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shipbuilding for a moment, it is plain

III that we have rather a startling array of changed conditions to deal with, which American prosperity is running high. may be summarized somewhat as fol- The Steel Corporation is reporting close lows:

to its previous high record of unfilled (a) Foreign yards so crowded with orders, and may easily surpass that admiralty work and arrears of mer- record in the months to come. All the chant work that prices should remain independent steel works are centres of abnormally high and facilities should the greatest activity; there have been be scarce, for some time to come. half a score of consolidations, and many

(6) Ship charters, now enormously more are talked about. Birmingham high, and apt to remain somewhat ab- pig iron (No. 2) is selling above $14 a normal until the shipbuilding arrears ton, and a premium is paid for future are met. Should the war close to-mor- deliveries, indicating the belief of the row, the crowding of slips could hardly trade that prices will go higher. Copcease in two years' time, and it seems per metal is selling above 22 cents, at more likely to last as long again. which price the operations of the cop

(c) Higher relative foreign labor and per producers are exceedingly profitcommodity costs than heretofore, es- able; and several great new companies pecially labor costs, thus tending to cut have been recently financed, so that down the handicap under which Amer- the copper production of the world has ican yards have worked.

jumped to a new high record, at the (d) American yards prosperous, for same time that prices are fifty per cent the first time in many years, and hence higher than the average of the ten years able to equip on a more efficient scale preceding. than before, and apply some of the A tolerably important part of this principles of quantity production that activity in the metal trades is of course have made it possible for America to due to the production of war munitions, produce automobiles, for example, and it is exceedingly interesting to obcheaper than they can be produced serve the way contracts for castings, abroad, in spite of the difference in forgings, lathe work, die-press work, wages paid. As an instance of a type and the other component parts of the of work more analogous to shipbuild- manufacture of artillery, small arms, ing, where America has been able to and shells (especially the two latter) turn a high wage-scale into a low labor have been spread around the country cost, by efficient production methods, by the principal main contractors, both the National Foreign Trade Council American and Canadian. The war (U.S.A.) cites the erection of structural lords' urgent demands and contempt of material used in modern tall buildings. prices found us in a period of severe in

If we add to these considerations the dustrial stagnation; 1914 was the third further, vital one, that Congress is sure consecutive bad year, with the result to add largely to the navy, and almost that commercial stocks, everywhere, equally sure to find some immediate were reduced to the minimum, and the way to add to the American-built mer- metal trades, as usual, were feeling the chant marine, the over-year change in depression as severely as anybody. the situation, from the point of view of Most shops with metal-working mathe shipbuilder, is so great as to admit chinery had plenty of room for war orno comparison with anything that he ders, and filled up at high prices. has ever experienced.

A comparison of the market valuations of the companies since famous mature, it seems not only likely, but in the munitions business, eighteen pretty certain, that we shall be carrymonths

ago and to-day, would be al- ing our own great armament burden most incredible, if it were possible to until the next outbreak. In that case, make it. Many of the conspicuous the great munition developments of companies of the present day were not 1915 will not be devoid of important organized at the comparative period, service to the country. however, and others, through absorp- Taking the question from the peacetions and regroupings, have complete ful, commercial angle, however, it ly changed their character (as, for ex- should be noted that most of the great ample, the Midvale Steel Company), so plant extensions will be fully written that not only would a general compari- off the manufacturers' books before son and valuation be immensely dif- profits are arrived at. On this assumpficult to make, but the result would be tion, there should be much idle facof doubtful value, owing to the absence tory space after the war, but it will of any quotations at all on the securities mostly be the old buildings that are of many of the absorbed companies. abandoned or torn down. The depreciTo deal with the two classic cases, how- ation arrears of a series of bad years ever, it is readily demonstrable that will prove to have been fully, even the aggregate valuation of the preferred sumptuously, met in the new strucand common stocks of the Bethlehem tures, the cost of which has almost inSteel and Electric Boat companies was variably appeared, outright, in the a little over $20,000,000, at a random price of munitions furnished under the date in June, 1914. In the autumn of first great contracts. A casual visitor 1915, the stocks of those two companies to New Haven, or Bridgeport, or Waexceeded $130,000,000 in aggregate terbury, is thunderstruck at the imvalue, at current quotations; an appre- mense areas that have been built up ciation of, say, $110,000,000.

with this extraordinarily rapid developHow is this prodigious skein to be ment. American industry has never unwound again, after the war? From had a similar experience, and it has not being conspicuously unprepared to yet found its bearings. make munitions, we suddenly find our- Assuming, again, the kind of peace selves in a condition of considerable which does not involve an immediate over-preparedness. What are we going and prodigious war-burden by this to do with the great workshops that country, it will be most interesting to have sprung up, overnight, to provide observe the uses to which this highly for this highly specialized form of ac- efficient factory equipment will be put. tivity?

Some of the powder-makers have plans Much of the answer to this question for the utilization of at least part of lies in the kind of peace that shall be their equipment in the manufacture of made. If the war is fought to a finish of chemicals, especially acids, dyes, and exhaustion (for it does not seem likely coal-tar products, and there can be but that it will be terminated by any single little doubt that the United States will great victory - by a Marathon, a Me- make new strides in this field, which taurus, or a Waterloo), it is surely im- has been characteristically German. probable that this country will be likely Germany's enemy customers have alto step outside the bounds of any ar- ready begun making inquiries here, not mament reduction or limitation that only for chemicals, but for many other Europe may adopt. If the peace is pre- industrial lines.

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IV

less be given to the export trade, offset,

of course, by such tariff barriers as each Right here, however, we come upon nation may see fit to erect against the one of the major after-war problems others. I believe that our own demo discussed, and disagreed on, by the cratic administration recognizes this bankers in the first paragraph. What situation fully, and is likely to erect is our situation going to be in compet- anti-dumping barriers in an efficiently ing with Germany, England, France - undemocratic manner. any of the warring nations, grasping In other words, the outlook for pertheir problems with a new fervor, and manently higher European wages (if confronted with the immense need of the reader grants it) will not immediaterestoring their respective exchanges to ly become effective to our advantage a better basis? German exchange, at as against the present exchange situathis writing, gives the mark a value tion except in certain special industries, of just over nineteen cents, as com- like shipbuilding; a situation which is pared with a normal value of nearly practically certain to be materially twenty-five cents; and yet Germany's worse before the war is over, although purchases from the rest of the world the better-regulated buying of the past have been at a minimum, as compared few months and the marshaling of with England, France, or Russia. Even American foreign-held securities to sell if we assume that this reduction in the back to us have all worked to correct value of the mark runs no further, the panicky feeling regarding the course and that would be a very rash assump- of exchange which so many experienced tion indeed,- the exchange is going to observers held a few months ago. Lamake it intolerably expensive for Ger- ter on, the quickest way for any foreign many to buy her after-war needs here, nation to regulate its exchange with us unless she can be selling at the same will be to sell us its own securities, but time that she is buying. Conversely, we are not ready to buy them just yet. anything she can sell here will produce This leads to another train of a home value, in marks, fully twenty- thought suggested by those bankers five per cent greater than usual, since whose economic disagreements started $1000 will buy upwards of 5000 marks, this paper. How about the foreign govinstead of the usual 4000-odd.

ernment bonds? They are surely going This situation, naturally, is not con- to be plentiful enough, after the war. fined to Germany; as a matter of fact, Shall we buy them here, because they Russia is probably the one of the great yield so much more than our own best powers most in need of restoring her railroad and municipal bonds, or shall exchange. But it can be accepted as we keep on refusing to buy them, and axiomatic that each warring country, will our reason for refusal be that we on account of the exchange situation, are afraid that we are not going to get will for a time be able to sell profitably our money, or will it be prejudice, or to us and to mutual customers, at prices the very shrewd reason that an overthat would be well below cost of pro- supply of any commodity always means duction and delivery on a basis of nor- a break in the market? Or, for another mal exchange. Moreover, it is so clear- supposition, will the price of the highly to the interest of each government grade government stuff go to a figure to have these exchange-restoring sales which no longer tempts us (in which made by its own merchants, that all case, we ought, in the parlance of the feasible governmental aid will doubt- Street, to get aboard now and go with it)? I do not believe any categorical though the new extension of certain answer can be made to these inquiries, important banking interests into the except to concur in the finding that southern hemisphere, coupled with the over-production of anything breaks very evident desire of the trading commarkets. There is going to be choice in panies to do the brilliant business offergovernment bonds, as there has been in ing, if only it can be financed, are pullthe past; and somewhere down the line, ing together to win over the reluctant in the Balkans or out of them, some American investor to a change of heart government is going to repudiate some regarding South American securities. thing, before they all get their war Let us assume, therefore, that so long debts paid off. But England, France, as South America can buy here cheaper and Germany are not going to repudi- than abroad, and get quicker deliveries, ate their external debts, although we she will buy from us to the maximum shall probably see manœuvring, forced extent that she can finance her purextensions, and the like, in the handling chases, and that there will be, to some of some of their internal debt.

extent, at least, a real change in the Is it not logical to suppose that when trade-relations between the two counthe war is over, or close to it, the best tries. But, while assuming that, let us governmental securities will tend to

not forget that South America and the rise rather suddenly — especially the United States are both producing, rashort-time ones, and those not issued ther than consuming, countries; that in such tremendous volume as to over- both of us sell our grain and beef in burden their own particular markets? foreign markets (although we of North And if this takes place, will not these America are buying both grain and beef two kinds of high-grade bonds, the best from South America to-day, in addigovernments, and the best American tion to our great purchases of Brazilrails and municipals, tend to approach ian coffee); that the principal market each other in price rather more closely for Chilean nitrate has always been than they stand at present? In other Germany. In short, let us keep clearly words, should we not expect that gov- in mind the old maxim that it is apt to ernment bonds will keep on selling for be profitable for any country to buy something less than their acknowledged where it sells, and that South America security-worth, and that the best Amer- and North America, both of them new, ican corporation bonds will keep on sell- developing, borrowing countries, will ing somewhat higher than their com- normally find it easier to trade with parative security-worth, but that the consuming, lending countries than with two classes of securities will tend to each other. draw together, impelled by the clamor- As against this argument, it is unde ous need for new development and re- niably true that, along with the constoration capital all over the world? stant rise in food-prices here, and our

The vision of the conquest of South rapid development as a great manufacAmerican trade is to me obscured by turing nation, we go through periods the barrier of exchange. Just now, we from time to time when our manufacmust finance South America or she turing and agricultural ratios get out must go without, but, at the time of of balance, so that it is temporarily prowriting, Argentina is the only South fitable for us to import food-products. American country which has been suc- But our agricultural production is so cessful in placing issues in our market, desperately far removed from a condieven in a moderately large way, al- tion of intensive efficiency, that a series

of years of abnormally high crop and terested in the kind of developments meat prices is quite capable of stimu- that have characterized British capital, lating production to an extent that we especially in South America, and does perhaps do not realize, unless we com- not seem likely to turn to them during pare the acreage outputs of our prairie the period of years when England may states with European figures.

feel cramped in her out-country develHere is a further consideration. We opment. Incidentally, it is a curious are told that France and England used side-light on our governmental regulato be lenders, but have now become tion that much of the speculative monborrowers, and that we, who used to be ey which, ten years ago, would have borrowers, are suddenly constituted gone into American railroad developthe world's bankers. This statement is ment, is being diverted, in these proscertainly true, as made; what we must perous times, to industrial enterprises, determine is whether it is a temporary because the investor feels that the procondition or a permanent one. Can we fits in railroad securities have been not summarize a matter difficult of strictly limited, while the losses have proof by saying that England and been left unlimited. This is the first France, at least, have not yet given in- strong commercial revival we have had dications of taxing themselves beyond since our national policy of railroad their recuperative power, or of chan- regulation assumed acute form, and it ging their fundamental national char- is the first one when railroad developacteristics, from being repositories of ment and railroad securities have been wealth and banking power, to being neglected. eager national producers, constantly The purpose of this paper being to borrowing to extend their commercial suggest, rather than to settle, some of facilities? In other words, if we assume the peculiar and novel commercial that France and England are going to problems with which the country is succeed ultimately in paying their war confronted, it should be noted that the debts, most of which are owed at home, great world changes in commercial enand which are not as yet disproportion- terprise are usually the result of someate to the war loads carried by other thing quite different from armed struggenerations, then we must assume that gles. England owes to the steam enthese two countries are likely event- gine more than she does to Drake or ually to resume the kind of world-busi- to Marlborough, and, in the long light ness to which they are accustomed. of history, it probably made very lit

The constantly increasing reserves tle difference to the status of Babylon of American money available for in- as a world capital whether Alexander vestment purposes find abundant out- the Great or King Darius won the batlet along the channels they like best; tle of Arbela. Thirty years hence, the that is to say, in American develop- economic effect of the Panama Canal, ment work. In so far as American devel- as shown in really vital commercial opment extends to foreign countries, changes, seems likely to be greater than as, for example, the Cuban sugar and the effect of the Great War. Meantobacco business, the oil business in while, we can be reasonably sure that Mexico, the copper business in Chile, much of what we predict will be set at and the beef business in Argentina and naught by changes now going on about Uruguay, — American money will fol- us - changes which barely attract our low it, doubtless in increasing amounts. attention at all, amid the clamor of But the American public is not yet in- arms.

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