Within forty-eight hours after England declared war she had engaged the total output of an American manufacturer, whose machinery was an important part of the sh.e.l.l-making business. An American factory in Connecticut received orders for $25,000,000 worth of cartridges which would mean, at five cents a cartridge, 500,000,000 rounds of ammunition. I know of a single order to America from England for 10,000,000 horseshoes.

Through a single agency in America more than $150,000,000 worth of war-supplies was placed several weeks ago. I do not know whether this included a single order, of which I have knowledge, for 3,000,000 American rifles, delivered over three years at $30 a rifle, or $90,000,000. The company receiving this order had to work so quickly to install new machinery that old buildings were dynamited to clear the land.

Such orders to America are bound to tell upon our exports, and, combined with the advance in food-stuffs, the loss in cotton values by the outbreak of the war is offset more than twice over.

America must feel the effect of these orders when the goods go forward in increasing quant.i.ties. They are paid for as promptly as shipped.

Many an American factory has been put on three eight-hour shifts for the day's work on these orders.

A Southern manufacturer received an order for 5000 dozen pairs of socks to be shipped weekly for six months. The price was under $1.00 per dozen, with ten per cent of wool in them. He complained that he was making only twenty cents per dozen profit, while if he had not been so anxious for the order, he might just as well have got a price that would have shown more than twice this profit.

In boots and shoes, England, instead of giving orders to this country, has been buying leather in America, and filling all her own factories.

It is the policy of England to fill every workshop in her tight little island before she permits business to overflow.

To-day there are no unemployed in Great Britain, except in the cotton districts dependent upon German trade. Wage advances and overtime are the rule rather than the exception. The one country that the warring world must turn to for supplies is the United States, and that in increasing measure. Orders for $300,000,000 of war goods already received must be duplicated several times.

Every American automobile manufacturer able to deliver motor-trucks in lots of one hundred, has received his orders for shipments to the Allies.

Germany has now no base from which to get many important supplies. In a long contest the Allies will supply motor-cars, sh.e.l.ls, guns, and ammunition to a far greater extent than Germany can manufacture them.

Factories for this work are expanding in both Russia and America. The English do not speak against the Germans as a people. They believe them seriously misled by Prussian militarism, which they declare must be crushed absolutely.

Where formerly England was an open door to Germans and suspicions against German spies were laughed at, the bars are now sharply up.

Most of the golfing clubs have voted to suspend the activities of members with German antecedents.

At the clubs in Pall Mall, notices have been posted requesting members not to introduce during the war Germans or those of German descent.

Membership on the Stock Exchange is not continuous as in this country, and at the March elections in 1915 there will be a dropping out of German names.

CHAPTER XII

ENGLISH WAR FINANCE

Protecting Trade and the Trader--How German Banks Paid--The English Loan--England's Wealth--The Income Tax--More Taxes.

A giant Atlas bearing the civilized world on its financial shoulders has arisen between the North and the Irish seas. That is the picture that stands at the opening of 1915, where before Germany had endeavored to stamp the label "Perfidious and degraded nation of shopkeepers."

Only the pencil of a Dore could sketch this giant and put him in figures of proper relief as, aroused from his pastime of trade and the acquisition of shillings, he summons with one hand the resources of the empire and with the other pa.s.ses them out to needy warring nations, taking care all the while that the necessary dealing of exchange and commerce have the least possible disturbance.

Kitchener says the war may last for two years, but he is making preparations for three years, and must do this job so thoroughly that no repet.i.tion will be required.

If it is war for three years, then this mighty financial Atlas of England is preparing to write its name on promises to pay more gold than all the money-gold on the surface of the earth today. And England won't hesitate to do it if necessary--not for one moment.

How can she advance money to Russia, Belgium, France, and other countries at war or just going into the war, and ask no foreign a.s.sistance, no overseas help,--except to be let alone,--expand her home trade and wages, pay with a lavish hand, and still pile up real gold both at home and over the ocean?

The first answer is because she does expand trade; because she does pay and pay promptly; and because she does protect her own trade.

The United States does not protect its trade or its citizens anywhere in the world to-day. It shivers in war-time, and borrows of everybody else when it has a panic of its own.

There is only one way to make trade, and that is to pay and protect.

England, through centuries of fighting to protect both trade and the trader, has learned the way to the highest freedom in both trade and finance.

Therefore, before this most Audacious War was set afoot England had a very small stock of coin gold but a very large stock of gold credit-bills.

For years England has held in her cash box from $1,800,000,000 to $2,500,000,000 of the commercial credits of the world. With goods and trade-honor behind these promises to pay gold, she had no need of the metal but only of command of the seas, that her gold might come in when needed. When the war broke out, $600,000,000 of these gold promises to pay were of German and Austrian origin. The big London bankers who had their names on the back of such acceptances could not in honor underwrite any more commercial bills. They knew their capital was involved in collection of those already out.

But Britain said the commerce of England must go on as well as the war.

The people who held these acceptances were promptly invited to turn them into the Bank of England, which held the guaranty of Great Britain behind it, and receive the money therefor; the discount rate after maturity to have 2 per cent added thereto, 1 per cent to go to the Bank for expenses and 1 per cent to the government for reserve fund to cover any losses. Of such bills $600,000,000 were promptly discounted.

I hear that two banks, the London City & Midland with its $525,000,000 of deposits, and Lloyds' Bank, both refused to rediscount. They believed the investments in commercial paper they had made were perfectly good, and that they were as well able as the Bank to wait for payment until one year after the war if necessary.

But to date more than half of these rediscounted bills have been paid.

It may be of financial interest to narrate how payments could be accomplished when by the King's orders there could not be any "dealings with the enemy" and payment to either side was forbidden by both. Yet the Dresdner Bank and other big German and Austrian banks have to date met fully one half their London obligations.

They were enabled to do this because their London branches were independent inst.i.tutions whose independence was recognized by the British government. The London branches were thus liquidated, collecting in and meeting their obligations at maturity, so far as possible.

Liquidation in acceptances is one of the keys to the success of the English loan. While England had the ability before the war to discount $2,500,000,000 of acceptances, and with the present expanded base of the Bank would, without war, have the ability to discount $3,000,000,000, or three times our national debt, there is now no large business offering. The discount credits can therefore be measurably turned to the war-loan account. One of the biggest acceptance houses in London told me that the post-moratorium bills, or the new acceptances made after the moratorium, could not amount to more than 80,000,000 pounds, or $400,000,000.

With the liquidation on account of pre-moratorium bills and the absence of new business I should estimate that the London money market was able to take care of the 350,000,000 pounds loan put forth in November by the government without much regard to the investing community.

With expanding trade and confidence, English investment interests can absorb the major part of this huge loan before next summer, when another loan of about equal size must be put forth, according to present calculations. This second loan will probably be for three or four hundred millions pounds sterling, bear 4 per cent, and issue at par. The November loan was issued at 95 per cent and it was announced in Parliament that the Bank of England would loan the issue price at one per cent under the Bank rate.

That the loan was fully subscribed is not contradicted by the small fraction of discount soon quoted on the full-paid loan. One could fully pay the loan, taking the discounts on undue maturities and sell at a fraction under 95 and still make a profit.

I believe the estimate of an annual English surplus for investment of $2,000,000,000 per annum is far too low. This figure is upon the basis that only about 20 per cent of the river of interest, dividends, and profits flowing annually to British pocket-books is available for reinvestment.

In the present war stress and with economy practised to-day more by the capitalist cla.s.ses than the laboring cla.s.ses, the amount of money for reinvestment should be far greater than this.

English finance will cut its cloth according to the pattern. If there is only $2,000,000,000 per annum of surplus earnings to put into the war, that money will be spent; and if England has 50 or 100 per cent more, that money likewise will be spent, but spent so judiciously that the largest possible sum from it is kept in channels of English trade.

The British Empire will work and finance the fight thus within a circle, and right on its own base.

The surprising thing is that it can be called upon to extend financial help to its allies. But everybody except Germany was caught absolutely unprepared. The war was early on French soil, tying up the resources of some of the richest provinces of France. Russia had so little thought of war that, as I have previously explained, she had deposited from her great gold reserve so that it had been loaned out on time and therefore was not available for the start of the war. Hence we have the spectacle of Russia gathering up 8,000,000 pounds sterling in gold and sending it to the Bank of England and, on this basis, borrowing of the Bank 20,000,000 pounds sterling.

Of course, this is good banking and good business and a good alliance.

The Allies are bunching their war orders and credits, and England is ent.i.tled to hold the bag since she is carrying the financial burden.

England's war finance is not wholly measured in her expenses or loans to other countries. In a single issue of a London paper you can count daily reports of more than a dozen charitable funds connected with the war-work. These funds range all the way from "Aid to the Mine-Sweepers," "Gloves for the Soldiers," and the "Servian Relief and Montenegrin Red Cross Funds" up to the "Prince of Wales's Fund."

This last was over $20,000,000 before Christmas. The suddenness of this war may be ill.u.s.trated by this fact: A friend of mine, who is managing director of a big English concern, has a.s.sumed the responsibility for seven years past of keeping in England one year's supply of everything that his company was likely to require from the Continent. This was at a cost to his company of many thousands of dollars. With dogged determination he stuck to the same policy for 1914, although in January of that year it was clear to him that Germany could not afford to go to war. While he was happy over his judgment, he admitted in conversation with me in December, 1914, that in January, 1914, the outlook was less indicative of a general European war than it had been for many years.

Thirty per cent of the workmen of his factory had gone to the war and his company was providing 250,000 pounds sterling a year to maintain the wages of the workmen at war up to the same amount as they would receive if they had stayed at home. He said that in one of his offices, of 80 men eligible for the work, 78 had enlisted, and, what was wonderful, the women were glad to take up the heavy work abandoned by the men,--something they would have refused to do in all ordinary times. On the whole, the output of this concern and its efficiency were materially increased, not diminished, by the war.

It is figured that troops at the front mean an expenditure of one pound per man per day, and that English troops in training mean an expenditure of not less than ten shillings per man per day.

The war expenses of Great Britain must thus be above one million pounds per day and steadily increasing. Indeed, the best economic estimate I have of the cost of the war to England is 500,000,000 pounds the first year.