Europe's Economic Predominance in Danger

By Professor Willy Wygodzinski

[The New York Times/Current History, March 1916]

The following article by a noted Professor of Philosophy and writer on economics in the University of Bonn, warning the belligerents of the probable effects of the continuance of the war upon their position in the world markets, originally appeared in the Cologne Gazette on Dec. 24, 1915:

Dr. Helfferich, the Imperial Treasurer, in his report to the Reichstag on Dec. 14 estimated the daily cost of the war at from $80,000,000 to $82,500,000, or a yearly total of from $30,000,000,000 to $32,500,000,000. These figures seem fantastic, but they are nothing more than the concrete expression of a grim reality. And in these figures only the immediate expenses of the war are included, i.e., what the belligerent States are laying out for warlike purposes. They do not cover the expenses of individuals, the destruction of goods, or the falling off in production.

It is easily comprehensible, therefore, that in these circumstances the leading financial organ of Great Britain, The Economist, raises the question if it is not possible to conclude an honorable peace before Europe goes into general bankruptcy. Indeed, the question of how the economic future of Europe has been and will continue to be affected by the war deserves the most careful attention.

Europe, or to speak more exactly, Northwestern Europe, has been up to the present the spiritual and economic centre of the world. Its advanced position has been due to no small extent to the restless economic urge of Germany, which, often enough against their will, dragged the older countries with it. Two things have threatened this European hegemony during the last few decades; the slow upward march of the United States of America and the force with which Japan, leaving the Middle Ages behind, thrust itself into the ranks of the great powers. So far, the other Asiatic or African countries have not been able to reach a similar height. The development of Canada and Australia has been limited partly by natural and partly by cultural reasons. The nations of Central and South America, the climatic conditions of which place them in the position of being essentially producers of raw materials, are by no means able to compete with the industrial countries.

If it is true that England now has 4,000,000 men under arms, this alone signifies a great sacrifice. According to the census of 1911 there were only 14,250,000 males engaged in industry in all Great Britain. If we count those who have fallen, or been hopelessly maimed, as well as the others whose services are required by the war, we find that fully a third of the male industrial population has been withdrawn from its former activities. The solders, however, naturally represent the pick of the workers in the prime of life, so in reality the loss in labor power is still greater. Consequently, instead of England being able to increase her production, as she had hoped to do, she has been obliged greatly to reduce it. The results are well known; the island kingdom's exports are steadily falling, while her imports are increasing, and at constantly rising prices.

The same is true in a still greater degree in the case of France and Russia, as these countries were the first to send their young men to the battlefields. Naturally, the Central Powers have also been hard hit by the war, but, as we shall show, they are in a much more favorable economic position than their opponents. Of course their sacrifice in blood has been extraordinarily large and can by no means be replaced, but England's intention to ruin them economically has luckily come to nought, although they have not been able to import some things that formerly seemed indispensable, as only small quantities have escaped the brutal policy of oppression of England, the sea pirate. They have been in the same situation regarding exports. In connection with the latter point, the significance of the fostering of the home market was well brought out. While England, with her disproportionately developed industry, depended upon selling from three-quarters to four-fifths of her entire production abroad, the case with Germany was just the reverse. Consequently, it was much easier for her to find a place for her former export goods in the domestic market. The war itself, with its never-ceasing demand for all sorts of articles, from shells to pocket lanterns, quickly assumed, thanks to the adaptability of our industry, the role of "substitute" purchaser.

Now, after having recognized the incomparably better situation of the Central Powers, let us try to take a good look at the general economic results of the war for the European powers concerned. Japan need not be counted as a belligerent, as her active part in the war may be regarded as ended. It would be unspeakably foolish from her standpoint if she did not complacently watch the European nations tear each other to pieces as long as possible. Let us estimate the number of men engaged in the war at 25,000,000 at least. All of them have been withdrawn from productive labor. Counting the average yearly production (not wages) of each of the 15,000,000 West Europeans at $250, and that of the 10,000,000 East Europeans at $125, we have a falling off in production of $5,000,000,000 a year. This is exactly the amount of the annual income of the rich French Nation, as estimated some years ago by Leroy-Beaulieu. In reality it is likely that the number of men withdrawn from industrial life is much larger, and the loss in production as well, since a great many factories are lying partly or entirely idle because of the absence of their managers or of other important officials.

Then we must add the immense destruction of goods, the consumption of material by the war itself, and the tying up of important shipping lines, to mention just a few instances. And then the list of losses is by no means ended. A very large number of the men in the field will either never return or will come back so crippled as to be hardly counted as members of productive industry. In many cases, even though no member of the family is killed or crippled, the disorganization of industry, the loss of customers, etc., will make former producers temporary or permanent passive elements in economic life. Finally, it must be remembered that the costs of the war, even though they be partly shifted to the shoulders of later generations, must be paid at some time, and with a high rate of interest at that. In case the expenses of the victor should be paid by the vanquished, which is by no means certain, the position of the former group of States would be bettered, but not the general situation of Europe.

Now, what is the position of Europe's rivals? The advantages derived out of the present situation by both America and Japan are universally known. "Neutral" America is enriching itself no less than the enemy land of the Mikado. It is characteristic of the situation that Japan, the poor nation, is now in a position to avail itself of the difference in exchange and buy back its securities in the stock markets of Paris and Berlin. But the developments of the future are more important than those of the moment. That Germany will no longer have a part in the world market, as her opponent hope, is naturally not to be thought of. She will remain indispensable as a purchaser and, above all, as a producer of high quality goods. We might even say that Germany could not have a better advertisement than this war, which has given her the opportunity to demonstrate her ability upon every field. Europe in general, however, has been set back to an incalculable degree by the war in the economic race with her non-European competitors, who have not been injured by it. President Wilson told a meeting of business men in Columbus early in December that it seemed as if the United States must form a reserve of financial and economic strength for the entire world after the war.

This is, of course, when we consider America's weakness in capital, one of those favorite exaggerations of the land of unlimited boasting. Nevertheless, it is certain that North America's advantage in the great export market of South America has grown enormously, and that it is also likely to maintain the position of purveyor to the Entente countries that it has obtained during the war. To be sure, Wilson, through his cowardly policy the Japanese are still in the Mexican bay where they landed more than a year ago to float a "stranded" ship has abandoned the East Asiatic market for a long time.

Right here lies what is probably the greatest danger for the economic position of Europe and for the white race in general. The incomprehensible shortsightedness of the Anglo-American policy in the Far East, inspired partly by hate and partly by blind business greed, has led to an immeasurable strengthening of Japan, and she seems likely to emerge as the real economic victor of the war. The Japanese textile industry is particularly active in availing itself of the favorable opportunity to get into the world's trade. We hear that the Red Cross in Moscow has received bids from Japanese woolen mills that were 40 per cent, under the Russian prices, and that the woolen manufacturers of Manchester are worrying over samples of Japanese goods which have stood the test of comparison with their own products, and have been offered at very low prices. If this is happening in England itself, we may well imagine how things look in the markets of the Far East, and particularly those of India, which the Japanese have for a long time openly regarded as in their sphere of influence. While the export of textile machinery from England to all other countries has fallen off, to Japan it has increased. If Japan succeeds in industrially organizing the human hordes of Eastern Asia, and she seems in a fair way to do so, the fate of the European-American working class, that cannot adapt itself to the living conditions of the coolies, is sealed, and that of the capitalists also. The war and the blind, suicidal policy of England and America are all hastening the advent of that period.

Let us summarize. The economic future of Europe is in great danger. The loss of men and material, if long continued, must entail the loss of Europe's economic hegemony. Germany has the least to fear, as her exploitation of the advantages of the "closed market" during the war, the new export possibilities opened to her in the Near East, and the great productive ability of her industry, which has been heightened during the war land promoted by German science, will continue to make her superior to the nations that are now trying to annihilate her because of this very superiority. England, with her relatively excessive foreign trade and her particularly exposed position in India, has the most to fear. Every further day of the war signifies a new and irretrievable loss, without any visible compensation for the aggressors. This sin against European culture and against the development of humanity does not rest upon our head.

© J. Fred MacDonald, 2013



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