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The Franco-Prussian war, on the other hand, was followed both in France and Prussia by a much longer spell of prosperity. The war broke out at a time when trade conditions were already good, the campaigns were short and localised, and involved comparatively little damage to property and industry. Harvests were exceedingly good in Europe generally; and, though industry, both in Germany and France, was handicapped by shortage of rolling stock on the railways while the war lasted, the blow to industry even in the belligerent countries was comparatively slight. Neutral countries were rather busier than usual supplying war material; and, as soon as the war was over, both Germany and France, with the rest of Europe and America, resumed at an accelerated rate the industrial boom which was previously in progress. In Germany the receipt of the indemnity was an additional artificial stimulus, which perhaps made the ensuing slump more severe than it otherwise would have been. But the chief lesson of the war is that in a case where the external trade of the belligerents is not cut off, where the war itself is fairly restricted in area, and where credit conditions are not seriously impaired, industry may be almost unaffected. In these respects, however, the present war is unlike the Franco-Prussian war. The industrial districts of Belgium, Poland, and Northern France are already devastated; and it may be assumed that before the war is over the chief industrial districts of Germany will share the same fate. Moreover, the position of the Central Powers in regard to foreign trade is very like that of Europe during the Napoleonic War, that is to say, they can only import by roundabout methods through neutral countries at enhanced prices. The number of men mobilised is altogether without precedent; and the falling off in production is much more serious than a century ago, or even than in 1870, when agriculture was more important in relation to manufactures in the belligerent countries than it is to-day.

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Finally, the terms of international exchange, at all events at the outbreak of the war, have been more seriously and more universally affected than in any previous war; and, though financial relations between the allies and the neutrals may, perhaps, be re-established on a fairly satisfactory basis before the end of the war, there


are certain outstanding difficulties to be adjusted which will make monetary conditions uncertain for some time to come. In this connexion the financial arrangements of Germany will be of great importance, since they will affect the solvency of many who have outstanding trade relations with that country, while one of the immediate after-effects of the war may be that Germany will want to dispose of all her holdings of foreign securities. The price of stocks generally, the rate of interest, and the general level of prices, will depend to a large extent on the degree of economic exhaustion in Germany itself and the steps which are taken by her Government to reestablish normal conditions. Against this there is the reasonable certainty that, given fair harvests, there will be an active demand in extra-European markets for commodities, which will make itself felt as soon as financial and currency difficulties have been settled. There will also be large purchases to repair the damage of war. British manufacturers must form some opinion as to the future in all these respects before drawing their plans for an after-war trade campaign.

Whatever the future demand for industrial products may be, and even if we may accept the optimistic view that peace will be followed by a great outburst of trade activity, the task of replacing millions of men in civilian employment will be one requiring great care and forethought. Many employers have undertaken to keep places open; but, in view of the transferences referred to above, it will be merely shifting the incidence of unemployment if the returning soldiers are put back and other men thrown on the streets. Moreover, a very large proportion of men have no specific promise upon which they can rely. Clearly it is far easier to throw the industrial machine out of gear than to put it back into order again. There are, however, one or two circumstances which may mitigate the acuteness of the difficulty of demobilisation. For example, some time may elapse between the arrangement of an armistice and the settlement of the terms of peace, during which period some slight recovery of private trade may be expected. If there is any question of indemnity, an army of occupation may be required for a longer or a shorter period; and in any case it will take some time to bring home the large army which, on the

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conclusion of peace, we shall presumably have on the Continent or even further afield, in Egypt and elsewhere. If these influences, however, do not apply, the Government will, in any case, have to spread out the process for industrial reasons.

We may now sum up the few broad conclusions which emerge from a mass of conjecture. In the first place, the dislocation and transference of the ordinary productive activity of the country has been on a scale entirely without precedent; but the privileged position of this country as an island power retaining command of the sea, together with the need of suddenly raising an army on a continental scale, has prevented this dislocation from being converted into terms of actual unemployment or distress among working people. Secondly, it appears that a balance has already been struck between The recruiting and unemployment in most industries. If anything like another million men are to be raised, it will be necessary not only to employ as many women as possible in the place of men, but also to restrict production in the least vital of our industries. Finally, history affords no precedent as to the immediate industrial aftereffects of the war. But the destruction of wealth, the interruption of commercial relations, and the dislocation of markets have been so general and on so large a scale that it is rash to assume, on historical analogies which are really inapplicable to the present situation, that trade will quickly be able to resume its normal conditions, or that spending power, in the form of either coin or credit, will at once be available for those who will have urgent need of material goods. Hence the re-absorption of European armies, together with the re-transference of those workpeople who have been diverted from their ordinary occupation to produce guns and war equipment generally may be a slow process, and will present our own as well as European Governments with a problem in organisation that will tax their utmost capacity.


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THE Course of the operations in the two principal theatres of war during the latter part of November made it apparent that the general situation had undergone an important change. After the supreme effort of Nov. 11, when the crack corps of Germany, including the Prussian Guard, were sacrificed in desperate attempts to break the Allies' line near Ypres, the enemy's offensive in France and Belgium began to abate. By the end of the month the infantry were almost everywhere on the defensive; and, though the artillery continued to display considerable activity, the Allies' guns were steadily establishing their superiority. In the Eastern theatre of war the Germans, after sustaining what seemed to be a decisive defeat between the Vistula and the Warta, had resumed the offensive with augmented forces and renewed determination. It was evident that, for the first time since the beginning of the war, they had relinquished the offensive in France, and transferred their principal activities to the Eastern theatre of war. As the significance of this change may not appear at first sight, it is proposed to consider the situation in some detail.

When Germany plunged into war, dragging with her half-reluctant Austria, she felt no misgivings as to the result. The problem she had to solve-that of defeating the numerically superior armies of France and Russiahad been studied by her General Staff during many years of peace. The plans for dealing with it had been thought out in the minutest detail, and every preparation had been made that careful forethought could suggest.

The Germanic powers enjoyed certain advantages which might be expected to go far to compensate for the numerical inferiority of their military forces. Being resolved on aggression, they could make certain of obtaining the initiative by secretly ordering mobilisation while France and Russia were still negotiating. The initiative confers the power of taking the offensive in any direction without regard to the adversary, who, being unprepared, is powerless to interfere. Being certain of possessing the initiative, the German General



Staff were therefore free to adopt the plan of operations best calculated to achieve the object of the war. conditions of the strategical situation defined the French army as the first objective, because it would be next in the field after the German army. Austria would follow, with Russia lagging far behind. Hence it was decided that Germany should attack France, while Austria should detach an adequate force to subdue Serbia, and invade Russia with the remainder of her army with the object of breaking up the Russian concentration before it could be completed. By these means it was hoped that France would be brought to her knees before Russia could become dangerous. The fundamental idea of the plan required that the Allies should be defeated in France while Russia was still held within her own frontiers.

This bold plan was thwarted by the defeat of the Germans on the Marne, and by the unexpected readiness of Russia, whose armies overran East Prussia and inflicted on Austria a series of defeats in Galicia which laid Silesia open to invasion. This situation was too menacing to be neglected. From that time till the middle of November the Germans continued to make strenuous but unavailing efforts to pursue the offensive simultaneously in both theatres of war. Being ultimately convinced of the inadequacy of their forces for such an ambitious project, they relinquished the offensive in the Western theatre of war and transferred several armycorps to the frontiers of Russia.

Thus, after nearly four months of war, the Germans have had to suspend the course of action on which they relied for ultimate success. What seemed imperatively necessary for Germany, on account of her central position between France and Russia, was a decision in one or other theatre of war, in order that one frontier might be secure from attack while she was engaged in offensive operations on the other. Against Russia such a decision is impracticable, because the vastness of her territory and resources would enable her to evade defeat, and to prolong the contest indefinitely. It is, therefore, against France that Germany must seek the decision.

Until recently it was probably the opinion of most students of war that the Germans could not afford to lose time in dealing the decisive blow in France. It

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