C. AFTER THE WAR
1. General Effects.—When the war comes to an end, an immediate revival of commercial relations between the combatant States and a general revival of foreign trade cannot be reasonably expected. After the Napoleonic Wars, English manufacturers, assuming the eagerness of continental peoples to buy their goods, were met with the obvious fact that impoverished nations are not good customers. When peaceful relations are resumed in Europe, we shall recognise very vividly the extent to which industry and commerce on the Continent have been closed down. Even assuming that British production continues, Germany, Belgium and Austria will have little to send us in exchange. The closing of the overseas markets of Germany, and the consequent shrinkage in production, the disruption of normal industrial life by the withdrawal of millions of men to join the colours, and the abnormal character of existing trade, due to the needs of the armies in the field, are not conditions favourable to the easy resumption of normal commercial relations. The dislocation of the mechanism of industry and commerce in Europe, on a much larger scale than ever before—a mechanism which has with growing international relations and interdependence become more complicated and more sensitive in recent years—cannot be immediately remedied by a stroke of the pen or the fiat of an emperor. The credit system upon which modern industry and commerce are built depends upon mutual confidence. This confidence will not be restored among the combatant nations immediately on the cessation of war; it will require time to grow. Further, Europe during the war has been spending its substance and must emerge much poorer. This applies not only to combatant States, but to neutral countries, some of which have floated loans to meet the abnormal expenditure thrown upon them by prolonged mobilisation. The capital and credit of a large number of people will have suffered great loss or have vanished into thin air. Houses, shops, and buildings of all kinds, produce manufactured and unmanufactured, bridges, ships, railway stations and stock of enormous value will have been destroyed. The community will have been impoverished, not only by the expenditure of great armies and the destruction of wealth, but by the utilisation for immediate consumption of wealth which would have been used as new capital, and by the withdrawal of probably close upon fifteen million men from production during the period of the war. Even if we assume that the world has lost the production of only twelve million men[1], the loss is enormous. If each man were capable of producing, on the average, wealth to the value of £100 per year, the loss of production per year during the continuance of the war would be about £1,200,000,000. The effect of these factors will be heightened by the fact that the millions of men whose needs during the war have been satisfied by their non-combatant fellow-countrymen will be thrown upon their own resources. And though Europe will still need to be fed and clad and housed, the effectual demand of the population for the goods and services it needs, a demand which it is able to satisfy because of its possession of exchangeable wealth, will be smaller than before the war. The demand will be more or less stifled until the credit system is re-established and mutual confidence restored, and until industry and commerce have adjusted themselves to the new situation. The volume of employment in this country during the war will have been swollen by temporary demands for war supplies which will cease when the war ends; foreign trade will be uncertain; a larger number of soldiers will be thrown on the labour market than ever before. It would seem, therefore, that in the absence of special steps, the volume of unemployment at the close of the war will be a good deal greater than during the progress of the war[2].
[Footnote 1: The number must be larger than this, as the mobilisation of the armies of neutral states should be taken into account.]
[Footnote 2: It is thought by some that the war will be followed by a short boom, when Europe will make good the necessities of industry and civilised life, but it is at least doubtful whether there will be a rapid reproduction of these commodities, owing to the conditions, already described, which will obtain at the close of the war. In any case, however, it will be merely a flash in the pan, and there will follow the gloom of a deep depression, unless there is clear-sighted State action.]
It is just conceivable, though one hopes not probable, that the economic effects of the war will be complicated by the imposition of war indemnities. The indemnity is really a means of obtaining booty from a vanquished State, and has been looked upon as a justifiable means of further humiliating an already beaten enemy. It has been pointed out[1], however, that the advantages derived from an indemnity are not an unmixed gain. The indemnity recoils on the heads of those who impose it. It is unnecessary here to enter into a consideration of the detailed effects of huge payments by defeated nations; though it may be remarked that the ramifications of such payments are so intricate and often so incapable of measurement, whilst other economic influences are at work at the same time, that it is impossible to draw an accurate conclusion as to the net advantage or disadvantage of indemnities to the State which levies them. But the point to be borne in mind is that the addition of a great debt to the already large burden of an unsuccessful war reacts upon all countries with which the defeated state enters into business relations. The losses due to this cause will not necessarily be counterbalanced by gains from increased trade with the country receiving the indemnity; and even if they were, the latter trade might be of a different character. In any case, countries not parties to the indemnity will be affected by it in some way or other; war indemnities, like wars, do not pass by neutral countries and leave them untouched.
[Footnote 1: See Norman Angell, The Great Illusion, Part I. chap. vi.]
It is important to remember that, though modern warfare is much more costly and more exhausting than in the past, there is another side to the matter. Society has also gained remarkably in its powers of recuperation. The blight of war is not as terrible as might be expected. The accumulated knowledge, the vastly increased productivity of industry, and the high organising ability, which have made the modern industrial and commercial world, will not be obliterated by the war. And though there will be difficulties in the way of their full operation when peace returns, they will aid powerfully in shortening the period of recovery. The forces which have transformed mediaeval into modern cities in a few short years will still exist. Though they can hardly be expected to overcome all the many factors likely to restrain economic activity, they may be relied on to stimulate the revival of normal economic life. Indeed, the knowledge of science and the faculty of organisation are likely to be applied more extensively than in the past to productive processes.
After the war, when the States of Europe begin to tread the paths of peace again, one of the first things to be done will be to repair as far as possible the damage done by the war. Take Belgium as an extreme example; leaving aside the irreparable destruction of historic buildings and priceless treasures, there are many million pounds' worth of houses and farm buildings, shops, warehouses, factories, public buildings, ships, railway stations, and bridges to be replaced. This work will take precedence over other kinds of production. Sugar, motor cars, glass, etc., will still be manufactured, but chiefly in order to buy the requisite raw materials and finished goods for the replacement of the wealth destroyed by the ravages of the war. Speaking generally, Belgium will probably consume less food than ordinarily, wear less clothes, and consume less luxuries. Savings, which would normally have been devoted to new industrial developments, will be needed to make good the losses in existing industrial establishments. It is clear, therefore, that the economic growth of Belgium will be retarded in a great degree.[1] The same holds good of Germany, though probably not to the same extent unless the theatre of war is extended to cover a considerable part of the Empire. In the case of our own country, provided it remains free from invasion, there will not be such a large replacement of lost wealth and capital destroyed by the war, except in the case of shipping; but in common with other States there will be the war to pay for, and certain obligations to meet regarding the maimed and the relatives of the slain. Taxation will be heavy, and therefore, on this ground alone the accumulation of new capital will be retarded. Industrial organisation, having been re-arranged and modified to meet the requirements of the war period, will not resume its old form without a good deal of creaking and jolting. And even if it could, it will not be able to face the new conditions arising out of the war at all rapidly. There is every prospect, therefore, of a time of great difficulty after the war is over, before the normal course of industrial and commercial activity is fully resumed. In all likelihood, we shall find that the relative importance of our various industries will have altered to some extent, and that the nature of our trade will have been modified also. Then also the relative positions of our home and foreign trade may shift; in other words, if the war lasts sufficiently long for new industries to develop and become efficient, they may survive the competition of foreign goods after the war; in which case, the goods which have hitherto been produced to buy the foreign goods will not now be required for foreign trade. It may be that on the return of peace, some European States, in order to give their industries an opportunity to recover from the effects of the war, will inaugurate new tariffs; there is, indeed, a strong possibility that on these grounds, and because of the dependence of the United Kingdom on the products of Germany, the Tariff Reform Movement here may be electrified into life.
[Footnote 1: If Germany be required to compensate Belgium for the damage done, these effects will in large part disappear; though the burden would still remain. The difference would be that it would be more widely distributed.]
2. Possible Industrial Developments.—But industrial changes will not be confined to the direction and form which economic activity will take. As has been suggested above, there may be far-reaching changes in the methods of production. It has been said that "there is only one way by which the wealth of the world will be quickly replaced after the war and that is by work. The country whose workers show the greatest capacity for productiveness will be the country which will most rapidly recuperate."[1] The question goes deeper than the replacement of wealth. The position after the war will be that production will be retarded because of the diminution in the rate of accumulation of new capital since the beginning of the war; there will be a certain amount of leeway to make up. Consequently, there will be every incentive towards the greatest possible efficiency in production. It is here that the workers are likely to be affected. Has labour reached its maximum efficiency? It has been shown by the application of what is called "scientific management," that the output of labour can be increased to a remarkable extent. For instance, instead of shovelling 16 tons a day, a man can shovel 59 tons; a man loading pig-iron increased his total load per day from 12-1/2 to 47-1/2 tons; the day's tale of bricks laid has been raised from 1000 to 2700. The list could be extended to cover operatives working at machines. In the endeavour to screw up industry to a maximum of production, it is not likely that the expedients of "scientific management" will long remain untried. Already the system is making considerable headway in the United States, and it is not altogether unknown in this country. It is not possible to enter into a full explanation of the methods of "scientific management." Briefly, by a process of scientific selection it puts each worker in the job for which he is best fitted, and teaches him exactly how to use the most efficient tools with which he would be provided. The method of teaching may be illustrated from Mr. F.W. Taylor's own example: "Schmidt started to work, and all day long and at regular intervals, was told by the man who stood over him with a watch, 'Now, pick up a pig and walk. Now sit down and rest. Now walk—now rest,' etc. He worked when he was told to work, and rested when he was told to rest, and at half-past five in the afternoon had his 47-1/2 tons loaded on the car."[2] By elaborate experiments the exact shape and size of a shovel is determined; by long observation useless and awkward movements of a workman are eliminated or replaced by the correct movements giving the maximum return for the minimum of effort. In this way, and by a bonus on wages, a largely increased output is obtained. It is clear that the adoption of such methods gives the "scientific manager" great power; it also seems inevitable that the workman should degenerate into an automaton; it is obvious that in the hands of employers ignorant of the principles underlying it, and seeing merely a new and highly profitable method of exploitation, it will be open to serious abuse, as experience has already shown in America.