In this connection, the fact must not be overlooked that the war has practically brought to a standstill, for the present, in many parts of Europe, any saving of capital for investment. If the war should soon end, and the men now employed in trying to kill each other were able to return promptly to the ranks of industry, a considerable stimulus would be given to the renewal of effective production, and a margin of savings for investment might emerge. On the other hand, there will be delay and considerable cost in re-establishing the important textile and other industries of northern France, of Belgium, and of other sections which have been the victims of hostile armies.
This great demand upon the world's saving for investment will make it difficult to obtain capital for industrial purposes except at a high rate. The credit of the strongest governments is usually at least ½ per cent. higher than that of private corporations. While England has succeeded in borrowing at a rate slightly under 4 per cent., Germany is paying 5 per cent. and France practically the same. The most severe pressure upon the market for capital is likely to be felt, however, after peace is made, during the distribution among investors of the large amounts of the loans which are being carried temporarily by the banks. This demand for capital will probably reduce the price of even the best bonds to the level of the new rate of return. Bonds might have a preference in certain cases over stocks, but, on the other hand, only those corporations which were able to pay a high return would be able to issue additional stock for the extension of their plants.
A high rate of return upon capital will not in itself be inconsistent with great industrial activity and certain types of commercial expansion. It is usually the experience after a war that the efficiency of labor is increased by the disposition to repair the waste of the conflict, and that the return of many thousands of men to peaceful industry not only restores, but increases the previous capacity for production. The prevalence of unusual economies also, both in Europe and the United States, will probably do something to offset the abnormal demand for investment capital for war purposes, and aid in the restoration of industry.
|THE PREVENTION OF THE FUNDAMENTAL CAUSE OF WAR—DISCONTENT|
OF WARREN W. ERWIN & CO., NEW YORK
BECAUSE of the very brief time (only two days) that I have been able to devote to this address, since I learned, on December 20, that I was expected to make it, I can do no more than to suggest, or outline, what if I had had sufficient time to prepare might have taken