FINANCE AND COMMERCE

Press, Volume LXXV, Issue 22850, 25 October 1939, Page 11

FINANCE AND COMMERCE

When economically advanced communities engage in war, it is stated, much greater devastation occurs than in wars fought between primitive communities, which are bound to be limited in scope because of sheer lack of material. This principle becomes clearer when the details of the amounts spent by the various countries in the war of 1914-18 are examined. In the table below, expenditure is expressed in sterling of present-day purchasing power. Expenditure in different years is reduced to a uniform purchasing power basis by means of cost of living index numbers. Other currencies are reduced to sterling on the basis of the purchasing power of money in the different countries, 'which did not, in fact, differ greatly from the 1913 exchange rates War Expenditure ; (In £ millions sterling a day)

i The .largest aggregate expenditure was that of Great Britain, but loans to "tallied countries made up more than one-third of the war expenditure of the United States and 22 per cent, of the British, expenditure. Total British war expenditure amounted to nearly twice the national income of the year 1913. Expressed in millions, sterling at pre-’'sent-day purchasing power ,the direct <post of the war to the chief belligerent countries was as follows: — ' P.c. of nat.

Britain's Borrowing In the last war, borrowing from the ' United-States and sales, of overseas, securities held by Great Britain yielded about £2IOO millions. Converted to present-day purchasing power, this ;be- • comes £2150 millions,.or 28 per-cent.-.of . Britain’s entire war outlay. It may be acjded that £1740 millions of this,was •-'used for loans to Allies and Dominions '■and if Britain had not .had to make vthese, she could have financed her war effort entirely from her own resources. ’ln 1918, Great Britain was , devot- : ing to war purposes about 60 per cent, of her currently produced national in‘come, representing nearly £2ooo’millions at present-day purchasing power. " This was made possible by the cessation bf oversea investment (which re\presented nearly 10 per cent, of the |'l}atibjjjs ihsppie of ,1913),. by heavy flatting s down;. of private expenditure

WAR AND DEPRESSION COMPARATIVE ECONOMIC COSTS 4 War under modern conditions, imposes a terrific financial' burden on the combatant countries, but that it need not be a crushing burden is indicated not only by the recuperative powers of well-organised countries but also by the comparative economic costs of the 1914-18 war and of the 1930-34 depression.

An interesting analysis of the costs of war appears in “Economic News,” published by the Queensland Bureau of Industry, setting out details of the cost of the Great War to the various belligerents, and comparing the effect on national income with that of the depression.

on construction and, maintenance of buildings and machinery, and by calling into work many people normally unoccupied, as well as by a reduction of private consumption. Of Germany’s expenditure, which was equivalent to £6640 millions sterling at present-day values, fully 90 per cent, was financed from internal sources. Germany • raised about £650 millions sterling externally, by sale of existing assets and by fresh borrowing from neutral countries. At the present time, the American loan market is not open to Great Britain, but the productive capacity of British industries is about 50 per cent greater than it was in 1918, with 10 per cent, higher population. Britain has, moreover, £3500 million of oversea assets, most of which could be realised. Expenditure even on the 1918 scale could thus be maintained for a number of years.

During the last few months of peace, Britain had already been spending at the rate of £2 millions a day- and Germany at the rate of £3.7 milliohs a day. So, economically, the transition from peace tp war had already been largely made. Germany, in fact, has already marshalled practically her full economic reserves, and cannot make a greater effort. The expenditure on war of economic resources equivalent to rather more than one year’s national income reduced both Russia and Austria-Hun-gaij to a state at economic collapse. In France and Germany, which had considerably greater economic reserves, it was possible to expend the equivalent of . one year’s national Income Australia and New Zealand both spent the equivalent of about 60.per cent, of a year’s income. American expenditure, though very large, represented only 39 per cent, of a year’s national income.

It is important to note, however, that a great economic depression may cause as much or more economic damage than a war. In addition, the anxiety and- distress which it causes may be as great as that caused by a war. The following table gives the economic losses caused in the years 1930-34. inclusive, by the great depression of those years. They are measured by the aggregate declines of national incomes below 1929 levels. Depression Losses (In terms of present-day purchasing power.) P.c. of 1929 national

Thus, in these countries alone, the depression caused a loss of £24.000 millions, or nearly as much as the economic loss caused by the Great War. The - United States lost the equivalent of five months’ national income by taking part in the Great War, but as much as 15 months’ income in the depression. Australia lost the equivalent of seven months’ national income in the war, and the same amount in the depression.

Country. 1915. 1916. 1917. 1918. Great Britain 3.8 4.7 4.9 •4.4 France 1.7 1.8 1.9 2.7 Germany 3.3 3.3 3.4 4.8 Italy 0.7 1.0 1.1 0.6 U.S.A. — —. 6.5 8.4

£ milincome Country. lion stg. in 1913. U.S.A 3915 39 Canada 340 51 Great Britain .. 7550 188 France 3100 102 Belgium 185 49 . Germany 6640 110 Italy 945 89 Austria-Hungary 1510 137 Russia .. , .. 3700 115 Turkey .. . * 110 • India 280 10 Australia 190 61 New Zealand . .. 50 60 •Not known. , ■

Country. £ Mill. Stg. income. U.S.A ,. 18,450 127 Great Britain ,. 1,885 40 Canada .. 1,213 112 Australia 330 59 Germany .. 1,456 42 Holland 578 102