But if the Germans impress one as a demoralized nation, we must not overlook the great extent to which this demoralization is due to exceptional condition. The influential and intellectual class is exhausted by the sacrifices of the war. The physical exhaustion of the people, caused principally by undernourishment, reveals itself to the superficial observer in a kind of nervousness which has engrafted itself upon the nature of present day Germans, and manifests itself in every phase of social intercourse.

In spite of all this, the essentially sound and vigorous character of the German race continues to reveal itself. It has erected a new government with a model democratic constitution, although every obstacle was thrown in its course, on the one side by a victorious and relentless enemy, and on the other side by the Bolsheviki.

[Hamburger Nachrichten, December 21, 1919] GERMANY'S ECONOMIC PROSTRATION

BY WALTER RATHENAU

FIRST among the effects of the war is, of course, the destruction of wealth, which continued five years, and has not yet ceased. This destruction is the greatest in the history of the world. It extends not only to consumable goods, but also to the instruments of production, the machinery of transportation, and to every form of useful property. Second to the destruction of wealth is the decrease in labor power. Not only is the proportion of men in the prime of life smaller now, but the survivors are affected with the lassitude that follows wars. Consequently, we are facing not only a great diminution of wealth, of means of production in particular of declining output

from our mines and from our tillable soil, but we are simultaneously facing a diminished ability to restore these instruments of production and other sources of wealth. We find ourselves in this situation at a moment when one of the greatest economic tasks of history presents itself to the civilized world that is, the reconstruction and development of the lands lying to the east of Germany, of ruined Russia and the newly organized nations formed from its territory. Last of all — and this takes precedence of all else we have the task of restoring the ruined areas of Belgium and Northern France.

But were none of these new and tremendous tasks before us, we should, nevertheless, be faced by a deficit of wealth throughout the world. The result is a condition that recalls the economic situation in the Middle Ages - a reversal of the relation of demand and supply. For decades the world has been producing a surplus for which it has been seeking markets. Producers had to hunt for consumers. To-day the opposite is true. For years to come, the consumer will seek the producer. The deficit in provisions and merchandise will continue. That attitude, which has, unfortunately, become only too familiar to our people, which we now assume toward the food supply, will be the habitual attitude toward all other commodities and articles. We must not make the error of assuming offhand that this situation will be identical with a period of intense industrial activity. A boom presupposes not only a great demand, but also abundant resources for supplying that demand. This is not the situation today. Indeed, the world is still living to a considerable extent upon its capital rather than upon its income.

The results of this situation will be twofold. On the one hand competi

tion in the familiar sense will lose its meaning. There is no longer any purpose in spending millions to promote trade. It is folly to exert ourselves as we have in the past to attract consumers. On the contrary, the demand of the hour is to simplify our distributive machinery and at the same time to standardize production so as to prevent the manufacture of a multitude of different types and styles of an article. A second result of the lack of wealth and decline of production throughout the world, is the continued fall in the value of money. This is not peculiar to Germany, though it is most apparent here. The same movement is evident throughout the civilized world. I may illustrate by saying that the General Electric Company, of which I am president, uses nearly two million marks worth of copper daily, although our output of goods has not yet attained its peace level.

Germany occupies the darkest point in this gloomy picture. We knew a year ago whither we were headed and why we must take that course. Reliable estimates had been made of the quantity of raw materials Germany would be forced to import within specified periods. Their value ran up into the hundreds of millions. We neglected, however, to arrange that these imports should not still further depreciate our foreign exchange. Everyone was talking of free trade. Germany and its government took up that cry. To-day we are under a free trade régime. The result is that German merchandise is being squandered abroad while our money is falling to a point

that we would have thought impossible a year ago. The task before us was a double one. We should have struck a balance immediately between consumption and production. Our country has continued to consume far more than it produced. That has necessitated mortgaging our future, and sacrificing our present stocks. The second task was to establish control of traffic across our frontier. Nothing effective was done to accomplish this. A year after the armistice, no commercial guardians watch our boundaries something that cannot be said of any other civilized nation.

The most serious danger that threatens our industry, however, is the possibility of a decline in our technical efficiency. The years when we were at war were not years of scientific progress. During that period research, invention, and the perfection of processes were more interfered with than ever previously in our history. That is a debit item of almost immeasurable gravity. So another task that confronts us is to exert all the energy that we can rally to promote research and scientific investigation, to improve our methods of work, and to maintain the highest technical standards among our industrial directors and the rank and file of our skilled labor. There is no legislative or regulative panacea for the ills that now inflict German industry. Our only hope lies in selfhelp. We must direct our efforts in these lines, increasing concentration of industry, simplification of types and processes, and the scientific management of production and distribution.

DESPITE all the plausible talk about a League of Nations and the reconciliation of peoples, of disarmament and eternal peace, a great tide of imperialist sentiment is sweeping over the world. Countries formerly opposed to militarism, like the United States and England, now demand powerful standing armies. Scandinavia, also, has caught the epidemic and is reviving long-forgotten colonial projects and buried imperialistic dreams. Norwegian journalists are retelling the tales of the Vikings and their distant voyages. The Danes are recalling the time when Danebrog came down from heaven in the siege of Reval, and the days when Esthonia was Danish. Last of all, Sweden looks, even though hesitatingly, toward the East, though its gaze is reminiscent rather than calculating.

Norway's writers are letting their thoughts rove, as the ancient Vikings roved, to the most distant quarters of the world, seeking new fields of employment and enrichment for their people. During the war, the battle cry of England's champions in that country was: 'We have the second commercial fleet in the world — we must make our importance felt.' These people are to-day ardent advocates of Norwegian trade expansion. They They hope to take the place of Germany in Russian commerce; for the Americans must have a middleman in dealing with that country. They have organized powerful, amply financed corporations for this purpose. They would

pursue a similar policy in South America and China, where it is planned to start banks and commercial houses. A common saying in the country is that Norway's future lies in Siberia. Unhappily, the investigations which Director Eyde made in Poland, in regard to the opportunities for Norwegian business in that country, resulted in a pessimistic report.

Those who seek territorial expansion are no less ambitious than these commercial promoters. They say that Norway was practically at war with Germany, and that it never even tried to maintain commercial neutrality. Thousands of Norwegian sailors laid down their lives for the victory of western democracy. It was a mere technicality that the government did not declare war officially. Some of the great Norwegian dailies repeat these arguments day after day, and claim territorial compensations for this service. They have succeeded in getting the Paris Conference to allot Spitzbergen to Norway. This was done in spite of the active opposition of the English Spitzbergen Company, which suddenly discovered that there was a vast wealth of marble, gold, and precious stones in the country. Norway, however, must confirm all existing rights of British subjects and not impair them by subsequent legislation. Matter-of-fact criticism reveals that England's generosity amounts in practice to permitting Norway to assume some very unprofitable police and judicial burdens, leaving the economic

Disillusioned in this direction, the territorial expansionists of Norway have cast greedy eyes upon German East Africa. However, cold water has been cast upon their plans by powerful influences in the government, that opposed trying for anything more after Spitzbergen.

England is prompt to take advantage of Norway's greed, as an opportunity to employ its old policy of 'divide and rule,' by encouraging the Norwegian correspondents in England to insist that Iceland and the Faroe Islands, which are now Danish possessions, are ancient Norwegian colonies. Naturally, the old argument of common culture does good service here. These imperialist ambitions, however, have startled the saner part of the people into vigorous opposition, especially when they threatened to arouse friction with Sweden, from whom some of these enthusiasts were demanding the return of districts which the latter country had controlled for two centuries.

A crisis of chauvinism is also manifesting itself in Denmark. When the West Indian possessions were sold to the United States, bitter resentment 'was aroused in certain circles. No one could question but what it was a wise move for the little government to jettison that part of its colonial cargo which was likely to prove so dangerous in the mighty conflagration that was then engulfing the world. It then appeared that international rivalries would tend to concentrate around certain colonial areas, and especially those commanding the ways to the Panama Canal.

The Liberal and Radical elements of the country enforced their policy in this matter, as they did in the question of widening the autonomy of Ice

tion as enjoying equal rights with the Mother Country. By doing this, Denmark also checkmated an active agitation in England in favor of an Iceland republic. It is not so certain that the Liberal elements in the Danish Government will be equally successful in carrying out their policy with regard to Northern Schleswig. The Conservatives are asserting, with cynical frankness, that regardless of the way the people vote, Denmark must annex at least the first and second zones, They thus demonstrate the ease with which men inspired by selfish interests forget the fair-spoken talk about international law and self-determination, which they themselves were so fond of using against Germany until the recent change in the international situation. According to the latest reports from the West Coast of Schleswig, British propaganda is active there endeavoring to deprive Germany of the Lister Deep, the only place where large war vessels can approach the coast. It is questionable whether the present ministry will be able to carry out its programme of incorporating no more Germans in Denmark than is absolutely necessary, in case the Paris Conference should also oppose a popular vote in the second zone. An election upon this platform would undoubtedly result in favor of the imperialists, although even they appreciate that their policy would expose Denmark to the permanent enmity of Germany, and to complete economic dependence upon Great Britain. Flensburg is a German City. The Danes who live there are merely settlers, as one of the best-known agitators in favor of the union of Northern Schleswig to Denmark, Master Clausen, the man who actually drew the boundaries of the zones in which these questions are being submitted to popular

vote, recently stated: however, we grant the Danish Imperialists enough sense to realize that they cannot undo the processes of historical evolution without provoking a new episode of 1864. We hope they will act accordingly in the interest of cordial coöperation between Germany and Scandinavia. Let the old source of friction be removed in such a way as to leave no ill effects behind.

Sweden has assumed a peculiar attitude toward the tumult of chauvinism which, at present, is unsettling everything in Scandinavian countries. Although its place in history has been that of a defender of Europe against the East and the shield of the German reformation, and a vigorous foreign policy, therefore, forms part of its political traditions, it refused to take part in the world war and even neglected to aid its old colony, Finland - which still remains the seat of Swedish civilization against its Russian oppressor. It did send a sanitary detachment to the Aaland Islands, but this timid and hesitating measure was speedily recalled. Consequently, the sympathy of the Finns for Sweden has been chilled, and Sweden has lost its prospect of securing the Aaland Islands through a friendly understanding. The party now in power in Finland is hostile to the Swedish element. Although they have always been such ardent advocates of the right of selfdetermination, the Finns deny to the forty thousand inhabitants of the Aaland Islands the exercise of that right.

Consequently, Sweden finds itself in the unpleasant situation of having to appeal to the Entente to further its claims. It must now court favor from the party to which it was covertly hostile in the war. English statesmen find a new trump thrust in their hands, and are using the opportunity to secure

valuable commercial advantages from Sweden. A recent issue of the Handelstidning says that the last tonnage agreement with Britain amounts to sacrificing Sweden's commercial independence without a sure prospect of securing any compensation whatever. This controversy between Finland and Sweden is the more to be regretted because it temporarily narrows the conception of Scandinavia. Not only have the Nationalists in Sweden suddenly discovered that the Finns belong to another race, but the Radical Socialists are agitating against the alleged atrocities of the reactionary Finn Government. This is deepening the gulf. The loss of Scandinavia's sympathy and the severing of intellectual relations between the two countries increases the always latent Russian danger for Finland, by tending to isolate that country. We may be sure that Greater Russia, whether it be Bolshevist or Reactionary, will strive again to extend its holdings along the Baltic. This antagonism is still further increased by the fact that Finnish expansionists are trying to establish claim upon a certain river valley in Northern Norway. But in spite of all these causes of discord, we keep hearing from Norway and Denmark the assertion that Finland properly is a part of Scandinavia, and that the four northern countries must form a close economic union. On the other hand the powers that be in Finland have conceived such hostility to Sweden that we are hearing very little from them of the plan for a Scandinavian union. The Finns rather incline now to closer alliance with the Esthonians. However, the latter scheme does not promise much, because both countries are infected with Bolshevism. It is hardly necessary to add that the boundary problems all through this region are still unsolved. Some people in Sweden are proposing