Author: Fisher, Irving, 1867-1947
World War
1914-1918
League of Nations
1914-1918 — Economic aspects
Treaty of Versailles (1919 June 28)
1914-1918 — Finance
Harper’s Pictorial Library of the World War, Volume XII
The Great Results of the War
Transcriber’s Note:
Words marked with a dotted underline are changes made by the transcriber. To view the published words, mouse-over the underlined words. There is a table of all words changed by the transcriber at the end of the book. The cover image was created by the transcriber and is placed in the public domain.

HARPER’S PICTORIAL LIBRARY OF THE WORLD WAR

In Twelve Volumes
Profusely Illustrated
VOLUME XII
THE GREAT RESULTS OF THE WAR
Economics and Finance, The Peace Treaty, The League of Nations. Index

Painting by Frank Stick
A Soldier of the Soil
Click for a larger image.

HARPER’S PICTORIAL LIBRARY OF THE WORLD WAR

In Twelve Volumes
Profusely Illustrated
FOREWORD BY CHARLES W. ELIOT, PhD.
President Emeritus, Harvard University
VOLUME XII
The Great Results of the War
Economics and Finance, The Treaty of Versailles and League of Nations——Index
WITH INTRODUCTION BY PROFESSOR IRVING FISHER, YALE UNIVERSITY
Edited by
DR. W. L. BEVAN, KENYON COLLEGE
and
DR. HUGO C. M. WENDEL, NEW YORK UNIVERSITY
GENERAL EDITORIAL BOARD
Prof. Albert Bushnell Hart,
Harvard University
Gen. Douglas MacArthur, U.S.A.,
Chief of Staff, 42nd Division
Admiral Albert Gleaves,
U.S. Navy
Prof. W. O. Stevens,
U.S. Naval Academy, Annapolis
Gen. Ulysses G. McAlexander,
U.S. Army
John Grier Hibben,
President of Princeton University
J. B. W. Gardiner,
Military Expert, New York Times
Commander C. C. Gill, U.S.N.,
Lecturer at Annapolis and aide to Admiral Gleaves
Henry Noble MacCracken,
President of Vassar College
Prof. E. R. A. Seligman,
Columbia University
Dr. Theodore F. Jones,
Professor of History, New York University
Carl Snyder
Prof. John Spencer Bassett,
Professor of History, Smith College
Major C. A. King, Jr.,
History Department, West Point
Harper & Brothers Publishers
NEW YORK AND LONDON
Established 1817

Vol. 12—Harper’s Pictorial Library of the World War

INTRODUCTION
By PROFESSOR IRVING FISHER

Department of Political Economy, Yale University
In various ways, as this volume shows, the war has profoundly affected our economic and political life. War has ever been a disturber and innovator, always leaving after it a different world from that which existed previous to it. On account of our tremendously complex economic organization—the specialization of industry among nations, and the network of commerce—war today causes more profound changes than ever before. There can not be a human being in the world today whose life is not altered by the war through which we have just passed.
In trying, now that the war is over, to stop drifting, and to think our way out of the bent (or broken) remains of the ante bellum life, the world is confronted by a maze of problems and a still greater maze of proffered solutions.
Many of these proposals are, unfortunately, of the nature of treatment directed not at fundamental conditions, but merely at symptoms. We should be past the stage, in our social science, as we are in medicine, where we treat symptoms without a thorough diagnosis of the fundamental causes.
And yet it is just this thorough diagnosis that we lack.
What, then, are the changes brought about by the war which most deeply affect “the body politic,” and by meeting which the most far reaching improvements can be made?

HIGH COST OF LIVING A VITAL QUESTION

I can not take up, or even touch on, all of them; but to one of them I wish to call especial attention—the High Cost of Living or, more generally, the high level of prices, which is the most striking economic effect of the war throughout the world. It is, as I see it, hard to over-emphasize the need for attacking this problem of the price level as a preliminary to attacking the other economic problems which the war has left us.
We need only glance at a newspaper today, or step into a corner grocery, or fall into conversation with our neighbor in the train to have this topic come out as foremost in interest. It is, I believe, responsible for much more of our present uncertainty and confusion than is usually realized. In its ramifications it is chiefly this phase of the war’s effects which, as I suggested above, touches every one of us at every point of our lives. A member of the Federal Reserve Board has called the price level problem the central economic problem of reconstruction.
Professor William Graham Sumner, who has inspired so many to the scientific study of social conditions, used to say: “In taking up the study of any social situation, divide your study into four questions—(1) What is it? (2) Why is it? (3) What of it? (4) What are you going to do about it?”
Let us follow this outline, and look first at the facts of the case; secondly at their causes; thirdly at the evils involved; and lastly at the remedies.

MEASURING CHANGES IN PRICES

We now possess a device for measuring the average change in prices. This is what is known as an “index number.”
Thus, if one commodity has risen 4 per cent. since last month and another, 10 per cent., the average rise of the two is midway between the sum of 4 per cent., and 10 per cent., or 7 per cent. It is
4 + 10          
————  =  7
2    
If we call the price level of the two articles last month 100 per cent., then 107 per cent. is the “index number” for the prices of the two articles this month. The same principle, of course, applies to any number of commodities.

The index number of the United States Bureau of Labor Statistics, the best index number we have, shows an average price level in 1918 of 196 for wholesale prices and 168 for retail prices of food on the basis of 100 per cent. for 1913, the year before the war; showing that wholesale prices, on the average, almost exactly doubled. The latest index number for wholesale prices (May, 1919) is 206, and for retail (July, 1919), 190.
A look at the history of prices shows the interesting fact that, while prices have sometimes fallen, they have generally risen. The high cost of living has been for centuries a source of complaint. In the 16th century, people objected to the price of wheat, which was three to ten times what it cost during the preceding 300 years.

WORTHLESS PAPER MONEY

Where, through ignorance of monetary science, irredeemable paper money was used, prices have sometimes gone up quite “out of sight.” This was the case with the famous assignats of the French Revolution, and the “Continental” paper money of our own Revolution. After the Revolution a barber in Philadelphia is said to have covered the walls of his shop with continental paper money, calling it the cheapest wallpaper he could get! Jokes were also heard of a housewife taking a market-basket full of this “money” to the butcher’s shop and bringing home the meat in her purse! This money became a hissing and a byword; and, even to this day, one of the favorite expressions for worthlessness is “not worth a Continental.” We see the same situation repeated again today with Russian paper money.
But our first scientific measurement of price movements began with 1782, the beginning of Jevons’ index number of wholesale prices in England.

COMMENTS ON FIGURE 1

Figure 1 shows the course of prices in England from that date, and also, for comparison, that in the U.S.