the poorer, not the richer for their war, and that the Russian people will gain more from defeat than they could possibly have gained by victory, since defeatwill constitute a check on the economically sterile policy of military and territorial aggrandizement and turn Russian energies to social and economic development; and it is because of this fact that Russia is at the present moment, despite her desperate internal troubles, showing a capacity for economic regeneration as great as, if not greater than, that of Japan. This latter country is breaking all modern records, civilized or uncivilized, in the burdensomeness of her taxation. On the average, the Japanese people pay 30 per cent.--nearly one-third--of their net income in taxation in one form or another, and so far have they been compelled to push the progressive principle that a Japanese lucky enough to possess an income of ten thousand a year has to surrender over six thousand of it in taxation, a condition of things which would, of[Pg 86] course, create a revolution in any European country in twenty-four hours. And this is quoted as a result so brilliant that those who question it cannot be doing so seriously![16] On the other side, for the first time in twenty years the Russian Budget shows a surplus.
This recovery of the defeated nation after wars is not even peculiar to our generation. Ten years after the Franco-Prussian War
France was in a better financial position than Germany, as she is in a better financial position to-day, and though her foreign trade
28
does not show as great expansion as that of Germany--because her population remains absolutely stationary, while that of Germany increases by leaps and bounds--the French people as a whole are more prosperous, more comfortable, more economically secure, with a greater reserve of savings, and all the moral and social advantages that go therewith, than are the Germans. In the same way the social and industrial renaissance of modern Spain dates[Pg 87] from the day that she was defeated and lost her colonies, and it is since her defeat that Spanish securities have just doubled in value.[17] It is since England added the "gold-fields of the world" to her "possessions" that British Consols have dropped twenty points. Such is the outcome in terms of social well-being of military success and political prestige!
[Pg 88] CHAPTER VI
THE INDEMNITY FUTILITY
The real balance-sheet of the Franco-German War--Disregard of Sir Robert Giffen's warning in interpreting the figures--What re-ally happened in France and Germany during the decade following the war--Bismarck's disillusionment--The necessary discount to be given an indemnity--The bearing of the war and its result on German prosperity and progress.
In politics it is unfortunately true that ten dollars which can be seen bulk more largely in the public mind than a million which hap-pen to be out of sight but are none the less real. Thus, however clearly the wastefulness of war and the impossibility of effecting by its means any permanent economic or social advantage for the conqueror may be shown, the fact that Germany was able to exact an indemnity of a billion dollars from France at the close of the war of 1870-71 is taken as conclusive evidence that a nation can "make money by war."
In 1872, Sir Robert (then Mr.) Giffen wrote a notable article summarizing the results of the Franco-German War thus: it meant to
France a loss of 3500 million dollars, and to Germany a total net gain of 870 millions, a money difference in favor of Germany[Pg
89] exceeding in value the whole amount of the British National Debt!
An arithmetical statement of this kind seems at first sight so conclusive that those who have since discussed the financial outcome
of the war of 1870 have quite overlooked the fact that, if such a balance-sheet as that indicated be sound, the whole financial history
of Germany and France during the forty years which have followed the war is meaningless.
The truth is, of course, that such a balance-sheet is meaningless--a verdict which does not reflect upon Sir Robert Giffen, because he drew it up in ignorance of the sequel of the war. It does, however, reflect on those who have adopted the result shown on such
a balance-sheet. Indeed, Sir Robert Giffen himself made the most important reservations. He had at least an inkling of the practical
difficulties of profiting by an indemnity, and indicated plainly that the nominal figures had to be very heavily discounted.
A critic[18] of an early edition of this book seems to have adopted most of Sir Robert Giffen's figures, disregarding, however, certain of his reservations, and to this critic I replied as follows:
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