shipbuilding for a moment, it is plain that we have rather a startling array of changed conditions to deal with, which may be summarized somewhat as follows:

(a) Foreign yards so crowded with admiralty work and arrears of merchant work that prices should remain abnormally high and facilities should be scarce, for some time to come.

(b) Ship charters, now enormously high, and apt to remain somewhat abnormal until the shipbuilding arrears are met. Should the war close to-morrow, the crowding of slips could hardly cease in two years' time, and it seems more likely to last as long again.

(c) Higher relative foreign labor and commodity costs than heretofore, especially labor costs, thus tending to cut down the handicap under which American yards have worked.

(d) American yards prosperous, for the first time in many years, and hence able to equip on a more efficient scale than before, and apply some of the principles of quantity production that have made it possible for America to produce automobiles, for example, cheaper than they can be produced abroad, in spite of the difference in wages paid. As an instance of a type of work more analogous to shipbuilding, where America has been able to turn a high wage-scale into a low labor cost, by efficient production methods, the National Foreign Trade Council (U.S.A.) cites the erection of structural material used in modern tall buildings.

If we add to these considerations the further, vital one, that Congress is sure to add largely to the navy, and almost equally sure to find some immediate way to add to the American-built merchant marine, the over-year change in the situation, from the point of view of the shipbuilder, is so great as to admit no comparison with anything that he has ever experienced.

III

American prosperity is running high. The Steel Corporation is reporting close to its previous high record of unfilled orders, and may easily surpass that record in the months to come. All the independent steel works are centres of the greatest activity; there have been half a score of consolidations, and many more are talked about. Birmingham pig iron (No. 2) is selling above $14 a ton, and a premium is paid for future deliveries, indicating the belief of the trade that prices will go higher. Copper metal is selling above 22 cents, at which price the operations of the copper producers are exceedingly profitable; and several great new companies have been recently financed, so that the copper production of the world has jumped to a new high record, at the same time that prices are fifty per cent higher than the average of the ten years preceding.

A tolerably important part of this activity in the metal trades is of course due to the production of war munitions, and it is exceedingly interesting to observe the way contracts for castings, forgings, lathe work, die-press work, and the other component parts of the manufacture of artillery, small arms, and shells (especially the two latter) have been spread around the country by the principal main contractors, both American and Canadian. The war lords' urgent demands and contempt of prices found us in a period of severe industrial stagnation; 1914 was the third consecutive bad year, with the result that commercial stocks, everywhere, were reduced to the minimum, and the metal trades, as usual, were feeling the depression as severely as anybody. Most shops with metal-working machinery had plenty of room for war orders, and filled up at high prices.

A comparison of the market valua

tions of the companies since famous in the munitions business, eighteen months ago and to-day, would be almost incredible, if it were possible to make it. Many of the conspicuous companies of the present day were not organized at the comparative period, however, and others, through absorptions and regroupings, have completely changed their character (as, for example, the Midvale Steel Company), so that not only would a general comparison and valuation be immensely difficult to make, but the result would be of doubtful value, owing to the absence of any quotations at all on the securities of many of the absorbed companies. To deal with the two classic cases, however, it is readily demonstrable that the aggregate valuation of the preferred and common stocks of the Bethlehem Steel and Electric Boat companies was a little over $20,000,000, at a random date in June, 1914. In the autumn of 1915, the stocks of those two companies exceeded $130,000,000 in aggregate value, at current quotations; an appreciation of, say, $110,000,000.

How is this prodigious skein to be unwound again, after the war? From being conspicuously unprepared to make munitions, we suddenly find ourselves in a condition of considerable over-preparedness. What are we going to do with the great workshops that have sprung up, overnight, to provide for this highly specialized form of activity?

Much of the answer to this question lies in the kind of peace that shall be made. If the war is fought to a finish of exhaustion (for it does not seem likely that it will be terminated by any single great victory-by a Marathon, a Metaurus, or a Waterloo), it is surely improbable that this country will be likely to step outside the bounds of any armament reduction or limitation that Europe may adopt. If the peace is pre

mature, it seems not only likely, but pretty certain, that we shall be carrying our own great armament burden until the next outbreak. In that case, the great munition developments of 1915 will not be devoid of important service to the country.

Taking the question from the peaceful, commercial angle, however, it should be noted that most of the great plant extensions will be fully written off the manufacturers' books before profits are arrived at. On this assumption, there should be much idle factory space after the war, but it will mostly be the old buildings that are abandoned or torn down. The depreciation arrears of a series of bad years will prove to have been fully, even sumptuously, met in the new structures, the cost of which has almost invariably appeared, outright, in the price of munitions furnished under the first great contracts. A casual visitor to New Haven, or Bridgeport, or Waterbury, is thunderstruck at the immense areas that have been built up with this extraordinarily rapid development. American industry has never had a similar experience, and it has not yet found its bearings.

Assuming, again, the kind of peace which does not involve an immediate and prodigious war-burden by this country, it will be most interesting to observe the uses to which this highly efficient factory equipment will be put. Some of the powder-makers have plans for the utilization of at least part of their equipment in the manufacture of chemicals, especially acids, dyes, and coal-tar products, and there can be but little doubt that the United States will make new strides in this field, which has been characteristically German. Germany's enemy customers have already begun making inquiries here, not only for chemicals, but for many other industrial lines.

IV

Right here, however, we come upon one of the major after-war problems discussed, and disagreed on, by the bankers in the first paragraph. What is our situation going to be in competing with Germany, England, Franceany of the warring nations, grasping their problems with a new fervor, and confronted with the immense need of restoring their respective exchanges to a better basis? German exchange, at this writing, gives the mark a value of just over nineteen cents, as compared with a normal value of nearly twenty-five cents; and yet Germany's purchases from the rest of the world have been at a minimum, as compared with England, France, or Russia. Even if we assume that this reduction in the value of the mark runs no further, and that would be a very rash assumption indeed, the exchange is going to make it intolerably expensive for Germany to buy her after-war needs here, unless she can be selling at the same time that she is buying. Conversely, anything she can sell here will produce a home value, in marks, fully twentyfive per cent greater than usual, since $1000 will buy upwards of 5000 marks, instead of the usual 4000-odd.

This situation, naturally, is not confined to Germany; as a matter of fact, Russia is probably the one of the great powers most in need of restoring her exchange. But it can be accepted as axiomatic that each warring country, on account of the exchange situation, will for a time be able to sell profitably to us and to mutual customers, at prices that would be well below cost of production and delivery on a basis of normal exchange. Moreover, it is so clearly to the interest of each government to have these exchange-restoring sales made by its own merchants, that all feasible governmental aid will doubt

less be given to the export trade, offset, of course, by such tariff barriers as each nation may see fit to erect against the others. I believe that our own democratic administration recognizes this situation fully, and is likely to erect anti-dumping barriers in an efficiently undemocratic manner.

In other words, the outlook for permanently higher European wages (if the reader grants it) will not immediately become effective to our advantage as against the present exchange situation except in certain special industries, like shipbuilding; a situation which is practically certain to be materially worse before the war is over, although the better-regulated buying of the past few months and the marshaling of American foreign-held securities to sell back to us have all worked to correct the panicky feeling regarding the course of exchange which so many experienced observers held a few months ago. Later on, the quickest way for any foreign nation to regulate its exchange with us will be to sell us its own securities, but we are not ready to buy them just yet.

This leads to another train of thought suggested by those bankers whose economic disagreements started this paper. How about the foreign government bonds? They are surely going to be plentiful enough, after the war. Shall we buy them here, because they yield so much more than our own best railroad and municipal bonds, or shall we keep on refusing to buy them, and will our reason for refusal be that we are afraid that we are not going to get our money, or will it be prejudice, or the very shrewd reason that an oversupply of any commodity always means a break in the market? Or, for another supposition, will the price of the highgrade government stuff go to a figure which no longer tempts us (in which case, we ought, in the parlance of the Street, to get aboard now and go with

it)? I do not believe any categorical answer can be made to these inquiries, except to concur in the finding that over-production of anything breaks markets. There is going to be choice in government bonds, as there has been in the past; and somewhere down the line, in the Balkans or out of them, some government is going to repudiate something, before they all get their war debts paid off. But England, France, and Germany are not going to repudiate their external debts, although we shall probably see manoeuvring, forced extensions, and the like, in the handling of some of their internal debt.

Is it not logical to suppose that when the war is over, or close to it, the best governmental securities will tend to rise rather suddenly - especially the short-time ones, and those not issued in such tremendous volume as to overburden their own particular markets? And if this takes place, will not these two kinds of high-grade bonds, the best governments, and the best American rails and municipals, tend to approach each other in price rather more closely than they stand at present? In other words, should we not expect that government bonds will keep on selling for something less than their acknowledged security-worth, and that the best American corporation bonds will keep on selling somewhat higher than their comparative security-worth, but that the two classes of securities will tend to draw together, impelled by the clamorous need for new development and restoration capital all over the world?

The vision of the conquest of South American trade is to me obscured by the barrier of exchange. Just now, we must finance South America or she must go without, but, at the time of writing, Argentina is the only South American country which has been successful in placing issues in our market, even in a moderately large way, al

though the new extension of certain important banking interests into the southern hemisphere, coupled with the very evident desire of the trading companies to do the brilliant business offering, if only it can be financed, are pulling together to win over the reluctant American investor to a change of heart regarding South American securities.

Let us assume, therefore, that so long as South America can buy here cheaper than abroad, and get quicker deliveries, she will buy from us to the maximum extent that she can finance her purchases, and that there will be, to some extent, at least, a real change in the trade-relations between the two countries. But, while assuming that, let us not forget that South America and the United States are both producing, rather than consuming, countries; that both of us sell our grain and beef in foreign markets (although we of North America are buying both grain and beef from South America to-day, in addition to our great purchases of Brazilian coffee); that the principal market for Chilean nitrate has always been Germany. In short, let us keep clearly in mind the old maxim that it is apt to be profitable for any country to buy where it sells, and that South America and North America, both of them new, developing, borrowing countries, will normally find it easier to trade with consuming, lending countries than with each other.

As against this argument, it is undeniably true that, along with the constant rise in food-prices here, and our rapid development as a great manufacturing nation, we go through periods from time to time when our manufacturing and agricultural ratios get out of balance, so that it is temporarily profitable for us to import food-products. But our agricultural production is so desperately far removed from a condition of intensive efficiency, that a series

of years of abnormally high crop and meat prices is quite capable of stimulating production to an extent that we perhaps do not realize, unless we compare the acreage outputs of our prairie states with European figures.

Here is a further consideration. We are told that France and England used to be lenders, but have now become borrowers, and that we, who used to be borrowers, are suddenly constituted the world's bankers. This statement is certainly true, as made; what we must determine is whether it is a temporary condition or a permanent one. Can we not summarize a matter difficult of proof by saying that England and France, at least, have not yet given indications of taxing themselves beyond their recuperative power, or of changing their fundamental national characteristics, from being repositories of wealth and banking power, to being eager national producers, constantly borrowing to extend their commercial facilities? In other words, if we assume that France and England are going to succeed ultimately in paying their war debts, most of which are owed at home, and which are not as yet disproportionate to the war loads carried by other generations, then we must assume that these two countries are likely eventually to resume the kind of world-business to which they are accustomed.

The constantly increasing reserves of American money available for investment purposes find abundant outlet along the channels they like best; that is to say, in American development work. In so far as American development extends to foreign countries, as, for example, the Cuban sugar and tobacco business, the oil business in Mexico, the copper business in Chile, and the beef business in Argentina and Uruguay, American money will follow it, doubtless in increasing amounts. But the American public is not yet in

terested in the kind of developments that have characterized British capital, especially in South America, and does not seem likely to turn to them during the period of the period of years when England may feel cramped in her out-country development. Incidentally, it is a curious side-light on our governmental regulation that much of the speculative money which, ten years ago, would have gone into American railroad development, is being diverted, in these prosperous times, to industrial enterprises, because the investor feels that the profits in railroad securities have been strictly limited, while the losses have been left unlimited. This is the first strong commercial revival we have had since our national policy of railroad regulation assumed acute form, and it is the first one when railroad development and railroad securities have been neglected.

The purpose of this paper being to suggest, rather than to settle, some of the peculiar and novel commercial problems with which the country is confronted, it should be noted that the great world changes in commercial enterprise are usually the result of something quite different from armed struggles. England owes to the steam engine more than she does to Drake or to Marlborough, and, in the long light of history, it probably made very little difference to the status of Babylon as a world capital whether Alexander the Great or King Darius won the battle of Arbela. Thirty years hence, the economic effect of the Panama Canal, as shown in really vital commercial changes, seems likely to be greater than the effect of the Great War. Meanwhile, we can be reasonably sure that much of what we predict will be set at naught by changes now going on about us changes which barely attract our attention at all, amid the clamor of

arms.