The New York Times Current History of the European War, Vol. 1, January 9, 1915 / What Americans Say to Europe

by Various

And the laboring man, who forms the majority, what of him? It seems improbable that he will be greatly affected, that is, on the average. He will have to pay more for his food, and food constitutes more than a third of his budget. But some articles he buys will probably fall and he may secure higher wages because of the withdrawal of competing laborers. Some labor may rise, especially in the industries benefited by the war, such as, for instance, farming and other food industries, canning, flour mills, sugar, &c., the automobile industry and perhaps ammunition and steel. In other industries thrown out of gear for lack of foreign markets or for lack of foreign raw material, the wage earner may lose in wages and employment. In other words, labor will be dislocated in spots, like the other parts of our industrial machinery.

Important dislocations will be felt in the fields of shipping and banking. One consequence is that American enterprise has now the golden opportunity to capture a good share of each. The outbreak of the war and the simultaneous opening of the Panama Canal will tend to divert the course of trade from Europe to South America. Probably our merchant marine can be developed more successfully for this South American trade than it could for the European trade. New York can largely take the place of London as the world's exchange centre for Pan-American trade. This opportunity is increased by the possibilities in the new Banking act for the establishment of branch banks abroad.

With these opportunities and the rise of interest in Europe, the United States will change to a great degree from a debtor to a creditor nation.

One of the dislocations of the war in the United States will be the cutting off of imports of a large part of our dutiable commodities, and therefore the loss of national revenue. There is an urgent need to compensate for this loss by some other form of tax.

But it is well not to lose perspective, to remember that dislocations are not necessarily losses, that, however loudly they are proclaimed in news columns, they are small in extent, when considered in relation to our whole trade, that this country of ours is a vast one, and that the rank and file of Americans will be but slightly affected by the war—especially by contrast with our friends, now fighting each other, across the sea.

We are too nearly self-supporting to be prostrated. Our foreign trade is and always has been a trifling matter compared with our internal commerce. The internal commerce paid for by money and checks annually in the United States amounts to nearly five hundred billions of dollars, which is more than a hundred times as much as our combined exports and imports.

Almost all of what has been said so far had grown out of the prospect that the prices of foods and other materials needed in Europe will be high, while the prices of securities which Europe does not need and cannot afford will be low. Other prices will rise or fall according to special circumstances. Like a bomb-shell, the effect of the war will be to disperse or scatter prices at all angles of rises and falls. The prices of luxuries will be lowered. The prices of chemicals will be raised. The same article will fall in price in one country and rise in another if the transportation from the former to the latter is interfered with. This is true today of cotton.

There has already been a speculative movement to anticipate these changes and arbitrarily to mark some prices up and some prices down. But as this is guesswork, and will be subject to frequent revision, one of the striking phenomena will doubtless be an increase in the variability of prices. The general level of prices will tend to rise. The rise will probably be greatest in little countries like Belgium, which are in the war zone and largely dependent on foreign trade. The rise will be less in England and in the United States than on the Continent. In fact, it is conceivable that in England the hoarding of money and the shock to credit, which is as predominant there as it is here, may actually lower the general level of prices during the war, especially if we could include in the index number the prices of securities, luxuries, and articles of English internal trade. If any nation tries the old experiment of paying its bills in irredeemable paper money, that desperate expedient will have the same result that it did with us during the civil war. Inflation of the currency will expel gold from that country and raise its price level higher than elsewhere.

After the war is over prices will probably not retreat, but will move upward even faster than before. There may then come the familiar "boom" period, which may culminate in a commercial crisis in a few years after the close of the war, as was true after the Crimean war, the American civil war, and the Franco-Prussian war. The rebound will probably be fastest in England. Statistical price curves of many nations usually show an upward turn when war begins and another when it ends. The war will thus aggravate a rise of prices already in prospect.

It would take considerable space to give, completely, the reasons for these prognostications, but I have tried to justify them in a brief addendum to a book to be issued this week on "Why Is the Dollar Shrinking?"