issue:
Request from Sailors and Soldiers at the Front to send large Consignments of FLINT and TINDER LIGHTERS, matches, when procurable, being unreliable in wet weather. Money to help purchase direct from makers solicited. Address Haden Cranford, Esq., Marlow, Bucks. Of pathetic interest is the following from the same column:
Refined Belgian Lady, whose means have given out, asks for HOSPITALITY in refined family. Would gladly accept room and breakfast. Highest references. Address, etc. Investigators of the high cost of living might do well to learn the methods of the Southern Industrial Institute, a philanthropic school for boys at Camp Hill, Alabama. An editorial in the school's paper says: "One doliar will keep a student in this school for nearly four days.
It will provide him with a room, heated and lighted, and with three substantial meals a day for four days." And the paper contains letters from boys who seem to like their fare!
The 475 wooden cars in use on the New York City subway have been condemned by the Public Service Commission as dangerous in case of fire, and they are to be replaced by steel cars.
Dogberry's exclamation, "Oh that he were here to write me down an ass !" was probably not in the mind of a correspondent who wrote to the New York "Times " recently that Bernard Shaw was an "intellectual asset." But Dogberry's friend was in the "Times" composingroom, and "intellectual asset" got into print as intellectual ass." Was this the same compositor who changed "the masses of the people" into "them asses of the people "?
In the 1913-14 egg-laying contests in Connecticut, which are under the charge of Professor William F. Kirkpatrick, 820 hens laid 117,901 eggs, an average of nearly 144 eggs for each bird; the best individual record was 265 eggs for the year; one group of ten hens laid 2,088 eggs, or nearly 209 eggs for each hen; and 60 hens of the 820 laid more than 200 eggs apiece. Each fowl consumed, on an average, 90 pounds of feed and produced 32 pounds of eggs. Here is a record for emulation by poultry-raisers everywhere.
The burning of the great plant of Thomas A. Edison, at West Orange, New Jersey, caused general regret, somewhat mitigated by the announcement that the inventor's private laboratories were saved. Among the world's great inventors Mr. Edison is quite exceptional as having carried on successfully a great manufacturing business while developing his numerous inventions. Any interference with his experimental work would have been a public loss; it is gratifying to learn that the fire will not have this result; perhaps it will, indeed, direct his genius toward new methods of preventing such catastrophes.
A writer in "Rider and Driver" predicts a great increase in the sale of automobiles to farmers. He makes the assertion that already nearly fifty per cent of the automobiles now in use are owned by farmers, though only one farmer in ten as yet owns a car. There are over six million farms in the country, and the field for utility machines for farmers is thus almost unlimited.
The record-holder, so far, for wounds received and recovered from in the European war is probably a French soldier who received forty-one mitrailleuse bullets in his leg. He is said to have recovered and to have gone to the front to face the guns again.
DOM PUBLIC LIBRA
DECEMBER 30, 1914
HAMILTON W. MABIE, Associate Editor
LYMAN ABBOTT, Editor-in-Chief
R. D. TOWNSEND, Managing Editor
PROHIBITION AND CONGRESS
The Story of the War will be found on page 993
One of the most dramatic incidents likely to take place in the present session of Congress was the fight for the adoption of a resolution proposing an amendment to the Constitution prohibiting the sale, manufacture, transportation, and importation of intoxicating liquor within the jurisdiction of the United States.
With the leaders of both the Democratic and Republican parties, Mr. Underwood and Mr. Mann, active in opposition, party lines went to smash. Representative Hobson, the author of the amendment and the chief spokesman for the "drys" in the lower branch of Congress, led the fight for the amendment. The resolution, though a majority of those present voted in its favor, failed by 91 votes to secure the two-thirds vote necessary for adoption. This was the first occasion on which this subject has come to a vote in either house of Congress.
Back of Speaker Clark's chair during the progress of the debate on the amendment was hung a petition representing the names of six million people, "twelve times as many," só Representative Hobson declared, "as had ever petitioned this or any Government for any one thing." Illustrated placards were likewise hung on the walls at the instance of the Alabama Congressman. Mr. Hobson's placards, however, suffered from the fact, pointed out by Representative Gallivan, of Massachusetts, that their display was against the rules of the House. Accordingly the pages gathered up a score or more of them and carried them out to oblivion. Some of these placards bore such legends as the following; nearly all were illustrated:
"Drunken mothers lose more than half their babies; sober mothers less than one-fourth." "Keep cool. Drink increases danger from sunstroke."
"Death rate in pneumonia increases with alcohol habit."
It is regarded as somewhat significant of political conditions that forty-five members of the House were not present, for reasons best known to themselves.
The Outlook is glad that the Hobson amendment was defeated. We do not believe that the form of the amendment was for the public welfare. It was an attempt to prohibit perpetually the sale of liquor by embodying that prohibition in the Constitution itself. Our position on the question of the enactment of an amendment to the Constitution looking towards the National prohibition of the sale of liquor was stated in our issue of the 18th of last July in the following words: "While we are not prepared to say that the time has yet come for National prohibition, we are prepared to say that Congress should have the Constitutional power to enact a prohibitory statute." We think that Congress and the public should have clearly in mind the distinction between embodying a prohibition in the Constitution as slavery is prohibited, and a Constitutional Amendment which may enable Congress at the right time by statute to enact National prohibition as the income tax is authorized.
THE PHILIPPINES AND THE
Before the termination of the present Congress it is expected that the Jones Philippine Bill will be passed and will receive the signature of the President. While this bill possesses few features that can be called radical, it is of interest, nevertheless, for in a large measure it expresses the present intent of the Democratic party toward the Philippine Islands. It contains, moreover, a preamble which promises independ
ence to the Philippines upon the creation of a stable government, and which, in the opinion of The Outlook, will retard rather than advance the progress of the Filipino people.
In this connection it is well to know what have been the accomplishments of the present Democratic administration in the Philippines and what results may be expected from the policies maintained by Governor Harrison and his co-laborers.
No little light has been thrown on this question by the preface to the second edition of Mr. Dean C. Worcester's "The Philippines, Past and Present." Mr. Worcester, as the readers of The Outlook know, has made a first-hand study of Philippine problems for a matter of eighteen years. served as a member of the first Philippine. Commission, and then as Secretary of the Interior for the Philippine Islands until the advent of Governor-General Harrison in Oc
tober, 1913. Mr. Worcester's summary of conditions in the Philippines at present is so judicial in tone and so well supported by facts that it will disarm any one who is likely to discount its value because it comes from 66 a member of a former Administration."
At the beginning of his own administration Governor Harrison told a great gathering of Filipinos that the change of the National Administration of the United States had brought for them a "new era." The spirit of this new era may perhaps be judged by a quotation which Mr. Worcester makes from an official address by Secretary Denison of the Philippine Commission: "Why should we insist upon hurrying the East against its will if the East wishes to lie placid murmuring mañana? . . . For example, a few days ago I received a letter which had been perhaps two weeks or more coming down to Manila from the mountain provinces. I mentioned the fact to a friend, and he said, 'Yes, that is the sort of thing you will get constantly if you Filipinize the post-office service.' I replied, 'Even if that is true, what of it? If the Filipino people prefer to have their letters arrive in two weeks and do it themselves, why haven't they the right to do it that way?" "
PROMISE AND THE PERFORMANCE
To The Outlook such an attitude of mind seems hardly consonant with the expressed purpose of the American people to devote their best energies toward bringing the Phil
ippine Islands into the closest possible harmony with the best that modern civilization affords. The principle enunciated in the above quotation, as Mr. Worcester points out, means that the annual saving of hundreds of thousands of Filipinos from untimely deaths, a result which we have achieved, is an unwarranted intrusion upon their freedom of action. If that is so, let us get out, bag and baggage!
In the pursuance of this policy, the distance which the present government has gone in the Filipinization of the islands and in destroying the efficiency of the government may be learned from the following statistics, and the record of one typical
At the beginning of Governor Harrison's administration there were in the Philippine service some 2,623 Americans on a permanent status. After three months of the new régime this number had decreased by 197; six months later it had decreased nearly a hundred more. These men were not of the rank and file, but in large percentage bureau chiefs, department chiefs, or occupants of positions of great responsibility. Nor does this list include the name of a single man separated from the service for alleged cause.
In what manner the Filipinos who profited by this wrecking of the civil service have acted is shown in Mr. Worcester's citation of the facts in regard to the Bureaus of Science and Agriculture. He says that since the American occupation the dangerous epizoötic of rinderpest had been virtually stamped out in the islands. This annual plague at one time had almost destroyed the agricultural industry of the islands. At the beginning of the present administration there were thirty municipalities in eight provinces still infected with the disease. On January 20, 1914, this number had been reduced to nine municipalities in four provinces, and then, when the final success was within easy reach, control of the campaign was taken from the Department of Agriculture and invested in Filipino provincial officers by an act of the Legislature.
On May 17 the number of infected towns had increased to thirty-six. On June 5 reports of the Bureau of Agriculture showed an increase of seventy-seven per cent in deaths and one hundred and eighteen per cent in new cases during a single week. The most recent reports from the islands show that the disease is still far from being under