The shortage of labor power caused by the demands of the war has as its direct result checked production and advanced wages. The economic effects however do not end here. There are other results, less direct but none the less important, that have followed. The more important of these indirect effects are, first, the speeding up of labors' pace; second, the introduction of women into various voca tions hitherto exclusively or almost exclusively occupied by men; and third, the forced di version of labor from the less essential voca tions to the more essential ones by the action of the various governments engaged in the war. Each of these movements is so important in the present and in the future that any ade quate discussion of its causes and results would call for space beyond the limits permissible here and on this account those interested in such economic developments are referred to the books and pamphlets on the several sub jects.* It is, however, not in international trade, nor in the relationships of capital and labor to each other and to the other economic activities that the present war has had its most far-reaching effects. Of all the economic phenomena, prices of commodities are most easily affected by economic changes and on this account it is here that war' accomplishes its most important economic results.
The Civil War, it will be recalled, was ac companied by a rapid increase in the price level and was followed for a period of 30 years by a continuous decline. Beginning about 1896, as a result of improvements in smelting and the opening up of new mining districts, the output of gold increased so rapidly that the downward trend was converted into an up ward movement that still continues. By 1904 prices had ascended to a level substantially equal to that of 1860 and by 1914 the general level was approximately 50 per cent above the low point of 1896. Since the outbreak of the war prices have continued to rise at an unpre cedented rate until at the present writing, Sep tember 1918, the general level is estimated by the United States Bureau of Labor Statistics to be somewhat over 90 per cent above that prevailing in 1914. The basic causes of the rise in prices both before and during the war are well understood. Prices are the rates at which goods exchange for money and conse quently anything that makes goods relatively scarce and money relatively plentiful causes prices to rise. The primary economic effect of war it must not be forgotten is to cause com modities to be used up more rapidly than be fore and at the same time to lessen the pro ductive power of the nations at war. Com modities then become less plentiful with respect to wants and prices begin to rise. Under nor mal conditions the rise in prices induces pro ducers to work harder and as a consequence goods become more abundant and then prices fall. In times of war, and pre-eminently in a
war making such unprecedented demands for arms, munitions, aircraft and other offensive and defensive instruments of warfare, a con siderable portion of the productive forces are engaged in war activities and the remainder are incapable of fully answering the calls made upon them. Food and clothing then become relatively scarce and despite the efforts of those producing the commodities needed for a comfortable and efficient life, prices continue to rise except where the, government inter venes and fixes a maximum beyond which they may not legally go. When the government fixes maximum prices it must at the same times establish priorities, classifying in0-.stries into the essential, the less essential, the desirable and the superfluous, and then by the creation of food commissions and fuel administrations not only see that its scales of prices are observed but also that production is stimulated or consumption curtailed or both as the occasion demands.
While commodities have been growing, relatively speaking, scarce and dear, money has as a direct result of the war been growing plentiful and cheap. It will be remembered that a part of the balance of trade in our favor has been settled by the importation of gold, thus making the supply of the basic money more abundant than ever before. From the beginning of the war, our financiers as well as those of England and France have been trying to prevent the importation of gold by the United States for the reason that such action causes prices to rise and thus interferes with the sale of our foodstuffs and other commodi ties which we desire to sell and the European nations at war desire to buy. It was for this reason that the British and French govern ments sent a joint commission to this country in the autumn of 1915 to confer with our gov ernment and our financiers with the result that arrangements were concluded by which a series of secured loans were provided for, thus per mitting the sale of our exports without at the same drawing gold from England and France into this country. Notwithstanding all efforts made to check the flow of gold toward the United States, so strong are the natural economic forces that the importation of this precious metal, while seriously interfered with, has nevet been entirely stopped. Between 8 Jan. 1915 and 22 June 1917, over $1,600,000,000 in gold was imported into the United States from various foreign countries, the larger part of it coming from the nations at war. From the beginning of the war to 10 Aug. 1918, the net gain in our stock of gold resulting from the large excess of imports over exports is over one billion dollars worth.