The Relation of the Old World to the New

The accumulative habits of Europe before the war were the
necessary condition of the greatest of the external factors which maintained the European equipoise.

Of the surplus capital goods accumulated by Europe a
substantial part was exported abroad, where its investment made
possible the development of the new resources of food, materials,
and transport, and at the same time enabled the Old World to
stake out a claim in the natural wealth and virgin potentialities
of the New. This last factor came to be of the vastest
importance. The Old World employed with an immense prudence the
annual tribute it was thus entitled to draw. The benefit of cheap
and abundant supplies, resulting from the new developments which
its surplus capital had made possible was, it is true, enjoyed
and not postponed. But the greater part of the money interest
accruing on these foreign investments was reinvested and allowed
to accumulate, as a reserve (it was then hoped) against the less
happy day when the industrial labour of Europe could no longer
purchase on such easy terms the produce of other continents, and
when the due balance would be threatened between its historical
civilisations and the multiplying races of other climates and
environments. Thus the whole of the European races tended to
benefit alike from the development of new resources whether they
pursued their culture at home or adventured it abroad.

Even before the war, however, the equilibrium thus
established between old civilisations and new resources was being
threatened. The prosperity of Europe was based on the facts that,
owing to the large exportable surplus of foodstuffs in America,
she was able to purchase food at a cheap rate measured in terms
of the labour required to produce her own exports, and that, as a
result of her previous investments of capital, she was entitled
to a substantial amount annually without any payment in return at
all. The second of these factors then seemed out of danger but,
as a result of the growth of population overseas, chiefly in the
United States, the first was not so secure.

When first the virgin soils of America came into bearing, the
proportions of the population of those continents themselves, and
consequently of their own local requirements, to those of Europe
were very small. As lately as 1890 Europe had a population three
times that of North and South America added together. But by 1914
the domestic requirements of the United states for wheat were
approaching their production, and the date was evidently near
when there would be an exportable surplus only in years of
exceptionally favourable harvest. Indeed, the present domestic
requirements of the United States are estimated at more than
ninety per cent of the average yield of the five years
1909-13.(4*) At that time, however, the tendency towards
stringency was showing itself, not so much in a lack of abundance
as in a steady increase of real cost. That is to say, taking the
world as a whole, there was no deficiency of wheat, but in order
to call forth an adequate supply it was necessary to offer a
higher real price. The most favourable factor in the situation
was to be found in the extent to which Central and Western Europe was being fed from the exportable surplus of Russia and Roumania.

In short, Europe's claim on the resources of the New World
was becoming precarious; the law of diminishing returns was at
last reasserting itself, and was making it necessary year by year
for Europe to offer a greater quantity of other commodities to
obtain the same amount of bread; and Europe, therefore, could by
no means afford the disorganisation of any of her principal
sources of supply.

Much else might be said in an attempt to portray the economic
peculiarities of the Europe of 1914. I have selected for emphasis
the three or four greatest factors of instability -- the
instability of an excessive population dependent for its
livelihood on a complicated and artificial organisation, the
psychological instability of the labouring and capitalist
classes, and the instability of Europe's claim, coupled with the
completeness of her dependence, on the food supplies of the New
World.

The war had so shaken this system as to endanger the life of
Europe altogether. A great part of the continent was sick and
dying; its population was greatly in excess of the numbers for
which a livelihood was available; its organisation was destroyed,
its transport system ruptured, and its food supplies terribly
impaired.

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