COMMERCIAL gatherings, these last twelve months, have been listening to a series of important addresses on the trade and financial conditions which may be expected to prevail after the war ends. If a dozen of these addresses, carefully selected as representing the sober thought of a group of prominent merchants and bankers, should be parallel-columned in journalistic fashion, the differences of opinion would prove not merely fundamental, but laughable, were it not for the immense seriousness of the subject, and the downright urgency of guessing the right answer to at least some of the problems discussed.
Banker A sees the United States entering a series of years of unexampled, golden prosperity, and he bases his thesis on a number of propositions which seem obvious. He points out that this country, relatively free from debt at the beginning of the war, will be in an immeasurably better financial position than Europe at the close of it. We shall suddenly step into the rôle of world’s banker; we shall re-stock the belligerent countries with the products of our mines, forests, and workshops. With a prodigious trade-balance in our favor, and with our human resources of trained minds and skilled hands unwasted by war, we shall have a tenyear start on the rest of the world. Becoming South America’s creditor, we shall do the business with South America hitherto done by England and Germany, and may placidly contemplate the commercial dissolution of those powers. We shall say, like Mimi at the dragon’s cave, ‘Fafnir und Siegfried, Siegfried und Fafnir, brächten beide sich um!’ All this, and much more in similar vein, from Banker A.
But Banker B sees it all differently. Europe is bankrupt, and rapidly becoming more so, if the term admits comparative degrees. We are not going to be able to sell goods to Europe, because she will not be able to pay for what she buys; our mushroom prosperity, our hundred per cent profits on war contracts, are making us unfit, not fit, because they are raising wages to a point which makes effective competition impossible, and is of itself unsound. Immigration from Europe will be so closely restricted that we shall lose the abundant supply of unskilled labor which is the foundation of so many of our industries. Instead of replenishing the stocks of the belligerents, the belligerents wall dump commodities on our shores, confronted by hard times and low wages at home, and the necessity of restoring their exchange and protecting their gold reserves. We shall not do much business with South America, partly for the above reasons as affecting the price of our goods, and partly because South America must needs buy where she sells, and being a raw-material producer, like the United States, she will sell, not to a rival engaged in the same line of business, but to the European market common to both. In short, following the present inflation, we are in for a severe panic, followed by hard times and a ‘long drag.’
It is going to make a good deal of difference to the United States whether Banker A is right, or Banker B, but it would take a bold prophet, in the light of past events, to write down his answer categorically, opposite even the primary points of issue, regardless of the multitude of ramifications, of actions and reactions, that must needs follow each main economic drift. Perhaps no single instance better illustrates the errors of trained commercial observers than the course of security prices in the first twelve months of the war. When the stock markets of the world went out of business, in August, 1914, the real economics of the situation did not matter; the certain thing was that a multitude of individuals and institutions, driven either by necessity or by panic, would liquidate their holdings on any free exchange that remained open, without much regard to prices obtained; that banks and lenders would be forced to recognize quotations and call in weak loans, thereby causing more liquidation and bringing about a protracted panic of great severity. This reasoning was self-evident, and the bourses of the world, in bending all their efforts to block free exchange and prevent quotations, undoubtedly handled the matter correctly and promptly. The transition from the suppressed markets of the later months of 1914 to the optimism and immense volume of trading at progressively higher prices, a year later, was certainly not anticipated by any considerable number of people, or the aggressive buying would have started many months earlier than it did.
The American market was agitated by three principal fears: the re-sale in America of American securities held abroad; the belief that the United States would either be drawn into the war or approach it closely, with attendant financial panic; and the feeling that the exhaustion of wealth and the necessity for immense and continuing foreign loans would so raise the interest rate that the current return, especially on the best grade of bonds, would prove far out of line. Now, at the beginning of 1916, the first of these contemplated evils is seen to have happened, and to be continually happening, but it has not produced the expected effect. Our securities were held, not by Europe, but by individuals and institutions in Europe, and these individuals and institutions, after the shock of the first few weeks, acted in a normal and conservative manner, in which they were assisted by their respective governments. The selling was both gradual and skillful, and on a rising scale of prices, in a constantly broadening market. The full effect of the marshaling of American securities by the British government, for sale or pledge in this country, cannot yet be stated, but it is fair to assume that the disposition of them will continue to be cautious and intelligent. Our market has not only absorbed a flood of foreign-held securities already, but has been eager about it, our dealers calling on foreign dealers for offerings, especially of high-grade bonds, which are selling to-day not merely on a peace basis, but higher than for several months before the war.
The next market anxiety, concerned with the possible embroilment of the United States, came measurably near fulfillment when the Lusitania went down, with further shocks on at least half a dozen other occasions, notably at the time of the Arabic affair. But a long period of tense relations, with the daily scarehead in the morning paper, produced an effect that might have been anticipated, although it was not; the market became shock-seasoned, so that each successive threat of danger produced a relatively smaller effect than the preceding one. A comparison of American public apprehension over the torpedoing of the Arabic and of the Ancona sufficiently illustrates the point.
The third factor, based on the belief that the huge competition for governmental borrowing would upset the rate of return on all American corporation securities, was regarded as fundamental by many of the ablest bankers in the country. There are probably few people to-day who would dare express the doubt that the capital waste of the war and the vast volume of emergency finance will not eventually produce some such situation as was anticipated, but meanwhile, certain immediate influences have been pulling the other way. The banks of the country are embarrassed with the piling up of surplus funds, individuals have unusually large investment balances, and prosperity is running high. But the investor reasons, quite correctly, that so long as the war lasts, governmental securities will tend to come along in increasing amounts, and probably at increasing rates of return. So he buys American corporation bonds instead of government bonds, and we see the curious comparison of high-grade railroad bonds, earning perhaps five or six times their charges, on a 4.20 per cent basis, while bonds protected by the joint credit of France and Great Britain, constituting substantially the only external debt of those two countries, which have a tax power against surplus annual national wealth amounting certainly to a hundred times the interest, sell on a six per cent basis.
Another rather characteristic example of bad calculation was the shutdown of the English nitrate works in Chile, at the outset of the war. Trade was paralyzed temporarily, and ocean freights were high, so the mines closed, in calm oblivion of the indispensable part which nitrates play in the production of modern high explosives. Needless to say, the mines are now open again, and are receiving the highest prices in their history.
It is certainly a fair question whether we are organizing along the right industrial and commercial lines for the eventual peace; whether we know its raw materials. Presumably we are not organizing along right lines; it would be somewhat more than human and considerably more than American if we were. But there is a good bit of sheer fascination in attempting to reason out some of the tendencies that are just beginning to appear, and in wondering what the missing factors may prove to be, that will doubtless upset the calculation.
Take the shipbuilding industry as an example. It has cost, say, forty per cent more to build an ocean steamer in American yards than in British yards, most of the difference being the labor cost. It has probably cost nearer fifty per cent more to build an American boat than it costs to build a Norwegian boat, yet American shipyards are getting many inquiries to-day from Scandinavia, and, indeed, from many other parts of Europe. The home yards are filled up with admiralty work, or with merchant work driven there by the admiralty work somewhere else, and Germany has temporarily ceased to be a factor. Meanwhile, charters are so prodigious that many a steamer, purchased at full prices, has paid for herself in a few voyages.
Now, it goes without saying that this charter situation will not persist in its present brilliancy after the German fleet takes the ocean again. Will American deep-sea shipbuilding thereupon lapse to its former desperate condition? I think not, but I wish I could weigh some of the factors more certainly. It makes a tremendous difference, in the first place, whether we have an armed peace or a relatively disarmed peace. If the admiralties of the world scramble for their own urgent tonnage requirements, American yards will be busy for years to come, since the war wastage, although of much less importance than it appears, leaves plenty of work to be done, while the overhauling and refitting of the many Atlantic liners that have been in transport service will cause much temporary congestion of facilities.
For a longer look at American shipyard prospects, however, the wage question is paramount, and the principle involved leads into many lines of industry besides the one cited. We all know that taxes in the belligerent countries and the countries of their armed neighbors are going to reach an after-war scale which it is painful to think about. I cannot imagine that the great estates will escape the major share of the burden; that the process, begun by Lloyd George with his taxation of unproductive land in England, will not be carried immensely further. I cannot see how the Prussian Junker is going to keep together his vast acreage, or how land-poor Russia can persist in her present system.
If this view happens to be correct; if the tendency is to socialize land holdings through cumulative taxation of great estates, I should anticipate, with the increase of peasant proprietorship, a reduction in the floating supply of agricultural labor, and a consequent wage-increase in that field, accentuated, of course, by the human waste of the war. But the changed conditions, although producing perhaps their most far-reaching effect through revision of land-tenure, will naturally act more promptly in industrial sections. Is it not correct to assume that a perpendicular rise in taxation will keep the cost of living high for a protracted period, in conjunction with a tendency on the part of each country to turn to protective tariffs to prevent every other country from dumping goods on its shores, especially during the first great efforts to restore exchange?
For Europe is busy trying a currency and credit experiment, to-day, that has far more of Bryanism in it than Europe likes. She is finding out how much, or how little, of a gold ‘cover’ is really indispensable to stabilize currency under modern credit conditions. The supply of gold in the central banks is abundant, but the ratio of gold to circulating medium is steadily getting lower. Whether England, France, Russia, and Germany — to say nothing of the lesser states — can maintain their currencies on a gold parity, all of them, after international trade barriers are let down again, is an exceedingly interesting question. Meanwhile exchange quotations reflect some of this uncertainty, but more of the difficulty of maintaining credit balance between two countries, one of which is doing all the buying and the other all the selling.
Looking at this perplexing question merely from the wage side, and allowing full latitude for the possibility of doing the world’s credit business with a smaller gold backing than has heretofore been attempted, are we not justified in surmising that wages paid in a cheapened currency will run relatively high in the terms of that currency; that the cost of living will rise, whether measured in commodities or in currency, and force wages up with it? Add to this the probable tendency to protective tariffs, the imminent changes in land-tenure, new taxes all along the line, and scarcity of labor everywhere, and it seems to me that the case has been made for substantially higher European labor-costs. Nor is it reasonable to expect that the new wage-scale will disappear after the war is ended. The prodigious inflation of currency that has already taken place, especially in Germany, is resulting, and must result, in higher living costs (as measured by the depreciated currency), until the state land-bank systems of finance, and all other emergency expedients for capitalizing private earning power into non-gold-secured (or insufficiently secured) currency, are disentangled and wound up again. But thereafter, it will not be an easy matter to get wages back to the same relative purchasing power that they had before the war. In the hard times which may confidently be expected to follow any period of inflation, labor is nowadays more apt to suffer from non-employment than from reduction of nominal wages, just as in 1908, in this country, the labor that was employed at all drew wages that had a higher purchasing power, relative to the price of commodities, than any that had been paid in many years.
However great may be the dilution of gold reserves after the present war, it is not to be thought of that any one class in the community will have any purchasing advantage over any other: the money, such as it is, will be the same for all. And the very perfection of international communications and exchange can, I think, be relied on to accentuate the price of both commodities and labor, as measured in depreciated currency. If labor were to be very abundant, it might well suffer in relation to the rise in commodity prices; there would be plenty of historical counterparts for such a state of affairs. But labor is not going to be abundant. Apart from the actual war wastage, great armies returning from the field are not fully and economically employed at once; there is undoubtedly an adjustment to be gone through with, and just at the time when industrial replacements will be most active.
For a historical case in point, I should think that Europe would witness an economic condition more like that in England following the Great Plague of 1665, when, for some years to come, land was cheap, labor was scarce, and there was a general and important rise in wages. As a matter of fact, the important rise in wages has taken place already, and an outside observer is inclined to believe that, in England, it might have gone even further than it has, if left to natural adjustment, and not complicated by the curious ‘ dugin’ condition of British employer and employee, each holding his battle-line as best he can in a struggle only second in importance to the struggle on the Continent. The British labor attitude, throughout the war, has been most unfavorable, as compared with the feeling of exaltation in the life-and-death struggle for the common cause which has so clearly ennobled the masses of the people in France and Germany alike. Viewed from this side of the ocean, the coal strikes, for example, are hard to understand in a nation fighting for its life. They suggest a class barrier which holds little promise for the future.
It seems to me that we can safely assume a tendency to high commodity prices and labor costs as well, not only during the war, but for some time afterwards. The vital question is whether European wages, rising easily in bad, or at least doubtful, money, will not tend to stay up after money gets good again, and thereby change their present relation to European commodity values. If it eventually works out this way, it will have a very important effect on certain American industries heretofore handicapped by high comparative labor cost; the shipping industry, as above mentioned, being particularly conspicuous in this respect.
In short, if we focus the discussion of after-war conditions upon American shipbuilding for a moment, it is plain that we have rather a startling array of changed conditions to deal with, which may be summarized somewhat as follows : —
(а) Foreign yards so crowded with admiralty work and arrears of merchant work that prices should remain abnormally high and facilities should be scarce, for some time to come.
(b) Ship charters, now enormously high, and apt to remain somewhat abnormal until the shipbuilding arrears are met. Should the war close to-morrow, the crowding of slips could hardly cease in two years’ time, and it seems more likely to last as long again.
(c) Higher relative foreign labor and commodity costs than heretofore, especially labor costs, thus tending to cut down the handicap under which American yards have worked.
(d) American yards prosperous, for the first time in many years, and hence able to equip on a more efficient scale than before, and apply some of the principles of quantity production that have made it possible for America to produce automobiles, for example, cheaper than they can be produced abroad, in spite of the difference in wages paid. As an instance of a type of work more analogous to shipbuilding, where America has been able to turn a high wage-scale into a low labor cost, by efficient production methods, the National Foreign Trade Council (U.S.A.) cites the erection of structural material used in modern tall buildings.
If we add to these considerations the further, vital one, that Congress is sure to add largely to the navy, and almost equally sure to find some immediate way to add to the American-built merchant marine, the over-year change in the situation, from the point of view of the shipbuilder, is so great as to admit no comparison with anything that he has ever experienced.
American prosperity is running high. The Steel Corporation is reporting close to its previous high record of unfilled orders, and may easily surpass that record in the months to come. All the independent steel works are centres of the greatest activity; there have been half a score of consolidations, and many more are talked about. Birmingham pig iron (No. 2) is selling above $14 a ton, and a premium is paid for future deliveries, indicating the belief of the trade that prices will go higher. Copper metal is selling above 22 cents, at which price the operations of the copper producers are exceedingly profitable; and several great new companies have been recently financed, so that the copper production of the world has jumped to a new high record, at the same time that prices are fifty per cent higher than the average of the ten years preceding.
A tolerably important part of this activity in the metal trades is of course due to the production of war munitions, and it is exceedingly interesting to observe the way contracts for castings, forgings, lathe work, die-press work, and the other component parts of the manufacture of artillery, small arms, and shells (especially the two latter) have been spread around the country by the principal main contractors, both American and Canadian. The war lords’ urgent demands and contempt of prices found us in a period of severe industrial stagnation; 1914 was the third consecutive bad year, with the result that commercial stocks, everywhere, were reduced to the minimum, and the metal trades, as usual, were feeling the depression as severely as anybody. Most shops with metal-working machinery had plenty of room for war orders, and filled up at high prices.
A comparison of the market valuations of the companies since famous in the munitions business, eighteen months ago and to-day, would be almost incredible, if it were possible to make it. Many of the conspicuous companies of the present day were not organized at the comparative period, however, and others, through absorptions and regroupings, have completely changed their character (as, for example, the Midvale Steel Company), so that not only would a general comparison and valuation be immensely difficult to make, but the result would be of doubtful value, owing to the absence of any quotations at all on the securities of many of the absorbed companies. To deal with the two classic cases, however, it is readily demonstrable that the aggregate valuation of the preferred and common stocks of the Bethlehem Steel and Electric Boat companies was a little over $20,000,000, at a random date in June, 1914. In the autumn of 1915, the stocks of those two companies exceeded $130,000,000 in aggregate value, at current quotations; an appreciation of, say, $110,000,000.
How is this prodigious skein to be unwound again, after the war? From being conspicuously unprepared to make munitions, we suddenly find ourselves in a condition of considerable over-preparedness. What are we going to do with the great workshops that have sprung up, overnight, to provide for this highly specialized form of activity?
Much of the answer to this question lies in the kind of peace that shall be made. If the war is fought to a finish of exhaustion (for it does not seem likely that it will be terminated by any single great victory—by a Marathon, a Metaurus, or a Waterloo), it is surely improbable that this country will be likely to step outside the bounds of any armament reduction or limitation that Europe may adopt. If the peace is premature, it seems not only likely, but pretty certain, that we shall be carrying our own great armament burden until the next outbreak. In that case, the great munition developments of 1915 will not be devoid of important service to the country.
Taking the question from the peaceful, commercial angle, however, it should be noted that most of the great plant extensions will be fully written off the manufacturers’ books before profits are arrived at. On this assumption, there should be much idle factory space after the war, but it will mostly be the old buildings that are abandoned or torn down. The depreciation arrears of a series of bad years will prove to have been fully, even sumptuously, met in the new structures, the cost of which has almost invariably appeared, outright, in the price of munitions furnished under the first great contracts. A casual visitor to New Haven, or Bridgeport, or Waterbury, is thunderstruck at the immense areas that have been built up with this extraordinarily rapid development. American industry has never had a similar experience, and it has not yet found its bearings.
Assuming, again, the kind of peace which does not involve an immediate and prodigious war-burden by this country, it will be most interesting to observe the uses to which this highly efficient factory equipment will be put. Some of the powder-makers have plans for the utilization of at least part of their equipment in the manufacture of chemicals, especially acids, dyes, and coal-tar products, and there can be but little doubt that the United States will make new strides in this field, which has been characteristically German. Germany’s enemy customers have already begun making inquiries here, not only for chemicals, but for many other industrial lines.
Right here, however, we come upon one of the major after-war problems discussed, and disagreed on, by the bankers in the first paragraph. What is our situation going to be in competing with Germany, England, France — any of the warring nations, grasping their problems with a new fervor, and confronted with the immense need of restoring their respective exchanges to a better basis? German exchange, at this writing, gives the mark a value of just over nineteen cents, as compared with a normal value of nearly twenty-five cents; and yet Germany’s purchases from the rest of the world have been at a minimum, as compared with England, France, or Russia. Even if we assume that this reduction in the value of the mark runs no further, — and that would be a very rash assumption indeed, — the exchange is going to make it intolerably expensive for Germany to buy her after-war needs here, unless she can be selling at the same time that she is buying. Conversely, anything she can sell here will produce a home value, in marks, fully twentyfive per cent greater than usual, since $1000 will buy upwards of 5000 marks, instead of the usual 4000-odd.
This situation, naturally, is not confined to Germany; as a matter of fact, Russia is probably the one of the great powers most in need of restoring her exchange. But it can be accepted as axiomatic that each warring country, on account of the exchange situation, will for a time be able to sell profitably to us and to mutual customers, at prices that would be well below cost of production and delivery on a basis of normal exchange. Moreover, it is so clearly to the interest of each government to have these exchange-restoring sales made by its own merchants, that all feasible governmental aid will doubtless be given to the export trade, offset, of course, by such tariff barriers as each nation may see fit to erect against the others. I believe that our own democratic administration recognizes this situation fully, and is likely to erect anti-dumping barriers in an efficiently undemocratic manner.
In other words, the outlook for permanently higher European wages (if the reader grants it) will not immediately become effective to our advantage as against the present exchange situation except in certain special industries, like shipbuilding; a situation which is practically certain to be materially worse before the war is over, although the better-regulated buying of the past few months and the marshaling of American foreign-held securities to sell back to us have all worked to correct the panicky feeling regarding the course of exchange which so many experienced observers held a few months ago. Later on, the quickest way for any foreign nation to regulate its exchange with us will be to sell us its own securities, but we are not ready to buy them just yet.
This leads to another train of thought suggested by those bankers whose economic disagreements started this paper. How about the foreign government bonds? They are surely going to be plentiful enough, after the war. Shall we buy them here, because they yield so much more than our own best railroad and municipal bonds, or shall we keep on refusing to buy them, and will our reason for refusal be that we are afraid that we are not going to get our money, or will it be prejudice, or the very shrewd reason that an oversupply of any commodity always means a break in the market? Or, for another supposition, will the price of the highgrade government stuff go to a figure which no longer tempts us (in which case, we ought, in the parlance of the Street, to get aboard now and go with it)? I do not believe any categorical answer can be made to these inquiries, except to concur in the finding that over-production of anything breaks markets. There is going to be choice in government bonds, as there has been in the past; and somewhere down the line, in the Balkans or out of them, some government is going to repudiate something, before they all get their war debts paid off. But England, France, and Germany are not going to repudiate their external debts, although we shall probably see manœuvring, forced extensions, and the like, in the handling of some of their internal debt.
Is it not logical to suppose that when the war is over, or close to it, the best governmental securities will tend to rise rather suddenly — especially the short-time ones, and those not issued in such tremendous volume as to overburden their own particular markets? And if this takes place, will not these two kinds of high-grade bonds, the best governments, and the best American rails and municipals, tend to approach each other in price rather more closely than they stand at present? In other words, should we not expect that government bonds will keep on selling for something less than their acknowledged security-worth, and that the best American corporation bonds will keep on selling somewhat higher than their comparative security-worth, but that the two classes of securities will tend to draw together, impelled by the clamorous need for new development and restoration capital all over the world?
The vision of the conquest of South American trade is to me obscured by the barrier of exchange. Just now, we must finance South America or she must go without, but, at the time of writing, Argentina is the only South American country which has been successful in placing issues in our market, even in a moderately large way, although the new extension of certain important banking interests into the southern hemisphere, coupled with the very evident desire of the trading companies to do the brilliant business offering, if only it can be financed, are pulling together to win over the reluctant American investor to a change of heart regarding South American securities.
Let us assume, therefore, that so long as South America can buy here cheaper than abroad, and get quicker deliveries, she will buy from us to the maximum extent that she can finance her purchases, and that there will be, to some extent, at least, a real change in the trade-relations between the two countries. But, while assuming that, let us not forget that South America and the United States are both producing, rather than consuming, countries; that both of us sell our grain and beef in foreign markets (although we of North America are buying both grain and beef from South America to-day, in addition to our great purchases of Brazilian coffee); that the principal market for Chilean nitrate has always been Germany. In short, let us keep clearly in mind the old maxim that it is apt to be profitable for any country to buy where it sells, and that South America and North America, both of them new, developing, borrowing countries, will normally find it easier to trade with consuming, lending countries than with each other.
As against this argument, it is undeniably true that, along with the constant rise in food-prices here, and our rapid development as a great manufacturing nation, we go through periods from time to time when our manufacturing and agricultural ratios get out of balance, so that it is temporarily profitable for us to import food-products. But our agricultural production is so desperately far removed from a condition of intensive efficiency, that a series of years of abnormally high crop and meat prices is quite capable of stimulating production to an extent that we perhaps do not realize, unless we compare the acreage outputs of our prairie states with European figures.
Here is a further consideration. We are told that France and England used to be lenders, but have now become borrowers, and that we, who used to be borrowers, are suddenly constituted the world’s bankers. This statement is certainly true, as made; what we must determine is whether it is a temporary condition or a permanent one. Can we not summarize a matter difficult of proof by saying that England and France, at least, have not yet given indications of taxing themselves beyond their recuperative power, or of changing their fundamental national characteristics, from being repositories of wealth and banking power, to being eager national producers, constantly borrowing to extend their commercial facilities? In other words, if we assume that France and England are going to succeed ultimately in paying their war debts, most of which are owed at home, and which are not as yet disproportionate to the war loads carried by other generations, then we must assume that these two countries are likely eventually to resume the kind of world-business to which they are accustomed.
The constantly increasing reserves of American money available for investment purposes find abundant outlet along the channels they like best; that is to say, in American development work. In so far as American development extends to foreign countries,— as, for example, the Cuban sugar and tobacco business, the oil business in Mexico, the copper business in Chile, and the beef business in Argentina and Uruguay, — American money will follow it, doubtless in increasing amounts. But the American public is not yet interested in the kind of developments that have characterized British capital, especially in South America, and does not seem likely to turn to them during the period of years when England may feel cramped in her out-country development. Incidentally, it is a curious side-light on our governmental regulation that much of the speculative money which, ten years ago, would have gone into American railroad development, is being diverted, in these prosperous times, to industrial enterprises, because the investor feels that the profits in railroad securities have been strictly limited, while the losses have been left unlimited. This is the first strong commercial revival we have had since our national policy of railroad regulation assumed acute form, and it is the first one when railroad development and railroad securities have been neglected.
The purpose of this paper being to suggest, rather than to settle, some of the peculiar and novel commercial problems with which the country is confronted, it should be noted that the great world changes in commercial enterprise are usually the result of something quite different from armed struggles. England owes to the steam engine more than she does to Drake or to Marlborough, and, in the long light of history, it probably made very little difference to the status of Babylon as a world capital whether Alexander the Great or King Darius won the battle of Arbela. Thirty years hence, the economic effect of the Panama Canal, as shown in really vital commercial changes, seems likely to be greater than the effect of the Great War. Meanwhile, we can be reasonably sure that much of what we predict will be set at naught by changes now going on about us — changes which barely attract our attention at all, amid the clamor of arms.