The Effect Of War On Investments Conditioned By Its Range

The effect of war upon the values of investments will obviously depend upon its range - whether it be limited to a country and any of its dependencies (although in the case of India complications with other Powers might probably occur to expand the effect), or whether it be a conflict between independent nations. In the latter case, especially so far as general commerce is concerned, the position is intensified by the apprehension respecting the future, since all bargains and enterprises are necessarily founded on the presumption that the future is not likely to prove divergent from the past beyond the range of reasonable limits. No interchange of business would be practicable unless some valid workable assurance were feasible on this continuity of experience. Existent and definite burdens upon trade produce a markedly inferior hindrance to industrial effort than does uncertainty concerning the probable course of future events. And so intimately allied are the various markets of the world for money and commerce that the disturbance of one inevitably involves, and almost instantly, the dislocation of the rest, when the chain which binds the whole into a unity of interests is sundered at any link.

The Primary Effect Of War Is That Of Unproductive Expenditure

The primary effect resulting from a declaration of war (omitting for the moment the disruption of international commercial exchanges of goods and the apprehension affecting credit) is that of unproductive expenditure - expenditure which does not by economic use result in the creation of additional wealth for wider enterprises and extending productiveness. Even should one warring nation wrest in conquest a province (with the benefit of its local industries) from another nation, the gain is simply the transfer of a source of wealth or resources, and the aggregate productive means of the world are not increased.

The Feebleness Of Human Memory

The characteristics of human nature are significant in all their forms, but no feature so astounds the careful observer as the general feebleness of memory, and the facility and promptitude with which the disastrous evils and losses of war, the serious consequences of commercial crises, and generally all experiences of exceptional magnitude and misery are obliterated from recollection, leaving but the slenderest warning and restraining influence upon future conduct, which, slender though it be, grows dimmer and less impressive with the lapse of time, and speedily evanesces completely. This obliviousness is not dependent upon the advent of a new generation, with its own freshness of energy and vacancy of memories, but is plainly discernible, as a lasting element of the human fabric, in the people who have themselves encountered these disastrous events. The practical lesson thus taught to the investor, in support of calmness of judgment in critical times, is the inevitable succession of the equilibrium of prices after even the extremest descent.

War Means An Increase In The Valne Of Money

The occurrence of international war necessarily, first of all, occasions an increase in the value of money. The rate of interest advances, for besides the element of remuneration for the use of capital, the rate must include a provision for the greater chance of loss to which loans are now subject. Considerable sums are required by the Government (obtained by borrowing in the form of the fresh issue of securities) for the transport and maintenance of troops, the collection of military materials, and the effective equipment of ships of war. The supply of money, which is sufficient in ordinary times for the needs of trade, is accordingly reduced by absorption in these national loans; and, commercial purposes (however restricted) still requiring the monetary medium of exchanges, the current demand exceeds the diminished available supply with a consequent enhancement of the charge for loans.

The Effect Of War In The Case Of Great Britain

In England, at least, enormous expenditure would be entailed in the possession of an irresistible fleet for preserving the communication with its colonies and their open intercourse with each other. If this intercourse were arrested by an enemy's vessels, either by the destruction of our fleet or by blockade, our carrying trade might, at all events partially, pass to alien hands; the importation of raw materials and food supplies would be checked; and commerce, manufacturing power and expansion, social condition, the receipt of foreign remittances in discharge of our mercantile credits, and the satisfaction of internal trading obligations might, in extreme contingencies (and, in all cases, the tendency in varying degree would be in this direction), prove so grave an influence as to imperil our national credit. With these momentous implications it is to me utterly inexplicable how, as it not infrequently has occurred, any statesman can descend to light and irresponsible language which could wantonly affront the feelings of another nation, with their possible expression in distrust, dislike and inimical action.