ing as she did a central position between Europe, Asia, and Africa, she easily made herself the commercial mistress of these three parts of the planet and acquired over them an immense preponderance; for in politics, as in strategy, the centre exercises dominion over the circumference. That might remain true even to-day were it not, as Montesquieu says, that God permitted the Turks to exist in order that the world might behold a nation capable of conquering and holding a vast empire without drawing any profit from it. There exists in the New World a country that possesses the geographical advantages of Constantinople but which, it must be said, has not known how to utilize them up to the present. I refer to Nicaragua. As Constantinople is the centre of the Old World, the city of León is the centre of the New, and, if a waterway were dug across the narrow stretch of land that separates the Nicaraguan lakes from the Pacific Ocean, her central position would give her dominion over all the coast of North and South America. Nicaragua might be, even more than Constantinople, the inevitable tollgate of world commerce. She is destined to attain some day an extraordinary position of wealth and grandeur. France, England, and Holland are deeply interested in the construction of a waterway between the two oceans. England above all has imperative political motives for carrying out that project. She has every reason to desire that Central America may become a powerful and flourishing nation, a centre of Spanish American enterprise, strong enough to uphold the national banner of her race and to help Mexico to resist the pressure of its invaders from the North.'

Here, as in the affirmations of Bolivar, we find joined with an erroneous geographical idea of the economic value

it, under English auspices, made a buttress against the expansion of the United States. One of the ironies of history is that this same Prince Louis Napoleon was destined later, as Emperor of France, to open the Suez Canal, half a century before the Panama Canal was built, thus belying his own prophecies as to the greater immediate importance of the American waterway.

The only man whose prophetic vision penetrated to the bottom of the problem was Goethe. The German poet comprehended in one glance the significance for world commerce of both the Egyptian canal and the Central American canal, and the political factors that each represented for two great empires. In his conversations with Eckermann he referred to Humboldt's opinion as to various points where it would be easy to connect the Atlantic and the Pacific across the Isthmus, and said: 'Good. All this is reserved for the future and for a great spirit of enterprise. But one thing is certain incalculable benefits for all the world, both civilized and uncivilized, will follow opening a canal between the Gulf of Mexico and the Pacific Ocean big enough to accommodate large vessels. It would surprise me, however, if the United States were to let the opportunity pass and fail to take the matter into her own hands. There are reasons for believing that this young nation, with its rapid progress toward the west, will within thirty or forty years occupy and settle the extensive territories that lie beyond the Rocky Mountains. It is also likely that along the coasts of the Pacific, which Nature has blessed with large and safe harbors, great trading cities will eventually arise which will build up a trade between China and the East Indies on the one hand and the United States on the other. Should this happen, it would

be not only desirable but imperative for merchant and naval vessels to pass readily from one coast of North America to the other by some shorter and safer route than the long, expensive, and dangerous trip around the Horn. I repeat, it is absolutely imperative for the United States to be able to communicate rapidly from the Gulf of Mexico to the Pacific Ocean, and I believe she will do it. I should like to live to see it, but it will not come in my day. In the second place, I should like to see a canal connecting the Danube and the Rhine, but that is so vast an enterprise that I doubt if it will be carried out, considering our scanty resources. Third and last, I should like to see the English in possession of a canal across the Suez. Those three things would be worth the trouble of waiting here fifty years to behold.'

Goethe died in 1832. The Suez Canal was opened in 1869, and the Panama Canal in 1914, four centuries after Balboa first cast his eyes upon the Southern Sea. In the interim, as if to demonstrate the fallibility of even the greatest human genius, Germany was able with little effort to construct a great system of inland waterways uniting her important rivers. Nevertheless, the German poet had a correct appreciation of the place the two great interoceanic highways were respectively to occupy in the commerce of the world. The Suez unites the most densely populated portions of the earth — Western Europe, the East Indies, China, and Japan. The Panama Canal benefits primarily the domestic trade of the United States, and that nation's commerce with the Far East and with the western coast of South America.

The Eastern States of North America were settled and developed without an

interoceanic canal; but the railway across Panama determined the future of California. As soon as the Canal was built, a large part of the freight carried by the transcontinental lines - except, of course, local traffic - was transferred to vessels of ten or twelve thousand tons, which carried such commodities as timber from the Pacific Northwest to the Atlantic seaboard, and the manufactures of the East to the Pacific Coast.

From the very beginning, therefore, the domestic commerce of the United States has accounted for one quarter of the annual movement through the Canal. Next in importance are exports from Atlantic and Gulf cities of the United States to Asiatic markets, which constitute fourteen and one-half per cent of the tonnage by that route. North America competes with Europe for business on the west coast of South America, but her relative nearness to that market adds fifty per cent to the effective carrying capacity of every vessel she employs in this trade. Consequently the Panama Canal is first and foremost an instrument for the internal development of the United States and the expansion of her Pacific commerce.

Some people formerly argued that the Panama Canal and other waterways across Central America were destined primarily to be highways for world navigation, because the United States did not possess a merchant fleet and would be compelled to use British, German, French, and even Japanese vessels for its own business by that route. But they counted without their host, as the increase in American tonnage engaged in the export tradefrom one million to ten million tons - testifies.

An optimistic - perhaps a too optimistic - opinion prevails regarding the movement of gold prices throughout the world. Wholesale quotations have steadily fallen since 1924, in the United States from 152 to 136, in England from 160 to 145. Last January, the date for which the later figures are quoted, corresponding gold prices in Belgium stood at 123. Therefore the cost of living in our country is sensibly lower than in those lands which have maintained the gold standard since the war. The question arises whether the present downward tendency will continue, or possibly become even more accentuated than hitherto.

First of all, let us observe that there is no economic reason for assuming that prices will return to their level in 1913. That level never had any special sanctity. Prices had ranged above and below it for many years. Probably they would have risen had there been no war, and we should have heard the same complaints we hear to-day of the high cost of living. Apparently the marked rise after the Armistice was due to the concentration of gold in the United States, which produced a kind of inflation there. A superabundance of money made things dearer. Many assume, therefore, that as America returns part of her gold to its former holders prices will fall to correspond.

That is a popular prediction which may be refuted by experience. For example, in 1921 and 1922, when the Unit1 From L'Indépendance Belge (Brussels Liberal Progressive daily), March 10

ed States was still surfeited with gold, wholesale prices there fell considerably, although they subsequently recovered. Economics is the most uncertain of the sciences, and one can never trust with absolute confidence to its theories. Indeed, in following the evolution of prices since the war we are faced with a great number of economic phenomena that seem to deny all the earlier tenets of the science.

While the price level of 1913 was in no way remarkable in itself, that of 1927 has several notable features. First of all, the universal adoption of protective tariffs has produced artificial increases. So long as this condition obtains, we cannot expect an appreciable decline. We may safely conclude that the slow readjustment of prices, particularly in Europe, will, in view of her monetary disorders, her overpopulation, and her inability to feed herself, result in a higher price level than in the past. Other facts upon which we can rely with confidence without venturing into the field of prophecy can be learned by studying the American market, which has been for the last ten years, and probably will be for many years to come, the regulator of the world market.

Ever since the war the economic policies of the United States have steadily promoted high prices throughout the world. Before the war that country was the principal outlet for European emigration. It possessed a territory equal to that of all Europe, with unmeasurable natural resources

calling for imported labor. It was a land where a relatively sparse population lived in unusual comfort with relatively high average incomes. During hostilities wages irresistibly rose in response to wages abroad, and when the fighting was over the nation found itself faced with a dilemma seriously imperiling its future. It could either keep its doors open to the millions of immigrants who were sure to flock to its shores from the great hordes of unemployed in the Old World, or it could restrict and ration this immigration. Congress adopted the latter course. It had powerful reasons for doing so. One of undoubted weight was fear lest the Anglo-Saxon character of the population be threatened by an influx of people of different races and types difficult to assimilate. But publicly Congress laid chief stress upon the danger lest a flood of immigrants force down wages, thus diminishing the purchasing power of the people and inviting an economic crisis.

So America put up the bars against the foreigner. The effect of that measure was immediately felt. Throughout her vast dominions wages continued to rise. They have been maintained artificially at such a high level that prices, notwithstanding the abundance of cheap raw materials, are higher there than they are abroad. Consequently the Government has been forced, in order to prevent a second invasion, this time of cheap foreign goods, to raise its tariff walls. In a word, the United States has isolated itself by immigration bars and customs barriers from all the rest of the world. This would not be important either

for that country or for other countries if the domestic market of the United States absorbed all the goods its people produce; if its merchants and manufacturers were not exporters, and if they did not monopolize most of the gold in the world. But nations have become too interdependent, in spite of themselves, for isolation to work as a permanent policy. America has therefore become involved in a vicious circle, which compels her people to go on raising wages, raising customs duties, raising the cost of living - sustaining the whole economic structure on an artificial basis. A rise in any one of these involves a rise in the others also, and this again reacts upon the first, and so on indefinitely. This will continue until a point is reached where foreign competition becomes irresistible and sweeps over any barriers that may be erected against it. Then we may see an unexampled economic crisis in America, of which that country will be at least the principal, if not the sole, victim.

Meanwhile it is evident that the policy of the United States has serious consequences for all other countries. That country remains, notwithstanding everything, one of the greatest of the exporting nations. If wholesale prices have steadily declined there during the past year, they cannot continue to do so. Their rhythm of movement tends to slow down decidedly, and that itself is a serious symptom. In our opinion, we shall soon see the wholesale price level in America resume, as it did in 1923, its upward tendency. Is that likely to cause a corresponding movement in Europe?

I. MORE HANKOW IMPRESSIONS1

Even revolutionary China is China, after all. One may have his doubts about the country itself, but he must recognize the reality of the revolution. A shrewd observer of a Communist turn of mind declared some years ago that a social and economic revolution could never occur spontaneously in China, because she has no organized capitalism of her own, but only isolated capitalist enterprises introduced from abroad. Necessarily, therefore, any revolution that occurred would be primarily nationalist, or, to put it bluntly, antiforeign.

That was merely a Marxian statement of what the Chinese themselves have been saying for some time. They claim that their revolution really began with the Taiping Rebellion, and that the Boxer outbreak, and the overthrow of the Monarchy in 1911, were only phases of what is really one continuing movement. That may be true from the standpoint of the historian and the theoretician. The plain fact is, however, that conscious and organized revolution dates only from 1924 and 1925. In the former year the Kuomintang first adopted a constitution that contemplated specifically revolution and reconstruction. In 1925 Borodin, who had already been stationed at Canton for a considerable period, first became really prominent in the movement. To-day the Kuomintang is

1 From Frankfurter Zeitung (Liberal daily), March 9

rapidly emerging from its romantic age, and it now stands face to face with practical problems of government. That is what makes the Chinese revolution a reality.

A great deal has been said about Soviet intrigue and Bolshevist influence among the Nationalists. I have called three times at Borodin's home. He is very comfortably housed, a short distance from the German ConsulateGeneral, above the offices of the Siemens China Company. The first time I came I found the door ajar and a Chinese boy wearing a bicycle cap sitting in the hallway. Another was sprawling on a dilapidated sofa, spitting slowly and thoughtfully over the back on to the floor behind it. I handed the first youngster my card and he took it upstairs, while I glanced at the title of the pamphlet he had been perusing. It was a Chinese translation of a Russian article upon the organization of the Russian Communist Party. A neat young Russian came down and excused Mr. Borodin, who was suffering from a bad cold, and asked me to come back a couple of days later.

The second time I called I met Madame Borodin, a lady no longer young, whose motherly mildness does not entirely disguise a marked masterfulness of manner. She told me her husband was quite ill, and would appreciate it if I would wait until he had recovered. She begged me, however, not to leave Hankow without seeing him. So I called for the third time a few days later. The young Russian