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DEC , 1919

The Effect of the War
on European Neutrals



_^ COMPUMENTS



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Guaranty Trust Company
of New York



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The Effect of the War
on European Neutrals



Guaranty Trust Company of New York

140 Broadway



FIFTH AVENUE OFFICE
Fifth Avenue and 43rd Street

LONDON OFFICES
32 Lombard Street, E. C.
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COPYRIGHT, 1919, BY
GUARANTY TRUST COMPANY OF NEW YORK



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42Q0iii



CONTENTS

Page

Foreword ....... 5

Holland 6

Norway 12

Sweden . 16

Denmark 19

Switzerland 21

Spain 26



Foreword



^T^HE effects of the war In general upon
-^ the European countries which re-
mained neutral were diverse, depending
upon factors peculiar to each nation. The
interchange of goods between nations
plays so important a role in economic life
that any serious disturbance of the normal
course of world trade entails losses for all
the trading countries.

How a nation shares in these losses de-
pends on such factors as its location wuth
reference to other nations, the nature and
extent of the restrictions upon its trade,
changes in relative demand for commo-
dities in other countries, and the country's
own degree of self-sufficiency as regards
the sources of the goods it consumes.
Other losses may be due to extraordinary
expenses on account of the mobilization
of military forces in order to preserve a
state of neutrality.

It is possible, then, for a nation not taking
part in a war to bear not only relatively
but actually heavier economic losses than
are borne by belligerent nations compar-
able in population and industrial strength.
One can, therefore, no more attribute
identical effects of a war indiscriminately
to all neutrals than to all belligerents. One
neutral may be an important source of
supplies needed by the warring peoples,
while another may have almost no export-
able goods which the belligerent nations
require. The less fortunate nation may be
even more unfavorably placed as regards
commodities, for besides producing prin-



cipally those goods which the belligerents
least want, it may normally require im-
ports of fuel, foodstuffs, and other
materials which are eagerly sought by the
groups at war.

Neutrals may experience also all the
embarrassments growing out of currency
disorders and price fluctuations to which
belligerents are subjected.

On the other hand, a neutral nation
may have its losses on account of a war
completely offset or more than equaled
by the gains attributable to the war. In
the sale of supplies at unusually high
profits, and in the development of the
capital equipment of the country for pro-
ducing the exported goods, the nation in-
creases its wealth. Moreover, the inabil-
ity of belligerents to continue during the
war to place upon the neutral's markets
the same volume of goods as before may
operate for the neutral country exactly
like an effective tariff designed to protect
industries in their early stages of de-
velopment, industries which are really
appropriate for the country. While serv-
ing all belligerents legitimately and with-
out partiality, a neutral nation may,
therefore, have its industrial growth ma-
terially hastened during the war, so much
so that its losses are trivial in comparison.
With these considerations in mind we
shall note some of the outstanding de-
velopments which ha-N-e taken place in
some of the European countries that took
no direct part in the war.



[5]



Holland



PERHAPS none of the neutrals felt
the effects of the war more than
Holland. It was virtually surrounded on
all sides by belligerents ; on three sides
it was bordered by Germany or German-
occupied Belgium, and on the fourth
side by the North Sea, which, infested
by mines and submarines, was very much
of a war and danger zone.

Effects of the War on Holland

Promptly upon the invasion of Belgium,
Holland mobilized half a million men and
throughout the war kept its soldiers
under arms. This involved direct ex-
pense to the state as well as loss of man-
power to industry. Civilian refugees
from Belgium were cared for — and to a
certain extent found places for them-
selves in Dutch industry — military fugi-
tives were interned, large sums were
spent to keep down the prices of food
and for the relief of indigence grow-
ing out of unem-
ployment. Total
"crisis" expendit-
ures to the end of
1918 were $600,-
000,000, of which
one- third was raised
by loans, and the
remainder by taxes,
including war-profit
taxes.

For the first year
or two of the war
Holland as a whole
profited greatly.
This is not to say
that here, any more
than anywhere else,
were benefits evenly
divided. Ship- A typical scene




owners made large profits, agricultural
and dairy products were sold to Germany
at enhanced prices, and new industries,
such as dyestuffs and munition-manu-
facture, had their inception or received
a great impetus. -

In time, however, the disadvantages
began to outweigh the advantages. Ex-
port embargoes by belligerents on both
sides began to deprive Holland of both
raw materials and finished products.
Shipping and fishing risks increased.
Increased production of its own inferior
coal and of peat failed to make up for the
reduction or cutting off of badly needed
imports of fuel. Imports of cereals for
human consumption and cattle-feeding
normally form the chief item of Dutch
imports. Germany's imperious need and
demands for imports of foodstuffs, which
were called for in exchange for coal to
be released to Holland, while they brought
large profits to farmers and cattlemen,
brought food scar-
city and high prices
to the remainder of
the Dutch people.
What is more, these
exports caused the
Allies, especially af-
ter the entry of the
United States into
the war, to refuse to
sell cereals or fodder
to Holland, for ex-
port as such, or for
fattening cattle for
export to Germany .
Unrestricted sub-
marine warfare
greatly increased
shipping risks and
in Holland losses and thorough-



[6]




Copyright, Undewrood & Underwood



A general vieiv of Amsterdam



ly disrupted international trade, as well
as caused the requisitioning of Dutch
ships in Allied harbors in March, 1918.
Toward the end of the war, chiefly be-
cause of this interference with over-seas
trade, Holland experienced a shortage
of raw materials and a slackening of
industrial activity.

Present Position-

The fruits of the earlier prosperity for
Dutch industry and trade were largely
retained, however, and Holland now
finds itself in a strong position. The
Bank of the Netherlands, at the opening
of the war, held approximately $68,-
000,000 in gold; at present it holds four
times this amount. Furthermore, it was
the only central bank among the Euro-
pean neutrals, save that of Spain, whose



ratio of holdings of gold and silver to note
and deposit liabilities increased during
the war; the increase was from 54 per
cent, to more than 60 per cent. The
other banks have similarly improved their
position. If Dutch investments abroad
— other than those in Eastern Europe —
have diminished, the decrease has been
not because of the compulsion cl dis-
tress, but on the contrary, either to take
profits or to employ the capital more ad-
vantageously at home. Losses, of course,
have been suffered by the people of
Holland from extensive 'pre-war invest-
ments in Russian and Hungarian and
other Eastern European securities.

Dutch shipping, in spite of losses, held
its own; in fact, according to figures in
Lloyd's Register, Holland was the only
European neutral whose gross steam



[7]



tonnage increased between June, 1914,
and June- 1919. Dutch owners did not
take such risks with their ships as did
other neutral owners.

The exigencies of war caused certain
new industries to come into existence in
Holland, notably the making of chemicals;
and others, such as the manufacture of
clothing and foods and other articles of
consumption, grew considerably.

Economic Resources

Holland has a land area of about
12,500 square miles; to which roughly
2,000 square miles may be added if the



Zuider Zee be included in the country's
area. Its population is a little more than
six and one-half millions. Its wealth in
1911 was estimated to be in excess of $4,-
300,000,000. At the close of 1913, the
national debt was about $465,000,000.
The chief occupations of the country
have been agriculture, cattle-raising
and dairying, fishing, and foreign com-
merce. About one-third of the land is giv-
en over to pasturage. Possessing a remark-
able system of inland waterways, as well
as a long coast line, and rich colonies, this
little nation is and has long been one of
the world's great trading and shipping




Copyright, TJnder\.'ood h Underwood

On one of the cam,h of Amsterdam, which have made thil citij known as th^ Ven'ce of the North

(81




Rotterdam. The transit trade through Dutch ports, especially Rotterdam, between Central Europe
and the remainder of the world, has been of great importance



nations. Its foreign commerce in 1913
amounted to more than $300 per
capita. The transit trade through Dutch
ports, especially Rotterdam, between
Central Europe and the remainder of the
world, has been of very great importance.
Dutch North Sea fishermen,, too, have
made enormous harvests from the sea,
not only supplying a large local demand
but furnishing large exports of fish.

The mineral resources of the country
are small, the coal supply, for instance,
being quite insufficient for the industry
that has been established there. In 1916
the quantity of coal mined was 2,650,000
metric tons, as against imports of several
times that amount. Before the war, coal
came chiefly from England, Belgium, and
Germany, and iron ore from Spain. The
total imports of iron and steel of all kinds
in 1914 were valued at $150,000,000, or 13
per cent, of all imports, as agamst exports
of about $100,000,000. Cereals and flour
contributed in the same year 173^ per
cent, of Dutch imports; raw and manu-
factured textiles, 6H per cent. ; and coal, 4
per cent. Statistics of manufactures are
rather incomplete. Among the chief



industries have been cotton manufactur-
ing, carpet weaving, distilling and brew-
ing, ship-building, and certain specialized
industries, such as diamond-cutting.

Dutch Colonies

Holland was the only European neutral
with important colonial possessions. Its
richest colonies, of course, are the Dutch
East Indies, including Java and Madura,
Sumatra, Borneo, Celebes, the Molukka
Islands, and other islands. The total
population of the Dutch East Indies is
about 40,000,000, of which only a fraction
of one per cent, is European, the great
majority of the remainder being natives.
The products of these islands are chiefly
agricultural and include sugar, coffee, tea,
tobacco, cinchona and rubber. Con-
siderable ciuantities of tin are also pro-
duced. Among the other mineral resour-
ces are the iron ore deposits of Celebes.

The Dutch have had possession of
the islands since the seventeenth century,
and have built up with them a large
colonial trade.

In 1916 the foreign trade of the Dutch
East Indies amounted to approximately



9



$527,000,000, of which imports were
$180,000,000, and exports $347,000,000.
Holland itself in 1914 took for home con-
sumption $158,000,000 worth of products
of the Islands and exported to them
$57,000,000 worth of merchandise. In
addition to this trade with the Islands,
the Dutch have carried in their ships no
small part of the foreign commerce of the
Dutch East Indies with other countries
They have, therefore, been a most
profitable possession for the mother
country.

The Dutch West Indies include Dutch
Guiana or Surinam and Curagao. The
total population of these possessions is
about 150,000, and their chief products
are sugar and its by-products, molasses
and rum, cocoa, bananas, rice and corn.



Their total foreign trade in 1916
amounted to $9,000,000.

Future Development

Dutch East Indian trade, for the
moment diverted to other channels, is
likely to resume in large part its former
channels and perhaps to be more profit-
able than ever. The chief articles of
production in 1916 in the Dutch East
Indies were, as follows :

Sugar, 1,625,718 tons; coffee, 73,817
tons; tea, 93,380,000 pounds; tobacco,
140,000,000 pounds; tin, 18,597 tons;
cinchona, 18,500,000 pounds.

With these products in such demand at
such prices as now obtain, Holland should
continue to reap large returns from its en-
vestments in and trade with the islands.




Copyright, Underwood & Un'irrwood

The harbor of Rotterdam, is becoming busw with post-bellum commerce

[10]



Holland seems to
have no intention
of neglecting the
opportunity for fur-
ther development of
the Islands through
the extended culti-
vation of the re-
markably fertile
soil, and the exploit-
ation of the abund-
ant mineral and
forest resources.

Industrial enter-
prise in the Dutch East Indies has made
considerable progress during recent years,
although with the possible exception of
the sugar industry, which is, properly
speaking, a purely agricultural industry,
the resources are not adequately utilized.

At the end of the year 1915, there were
in the Netherlands East Indies a total of
2,250 industrial enterprises employing
58,051 workmen. These enterprises in-
clude the manufacture of building




A diamond cutting factorii in Holland



materials, such as
cement, concrete
and limestone;
manufacture of food
and drink; chemi-
cal, metal and
woodwork indus-
tries and shipbuild-
ing.

The virtual
doubling of the na-
tional debt since
1914 and conse-
quent higher taxa-
tion could hardly be unduly burden-
some to a people with the wealth, thrift
and industry of the Dutch. The history
of this little nation is the history of a
people ready to utilize every opportunity
to strengthen their position in the world
of commerce and industry. The strategic
position of the Dutch on the Continent
of Europe and in colonial and inter-
national trade is such as to promise a full
measure of future prosperity to Holland.



[n:



Norway



IN area Norway is a little more than
three times as large as Ohio. On the
whole it is one of the most sparsely popu-
lated countries of Europe, the population
numbering 2,392,000 in 1910.

Depending largely upon its fisheries,
forests, and ocean-carrying, the country
was in a prosperous condition at the out-
break of the war.

Debt

On June 30, 1918, the funded debt at
the par of exchange was $133,000,000, rep-
resenting an increase of 39 per cent, since
1914. The proportions of internal and



external debt in 1918 were quite different
from those obtaining in 1914. In 1918
only 68 per cent., as compared with 94
per cent, in 1914, was classed as external
debt. The per capita funded debt in 1918
was $52.

In addition to the funded debt there
was on June 30, 1918, an unfunded debt
amounting to $64,460,000. Altogether
then the debt, funded and unfunded, was
equivalent to $197,460,000.

The principal asset of the state which
may be regarded as an offset to the
funded debt consists of the state-owned
railways. In 1918 there were 1,731 miles




The busy harbor of Bergen. Shipping is one of Norway's principal sources of income

fl2l










Next to fishing the lumber industry in Norway yields products of greatest export value



of state-owned lines out of a total of 2,030
miles in the state as a whole. The capital
investment in these railways in 1916 was
$82,318,078. The railways have been
operated regularly at a profit until the last
two years, the average profit for eight
years being more than $1,340,000 annu-
ally. In other words, the operating profits
of the state railways have in ordinary
years been equal to about one-third of the
total debt charges. The deficits incurred
during 1917 and 1918 have been due to
the extraordinary increases in the cost of
operation.

In addition to the state-owned railways
the state possessed in 1917 other assets,
not including ships, public buildings, etc.,
which had a current value of $79,154,872.

The combined values of these non-
material assets and the state railways
represent a total investment of approxi-
mately $161,000,000, which is $28,000,-



000 in excess of the total funded debt
in 1918.

Resources and Industries

The national wealth just before the war
was estimated at approximately $2,000,-
000,000, or a per capita of $800. Partly
on account of the increase in the general
level of prices the value of the national
wealth now is much greater.

The country is for the most part moun-
tainous, and neither soil nor climate is
particularly favorable for agriculture.
Less than six per cent, of the area was in
cultivation prior to the war. A, shortage
of foods which was experienced in recent
years has, however, given rise to much
discussion concerning the possibilities of
enlarging the country's agricultural out-
put. While there is no expectation that
the food crops can be made to yield suffi-
cient for domestic needs, a systematic

13]



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Online LibraryGuaranty Trust Company of New YorkThe effect of the war on European neutrals → online text (page 1 of 2)