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The minor States were, according to the Constitution, to act as a brake upon a rash and impulsive Prussian King. Hence, not only the South Germans but the Prussians also are strongly interested in the careful observance of the Constitution on the part of the King-Emperor. The sovereigns of the minor States are not merely ornamental Lords-Lieutenant but are, according to the Constitution, partners in the Imperial concern, in which they possess a controlling interest if a war of aggression is planned by the Emperor.

The sovereigns of the minor States insisted upon the limitation of the Emperor's power, not merely in their personal interest or in that of their States, but in that of all Germany, of the German nation. Hence, the limitations demanded by them, restricting the Emperor's powers with regard to the declaration of war, were considered reasonable by Bismarck and by the old Emperor and by his advisers, and they were readily assented to as being in the best interest of the nation and of the Emperor himself.

Rightly considered, the German Constitution is a deed of partnership concluded between the King of Prussia and the German sovereigns and free towns on the one hand, and between the Emperor and the German people on the other hand. The Imperial dignity was in 1871, and again in 1888, bestowed upon the King of Prussia on conditions. William the Second has broken the formal pact between himself and his brother sovereigns and between himself and the nation, notwithstanding his solemn declarations made at the time of his accession, either owing to his wilfulness or owing to his weakness, either because he wished to embark upon a war of aggression, or because he allowed himself to be forced into such a war, which violates the Constitution, by the intrigues of the military party. It seems by no means improbable that the German sovereigns and people will hold the German Emperor accountable should the War end disastrously for Germany,

CHAPTER VII

BRITAIN'S WAR FINANCE AND ECONOMIC FUTURE

A FORECAST AND A WARNING 1

Late in 1915, Mr. Montagu stated in the House of Commons that the British War expenditure came to £5,000,000 a day, that the War was swallowing up half the national income. This was evidently a very serious understatement. Five million pounds a day is equal to £1,825,000,000 a year. According to the ‘British Census of Production,' published in December, 1912, and relating to the year 1907, the national income of that year amounted to £2,000,000,000. Even the most optimistic statisticians have not seen in that figure a very great understatement. It therefore appears that the British War expenditure per day was at that time approximately equal to the entire national income per day in normal times. It need, however, scarcely be pointed out that the War, which has taken millions of able-bodied British men from the productive occupations, and which has diverted the industries from the production of useful commodities to that of war material, has very seriously diminished the true national income. Besides, with the constantly increasing numbers of the British Army, and the steadily growing financial requirements of the Allies for British loans and subsidies, the daily War expenditure of this country has continually kept on increasing. Hence, the daily cost of the War may now greatly exceed the whole of the national income.

1 The Nineteenth Century and After, December, 1915.

The vastness of Great Britain's War expenditure staggers the imagination not only of people in general but even that of financiers and statisticians. It can be visualised only by comparison. The Franco-German War of 187071, which lasted nine months, cost Germany £60,000,000 ; the Panama Canal, the greatest and the most expensive engineering undertaking the world has seen, cost the United States in ten years £80,000,000 ; the Boer War, which lasted three years, cost this country £250,000,000. It follows that Great Britain has spent on the War, at the comparatively moderate rate of £5,000,000 per day, every two weeks almost as much as the total cost of the Panama Canal, and that she has spent every two months considerably more than she did during the whole of the protracted campaign against the Boers.

The War has so far cost about £3,000,000,000. The national capital of Great Britain is usually estimated to amount to about £15,000,000,000. As the struggle seems likely to continue, it may eventually swallow a sum equal to one-third of the British national capital, if not more. Interest will have to be paid on the gigantic War debt. Its capital must, by purchase, gradually be reduced to manageable proportions, and in addition untold millions will be required every year for the support of the crippled and incapacitated veterans, and for the widows and orphans. Before the War, Budgets of £200,000,000 per year seemed monstrous. After the War, Budgets of £500,000,000 may seem modest. If we now remember that years of hard times followed the relatively cheap Boer War we can well understand that statesmen and business men look with grave anxiety and alarm into the future, and at the mountainous debt which Great Britain is rapidly piling up, and that they are asking themselves : Can this over-taxed country stand the additional financial burdens ? Will not the War destroy the British industries and trade, drive the country into bankruptcy and ruin, or at least permanently impoverish Great Britain ? In the following pages an attempt will be made to answer these questions.

In endeavouring to solve the great problems confronting them the most eminent statesmen and soldiers of all times have turned for their information and guidance to the experience of the past, to the teachings of history. A hundred years ago Great Britain concluded her twenty years' struggle with Revolutionary and Napoleonic France, in the course of which she spent about £1,100,000,000, a sum which greatly exceeded one-third of the national capital of the time. What, then, can we learn from Great Britain's experience ? How was the Napoleonic War financed ? What were the consequences of that gigantic expenditure upon the British industries, British trade, and the British finances ? Unfortunately, scientific history has been greatly neglected in this country. The existing accounts of the Napoleonic struggle are exceedingly unsatisfactory. They consist partly of pleasantly written popular books designed to while away the idle hours of the leisured and the uninformed, partly of books written by Party men for Party-political purposes in which are exposed the wickedness of the Tories or the stupidity of the Whigs, the narrow-mindedness of the Protectionists or the recklessness of the Free Traders. It is humiliating that an impartial documentary history of the Great War and of its economic aspects remains still to be written. The past should be a guide to the present. I propose in these pages to summarise the economic teachings of the Great War by means of most valuable evidence which will not be found in any of the histories of that struggle, and, fortified by the necessary data, an attempt will be made to apply their lesson to the present and to make a forecast of Britain's economic future.

The Great War between France and Great Britain began in 1793 and lasted, with two interruptions (1802-03 and 1814–15) until 1815. It cost this country about £1,100,000,000, but as that figure is not in accordance with tradition it may be challenged. I will therefore give my reasons for using it.

It is not easy, in analysing national expenditure during a

time of war, to state exactly what part of it is peace expenditure and what is war expenditure. Most writers on public finance have stated that the War with France cost this nation about £800,000,000. That seems to me to be far too low a figure. If we wish to ascertain the cost of a war we cannot do so by mechanically adding up all expenditure which is labelled “War Expenditure,' for much of it will appear under civil heads. Therefore, we must endeavour to find out, firstly, how much debt was incurred for the war, and, secondly, by how much the current national expenditure, which is raised by taxation, was increased during the war and presumably owing to the war. Let us make this test, for it will furnish us with some exceedingly interesting data which will be of great value in the course of this investigation.

Before and during the Great War the British National Debt increased, according to McCulloch's ‘Account of the British Empire,' as follows :

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It will be noticed that the British National Debt grew by £601,500,000 during the Great War.

Between 1792 and 1815 the national expenditure, the Tax Revenue, and the interest paid on the National Debt increased, according to the following interesting table, which is taken from Porter's ‘ Progress of the Nation,' as follows.

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