predication, familiar to the well-trained economist, leave abundant room for some exercise of restraining and deliberated action. No doubt there are limits to which such action must be confined; but they are not narrow limits, and within them much was done which proved of advantage to the country.

WASHINGTON, D.C.

F. W. TAUSSIG.

THE BURDEN OF WAR AND FUTURE

GENERATIONS

SUMMARY

Burdens of war are objective and subjective, 242. — Costs resulting from destruction, and cost of maintaining the fighting forces, 243. — Choice between rival ways of financing a war, 245.- Different effects of the levy plan and the loan plan, 247. — The assumed burden of a loan to the lender, 249. — Subjective burdens of levy and loan methods, 252. - Conclusion, 254.

I HAVE been invited to contribute to the Quarterly Journal of Economics an article on how far and in what sense the burden of the war can be shifted on to future generations. This question is one of practical as well as theoretical importance and I welcome the opportunity of examining it. Some of the issues involved are, indeed, obvious, but others have been the subject of controversy. A part of the difficulty has arisen out of an ambiguity in the meaning of the term "burden": for that term may be interpreted either objectively as a cost in things and services, or subjectively as a cost in satisfactions. In the following pages I shall endeavor, keeping this distinction in mind, to set out the whole problem in a logical order.

The objective burden which future generations bear as the result of a war is measured by the difference between their actual economic situation and the situation which they would have enjoyed if all other things had been equal and no war had occurred. This difference in economic situation, interpreted in the broadest sense, will, for any country, take account of the indirect effect of war casualties upon the quantity and quality of the population of which future generations are composed.

For the present purpose, however, a somewhat narrower interpretation is more convenient, and I propose, leaving the difference made in the people themselves out of account, to consider only the difference made to their economic environment.

The real costs of war to a country include two parts, the destruction wrought in it or in its possessions by the enemy and the resources devoted by the country itself to the conduct of the war. The former of these groups includes in an invaded country all the wreckage done to houses and furniture and roads and land; in an uninvaded country the results of bombardment from sea and air and the destruction and damage done to shipping. The latter group includes the whole body of effort wrought by men laboring in conjunction with equipment to supply the sinews of war, together with the existing capital stock actually used up in the war, e.g., trees cut down, railway lines torn up, rolling stock sent to the front and destroyed there and so forth. In a country which is in contact and communication with the rest of the world yet other elements will be involved. For the government of that nation may, for the purposes of the war, borrow either from the governments of other nations or from individual foreigners, and, even when the government does not so borrow, private persons in the warring countries, in order to provide their contributions, whether of loans or taxes, to the government may do this; or, if they do not actually borrow from foreigners, they may do what is substantially the same thing by selling foreign securities or other marketable possessions formerly held by them to foreigners and using the proceeds for the war. Finally, the government or private persons may ship abroad gold for the purchase of war material thus depleting the gold reserves of the country.

These various costs are in part, but only in part, represented in a deterioration below the standard which it would otherwise have attained in the economic environment of the future: because, to meet them resources are obtained, not only by drawing upon that environment, but also in other ways. When so many factories and houses have been destroyed by enemy action, so much of a country's forests cut down, so much labor and capital diverted from making and maintaining industrial equipment, so much foreign borrowing undertaken, this inventory of cost is not equivalent to an inventory of objective burden thrown upon the future. Broadly speaking we may say that, in so far as the costs of war are met in ways other than the provision of extra work by the war-waging generation and the undertaking by them of unusual economies in personal consumption, these costs are thrown upon the future — it being understood that, against these costs the future is likely to have left to it certain durable forms of industrial equipment which were made for war purposes but remain and are useful also in peace. We cannot, however, make the converse statement that, in so far as war costs are met by extra work or unusual personal economies they are not thrown upon the future, because this extra work and reduced consumption is likely, by wearing out the efficiency of the present generation to reduce the contribution which it is able to make to production, and therefore, inter alia, to the capital equipment available for future generations. How far this sort of reaction will go must vary, of course, with different classes of people: - extra work for those who normally work hard and diminished consumption for those who already live sparingly will have a much larger effect than extra work for normal idlers and reduced consumption for gourmands and pleasure-seekers. The general conclusion

must be that costs met in these ways (and of course this holds good whether they are so met during the actual course of the war or during the period of reconstruction immediately following it) are partly thrown by an indirect process on the future. On the whole, however, they are likely to be so thrown in a much less degree than costs which are met in the other ways described in preceding paragraphs. Hence the greater the extent to which war costs are met by extra work and personal economies the smaller the extent to which future generations are likely to be burdened by them.

The choice between rival ways of meeting war costs, and therefore the extent of the objective burden on future generations, is influenced by a number of important factors wholly independent of the financial policy pursued by the government. Among these are the strategic position of the country and, therefore, the physical power of its citizens to borrow from abroad, the extent to which its citizens hold securities saleable in a foreign market, the extent to which there is labor power in the country which normally is leisured or not fully occupied, and the willingness of the people to stint their personal comfort and enjoyment for a public end. These factors call for no special comment. Let us suppose that in respect of all of them the conditions are given. On that assumption a very important question has to be faced, namely, what difference will be made to the sources from which war costs are met, and therefore to the objective burden thrown on future generations by the policy which the government chooses to pursue. The foreign borrowing undertaken by it we may suppose to be determined by military considerations foreign loans constituting a kind of extra over and above what it can get out of its own people — which lie outside our purview; and attention may, therefore, be con

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