[Footnote 2:  “Propterea quod a cultu atque humanitute provinciae longissime absunt.”]

What the Economic Effects May Be

By Irving Fisher.

     Professor of Political Economy at Yale University; member of
     many scientific societies.

When the future historian chronicles the facts of the present great world struggle and attempts to analyze its causes and effects the economic losses, gains, shiftings, and dislocations will form an important part of the story.  It is, of course, quite impossible at this time to know, in any detail, what all the economic results will be.  Much will depend on how long the war lasts, how many people and how much property are destroyed, what financial devices are resorted to in order to finance it, and which side is finally victorious.

The most palpable and the most fundamental effects will be a partial stoppage of earnings in the nations directly concerned, i.e., a reduction in the “real income,” which consists of enjoyable goods.  All the other important results follow from this.

The cost, however reckoned, is sure to be stupendous.  Prof.  Richet is quoted as reckoning it at $50,000,000 a day.  This is probably more than half the total income of all the inhabitants of the warring countries.  The highest estimates of the total income of the United Kingdom, France, and Germany, estimates of Bowley, Laverge, and Buchel, respectively, total up less than $70,000,000 a day.  Russia and Austria are poor countries per capita, and would scarcely bring the grand total to $100,000,000 a day.  Moreover, the loss of real income to Europe is, I imagine, in reality much greater than Richet’s estimate, chiefly because he takes little account of the indirect costs, which may well be the greatest of all.  The cost to the fiscal departments of Government is probably only a small part of the total cost which the people will have to bear.  The killing and disabling of the men engaged will cut off the financial support of European families to the tune of hundreds of millions of dollars per year.  The physical destruction of capital through the devastation of crops, the burning and demolishing of merchant ships and buildings, the crippling of industry through the sudden withdrawal of labor and raw materials, the introduction of new trade risks, and the cutting off of transportation, both internal and foreign, make up a sum of items which cannot be measured, but which may exceed those which can.  Last, but not least, is the impairment of that subtle but vital basis of business, commercial credit.