One would think that the Central European bankers would oppose such a step. They did not, however. For the sake of pre-war loans and investments, these men must favor a rehabilitation of the currency, and nothing would do that as effectively as a reduction of the war debt. The mark and crown buy to-day from one-third to one-half what they bought in 1914. With the war debt cut down to one-half they would buy from 60 to 75 per cent. what they bought in that year. As a measure of socio-economic justice, if there be such a thing, the reconstruction proposed would appeal to all who invested money before the outbreak of the war. These people put up money at the rate of 100, while the interest they are getting to-day is worth from 33 to 50. The man who in 1914 invested 100,000 marks would indeed get back 100,000 marks. The trouble is that the mark has depreciated in purchasing power, so that his capital has shrunk to 33,000 or 50,000 marks, as the case may be.
War does not only mortgage the future of a nation, but it also has the knack of tearing down the past.
Tired of hotel life, I had made up my mind in Vienna to find private quarters. In the end I found what I wanted. I ought to have been satisfied with my lodging, seeing that it was the comfortable home of the widow of a former professor of the Vienna university.
I never experienced such mixed feelings in my life as when I discussed terms with the woman. She was a person of breeding and tact and considerable false pride. How much did I want to pay? She did not know what she ought to ask. She had never rented rooms before.
We arrived at an understanding. I moved into the well-furnished flat and the old lady into her kitchen, where she lived and cooked and slept, together with a parrot, until I turned over to her the bedroom and occupied the couch in the parlor.
Before the war the woman had fared better. She was getting a small pension and had a little capital. The income had been large enough to give her a servant. When I moved in, the servant was gone long ago, and I suspect that since then there had been days when the old lady did not have enough to eat. Still, she was getting the same pension and her little capital was bringing the same interest. The difficulty was that the income bought but a third of what it had formerly secured.
There were thousands of such cases, involving pensioners, widows, and orphans. In their case the world had not only stood still, but it had actually gone backward. The inflated currency left them stranded, and the worst of it was that taxes were growing with every day. The government was levying tribute on the basis of the inflated money. These people had to pay it with coin that was 100 so far as they were concerned.
Real-estate owners were in no better position. The moratorium prevented them from increasing rents, which step had to be taken in the interest of the families of the men at the front. Taxes kept growing, however, and when the income from rent houses was all a person had there was nothing to do but stint. With the currency as low as it was, n.o.body cared to sell real property of course. It was nothing unusual to see the small rent-house owner act as his own janitor.
While the war loans and government contracts were making some immensely rich, thousands of the middle cla.s.s were being beggared. But there is nothing extraordinary in this. The socio-economic structure may be likened to a container that holds the national wealth. For purposes of its own the government had watered the contents of the bucket and now all had to take from it the thinned gruel. That thousands of aged men and women had to suffer from this could make little impression on governments that were sacrificing daily the lives and health of able-bodied producers on the battle-fields--one of whom was of greater economic value to the state than a dozen of those who were content to spend their life on small incomes without working.
XXI
THE AFTERMATH
In Caesar"s time the pound of beef at Rome cost 1 American cents. At the end of the thirteenth century it was 2 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 2 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 6 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 5 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 b.u.t.ter, $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 princ.i.p.ally is, Why has food become dearer?
Actually food is not dearer to-day than it was in Rome under Caesar. 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 a.s.similated 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 a.s.sume. 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 compet.i.tor. 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 n.o.body has meat to sell, and since all will draw on that market high prices are bound to limit the quant.i.ties 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, n.o.body expects trains to run a hundred kilometers per hour any more. The ma.s.ses 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 b.u.t.ter or some cheese on it, will seem a G.o.dsend 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 a.s.sertion 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 n.o.body 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. Pa.s.sions 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 ma.s.ses. 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 ma.s.ses shown by the several governments. What the socialist wishes to do for the ma.s.ses for their own good the government did for the good of the state. Since the ma.s.ses 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 ma.s.ses that wanted to control the government and the government that wanted to control the ma.s.ses.
[Ill.u.s.tration: Photograph by Underwood & Underwood, N. Y.
SCENE IN GERMAN SHIP-BUILDING YARD
The great ship in the background has just been launched. Though the war left Germany no man to spare, every effort has been made to materially increase the country"s merchant marine. To-day Germany"s mercantile fleet is stronger than ever.]
For the first time in the history of Central Europe, the several governments had to publicly admit that the ma.s.ses were indispensable in their scheme instead of merely necessary. That they were necessary had been realized in the manner in which the farmer looks upon the draft animal. The several governments had also done the best they could to have this policy be as humane as possible. There were sick benefits and pensions. Such things made the populace content with its lot. So long as old age had at least the promise that a pension would keep the wolf from the door, small wages, military service, heavy taxes, and cla.s.s distinctions were bound to be overlooked by all except the wide-awake and enterprising. The few that were able to examine the scheme from without, as it were, might voice their doubts that this was the best manner in which the ship of state could be steered, but their words generally fell on the ears of a populace to which government was indeed a divine-right inst.i.tution.
I have met Germans and Austro-Hungarians who were able to grasp the idea that the government ought to be their servant instead of their master.
Their number was small, however. Generally, such men were socialists rather than rationalists.
It is nothing unusual to meet persons, afflicted with a disease, who claim that nothing is wrong with them. The "giftie" for which Burns prayed is not given to us. It was so with the Germans and the thing called militarism. I have elsewhere referred to the fact that militarism as an internal condition in the German Empire meant largely that thinking was an offense. But the Prussian had accepted that as something quite natural. We need not be surprised at that. Prussia is essentially a military state. The army made Prussia what it is. Not alone did it make the state a political force, but it also was the school in which men were trained into good subjects. In this school the inherent love of the German for law and order was supplemented by a discipline whose princ.i.p.al ingredient was that the state came first and last and that the individual existed for the state.
The non-Prussians of the German Empire, then, knew that militarism, in its internal aspect, was a state of things that made independent thought impossible. To that extent they hated the system, without overlooking its good points, however. The fact is that much of what is really efficient in Germany had its birth in the Prussian army. Without this incubator of organization and serious effort, Germany would have never risen to the position that is hers.