Austria-Hungary, which is not an advanced industrial country, will not suffer quite so keenly, though even here the German newspapers admit that trade has come almost to a standstill.[1] In the western theatre of war the fighting has centred largely round the Franco-Belgian Coalfield, on or near which stand on both sides of the frontier many industrial towns. Lille, Nancy, Epinal, Belfort, Reims, Amiens, and Valenciennes on one side, and Liège and Charleroi on the other, are all of economic importance. Even apart from the actual destruction due to the war which in some of these towns has been serious, the mere presence of the contending armies will have a more or less paralysing effect on industrial and commercial life in both France and Belgium.[2] The position in Belgium, however, is much more serious than in France. It may best be described in the words of Professor Sarolea, written after a visit of five weeks to his native country. "Other belligerent nations may suffer from unemployment. In Belgium alone there has been created a whole nation of unemployed. In other countries trade and industry are dislocated. In Belgium they have come to a complete standstill. Out of a population of eight millions, seven millions are under the heel of the invader. Railwaymen are starving, for railways have ceased to work. Office clerks are starving, for banks and offices are closed. Public officials are starving, for no salaries can be paid…. Journalists and printers are starving, for newspapers and books have ceased to appear. Mill hands and coal miners and ironworkers are starving, for mills and coal mines and iron works are closed."[3] Bad as this is, the condition of affairs is somewhat relieved so far as France and Belgium are concerned by the fact that the seas are open to them, but even then we must add these areas to Germany and Austria-Hungary as regions where industry and trade are at the best severely hampered, regions all of which are important factors in the markets of Europe, and whose commercial paralysis will re-echo through the whole commercial world.
[Footnote 1: "The shortage of raw materials, notably cotton, wool, jute, and petroleum, is greatly restricting production in many branches of manufacture in Austria-Hungary. According to official estimates, the supplies of some of the most necessary raw products are barely sufficient for two more months. Factories are closing down, and the number of unemployed is steadily increasing" (Reuter's telegram from Venice, Oct. 21, 1914).]
[Footnote 2: For example, the probable number of French factories in a position to produce sugar in 1914-15, will be 82 or 83 as against 206 during the year 1913-14 (Times, Nov. 3, 1914).]
[Footnote 3: Letter to the Press dated Sept. 12, 1914. Mr. J.H. Whitehouse, M.P., who visited Belgium says, "The whole life of the nation has been arrested.">[
The most fortunately situated combatants in Europe are Russia and Great Britain. The former, covering half the area of Europe, has almost limitless resources, and is much more easily capable of being self-supporting than any of the other Great Powers engaged in the war. This country still has the seas open to it.[1] The State subsidy to marine insurance has encouraged overseas trade, and the re-establishment of the remittance market has removed an obstacle to the flow of exports and imports. Still, it is true that the financial world cannot recover all at once. "It is like a man whose nervous system has been shattered by a great shock. Tonics and stimulants may save him from complete collapse, but real recovery is a matter of months and even years."[2] Further, the work hitherto done and the services performed for Germany and Austria are now no longer called for; our allies in the west of Europe are suffering acutely from the immediate economic effects of the war and the large destruction of capital; our neutral customers have not escaped scot-free. It would seem, therefore, that in spite of the British command of the seas, production must necessarily be seriously curtailed and that, therefore, the volume of unemployment must be very considerable. On the other hand, though production in France, Belgium and Russia may diminish in many directions, what goods they do produce for export will find no market in Germany and Austria-Hungary and a proportion of them will find their way to this country. Such commodities will not only be valuable as food and raw material for industry, but will set up a flow of British goods in payment for them. Further, the production of commodities needed for the prosecution of the war, will increase the volume of employment. Goods of all kinds are required not only for the British armies but for the Allies generally. The manner and extent to which these factors have influenced unemployment will be considered presently.
[Footnote 1: According to an Admiralty statement, corrected up to Sept. 23, 1914, 12 British ships had been sunk by German cruisers, 8 had been sunk by mines, whilst a few fishing boats had been destroyed. British ships detained and captured by Germany numbered 86, with a total tonnage of 229,000. On the other hand, 387 German vessels had been detained or captured, the total tonnage being 1,140,000. According to The Times (Oct. 9, 1914), up to date 1.6 per cent of the tonnage registered in the United Kingdom had been lost. The figures for Germany and Austria were 18 and 13 per cent respectively. The Committee which prepared the State War Insurance Scheme estimated that the loss during the first six months of the war might be about 10 per cent of all British steamers employed in foreign trade.]
[Footnote 2: Round Table, Sept. 1914, p. 704.]
Now the demand for the goods hitherto supplied by Germany to her foreign customers, though abated, will still continue. As we have seen, she cannot for the present supply them. By whom will she be superseded?[1] The Government of this country early in the war took steps to co-operate with British traders in an attempt to obtain some share of this trade, and the United States also strove to make the fullest use of the opportunity. In this country goods previously imported from Germany will, if still needed, either be bought from the next cheapest importer or produced at home. Commodities which we have in the past produced for German consumption are not now required from us. If they continue to be made, it must be for other countries. In other words, whether the volume of British foreign trade remains the same or not, a proportion of it will be diverted into new channels during the progress of the war. In a less degree, the trade of other states will be deflected from its accustomed channels. Beyond this, special influences will be felt in the case of certain new countries, as for example Canada. "Canada's annual balance of trade is probably about £60,000,000 against her: £30,000,000 being the excess of her trade imports over her trade exports and the remaining £30,000,000 representing her annual payment on money borrowed. She has balanced her account hitherto by borrowing very large sums of money. Now she will be unable to do that any longer. Nor will she at present, at any rate, obtain the immigrants on which she is counting to enable her to pay her interest. She cannot redeem the balance due by the export of gold. The burden would be too great in any case, and moreover she has suspended specie payments. A part of the balance due may be covered by the higher value of her exports, such as wheat. The remainder she can only meet either by increasing her exports or by reducing her imports. The latter she has already begun to do."[2] This new readjustment may be accompanied by great economic loss; in any case the dislocation will be harmful for the time, not only to the new countries, but to the countries with whom they trade. It is clear that foreign trade generally will during the war gradually be readjusted to the new conditions of the times. To what extent the various streams of the world's trade will be directed into new channels it is impossible to say; the readjustment will be partly temporary, and partly permanent.[3] This redistribution of production, if it leads to production under less favourable conditions than before, will tend to raise prices, and thereby probably diminish the power to buy other commodities. If it leads to the substitution of a well organised and well paid industry by an industry of a less skilled kind, there will be in effect a net lowering of wages. The widespread effects of the war on industry and commerce must, therefore, have a profound effect on the whole of the economic world.
[Footnote 1: Towards the end of August, the tin-plate and steel-sheet trade in this country which had suffered badly on the outbreak of war revived, and "several mills were reopened, owing to the obtaining of orders which formerly went to Germany" (Board of Trade Labour Gazette, Sept. 1914, p. 330).]
[Footnote 2: Round Table, Sept. 1914, pp. 708-9.]