feared to take the sea, insurance rose to unheard of figures, and it seemed possible that our grain and cotton crops would have to remain unmarketed. The situation was made worse by the large quantity of foreign owned American securities which might at any time be offered in the American market in exchange for cash, which in turn would have to be sent out of the country. This state of anxiety was partly relieved when it was seen that the British fleet would be able to keep German warships off the ordinary routes of Atlantic travel, thus giving opportunity for a large portion of the British merchant marine to come and go as formerly. The American congress tried to remedy the situation further through four proposed laws, only three of which were passed.

The first was an act to admit foreign-built ships to American registry without serious restrictions. It became law on September 5, and although it necessarily acted slowly, the deep sea tonnage of the United States, which barely increased from 1913 to 1914, grew from 2,069,637 tons in 1914 to 3,522,933 in 1915. For more speedy relief the president recommended the appropriation of funds for the purchase of ships. A bill was accordingly introduced to expend $30,000,000 for this object and to authorize the government to acquire a controlling interest in a $10,000,000 company for operating these ships. It was defeated on the ground that the government should not conduct a steamship line in opposition to private enterprises. It was assumed that German ships, laid up in our harbors through fear of seizure by the Entente warships, would have been bought if the bill had passed. It became known that Great Britain held that to purchase these ships would be an unneutral act since the money paid would be used to help Germany carry on her war.

The third proposal was for the government to sell war risk insurance against loss at sea. Little objection was made in

congress, and a Federal Bureau of War Risk Insurance was created with a fund of $5,000,000 advanced by the government.

The fourth measure concerned the revenues, which had declined through the shrinkage of imports. The decrease was $10,000,000 in August, 1914, and it was thought that it would be greater in succeeding months. President Wilson asked congress to lay a special tax to make up the deficit. Opponents of the Underwood tariff, which had but recently gone into operation, wished to raise the money by revising its schedules. But the president's wish that the tariff should not be disturbed was respected and congress laid internal taxes to yield $54,000,000, not to be collected until after December 31, 1915. The principle here followed has been adhered to by the administration in all its war finances. It involves as heavy taxes as industry will stand, levied in such a way that the tariff is not disturbed, the balance of the money needed to be obtained from loans.

As the shock to business subsided it was evident that a wave of war prosperity was beginning. Russia was not a manufacturing nation and had to buy freely elsewhere. She had lost her German source of supplies, and as her allies were overtaxed with their own war demands she turned to neutral nations for a large portion of the merchandise she needed. As for army supplies and munitions of war, she had to obtain them in vast quantities from outside her own borders. In a less degree, but still in an important sense, France and Great Britain were in need of our commodities. As soon as the machinery of intercourse was repaired, therefore, a steady stream of exports turned toward the belligerent nations. By the middle of autumn business men were convinced that the worst was passed, and six months later it was evident that the United States was at the dawn of great prosperity. Germany herself turned anxiously to us for the supplies she could purchase of no other great nation, im

porting them freely for a time through the ports of the adjacent neutrals.

The tide had well turned when demands began to be made on the American manufacturers for munitions of war. Some refused to enter the field, but they were few. Agents from abroad offered contracts freely and at large profits, and it required great self-control to decline them on grounds of humanity. If a manufacturer had no special machinery for the work required of him, funds would be advanced to enable him to get it. Thus munition plants sprang up like mushrooms, drawing into them troops of laborers at increased wages. Many great fortunes were amassed in a few months. It was not pleasant to reflect that we were fattening upon the misfortune of others, but it was evident that if we refused to sell munitions to those who came to buy we should act in behalf of Germany. In refusing to saddle herself with militarism Great Britain had counted upon her right to buy military supplies in neutral countries when she needed them, a right clearly accorded to her by international law. If we had reversed that rule of law in 1914, we should have committed an unneutral act and taken from her that which by moral duty we had no right to withhold. Aside from our scruples, it was pleasant to reflect that the world was coming to us for business, and on our own terms.

The war brought us an unusual opportunity in South American trade. Here was a great continent nearly lacking in manufactures. Practically all its supplies, from tooth brushes to steam engines, had to be imported. Unable to get them from Europe, it was anxious to have the United States enter and appropriate the trade. Previously the South Americans had generally distrusted us politically, and the merchants of some of the European countries had worked upon the feelings of the natives in order to make it hard for us to gain admission to the trade. Now all restrictions were swept away. Lack of ship

ping proved a great obstacle, and the disappearance of British tramp steamers from the ocean not only made it difficult to answer the call upon us, but actually caused the volume of trade to drop from $146,147,993 in 1913 to $99,323,957 in 1915. In 1917, however, it had risen to $259,559,458.

As the volume of orders increased and the balance of trade grew in our favor American securities, which for years had been held in large sums by European investors, began to come home in payment of accounts. Along with them came, also, a large amount of gold, until the loose coin of Europe was piled high in American vaults. When vast stocks of securities had been transferred and so much gold sent over that the transatlantic reserves were reduced to the danger point, the Entente allies appeared in the American markets with bonds for sale. In the beginning the administration had requested financiers not to make such loans, but as foreign necessities increased, it was impossible to continue this policy. The result was repeated bond sales, the proceeds being placed in banks to settle trade balThus we ran from one success to another until we came to the dazzling summit of the financial world. All ships turned to our shores, all trade currents ran in and out of our harbors, and in American hands were the purse strings of two worlds. It was a success beyond previous power of imagination, but thoughtful Americans shuddered when they thought of the price the rest of the world paid for it.

ances.

2. Neutrality

August 4, 1914, President Wilson issued a proclamation of neutrality. He cautioned citizens to commit no act in aid of either side of the controversy. He declared the ports closed to belligerent warships, unless they came for succor, in which case they were to leave in twenty-four hours and receive coal and supplies only sufficient to take them to their nearest home

ports. He also reminded the people that while they had the right to sell contraband articles to a belligerent, such articles were subject to seizure if intercepted at sea.

By most people the neutrality proclamation was received as a matter of course, and it had little effect on the opinion of the average man. Such important moral principles were involved that it was impossible for Americans to refrain from taking sides in a contest which, it was evident, would shake the world to the foundation. Observing the drift and fearing that American opinion might become partisan enough to embarrass those who had to conduct the nation's diplomacy, President Wilson on August 18 issued an address urging editors, clergymen, and all other leaders of public opinion to try to promote the spirit of neutrality. So large a portion of the people were descended from the various belligerents that it was likely that strong discussion would lead to factional quarrels. In his own conduct he was studiously neutral. The president's words were well received by moderate people, but the distrust of Germany was not diminished because it was not discussed openly.

The use of wireless telegraph stations early attracted notice. It was possible for Germany to direct the operation of her scattered cruisers or lay plans to supply them from neutral ports by communications through these stations, thus making our territory a base for important acts of war. Considering this contrary to the spirit of neutrality, the president, on August 5, ordered all the wireless stations in the country to refuse to transmit any unneutral message, and he instructed the secretary of the navy to carry out the order. Directions were accordingly given by the secretary to establish a censorship, and messages from belligerents in code or cipher were prohibited. Naval officers were placed in charge of the high-power stations. The Germans protested against this action alleging discrimination in favor of Great Britain. It was afterwards agreed that the cen