preference; (g) prohibiting pooling of freights and earnings; and (h) providing that common carriers shall print and exhibit schedules.

3. That the government should forthwith consider a scheme for (a) controlling the export of frozen meat after the war, and, (b) in conjunction with the imperial government, the distribution of meat in the United Kingdom. (This is necessary to prevent the exploitation of the producer or consumer by meat trusts.)

4. That effective measures should in the interests of the British consumer be taken by the imperial government to control the prices of released meat in the United Kingdom.

5. That the government, either in conjunction with the home government or the New Zealand producer, consumer, and importer, or with all of these parties, should establish a controlling interest in the freights and shipping between New Zealand and the United Kingdom.

6. That the government should, in the interests of the small producer, and in view of the probable serious shortage of storage space, take power to prevent large buyers monopolizing space in freezing works during the war.

7. That special care be taken to see that foreign firms and their agents, and also companies registered in New Zealand with small capital, which carry on large business by means of outside financial support, shall not escape taxation on the grounds that small, if any, profits are made on their trading in the Dominion. Provision should be made that such firms shall be taxed to an amount not less than is paid by New Zealand firms not so financed or controlled.

THE FUTURE

The world-convulsion that we are witnessing today has brought in its train new trading and manufacturing situations which present problems never faced before. Commercial ententes between nations for the control of raw materials, control of production and distribution of some of the most important commodities by powerful combinations of private interests, huge agglomerations of capital in the hands of a few banking groups, the formation of gigantic capitalistic trading corporations-these are some of the economic outgrowths of the war. By common consent international competition for the trade of the globe will become a far more serious matter in the early future than at any previous period in history. Where before the war we witnessed competition among comparatively small groups, commercial giants are now preparing to measure their strength on the trade routes and in the markets of the world.

It will constitute a problem for our statesmen to solve in how far the public interest will have to be protected by national legislation against dumping, by tariff laws, etc., or by international agreements for the protection of industrial property, etc. Unbridled competition of a kind threatened by the developments outlined in the foregoing pages is bound to develop into a source of friction and ill-feeling among the nations of the world in whom the long years of war have created a deep yearning for a lasting peace. WILLIAM NOTZ

WASHINGTON, D.C.

PRELIMINARY SURVEY OF INDUSTRIAL

RECONSTRUCTION

Industrial reconstruction after the war might be left to take its own course without governmental interference, just as industrial preparation for war might have been left free but was not. The free operation of economic laws would result in wide price fluctuations, unemployment and prolonged business depression due to shattered values, suspension of credit and cessation of work. There would seem to be no need, therefore, of any argument to show that the government should assist wherever necessary by artificially stimulating and restraining natural economic forces.

It is vitally necessary, however, in planning governmental supervision of the reconstruction process, to divide the problem into its elements and to analyze the economic forces which are involved. Industrial reconstruction cannot be effected merely by reversing the present machinery of control. The machine must be taken apart and reorganized to meet widely different conditions, the exact nature of which should be definitely comprehended in advance.

The following are the elements of the problem: (1) Stimulation of a demand for the products of industry to take the place of government buying; (2) Restoration of a normal price level; (3) Conversion of industrial facilities from war to peace production; (4) Absorption of labor released from war industries and from the military establishment.

As a basis for a discussion of the purpose and form of governmental regulation during the reconstruction period, I will undertake to describe briefly the nature of each of the four elements.

1. Stimulation of a new demand.-The extent of this problem depends immediately upon the government's policy respecting its outstanding war contracts. If government purchases were sharply curtailed, industry would suffer for want of a market unless an effective demand arose from other sources.

An inventory of government contracts and a summary of the permanent needs of the military establishment should be prepared immediately as a basis for determining what classes of contracts should be canceled. The first class to be canceled would embrace contracts for the production of those raw materials of which there may already be an oversupply. The last would be contracts nearing completion. Purchases for the maintenance of the military establishment will of course continue as long as there are men under arms, but a much more economical buying program can be laid down the moment hostilities are ended for the reason that the government's policy will be changed from one of discounting an uncertain future to discounting a known future.

In any event, the government demand will fall off sooner or later and must be replaced. The problem can be approached by classifying the character of demand between (a) domestic and (b) export.

There will almost certainly be a strong tendency to minimize the importance of the domestic demand and exaggerate the importance of the export demand, a mistake which should be avoided.

The export demand will depend primarily upon the policy of the government respecting the extension of credits, particularly to France, Belgium, Serbia, and Russia for their own rehabilitation and reconstruction, and secondarily upon the price at which American industry can afford to sell abroad in competition with foreign producers. Even under the most favorable conditions, however, the extent of the export demand may not reach expectations because of limited shipping facilities and the fact that most of the warring nations will find themselves in the same situation of needing foreign markets for their products.

Stimulation of an effective domestic demand is the hope of the country and this depends upon maintaining the sequence of business prosperity at home; that is, activity in industry, full employment, profits for the entrepreneur, and wages for labor that leave a margin over bare subsistence. The cessation of industries reduces demand. A sharp contraction of wages diminishes buying power and reduces demand; wide price fluctuations have the same effect.

sume.

After-the-war demand must not be estimated on the basis of what the country is able to produce, but on what it is able to conThe distinction is of vital importance. In the face of almost unlimited demand during the past two or three years, industry has been speeded up through the use of specialized machinery to a degree which justifies calling this period a supermachine era in industry. Total production, even with three to four million men withdrawn from industry into the military establishment, has far exceeded pre-war production, both in physical volume and adjusted money value. War has been the consumer. The same volume of production of commodities for the public cannot be maintained because increased consumption comes gradually with the education of the people to higher standards of living, and maintenance of this volume with only the domestic public as a market would be impossible, would lead to a reaction and a clogging of the market.

Moreover, the returning soldiers must be absorbed back into industry. They must help to produce something that is wanted. It is difficult to retrace forward steps, such as the advancement of industry through increased use of machinery, but it is more important to have industry stabilized on a smaller volume than to aim at a height that might be reached only to topple over.

A careful estimate should at once be made in order to determine the probable amount of the future demand for the products of American industry from the following sources: (a) Reconstruction of Belgium, France, Serbia, and Russia; (b) Commercial export market in Europe, South America, and the Orient; (c) Railroad reconstruction at home; (d) Public works at home; (e) Domestic use of consumable products, present and potential.

Perhaps the most important element in this problem is the maintenance of public confidence. The business man must appreciate that a sharp reaction can be avoided only by controlling the industrial cycle. The banks must not restrict credits too sharply. The War Finance Corporation must stand ready to relieve them in an emergency. Stabilizing of credits during this transition period will be one of the most important functions of the government, to be accomplished directly by lending through the War Finance