HC \Qr7 UC-NRLF B 4 571 fiSfi GrPT DEC , 1919 The Effect of the War on European Neutrals _^ COMPUMENTS UU N 1 V E R S 1 T y| \\ oi* / Guaranty Trust Company of New York ^IFI' The Effect of the War on European Neutrals Guaranty Trust Company of New York 140 Broadway FIFTH AVENUE OFFICE Fifth Avenue and 43rd Street LONDON OFFICES 32 Lombard Street, E. C. 5 Lower Grosvenor PI., S. W, PARIS OFFICE 1 and 3 Rue des Italiens HAVRE OFFICE 122 Boulevard Strasbourg MADISON AVENUE OFFICE Madison Avenue and 60th Street LIVERPOOL OFFICE 27 Cotton Exchange Buildings BRUSSELS OFFICE 158 Rue Roy ale COPYRIGHT, 1919, BY GUARANTY TRUST COMPANY OF NEW YORK ClFl 42Q0iii CONTENTS Page Foreword ....... 5 Holland 6 Norway 12 Sweden . 16 Denmark 19 Switzerland 21 Spain 26 Foreword ^T^HE effects of the war In general upon -^ the European countries which re- mained neutral were diverse, depending upon factors peculiar to each nation. The interchange of goods between nations plays so important a role in economic life that any serious disturbance of the normal course of world trade entails losses for all the trading countries. How a nation shares in these losses de- pends on such factors as its location wuth reference to other nations, the nature and extent of the restrictions upon its trade, changes in relative demand for commo- dities in other countries, and the country's own degree of self-sufficiency as regards the sources of the goods it consumes. Other losses may be due to extraordinary expenses on account of the mobilization of military forces in order to preserve a state of neutrality. It is possible, then, for a nation not taking part in a war to bear not only relatively but actually heavier economic losses than are borne by belligerent nations compar- able in population and industrial strength. One can, therefore, no more attribute identical effects of a war indiscriminately to all neutrals than to all belligerents. One neutral may be an important source of supplies needed by the warring peoples, while another may have almost no export- able goods which the belligerent nations require. The less fortunate nation may be even more unfavorably placed as regards commodities, for besides producing prin- cipally those goods which the belligerents least want, it may normally require im- ports of fuel, foodstuffs, and other materials which are eagerly sought by the groups at war. Neutrals may experience also all the embarrassments growing out of currency disorders and price fluctuations to which belligerents are subjected. On the other hand, a neutral nation may have its losses on account of a war completely offset or more than equaled by the gains attributable to the war. In the sale of supplies at unusually high profits, and in the development of the capital equipment of the country for pro- ducing the exported goods, the nation in- creases its wealth. Moreover, the inabil- ity of belligerents to continue during the war to place upon the neutral's markets the same volume of goods as before may operate for the neutral country exactly like an effective tariff designed to protect industries in their early stages of de- velopment, industries which are really appropriate for the country. While serv- ing all belligerents legitimately and with- out partiality, a neutral nation may, therefore, have its industrial growth ma- terially hastened during the war, so much so that its losses are trivial in comparison. With these considerations in mind we shall note some of the outstanding de- velopments which ha-N-e taken place in some of the European countries that took no direct part in the war. [5] Holland PERHAPS none of the neutrals felt the effects of the war more than Holland. It was virtually surrounded on all sides by belligerents ; on three sides it was bordered by Germany or German- occupied Belgium, and on the fourth side by the North Sea, which, infested by mines and submarines, was very much of a war and danger zone. Effects of the War on Holland Promptly upon the invasion of Belgium, Holland mobilized half a million men and throughout the war kept its soldiers under arms. This involved direct ex- pense to the state as well as loss of man- power to industry. Civilian refugees from Belgium were cared for — and to a certain extent found places for them- selves in Dutch industry — military fugi- tives were interned, large sums were spent to keep down the prices of food and for the relief of indigence grow- ing out of unem- ployment. Total "crisis" expendit- ures to the end of 1918 were $600,- 000,000, of which one- third was raised by loans, and the remainder by taxes, including war-profit taxes. For the first year or two of the war Holland as a whole profited greatly. This is not to say that here, any more than anywhere else, were benefits evenly divided. Ship- A typical scene owners made large profits, agricultural and dairy products were sold to Germany at enhanced prices, and new industries, such as dyestuffs and munition-manu- facture, had their inception or received a great impetus. -- In time, however, the disadvantages began to outweigh the advantages. Ex- port embargoes by belligerents on both sides began to deprive Holland of both raw materials and finished products. Shipping and fishing risks increased. Increased production of its own inferior coal and of peat failed to make up for the reduction or cutting off of badly needed imports of fuel. Imports of cereals for human consumption and cattle-feeding normally form the chief item of Dutch imports. Germany's imperious need and demands for imports of foodstuffs, which were called for in exchange for coal to be released to Holland, while they brought large profits to farmers and cattlemen, brought food scar- city and high prices to the remainder of the Dutch people. What is more, these exports caused the Allies, especially af- ter the entry of the United States into the war, to refuse to sell cereals or fodder to Holland, for ex- port as such, or for fattening cattle for export to Germany . Unrestricted sub- marine warfare greatly increased shipping risks and in Holland losses and thorough- [6] Copyright, Undewrood & Underwood A general vieiv of Amsterdam ly disrupted international trade, as well as caused the requisitioning of Dutch ships in Allied harbors in March, 1918. Toward the end of the war, chiefly be- cause of this interference with over-seas trade, Holland experienced a shortage of raw materials and a slackening of industrial activity. Present Position- The fruits of the earlier prosperity for Dutch industry and trade were largely retained, however, and Holland now finds itself in a strong position. The Bank of the Netherlands, at the opening of the war, held approximately $68,- 000,000 in gold; at present it holds four times this amount. Furthermore, it was the only central bank among the Euro- pean neutrals, save that of Spain, whose ratio of holdings of gold and silver to note and deposit liabilities increased during the war; the increase was from 54 per cent, to more than 60 per cent. The other banks have similarly improved their position. If Dutch investments abroad — other than those in Eastern Europe — have diminished, the decrease has been not because of the compulsion cl dis- tress, but on the contrary, either to take profits or to employ the capital more ad- vantageously at home. Losses, of course, have been suffered by the people of Holland from extensive 'pre-war invest- ments in Russian and Hungarian and other Eastern European securities. Dutch shipping, in spite of losses, held its own; in fact, according to figures in Lloyd's Register, Holland was the only European neutral whose gross steam [7] tonnage increased between June, 1914, and June- 1919. Dutch owners did not take such risks with their ships as did other neutral owners. The exigencies of war caused certain new industries to come into existence in Holland, notably the making of chemicals; and others, such as the manufacture of clothing and foods and other articles of consumption, grew considerably. Economic Resources Holland has a land area of about 12,500 square miles; to which roughly 2,000 square miles may be added if the Zuider Zee be included in the country's area. Its population is a little more than six and one-half millions. Its wealth in 1911 was estimated to be in excess of $4,- 300,000,000. At the close of 1913, the national debt was about $465,000,000. The chief occupations of the country have been agriculture, cattle-raising and dairying, fishing, and foreign com- merce. About one-third of the land is giv- en over to pasturage. Possessing a remark- able system of inland waterways, as well as a long coast line, and rich colonies, this little nation is and has long been one of the world's great trading and shipping Copyright, TJnder\.'ood h Underwood On one of the cam,h of Amsterdam, which have made thil citij known as th^ Ven'ce of the North (81 Rotterdam. The transit trade through Dutch ports, especially Rotterdam, between Central Europe and the remainder of the world, has been of great importance nations. Its foreign commerce in 1913 amounted to more than $300 per capita. The transit trade through Dutch ports, especially Rotterdam, between Central Europe and the remainder of the world, has been of very great importance. Dutch North Sea fishermen,, too, have made enormous harvests from the sea, not only supplying a large local demand but furnishing large exports of fish. The mineral resources of the country are small, the coal supply, for instance, being quite insufficient for the industry that has been established there. In 1916 the quantity of coal mined was 2,650,000 metric tons, as against imports of several times that amount. Before the war, coal came chiefly from England, Belgium, and Germany, and iron ore from Spain. The total imports of iron and steel of all kinds in 1914 were valued at $150,000,000, or 13 per cent, of all imports, as agamst exports of about $100,000,000. Cereals and flour contributed in the same year 173^ per cent, of Dutch imports; raw and manu- factured textiles, 6H per cent. ; and coal, 4 per cent. Statistics of manufactures are rather incomplete. Among the chief industries have been cotton manufactur- ing, carpet weaving, distilling and brew- ing, ship-building, and certain specialized industries, such as diamond-cutting. Dutch Colonies Holland was the only European neutral with important colonial possessions. Its richest colonies, of course, are the Dutch East Indies, including Java and Madura, Sumatra, Borneo, Celebes, the Molukka Islands, and other islands. The total population of the Dutch East Indies is about 40,000,000, of which only a fraction of one per cent, is European, the great majority of the remainder being natives. The products of these islands are chiefly agricultural and include sugar, coffee, tea, tobacco, cinchona and rubber. Con- siderable ciuantities of tin are also pro- duced. Among the other mineral resour- ces are the iron ore deposits of Celebes. The Dutch have had possession of the islands since the seventeenth century, and have built up with them a large colonial trade. In 1916 the foreign trade of the Dutch East Indies amounted to approximately 9 $527,000,000, of which imports were $180,000,000, and exports $347,000,000. Holland itself in 1914 took for home con- sumption $158,000,000 worth of products of the Islands and exported to them $57,000,000 worth of merchandise. In addition to this trade with the Islands, the Dutch have carried in their ships no small part of the foreign commerce of the Dutch East Indies with other countries They have, therefore, been a most profitable possession for the mother country. The Dutch West Indies include Dutch Guiana or Surinam and Curagao. The total population of these possessions is about 150,000, and their chief products are sugar and its by-products, molasses and rum, cocoa, bananas, rice and corn. Their total foreign trade in 1916 amounted to $9,000,000. Future Development Dutch East Indian trade, for the moment diverted to other channels, is likely to resume in large part its former channels and perhaps to be more profit- able than ever. The chief articles of production in 1916 in the Dutch East Indies were, as follows : Sugar, 1,625,718 tons; coffee, 73,817 tons; tea, 93,380,000 pounds; tobacco, 140,000,000 pounds; tin, 18,597 tons; cinchona, 18,500,000 pounds. With these products in such demand at such prices as now obtain, Holland should continue to reap large returns from its en- vestments in and trade with the islands. Copyright, Underwood & Un'irrwood The harbor of Rotterdam, is becoming busw with post-bellum commerce [10] Holland seems to have no intention of neglecting the opportunity for fur- ther development of the Islands through the extended culti- vation of the re- markably fertile soil, and the exploit- ation of the abund- ant mineral and forest resources. Industrial enter- prise in the Dutch East Indies has made considerable progress during recent years, although with the possible exception of the sugar industry, which is, properly speaking, a purely agricultural industry, the resources are not adequately utilized. At the end of the year 1915, there were in the Netherlands East Indies a total of 2,250 industrial enterprises employing 58,051 workmen. These enterprises in- clude the manufacture of building A diamond cutting factorii in Holland materials, such as cement, concrete and limestone; manufacture of food and drink; chemi- cal, metal and woodwork indus- tries and shipbuild- ing. The virtual doubling of the na- tional debt since 1914 and conse- quent higher taxa- tion could hardly be unduly burden- some to a people with the wealth, thrift and industry of the Dutch. The history of this little nation is the history of a people ready to utilize every opportunity to strengthen their position in the world of commerce and industry. The strategic position of the Dutch on the Continent of Europe and in colonial and inter- national trade is such as to promise a full measure of future prosperity to Holland. [n: Norway IN area Norway is a little more than three times as large as Ohio. On the whole it is one of the most sparsely popu- lated countries of Europe, the population numbering 2,392,000 in 1910. Depending largely upon its fisheries, forests, and ocean-carrying, the country was in a prosperous condition at the out- break of the war. Debt On June 30, 1918, the funded debt at the par of exchange was $133,000,000, rep- resenting an increase of 39 per cent, since 1914. The proportions of internal and external debt in 1918 were quite different from those obtaining in 1914. In 1918 only 68 per cent., as compared with 94 per cent, in 1914, was classed as external debt. The per capita funded debt in 1918 was $52. In addition to the funded debt there was on June 30, 1918, an unfunded debt amounting to $64,460,000. Altogether then the debt, funded and unfunded, was equivalent to $197,460,000. The principal asset of the state which may be regarded as an offset to the funded debt consists of the state-owned railways. In 1918 there were 1,731 miles The busy harbor of Bergen. Shipping is one of Norway's principal sources of income fl2l Next to fishing the lumber industry in Norway yields products of greatest export value of state-owned lines out of a total of 2,030 miles in the state as a whole. The capital investment in these railways in 1916 was $82,318,078. The railways have been operated regularly at a profit until the last two years, the average profit for eight years being more than $1,340,000 annu- ally. In other words, the operating profits of the state railways have in ordinary years been equal to about one-third of the total debt charges. The deficits incurred during 1917 and 1918 have been due to the extraordinary increases in the cost of operation. In addition to the state-owned railways the state possessed in 1917 other assets, not including ships, public buildings, etc., which had a current value of $79,154,872. The combined values of these non- material assets and the state railways represent a total investment of approxi- mately $161,000,000, which is $28,000,- 000 in excess of the total funded debt in 1918. Resources and Industries The national wealth just before the war was estimated at approximately $2,000,- 000,000, or a per capita of $800. Partly on account of the increase in the general level of prices the value of the national wealth now is much greater. The country is for the most part moun- tainous, and neither soil nor climate is particularly favorable for agriculture. Less than six per cent, of the area was in cultivation prior to the war. A, shortage of foods which was experienced in recent years has, however, given rise to much discussion concerning the possibilities of enlarging the country's agricultural out- put. While there is no expectation that the food crops can be made to yield suffi- cient for domestic needs, a systematic 13] BBB^^^iSSBBBBB^^Sr" "^-\--'j_r*^^ i ^' ila^esund, d & TlnHenvood Copenhagen udll become nn increasingly important distrihuting point for American goods the capitalization of new enterprises. During the first two years of the war bank deposits more than doubled. The value of exports of merchandise increased 83 per cent, from 1913 to 1916; the cor- responding increase in imports was 59 ])er cent. The economic position of Denmark is stronger in many ways than before the war. The country's principal export commodities are among those now most in demand and likely to remain so for a comparatively long while. The propor- tion of the country's foreign trade con- ducted directly, rather than by way of other countries, is much greater than be- fore. Preparations are beijig made for a great expansion of trade, taking advan- tage of the exceptionally favorable geo- graphical position and the opportunities offered by the free port of Copenhagen. Although the Danish merchant marine was reduced considerably during the war — the gross tonnage of steam vessels being 631,000 in June, 1919, or 18 per cent, below the corresponding tonnage in June, 1914 — the losses will be quickly replaced. Financially, the Danish Government's position remains favorable. Although the gross debt, approximately $189,000,- 000 in December, 1918, was almost dou- bled during the war, the net debt may be regarded as negligible. In fact, the productive properties of the state prob- ably exceed in value the gross debt. The investments of the state, including a spec- ial reserve fund, the state railways, and state forests, were valued on March 31, 1918, at about $300,000,000, or more than $100,000,000 in excess of the debt. ' About $70,000,000 of the debt is nom- inally external, but it is estimated that nearly all the Danish obligations which had been held abroad were repurchased during the war and thus passed into Dan- ish ownership. The national wealth of Denmark before the war was valued at approximately $2,500,000,000, or $835 per capita. f20J Switzerland SWITZERLAND maintained its neu- trality in the late war, although sur- rounded on all sides by belligerent nations. This was not accomplished, however,with- out heavy cost to the Government. The Swiss army was mobilized in the early part of the war, and was kept in readiness for defense to the end. In addition, the difficulty of acquiring materials from or by way of neighboring belligerents bore heavily upon some branches of Swiss in- dustry. But at the end of the war the country was in an industrial and financial position which should produce great pros- perity for the Swiss people. A long and uninterrupted peaceful de- velopment had given the Swiss people, numbering in 1914 almost 3,900,000 and occupying a territory about double the size of Massachusetts, a place among the wealthiest nations of Europe. The esti- mated value of the national wealth in 1913, was 23,000,000,000 francs, equiv- alent to $1,135 per capita. Investments Geneva, known for its beautiful buildings, ancient and mn'ern [21] Copyr ght, UnJerivo