Part 52

Though the Central governments were fully aware of this, as some of their officials admitted to me, they had no reason to bring this to the attention of their publics or the world. The British Aushungerungspolitik--policy of starvation--was the most potent argument the Central governments had to present to their war-tired people. What the German air raids on London accomplished in promoting the British war spirit the blockade of the Central states effected in the German Empire and Austria-Hungary. In a war of such dimensions it was foolish to thus drive the governed into the arms of their governors.

The financial condition of the Central European states to-day is as sound as that of the Entente states. That would not be true if any great share of the Central European war loans had been raised in foreign countries. But, as I have shown, this was not done.

That the war debt is great is a fact. The government's creditors are all in the country, however, and if need be it can set against them the tax-tired multitude. For that there will be no necessity. The depreciation of the currency has automatically reduced by as much as 25 per cent. on an average all state indebtedness, in so far as capital is a lien against the community's natural resources and labor. But of this more will be said at the proper time.

Early in the summer of 1917 the German and Austro-Hungarian governments were occupied with the question to what extent it would be possible to lighten the burden of the taxpayer. Nothing came of it for the reason that finally it was concluded that the time for financial reorganization was not yet come. Inflated money and high prices would still have to be used to keep the producer at maximum effort and prevent his consuming more than could be permitted.

But the methods of financial reorganization, or we may call it reconstruction, that were discussed are none the less interesting. They involved a reduction of the interest which the government has to pay on war loans, as well as a lightening of the war-loan burden. It was tentatively proposed to either cut into half the rate of interest or to reduce by one-half the principal.

One would think that the Central European bankers would oppose such a step. They did not, however. For the sake of pre-war loans and investments, these men must favor a rehabilitation of the currency, and nothing would do that as effectively as a reduction of the war debt. The mark and crown buy to-day from one-third to one-half what they bought in 1914. With the war debt cut down to one-half they would buy from 60 to 75 per cent. what they bought in that year. As a measure of socio-economic justice, if there be such a thing, the reconstruction proposed would appeal to all who invested money before the outbreak of the war. These people put up money at the rate of 100, while the interest they are getting to-day is worth from 33 to 50. The man who in 1914 invested 100,000 marks would indeed get back 100,000 marks. The trouble is that the mark has depreciated in purchasing power, so that his capital has shrunk to 33,000 or 50,000 marks, as the case may be.

War does not only mortgage the future of a nation, but it also has the knack of tearing down the past.

Tired of hotel life, I had made up my mind in Vienna to find private quarters. In the end I found what I wanted. I ought to have been satisfied with my lodging, seeing that it was the comfortable home of the widow of a former professor of the Vienna university.

I never experienced such mixed feelings in my life as when I discussed terms with the woman. She was a person of breeding and tact and considerable false pride. How much did I want to pay? She did not know what she ought to ask. She had never rented rooms before.

We arrived at an understanding. I moved into the well-furnished flat and the old lady into her kitchen, where she lived and cooked and slept, together with a parrot, until I turned over to her the bedroom and occupied the couch in the parlor.

Before the war the woman had fared better. She was getting a small pension and had a little capital. The income had been large enough to give her a servant. When I moved in, the servant was gone long ago, and I suspect that since then there had been days when the old lady did not have enough to eat. Still, she was getting the same pension and her little capital was bringing the same interest. The difficulty was that the income bought but a third of what it had formerly secured.

There were thousands of such cases, involving pensioners, widows, and orphans. In their case the world had not only stood still, but it had actually gone backward. The inflated currency left them stranded, and the worst of it was that taxes were growing with every day. The government was levying tribute on the basis of the inflated money. These people had to pay it with coin that was 100 so far as they were concerned.

Real-estate owners were in no better position. The moratorium prevented them from increasing rents, which step had to be taken in the interest of the families of the men at the front. Taxes kept growing, however, and when the income from rent houses was all a person had there was nothing to do but stint. With the currency as low as it was, nobody cared to sell real property of course. It was nothing unusual to see the small rent-house owner act as his own janitor.

While the war loans and government contracts were making some immensely rich, thousands of the middle class were being beggared. But there is nothing extraordinary in this. The socio-economic structure may be likened to a container that holds the national wealth. For purposes of its own the government had watered the contents of the bucket and now all had to take from it the thinned gruel. That thousands of aged men and women had to suffer from this could make little impression on governments that were sacrificing daily the lives and health of able-bodied producers on the battle-fields--one of whom was of greater economic value to the state than a dozen of those who were content to spend their life on small incomes without working.

XXI

THE AFTERMATH

In Cæsar's time the pound of beef at Rome cost 1¼ American cents. At the end of the thirteenth century it was 2½ cents, due largely to the influence of the Crusades. In a Vienna library there is an old economic work which contains a decree of the Imperial German government at Vienna fixing the price of a pound of beef, in 1645, at 10 pfennige, or 2¼ American cents. When peace followed the Seven Years' War the pound of beef at Berlin was sold at 4 cents American. During the Napoleonic wars it went up to 6½ cents, and when the Franco-Prussian War was terminated beef in Germany was 9 cents the pound. The price of bread, meanwhile, had always been from one-tenth to one-quarter that of beef. In Central Europe to-day the price of beef is from 60 to 75 cents a pound, while bread costs about 5¼ cents a pound. The cost of other foods is in proportion to these prices, provided it is bought in the legitimate market. As I have shown, almost any price is paid in the illicit trade. I know of cases when as much as 40 cents was paid for a pound of wheat flour, $2.70 for a pound of butter, $2.20 for a pound of lard, and 50 cents for a pound of sugar. I have bought sugar for that price myself.

These figures show that there has been a steady upward tendency in food prices ever since the days of imperial Rome, and we have no reason to believe that it was different in the days of Numa Pompilius.

Looking at the thing from that angle, we must arrive at a period when food, in terms of currency, cost nothing at all. Such, indeed, is the fact. When man produced himself whatever he and his needed, money was not a factor in the cost of living. The tiller of the soil, wishing to vary his diet, exchanged some of his grain for the catch of the fisherman, the first industrial, who could not live by fish alone. The exchange was made in kind and neither of the traders found it necessary to make use of a medium of exchange--money. The necessity for such a medium came when exchange in kind was not possible--when food and the like began to have time, place, and tool value, when, in other words, they were no longer traded in by the producer-consumers, but were bought and sold in markets.

But the question that occupies us here principally is, Why has food become dearer?

Actually food is not dearer to-day than it was in Rome under Cæsar. The fact is that money is cheaper, and money is cheaper because it is more plentiful. Let me quote a case that is somewhat abstract, but very applicable here.

Why should the farmer sell food when the money he gets for it will purchase little by virtue of having no longer its former purchasing power? He can be induced to sell such food if he is given enough dollars and cents to buy again for the proceeds of his soil and labor what he obtained through them before. That means that he must be given more money for his wares. But that he is given more money does not leave him better off. What difference does it make to him if for the bushel of wheat he gets one dollar or two dollars when the price of an article he must buy also jumps from one to two dollars? The result is a naught in both cases. To be sure, he could save more, apparently, from two than he could from one dollar. That, however, is fiction, for the reason that the twenty cents he may save of two dollars will in the new economic era buy no more than the ten cents he saved from the one dollar.

It is clear now that the farmer has not profited by the increase in food prices. All others are in the same position. Money has ceased to buy as much as before. The worker who is getting twice the wages he received before the outbreak of a war is obliged to pay twice as much for food. Like the farmer, he is no better off than he was. He, too, sees nothing but zero when expenditures are subtracted from income.

The body politic is a living organism for the reason that it is composed of living organisms--men and women. As a living organism this body has the inherent quality to repair or heal the wounds it has received. The men lost in war are replaced by the birth of others. In our time, at least, the women are no longer killed off, and since the remaining males are able to fertilize them a decade or two generally suffices to make good this loss which the body politic has sustained. It is a well-known fact that the average man is able to produce many times the number of children to which monogamy limits him. At the conclusion of the Thirty Years' War, when polygamy had to be legalized in southern Germany, Nuremberg boasted of a citizen who had thirty-seven children by six women.

But even the economic wounds of the body politic heal rapidly. They begin to heal in war almost with the first day on which they are inflicted. Over them spreads the protecting scab of cheap money and high prices.

The German mark buys to-day about one-third of what it bought in July, 1914; this means that it is worth no more in comparison with its former value as a lien against the wealth of the German nation. The several German governments, however, will continue to pay on their public debts the old rate of interest, and when the loans are called in the depreciated mark will take the place of a mark that had full value. The gain for the state is that it has reduced automatically its old public debt by 66 per cent. in interest and capital.

The same applies to the first war loans. The German war loans up to the middle of 1915 were made with a mark that still bought 90 per cent. of what it had bought before. Interest on them will be paid and the loan redeemed with a mark which to-day has a purchasing power of only 33 pfennige. If nothing is done to interfere with this relation of currency values, the German governments will actually pay interest and return the loan with money cheaper by 62.97 per cent. than what it was when the loans were made. The fifth war loan was made at a time when the purchasing power of the mark was down to about 50 points, so that on this the "economic" saving, as established with the present purchasing power of the mark, would be only 33.34 per cent. On the seventh war loan, made with the mark down to roughly one-third of its former purchasing power, nothing could be saved by the government if redemption of the loan should be undertaken with a mark buying no more than what it buys to-day.

We are dealing here with the mark as a thing that will procure in the market to-day the thing needed to live. In its time the mark that made up the public debt and the war loans served the same purpose, in a better manner, as it were. But that mark is no more. The several governments of Germany will pay interest and redeem loans in the mark of to-day, without paying the slightest heed to the value of the mark turned over to them when the loans were made.