PBlf IMINARV tK.LLlmln AK. t ; EARLY EFFEC UPON THE FHE EUROPEAN WAR S, COMMERCE AND \yerson Street\ Brooklyn New York Carnegie Endowment for International DIVISION OF ECONOMICS AND 'HISTORY' JOHN BATES CLARK, DIRECTOR PRELIMINARY ECONOMIC STUDIES OF THE WAR EDITED BY DAVID KINLEY Professor of Political Economy, University of Illinois Member of Committee of Research of the Endowment EARLY ECONOMIC EFFECTS OF THE EUROPEAN WAR UPON CANADA BY ADAM SHORTT Formerly Commissioner of the Canadian Civil Service, now Chairman, Board of Historical Publications, Canada EARLY EFFECTS OF THE EUROPEAN WAR " UPON THE FINANCE, COMMERCE AND INDUSTRY OF CHILEj BY L8 L S. ROWE Professor of Political Science, University of Pennsylvania NEW YORK OXFORD UNIVERSITY PRESS AMERICAN BRANCH : 35 WEST 33ND STREET LONDON. TORONTO. MELBOURNE. AND BOMBAY 1918 COPYRIGHT 1918 BY THE CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE 2 JACKSON PLACE, WASHINGTON. D. C. INTRODUCTORY NOTE BY THE DIRECTOR THE Division of Economics and History of the Car- negie Endowment for International Peace is organized to " promote a thorough and scientific investigation of the causes and results of war." In accordance with this purpose a conference of eminent statesmen, publicists, and economists was held in Berne, Switzerland, in August, 1911, at which a plan of investigation was formed and an extensive list of topics was prepared. An elaborate series of investigations was undertaken, and, if the war had not intervened, the resulting reports might have been expected, before the present date, in printed form. Of works so undertaken some aim to reveal direct and indirect consequences of warfare, and thus to fur- nish a basis for a judgment as to. the reasonableness of the resort to it. If the evils are in reality larger and the benefits smaller than in the common view they ap- pear to be, such studies should furnish convincing evi- dence of this fact and afford a basis for an enlightened policy whenever there is danger of international conflicts. Studies of the causes of warfare reveal, in particular, those economic influences which in time of peace bring about clashing interests and mutual suspicion and hos- tility. They show what policies, as adopted by different nations, reduce the conflicts of interest, inure to the common benefit, and afford a basis for international con- fidence and good will. They tend, further, to reveal the natural economic influences which of themselves bring about more and more harmonious relations and tend to substitute general benefits for the mutual injuries that follow unintelligent self-seeking. Economic interna- tionalism needs to be fortified by the mutual trust that just dealing creates; but just conduct itself may be 1.82309 iv INTRODUCTORY NOTE BY THE DIRECTOR favored by economic conditions. These, in turn, may be created partly by a natural evolution and partly by the conscious action of governments; and both evolution and public action are among the important subjects of inves- tigation. An appeal to reason is in order when excited feelings render armed conflicts imminent; but it is quite as surely called for when no excitement exists and when it may be forestalled and prevented from developing by sound national policies. To furnish a scientific basis for rea- sonable international policies is the purpose of some of the studies already in progress and of more that will hereafter be undertaken. The war has interrupted work on rather more than a half of the studies that were in progress when it be- gan, but it has itself furnished topics of immediate and transcendent importance. The costs, direct and indirect, of the conflict, the commercial policies induced by it and, especially, the direct control which, because of it, govern- ments are now exercising in many spheres of economic activity where formerly competition and individual free- dom held sway, are phenomena that call, before almost all others, for scientific study. It is expected that most of the interrupted work will ultimately be resumed and that, in the interim before this occurs, studies of even greater importance will be undertaken and will be pushed rapidly toward completion. The publications of the Division of Economics and History are under the direction of a Committee of Re- search, the membership of which includes the statesmen, publicists, and economists who participated in the Con- ference at Berne in 1911, and two who have since been added. The list of members at present is as follows: EUGENE BOREL, Professor of Public and International Law in the University of Geneva. LTJJO BRENTANO, 1 Professor of Economics in the Uni- versity of Munich; Member of the Royal Bavarian Academy of Sciences. 1 Membership ceased April 6, 1917, by reason of the declaration of a state of war between the United States and the Imperial German Government. INTRODUCTORY NOTE BY THE DIRECTOR v CHARLES GIDE, Professor of Comparative Social Eco- nomics in the University of Paris. H. B. GREVEN, Professor of Political Economy and Statistics in the University of Leiden. FRANCIS W. HIRST, London. DAVID KINLEY, Professor of Political Economy in the University of Illinois. HENRI LA FONTAINE, Senator of Belgium. His Excellency LUIGI LUZZATTI, Professor of Con- stitutional Law in the University of Rome; Secretary of the Treasury, 1891-93; Prime Minister of Italy, 1908-11. GOTARO OGAWA, Professor of Finance at the Uni- versity of Kioto, Japan. SIR GEORGE PAISH, London. MAFFEO PANTALEONI, Professor of Political Economy in the University of Rome. EUGEN PHILIPPOVICH VON PniLippsBERG, 1 Professor of Political Economy in the University of Vienna; Member of the Austrian Herrenhaus, Hofrat. PAUL S. REINSCH, United States Minister to China. His Excellency BARON Y. SAKATANI, formerly Minister of Finance; formerly Mayor of Tokio. ^ THEODOR SCHIEMANN,' Professor of the History of Eastern Europe in the University of Berlin. HARALD WESTERGAARD, Professor of Political Science and Statistics in the University of Copenhagen. FRIEDRICH FREIHERR VON WIESER, S Professor of Po- Economy in the University of Vienna. The function of members of this Committee is to select collaborators competent to conduct investigations and present reports in the form of books or monographs- to consult with these writers as to plans of study- to the completed manuscripts, and to inform the officers of the Endowment whether they merit publica- 1 Died, June, 1917. f ot a vi INTRODUCTORY NOTE BY THE DIRECTOR tion in its series. This editorial function does not com- mit the members of the Committee to any opinions ex- pressed by the writers. Like other editors, they are asked to vouch for the usefulness of the works, their scientific and literary merit, and the advisability of issu- ing them. In like manner the publication of the mono- graphs does not commit the Endowment as a body or any of its officers to the opinions which may be expressed in them. The standing and attainments of the writers selected afford a guarantee of thoroughness of research and accuracy in the statement of facts, and the character of many of the works will be such that facts, statistical, historical, and descriptive, will constitute nearly the whole of their content. In so far as the opinions of the writers are revealed, they are neither approved nor con- demned by the fact that the Endowment causes them to be published. For example, the publication of a work describing the attitude of various socialistic bodies on the subject of peace and war implies nothing as to the views of the officers of the Endowment on the sub- ject of socialism; neither will the issuing of a work, de- scribing the attitude of business classes toward peace and war, imply any agreement or disagreement on the part of the officers of the Endowment with the views of men of these classes as to a protective policy, the control of monopoly, or the regulation of banking and currency. It is necessary to know how such men gen- erally think and feel on the great issue of war, and it is one of the purposes of the Endowment to promote studies which will accurately reveal their attitude. Neither it nor its Committee of Research vouches for more than that the works issued by them contain such facts; that their statements concerning them may generally be trusted, and that the works are, in a scientific way, of a quality that entitles them to a reading. JOHN BATES CLARK, Director. EARLY ECONOMIC EFFECTS OF THE WAR UPON CANADA EDITOR'S PREFACE TO THE PRELIMI- NARY STUDIES OF THE WAR THE following brief study of the early effects of the war upon Canadian industry, trade and finance, was prepared by the author, Dr. Adam Shortt, formerly of the Civil Service Commission of Canada, now Chairman of the Board of Historical Publications, to indicate in a general way the character of the extended study of the same subject which he is preparing for publication later. The chapter contains so much of interest and value to the people of our own country at the present juncture that it seemed proper to the Director of the Division of Economics and History and to the editor to publish it. It is the first of a series of preliminary studies on the effects of the war. It is the intention of the Endowment to prepare and issue in due time a comprehensive docu- mentary and critical history of the war. Such a history, however, is a work of years and could not be prepared in time to be of immediate service to our people in their conduct of the war. Inasmuch as the experiences of the Allied countries already at war have valuable lessons for us, especially within the first year of our participation, it has been decided to issue a series of preliminary war studies, setting forth their experiences. The effects of the war on the trade, the external policies of nations, and also upon their internal economic organization, will be far reaching. The cost of the war will be so great that expenditures upon measures pro- motive of welfare are likely to be long postponed. The programs of social betterment, legislation looking to the improvement of conditions of labor, the suppression of poverty, improvements in the conditions of employment of women and children, better health conditions, better viii EDITOR'S PREFACE education, social health and life insurance, probably will all be delayed on account of the tremendous expenditures of the conflict. The probable necessary reorganization of public budgets to meet the burden of taxation will leave little income to apply to such projects. The whole world had reached a high state of expectation with refer- ence to general social betterment, budgets were being constructed and financial systems were being molded with that in view. The war has dimmed the hopes of the reformer about these matters, and doubtless will make improvement of the conditions of living a harder problem than before. For the cost of the war is to be reckoned not merely in destruction of wealth. It is draining the working power of the world, and is adding to the number less capable of taking care of themselves. It has increased the army of the maimed, the halt, the blind and the dependents, and has imposed upon all the rest of us the task of caring for them as a sacred duty and a debt of gratitude for the sacrifice which they have made for us. But the cost and the sacrifice we cannot stop to count now, for we have entered the war and must do our part to bring it to a successful conclusion. The realization of the staggering burden of the cost of the war will not prevent any one of the nations at war from continuing to do its part; but a study of this cost in all its bearings may have a sobering effect in years to come when peoples and rulers may perhaps contemplate war again. For that reason among the preliminary studies, which it is our purpose to publish, will be one or two on the cost of the war and its financial management. A second subject needing serious study is the alleged trend toward Socialism. Socialists point with rejoicing to the vast extension of government control over, and participation in, industry on account of the war. In Great Britain the government is running the railroads and is virtually in absolute control of industry. The EDITOR'S PREFACE ix railroad system is operated as a unit for the single purpose of securing efficiency in war production. Steel and munition factories, many in number and great in output, are entirely operated by the government. Thousands of other factories have been operated for some time under government control, although immedi- ately by the owners. It is estimated that probably about seven million men and women are at present employed in industries under the control of the British government. Moreover, the government has entered the field of the middleman and is doing collective buying on a very large scale, just as we ourselves are. Similar conditions prevail in France and in Italy. The government of Italy is said now to control in the neighborhood of 2,500 establishments, with approxi- mately three million workers. In France the control of the government over industry is even more extended and intense. Even countries not in the war have found it necessary, on account of the disturbance of industry and the shortage of supplies of one kind and another, to undertake economic functions in character and extent hardly thought of hitherto. The culmination of the whole process seems to be reached in the project for collective purchasing for all the Allies in the matter of metals, food and other articles. On the steps which the United States has taken it is not necessary to enlarge. We are controlling the iron and steel industry, the coal business, the wheat market, and are reaching indirectly to the control of retail trade in a variety of articles. These things are welcomed by Socialists as steps towards the permanent establishment of Socialism. Many other people look upon them with fear because they have the same belief. It is important, therefore, to study and discuss this trend and its aftermath. In the opinion of the editor of this series, a distinction must be made between Socialism and mere state economic x EDITOR'S PREFACE activity, which may be called stateism. To be sure, the state, or, at any rate, the government in a socialistic state, is the active agent for carrying on the economic life of the people. But government activity of this kind is not truly socialistic unless the purposes and the methods of the government reflect the desires and the will of the people. An autocratic state might occupy its government quite as fully with the performance of economic functions as could be desired by any Socialist, but the resulting condition would not be one of Socialism. In short, the mere extension of government economic functions is not of itself the establishment of Socialism. Germany is commonly spoken of as a state which has gone far on the road to Socialism. Not so. Germany is an example of stateism. Her government has in a measure provided the conditions of economic welfare for all her people, but she has done so at the expense of their individual initiative and freedom. A minority the ruling class have determined what should be done for the rest; and that not primarily for the good of the rest, but in order that they might be more suitable, or useful, or available, for the purposes of the few. If such economic comfort were achieved as a result of the free action of the majority, it would be Socialism in the true sense. Even then, however, it is questionable whether the attainment of a larger economic comfort through Socialism would not entail a cost, in the sacrifice of freedom, that would be in the long run too great. Whether the extension that is taking place now in the war will be socialistic, even if it is permanent, will depend, therefore, on the will of the people; for certainly the government of a democratic country cannot continue such economic activities against the will of the people. Now the great majority of the people of the country are willing to submit to inconveniences due to the extension of government functions in unusual lines to accomplish more effectively the specific purposes of the EDITOR'S PREFACE xi war. It is more than doubtful whether they will submit to such inconveniences and interferences when the dangers of war have passed. Moreover, whatever effi- ciency is gained in the conduct of the war by the exten- sion of the economic activities of the government, is secured very largely at the price of tremendous inter- ference with ordinary business relations, economic con- ditions, and ways of living, such as the people of this country will probably not endure excepting under the stress of patriotic motives. In other words, in the opinion of many, the efficiency necessary to win the war is gained at a cost of interference in our ordinary economic life that will not be tolerated in time of peace. There is no more evidence today that the government performance of industrial and mercantile services will be more efficient in the future than it ever has been; or that it will even approximate to the efficiency secured by individual initiative. Government conduct of in- dustries for the purpose of conducting a war efficiently is a very different thing from such conduct for the greatest service in the more diverse purposes of human life in times of peace. Indeed, what constitutes effi- ciency in the former conditions may be inefficiency in the latter. As to the alleged efficiency of government operation of the railways, for example, we must remember that this efficiency is secured at a cost. Only those who are accustomed to use the railroads frequently have a suit- able realization of the inconvenience and loss injected into private business by the coordination and cooperation which the war has made necessary for the purposes of the war. The business of the war is at present impera- tive, and must displace everything else. Efficiency in carrying it on must be attained without much regard to the cost involved in the disturbance of passenger and freight traffic for other purposes. Those who are now managing these new activities of xii EDITOR'S PREFACE the government are, in the main, so-called captains of industry who have built up under the system of individ- ualism and competition the great structure now available for government use. There is no reason to think that their services would be readily available for such a pur- pose excepting in an emergency. Their experience, however, will undoubtedly give them a somewhat dif- ferent outlook after the war, when the old order of things begins to return. It is to be hoped that they will have that higher point of view and broader outlook concerning the welfare of the public at large which, by establishing a higher ethical standard for business, will do away for- ever with the phases of capitalistic exploitation which have so justly drawn condemnation in the past. It must be remembered, too, that if the government is to direct industry, it must direct labor. There is no reason to think that the workers of the country, whether organized or unorganized, are disposed to turn over to bureaucratic control the determination of important ques- tions concerning their work and their welfare. For these reasons it seems to the editor that the present trend does not necessarily indicate a tendency toward the permanent establishment of Socialism prop- erly so-called, nor even a tendency toward a permanent extension of government participation in economic life. That there will be some such extension for a time at least is very likely, but the general result is just as likely to be the establishment of better standards in the conduct of privately conducted business. Excessive profits and other forms of exploitation will be better understood by the public; those who have been guilty of such practices will be more easily discovered, and their own point of view undoubtedly will be largely modified. In other words, the permanent result of our present activity is just as likely to be the conduct of business with larger emphasis of service to public welfare as an extension of direct government management and control. EDITOR'S PREFACE xiii A third line of study which is brought prominently to the attention of the world by the war is that of national economic independence. The war had not been going on long before it became evident to some of the warring nations that they had allowed themselves to become com- pletely dependent on Germany, for example, not only for some articles necessary for the prosecution of the war, but for many others needed in ordinary industries. Dyes are a familiar illustration. Even foodstuffs were in some cases obtained from enemy sources of supply. The discovery of these conditions naturally stirred people of different countries, and brought out anew a demand for national economic independence on the part of each nation, so that its power to defend itself in war would not be impaired. Other motives, however, led to em- phasis of the same demand as the war progressed. A conference among the Entente Allies was reported to have been held for the formation of an economic alliance, to continue after the war, the purpose being to develop trade among the Allies and their colonies, to the exclusion, so far as possible, of the trade of Germany and of her allies. The situation has intensified again the demands of the protectionists and exponents of nationalism, who, even in times of peace, advocate national economic self-suffi- ciency. For, of course, the movement is not one that originated with the war. It has come to notice from time to time as one nation or another has developed its foreign trade. It is not many years since central Euro- pean statesmen talked about a " Zollverein," or Mid- European tariff union against the United States. British statesmen have from time to time discussed the advisability of an imperial customs union against the rest of the world. But the war has given a new em- phasis and a new aspect to the proposed policy, and it will need careful study in order not only to prevent mistakes on the part of particular countries, but to lay xiv EDITOR'S PREFACE the foundations for lasting peace on the basis of inter- national amity. Of course, no peace can be permanent if its conditions are such that each nation must continue the struggle for economic self-sufficiency; for a country could be eco- nomically independent only if it had within its own boundaries all the natural resources necessary for the purpose. National lines, however, are not drawn with this in view. Moreover, national self-sufficiency would mean in the long run a restricted national life, for no country could have within its own boundaries all the resources and conditions necessary to satisfy its people, meet its re- quirements of defense, and enable it to make progress. New ways of living, new ideals, new culture, new con- ditions, would require changed economic methods and different economic resources. Consequently, self-suffi- ciency at one time is insufficiency at another, so that there can be no assurance of permanence for such a policy. Moreover, the country which had resources that prompted it to rise to a higher civilization might still be the object of attack of these which were less fortunate. Such a policy would tend to national isolation and the destruction of intercourse and to act as a check on the progress of civilization. There is no ideal worthy of the world and worthy of the peace which we all hope to establish, if not permanently, at any rate for a long period, excepting the ideal of free intercourse, whereby the resources of the earth shall be made available through the processes and agents that are most advantageous to the whole world. But to make the people of the world satisfied that an international policy based on that ideal is safe, it will be necessary to find means of insuring that no one country will find its existence or independence in danger because it does not include in its industrial system all the things and processes necessary to defend itself against attack. In other words, we must find some EDITOR'S PREFACE xv way of seeing to it that aggression against a nation will not be possible. Unless we can do that, economic inter- nationalism, after the experience of the present years, will be merely a dream. The practicableness of economic internationalism will depend in part, after the war, on the methods adopted by the world for the improvement of backward parts of the earth. The colonization of Africa and the develop- ment of other places will have to be undertaken in some way which will preserve what may be described as the international equities. No arrangements can be re- garded as morally justifiable which do not have as their first purpose the uplifting of the people already oc- cupying the land. Closely connected with this question is that of the expansion of older countries by immigra- tion. One of the arguments frequently put forth by Germans in defense of the present war is that Germany needs territory for its surplus population. The world cannot afford to admit such a plea. Germany does not need territory, although people of German origin may need more space in which to live. They can get it, as can other people, by going to less densely occupied parts of the earth ; but they may not in this day and generation insist that they may take with them also the German government. They are free to settle and live their lives in other countries, and under other flags, which admit them. On such a principle a constant flux and reflux of population is possible without impairment of the rights of other people or the authority of other governments. These and other subjects, as has been stated, are brought to the forefront of public discussion by the present war. Inasmuch as it is the purpose of the Carnegie Endowment for International Peace to spread information and add to knowledge in such ways as will bring about a better understanding among the nations of the earth, it is proper that a series of studies into such xvi EDITOR'S PREFACE questions should be undertaken by the Endowment. Preliminary to more extended inquiries into these and kindred subjects, arrangement has been made for their early publication. DAVID KINLEY, November 28, 1917. Editor. EARLY ECONOMIC EFFECTS OF THE WAR UPON CANADA To appreciate the true effect of the great war upon Canadian economic conditions, it is essential to realize what was the economic situation of the country during the period which immediately preceded the war. This war which burst upon the world so suddenly did not strike the Dominion in the midst of a great period of expansion, but rather at the close of one. A fairly prolonged era of exceptional capital investment and active trade was drawing to an end, while readjustment and stock-taking were in process. What the next phase of economic development might be was the subject of active discussion by publicists, financiers, promoters, manufacturers, and merchants alike. Canada, one of the younger countries, containing prob- ably the largest area of unexploited powers of nature attractive to European immigrants, was especially inter- ested in the practical outcome of readjustment. During the decade ending with 1913 the country had undergone a process of economic expansion which, in proportion to its previous trade and population, probably exceeded that of any other country. The evidence for this may be found in the correlated factors of the investment of foreign capital, the building of railroads, the influx of immigration, the expansion of towns and cities, and the speculation in land values connected therewith, particu- larly in western Canada and the eastern cities affected by the western expansion. These factors naturally re- acted upon all other forms of economic activity in the country, making great demands for goods and services of all kinds, enhancing prices and wages, stimulating industries, expanding markets, and encouraging by precept and example a speculative spirit throughout the country. A few central facts will illustrate the movement during this decade. The population of Canada between the census periods of 1901 and 1911 had increased from 5,371,000 to 7,206,000, an increase of 1,835,000 or 150,000 more than during the three previous decades. 1 The percentage increase was greater than that of any other country. This increase was chiefly due to im- migration; the number of immigrants arriving in the country for the census decade 1901-11 being 1,453,391, which is within 380,000 of the total increase of popu- lation for the decade. During the three years from 1911 to 1913 the country received a further increase in immigration of 1, 067,753. 2 During the decade of 1903-13 the total trade of the country had expanded from $467,000,000 to $1,085,000,000, or nearly 232 per cent. The expansion in imports was much greater than that in exports. Imports increased from $241,000,000 to $692,000,000, being 287 per cent, while exports in- creased from $225,000,000 to $393,000,000, or 180 per cent. 3 This, as we shall find, was due to the special conditions of expansion under the influence of the influx of foreign capital. While, for the decade 1903-13, the capital of the Canadian banks expanded only from approximately $76,500,000 to $116,000,000, or 51 2-3 per cent, the note circulation increased from $58,750,000 to $105,500,000, or 80 per cent. At the same time dominion notes, or the government legal tender notes, expanded from $39,000,000 to $116,750,000, or practically 200 per cent. 'The Canada Year Book, 1915. Published by Authority of the Minister of Trade and Commerce. Ottawa, The King's Printer, 1916, p. 64. 3 Ibid., p. 111. s Report of the Department of Trade and Commerce for the Fiscal Year ended March 31, 1916, Part I, Canadian Trade. Ottawa, 1917, pp. 6 and 7. THE WAR UPON CANADA 3 Deposits of the public with the banks increased from $379,000,000 to $985,000,000, or 160 per cent, while bank loans to the public increased from $406,000,000 to $972,000,000, or 139^ per cent. Bank clearings increased from $2,750,000 to $9,250,000.' On the other hand, notwithstanding the immensely increased capacity for saving during the period, the deposits in the Post Office and Government Savings Banks fell during the decade from $60,750,000 to $57,000,000. 2 This, how- ever, is quite in accordance with the speculative atmos- phere of the period. The total dominion revenue on consolidated account expanded from $66,000,000 to $168,500,000, while the expenditure on consolidated account, that is, excluding the special capital expendi- ture, increased from $51,500,000 to $112,000,000, while the total expenditure including capital investments in- creased from $61,750,000 to $144,500,000. 3 It might appear from the figures for the beginning and ending of the period that a considerable surplus had been accumulated. During some of the intermediate years, however, while the railways and other public works con- structed or subsidized by the government were under construction, the total expenditure greatly exceeded the total revenue; as, for instance, in 1909, when the total revenue was $85,000,000 and the total expenditure $133,000,000. The actual result for the whole decade is shown in the increase of the national debt. The total debt increased from $361,000,000 to $483,000,000, but this was offset by public assets; in other words, the capital valuation of the government railroads and other public works for which a considerable portion of the total debt had been incurred. Deducting these assets, the net debt had increased from $261,000,000 to 1 Report of Department of Trade and Commerce, 1916, Part IV, pp. 32 and 33. 2 Canada Public Accounts for Fiscal Year ended March 31, 1916. Ottawa, 1917, pp. 106 and 109. * Public Accounts, 1916, pp. 24 and 25. 4 EARLY ECONOMIC EFFECTS OF $8 14,000,000 : x a very modest increase it must be ad- mitted for a rapidly expanding country such as Canada. The period 1903-13 being one of rapid expansion of railroads and other public works, we find that the rail- road mileage in operation had increased from 18,988 to 29,304, or 54 per cent, while the gross earnings increased from $96,000,000 to $256,500,000, an increase of 166 per cent. 2 Some consideration is necessary as to just how the expansion indicated in these typical statistics affected the country as a whole and in its several parts. Also in what condition it left the country to meet the revolutionary economic changes occasioned by the outbreak of the war. The first great factor is of course the enormous increase of immigration which occurred during the period in question, amounting to 2,276,252. Even allowing that a considerable number of the immigrants did not remain long in the country, the United States returns showing an immigration from Canada to the United States during the same period of 363,6 14, 3 still the total increase of the population was very large and involved a great stimulus to the economic expansion of the country. It is an interesting fact that the great majority of these immigrants came to Canada with the professed purpose of settling on the land. The Canadian government had solemnly pledged itself by Act of Parliament and in the interests chiefly of the trade unions to assist only two classes of immigrants, viz.: those going on the land and those entering domestic service. General observa- tion, however, supported by the census returns of 1911, indicates that the great majority of the immigrants, from Great Britain at least, went into the towns and cities. They were accompanied also by a good many from the older districts of the eastern provinces of Canada and 1 Public Accounts, 1916, p. 26. 2 Report of Trade and Commerce, 1916, Part IV, p. 47. * From statistics furnished by Canadian immigration officials. THE WAR UPON CANADA 5 even from the older settled portions of southern Mani- toba. Thus while the urban population of the country increased by 1,259,165, the rural population increased by only 576,163. This increase of rural population was more than represented in the western provinces. In all of the eastern provinces except Quebec, the rural population declined during the decade; even in the two western provinces of Manitoba and British Columbia the increase in the urban population considerably ex- ceeded that in the rural. Thus in the western provinces from Manitoba to the Pacific Coast while the rural population increased by 638,494 the urban population in these almost entirely new districts increased by 478,526. In the previous decade the relative increases in these regions were, rural population 399,344; urban population 198,825, or as two to one in favor of the rural population. 1 Almost the only permanent services rendered by the urban population in the newly settled districts are those of distribution and transportation of goods, with little manufacturing, except lumber in the timber districts and coal mining in Alberta and British Columbia. It is therefore an interesting question as to how so large an urban population could be maintained in a country which is chiefly concerned with the breaking up of new lands and the simpler forms of agriculture. On a closer survey it is found that the greater part of the urban population in the western provinces was supported by the building of the railroads which opened up the country, but more especially through the construction of the very towns and cities which grew up along these railroads and into which the newer population poured, stimulating and expanding the general atmosphere of speculation and the promo- tion of local enterprises of a purely temporary nature. Needless to say, not only was the railroad construction 1 Canada Year Book for 1915, p. 77. 6 EARLY ECONOMIC EFFECTS OF which pioneered the way into the wilderness financed on borrowed capital, but so were practically all of the towns and cities which sprang up in the wake of the railroad construction. Land speculation, in the shape of in- definite subdivisions and the sale of town and city lots, was at the bottom of most of the rapid expansion of the western municipalities extending far beyond any actual needs of the time. What disguised from the people of the West the purely temporary character of the prosperity of the newer towns and cities was the very large amount of business being done in these urban centers and the exceptional number of people who found very profitable employment, with much consequent demand for housing, food, clothing, household equipment, and luxuries of various kinds. All this, however, was being supported chiefly on borrowed capital. When the flow of capital ceased the growth of the towns and cities ceased also. Those employed in the building trades must go else- where or starve. On their departure they left empty houses and a glutted real estate market. Also when their high wages ceased to flow into the coffers of the local merchants, they too were in distress and must either curtail or close up their establishments. Thus the shrinkage of the prosperity built up on the very con- struction of the towns themselves led to many unex- pected hardships for those who remained and who had only the requirements of the neighboring settlers to sus- tain their urban businesses, or, in the case of the larger centers, the declining distributing trade for the smaller towns. This process repeated in varying degrees from the smaller towns to the larger cities throughout a great area such as the Canadian West, linked up by ever- expanding railroad systems, represented many hundreds of millions of additional capital in their construction and equipment and naturally involved an immense stimulus THE WAR UPON CANADA 7 to the economic activity of the country, while bringing great volumes of trade and prosperity to the older sec- tions of the country where manufactures of various kinds had been established. Such was the period of exceptional expansion which continued during the decade closing the year before the outbreak of the great war. A few observations on the special effect of such a period of expansion on a half- matured country such as Canada may be necessary in order that one may appreciate the changes wrought by the war conditions. In the first place, the absorption of so much of the incoming population and wealth of the country in the building of railroads and urban centers, prevented hun- dreds of thousands of people from going on the land or engaging in any immediately productive enterprises. The fact that so much of the capital and energy of the country was being employed in the production of forms of wealth which, however attractive and desirable in themselves, yet represented no available products to meet popular needs for the immediate present or future, greatly affected not only the imports and exports of the country but had an important bearing upon the prices of the standard articles of consumption. In all cases the millions of capital which were absorbed in the con- struction of great public works, such as railways, and the building of towns and cities, were expended very rapidly, while the services to be rendered by these, even assuming that they might in time amply repay the out- lay, would return very slowly. In any case, only a few of the mercantile establishments in the expanding towns and cities made any pretense of immediately replacing the capital invested in them. This being so, what we find is that during such a period of expansion there must be but few exports to meet or replace the imports, which are stimulated by the expenditure of scores of millions of borrowed capital. 8 EARLY ECONOMIC EFFECTS OF In fact, the investment of so much borrowed capital in either non-productive or but slowly productive forms means the creation of a great demand in the country itself for domestic supplies, such as all forms of food, lumber, coal, and other native products which would normally be exported. It means also a great increase in the demand for foreign imports in the way of food, clothing, implements, and general supplies which are not produced within the country. When we turn to the statistics of Canadian trade for the decade of expanding immigration, great borrowing of capital for railroads and other public works, the building of new towns and cities and the expanding of older ones, we find that practically all of the borrowed capital from abroad came to Canada in the shape of imported goods. The excess of the import of bullion over its export was not more than sufficient to meet the normal needs for an increased reserve in specie to offset the normal expansion of paper currency required to meet the needs of an increased trade. Thus we find that, for the decade between 1903 and 1913, imports increased from $241,000,000 to $692,000,000, while ex- ports increased only from $225,000,000 to $393,000,000, the former being an increase of 187 per cent, while the latter represented an increase of only 97 per cent. 1 In 1899, for the first time in five years, the imports exceeded the exports, but it was not until 1903 that the average imports gained an ascendency over the exports. That year they did so to the extent of about $15,250,000. Thereafter the imports had decidedly the ascendency and by 1913 the excess of imports had ex- tended to $298,750,000 for that year. During the decade the accumulated excess of imports over exports amounted to $1,164,000,000. 2 This excess of imports represented practically that portion of our borrowings abroad which 1 Report of Trade and Commerce, 1916, Part IV, p. 50. 1 Ibid. THE WAR UPON CANADA 9 were transmitted to Canada. In this there were only $26,000,000 of gold, which was not more than necessary to meet the additional requirements of the increased note issues of the government and the banks. Most of the borrowings which were not transmitted to Canada served to offset the interest on the national debt, which for this period amounted to upwards of $123,000,000/ The interest on the provincial and municipal debts on railway bonds and on many other corporate securities held in Britain had also to be provided for out of the borrowings, inasmuch as the exports were all offset in meeting only a portion of the imports. In the course of the year 1912 a somewhat uneasy feeling began to pervade the financial world as to the possibility of the optimistic or speculative spirit having led to numerous doubtful or unwise investments. In consequence there ensued very generally throughout the world during 1913 a much more cautious spirit. This naturally applied more particularly to those countries where extensive new developments were taking place, and thus included Canada. The curtailment of invest- ment was therefore felt in Canada to an increasing extent. The immediate result as reflected in Canadian experience was a shrinkage of funds for public and cor- porate enterprises, various government enterprises were checked, the western municipalities had perforce to curtail their expenditures, the railroads diminished their capital expenditure, and, as an immediate effect, quite a number of persons connected with the extensive enter- prises previously carried on were thrown out of em- ployment. A check was also put upon the immigration of those who sought employment in the cities. The secondary consequences of these primary conditions were revealed in a marked diminution in the business of fur- nishing materials and equipment of construction, as also in that of supplying both the necessaries and luxuries of 1 Public Accounts, 1916, p. 27. 10 life, freely purchased by communities enjoying generous incomes whether from personal services or profits. As the most widespread and highly speculative ac- companiment of good times had been the dealings in urban and suburban real estate, especially in the western provinces, there was an immediate and effective check in this extensive line of speculation, followed by a very pronounced reaction in realty values which continued during the latter part of 1913, and was still very marked when the war broke out in 1914. There was at once a double reaction in economic conditions during the twelve months before the beginning of the war. First and most extensive, a reaction in purely speculative values; secondly, a shrinkage in the output of numerous industries connected with the supply of materials and equipment for the building of railroads, towns and cities, and the miscellaneous equipment, including internal fur- nishings, in thousands of public, business, and private buildings; lastly, and in consequence of the foregoing, there was a shrinkage in the supply of goods for the daily wants of a population which had been rapidly increasing in numbers and purchasing power. In time, of course, in Canada as in other countries, there would have been a readjustment of employment. Many persons would have transferred from the cities to the country and from employments which furnished no immediate returns for the satisfaction of daily wants to those which furnished such supplies alike for domestic consumption and export. The war, however, was pre- cipitated before this readjustment could take place. While there was much unemployment and consequent distress throughout the country during the winter of 1913-14, there was certain to have been much greater distress during the ensuing winter of 1914-15. The fact that the war burst upon the world while Canadian economic conditions were in this critical situation must be kept steadily in mind in attempting to estimate the THE WAR UPON CANADA 11 effects of the war upon the economic condition of the country. One of the most immediate and striking factors in the situation was the facility for voluntary recruiting which the critical condition of lessened employment provided. Only those who have been actively engaged in recruiting can realize how many and varied are the motives and influences which lead men to voluntarily enlist for mili- tary service. In a war such as the present where so much that is vital to the very existence as well as the civilization of the race is at stake, there is room for the very widest range and combination of motives in taking up arms. But whether the motives be of a higher or of a lower type or, as in the great majority of cases, of some intermediate quality, the fact that a great many persons find themselves free to enlist in the sense of not having any fixed employment or business engage- ments that cannot easily be postponed, was a very im- portant factor in leading to such an immediate and ready response to the call to join the colors and to risk every- thing in the service of the country. Such was the situation in Canada when the war broke out. One immediate effect of the war was to greatly increase the paralysis of trade and industry, as also the financial, transportation, and other interests depend- ing upon them, and thus to enlarge the field of unem- ployment actually and prospectively. Of the large numbers who found themselves actually or in prospect without employment, the number of recent immigrants from Britain, chiefly located in the newer urban centers of the West and in the larger cities of the East, naturally constituted a large proportion. Thus one of the earliest and most important economic effects of the war was the relief of the congested condition of the labor market at the time of its outbreak. A secondary and important consequence was that the assigned pay and separation allowances which were arranged for the wives and de- 12 EARLY ECONOMIC EFFECTS OF pendents of the enlisted soldiers provided for the essential wants of many who would otherwise have been in distress by reason of the head of the household being wholly or partially out of employment. When these allowances to the dependents were speedily supplemented, in all neces- sary cases, by payments from the Patriotic Fund, derived from voluntary subscriptions, the general distress due to unemployment was almost at an end and cannot recur before the close of the war at least. Naturally those native Canadians who felt most strongly the responsibility to respond to the call of their country, whether having at the time of the out- break of the war permanent occupations or not, were among the first to offer their services and swelled the numbers of those presenting themselves for enlistment in the early months of the war. In fact, at this stage of the conflict the military authorities had many more offers of enlistment than they could possibly provide for. Evidently impressed by the readiness of so many citizens to enlist, the government estimated that there would be little difficulty in securing as volunteers all the troops required and perhaps more than the civil requirements of the country could spare. As the gravity and duration of the war began to be more fully realized the offers of troops by the Canadian government rapidly expanded. Immediately on the outbreak of the war 30,000 men and supplies were offered. Then in July, 1915, 150,000 troops were promised. In October, 1915, the number was increased to 250,000. Finally, on January 1, 1916, the numbers promised were raised to 500,000.* As we shall have occasion to observe, this larger number proved more difficult to find on the voluntary principle than was at all anticipated in the early stages of the war. The rapid enlistment during the first year of the war would itself have prevented the unemployment problem 1 Unrevised Hansard, Jan. 17, 1916, p. 25. THE WAR UPON CANADA 13 from becoming a matter of any great difficulty. But the immediate revival of the national borrowings and ex- penditure on a rapidly developing scale, and the trans- formation into munition factories of many of the largest manufacturing establishments of the country, whose businesses had been severely checked by the previous period of reaction, resulted in a sharp transition from stagnation to feverish production. This was particularly true of those industries connected with iron and steel, clothing, leather, vehicle, and other supplies called for in connection with war equipment. This immediately stim- ulated the demand for all forms of labor. Again, the rapid development of munition industries, the transport of large quantities of raw materials to be converted into finished articles, the enormous movements of troops with all their personal and camp equipments and food supplies, not only greatly augmented the import and export of various lines of supplies, but incidentally led to a remarkable expansion of the trans- portation services and the industries subsidiary to them, still further increasing the demand for labor and many other forms of supplies. Thus between the demand for men as troops and as workmen, the condition of business stagnation and unemployment in which Canada found itself when the war broke out and for some weeks after- wards, was rapidly dissipated by a new, strange, and wholly abnormal situation incidental to the outbreak of war. The situation was marked by an unlimited demand for men, materials, and supplies at ever-increasing prices and rates of remuneration, the whole financed by rapidly succeeding loans doubling and trebling their predecessors each year. One of the most important features in connection with this economic revolution was the fact that practically none of this borrowing, manufacturing and price making which prevailed proceeded on the basis of ordinary economic investment, production, and marketing. In borrowing 14 EARLY ECONOMIC EFFECTS OF the funds to be expended, there was no longer any question as to whether the returns to be expected would replace any part of the capital or meet the interest, much less furnish a margin of profit. No economic return was expected from most of the goods supplied or the services rendered. Almost all economic activities became subsidiary to the prosecution of the war, and in meeting the demands of the state for men and supplies, prices and rates were made without reference to whether industry could be maintained at the cost of production and the rates of profit and remuneration for services which were soon prevailing. This does not altogether mean that there was no competition in business, or that the rates established by public institutions, such as those governing railway transportation, were entirely disre- garded. But it does mean that where the ultimate de- mand for finished products and services emanated from the Canadian, British, or allied governments who had no thought of economic returns but only of speedy and adequate supplies for the conduct of the war, the ultimate question was not whether the prices or profits were rea- sonable or unreasonable, economically possible or not, but simply at what effective and necessary rates the indis- pensable supplies and services could be obtained. In this connection it is worth noting that as far as the prosperity which fesults from an active period of production and high prices is concerned, there is no difference between the investment of funds in enterprises which will prove highly remunerative to the investors, or in enterprises which will prove to be entirely un- profitable even to the extent of losing the whole or at least the greater part of the capital invested. It is only when an enterprise, in which capital is invested and which is beneficially promoting trade and industry, comes to the practical test as to whether its output of goods or services at prevailing rates will make an adequate return on the expenditure, that the question of profit or loss THE WAR UPON CANADA 15 to the investors, and therefore to the communities served, is determined. While the capital is being invested the stimulus to trade and industry is just as great from the enterprise doomed to failure as from one destined to success. So in the case of the expenditure on war. The prosperity due to the disbursements of large war loans is as beneficial to the trade and industry of the country, while the expenditure continues, as if it were made with the most certain prospect of ample returns on the funds expended. Only after the war expenditure is completed and no economic returns are forthcoming to replace the wealth destroyed do the unfortunate con- sequences make themselves felt, in the absence of any replacement of -the capital expended, with which to meet the next stage of capital production. At the same time, the interest on the vanished wealth requires to be met, while new efforts are called for to replace the vanished funds. This double burden of replacing wasted capital and paying the interest on what has vanished falls upon the remaining industry and capital of the country. The measure of the burden thus imposed is the proportion which the capital destroyed bears to that which remains, making allowance in the case of individual countries for new capital which may be borrowed. At the same time one recognizes the additional burdens entailed by bor- rowed capital as compared with the accumulations of domestic savings. Up to the present, however, Canada knows practically nothing of this unfortunate aftermath, for even the in- terest on past war loans is being met from new loans or the excess profits tax, which latter is only part of the exceptional capital expenditure due to war conditions. The prosperity of those immediately concerned in the production of war supplies and services has already extended to those other economic classes who cater to these primary beneficiaries, whether in the way of sup- plying raw materials, secondary goods and instruments 16 EARLY ECONOMIC EFFECTS OF for production, or in the way of meeting their daily wants in the lines of food, clothing, housing, fuel, trans- portation, amusements, and luxuries of various kinds. On the other hand, high earnings and high profits lead to increased personal expenditure, thus making an increased demand not only for all manner of the neces- saries of life but for most of its luxuries as well. Further, where light labor and personal services are in demand there are increased openings for women and the junior members of families. Thus a larger pro- portion of the total population left in the country after the departure of the troops is finding profitable employ- ment. When there is added to this the further fact that supplementary allowances are made to the wives and families of most of the overseas troops, it is obvious that an exceptionally large spending fund, in proportion to the total population, is in circulation. This manifests itself not only in exceptional demands for the ordinary means of life, but also for most of the luxuries and amusements available for modern urban dwellers. As will be pointed out later, these broad facts are effectively exhibited in the trade statistics of the country. Only those who receive fixed salaries or other un- expansible incomes, in the way of annuities and returns from permanent investments, suffer without compen- sation from the ever-increasing prices which prevail. High prices, however, may outrun even the increasing profits and wages obtained by those in the secondary economic classes dependent upon the primary benefi- ciaries of war supplies and service. As, however, these classes are either well organized or have other methods of protecting themselves by insisting upon increases in wages and profits, there results a general clamor for increased incomes and diminished outlay. In the latter case this takes the form of demands for lower prices for at least the most essential requirements of life. These claims tend eventually to concentrate upon the THE WAR UPON CANADA 17 government in the form of somewhat antagonistic de- mands upon our rulers for at once increased wages and diminished prices. Since the government itself has emancipated its operations from the conditions of all ordinary economic production and consumption, the unreflecting masses are apt to demand that it should do for the people at large what it has been able to do for itself. In a word, there seems to be no valid reason why the government should not forthwith abolish by Order in Council the old aphorism " ex nihilo nihil fit." In any case, the general economic outcome of the war, after nearly three years duration, is that the country has been converted from a condition of economic depression, with growing anxiety in industrial and commercial centers, into a condition of exceptional prosperity with high wages and ready employment, and with high profits in large volume followed by increased and even lavish expenditure. This condition, accompanied by great for- eign demand for the staple means of life, is resulting in very high prices without, however, any corresponding increase in supplies, because the profits and incomes obtainable in the urban centers still exceed those in the rural districts. In a word, the economic condition of the country has come to be entirely dominated by the war, and is therefore increasingly artificial and abnormal in almost every line of activity. Having outlined the general situation of Canada for the decade immediately preceding the outbreak of the great war and having shown what was the more or less critical condition of the country at the time of the dec- laration of war, and also having given a general indication of the temporary economic revolution which has been produced by war conditions, we are now in a position to appreciate the significance of the concrete facts re- lating to the various phases of the economic activity of Canada and its relations to foreign countries and world 18 EARLY ECONOMIC EFFECTS OF conditions. We may deal first with the general trade of the country, then extend our survey to the underlying and conditional factors of production including labor conditions and prices, transportation, exchange, and finance, national and corporate. As we have seen, Canadian imports, reckoned accord- ing to the fiscal year ending the 31st of March, cul- minated in a maximum of $686,000,000, exclusive of coin and bullion, in 1912-13, or $670,000,000 for domestic consumption. During the year of partial reaction pre- ceding the war, imports not only ceased to expand but receded by over $50,000,000, faUing to $618,500,000 for domestic consumption. During the following year, 1914-15, covering eight months of the war, they receded another $163,000,000, dropping to $455,000,000 for domestic consumption. During the year 1915-16, en- tirely under war conditions, owing to the immensely augmented expenditures of the government and the revival of manufacturing on a large and profitable scale, with the incidental benefit of a bountiful harvest, not only was the downward tendency of imports arrested but the tide was turned in an upward direction to the extent of over $50,000,000, the total amounting to $507,000,000 for domestic consumption. 1 The continuing tide of pros- perity for the past year, 1916-17, has led to a still greater increase of imports. The preliminary returns for the fiscal year of 1916-17 show that the imports amounted to $845,000,000 for domestic consumption and exclusive of coin and bullion. 2 This represents an increase over the year ended 1916 amounting to $337,400,000, repre- senting over 66 per cent; it also represents an increase of $175,000,000 over the imports of the year 1912-13, which as we have seen was the previous high-water mark of importation. Of course, as we shall see, some allow- ance must be made for an increase in prices. 1 Trade and Commerce Report for 1916, Part 1, p. 7. 2 Weekly Bulletin, Department of Trade and Commerce, May 7, 1917, p. 1116. THE WAR UPON CANADA 19 We turn now to exports as affected by the war. We have already seen that while for the year 1912-13 imports had reached a maximum of $686,000,000 the exports had risen to only $377,000,000, including foreign produce but excluding coin and bullion. This was not much more than half the amount of the imports. The following year, however, 1913-14, the last before the war, while the imports fell by $50,000,000, the exports increased by over $75,000,000, to a total of $455,000,000. During the first year of war, 1914-15, the exports increased only $6,000,000 to $461,000,000. Since, however, the imports fell off very greatly, there was a difference of only $36,000,000 in favor of imports. For the second year of the war, 1915-16, the balance was heavily turned in favor of exports, the total having risen to $779,000,000, an increase of not less than $318,000,000, or 68 per cent. 1 From the preliminary returns for the year 1916-17, we find that the exports amounted to $1,179,000,000, an increase of $400,000,000, or over 51 per cent. 2 Great as is this increase it is not, however, as great in pro- portion as that for imports for this year, which amounted to 66 per cent. When we turn to the items which make up the in- creased exports we find that the greatest increase during the war period has been in manufactures, which have risen from $54,000,000 for the twelve months ending December, 1913, through $69,000,000 for the year 1914, to $191,000,000 for the year 1915, and $440,000,000 for the year 1916. This, of course, represents chiefly war munitions. The next largest increase was in agricul- tural products, apart from animal products. These in- creased from $127,000,000 in 1914 to $364,000,000 in 1916. Next come animal products, increasing from $68,000,000 in 1914 to $117,000,000 in 1916. For the same calendar years, 1914-16, the products of the mine 1 Trade and Commerce Report for 1916, Part I, p. 6. 3 Weekly Bulletin, May 7, 1917, p. 1116. 20 EARLY ECONOMIC EFFECTS OF increased from $53,000,000 to $81,000,000; the fisheries from $18,000,000 to $24,000,000, and the forest products from $41,000,000 to $55,000,000." A closer analysis of the exceptional increase in manufactures between 1914 and 1916, amounting to $371,000,000 or a fivefold increase over 1914, reveals certain important facts bearing on the economic effects of the war. The chief articles making up this great increase were cartridges, including shells of every de- scription. Before the war the export of these was wholly negligible. They began to be sent forward in large quantities only in December, 1915, but from that to the end of 1916 $231,000,000 worth have been shipped. Before December, 1915, less than $3,000,000 worth had been shipped during the first sixteen months of the war. 2 Other explosives accounted for an increase of $28,000,000 during 1916, while before that less than $2,000,000 had been exported during the war period. 3 For the first two months of 1917 an additional $41,000,000 of cart- ridges and $8,000,000 of other explosives had been shipped. 4 Cartridges and explosives accounted for over two-thirds of the increase in exports from the outbreak of the war. Another large increase was in gasolene launches, which before 1916 had not amounted to above $10,000 worth for a year. During the year 1916, how- ever, they were exported to the extent of $7,250,000, 5 and in January, 1917, an additional $7,900,000 were shipped. 6 Leather and leather goods accounted for a considerable increase in manufactures, but there was much variation in this line. The most pronounced increase was in harness and saddlery, of which only a few thousand dollars' worth had been exported before the war. In 1 Trade and Commerce Report for 1916, Part I, p. xx. 2 Ibid., p. xxii. * Ibid. * Trade and Commerce Monthly Reports, Jan., 1917, p. 1357, and Feb., 1917, p. 1667. Trade and Commerce Report for 1916, Part I, p. xxii. * Trade and Commerce Monthly Report, Jan., 1917, p. 1385. THE WAR UPON CANADA 21 November, 1914, however, there began quite an excep- tional increase in these exports to Europe, chiefly to Great Britain, France, and Russia. The amount rapidly rose in a few months to over $2,000,000 in March, 1915, and the export was well sustained until August of that year. Thereafter, however, it fell off rapidly, with a slight increase in the spring of 1916. Since then the export has shrunk to almost prewar conditions. 1 The export of iron and steel manufactures has greatly increased. Before the war Canada exported from $8,000,000 to $10,000,000 in these lines, from a half to three-quarters of which consisted of agricultural imple- ments. But while these fell off by more than a half during the second and third years of the war, the total export of iron and steel manufactures rose from $11,000,000 in 1914 to $14,000,000 in 1915, and $54,- 000,000 in 1916. 2 These represent largely miscella- neous products sent to Great Britain. Other manufactured articles in which there has been a considerable increase during the war are clothing, which reached a maximum of $11,250,000 in the six months from December to May, 1915, but soon fell off again to less than one-third of that amount for the corresponding period in 1916, while in the last six months of 1916 the export amounted to only $716,000. Drugs and chemi- cals have also steadily increased from about $6,000,000 in 1915 to nearly $9,000,000 in 1916. 3 Of the agricultural products exported the greatest increases have occurred in wheat and wheat flour and oats. The exports of wheat rose rapidly in the autumn of 1914, yet the harvest of that year was not good and the amounts exported for the first nine months of the following year, 1915, were on the whole not more in value and less in quantity than the normal exports before the war. With the incoming of the exceptional harvest 1 Trade and Commerce Report, 1916, Part I, p. xxiii. * Ibid., p. xxiv. * Ibid., p. xxii. 22 EARLY ECONOMIC EFFECTS OF of 1915 there was naturally an enormous increase in the export of Canadian wheat to Europe. During the first nine months of that year the monthly export had not ranged beyond $3,500,000 to $7,500,000, except in June when it rose to $10,000,000. In the autumn of 1915, however, the monthly exports suddenly increased, rising to nearly $33,000,000 in October, followed by $44,000,000 in November and $39,000,000 in December. In April of the following year, 1916, extensive shipments were re- sumed, ranging from $14,500,000 to $34,500,000 per month. Owing to the autumn shipments the total for 1915 was increased to $166,000,000, 70 per cent of which had been contributed in the last three months of the year. The total for 1916 amounted to $239,000,000." A rise in prices, as we shall see, accounted for some proportion in the increase but not as much as might be expected. The statistics as to quantities exported are available only to the end of the fiscal year in March, 1915-16. For the last four years quantities and values compare as follows: 1912-1913 1913-1914 1914-1915 1915-1916 Bushels 93,100,000 120,410,000 71,900,000 157,700,000 Value $88,600,000 $117,700,000 $74,200,000 $172,800,000 ' The export of flour, depending much more upon the capacity of the mills than upon the harvest, did not expand to any considerable extent until the fiscal year 1915-16. There was, however, a very considerable expansion in values at least during the latter part of 1915 and throughout 1916, the totals for these years being $31,000,000 and $46,000,000 respectively. 3 As in so many other cases the diminished consumption in the country due to the decrease in population tended to provide a corresponding increase in exports. Moreover, the feeding by Canada of its own soldiers overseas caused 1 Trade and Commerce Report for 1916, Part I, p. xxii. 2 Ibid., p. 684. 3 Ibid., p. xxii. THE WAR UPON CANADA 23 the amounts supplied to appear in the exports of the country. There was a rapid increase in the export of oats in the autumn of 1914 and which was resumed in the spring of 1915. The irregularity of shipping conditions caused considerable variation in the export of oats for individual months. Thus in May, August, September, November, and December of 1915 the shipments were over $1,000,000 worth per month, whereas in some of the intermediate months the exports did not amount to more than one-half, one-third, or even one-sixth of that. The total exports for the year 1914-15 rose to $10,000,000, but the following year when the shipments were somewhat more steady the total amounted to $35,000,000." The increase for this period was chiefly to France, the amount going to Great Britain being offset by the diminished amount going to the United States. The price of oats proportionately increased more than that of wheat as indicated in the following rates : 1913-1914 1914-1915 1915-1916 Bushels 35,000,000 17,700,000 26,800,000 Value $13,300,000 $8,900,000 $14,600,000 There was no increase in the export of potatoes as due to the war, but rather the reverse. The great increase in the price of potatoes and certain other vege- tables during 1916-17 was due to the very unfavorable weather of 1916, which greatly reduced the crops of roots and vegetables. There was, however, a considerable increase in the export of vegetables other than potatoes, both in the shape of canned goods and in other forms. The total value of the exports, however, up to the fiscal year ending March, 1916, did not exceed $500,000. 3 The effect of the war upon the export of hay resulted 1 Trade and Commerce Report for 1916, Part I, p. xxii. 2 Ibid., p. 682. 3 Ibid., p. 730. 24 EARLY ECONOMIC EFFECTS OF in a change of destination from the United States, to which most of it had previously gone, to England and France, especially the latter country. From the fiscal year ending in 1912 to that ending in 1915 there had been a rapid decline in the export of hay, from 784,000 tons to 131,000 tons. During 1915-16 the export rose to 255,000 tons, about half of which went to France. The value of hay was practically doubled between 1915 and 1916. 1 The next important line of export stimulated by the war was that of animals and animal products. The results, however, were far from uniform and much in- fluenced by other currents than those of the war demand directly. In other words, the war conditions tended at one period to increase exports and at another to diminish them. This was due, of course, chiefly to the conditions affecting transportation. In the matter of cattle of one year old and upwards, the export for the year before the war amounted to over $7,500,000. For the first of the two years of the war the value of the exports rose to $8,750,000 and the next year to $12,000,000. 2 The increase, however, was entirely to the United States, inasmuch as the export to Britain, which was only about $700,000 the year before the war, was practically para- lyzed for lack of shipping facilities. As a matter of fact meat had to be shipped to Europe in a dressed or packed condition. Thus the export of beef, which had increased rapidly from 948,000 pounds in 1911-12 to 13,000,000 pounds in 1914, continued to increase for the first two years of the war from 18,750,000 pounds in 1915 to 47,500,000 in 1916. 3 The increase in value, however, was much more rapid, being about 50 per cent in the two years of the war as compared with the last year of peace. Not much beef had been shipped to Great Britain before 1 Trade and Commerce Report, 1916, Part I, p. 754. 2 Ibid., p. 645. 8 Ibid., p. 721. THE WAR UPON CANADA 25 the outbreak of the war, owing to the great demand with high prices in Canada itself during the period of rapid expansion. The diminished consumption at home, how- ever, and the high prices abroad greatly increased the exports to Britain. They rose from 190,000 pounds in 1913-14 to 1,330,000 pounds in 1915 and to 13,912,000 pounds in 1915-16. The United States shared with Great Britain in the increased exports of Canadian beef after the close of the expansion period in Canada. 1 One of the striking consequences of the war has nat- urally been the great alteration in the volume and direction of Canadian exports and imports. In the matter of exports articles which scarcely figured in the external trade of the country rapidly rose within the last two years to leading places on the list. Thus car- tridges and shells of various kinds, which in the three years before the war had not amounted to $10,000 a year, in the first ten months of the fiscal year 1914-15 were exported to the value of $188,000. The following year, 1915-16, for the same period they rose to $37,800,000 and in 1916-17 to $185,329,000. 2 The ex- ports of other explosives before the war were equally insignificant. But in ten months of 1914-15 they amounted to $202,000, the ten months of the next year to $3,691,000 and for the corresponding ten months ending January, 1917, to $26,760,000. 3 Steam launches, which even in the first two years of the war amounted to only $6,000 and $7,000 respectively, suddenly rose in ten months of 1916-17 to $15,147,000. Carbide rose from $625,000 in 1914-15 to $2,789,000 in 1915-16 and $3,743,000 in the ten months to January, 1917.* Sugar, which was exported for the first time in 1915, but only to the extent of $31,000, suddenly rose in 1916 to $3,393,000, sent to Great Britain. 5 1 Trade and Commerce Report, 1916, Part I, p. 721. * Trade and Commerce Monthly Report, Jan., 1917, p. vii. Ibid. 4 Ibid. Ibid. 26 EARLY ECONOMIC EFFECTS OF Taking the exports of the following seven articles, cartridges and shells, copper and brass, gasolene launches, carbide, sugar, butter, and whiskey, the total export for the ten-month periods to January in each year amounted to $8,519,000 in 1915, $59,670,000 in 1916, and $262,- 158,000 in 1917. These amounts represent the following percentages of the total Canadian exports for these periods: in 1915, 2.5 per cent; 1916, 10 per cent; 1917, 27.4 per cent. 1 As to the limited field in which Canadian export trade operates, it is found that fifty of the leading articles of export amounted, in the ten-month periods already referred to, to the following percentages of the total exports of the country: January, 1915, 84 per cent; 1916, 88 per cent; 1917, 91 per cent; while thirteen of the leading articles amounted to the following per- centages of the total exports: 1915, 51 per cent; 1916, 59 per cent; 1917, 71 per cent. 2 As to the general direction of Canadian trade, it is found that for many years past a very large proportion of Canadian imports and exports have been connected with the two countries Great Britain and the United States. The place which Canada fills in United States trade is shown from the following facts. In the foreign trade of the United States, Great Britain is in all respects first. As regards the other countries, the imports into the United States from Canada came second to Britain in 1915, third in 1916, Cuba coming second, while Canada was second again in 1917. As regards exports from the United States to all countries, Canada came second to Britain in 1915, third in 1916, and third in 1917, France coming second in those two years. 3 The percentages of Canadian trade with the two countries of Great Britain and the United States taken 1 Compiled from various Trade and Commerce Returns. 2 Ibid. 3 From Tables of United States Returns given in Canadian Trade and Commerce Monthly Report for Jan., 1917, p. 1122. THE WAR UPON CANADA 27 together and separately are set forth in the accompany- ing table. These percentages cover the ten-month periods ending in January in each year. 1915 1916 1917 Percentages of Canadian exports to Great Britain and the United States 88y 2 % 88% 89% Great Britain 44 y 2 60 6434 The United States 44 28 24% Percentages of Canadian imports from Great Britain and the United States 8434 87y 2 91 Great Britain 20 15y 3 13 The United States 64,% 72 73 Taking the period before the war we have the follow- ing corresponding percentages for the full fiscal years ending with the dates indicated: 1912 1913 1914 Percentages of Canadian exports to Great Britain and the United States 93% 87% 87%% Great Britain 51 4734 50 The United States 42 39% 37% Percentages of Canadian imports from Great Britain and the United States 85 85 85 Great Britain . . 22 20 21 The United States 63 65 64 s It will be seen from these figures that the trade of Canada not only under normal conditions but even during the war period is so overwhelmingly with the two countries of Great Britain and the United States that its trade with the rest of the world is of very secondary interest to the country as a whole. Conse- quently, the almost total cessation of trade with certain countries, particularly those of the enemy and those affected by the war zones, makes but little difference to the general economic condition of Canada, however much it may affect a few special interests or individuals. It may be observed that, taken as a whole, the proportion of Canadian exports going to Great Britain and the United States together, has varied very slightly in pass- ing from the prewar to the war period. The proportion of the joint trade has slightly increased since the out- break of the war, but not so greatly as might have been 1 Compiled from Returns in Monthly Report for Jan., 1917. * Compiled from Returns in Trade and Commerce Report, 1916, Part I. 28 EARLY ECONOMIC EFFECTS OF expected when we consider the very considerable altera- tion in the demand for Canadian raw materials, and especially in the character of Canadian manufactured exports. When, however, we come to survey the pro- portions in which this fairly uniform joint trade is made up from the two separate countries, we find that while the individual proportions are fairly uniform for the three years before the war, there is a very great change in the three years during the war. Canadian exports to Great Britain are normally greater than those to the United States, nearly in the proportion of five to four. During the first year of the war, however, they were equally divided between the two countries. Then the war demands from Britain greatly increased, but this was almost exactly offset by a corresponding decrease in the exports to the United States. Thus, while the joint proportion remained substantially the same, the practical equality in the case of the two countries which prevailed during the first year of the war, became as two to one in favor of Britain in the second year, and approximately three to one in the third year of the war. On the other hand, the imports from Great Britain, which were practically one-third those from the United States in the prewar period, became steadily less during the war period, being somewhat less than one-third in the first year, falling to practically one-fifth during the second year, and exactly one-sixth during the third year. In the case of imports, not only was there a marked transference of the source of supply from Great Britain to the United States, but the United States absorbed also most of the reduced trade with several other coun- tries. This accounts for the fact that the total import trade with Great Britain and the United States rose from 84^4 per cent in 1915 through 87^ per cent in 1916 to 91 per cent in 1917. Of this trade, the United States obtained no less than 78 per cent. The normal percentage of imports from the United States during the THE WAR UPON CANADA 29 prewar period was practically 64. The very great in- crease of imports from the United States during the war has been due to several combined conditions. First, the almost complete cessation of supplies from foreign countries, particularly those of the enemy and those in the zone of war. The chief cause of the transference of trade from Great Britain to the United States has been partly that many articles hitherto exported were urgently needed in Britain; chiefly because of the in- creasing cost of ocean freights and the diminishing ocean tonnage. Lastly, the supplies of materials and equip- ment for the manufacture of munitions in Canada were most readily obtained from the United States. Thus if we take some typical imports for the ten-month periods ending in January of each year we find such results as these for the war period: Imports for 10 Months 1915 1916 1917 Metals and minerals $71,500,000 $80,700,000 $133,100,000 Articles for the army and navy 600,000 27,000,000 115,900,000 Chemicals, drugs, dyes, etc 11,100,000 13,100,000 23,200,000 Cotton, and manufacture of 21,100,000 24,400,000 41,300,000 Provisions 4,700,000 7,000,000 19,200,000 l These great increases in the total amounts were almost entirely from the United States, thus materially in- creasing the proportion obtained from that country. Thus $114,400,000 of the $115,900,000 of the articles for the army and navy came from the United States. In the case of chemicals, drugs and dyes, the proportion from the United States rose from sixty-two in 1915 to seventy-six in 1916 and to seventy-seven in 1917. In the case of cottons in 1915 the percentage obtained from the United States was forty-seven, while in 1916 it rose to sixty-two, and in the following year to sixty-three. In the case of provisions, the percentage from the United States rose from sixty- three in 1915 to ninety- three in 1916 and to ninety-seven in 1917. Among 1 Trade and Commerce Monthly Report for Jan., 1917, p. vi. 30 EARLY ECONOMIC EFFECTS OF other articles in which there was considerable increase in imports during the war, the greater part of which came from the United States, may be mentioned beans, corn, automobiles, sugar, silks, furs, woolens, fancy articles, fish, hides and skins, leather and manufactures, glass and manufactures, paints and colors, and cocoa. 1 Of the trade with other countries, which has been greatly altered, that with the enemy powers, it goes without saying, has been almost completely suspended. This trade before the outbreak of the war was chiefly with Germany; the imports from that country amount- ing in the last two years before the war to about $14,500,000 annually, while the imports from Austria ran from $1,600,000 to $2,600,000 in the same years. There was also about $500,000 of import trade from Turkey. The trade with the other Balkan allies of Germany was quite insignificant. The exports to Germany ran from $3,000,000 to $4,000,000 a year and to Austria and Turkey never amounted to $500,000. The total trade with the enemy for the three years before the war was as follows: 1912 1913 1914 Total imports from enemy countries.. $13,151,000 $16,682,000 $17,803,000 Total exports of Canadian products to enemy countries 3,659,000 3,228,000 4,881,000 2 It will be recognized that the total cessation of this trade was not of much consequence to Canada, especially as the goods involved could be, as a rule, readily obtained elsewhere, and the market for Canadian exports, except as to agricultural implements, has been greatly extended elsewhere. The chief lines of import from the enemy countries were drugs and dyes from Germany, running from two-thirds to a million dollars, also earthenware, china, machinery, iron and steel goods, settlers' effects, cotton manufactures, and woolen goods. In the matter of the imports of textiles generally, 1 Compiled from various sections of Trade and Commerce Report, 1916. 2 Trade and Commerce Report, 1916, Part I, pp. 40-43. THE WAR UPON CANADA 31 Germany was only sixth on the list, coming after France, Switzerland, and India. Other articles in much smaller quantities were sugar, graniteware, zinc, spelter, paints and varnishes, and perfumery. Austria sent much the same articles, though in much smaller quantities, with the exception of silks. The Canadian exports to Germany and Austria were chiefly wheat, flour, fish, some meats, and agricultural implements, the latter furnishing about one-fourth of the total export. 1 As already indicated, no great disturbance in Canadian trade resulted from the breaking of trade relations with the enemy. In the case of the other countries we may note, first, the changes in our trade relations with the chief Euro- pean Allies, France, Russia, Italy, and Belgium. In the case of France the imports, which amounted to about $14,500,000 before the war, fell to $8,250,000 in 1914-15, and to $5,700,000 in the first full year of the war, 2 but have revived to the amount of $5,981,000 for the eleven months to February, 1917. 3 On the other hand, exports to France, which had been running from $2,100,000 to $3,800,000 before the war, suddenly expanded to $14,- 500,000 during the year when the war broke out, rising to $36,000,000 for the first full year of the war, 1915-16, 4 and to $57,000,000 for the eleven months to February, 1917. 5 The special exports to France consist, in the order of their importance, of oats, flour, wheat, hay, harness and saddlery, beef and fish. 6 Imports from Russia had not amounted to the full million even in the best year before the war and fell below half a million in 1913-14 and as low as $103,000 in 1915 and $124,000 in 1916. On the other hand, the exports to Russia, which before the war consisted almost entirely 1 Compiled from various sections of the Trade and Commerce Report, 1916. * Trade and Commerce Report, 1916, Part I, pp. 40-41. * Trade and Commerce Monthly Report, Feb., 1917, p. 1721. * Trade and Commerce Report, 1916, Part I, pp. 40-41. 1 Trade and Commerce Monthly Report, Feb., 1917, p. 1721. * Trade and Commerce Report, 1916. Various sections. 32 of agricultural implements, expanded considerably after the outbreak of the war. Large quantities of railroad equipment , as also considerable harness and saddlery during the first year of the war were sent to Russia. Thus the exports which before the war had not risen above $2,100,000 expanded to $6,000,000 in 1915 and to $7,000,000 in 1916. 1 Imports from Italy had risen to $2,100,000 in 1913-14, but fell off the following year to $1,500,000 and to $966,000 for 1915-16. They revived, however, to over $1,000,000 during the eleven months to February, 1917. On the other hand, the exports to Italy, which had not exceeded $655,000 before the war, increased to $4,800,000 in 1915-16, 2 this being part of the wheat commandeered by the Canadian government in the autumn of 1915. Belgian trade has practically vanished since the outbreak of the war except for goods sent on charitable account, especially in the first year of the war. 1 Trade and Commerce Report, 1916. Various sections. 3 Ibid., Part I, pp. 42-43. THE EARLY EFFECTS OF THE EUROPEAN WAR UPON THE FINANCE, COMMERCE, AND INDUSTRY OF CHILE EDITOR'S PREFACE THIS study of the first effects of the European War on Chile was made by Dr. L. S. Rowe, of the University of Pennsylvania, who spent two months in the country for the purpose. Dr. Rowe needs no introduction. He is well known in both North and South America and has been long recognized as an authority on Pan American relations and policy. His knowledge of the people and the language of Chile makes it peculiarly fitting for him to prepare such a report. Dr. Rowe's study shows that trade, transportation, labor conditions, and finance in Chile all suffered. As Dr. Rowe remarks, " The widespread suffering caused throughout Chile by reason of the European conflict is but another indication of how deeply the vital interests of the republics of America have been affected. Not only were government finances seriously impaired but almost every branch of industrial life suffered a severe shock." While it is true that the European War at its out- break produced serious effects on the economic life of Chile, as, indeed, of other South American countries, some of the evil results were soon overcome. Moreover, some of the immediate effects of the war were good rather than bad. In all cases we find reported, at first, stoppage of industry, trade and commerce, and dis- organization of finance and labor. But readjustment soon took place, in some cases on a healthier basis. Bad credit practices have been destroyed; desirable retrench- ment in public expenditures has been in some cases enforced. Trade losses in one direction have been made up in many instances by gains in other directions; and, 85 36 EDITOR'S PREFACE in some cases perhaps, more natural routes and relations have been established. Some of these advantages will undoubtedly be lasting. Very likely some of the main currents of trade will be permanently altered and domestic industry will un- doubtedly be stimulated. In so far as this stimulation leads to greater use at home of the immense natural resources of South American countries it will be a benefit to their people as well as to the rest of the world. ' It is believed that this study, in spite of the fact that it was written two and one-half years ago, will be of interest in connection with that by Senor Vildesola on Chile and the European War., published by the Endow- ment in its Division of Intercourse and Education. The reader must remember that it was written soon after the outbreak of the European War and that the figures are those of that period. It is believed, however, that the material will be of value as indicating the immediate effect at the outbreak of the war on the commerce, finances, and industries of Chile. DAVID KINLEY, Editor. FOREWORD THE material contained in this report was collated dur- ing the course of a visit to Chile in the summer of 1915. The purpose of the Carnegie Endowment was to secure a series of studies setting forth the effect of the European War on certain of the countries of South America. It is important in reading this report to bear in mind that its purpose is to explain the immediate effects of the out- break of the European War on the finances, commerce and industry of Chile. The report was submitted to the Endowment late in 1915. The period that has elapsed since its preparation has witnessed marked changes in the financial and industrial situation of Chile. The rapid rise in the price of nitrate and copper has brought these indus- tries to the highest level of prosperity. The situation in 1918 is in marked contrast with that which prevailed im- mediately after the outbreak of the war. L. S. ROWE. University of Pennsylvania, February, 1918. CONTENTS CHAPTER PAGE I. THE ECONOMIC AND PHYSICAL BACKGROUND 39 A. THE NITEATE AND MINERAL REGION OF THE NORTH 41 B. THE AGRICULTURAL CENTRAL DISTRICT 43 C. THE SOUTHERN DISTRICT . . . 46 II. THE INDUSTRIAL, COMMERCIAL, AND FINAN- CIAL SITUATION IMMEDIATELY PRECEDING THE WAR . . . -.' 47 III. EFFECT OF THE WAR ON NATIONAL FINANCES 49 IV. EFFECT OF THE WAR ON CURRENCY AND BANKING 56 V. EFFECT OF THE WAR ON COMMERCE AND IN- DUSTRY 63 THE COPPER INDUSTRY 66 AGRICULTURE 67 DOMESTIC AND INTERNATIONAL TRADE . 67 EMERGENCY MEASURES ADOPTED TO EN- ABLE MERCHANTS TO MEET CONDITIONS CREATED BY THE WAR 70 TRANSPORTATION FACILITIES AS AFFECTED BY THE WAR 72 LABOR CONDITIONS AS AFFECTED BY THE WAR 75 CONCLUSION 85 APPENDICES . . . * . . 87 THE EARLY EFFECTS OF THE EUROPEAN WAR UPON THE FINANCE, COMMERCE, AND INDUSTRY OF CHILE CHAPTER I THE ECONOMIC AND PHYSICAL BACKGROUND THE economic and financial condition of Chile before and after the outbreak of the European War can best be understood by keeping constantly in mind the peculiar conditions of physical environment which have given to the country an exceptional position amongst the South American republics. In physical conformation, Chile is a long, narrow country stretching from latitude 17 15' south to 55 59' south, a distance of 2,535 miles. Compared with its enormous coast line, the country is exceedingly narrow, ranging from a width of 102 miles (latitude 31 30') to 210 miles (latitude 46 30'). The population is massed in the central district, the far southern section being practically uninhabited and the population of the arid northern district being limited to the mining population of the nitrate, copper, iron, and borax fields. Inasmuch as there is little immigration into Chile, the increase of population is due almost entirely to the excess of births over deaths. It is true that the nitrate fields of the North attract a certain number of Bolivian laborers, but their number remains fairly constant, diminishing somewhat in periods of depression and increasing in periods of prosperity. 40 THE EARLY EFFECTS OF The growth of population in Chile has been as follows: 1835 1,010,332 1843 1,083,801 1854 1,439,120 1865 1,819,223 1875 2,075,971 1885 2,527,300 1895 2,712,145 1907 3,249,279 1913 3,551,703 1914 3,596,541 The distribution of population among the twenty-four provinces of the Republic is as follows : Provinces Area in Bqna kilometer I Population Population p square kiloui Tacna . . . 23,958 28,748 1.2 Tarapaca" . , Antofagasta Atacama . . . ... 46,957 ...120,718 . . . 79,585 110,036 113,323 63,968 2.3 0.9 0.8 Coquimbo . . Aconcagua . Valparaiso . Santiago . . . . .. 34,862 ... 14,210 . . . 5,059 . . . 14,672 175,021 128,486 281,385 516,870 5.0 9.0 55.6 35.2 O'Higgins . . Colchagua . Curic6 .... . . . 6,066 . . . 9,948 . . . 7,714 92,339 159,030 107,095 15.2 15.9 13.8 Talca . . . 9,948 131,957 13.2 Linares .... 10,210 109,363 10.7 Maule . . . 6,410 110,316 17.2 Nuble . .' . . . 8,823 166,245 18.8 Concepci6n . Arauco . . . 8,422 . . . 6,366 216,994 61,538 25.8 9.6 Bfobfo . 13,587 97,968 7.2 Malleco . . . 7,701 109,775 14.2 Cautfn . . . 15^105 139,553 9.2 Valdivia 21,637 118,277 5.5 Llanquihue . Chilo6 ... 91,676 22,255 105,043 88,619 1.1 4.0 Magallanes . ...171,438 17,330 0.1 S G bi 757,366 3,249,279 1 ll | J3 a, 3 So m I *- T-l 191 rt ft 44,291 1.8 15,543 70.2 119,714 2.5 9,678 16.2 122,354 1.0 9,031 14.8 65,875 0.8 1,907 5.8 181,242 5.2 6,221 6.9 135,558 9.5 7,072 10.4 311,809 61.6 30,424 19.5 566,787 38.6 49,917 17.6 95,524 15.7 3,185 6.7 159,676 16.0 646 0.8 108,791 14.1 1,696 3.1 133,235 13.4 1,278 1.9 113,365 11.1 4,002 7.1 119,107 18.6 8,791 14.8 172,244 19.5 5,999 7.0 230,442 27.4 13,448 11.7 62,732 9.8 1,194 3.8 102,170 7.5 4,202 8.2 115,177 14.9 5,402 9.4 166,895 11.0 27,342 32.8 141,298 6.5 23,021 32.6 118,973 1.3 13,930 23.4 93,684 4.2 5,065 10.8 24,374 0.1 7,044 57.8 4.3 3,505,317 4.6 256,038 14.6 The laboring population of Chile is, in the main, a mixture of Spanish and Indian blood, whereas the ruling classes are white, of pure Spanish descent. For purposes of study, the country may best be divided into three zones: THE EUROPEAN WAR UPON CHILE 41 (a) The nitrate and mineral region of the North. (b) The agricultural central district, which also contains important mineral deposits. (c) The vast southern region stretching southward from the Island of Chiloe to the Magellan dis- trict which is, as yet, practically uninhabited and whose resources are almost untouched. A. THE NITRATE AND MINERAL REGION OF THE NORTH The salitre of Chile or Chilean saltpeter (chemically, sodium nitrate [Na NO 3 ]) is found in the district from the Camerones River in the North to Caldera in the South. 1 The nitrate area is, roughly speaking, about 450 miles in length, in an arid region. The deposits are found at from fourteen to twenty miles from the coast at elevations varying from 2,200 to 7,500 feet above sea- level. 2 The importance of nitrate as a national product is readily seen from the fact that it represents nearly eighty per cent in value of the total exports of Chile. The growth of nitrate production has been as follows: Amount in Year Metric Tons 1879 59,344 1889 951,372 1899 1,389,822 1900 2,110,961 1910 2,465,415 1911 2,521,023 1913 2,585,850 1914 2,463,356 In 1913 the nitrate output represented about eighty per cent of the total mineral product of the country. Although nitrate is by far the most important product of this northern district, other mineral products of 1 See South America as an Export Field, by Otto Wilson, U. S. Bureau of Foreign and Domestic Commerce, 1914. ' See Strauss, The Chilean Nitrate Industry, Mining and Scientific Press, San Francisco, Cal., 1914. 42 THE EARLY EFFECTS OF importance are found in the same region. Of these copper ranks first. Iron and borax are found also in considerable quantities. It is to be noted, how- ever, that these minerals are found not only in the northern section but in the central agricultural districts as well. Inasmuch as the most important nitrate fields did not come under Chilean jurisdiction until after the Peruvian War of 1879, as a result of the annexation of the Peruvian provinces of Tarapaca and Atacama and of the Bolivian province of Antofagasta, the preponder- ant position of nitrate is a matter of the last thirty years. The most accurate estimate 1 indicates that during the century 1810-1910 the total production of minerals in Chile was $2,463,500,000. This total was made up as follows : Nitrate $1,235,300,000 Copper 664,292,000 Silver 298,695,000 Coal 114,516,000 Gold 68,084,000 Other Minerals 82,613,000 The latest available official statistics indicate the mineral production in 1913 and 1914 as follows: Product 1913 1914 Nitrate of soda $119,554,485 $106,232,227 Copper 11,389,315 11,790,522 Coal 9,144,580 8,152,095 Borax 2,636,835 1,675,117 Iodine 1,925,400 2,154,444 Silver 523,875 448,757 Chalk 313,710 Sulphur 299,115 450,360 Gold 286,680 208,320 Salt 256,695 325,562 Iron Ore 105,750 476,292 Lime 69,040 2 304,127 Lead 2,370 2,063 Zinc 405 65 Total $146,508,255 $132,219,921 1 See Wilson, op. cit., p. 110. 1 Including figures for chalk. THE EUROPEAN WAR UPON CHILE 43 B. THE AGRICULTURAL CENTRAL DISTRICT While the peculiar physical conformation of Chile means a relatively restricted arable area, the importance of the agricultural interests is such as to give to Chile the character of an agricultural country. In fact, prior to the annexation of the northern provinces in 1883, this was practically the exclusive interest of the country. In spite of this fact, but 1.6 per cent of the total area of the country is under cultivation, 3,047,000 acres out of a total of 187,148,000. 1 It is true that this area can be greatly extended, but in the north central section such extension involves the construction of extensive irrigation works. At present about 2,470,000 acres are under irrigation, but it is estimated that the irrigation system can readily be extended to nearly five million additional acres. A law passed December 9, 1914, authorizes the execution of four plans known as the Aconcagua, Maule, Melado, and Laja projects. The assent of the property owners affected has been received, but the financial crisis precipitated by the European War has temporarily post- poned the execution of the plan. In the south central district, where the rainfall is adequate at all seasons, the greatest obstacle to more extended cultivation has been the absence of immigration. The Chilean agricultural laborer has, for generations, been kept in a condition of economic dependence. In addition to housing and a small ration of from one to two and one-fifth pounds of beans per day, his money wage ranges from twenty to forty cents per day. The depreciating paper cur- rency of the country has served to make his lot more and more difficult. With a relatively low wage scale, the agricultural laborer is not in a position to become a small farmer. In fact, with the exception of relatively restricted sections in the provinces of Valdivia and Con- 1 Wilson, op. clt., p. 114. 44 THE EARLY EFFECTS OF cepcion, the system of large landed estates prevails. These conditions have discouraged immigration. In this section all the cereals and fruits of the temperate zone are cultivated, as well as some of the sub-tropical fruits, such as the orange and the lemon. Cattle raising is also an important factor in the wealth of the region. The growing of grapes for the making of wine has been for many years one of the leading industries of the central district. A little over 140,000 acres are now in vineyards. In 1912 the leading crops were as follows: Metric Tons Cereals and Vegetables 1912 Wheat 615,023 Barley 70,786 Oats 49,065 Corn 38,774 Potatoes 262,795 Beans 45,000 Carrots 12,700 Alfalfa hay 262,795 Clover hay 10,050 Tobacco 2,303 Clover seed 720 Hemp fibre 272 In addition to the above products, it is essential to mention the lumber industry, which is yet in its infancy in Chile but which promises to assume great importance owing to the large quantities of excellent timber to be found in the provinces of Valdivia, Llan- quihue, and on the Island of Chiloe. Furthermore, during the last twenty-five years apiculture has assumed large proportions. In 1912 there were 86,000 beehives in Chile, with a total production of 731 tons of honey and 157 tons of wax. 1 Dairy products are also a significant factor. In 1912 there were 195,167 milch cows in Chile, with a total production of 33,300,000 gallons of milk, 1,336 metric tons of butter, and 3,493 metric tons of cheese. It is also in this central district that manufacturing has assumed considerable importance. In fact, almost 1 See Wilson, op. cit., p. 117. THE EUROPEAN WAR UPON CHILE 45 every foreign visitor expresses surprise that the indus- tries of the country have not been developed on a far larger scale. With ample water power, and no lack of coal, iron, and lumber, one would expect Chile to be the leading manufacturing country of South America. Although there has been considerable de- velopment of national industries the great obstacles have been the lack of capital and the absence of an adequate supply of skilled labor. With practically no immigration from Europe, little attempt has been made to develop the industrial capacity of the native laborer. In spite of these difficulties the industrial development of the country has proceeded without interruption during the last twenty-five years. In 1912 the number of manu- facturing establishments, together with capital and out- put, was as follows: 1 Number of Establish- Value of Industry ments Capital Output Flour mills 179 $12,193,434 $14,536,219 Breweries 63 5,S34,031 3,249,423 Tanneries 129 5,116,415 4,936,200 Establishments for the elaboration of wood products other than sawmills.. 134 4,827,576 5,044,088 Sawmills 296 2,931,287 1,701,626 Sugar refineries 8 4,327,917 4,933,736 Printing and binding establishments... 302 4,369,780 6,025,810 Shoe factories 45 3,498,020 4,394,493 Glass factories 3 583,176 457,995 Spaghetti factories 40 892,497 783,176 Cracker factories 12 379,145 645,057 Fruit and vegetable canneries 23 1,495,839 603,975 Meat and sea food packing establish- ments 6 158,000 175,090 Shipbuilding and repair 32 929,257 556,518 Hat factories 11 1,090,942 829,132 Corset factories 5 273,906 364,210 Cement factories 3 726,333 450,500 Textile factories 18 2,409,427 2,097,426 Agricultural and industrial machine shops 2 763,333 633,333 Bed and cot factories 4 192,652 607,574 Powder factories 9 191,072 138,447 Soap and candle factories 66 1.738,732 2,047,497 Total 1,390 $54,422,771 $55,211,525 1 See Sinopsis Estadistica de la Republica de Chile. Oficina Central de Estadfstica, 1914. 46 EFFECTS OF WAR UPON CHILE While some manufacturing is carried on in all parts of the country the great centers of industrial activity are the provinces of Santiago, Valparaiso, and Valdivia. The labor supply is almost exclusively native. The rate of wages is exceedingly low and the position of the labor classes has been unfavorably affected by the depreciating paper currency. For instance, in the textile industry the average wage of the 2,766 operatives is fifty-five cents per day. 1 The government has made every effort to encourage national industries, extending protective tariffs and, in some cases, offering further special finan- cial inducements. The central district, now under consideration, in addition to its agricultural and industrial position, also possesses important mineral deposits. One of the greatest copper mines of Chile is situated in the heart of this region. C. THE SOUTHERN DISTRICT With the exception of the agricultural and lumber interests on the Island of Chiloe and the great sheep ranges of the Magellan territory the resources of the far southern district may be said to be untouched. At present the population of the Island of Chiloe is 94,714 and of the entire Magellan territory 22,744. Although this district is acquiring increasing importance, it repre- sents at the present time but a small part of the total production of the country. To develop its resources large investments of capital will be necessary. 1 Wilson, op. cit., p. 119. This was true in 1915. Since then the wages of industrial laborers have increased considerably. CHAPTER II THE INDUSTRIAL, COMMERCIAL, AND FI- NANCIAL SITUATION IMMEDIATELY PRECEDING THE WAR ALTHOUGH Chile, like all the countries of South America, felt the effects of the industrial and financial depression which hung over Europe during the year 1913, they were less noticeable than in the Argentine and in Brazil. This was due, in large measure, to the fact that the spirit of speculation which led to inflated values in both of those countries during the period of 1910 to 1913 did not extend to Chile. There the leading influence during the period immediately preceding the war was the declining price of nitrate at once the most important article of export (eighty per cent of the total exports) and the most important source of national revenue. 1 Although the production of nitrate had not been curtailed, profits were rapidly declining and plans were formulated to reorganize, under government auspices, the combination of nitrate producers which had been operated successfully for a number of years but which was finally dissolved because of lack of cooperation. The condition of the nitrate industry reacted unfav- orably on the general economic and financial condition of the country. The year 1913 was marked by a restriction of bank credits which accentuated the business depression. Between June 30, 1913, and June 30, 1914, bank loans declined from $115,085,956 to $111,967,636 1 The nitrate export tax yields thirty-five per cent of total national revenues. 47 48 EFFECTS OF WAR UPON CHILE (American gold). During this same period bank de- posits declined from $91,240,000 to $87,300,000. In spite of these unfavorable conditions the country cannot be said to have been in a period of pronounced depression as was the case in Argentine and in Brazil in 1912 and 1913. It is true that but few new enter- prises were being floated, banks were exercising greater care in extending credits, and merchants were showing greater caution and conservatism in their purchases. Everybody was awaiting an improvement in nitrate prices, which alone would have been sufficient to place the country on the high road to prosperity. Further- more, there were indications of an improvement in the price of copper, the low price of which had been for a long time an unfavorable factor in the Chilean industrial situation. At this moment of expectancy, the European War came as a crushing blow, bringing with it a series of consequences which seriously embarrassed the national treasury and threatened ruin and disaster to the indus- tries of the country. CHAPTER III EFFECT OF THE WAR ON NATIONAL FINANCES IN order to understand the unfortunate effects of the war on Chilean finances, it is important to bear in mind the extraordinary and exceptional fiscal system of the country. Prior to the war of 1879 with Peru and Bolivia, the Chilean fiscal system was similar in most respects to those of the other South American countries. In addition to the customs revenues, the main sources of income to the national treasury were a general property tax and certain internal revenue taxes. As a result of this war, Chile took from Bolivia the province of Anto- fagasta and from Peru the provinces of Atacama and Tarapaca, leaving pending for subsequent determination the status of Tacna-Arica. The annexation of these great nitrate provinces com- pletely changed the fiscal system of the country. Pos- sessing a practical monopoly of the nitrate deposits of the world, the government was able to impose a high export tax without danger of hampering the development of the industry. This tax proved so productive that it was possible either to dispense with other forms of taxation or reduce the rates to so low a point as to relieve the property owners of the greater part of their burden. From a country with a normal fiscal system, Chile was soon transformed into a country occupying the exceptional position of granting to its inhabitants 49 60 THE EARLY EFFECTS OF practical immunity from general taxes on real and per- sonal property. While at first glance this may seem an advantage, it involved some serious dangers, the effects of which soon became apparent. The enormous and constantly in- creasing returns from the nitrate export tax and the consequent diminution of all direct taxes, relieved the government of that control by public opinion which is the immediate and direct result of the taxpayers' vigi- lance. The annual budget increased rapidly, due to a wide extension of government activities. The govern- ment embarked upon an elaborate system of state rail- roads, which, whatever their immediate strategic value or ultimate commercial importance, involved the necessity of meeting a large annual deficit. This situation, while profundly affecting the or- ganization of the Chilean administrative system, did not involve any financial difficulties so long as the growing nitrate industry assured a constantly increasing national revenue. With no elastic internal revenue system to fall back upon, it was evident to the lead- ing financiers of the country that any serious decline in the returns from the nitrate tax would mean disaster to the national treasury. The years 1911, 1912, and 1913 brought a foretaste of what was impending. The heavy drain on the financial resources of the country, due to the unusually large deficits in the state railway budget, resulted in deficits which in 1912 amounted to $4,700,000 American gold and in 1913 to $2,000,000. It was claimed, however, that this deficit was temporary; the state railway administration holding out the constant hope that the new lines soon would be put on a paying basis. With the outbreak of the war the most important source of national revenue practically disappeared. The average monthly production from January 1 to August 1, 1914, was 5,404,729 quintals of 101.4 pounds. The THE EUROPEAN WAR UPON CHILE 51 rapid decline in production is seen from the following table: 1 Production Month (in quintals of 101.4 Ibs.) August, 1914 4,830,233 September, 1914 2,856,600 October, 1914 2,865,494 November, 1914 2,659,875 December, 1914 2,428,759 January, 1915 2,082,549 The price of nitrate dropped from eight shillings per quintal in July, 1914, to six shillings four pence in September, and soon thereafter to five shillings eight pence. Although these prices were quoted, there was practically no market. Contemporaneous with the rapid decline in price and adding still further to the difficulties of the situation came an extraordinary rise in freight rates which made exportation practically impossible. The sudden change that took place is made clear in the following table: Exportation Exportation Jan. to July, iucl. August to Dec., incl. Quintals (101.4 Ibs.) 1913 30,481,463 29,047,647 1914 30,538,756 9,608,707 The decline in national revenues from this source alone has been as follows: REVENUE FROM NITRATE EXPORT TAX Dollars American Gold 1913 32,446,303 1914 23,369,471 Another element in the financial situation which served to place the public treasury in a difficult position was the rapid decline in customs revenues. With the out- break of the European War the import trade of Chile came to a standstill. This was due in part to the temporary paralyzation of steamship communication, although the permanent underlying cause was the cut- ting off of European credits and the inability of local 1 Commerce Reports, March 29, 1915. 52 THE EARLY EFFECTS OF merchants to meet the new trade conditions created by the war. The .Chilean merchants were accustomed to a system of long term credits, and the sudden change to the requirements of cash transactions crippled the purchasing power of most of the commercial houses. It is not surprising, therefore, to find that the customs receipts for 1914 were $7,138,558 less than those of 1913, i.e., $16,417,136 as compared with $23,555,694. That this decline continued during the year 1915 is shown by the fact that whereas the customs receipts during the first three months of 1913 (January to March inclusive) were $5,039,123 the receipts during the same period of 1915 were less than half this amount, $2,353,658. Confronted with the prospect of inability to meet the ordinary requirements of the public administration, the government was compelled to have recourse to a series of emergency measures of which the most important were as follows: 1 1. Law of March 1, 1915, reducing by from five to fifteen per cent salaries of officials of the national gov- ernment as well as all pensions. 2. Law of March 1, 1915, imposing the following export tax on borax : (a) During the first two years after enactment of the law $2.50 American gold per metric ton. (b) Thereafter $3.65 per metric ton. 3. Law of February 5, 1915, establishing an in- heritance tax: (a) Of from one to four per cent on bequests to lineal heirs. (b) Of five per cent on all collateral inheritances. (c) Of ten per cent on bequests to persons bearing no blood relation to the testator. All bequests to the Church are exempt from this tax. 1 The further emergency measures intended to help the banking situation and to assist the nitrate industry will be discussed in a subsequent section. THE EUROPEAN WAR UPON CHILE 53 4. Law of March 1, 1915, establishing a national general property tax of from two to four mills. Here- tofore the general property tax has been exclusively municipal and the new national tax is based entirely on the municipal tax, being collected as a surtax on the assessments made for municipal taxation. The law provides that the national tax shall be two mills on real estate in Santiago, Valparaiso, Vina del Mar, and all other cities in which a special local paving and drainage tax exists, and four mills on real estate in all other sec- tions of the Republic. The national rate on personal property is fixed at four mills in all parts of the country. While these additional taxes will add considerably to the national revenues, it is not likely that they will be sufficient to balance the budget. Fortunately, the last few months 1 have witnessed a notable revival of the nitrate industry. The large demand of the powder manufacturers has advanced the price to a point higher than before the outbreak of the war. Exportation has again assumed normal proportions and there is every indication that it will soon exceed the normal. The result is that the revenue from the export tax will be considerably larger than was estimated in the budget. The indications are therefore that the deficit for the year 1915 which seemed inevitable at the opening of the year will either disappear or will be greatly reduced. It probably will be necessary to fund the standing defi- cits of the preceding years by means of a loan, although the government fully realizes that owing to the high prevailing rates of interest the conditions are unfavorable to any funding operations. The national debt is classified into two distinct cate- gories, the " external " and the " internal " debt. The "external" debt is as follows: 1 This was written in 1915. THE EARLY EFFECTS OF Rate of Year interest Per cent 1885 4% 1886 4% 1887 4% 1889 4% Sinking Original fund Name of loan amount Per cent , Pounds % Chilean Government 4% per cent loans of 1885. . 808,900 % Chilean Government 4^ per cent loans of 1886. . 6,010.000 % Chilean Government 4% per cent loan of 1887.. 1,160,200 % Chilean Government 4% per cent gold loan of 1889 1,546,400 Amount outstanding Sterling > 531,100 4,206,700 817,500 1,223,640 Issue price 89 971/2 101% 1892 5 1892 6 % Chilean Government 5 per cent loan of 1892.. 1,800,000 1 Chilean Government 6 per cent international loan of 1892 149,000 1,447,300 90,520 95 1893 4% % Chilean Government 4% per cent bonds of 1893. . 630,COO 495,700 1895 4% 1896 5 1896 5% i& Chilean Government 4% per cent loans of 1895 . . 2,000,000 % Chilean Government 4^ per cent loans of 1896.. 4,000,000 2 Penuelas loan 200,000 1,661,300 3,436,700 74,400 951/3 1900 4y 2 % Chilean Government 4y2 per cent Coquimbo Rail- way bonds 265,000 222,160 1905 5 1906 4y 2 1 Chilean Government 5 per cent loan of 1905.. 1,350,000 2 Chilean Government 4y 2 per cent gold loan of 1906 3,700,000 1,256,700 2,981,220 95^ 9414 1909 5 1910 5 1911 5 % Chilean Government 5 per cent loan of 1909.. 3,000,000 1 Chilean Government 5 per cent loan of 1910.. 2,600,000 1 Chilean Government 5 per cent loan of 1911, first series 4,905,000 2,934,700 2,517,040 4,802,180 9ey a 99 98% 1911 5 1 Chilean Government 5 per cent loan of 1911, second series 5,000,000 4,948,200 9sy, 1911 4% iy 2 Chilean Government 4y 3 per cent bonds (Copiapo Railway bonds) 275,000 265,280 Total external debt of Chilean Government ...39,399,500 33,912,340 To the above there should be added 2,000,000 pounds sterling of treasury notes floated in London. In ad- dition, the government has guaranteed the following: (a) A loan of the Iron Smelting Co. of Corral, for 525,000 pounds sterling. (b) The bonds issued by the Transandine Railway Co. amounting to 1,450,000 pounds sterling. THE EUROPEAN WAR UPON CHILE 55 (c) The bonds issued by the Longitudinal Railway Contracting Co. amounting to about 7,000,000 pounds sterling. The so-called "internal" debt is made up as follows: Gold Pesos of 18d. 1. Obligations incurred in Treaty of Peace with Bolivia 5,822,535.00 Paper Pesos 2. Municipal indebtedness assumed by the national government l 9,232.28 3. Censos Redimidos 30,450,431.46 4. Internal loan of 1837 (3%) 1,594,772.06 5. Paper money (against which a conversion fund is deposited in Europe) 150,000,000.00 6. Early issues of paper money 863,803.00 1 The total " external " indebtedness of Chilean municipalities amounts to 800,000. CHAPTER IV EFFECT OF THE WAR ON CURRENCY AND BANKING THIS subject is so closely related to the question of government finances that the discussion of the one necessarily involves the other. The Chilean currency system is based on the gold peso, whose nominal value is 18 pence or 36.5 cents American gold. Until 1898 the convertibility of the peso was maintained; but since that time a system of inconvertible paper money with a fluctuating value has prevailed. The extent of these fluctuations has been as follows: VALUE OF CHILEAN GOLD PESO IN ENGLISH PENCE (Nominal Value 18d.) Average value in Average value in English Pence English Pence 1899 ................ 14% 1906 ................ 14% 1900 ................ 16% . 1907 ................ 123/4 1901 ................ 15% 1908 ................ 9% 1902 ................ 15% 6 1909 ................ 1025^ 2 1903 ................ 16% 1910 ................ 102% 2 1904 ................ 16% 1911 ................ 10% 1905 ................ 15% 1912 ................ 10y s During the last two years the fluctuations have been as follows: VALUE OF CHILEAN PAPER PESO IN ENGLISH PENCE 1913 1914 d. d. January ..................... February ............. 1%6 91 %2 March... ................... 10%2 April ................. May ..................... :::: 9% June ........................ 92% 2 Hie July ......................... 9%6 9% August ...................... 91 Me September ................... 9% 6 October ...................... 91%-j November ................... 9% 2 7% 6 December .................... 9i% 2 7% 6 Average for year ......... 9% 56 EFFECTS OF WAR UPON CHILE 57 This constantly fluctuating currency has been a serious obstacle to the development of Chilean commerce as well as a constant discouragement to the investment of foreign capital. The uncertainties of the situation, the constant danger of finding profits swept away by reason of falling exchange have not only been a handicap to commercial transactions but have introduced an element of speculation into international trade which has been harmful to the country. Commission houses in Chile in order to protect themselves against losses due to fluc- tuations in exchange are compelled to go into the market and purchase Chilean exchange to the amount of their sales for delivery ninety days from date, i.e. when pay- ment for the goods they have sold becomes due. During the last fifteen years the leading problem con- fronting the Chilean government has been the reestablish- ment of the convertibility of the paper peso. A " con- version fund," which today amounts to $38,495,390 in American gold, has been maintained in Europe. In- numerable projects have received the consideration of the government, but there has always been an influential element the large landowners who while publicly fav- oring a conversion plan are in reality in favor of main- taining the present system, which permits them, for all exported products, to receive payment in gold, while they are paying their laborers in a depreciated paper currency. During the last ten years, however, the laboring classes have been acquiring some little influence in public affairs. They have seen with increasing clearness that they are the main sufferers by reason of a depreciating currency their money wages remaining practically the same, while the purchasing power is constantly declining. After a long series of discouraging postponements, a plan was finally evolved by which the convertibility of the paper peso was to be reestablished in 1915. This plan provided for the establishment of an institution to be known as the " Caja de Conversion " to be managed 58 THE EARLY EFFECTS OF by a board of six directors to be appointed by the President of the Republic, two to be approved by the Senate and two by the Chamber of Deputies. Under the plan as approved by the Senate, the conversion was to be made on the basis of twelve pence gold to the peso and a fixed rate of exchange to be maintained at that point thereafter. In the Chamber of Deputies this rate was reduced to ten pence. In spite of this deadlock, the conditions seemed favor- able to the carrying out of some definite plan in 1915. The financial crisis precipitated by the European War put an immediate end to all thought of an early solution of the problem. Congress immediately postponed until 1917 the date at which the convertibility of paper money should be established. Unless financial conditions both in Chile and in the world at large improve considerably during the coming year it is likely that Chile will be compelled to postpone for a further period the reform for which her merchants have been waiting so long the establishment of a stable currency system. In spite of the fact that the " Conversion Fund " amounts to more than twelve pence per peso in circu- lation, the effect of the war was to cause a rapid decline of exchange to less than eight pence. Although it has recovered somewhat, the prevailing rate during the first six months of 1915 was less than nine pence. This has been due in part to the unfavorable trade balance and in part to the speculative manipulation of exchange. The amount of paper currency in circulation at the end of 1913 was 150,863,803.50 pesos. In Chile, as in all the other countries of South America, the outbreak of the war led to a financial panic which caused heavy withdrawals of bank deposits. In order to avert disaster the first step taken by the banks was to avail themselves of the provisions of the law of May 11, 1912, which created a " Central Office of Issue " and authorized the banks to receive paper money in exchange THE EUROPEAN WAR UPON CHILE 59 for gold deposited at the rate of one peso paper for every twelve pence. The extent to which use was made of this emergency circulation is evidenced by the fact that on August 3, 1914, at the height of the financial stress, 33,000,000 pesos were issued to three local banks in Santiago. Of the total emission of 55,481,590 pesos issued under this law a considerable portion had been retired, so that on July 31, 1915, but 25,820,000 pesos remained in circulation. As a further measure to relieve the strain caused by the European War on the country's banking system, the Congress passed a law (August 3, 1914) providing for the issuance of treasury notes by the government. The legislation relating to this subject was intended not only to relieve the banking situation, but also to assist the nitrate producers, the hope of the government being that by coming to their aid, it would be possible to induce them to continue operations and thus prevent the com- plete paralyzation of the industry and the widespread misery which would be entailed in throwing out of employment sixty or seventy thousand men. The emergency laws relating to this subject were passed on August 3 and August 12, 1914, and are known as laws Nos. 2912 and 2918. The first relates to treasury notes issued to the banks and authorizes the President of the Republic to issue for a period of one year treasury notes of denominations of five thousand, one thousand, and five hundred pesos Chilean currency. These notes are not to bear interest but are legal tender for all obligations payable in paper currency. Under the provisions of the law banks may secure these treasury notes under the following conditions : First. Banks desiring these notes may secure them by depositing with the government mortgage " cedulas," a form of bond issued by the agricultural credit institutions. 60 THE EARLY EFFECTS OF Notes to the extent of ninety per cent of the market value of such " cedulas " will be issued. Second. For the use of these notes the banks are re- quired to pay to the government a rate of interest three per cent less than the interest charged by such banks to their debtors. The possibility of increasing their reserves through these treasury notes contributed materially toward en- abling the banks to tide over the crisis caused by the withdrawal of funds by depositors. From August 12, 1914, to July 31, 1915, the government issued to the banks treasury notes to the amount of 38,554,500 pesos. Of this total the banks have returned for cancellation 33,100,000 pesos, leaving a balance of 5,454,500 pesos outstanding. Notes of a similar character were issued to producers of nitrate. The conditions of this issue will be described in considering the effect of the European War on com- merce and industry in Chile. Suffice it to say in this connection that under authority conferred by the law of August 12, 1914, the government has issued to pro- ducers of nitrate treasury notes amounting to 39,300,500 pesos. Of this total 32,085,000 pesos have been returned for cancellation, leaving a balance of 7,215,500 pesos. Thus the total of treasury notes still in circulation on July 31, 1915, amounted to 12,670,000 pesos. The effect of the European War on the banking situation in Chile as compared with that produced in the other countries of South America leads one to the con- clusion that, relatively speaking, the Chilean banks suf- fered but little. The fact that the country's currency is on a paper basis served to lessen the shock. With- drawals of gold by foreign banks were met by the emergency issues described above. The paper currency enabled the banks to meet the threatened contraction with comparative ease. But one institution, the Banco THE EUROPEAN WAR UPON CHILE 61 Italiano, was compelled to close its doors and the general opinion prevailing in financial circles is that the failure was not due primarily to the war. The most serious aspect of the banking situation was the effect on the relations existing between the banks and the general public. Commerce and industry suffered severely from the sudden restriction of credits. While the banks took this step as a measure of self- protection, the immediate effect was to bring about the paralyzation of trade. Since the beginning of 1915 there has been a marked tendency toward a more liberal policy in the extension of bank credits. The improvement of the nitrate situation has had a buoyant effect on the banks and has led them to grant facilities which they consistently refused during the latter half of 1914. The extent to which credit restriction was carried can be seen from a comparison of the bank statements for 1913 and 1914 respectively: CHILEAN BANKS 1913 1914 Paper Pesos Gold Pesos 18d. Paper Pesos Gold Pesos 18d. Deposits 316,055,823.55 33,041,352.93 313,138,171.18 40,341,725 Capital 142,271,047.00 502,000.00 188,477,340.00 2,121,035 Cash 51,595,617.35 6,759,589.00 76,831,730.00 5,997,985 Discounts, loans and advances 453,318,217.00 25,494,440.00 418,613,893.00 16,715,293 FOREIGN BANKS 1913 1914 Paper Pesos Gold Pesos 18d. Paper Pesos Gold Pesos 18d. Deposits 94,604,919 28,060,408 78,415,724 28,327,621 Capital 16,639,207 8,267,973 27,632,312 3,267,973 Cash 14,853,229 2,004,020 30,011,968 2,222,068 Discounts, loans and advances 137,797,622 31,220,208 93,898,825 32,519,997 From the foregoing table it will be seen that the foreign banks restricted their credits to a far greater extent than the Chilean banks. This was a source of widespread complaint and led to a marked feeling of opposition toward the foreign institutions. In fact, one 62 EFFECTS OF WAR UPON CHILE of the immediate results has been to give renewed force to the agitation for legislation requiring banks to invest or maintain in the country the capital they declare for use in Chile and also limiting their deposits in proportion to their declared local capital. Although it cannot be said that the banking situation has again reached normal conditions, the danger point has been passed and with each month the leading banks are strengthening their position through increasing gold reserves and at the same time extending their usefulness to the community through a more liberal credit policy. As regards the currency situation, there is noticeable a slight tendency toward the improvement of exchange. CHAPTER V EFFECT OF THE WAR ON COMMERCE AND INDUSTRY ALTHOUGH the effects of the general world-wide depression were felt in Chile throughout the year 1913 and during the six months of 1914 immediately pre- ceding the outbreak of the European War, the acuteness of the depression was not so marked as in the other leading countries of South America, notably the Argen- tine, Brazil, and Peru. The main reason for the more favorable situation of Chile has been referred to in a preceding section, viz.: the local situation was not ag- gravated by a reaction against a long period of specu- lative inflation, such as characterized Argentine and Brazilian commercial conditions during the years 1910 to 1913, inclusive. While it is true that world conditions were not favorable either to the nitrate or to the copper market the two great products of Chile the depression was not sufficient to lead to any serious curtailment of production. In fact, during the months of May, June, and July, 1914, there were marked indications of a healthy renewal of business. It was generally expected that the year would end with a record of real improve- ment over 1913. The war came as a blight to all these prospects. The fact that Chile is essentially a " one-product country " and that not only the general prosperity of the country but also the stability of government finances are de- pendent on the conditions of the nitrate market, means that any influence that seriously affects the demand for nitrate immediately reacts throughout the entire country. The European War, at one blow, practically destroyed 63 64 THE EARLY EFFECTS OF the nitrate market, for the time being. Up to the out- break of the war Europe was the great market for this product, as will be seen by examining the export figures for 1913 and 1914. EXPORT OF NITRATE (Metric Tons) 1913 1914 Great Britain 1,004,979 607,022 Germany 629,298 303,334 France 121,472 67,128 Belgium 118,690 74,082 Netherlands 100,379 77,314 Italy 10,684 18,231 United States 630,790 536,799 Other Countries 122,731 162,873 Total 2,739,023 1,846,783 The uncertainties of transportation due to the presence of belligerent fleets in the Pacific completely paralyzed shipping and thus made it impossible to meet even the reduced demands of Europe. The importance of nitrate as a factor in the international trade of Chile is seen from the fact that in 1913 it represented $111,454,397 out of a total export of $142,801,576. The misery entailed on the laboring classes will be discussed in a subsequent section. As regards the nitrate producers they found themselves facing a situation which threatened ruin. During the first six months of 1914 the production of nitrate was 32,148,999 quintals of 101.4 pounds as compared with 30,092,777 quintals during the first six months of 1913. Exportation during the first six months of 1914 was 24,144,211 quintals as compared with 26,922,030 for the same period of 1913. The fol- lowing comparison of production and exportation illus- trates the situation immediately preceding and immedi- ately following the outbreak of the European War. Jan.-July Aug.-Dec. (inclusive) (inclusive) Quintals Quintals Production of nitrate (1913) 35,388,811 37,862,106 Production of nitrate (1914) 39,963,956 15,689,115 Exportation of nitrate (1913) 30,481,463 29,047,647 Exportation of nitrate (1914) 30,538,756 9,608,707 THE EUROPEAN WAR UPON CHILE 65 Not only did prices drop violently but for a time there was practically no market at any price. By Feb- ruary, 1915, the price had declined to five shillings eight pence per quintal and the number of plants in operation was reduced from 134 to 43. The general closing down of the nitrate plants threatened to create a critical labor situation. In normal times about 53,000 laborers are employed in this industry, earning on an average 6.48 Chilean paper pesos per day, which at the then rate of exchange is equivalent to $1.02 American gold. The arid character of the nitrate district makes it im- possible to transfer this labor to other employment in the same region during periods of depression. Further- more, the laborer in the nitrate fields is accustomed to a higher standard of life than the agricultural laborers of the South. As soon as the nitrate plants began to close down the government addressed itself to the problem of transport- ing the laborers to the agricultural provinces. Thirty thousand were thus transferred. We shall have occasion to refer to the results of this transfer in considering the labor situation created by the European War. Refer- ence is made to the matter in this connection in order to explain the motives that led the government to come to the rescue of the nitrate industry through special legislation intended to encourage the continued operation of the plants. On August 2, 1914, the Congress passed a law author- izing the President of the Republic to advance to such nitrate producers as agreed to continue the operation of their plants the sum of three Chilean pesos (at the then rate of exchange 49 cents) per Spanish quintal of nitrate in stock at the plant or four pesos for each quintal deposited at any of the ports of the Republic. The original act provided that no such advances were to be made after December 31, 1914, but a subsequent law 66 THE EARLY EFFECTS OF (that of January 4, 1915) extended the period for a further six months. Up to January 31, 1915, sixty-seven nitrate producers had availed themselves of the privilege accorded by the law, receiving advances amounting to 37,713,455.00 paper pesos. Of this total 9,813,544.77 have been repaid to the government, leaving a balance of 27,899,910.23 pesos outstanding. Since the first of February, 1915, the nitrate situation has been gradually improving. During the months of May, June, and July, 1915, the improvement has been so rapid that at the present moment (September, 1915) the industry has almost reached a normal level. In fact, the only obstacle to complete restoration has been the absence of an adequate labor supply. With the return of the laboring population that was trans- ported to the southern provinces at the outbreak of the war, all the plants will be placed in full operation. The main reason for this rapid improvement has been the advancing demand for nitrate by the powder factories of the United States. With this increasing demand prices have advanced steadily. Instead of being unsal- able at five shillings eight pence per quintal, as was the case soon after the outbreak 'of the war, the quotations in September reached and passed the eight shilling mark. The price range during the last two years has been as follows : RANGE OF PRICE PER QUINTAL August, 1913 7s. 9^d. to 8s. ($1.89 to $1.94) September, 1913 8s. " 7s. lid. ( 1.94 " 1.92) August, 1914 7s. %d. "6s. lOd. ( 1.71 " 1.66) September, 1914 6s. ( 1.46 ) October, 1914 6s. ( 1.46 ) July, 1915 7s. 7d. ( 1.84 ) August, 1915 8s. ( 1.94 ) THE COPPER INDUSTRY The effect of the European War on the copper industry in Chile has been practically the same as in THE EUROPEAN WAR UPON CHILE 67 Peru. Unsatisfactory conditions prevailed in the copper market since 1910. Prices steadily declined from eleven cents in 1910 to ten cents in 1914. With the outbreak of the war the industry suffered temporarily because of a lack of shipping facilities, but the increasing demand for copper for the manufacture of war materials led to a steady advance in price. Although freight rates have risen, the increase has not been sufficient to discourage the development of the industry. The two great plants, " El Teniente " and " El Chiqucamata," are now work- ing to their full present capacity and this is also true of the smaller enterprises. The value of the exports of copper in 1914 as compared with 1913 is as follows: 1913 1914 Copper bars $5,593,540 $7,135,015 Copper concentrates 2,432,942 1,867,214 Copper ore 2,310,869 1,912,313 These figures give but an inadequate idea of the extent of the revival of the copper industry, as the effect of the increasing world demand for copper did not make itself felt until well toward the end of 1914. AGRICULTURE Inasmuch as Chile is not an exporter of agricultural products to any considerable extent, the European War cannot be said to have had a marked effect on the agricultural situation. The temporary closing of the nitrate fields during the latter half of 1914 deprived the farmers of the South of an important market for their products, but this was merely a temporary setback from which full recovery has been effected. DOMESTIC AND INTERNATIONAL TRADE With the exception of the laborers in the nitrate fields, no class of Chilean society has suffered so severely from the effects of the war as the wholesale and retail, 68 THE EARLY EFFECTS OF merchants. From whatever point of view we approach the situation, it is evident that all the influences set in operation by the European War tended to make their position increasingly difficult. The restriction of credits by the banks made it impossible to secure the customary accommodations, falling exchange served further to re- duce the little credit that remained in the foreign market, and the widespread unemployment amongst the laboring classes led to a serious decline in the amount of business transacted. The restriction of European sources of supply for manufactured goods led the merchants of the country to look to the United States as a possible source of supply, but here they were confronted by the refusal of American manufacturers to grant the long term credits to which the Chilean merchants had been ac- customed and without which they were unable to make any large purchases. In the discussion of the effects of the European War on the nitrate industry we have incidentally referred to the temporary paralyzation of the export trade in this, the most important of Chilean products. Although nitrate suffered more severely than other articles of export a comparison between the figures of 1913 and 1914 indicates a general falling off, with the exception of copper bars and barley. VALUE OF EXPORTS OF CHILEAN PRODUCTS, 1913-1914 1913 1914 Nitrate $111,454,397 $77,117,063 Copper bars 5,593,540 7,135,015 Copper ore 2,310,869 1,912,313 Copper concentrates 2,432,942 1,867,214 Wheat 2,390,727 199,775 Hides 1,537,850 918,260 Barley 303,361 1,677,078 Quillay bark 90,639 132,857 The total value of exports sent to the various countries during the years 1913 and 1914 was as follows: THE EUROPEAN WAR UPON CHILE 69 DISTRIBUTION OF EXPORTS, 1913-1914 1913 1914 Great Britain $55,548,341 $40,041,306 United States 30,413,385 31,437,890 Germany 30,772,742 18,078,985 France 8,847,885 4,245,128 Belgium 5,673,769 3,444,558 Holland 4,470,103 3,290,995 Argentine 1,034,880 1,511,508 These figures indicate a marked falling off in the exports to all countries with the exception of the United States and the Argentine. As regards the former, it is explained by the recovery of the copper and nitrate shipments toward the end of 1914. In the case of the Argentine the increase is due to the demand for dried fruits and vegetables. The European War has had a disastrous effect on the import trade, due, in part, to the crippling of shipping facilities from Europe, but mainly to the shutting off of European credits and the inability of the Chilean merchants to establish such credits in the United States. In 1913 the total imports were $120,254,731. They declined to $108,461,095 in 1914. Imports from the United States held their own, whereas those from Eu- rope suffered a severe decline. The increase of imports from Australia and Peru were due to heavy shipments of coal and sugar respectively. CHILEAN IMPORTS, 1913-1914 1913 1914 Germany $29,598,138 $25,889,770 Great Britain 35,928,943 22,309,086 United States 20,089,158 20,148,575 France 6,623,260 4,106,107 Belgium 5,673,426 4,151,372 Argentine 3,262,653 2,164,935 India 3,187,043 1,979,472 Italy 3,176,284 1,976,512 Peru 4,810,475 5,380,220 Australia 3,343,831 6,270,379 1 For many of the figures relating to exports and imports the writer desires to acknowledge his indebtedness to the Hon. L. J. Keena, American Consul General at Valparaiso. .70 THE EARLY EFFECTS OF The violent fluctuations of Chilean currency since the outbreak of the war have been another factor that has entered to discourage increasing importations. Inas- much as such imports must be paid in gold and are sold for paper currency, there necessarily exists consid- erable uncertainty with reference to profits. A sudden fall in exchange may wipe out all prospective profits. There exists, therefore, on the part of all merchants who do not wish to incur speculative risks a tendency to await a period of more stable exchange before under- taking large purchases. EMERGENCY MEASURES ADOPTED TO ENABLE MERCHANTS TO MEET CONDITIONS CREATED BY THE WAR a. Moratoria One of the first measures adopted was the Act of August 7, 1914, declaring a moratorium of thirty days for all bills of exchange, notes, and drafts payable dur- ing the month of August. This law also gave authority to the President to extend the moratorium for a further period of thirty days. A little later, September 7, 1914, an act was passed establishing a moratorium of sixty days for all obligations payable in gold entered into prior to August 1, 1914, and which fell due between that date and November 1. During this period, how- ever, the debtor was required to pay interest at the stipulated rate or, if no such rate had been agreed upon, at the current rate of interest. Creditors could, how- ever, demand the payment of the amount due at the time when due, if they were willing to accept in payment Chilean paper money at the rate for ninety-day drafts on London or at the rate fixed by the government for the payment of customs dues. The President of the Republic was authorized by this law to extend this moratorium for a period of thirty days. By decree of October 29, 1914, he made use of this power. THE EUROPEAN WAR UPON CHILE 71 The Act of February 5, 1915 (Law No. 2980), pro- vided for an additional extension of ninety days of the moratorium for obligations due in gold and authorized the President to make further extensions for periods of sixty days until September 1, 1915. By a series of decrees, the last of which was issued August 9, 1915, the moratorium for such obligations was extended until September 1, 1915. The Act of February 5, 1915, also provided for a period of four months' grace, without right of protest, on all international commercial obliga- tions contracted by merchants in Chile with firms resident in belligerent countries or in countries under moratorium. The four months' period ran from the date on which the obligation fell due and was only applicable to obligations contracted prior to August 1, 1914. The President was given power to extend this moratorium for periods of thirty days until September 1, 1915. Availing himself of this power, he published a series of decrees, the latest being dated August 9, extending the period of grace to September 1, 1915. b. Exportation of Cattle and Food Products By Act of August 3, 1914, the President was au- thorized to prohibit the exportation of cattle, food products, and coal for such period as he might deem advisable. The same act gives to the President the power to suspend customs dues on food products in all cases in which the wholesale price of such products exceeds the price quoted during the first two weeks of July, 1914. On August 4, 1914, the President, availing himself of the power thus conferred upon him, issued a decree pro- hibiting the exportation of cattle and coal, and of a long list of food products. By a later decree, that of March 4, 1915, the import duty of thirty-six cents per hundred pounds on wheat flour was suspended until June 30, 1915. 72 THE EARLY EFFECTS OF TRANSPORTATION FACILITIES AS AFFECTED BY THE WAR One of the most serious consequences of the European War has been the crippling of transportation facilities between Chile and the European countries from which the supplies of manufactured products were obtained. It is true that the paralyzation was temporary, but even after the battle of the Falkland Islands, when the last of the German cruisers were driven from American waters, the scarcity of bottoms was such that Chilean products were compelled to wait at the docks for months for available cargo space. When shipping facilities could be secured, it was found in many instances that freight rates had advanced to such an extent that either shipment was impossible or the pos- sible profits of the transaction were considerably reduced by reason of the inordinately high transportation charges. Prior to the outbreak of the European War the steamship lines serving the West Coast of South America had reached an agreement with reference to rates from Valparaiso to New York and Liverpool via Panama or Magellan. With the outbreak of the conflict these schedules were thrown to the wind and a system of charging " what the traffic would bear " was inaugurated. Since August, 1914, freight rates have been subject to the most violent fluctuations, depending entirely on the relation of the cargo offered to the available space. Published rates can no longer be depended upon as the actual rates charged. To quote but one instance: prior to the outbreak of the war the rate on nitrate to Liver- pool varied from sixteen to twenty shillings per ton. As late as July, 1914, shipments to England were made at the former rate. The rate to New York was prac- tically the same. Soon after the outbreak of the war rates advanced violently and in at least one instance one THE EUROPEAN WAR UPON CHILE 73 hundred shillings per ton were paid for transportation of nitrate from Antofagasta to Liverpool. Some idea of the advance in freights can be obtained through a comparison of the published rates, although it is im- portant again to emphasize the fact that to secure space the shipper must often pay a rate considerably in excess of the published rate. FREIGHT RATES PER TON WEIGHT VALPARAISO TO NEW YORK VIA THE PANAMA CANAL July 1914 December 1914 July 1915 Angnst 1915 Copper bars 2 2.10.0 $11.25 $11.25 Copper ores 1. 2.6 1.17.6 12.00 12.00 Hides 2.10.0 5. 0.0 25.00 25.00 Nitrate (fluctuating to such an extent that quotations are impossible) VALPARAISO TO LIVERPOOL VIA MAGELLAN July 1914 December 1914 July 1915 August 1915 Copper bars 2 2.10.0 2. 0.0 2.10.0 Copper ores 1. 6.0 1.15.0 2.10.0 2.10.0 Hides 2.10.0 4.10.0 4.10.0 4.10.0 Borate 1.10.0 1.17.6 2. 0.0 2. 0.0 Nitrate (constantly fluctuating) The falling off in tonnage loaded and discharged in Chilean ports has been as follows : l MERCHANDISE LOADED AT PORT OF VALPARAISO 1913 466,817 tons 1914 413,172 " January-June, 1914 242,476 " " ' " 1915 216,697 " MERCHANDISE DISCHARGED AT VALPARAISO 1913 1,183,998 tons 1914 868,467 " January-June, 1914 489,983 " " 1915 326,550 " MERCHANDISE LOADED AT ALL CHILEAN PORTS 1913 4,735,848 tons 1914 3,711,146 " January-June, 1914 2,243,406 " " 1915 1,714,845 " 1 1 am indebted for these figures to the Hon. L. J. Keena, American Consul General at Valparaiso. 74 THE EARLY EFFECTS OF MERCHANDISE DISCHARGED AT ALL CHILEAN PORTS 1913 3,870,072 tons 1914 3,226,687 " January-June, 1914 1,855,489 " " " 1915 946,602 " The problem of improving transportation facilities between Chile and the United States is one that is now receiving the serious consideration of the Chilean govern- ment. There exists a widespread desire not only to add to the available bottoms, thus reducing the heavy burden which existing freights have placed on Chilean indus- tries, but also to improve the passenger facilities by means of a direct line, without trans-shipment, from Valparaiso to New York, making the trip in fifteen days instead of the present unsatisfactory schedule, which means from twenty-three to twenty-seven days, with the additional discomfort of trans-shipment at Colon. 1 In normal periods, such as 1913, the tonnage move- ment northward from Chile to the United States is approximately 600,000 tons; the movement southward is about 532,000 tons. This tonnage is divided as follows : CHILE TO UNITED STATES UNITED STATES TO CHILE Nitrates 573,773 tons Oils 350,000 tons Copper and Regulus 20,270 " Coal 112,500 " Lead 2,112 " Cloth 5,500 " Iodine 175 " Fish 1,200 " Antimony 170 " General merchandise 63,300 " Wool 25 " Miscellaneous 3,475 " 532,500 " 600,000 " The problem to which the Chilean government has addressed itself is to formulate a policy which will enable the Chilean merchants to enjoy regular and rapid com- munication with the United States either through a system of direct subsidies or through liberal payments for the transportation of mails. This desire and deter- 1 November, 1917. The establishment of a direct line from New York to Valparaiso within recent months will go far towards solving the immediate problem. THE EUROPEAN WAR UPON CHILE 75 mination have been the direct outcome of the situation created by the European War. The powder mills of the United States have become great consumers of Chilean nitrate and it is the hope of the government that with improved means of communication other Chilean products, notably the fruits of the country, will find a market in the United States. While there exist wide differences of opinion as to whether such a steamship line can be made to pay, the Chilean government is prepared to make sacrifices in order to bring about closer relations with the United States. It is the hope of both officials and merchants that such a demonstration of national goodwill will have some influence on American manufacturers in inducing them to adapt their business methods more closely to the credit system which has prevailed in Chile from the earliest period of her commercial development. LABOR CONDITIONS AS AFFECTED BY THE WAR The difficulties and hardships encountered by Chilean merchants and manufacturers as a result of the Euro- pean War sink into insignificance when compared with the widespread suffering and misery which the paralyza- tion of commerce and industry entailed upon the working classes. Broadly speaking, the laboring population of Chile may be divided into four categories, each living under totally different conditions, both of physical environment and general conditions of employment. First The nitrate laborers of the northern provinces. Second The mining laborers of the northern and central provinces. Third The industrial laborers of the central provinces. Fourth The agricultural laborers of the central and southern provinces. 76 THE EARLY EFFECTS OF The Nitrate Laborers of the Northern Provinces The laborers in the nitrate fields of the provinces of Tarapaca, Atacama, and Antofagasta live under condi- tions totally different from those of the remainder of the laboring population of Chile. Labor in the arid nitrate fields requires great strength and endurance under the most trying of living conditions. The nitrate regions produce no food products and the price of fresh vege- tables is so high that the nitrate laborer is compelled to live on canned goods. It is true that he receives a wage far higher than any other class of Chilean labor, but it also must be remembered that the cost of all the necessaries of life in the nitrate district is exceedingly high. The daily wage of the ordinary laborer ranges from five pesos, ninety centavos, to seven pesos, three centavos per day, which at the rate of exchange of August, 1915, is the equivalent of ninety-five cents to $1.14 American gold. At the outbreak of the European War 53,161 laborers were employed in the nitrate fields. We have had oc- casion to describe the acute crisis through which this industry passed as a result of the sudden closing of the European market and the complete paralyzation of transportation facilities. In August, 1914, the nitrate works began to shut down and the government found itself confronted with the serious problem of taking care of a great army of unemployed. Inasmuch as in this entire district nitrate production is the only possible industry there was no possibility of transferring these people to other occupations in the same district. As we have seen, the government endeavored to induce the nitrate producers to keep their plants running by advancing funds to those who would agree not to shut down. In this effort they were but partially successful, and it was soon found necessary, in order to prevent actual starvation, to transfer at government expense THE EUROPEAN WAR UPON CHILE 77 more than thirty thousand laborers with their families. The Chilean laborers were taken to the central provinces, the Bolivians and Peruvians returned to their respective countries. Some idea of the extent of unemployment in this district can be secured from an examination of the statistics of labor employed in one of the nitrate provinces that of Tarapaca during the year 1914. PROVINCE OF TARAPACA LABORERS EMPLOYED DURING EACH MONTH OF 1914 January 22,598 July 23,157 February 22,618 August 17,581 March 22,777 September 8,347 April 23,168 October 7,956 May 23,170 November 7,763 June 23,509 December 7,506 This transfer to the South did not serve to relieve the suffering of this large laboring population. While agricultural employment could have been found for a large number, the daily wage of the farm laborer in Chile is so low that these nitrate laborers refused to accept employment on such terms. 1 The result was that the government was compelled to maintain at public expense a large army of workers and their families. Furthermore, the willingness of a certain number of the nitrate laborers to accept employment on the farms served still further to depress the wage scale of the agricultural laborer. Fortunately, early in 1915, the demand for nitrate received a strong stimulus by reason of the needs of the powder factories in Europe and the United States. By that time, shipping facilities had also improved. As a result of these influences the nitrate plants that had been shut down began to resume operations and the laboring 1 The agricultural laborer receives from 1 peso to 1 peso 75 centavos per day, together with free lodging and a pound of beans per day. At the present rate of exchange the peso is worth 16 * cents, American gold. 78 THE EARLY EFFECTS OF population was not slow to return to this district of relatively high wages. The nitrate producers are now making every effort to secure the immediate return of their laborers and every plant will soon be working at full capacity. Every steamer from the South is bring- ing hundreds of workers and at the present writing (September, 1915) the production of nitrate has reached about ninety per cent of normal. While, therefore, the war precipitated a period of great suffering for the nitrate laborers, this period has now passed. The Mining Laborers of the Northern and Central Provinces The most recent official reports place the total number of laborers engaged in the mining industries in normal times at 84,619. Deducting, therefrom, the 53,161 en- gaged in the nitrate fields, there remains a balance of 31,458 engaged in the other mineral industries. Of this total 18,471 are employed in the copper mines and smelters and 8,414 in the coal mines. The remaining 4,573 are employed in the iron, borax, sulphur, gold, and silver mines. Wages in the mining industries are relatively high, the average ranging from eighty cents (American gold) per day in the iron mines to $1.00 in the copper mines. This leaves out of account the nitrate mines, with which we have dealt separately and in which, as we have seen, the wage scale is higher than in any other of the mining industries. While the European War brought about a temporary paralyzation of the nitrate industry, the other mineral industries were less affected. The main difficulties experienced by the copper producers were, first, a lack of shipping facilities, and second, a scarcity of subsidiary currency with which to pay their laborers. The with- drawal of funds from banks by depositors created a THE EUROPEAN WAR UPON CHILE 79 scarcity of circulating medium, which was keenly felt by the mining companies during the month of August, 1914. This situation was soon remedied through the facilities afforded by the " Caja de Emision." On the other hand, the transportation problem was not so easily solved and for a time proved a menace to the mining industry. In spite of the unfavorable conditions that prevailed immediately after the outbreak of the war, the mining companies made a determined effort to keep their plants in full operation and in this effort were entirely success- ful. There was practically no shutting down and as early as August 11, 1914, the manager of one of the largest copper mines informed the government that if he could secure adequate currency for the payment of his men, he would be willing to add to his labor force. The Industrial Laborers of the Central Provinces Although the effect of the European War was most keenly felt by the nitrate laborers of the northern provinces, the employees of the manufacturing estab- lishments of the central provinces also suffered severely. The total number of factory employees at the outbreak of the war was 80,697, distributed as follows: Industry Employees Breweries and distilleries 4,225 Glass and pottery 1,053 Food products 12,068 Gas and electricity. 1,218 Shipyards 1,034 Clothing 14,016 Furniture and all other wood products 12,393 Building supplies 1,365 Textiles 2,568 Metal products 6,880 Paper and printing 4,731 Leather and fur products 12,279 Drugs and chemical products 2,871 Tobacco products 1,735 Carriages and other vehicles 1,530 Miscellaneous 731 Total 80,697 80 THE EARLY EFFECTS OF This total is made up of 53,559 males and 27,138 women and children. In normal times, the maximum, minimum, and average wage in each of these industries and the hours of labor are as follows: WAGES PER DIEM 1 HOURS OF LABOR Industry Skilled Lowest paid Maximum Minimum unskilled Breweries and distilleries $0.60 $0.24 14 9 Glass and pottery 0.78 0.24 13 10 Food products 0.86 0.08 14 9 Gas and electricity 0.83 0.32 16 13 Shipyards 0.68 0.36 9 9 Clothing 1.12 0.30 11 8 Furniture and other wood prod- ucts 1.12 0.16 12 9% Building materials 1.13 0.32 16 8 Textiles 0.94 0.30 12 9 Metal products 1.45 0.26 11 8 Paper and printing 0.96 0.23 14^ 9 Leather and fur products 1.30 0.21 10% 9 Drugs and chemicals 0.98 0.16 13 8 Tobacco products 0.62 0.24 10 9 Carriages and other vehicles 0.66 0.24 10 9% The financial crisis precipitated by the European War, the restriction of credits by the banks, together with the uncertainty as to the future, led to the immediate curtailment of production and an alarming increase of unemployment in all manufacturing centers. The re- ports received from the Provincial Intendentes indicate the following situation with reference to industrial un- employment in September, 1914: Province Unemployed Valparaiso 4,142 (in the city of Valparaiso). Santiago 1,059 (in the city of Santiago) . Concepci6n No statistics given, but many industries closed. Cautin Sawmills closed. Valdivia Some breweries and factories working half time. Many closed. Coquimbo Many unemployed. Factories have discharged por- tion of personnel. 1 The American equivalent of wages is calculated on the rate of exchange prevailing prior to the outbreak of war. THE EUROPEAN WAR UPON CHILE 81 In addition to the widespread unemployment, the laborers who were retained in the factories were com- pelled in many instances to submit to a reduction of wages. The latter part of 1914 and the early months of 1915 witnessed but little improvement in the condition of factory labor. Employers are unwilling to resume operations on full time until they can see their way clear with reference to the bank credits, currency stability, and market conditions. Not until August, 1915, was a marked improvement in the manufacturing industries noticeable. The recovery of the nitrate industry has reacted on manufacturing activities, stimulating the re- sumption of work. Although there still exists consider- able unemployment, there is every indication that by the close of the year 1915 manufacturing will again have reached a normal level. The Agricultural Laborers of the Central and Southern Provinces The agricultural laborers suffered less in consequence of the European War than any other section of the laboring population. This is due to two circumstances. First, to the fact that the agricultural interests of Chile suffered but little as a result of the war, inasmuch as the prices of food products showed a marked tendency upwards. The difficulties which the large landowners encountered were due almost entirely to the restriction of credits, which in some sections led to the discharge of farm laborers. The second circumstance which ex- plains the relative immunity of the agricultural laborer from the disastrous effects of the war is the exceedingly low wage and low standard of life of this section of the population. Chile is a country of large landed estates. Agricultural labor receives a wage which ranges from twenty to forty cents * per day, together with a ration 1 At the rate of exchange immediately preceding the war. 82 THE EARLY EFFECTS OF which usually takes the form of from one to two and one- fifth pounds of beans. In addition, the proprietor fur- nishes habitation which is usually of the most primitive type. Laborers are usually given the use of a small tract, about half an acre, on which they may raise produce for their personal consumption. This latter privilege is only enjoyed by the so-called " Inquilinos," who differ from the ordinary farm laborer by reason of more per- manent tenure. In most provinces they also receive a somewhat higher wage than the more transient day laborer but in return are required to perform certain extra services. In some cases they are obliged to furnish to the landowner one additional laborer. It should, furthermore, be added that the exceedingly low wage of the " Inquilino " is sometimes supplemented by minor earnings of wife and children in the dairies attached to the estates. The great influx of nitrate laborers from the North led to a superabundance of farm labor. During the latter part of 1914 there was a tendency to reduce wages, as will be seen from the following reports from the agricultural provinces. PER DIEM WAGE 1 PER DIEM WAGE 1 WITHOUT RATION WITH RATION Province Inquilino Laborer Inquilino Laborer Aconcagua $0.30 $0.28 $0.25 $0.21 Valparaiso 0.40 0.34 0.30 0.22 O'Higgins 0.40 0.34 0.28 0.26 Colchagua 0.40 0.40 0.30 0.22 Curic6 0.30 0.28 0.22 0.20 Talca 0.40 0.37 0.18 0.22 Nuble 0.20 0.18 0.16 0.22 Conception 0.24 0.24 0.23 0.22 Government Measures to Meet the Problem of Unemployment The labor problem confronting the Chilean government at the outbreak of the European War was an exceedingly serious one, owing to the necessity of transporting so 1 Estimated in American gold. THE EUROPEAN WAR UPON CHILE 83 large a proportion of the nitrate labor of the North to the central provinces. Although receiving a relatively high wage, the habit of saving has never been developed in the poorer classes. The government saw itself con- fronted with the necessity not only of giving free trans- portation to a great mass of laborers and their families, but also of supporting them unless some plan could be devised to secure employment for them. To meet this emergency, a National Labor Bureau was organized which has done excellent service in securing employment for at least a portion of the great army of unemployed. Between August 18, the date of the establishment of the Bureau, and November 17, 1914, this agency had secured employment for 7,686 persons distributed as follows: Number for Whom Employ- Character of Work ment Secured Public works 1,530 Public roads 3,863 Factories and workshops 458 Agriculture 1,835 7,686 The magnitude of the unemployment problem is made evident by the fact that during the first four months after the outbreak of the war the government brought 29,919 persons from the nitrate district to the ports of Coquimbo and Valparaiso. The situation was further complicated by the fact that the nitrate laborer of the North is the least adaptable and the most restless element of the labor- ing population. It soon developed that employment could only be found for a relatively small percentage of the total and that in many cases offers of employment were met with a refusal to work for a wage less than that to which they had been accustomed in the nitrate fields. The result was that the government found itself compelled to support the greater part of the unemployed for a period of several months. Throughout the country 84 EFFECTS OF WAR UPON CHILE the situation was regarded as involving a serious menace to the social order of the Republic. The return of the nitrate laborers to the North has also served to improve somewhat the condition of agri- cultural labor. For the harvesting of the present crop there will probably be a scarcity of labor which will, no doubt, bring about some little improvement in the wages of the transient farm laborer. While there has been this distinct improvement in the condition of mining and farm labor, the status of the factory workers has not advanced in the same ratio. The manufacturing establishments that closed are slowly resuming operations and those that discharged a portion of their labor force are not adding thereto. Restriction of credits by the banks, together with the uncertainties incident to fluctuating exchange, has created an atmosphere of distrust which is proving a serious obstacle to the recovery of manufacturing enterprise. CONCLUSION The widespread suffering caused throughout Chile by reason of the European conflict is but another indication of how deeply the vital interests of the republics of America have been affected. Not only were government finances seriously impaired but almost every branch of industrial life suffered a severe shock. From a strictly governmental point of view the crisis has not been an unmixed evil, inasmuch as it has brought into the foreground of public attention the necessity of undertaking some systematic revision of the national fiscal system. Basic industrial and economic conditions in Chile are today essentially healthy, and will enable the country rapidly to emerge from the crisis precipitated by the war. Another effect of the war, which may prove of indirect benefit to the country, is the fact that the crisis pre- cipitated by the European conflict has served to impress upon the business men of the country the dangers in- volved in the dependence on foreign capital. The bitter lessons of the recent financial crisis have shown that what Chile needs most is a larger measure of financial inde- pendence, and that this can be secured only through the development of the habit of saving amongst her people. The wealth and resources of the country and the energy of the inhabitants would lead one to expect a larger sum total of native capital. With such great resources, with no racial problems of a serious or vital character, Chile's future depends entirely on the extent to which her population is willing to make present sacrifices for larger ultimate returns. APPENDICES APPENDIX A IMPORTS OF UNITED STATES FROM CHILE Year Ending June 30 QUANTITIES 1913 1914 VALUES 1913 1514 Antimony ore, regulus or metal, Ibs. (dut.) 341,597 $20,496 $ Articles, the growth, produce, or manufacture of the United States, returned (free) 19,317 20,474 Artworks (free) 92 169,250 Bladders, integuments, etc. (free) 6,099 5,572 Chemicals, drugs, dyes and medicines : Extracts for tanning, Ibs. (free) 157,795 8,509 Iodine, crude or resub- limed, Ibs. (free) 351,236 195,030 739,734 423,293 Soda, nitrate of, tons (free) 573,773 561,209 19,942,419 17,808,763 All other (free) 10,320 101,588 Coal, bituminous, tons (free) 20 (dut.) 1,007 182 (dut.) 6,035 Copper, and manufactures of : Ore (copper contents), Ibs. (free) 14,096,944 15,213,097 2,242,784 1,974,429 Matte and regulus (copper contents) Ibs. (free).. 13,436,913 13,289,555 2,165,418 2,004,898 Pigs, ingots, etc., Ibs. (free) 14,004,408 14,426,881 2,248,311 2,145,748 Fertilizers (free) 395,948 Fruits and nuts: Walnuts, unshelled, Ibs. (dut.) 443,713 3,120,824 33,832 253,622 Furs and fur skins, un- dressed ( free ) 32,256 7,144 Hides and skins, etc.: Goat, dry, Ibs. (free) 31,674 13,028 5,081 2,538 Household and personal ef- fects, etc. (free) 5,637 8,721 India rubber scrap, fit only for remanufacture, Ibs. (free) 33,746 2,450 Iron ore, tons (free) 6,600 7,829 J " Trade of the United States with other American Countries, 1913-1914." (United States Bureau of Foreign and Domestic Commerce.) 89 90 APPENDIX A QUANTITIES 1913 1914 VALUES 1913 1914 Lead and manufactures of: Lead ore (lead contents) Ibs. (dut.) 4,223,430 5,315,937 $88,692 $182,622 Bullion and base bullion Ibs. (dut. ) 2,673,030 91,994 Meat products; sausage cas- ings, Ibs. (free) 18,862 14,639 Tin in bars, blocks, pigs, etc., Ibs. (free) 39,173 12,418 Wax: beeswax, Ibs. (free) .. 32,926 108,983 9,874 36,975 Wool of the sheep, hair of the camel and other like animals: Class 1 : Clothing, Ibs. (free) 127,299 33,969 Class 3 : Carpet, Ibs. ( free ) 73,225 9,383 Wool, hair of the camel, goat, alpaca, and other like animals: Class 1: Clothing, Ibs. (dut.) 33,085 23,380 4,982 3,735 Class 3: Carpet, Ibs. (dut.) 16,693 40,948 1,673 4,027 Zinc ore (zinc contents) Ibs. (dut.) 2,304,742 46,095 All other free and dutiable goods 2,619 15,062 Total free of duty $27,458,211 $25,184,940 Total dutiable 197,209 537,188 Total imports of merchandise $27,655,420 $25,722,128 EXPORTS OF UNITED STATES TO CHILE 1 DOMESTIC EXPORTS QUANTITIES VALUES 1913 1914 1913 1914 Abrasives : Wheels, emery and other $4,868 $2,188 All other 14,357 8,807 Agricultural implements and parts of: Hay rakes and tedders 2,063 3,720 Mowers and reapers 87,579 85,155 Planters and seeders 3,949 3,885 Plows and cultivators 119,614 94,496 Threshers 108,236 107,330 All other, and parts of 112,207 94,882 Aluminum, and manufac- tures of 1,218 1,938 1 " Trade of the United States with other American Countries, 1913-1914." (United States Bureau of Foreign and Domestic Commerce.) APPENDIX A 91 129 1,158 139,213 65,633 184,062 474,434 1,459 477,321 28,781 152,324 78 2 195 QUANTITIES 1913 1914 Animals : Cattle, No 20 17 All other, including fowls Asbestos (manufactures of) Asphaltum : Unmanufactured (tons) . Manufactures of Babbitt metal ( Ibs. ) Blacking ( including shoe paste and polish and other) Brass, and manufactures of. Breadstuffs : Barley (bush.) Oatmeal ( Ibs. ) Preparations of, for table food Wheat flour (bbls.) All other Broom corn, and manufac- tures of Brushes Cars, carriages, other vehi- cles, and parts of: Automobiles Commercial (No.) .... Passenger (No. ) Parts, not including en- gines and tires Carriage (No.) Cars, passenger and freight: For steam railways Passenger All other For other railways Bicycles, tricycles, etc Motorcycles (No.) 39 37 Wagons (No.) 81 131 Wheelbarrows, pushcarts and handtrucks All other, and parts of Cement, hydraulic (bbls.).. Chemicals, drugs, dyes and medicines : Acids Sulphuric (Ibs.) All other Baking powder (Ibs.) ... 22,037 29,762 Calcium carbide (Ibs.) .. 1,584,000 2,797,440 Medicines, patent or pro- prietary All other Clocks and watches and parts of: Clocks, and parts of Watches, and parts of Coal, bituminous (tons) .. 112,067 83,876 Confectionery VALUES 1913 1914 358 109 38,449 26,203 327,673 4,150,910 2,260 2,573 2,919 4,129 73 32,599 27,413 30,737 134,633 23,424 4,742 114,414 13,925 18,802 843 109,982 4,711 40,288 192,639 271,002 57,443 2,566 8,134 7,577 10,827 15,479 51,823 3,889 2,172 7,929 49,231 235,640 70,444 17,000 19,979 324,153 2,879 3,725 641 4,974 35,875 14,472 11,231 18,506 31,603 790 24,845 4,645 574,456 1,404 9,705 2,178 10,743 160,194 22,405 12,118 138,547 7,375 134,991 2,506 7,967 13,161 7,490 21,379 35,807 48,277 3,415 10,663 72,289 200,918 71,874 9,523 18,553 252,490 3,494 92 APPENDIX A QUANTITIES VALUES 1913 1914 1913 1914 Copper, manufactures of: Pigs, ingots, and bars (Ibs.) 1,309 117,636 $ 239 $ 21,010 Plates and sheets (Ibs.) 4,837 408,125 932 76,268 Rods and wire (Ibs.) ... 10,295 79,772 1,727 13,702 All other manufactures of 4,626 147,832 Cotton manufactures of: Cloths Unbleached ( yds. ) .... 8,346,412 9,590,339 537,105 660,091 Bleached (yds.) 1,870,722 448,252 129,032 44,069 Colored (yds.) 280,214 215,378 23,269 18,585 Laces and embroidery . . . 3,750 Waste, cotton ( Ibs. ) .... 27,782 , 52,644 2,123 3,741 Wearing apparel Corsets 3,037 9,895 Knit goods 17,583 22,576 All other 31,215 37,431 All other 65,310 89,406 Dental goods 20,338 21,839 Earthen, stone and China ware: Bricks, fire (M) 158 245 16,434 23,822 Tiles, except drain 1,225 6,242 All other 8,610 15,016 Eggs (doz.) 270 9,875 73 2,414 Electrical machinery, appli- ances, and instruments: Dynamos, or generators 15,777 19,687 Insulated wire and cables 45,952 Interior wiring supplies, etc. (including fixtures) 26,175 Lamps Arc (No.) 81 90 1,958 1,880 Incandescent Carbon filament (No.) 73,296 53,275 8,377 6,780 Metal filament (No.) 89,349 31,996 17,701 8,344 Motors 104,279 92,747 Static transformers 37,839 Telephones 4,600 3,374 All other 201,542 166,141 Explosives : Cartridges 60,950 45,220 Dynamite ( Ibs. ) 961,850 912,485 100,384 107,087 Gunpowder ( Ibs. ) 5,452 15,625 1,741 5,270 All other 25,893 15,134 Feathers 8,283 7,489 Fibers, vegetables, and tex- tile grasses, manufac- tures of: Cordage ( Ibs. ) 206,169 202,177 22,444 22,436 Twine Binder (Ibs.) 320,111 1,013,110 22,121 87,213 All other 6,055 8,077 All other manufactures of 2,279 7,888 Fish: Salmon, canned (Ibs.)... 2,318,720 2,123,237 143,574 134,678 Shellfish 11,928 13,745 Fly paper 5,562 4,003 APPENDIX A 93 QUANTITIES VALUES 1913 1914 1913 1914 Fruits : Green, ripe or dried $ 2,585 $ 5,466 Prepared or preserved 6,121 5,136 Furniture of metal 14,710 16,345 Glass and glassware 30,823 40,224 Glucose (Ibs.) 745,753 586,801 18,658 14,808 Gold and silver, manufac- tures of, including jewelry 12,686 2,831 Grease 75,056 80,208 Household and personal ef- fects 16,871 13,216 India rubber, manufactures of: Belting, hose and packing 57,970 71,113 Boots and shoes Boots (pairs) 2,001 930 8,720 4,643 Shoes (pairs) 20,434 9,957 12,677 5,676 Tires: For automobiles 2,844 10,636 All other 31,076 19,805 All other manufactures of 24,812 27,383 Ink 12,201 12,408 Instruments and apparatus for scientific purposes : Medical and surgical in- struments 6,059 5,750 All other 12,564 19,341 Iron and steel, and manu- factures of: Pig iron (tons) 938 1,465 13,637 18,289 Bars or rods of steel (Ibs.) 12,281,617 14,535,376 206,922 237,433 Bolts, nuts, rivets and washers (Ibs.) 783,209 1,011,037 29,421 35,986 Builders' hardware Locks 30,424 30,829 Hinges and others 51,611 69,033 Car wheels (No.) 950 590 8,030 4,501 Castings, n.e.s 3,627 8,648 Cutlery: Razors 3,126 6,364 Table 3,894 6,232 All other 16,609 15,154 Enamelware : Bathtubs (No.) 291 278 5,368 5,372 Lavatories and sinks 11,612 5,705 All other 3,324 2,463 Firearms 38,861 45,789 Machinery, machines and parts of: Adding machines (No.) 8 38 2,271 6,898 Air-compressing ma- chinery 17,646 11,484 Cash registers (No.) .. 139 188 21,211 25,373 Engines and parts of: Electric locomotives (No.) 5 2 16,918 4,112 94 APPENDIX A 10 58 28 4 23 28 17 28 QUANTITIES 1913 1914 Iron and steel, and manu- factures of: (Cont. ) Internal combustion Gas, stationary (No.) 6 Gasoline Marine (No.) .. 25 Stationary (No.) 17 Traction (No.) Steam Locomotives (No.) . 18 Stationary (No.)-. 20 Traction (No.) All other engines (No.) 58 Parts of Laundry machinery Lawn mowers Metal working machinery Milling machinery (flour and grist ) Mining machinery Printing presses Pumps and pumping- machinery Refrigerating machinery including ice-making machinery Sewing machines Shoe machinery Sugar mill machinery Typesetting machines, linotype and others Typewriting machines Windmills Woodworking ma- chinery: Sawmill machinery All other All other machinery, and parts of Nails and spikes: Cut (Ibs.) 5,105,182 5,775,023 Railroad spikes (Ibs.) 175,677 202,664 Wire (Ibs.) 352,860 520,799 All other (including tacks) (Ibs.) 328,026 333,882 Pipes and fittings (Ibs.) 3,540,988 7,926,138 Rails for railways, of steel (tons) 13,939 7,302 Railway track material, etc. (except rails and spikes ) Scales and balances Sheets and plates: Iron Galvanized (Ibs.) .. 11,160,505 88,191 All other (Ibs.) .... 350,344 221,005 VALUES 1913 1914 $ 4,432 $ 1,798 2,599 1,853 202,753 13,579 12,480 27,478 4,401 8,296 43,930 58,246 182,017 7,438 73,527 21,299 94,774 58,247 7,345 9,421 117,023 22,226 37,099 39,799 91,089 3,400 7,749 16,213 111,932 55,747 42,587 337,075 8,427 5,942 4,398 10,540 190,944 23,904 32,679 7,920 74,657 7,427 436 85,168 42,576 274,421 5,074 61,713 18,656 42,886 43,350 370 29,379 95,026 27,686 24,147 28,049 260,647 327,058 105,249 3,395 10,627 16,791 226,780 458,827 253,166 83,939 43,195 2,653 5,537 APPENDIX A 95 Iron and steel, and manu- factures of: (Cont.) Steel- Plates (Ibs.) ....... Sheets (Ibs.) ....... Stoves, ranges, and parts of Structural steel and iron (tons) ............... Tin plates, terneplates, and taggers tin (Ibs.) Tools, n.e.s.: Axes (No.) .......... Hammers and hatchets Saws Shovels and spades All other Wire and manufactures of wire: Barbed (Ibs.) ........ All other (Ibs.) ...... Manufactures of All other manufactures of iron and steel Lamps, chandeliers, etc. (ex- cept electric) Lead, manufactures of Leather and tanned skins, and manufactures of: Leather and tanned skins Belting Patent Upper Calf (sq. ft.) ...... Glazed kid (sq. ft.) All other All other leather and tanned skins Manufactures of boots and shoes : Children's (pairs) ...... Men's boots and shoes (pairs) .............. Women's (pairs) ....... All other Leather, imitation Meat and dairy products: Meat products Beef products Beef, pickled and other cured (Ibs.) Oleomargarine, imita- tion butter (Ibs.) Tallow (Ibs.) ...... All other (Ibs.) ---- Hog products Hams and shoulders (Ibs.) ........... QUANTITIES 1913 1914 4,008,851 7,557,603 25,005,801 22,969,765 VALUES 1913 1914 5,859 8,759 4,799,351 4,252,521 16,311 14,948 2,781,555 3,517,910 20,209,057 7,790,153 176,376 218,532 2,524,490 1,317,127 616 48,204 12,394 68,748 79,293 133,505 78,667 16,882 2,010 38,817 18,311 24,000 131,311 404,029 8,559 25,061 $67,529 750,000 23,093 232,181 180,188 10,454 15,268 44,836 3,231 120,955 70,093 408,531 53,153 26,295 10,006 27,607 35,599 47,173 482,929 16,082 2,194 685 140,626 33,722 43,412 1,675 7,461 8,655 9,104 9,561 2,655 $130,276 630,098 23,072 450,213 157,442 10,011 15,636 33,435 7,758 117,129 83,783 156,445 50,067 257,752 244,364 15,513 128,628 13,672 56,305 62,312 238,924 5,820 10,641 2,153 118,587 51,621 26,595 2,076 2,578 14,481 26,546 1,236 4,226 96 APPENDIX A 1,539 8,245 25,531 118,501 "ii "s 75 169 1,578 11 161 QUANTITIES 1913 1914 Meat and dairy products: (Cont.) Lard (Ibs.) 1,934,928 1,866,147 Pork, pickled (Ibs.) 34,500 28,500 Lard, compound, and other substitutes for lard (Ibs.) 1,791,802 1,411,417 All other Dairy products Butter and cheese (Ibs.) Milk- Condensed ( Ibs. ) ... Other, including cream Motor boats Musical instruments, and parts of: Pianos Player pianos (No.)... All other (No.) Perforated music rolls All other, and parts of Naval stores: Resin (bbls.) 11,413 4,739 Turpentine, spts. of (gals.) 131,005 84,460 Oilcloth Oils: Animal (gals. ) Mineral Crude, including all nat- ural oils, without re- gard to gravity (gals. ) Refined or manufactured Illumination oil (gals.) 7,961,224 Lubricating and heavy paraffin oil (gals.) 1,774,587 Gasoline (gals.) 34,615 All other, naphtha, etc. (gals.) 324,696 Residuum, etc. Gas oil and fuel oil (gals.) 58,244,417 All other (gals.) ... 19,857,507 Vegetable, fixed or expressed Cottonseed (Ibs.) 3,639,389 Linseed or flaxseed (gals.) 3,423 All other Paints, pigments, colors and varnishes : Ready-mixed paints (gals.) Varnish ( gals. ) All other, including crayons Paper, and manufactures of: 3,225 500 6,636,000 9,125,953 1,960,331 747,930 53,189 77,566,178 64,543,524 4,921,207 5,058 17,464 8,845 16,051 7,364 Books, music, maps, en- gravings, etchings, etc. Carbon paper VALUES 1913 1914 $229,413 $ 222,012 3,901 3,151 149,563 3,010 519 2,118 3,712 16,186 24,647 41,490 9,363 3,360 80,907 65,342 2,926 1,275 392,945 9,348 77,725 1,859 18,325 29,412 9,768 24,100 1,980 269,879 1,563 130,432 4,622 1,469 9,288 1,393 8,035 3,705 41,585 2,882 1,344 24,298 43,569 10,972 2,872 27 118,500 900,771 1,028,155 418,279 166,724 12,412 923,801 1,365,661 303,912 978,662 296,752 436,672 2,598 11,982 26,829 10,712 23,552 2,884 109,509 8,108 APPENDIX A 97 QUANTITIES 1913 1914 Paper, and manufactures of : (Con*.) Paper hangings Playing cards Printing paper Newsprint (Ibs.) 3,091,416 1,493,973 All other (Ibs.) 1,047,745 913,419 Wrapping paper (Ibs.) .. 20,681 27,545 Writing paper and en- velopes All other Paraffin, and paraffin wax (Ibs) 1,477,818 2,282,161 Pencils (except slate) and pencil leads Penholders and pens Perfumeries, cosmetics, and all toilet preparations Phonographs, graphophones, gramophones and rec- ords, and materials for Photographic goods: Cameras Motion picture films (lin. ft.) 2,400 116,977 Other sensitized goods All other Plated ware, except cutlery and jewelry Plumbago, or graphite, and manufactures of Roofing felt, and similar materials Silk, manufactures of Soap Toilet, or fancy All other (Ibs.) 202,562 244,971 Spirits, wines, malt liquors, and other beverages Stone (including marble) Surgical appliances (not in- cluding instruments) Tin, manufactures of Tobacco, and manufactures of Toys Trunks, valises, and travel- ing bags Type (Ibs.) 9,088 7,676 Typewriter ribbons Vegetables : Potatoes, except sweet po- tatoes 7,709 8,950 Vegetables, canned All other Wood and manufactures of: Logs and other round tim- ber (M. ft.) 10 500 4,440 7,970 75,692 48,207 802 12,228 19,778 54,023 4,825 3,168 21,645 41,395 6,372 175 14,143 5,000 26,498 1,341 5,439 1,159 113,862 12,593 4,524 6,700 16,411 7,824 5,647 7,474 1,748 3,658 6,063 5,474 1,360 3,685 100 2,374 6,032 37,141 40,665 1,071 6,968 18,851 92,098 3,641 6,501 25,437 44,213 6,158 5,468 17,978 5,134 27,303 2,297 2,462 5,276 91,330 16,290 6,793 6,304 28,351 5,992 7,045 4,094 2,610 2,959 4,777 7,152 12,310 4,762 5,000 98 APPENDIX A 1913 QUANTITIES 1914 VALUES 1913 1914 Wood and manufactures of: (Cont.) Lumber : Boards, planks and deals Fir (M. ft.) 63,271 58,229 $776,626 $727,970 Oak (M. ft.) 349 270 27,099 21,869 White pine (M. ft.) 98 299 4,850 9,692 Yellow pine, pitch and other (M. ft.) ... 218 363 12,093 20,844 All other (M. ft.).. 386 126 23,581 10,568 Staves (No.) 99,875 151,091 18,504 28.278 Doors, sash and blinds 4,642 8,551 Furniture 151,004 115,869 Incubators and brooders 3,361 3,924 Trimmings, moldings and other house finishings 9,209 4,228 Woodenware 3,379 3,121 All other manufactures of wood 83,506 90,947 Wool, manufactures of: Wearing apparel 359 3.385 All other 15,336 6,510 Zinc, and manufactures of 1,874 4,240 All other articles 46,649 56,712 TOTAL DOMESTIC EXPOBTS $16,064,969 $17,408,724 TOTAL FOBEIGN EXPOBTS 11,794 23,668 TOTAL EXPORTS OF MER- CHANDISE $16,076,763 $17,432,392 APPENDIX B TRADE WITH UNITED STATES, 1913-1914 Month January-July August EXPOJ B 1913 $18,979,949 i ITS 1914 $14,745,891 1,207,613 2,104,309 2,238,189 2,286,714 1,655,997 IMPOSTS 1913 1914 $9,129,794 $10,203,716 1,393,553 596,196 1,375,822 462,470 2,221,572 1,369,168 578,270 700,890 1,917,901 295,178 2,314,912 September . . 3010449 October 934,114 November . . . . 1,827,465 December 2,486,934 TOTAL FOB YEAE.. $29,553,823 $24,238,713 $16,616,912 $13,627,618 Great Britain Germany United States France Belgium IMPORTS AND EXPORTS, 1913 IMPOSTS FBOM $55,548,341 30,772,742 30,413,385 8,847,885 5,674,869 GBAND TOTAL $142,801,576 EXPOBTS TO $36,028,943 29,578,138 20,089,158 6,623,260 5,671,426 $120,274,001 THREE PRINCIPAL IMPORTING COUNTRIES 1908 1909 1910 1911 1912 1913 1914 1915 UNITED UNITED STATES KINGDOM GEBMANY $8,697,209 $30,630,809 $27,555,784 9,601,084 31,842,746 22,435,041 13,369,774 34,340,573 26,296,071 15,775,969 40,795,279 32,696,171 16,806,341 38,599,283 33,189,070 TOTAL IMPOSTS $97,202,960 95,399,399 108,627,188 127,381,479 122,075,994 1 Otto Wilson: Forecast of Trade with South America in 1915. U. S. Bureau of Foreign and Domestic Commerce. 2 Otto Wilson : South America as an Export Field. U. S. Bureau of Foreign and Domestic Commerce. 99 100 APPENDIX B CHILEAN COMMERCE (1913) ITEMS Imports (d) Exports (d) Nitrate .... Copper Wool . TOTAL TBADE $120,274,001 144,653,312 111,454,397 10,337,360 3,383,653 (d) Figures include gold and silver. CHILE STATISTICS OF MANUFACTURES 1911 KIND OF MANUFACTORIES ESTABLISHMENTS Alcohol, beverages, etc 297 Pottery, ceramics and glassware 6 Foods and food preparations 807 Lighting, heating and combustibles . . 37 Dock-vard and ship repair stations .... 27 Clothing, etc 711 Wood and manufactures 676 Construction materials 89 Textiles 32 Metals and manufactures 805 Furniture 189 Paper, printing presses, etc 290 Hides and skins, and manufactures ... 1,199 Chemical and pharmaceutical products 130 Tobacco and manufactures 98 Vehicles 188 Various 141 TOTAL 5,722 1 U. S. Commercial Reports, January 2, 1915. CAPITAL $8,222,433 559,009 27,601,757 6,073,374 1,065,868 5,869,542 8,555,065 1,921,780 3,508,027 5,933,705 1,155,970 5,277,145 11,249,800 4,046,385 986,076 1,063,566 1,164,964 $94,257,466 APPENDIX B 101 CHILE STATISTICS OF EXPORTS' Countries United Kingdom . Germany ... Year 1910 1911 1912 1913 1914 1910 Animal Products $5,163,334 4,365,549 4,001,008 5,478,774 5,054,807 1,783,225 Vegetable Products $3,950,165 1,537,889 2,739,885 3,069,561 3,118,996 807,318 Mineral Products $38,714,734 47,345,056 48,360,235 46,999,462 31,845,984 20,479,097 Various Products $6,792 9,788 1,521 544 21,520 73,267 Total $47,835,025 53,258,282 55,102,649 55,548,341 40,041,307 23,142,907 United States France 1911 1912 1913 1914 1910 1911 1912 1913 1914 1910 1,610,946 1,861,578 1,651,860 1,636,874 287,755 96,201 86,433 20,097 158,361 1,171,868 852,774 1,143,821 944,357 553,293 124,628 217,671 1,601 185,668 210,213 59,160 23,698,525 25,031,886 28,147,807 15,879,252 24,264,299 19,237,176 24,425,951 30,207,534 31,057,978 3,947,551 37,525 23,410 28,718 9,567 4,196 884 580 87 7,689 58,707 26,199,770 28,060,695 30,772,742 18,078,986 24,680,878 19,551,932 24,514,565 30,413,386 31,434,241 5,237,286 Belgium . , 1911 1912 1913 1914 1910 1,157,620 1,385,147 1,546,571 670,441 141,317 18,744 29,413 26,735 16,828 59,259 4,650,608 6,223,415 7,251,877 3,548,944 3,236,880 38,206 30,595 22,702 8,915 1,031 5,865,178 7,668,570 8,847,885 4,245,128 3,438,487 Netherlands . . . 1911 1912 1913 1914 1910 149,224 57,233 250,522 42,583 12,814 158,329 229,648 138,017 45,062 46,742 3,166,268 4,322,816 5,286,020 3,352,460 2,391,287 5,208 1,263 310 4,453 3,479,029 4,610,960 5,674,869 3,444,558 2,450,843 1911 50,966 52,685 3,338,118 3,441,769 1912 1913 34,438 55,652 119,369 14,147 4,081,639 4,400,303 102 4,235,548 4,470,102 Spain 1914 1910 32,898 18,092 1,406 3,239,967 1,987,458 38 1,398 3,290,995 1,990,262 1911 1912 220 29,234 1,981,025 1 834,419 1,171 2,011,650 1,834,419 1913 987,174 987,174 1914 2,190 1 186 3,376 Uruguay 1910 1,993 209,577 14,339 225,909 1911 1912 1913 1914 613 716 33,773 18 431,181 228,945 302,294 231,922 787,661 2,483,624 86,172 2,621 4,395 1,797 2 438 1,222,076 2,717,680 424,036 234 378 Argentina 1910 72,935 849,401 10,291 116,147 1 048 774 1911 1912 1913 1914 1910 105,451 34,384 25,488 292,134 1,003,274 1,020,441 855,903 1,132,627 13,471 17,388 94,832 7,064 730,215 76,466 56,348 58,658 79,684 26 1,198,662 1,128,561 1,034,880 1,511,508 730 241 1911 1912 120 109 22 1,018,296 957 114 1,132 109 1,019,657 957 245 1913 1,204 1 332 277 1 333 481 1914 818,961 4 537 823 498 Bolivia 1910 67,447 859,350 1,347 357 870 1 286 014 Other Countries. . 1911 1912 1913 1914 1910 1911 1912 1913 1914 41,804 64,519 60,540 13,516 120,956 89,955 55,506 82,621 64,386 565,212 489,103 445,103 250,938 1,107,517 414,584 1,237,806 1,098,799 502,645 2,591 2,259 11,200 9,666 2,471,177 2,244,462 4,923,996 1,561,759 3,448,132 56,934 30,421 30,433 15,595 16,635 13,176 8,151 4,223 14,458 668,541 586,302 547,276 289,715 3,716,285 2,762,177 6,225,459 2,747,402 4,030,621 Total 1910 $8,823,644 $8,074,523 $98,234,336 $650,408 $115 782 911 1911 1912 1913 1914 7,668,669 7.580,962 9,207,102 7,966,018 5,381,686 7,240,054 7,080,585 6,082,806 107,483,257 122,664,742 126,366,417 93,208,408 243,111 157,395 147,172 170,080 120,676,723 137,643,153 For figures for 1910-11-12, see Otto Wilson U. S. Bureau of Foreign and Domestic Commerce. South America as an Export Field. DATE DUE PRINTED INU.S. A. A 000 548 303 7