HE other night, the "Norddeutsche Allgemeine Zeitung"-still a pow erful paper-aptly quoted Bismarck's phrase regarding Russia and Austria: "Between these two states the relations can become better or worse; they cannot remain as they are."

I-GERMANY

Ever since the signing of the Treaty of Versailles, over three years ago, Germany has unceasingly endeavored to escape the terms it imposed upon her. For instance:

(1) Her real armament is greater than that to which she has a right.

(2) The trial of her war culprits, imposed by the Treaty of Versailles, has been insufficient and in some cases ridiculous.

(3) She has not delivered coal and wood as agreed.

(4) She has lowered her exports and augmented her imports, especially in articles of luxury, instead of limiting those importations to articles of necessity.

(5) In order to show an apparent bankruptcy, the Germans have sent much of their capital to other countries, a leakage estimated at from $1,000,000,000 to $2,000,000,000.

(6) With the same end in view, the German Government has greatly augmented the personnel and therefore the total of salaries in its postal and railway services.

(7) Finally, also with the same end in view, the Government has pursued a policy of lowering the exchange value of its monetary standard by enormous emissions of paper money. It has put forth such a large number of paper billions that its printers must now work their presses continually night and day in a fruitless attempt to provide themselves with an adequate medium of exchange. At present the attempt to keep up takes an incredible number of paper marks.

Hence the German Government has certainly not done all it could to increase its receipts, to lessen its expenses, and to prevent its capital from evading the just demands upon it.

Apparently the Government adopted three rules of conduct:

has

First, it does not intend to pay for reparations a single mark more than is actually forced upon it.

Second, it seems to think it quite within its right to create deliberate bankruptcy in order to obtain easier terms from its creditors.

Third, it thinks that all its recent policy will give a prodigious boom to its industry.

Now, however, with the recent great fall in the value of the mark, the German banks can no longer finance German industries in their necessary purchases of raw materials. If there is no pward turn in the situation, there will

be an army of the unemployed. Then many stores and shops will close for want of custom. A comparatively small quantity of foodstuffs, if any, will be ordered from abroad. We may hear also of insufficient crops in Germany. There may even be some starvation.

Can the present Government with stand such a crisis? Suppose it cannot and is overthrown? What kind of a government would succeed it? A monarchist and reactionary Government? Or a communist-bolshevist affair? Either would menace not only the execution of the Versailles Treaty but also the actual peace of Europe infinitely more than does the present Government -which should be upheld wherever possible.

Certainly no nation of the Entente wants Germany to escape the punish ment she merits for her culpability in starting the World War. But no country wants to reduce Germany to economic or political impotence. If any country wanted to bring about Germany's ruin, it would only have to allow those great German industrialists who have been exploiting the people to go on lowering the value of the mark; or to permit the conspirators, whether monarchists or bolshevists, to continue their daily and nightly work of trying to destroy the present republican régime. No, the Entente is not acting that way. Nor is France in particular.

II-FRANCE

It is unfortunately too easy for us in America to forget that France fought for us for three years before we entered the war, that France did deeds of heroism at the Marne and at Verdun really for us too as well as for herself.

If we have not seen with our own eyes the devastation in France wrought by the Boches, it is difficult to comprehend that they have destroyed no less than ten French departments; that they have killed thousands and thousands of Frenchmen in battle; that they have outraged and mutilated women and children; that they have demolished buildings-churches, schools, factories, homes; that they have ruined mines, forests, orchards, vineyards. For years the Germans had been preparing for a war with France and in France so that they might devastate it to such a point as to make its rehabilitation impossible.

France has indeed suffered much more than has any of her allies. Not one of them has had so much territory devastated as she has; not one of them has lost so many men or so much material.

The difference between France and the other allies, especially England, is being continually accentuated by the talk concerning German payments. The proportion which France will receive is 52 per cent and that of England 22 per cent, a

seemingly just proportion because, among the reparations, the Versailles Treaty included pensions. And that in spite of American opposition. It was easy to see that if pensions had not been included in the total of reparations, France would have received in the neighborhood of 75 per cent and England only about 5 per cent.

Since the war closed France has done all possible to rehabilitate herself. To repair her devastated departments she has spent millions of dollars. The total sum, though large, can repair but a small part. But the sum represents all that France can find or borrow. For the rest she asks for the execution of the Treaty of Versailles.

When the French look at their country, they see no results of reparations; they see no security.

No country has so much need of security as has France, because no country is so much threatened. In the ultimate analysis, security is not only necessary for France herself, it is the only base on which the reconstruction of Europe can rest.

Where is such security to be found? At present only in the French army. Yet, in England and America, France is blamed for wishing to maintain her present army. Instead of blaming her, she may well be excused. It is not her fault; the fault in the first place is with the English and American Governments, who have not kept their pledges with France to protect her against Germany, pledges made when the Treaty of Versailles was signed.

In view of her alarming economic situation, Germany requests a remission of debts, a so-called moratorium, until 1925. Her creditors want to do all they can to aid Germany in her distress consonant with their own self-respect. In this regard the policy of one of the Allies -France-has been characteristically French; the policy of another of the Allies-England-has become, unfortunately, Germanized.

France will not consent to accord a moratorium without the assurance, by guaranties given, that the German payments for reparations will begin again. Any other means would be, in French opinion, a denial of justice, first, toward the creditors, and, next, towards Germany herself. For a moratorium, pure and simple, would only encourage the German industrialists and profiteers in their speculations, the German Government in its obstinacy, and the German people in their illusions. For the whole world, indeed, the result would be a catastrophe if one followed this abysmal course. The only conditions on which France will consent to accord a moratorium are conditional on Germany's giving guaranties. France has wanted.to include among these German mines and forests. Other guaranties to

be demanded might be, for example, the control of import and export licenses, the establishment of a customs boundary on the Rhine, a supplementary percentage on the value of Germany's exports, a certain percentage on the receipts of dye works, and, finally, a monthly deposit of a certain quantity of gold in a foreign bank.

In all this France is convinced that she will never get anything from a Germany which is not equally convinced that, in the last analysis, France is prepared to act coercively. It is because of this conviction that Premier Poincaré acted as he did during a recent week in Alsace in expelling certain Germans. This policy, nevertheless, though based on justice, can easily go too far. M. Poincaré saw it and modified it immediately. It would be regrettable for French as well as for German interests if too rigorous measures were taken.

III-ENGLAND

What a difference between France and England! In England we see a country better prepared than ever to repel aggression, a country with no devastated provinces, a country whose commerce is ever more powerful and whose finances are so satisfactory that a beginning may be made in paying the debt to the United States. The ends which England proposed at the beginning of the war she has obtained.

England remains always "a nation of shopkeepers." She does not wish to lose any customer; certainly she does not wish to lose one of her best customers, Germany.

Hence what we sometimes call "the Keynes school" has made its way in that country. Instead of imposing very

I

severe financial reforms on Germany (including even the nomination of an Allied counselor at Berlin, who would have the right of veto on German expenditures, a sort of impartial liquidator of no matter what Entente nationality, even American), now we see that England wants to give Germany a moratorium without any guaranties whatever! There you have a Germanized policy.

Its topmost height was reached day before yesterday when the British delegate in the Committee of Reparations publicly made his confession of faith before the Commission had handed down its decision. He said that England wanted to give Germany time enough to pull herself together and to meet her engagements-so does all the world. But, he added, the only means to this end is to give her a very long moratorium and not to put any obstacle, such as rigorous guaranties, in the way of getting back her credit. Any other policy, he proclaimed, would have the result of dissipating hope of obtaining actual or eventual reparations; any other policy would ruin Germany-and not only that, it would entail an inevitable and immediate repercussion in other countries, that is to say, it would bring about a world catastrophe.

So spoke the British delegate. Suddenly and publicly he announced his personal opinion concerning the secret debates which his colleagues were still having. Such an act is like that of a judge who gives out an opinion before the court in which he is sitting has adjudged the case.

Naturally this act has encouraged the German people in their illusions, their misunderstandings, their obstinacy. Naturally, also, the act, with the implied

strength of the British Government behind it, will push the German Government more than ever to extremes. It is not surprising, therefore, that to-day we find in the telegraphed editorials from the German papers the echoes of the opinions of the people and the Government-a joyous chorus of praise for the Germanized English policy.

IV-BELGIUM

As she was at Genoa, brave little Belgium is also now particularly worthy of attention, admiration, and respect.

By virtue of her right of priority, established by the Treaty of Versailles, Belgium should receive any present German reparations. In the desire to bring about an arrangement fairly satisfactory to all the Entente Powers, the Belgian Government has made a proposal which last night the Commission on Reparations accepted. It is that, instead of the cash payments due to the end of the present year, the Allies are to accept payment of these amounts in six months' German Treasury bills, payable in gold, and guaranteed in such manner as may be agreed upon by the German and Belgian Governments. If there is default in agreement, the bills are to be guaranteed by a sufficient deposit of gold in some foreign bank acceptable to Belgium.

And yet, with guaranties twice re peated in the agreement, so worthy a paper as the London "Telegraph" actually proclaims it, as per report just here, "a defeat for France." On the other hand, to-day's "Journal de Genève" more justly concludes that "la politique française a enregistré . . . un succès indiscutable."

Geneva, September 1, 1922.

T is not solely an American riddlethis so-called business cycle which brings the United States alternately fat and lean periods, these booms and slumps that are the plague of business to-day. No industrial country is free from its influence-America least of all. Now, what is the remedy?

Lopping off the peaks of booms and filling up the valleys of slumps to make business more nearly level, by applying to the future a knowledge of the past.

Business moves in a ceaseless ebb and flow, sometimes high and sometimes low, but never the same. The only normal thing about it is its continuous change. Business at an eternal sameness of level would be wholly abnormal. In fact, the idea of a normal business level has wrecked many a concern-dry rot and self-satisfaction are deadlier than fall of prices and lack of orders.

In forty years we have had five seri

ous depressions: 1883-6; 1903-4; 19078; 1914-15, and 1921. In other words, within the lifetime of the average man there have been five industrial catastrophes in which the unemployed have been reckoned by the millions and the idle capital by the billions. We are just emerging from the latest of these business horrors, when all the resources of the Government and of private persons in better position have been called upon to care for those who, through no fault of their own, have been thrown out of work because there has been simply nothing for them to do.

The time is coming when the forehanded business man is going to be able to take in sail before the storm strikes him, because his business barometer will warn him in advance.

Let us analyze a cycle, beginning, because we have to begin somewhere, with the revival of activity.

Revival at first is confined to narrow limits, but it spreads in an ever-widening circle because the more active businesses must perforce buy raw materials and supplies from other industries, which in turn buy from others, and so on and on.

As they buy they employ more labor, they borrow more money, they expand their plants. These make higher profits, increase family incomes, and widen demand. Retailers begin to buy from wholesalers, who in turn order from manufacturers, and they from producers of raw materials. All this while the sun is shining and everybody begins talking prosperity, so that orders are plentiful and prices boom, while buyers rush into the market to secure stocks before prices go even higher. Wholesale prices mount and retail prices follow. Wages rise; discount rates increase; interest rates move upward; stocks and bonds are car.

ried along with the rising tide of prosperity.

As the profits increase, heavier orders are placed and large contracts for new construction are made. Again, these still further swell the physical volume of business and help to drive prices farther upward. The boom is on. And this prosperity contains within itself the seeds of future depression. As old contracts expire, new ones are made at higher costs-materials, interest, rents, salaries, all go up. Out-of-date equip ment and uneconomically located plants are called into use. Everybody bids for labor and wages mount, with overtime and bonuses common. Labor and management decline in efficiency, because undesirables are employed, and when jobs are easy to get men do not put forth their best efforts.

Finally comes the time when the supply of funds at the old rate of interest lags behind the volume of business. New bonds can be floated only at higher rates. Capital gradually grows scarcer. This reduces the prospective margin of profit, and here and there a new venture is postponed. So certain businesses which depend on industrial expansion for their own prosperity begin to feel a tightening of the lines. Buyers are starting to defer the execution of new plans. The demand for consumer goods is rapidly reaching its climax. With the restriction of those businesses which have to do with industrial expansion comes a lessening in the orders to enterprises that furnish them with materials.

High interest rates force the unloading of stocks previously held off the market to be sold at higher prices. Profits begin to waver; wary creditors conjure up imagined losses because of the shrinkage in the market value of the enterprises to which they have lent money. They begin to refuse renewals of old loans; they press for a settlement of outstanding accounts.

And so liquidation starts in and rapidly extends, because as one enterprise is called on to pay its maturing debts it makes similar demands of its own' creditors.

A new phase develops-industry is forgetting about profits and trying to forestall bankruptcy. Instead of trying to make sales, executives devote their energies to saving money. Expansion gives way to contraction, securities begin to fall and commodities follow the downward trend. Credit adjustment has created a crisis. In the old days, right here would we have had a money panic, but the Federal Reserve Bank Law has given us a safety-valve and the impending depression is industrial rather than financial.

It comes on fast; just as prosperity began cumulatively, so depression starts in the same way. The discharge of wage-earners lessens consumer demand. Savings go and family incomes fall. Investor demand diminishes, because people with money will not go into new "terprises while business is depressed.

This causes further contraction, and every reduction of employment creates another reduction of consumer demand, which further depresses business demand and discourages investment. As prices fall, competition is keener for the remaining business. Every reduction in price is the progenitor of another reduction. Wholesale prices tumble first. Raw material falls faster than manufactured goods. Lessening profits spread discouragement and check enterprise; but right here when things are blackest are the germs of revival.

Costs of doing business are being reduced. Labor and management become more efficient as jobs grow scarcer. Economy is the watchword. Loosely organized concerns are reorganized to save them from disaster. Rents and salaries are pruned, old debts are written off, and inventories are revalued. Production sinks to lower levels and the demand for accumulated stocks slowly makes itself apparent. Articles used as long as possible wear out and must be replaced, and the first step towards revival is the fact that the demand for goods finally ceases to shrink.

With all these readjustments the crisis is gradually overcome and recedes into the past, and hoarded.capital held at low rates of interest seeks outlet at more attractive yields. A few bold ones put their money into new enterprises; business prospects brighten with the payment of old debts and the disappearance of accumulated stocks. Prices slowly stagger upwards; the banks have money to lend and want to lend it, and so revival starts in ever-widening circles and the business world is back where it began.

To attempt to blot out such an economic process would be futile. It simply cannot be done. Every period of "prosperity" has in itself the very forces which will eventually make for its undoing. Credit is at the bottom of the matter, and business cannot exist without credit.

But the business cycle, in part at least, can be controlled.

But how?

Last October the President's Conference on Unemployment, after adopting a series of recommendations for temporary measures of relief, suggested that an analytical study be prepared of the causes of the business cycle and an attempt be made to collect facts and statistics as to the best methods for offsetting bad results of the periods of expansion and depression which have been characteristic of our industries. Secretary Hoover, Chairman of the Conference, appointed a committee on the business cycle, namely: Owen D. Young, Chairman; Clarence Mott Woolley; Joseph H. Defrees; Matthew Woll; Miss Mary Van Kleeck; and Edward Eyre Hunt, Secretary.

The work of making the survey of the business cycle has been undertaken by the National Bureau of Economic Research, Inc., 175 Ninth Avenue, New

York City, of which Dr. Wesley C. Mitchell, the American authority on the business cycle, is Director.

The Committee is to report in November. It will make certain definite recommendations. Some of them will

deal with the part which the Government is to play and some of them with industry's share in the new business life of the Nation. Statistics of course will have much to do with the solution of this problem of the business cycle, to which forehanded men are looking as a possible way out of their many troubles.

Taking this for granted, what are some of the proposals for controlling the business cycle? Various authorities have suggested certain possibilities. Government and railway purchases may be used as a balance-wheel to steady the business mechanism. Rolling stock might be ordered over the whole period of a business cycle, reducing the volume of orders in good years and increasing it in bad ones. The Government might hold back its great projects in years of intense activity and not bid against private enterprises for labor and materials, postponing its best efforts to seasons of dullness, and thus providing work for the workless and markets for those who have stocks of material to sell. It has been suggested also that roads be built in bad times and that colleges, schools, and Federal building projects be pushed when labor is idle and prices are low. In the aggregate this will be a very material help.

Mr. Hoover has outlined further remedies. He advocates the systematic forecast of business conditions. Present statistics are inadequate, because they do not cover the field and they do not bring to one business what is going on in another one. Such a knowledge is now possessed by the few, but if our plans work out it will be the property of the many.

This is not mere theorizing. Many industries have solved the problem for themselves already. It is the boast of some of them that they were able to forecast the acute depression of 1920 by fully six months, so that they were able to go through the crisis without discharging a man or clipping a dollar from their dividends. They did not buy in the boom, but they devoted all their energies to selling in the slump. They cut down production, they reduced prices, they paid their debts, they discounted their bills, they liquidated their inventories, and wrote off bad accounts ahead of hard times.

What the Committee hopes is to help many business men by informative statistics and their own business barometers to gird themselves against future depression. Thousands of American business men, by wise thought and careful planning, can largely control the cycles of depression by forecasting the course of their own particular business.

This is the first time that the problem has been resolutely attacked. It is a

real effort to deal fundamentally with a failure in our industrial and economic organization which is as old as industrialism. Mr. Hoover says:

There is a solution somewhere, and its working out will be the greatest

blessing yet given to our economic system.

This is a long-time job. It is an old and world-wide industrial problem which we can solve only by American ingenu

ity and sticktoitiveness. This dismal economic phenomenon has been endured too long by civilization without an organized attempt to combat it.

The time to begin an effective, vigorous, aggressive attempt is to-day-now.

E

VERY time the farmer touches the tariff he gets burned.

It was so in the 60's, when the farmers entered into a deal with the Eastern manufacturers to outvote the South and put through a programme of protective tariff and free Western lands.

It was so all through the years when the farmer's voice was strong in condemning the tariff, yet his vote was too weak to upset it.

It bids fair to prove true again to-day, when the farmer admittedly has the votes and the power in Congress to get just about anything he wants.

"If the present Tariff Bill goes through, it will impose a charge on the American people of between five and six billion dollars in excess of the actual amount necessary to offset the difference in wages here and abroad," says Gray Silver, head of the organized farmers' legislative activities at Washington.

The farmer seems to have been outtraded. He has come to the point where he needs some tariff protection against a few products, such as wool from Australia, frozen eggs from China, lemons from Italy, and hides from South America. Except for these products and a few others, tariff protection is practically useless to the farmer. Of what good, for instance, is a tariff on corn or most grades of wheat, when the American farmer must export these products and sell in competition with the producers of all the world? On our really important crops-the crops that bring in the money-tariff protection means little to the average farmer.

Yet Congress has liberally provided him with a nice, fat, new tariff on nearly all agricultural products. The farmer can't say that the tariff-makers in Congress never did anything for him. They have. They have been most generous with their tariffs-on farm products that do the farmer no good. And then, having done this, what could be fairer than to give everybody else high tariffs on their products too? Certainly the farmer should not object to that theory, the tariff-makers argue. So, as Mr. Silver points out, the farmer is placed in the position of paying billions more for the things he has to buy and receiving tariff benefit on a few comparatively insignificant products.

The farmer believes in protecting in

fant industries and in protecting against ruinous competition, but what raises his ire, and what should raise the ire of all consumers, is to see tariffs used merely for the purpose of raising prices in this country. For instance, a tariff of twelve dollars is asked on ammonium sulphate, a fertilizing material, at the very time the producers are selling large quantities abroad. Glove manufacturers are asking several hundred per cent duties on grades of gloves not even made or likely to be made abroad.

But how, you ask, has it been possible for the tariff-makers to put this across if the farmers hold the balance of power in Congress?

Well, in the first place, they haven't finished the job of putting it across yet. Not quite, but they very likely will.

The difficulty comes from the fact that the agricultural bloc is a bi-partisan organization. And the tariff is not a bipartisan matter. It has furnished the chief party issue during all these years when party issues were scarce. A lot of Democrats have come out in favor of protection of certain specific things, and some have even adopted the idea of sufficient protection to overcome the difference in labor costs here and abroad. But it is not quite possible yet to get the two parties to lie down together on the same tariff bed. Not even in the agricultural bloc.

You see, tariff isn't essentially an agricultural question, although it of course affects agriculture. So the bloc members and the Farm Bureau leaders very wisely agreed right at the start not to touch the tariff problem as a bloc. Tariff has never been discussed at a single meeting of the agricultural bloc.

Now a new bloc has arisen in the Senate a so-called agricultural tariff bloc. It includes some twenty-five Senators, all Republicans, and mostly from the mountain States and the Pacific coast, but for some unexplained reason including Senator New of Indiana, Senator Willis of Ohio, and Senator Keyes of New Hampshire. Its chairman is Senator Gooding of Idaho, and it includes several members of the regular agricultural bloc, notably Senators Capper and Ladd. It holds regular meetings and works on the Senate tariff-making committee with considerable effect.

But this is not an agricultural organization. Certain agricultural groups, like

But

the poultrymen, the wool men, and the butter producers, who want high tariffs on their products are glad enough to accept the help of the tariff bloc. the big and powerful agricultural organizations like the Farm Bureau and the Grange take little notice of and have very little to do with the tariff bloc as such. The reason is that all the bloc's efforts are to increase tariffs; they are doing nothing to get schedules cut down on the products the farmer and the consumer have to buy.

The opportunity for this unsatisfactory situation arose when certain farm organization leaders, with more vehemence than logic, asserted last fall, "We are going to ask for the same tariff protection the manufacturer gets." This statement was later corrected to read, "We insist that tariffs be such only as are necessary to overcome the difference in the cost of production in this country as compared with costs in foreign countries." But the damage had been done. The manufacturer said: "All right; we are perfectly willing to give you the same kind of tariffs we take. We want high tariffs; you may have high tariffs, too, on your farm products."

Right there the farmer was out-traded. Whether or not he can improve his position before the Tariff Bill is finally passed remains to be seen.

What the farmers' organizations are working for now is to take the tariff out of politics.

They want a non-partisan tariff board that will make scientific determinations as to just what duties must be laid to make up the difference between labor costs here and abroad, investigate special exceptions to this general rule, and then present a Tariff Bill to Congress to enact with but brief discussion and few modifications. The American Farm Bureau Federation has indorsed and is working for the Frelinghuysen Bill designed to accomplish this purpose. Can it be enacted?

Senator Gooding says: "Not until the South is educated away from the freetrade idea."

Senator Ladd says: "Tariff can and must be taken out of politics. It will only be a little while longer now until this is accomplished."

Give the farmer a little more time, and he may yet learn how to handle the tariff without getting burned.