6 per cent.; and it was not until March 1874 that it was reduced to 4 per cent. The rapidity with which France recovered from the effects of the war was remarkable; and for some years her economic development appeared to be more rapid than that of Germany. Since 1880, however, Germany's economic development has been very much greater than that of France.

The average strength of the German troops from August 1870 to March 1871 was 1,250,000, and her losses were 6,247 officers and 123,400 men. Official estimates place the cost of the war to Germany at 77,550,0007. This amount does not, however, include the cost of re-establishing the army, nor the invalid, widows' and orphans' pensions, nor the compensation for damage to private property. An invalid pension fund of 28,000,000l. was provided out of the indemnity of 212,600,000l. received from France, and after making provision for this and for the direct cost of the war, Germany, it will be seen, made a profit of over 100,000,000l., to which must be added 64,000,000l., representing the money value of the two provinces ceded to her, making a total of 164,000,0007. This does not exhaust all the advantages which Germany derived from the war, because the transference of the population of Alsace-Lorraine, which numbered 1,597,000, strengthened her relative position so far as the population question was concerned.

The South African War lasted a little over 31 months, namely, from October 11, 1899, to May 31, 1902. The total British forces employed in the course of the war numbered 448,000 men, and our losses in killed and wounded amounted to 44,700 men. The direct cost of the war to the Imperial Exchequer was 211,156,000l., and the war charges in China during the same period amounted to 6,010,000l., making a total of 217,166,000%. The principal items of expenditure are as follows:

Pay of regular forces (extra to the peace establishment)
Pay of Imperial Yeomanry and Volunteers

£

14,500,000

5,150,000

2,700,000

7,500,000

3,500,000

7,670,000

2,270,000

2 M

A variety of circumstances tended to make the war a costly one. The remoteness of the theatre of war from our military base naturally involved a vast expenditure on transport services, while the high pay granted to the colonial troops, the huge prices paid for com. modities, and the lavish expenditure on stores contributed materially to swell the total expenditure. The absence of any prevision in the domain of finance contributed largely to the great cost and duration of the war. It may be pointed out that on October 20, 1899, the Secretary for War and the Chancellor of the Exchequer estimated that the war would cost 10,000,000l., whereas the actual cost was more than twenty-one times that amount. It has been said, with a great deal of truth, that the War Office prepared for peace while the Colonial Office prepared for war.

Of the total cost of the war, 149,482,000l. were charged to capital account, 9,228,000l. were obtained by suspending the Sinking Fund, and 58,456,000l. were met out of Revenue a proportion of which we have no reason to be ashamed. In order to provide this latter sum and to make good the shrinkage of ordinary revenue and to meet the growth of ordinary expenditure, it was necessary to impose additional taxation to the extent of 75,150,000. Of this amount, 27,000,000l. were obtained from Customs by means of additional duties on sugar, tea, tobacco, corn, and the export duty on coal; and 48,000,000l. were obtained from Inland Revenue, the bulk of this amount being additional income tax, which brought in 40,000,000Z.

The following is a statement of the manner in which the capital sums required were provided:

The aggregate gross liabilities of the State on March 31, 1899, were 635,393,000l. On March 31, 1903, they amounted to 798,349,000l., so that the war may be said to have added about 25 per cent. to the national debt. As the war progressed British credit declined. When war was declared the price of Consols was 1023; when peace was arranged the price had fallen to 974.

The South African war may be said to have made but little difference to the method of living of the bulk of the people of the United Kingdom. The withdrawal of so many men, horses, and ships from productive employment naturally had a bad effect on trade; while the high price of coal and the additional taxes all tended in the same direction. The war practically absorbed a sum equivalent to two years' savings, which would otherwise have been available for investment abroad; and the influence which this had upon our export trade may be gathered from an examination of the figures furnished in the 'Bankers' Magazine' for November 1909, which showed that the average amount of capital offered for public subscription in London for foreign and colonial investments during the three years 1900-1-2 was 47,167,000Z., and the value of the exports of British manufactures during those three years averaged 284,879,000l. For the three years 1906-7-8, when the effects of the war may be said to have been practically overcome, the average amount offered for subscription for foreign and colonial loans, etc., had increased to 104,936,000l., and the average value of exports of manufactures to 392,904,000l.

*At that time Consols carried interest at 2%.

It is almost impossible to frame any estimate of the indirect losses occasioned by the war. For example, during the ten years which followed its outbreak, the market value of home railways stocks declined by about 300,000,000l., and Government stocks by about 190,000,000. The war was undoubtedly responsible for a share of this shrinkage, but it would be extremely difficult to define the exact proportion which should be ascribed to this cause. The war, of course, resulted in a great decline in the trade of Cape Colony and Natal; and the foreign or inter-colonial trade of the Transvaal was suspended for two years, during which the output of gold was stopped and the development of the Rand arrested. Our investments in these colonies suffered accordingly.

The Russo-Japanese War lasted for about eighteen months, namely, from Feb. 9, 1904, to Aug. 31, 1905. The Japanese military forces numbered upwards of 1,000,000 men, and their losses amounted to about 135,000 men. The direct cost of the war to the Japanese Government was 203,094,2627., and the indirect losses to Japan, including loss of trade, etc., were about 35,100,000l.

The cost of the war was mainly financed by loans. The proportion of the total expenditure which was charged to the national debt was 784 per cent., while no less a proportion than 21.6 per cent. was met out of revenue either by retrenchment of ordinary expenditure or by additional taxation. The national loans raised to meet the cost of the war were as follows:

NOTE.-The 4 per cent. (Second Series), 1905, and the 5 per cent. Sterling Bonds, 1907, which were both issued abroad, are omitted from this table because they were issued for the conversion of the Fourth and Fifth Series of Exchequer Bonds and the 6 per cent. Sterling Bonds.

It will be observed that, notwithstanding her victories, Japan's internal credit declined as the war progressed. Attention may be directed to the fact that in the early stages of the war the internal loans were raised on more favourable terms than the external loans, whereas towards the close of the war the position was reversed, and the money raised abroad was obtained on much better terms than that raised at home. The reason for this was that the victories of Japan improved her credit in the foreign markets, but the strain on her financial resources reduced the capacity of the Japanese market to absorb any further internal loans.

The amount of gold held by the Bank of Japan at the commencement of the war was 11,696,2187.; and at the end of the war the amount was 10,444,3971. There was a temporary diminution towards the end of May 1904, when the stock of gold fell to 6,808,7261. The Government kept the gold reserve constantly replenished from time to time, and took good care to withdraw its gold as little as possible from London. Every precaution was taken not to disturb the money market. All spending authorities in connexion with the war took care to buy as much as possible in the home market. But at the same time they took equal care to avoid raising the price of commodities under the circumstances by various means, such as by giving orders direct to the manufacturers or producers, and by ascertaining the lowest cost of production with the help of local authorities. These precautions helped to prevent a sudden increase in currency, while