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    "source_key": "britannica_1926",
    "source_title": "Encyclopaedia Britannica (1926)",
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    "chunk_id": "1926:canning:cd3b4909c630",
    "title": "CANNING",
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    "verified_text": "several factors have tended to develop the food canning industry in various countries of the world dur- ing the period 1910~25, and although the united states main- tained the leading position, keen competition arose from other foreign countries, particularly from the british dominions. un- doubtedly the chief cause for the remarkable advance—quite 100% in many countrics—was the great disturbance in economic conditions occasioned by the world war, which gave rise to a range of new problems, not only in providing food for the various armies, but in supplying the needs of the pcople of the various belligerent nations. i. in the united states according to the u.s. census returns, the value of canned foods packed in the united states increased from $139,000,000 in 1909 to about $550,000,000 in 1923. after due allowance is made for changes in price levels, these figures show that the out- put of canned foods increased during that period about two and canning a half times. the quantity of canned fruits, vegetables and soups increased jrom 41,000,000 cases of 24 cans each in 1900, to 110,000,000 cases in 1923. corresponcling figures for fish, shell- fish and meat cannot be given, because quantitative statistics for the pack of 1909 are not available. canned foods have thus come to occupy 4 more important place in the diet, which is thereby broadened, and the consumption of seasonal foods 1s less and less confined to short periods of the year. this increased production was made possible by improvements in canning machinery. cans which were formerly made by hand were in 1925 made by machine at the rate of 12,000 per hour. machines developed for the various steps in canning have replaced hand labour, cheapened and speeded up production, and contributed to the sanitary condition of the plant, while the raw product, by means of motor-trucks, is brought long distances to the fac- tories without loss of quality. there has been a pronounced tendency to remove canning plants from large cities, in which the majority were formerly located, to smaller towns, and to establish them in areas producing products to be canned. this makes it possible to can the products within a shorter time after harvesting, and in that way to secure a higher quality. the method of canning is, briefly, as follows: the raw product, alter proper cleansing, pecling, trimming, etc., is placed in the can, usually with sufficient water, syrup or dilute brine to cover the product and facilitate penetration of heat. the raw product or the liquid surrounding it is usually preheated, or else the can is passed through a steam-box or vacuum chamber before sealing, in order that the contents may be heated sufficiently and the can eventually show a substantial vacuum. the can is then sealed and processed (sterilised) in steam or hot water. during the years 1910-25 funda- mental changes were made in the character of the cans employed. the soldered can, formerly used exclusively, was largely superseded by the open-top or sanitary can, which is scaled by crimping the ends to the body of the can, the scam being made tight by rubber com- position or paper gasket. with this type of can no solder is employed except on the side seam, which is soldered on the outside. the temperature required for sterilisation varies with the nature of the food to be canned. acid products, such as fruits, need be heated only for a short time in boiling water, so that all portions of the contents come to a temperature of at least 180° f. the acidity of the fruit suffices to prevent bacterial spores from germinating, and it isonly necessary to destroy the vegetative form of bacteria. sub- stances of lower acidity, such as meat, fish, shellfish and the ma- jority of vegetables, must be heated to a higher temperature in order to destroy bacterial spores. the length of time required for sterilisation depends on the rate at which the heat penctrates the product. such penetration is most rapid in foods containing a free liquor, and slowest in closely packed solids, and in products of a pasty consistency. the canning industry has led the way in the organisation of co- operative industrial research, having been the first in the united states to provide for research on such a bssis, laboratories estab- lished by the national canners’ association in 1913 have made fundamental contributions to the knowledge of sterilisation and other processes of manufacture. the bureau of raw_ products research, organised later, has been instrumental in greatly increas- ing the attention given by government and state investigators to the agricultural questions involved in raising crops utilised by the canning industry. in several universitics, also, investigations relating to food poisoning and the vitamin content of foods have been financed by the industry, the results of which have appeared in scientific literature. it had been assumed that the nutritive value was diminished by the canning operation, through destruction of the vitamins. these investigations, however, showed that the anti- scorbutic vitamin (vitamin c) is destroyed to a less extent by the canning operation than by cooking in an open vessel, as is customary in the home, canned foods are therefore richer in vitamin c than the same varieties of foods cooked by the ordinary kitchen methods, while retaining the same content of the other vitamins. broadly speaking, the nutritive value of canned foods is substantially the same as the nutritive value of the same foods cooked in the home from the raw product. (see milk.) (w. d.b,) ii. in the british empire the canning industry was of considerable importance in great britain during the pre-war period, and a large export trade in canned meats, fish and vegetables had been developed. war de- mands gave a great impetus to the industry, particularly in the production of canned “ rations,” hams, etc., for the british and belgian armies. the export trade, however, was greatly reduced, but it quickly revived after the end of the war. [ruit canning canteen developed rapidly in the post-war period, model plants being set up in various parts of the country. australia, new zealand, canada and south africa have made considerable progress in the canning industry, and during the post-war period trade has greatly increased. the indusiry has been in existence in australia since the last decade of the roth century, but the output was principally confined to home re- quirements to the end of the world war. asa result of the government scheme for the settlement of ex-soldiers, canning plays a very important part in the development of the soft fruits industry in the dominions. in several of the states, such, for instance, as queensland, new south wales and victoria, the respective governments have advanced large sums for the erec- tion of modern plants with which to deal with the produce of the orchards. considerable attention is paid to stemming, grading, weighing and packing, and the methods employed make any handling of the fruit unnecessary. war demands stimulated the exports of dried and preserved fruits, and the trade greatly in- creascd during the post-war period. the following table gives the values of exports of dried and preserved fruits for the years 1913, 1917-8 and 1923-4:-~ 1917-8 1923-4 dried fruits 31,000 | 265,000 | 1,238,000 preserved fruits 21,000 | 255,000 621,000 new zealand—in new zealand the process of manufacture is under careful supervision and is subject to the provisions of a strict law against adulteration. canned sheep tongue is an important item of export: other packs include ox-tongue, boiled mutton, boiled beef, corned mutton, corned beef and meat ex- tract. boiled mutton has a large sale, mainly for ships’ stores, but other lines had not been extensively developed by 1926. canada.—the canadian export trade in preserved foodstuffs greatly increased after 1910. packing and canning factories were established and close attention was given to grading and standardisation. the chief commodity is fish, although canned tongues, fruit, tomato soup, milk powder and other articles of food are making considerable progress. the total value of the fisheries production of canada in 1924 was approximately $45,- oc0,000. this totalrepresents the value of the product as market- ed, whether fresh, domestically prepared or factory made. ‘the fish includes salmon, halibut, cod and lobsters, a large proportion of which is canned. the first fish canning plant was established on the pacific coast in 1863, but the fruit canning and by-prod- ucts industry is of much later growth. during the period 1922-5 british columbia salmon canneries experienced severe compc- tition in the british market from japanese and sibes*an salmon, and have had to look to other markets, particularly france. in newfoundland the canning of fish products was only in the ini- tial stages in 1925, except in the case of lobsters. lobster canning was, however, owing to over-fishing, subjected in 1924 to a close season of three years. the canning of codfish, salmon, codfish tongues and halibut was developed during the post-war period, and in 1925 a small export trade was carried on in these products. south africa.—in 1910 the union of south africa imported an appreciable quantity of dried fruits of various kinds, but prog- ress in the canning and dried-food industry was so rapid and sustained that by 1925 not only were all local requirements met, but a considerable export trade had been developed. the govt. imposes certain regulations regarding grading, etc., with which all exporters must comply before their produce is permitted to leave the union. fruit canneries are established in many of the principal towns throughout the union, the chief centres of the industry being durban, port elizabeth and cape town, with the paarl and worcester districts of the cape province. the canning of crayfish is of great importance. the lobster occurs in abundance on the coast of south west africa, and four large factories were started in 1924 at liideritz bay. great advances were quickly made and an extensive export trade both to the united kingdom and the continent developed. s77 federated malay states —in the federated malay states the pineapple is extensively grown for canning purposes; the chief planted areas are in the neighbourhood of singapore where several large canneries engaged in the preserving of the fruit have been established. the local industry is very large, as will be seen from the following official figures, showing the exports from singapore:— quantittes value 191g cases 255,873 3,286,001 1920 cases 446,890 7,177,976 1921 cases 662,360 6,210,383 1924 tons 39,203 8,873,077 the rise in the value of exports in 1920 was due partly to the post-war revival of trade, and partly to the fact that supplies of tin plate, practically unobtainable during the war, were available. the principal country for export is the united king- dom, but canada, british india and the united states of america absorb fairly large quantities. til. in other countries in italy, where the canning industry is firmly established, the export of canned fruit and vegetables, particularly tomatoes and cherrics, has shown a steady increase, the general standardisation, packing and canning being most efficient. before the war, france also had many canning establishments and exported a large quantity of sardines, vegetables and preserved fruits. during the post-war period she began to re-establish her tradle and by 1925 was regaining a number of her lost markets. norway's canned fish and meat indus- try is of great importance to the country. from 1895 until the out- break of the world war, the fish-canning trade expanded at an ex- ceptionally rapid rate, and by 1925 norway was one of the leading exporters of canned fish, this expansion is clearly instanced in the exports of brisling sardines, the main product of the industry, which are about 22,000,000 kegs yearly. norway has over 200 canneries employing some 6,500 hands. the total weight of canned goods ex- ported during 1924 was 40,249 metric tons, of which 28,202 tons were smoked sardines, 5,061 tons unsmoked sardines and 5,389 tons kippers. canning machinery is exported from norway to other countries engaged in the industry. spain, portugal and siberia are all engaged in the canned sardine industry, while spain and portugal also devote considerable attention to canned fruits, the exports of which are increasing. in belgium the canning industry rapidly developed after 1910. the oldest and the most flourishing branch is that of canned vegetables. the manu- facture of canned fruits on a very large scale has been developed largely in co-operation with british firms, an industry which has made great strides is the manufacture of canned and crystallised fruit, in which 22 manufacturing firms were engaged in 1925 as against less than 10 before the war. the works engaged in the prepa- ration of canned and dried fish are located for the most part along the coast, and specialise in sprats and sardines and shellfish. japan, through the organisation of a large trust of canhed provision merchants, has become important in the canned crab and salmon trade. in 1923 she shipped to america and europe 220,000 cases of crab, but in 1924 the output somewhat decreased and the value fell from yen 50 to yen 40 per case. asa result of the influence of the trust, however, and also of improved packings, the industry in 1925 showcd signs of greater expansion. (a, f. w.) canteen.—the term is chiefly used for the bar or general shop attached to barracks, but it is also used for other places where food is provided, e.g., in connection with factories and workshops. canteens exist, too, in warships. in a less-known sense, a cantcen is the small tin utensil carried as part equipment in marching order for cooking, eating or drinking. service cantcens.—prior to 1914 canteens were generally work- ed in the british navy by a ship committee, and in barracks as a regimental institute, but with the rapid growth of new units after the outbreak of the world war, it was found desirable to have a central organisation to provide cantcens for barracks, hutments and for all the expeditionary forces. much experience in this direction had been gained in the south african war, where the canteens had done much for the comfort of the troops, and yet made tremendous profits, providing capital sums spent for the sailors’ and soldiers’ benefit on the union jack club, union jack hostel, ete. from tots onwards, the expeditionary force canteens be- came a vast organisation, providing right up to the front lines, for officers and men, good shopping facilities and rest and 518 recreation centres, and for officers excellent hotels. mention must be made of the auxiliary work of the ¥y.m.c.a. and the church army, which carried on similar work on a very large scale both at home and abroad. with the american army, the canteen work was largely carried out by the y.m.c.a. and by the u.s. red cross, already es- tablished in france, and to a certain extent by regimental institutions. in great britain, the outcome of the canteen organi- sation was the navy and army canteens board, which, since the war, has taken over nearly all the naval and other service can- teens. a few units particularly situated still manage their own canteens on the old lines. civilian canteens.—in great britain the need for providing canteens for industrial workers is widely recognised and an act of parliament of r916 empowered the home secretary to require employers to provide cantcens or messrooms when it appears that such are necessary for securing the welfare of the workers. the exact words are in section 7 of the police, factories (mis- cellaneous provisions) act, 1916: the occupier shall provide and maintain for the use of all persons employed m a factory and remaining on the premises during the meal intervals a suitable messroom, which shall be furnished with (2) sufficient tables and chairs or benches with back rests; (0) ade- quate means of warming food and boiling water; (c) suitable facil- ities for washing, comprising a sufficient supply of clean towels, soap and warm water. the messroom shall be sufficiently warmed for use during meal intervals. welfare pamphlet no. 2 issued in 1924, by the stationery office, london, gives advice on the provision of these accessories, the information being accompanied by plans of model canteens. cantigny, 2 small village in northeast france, west of mont- didicr and 18 m. south of amiens, was the scene of the first u.s. offensive in the world war. after the great german advance in march 1918, the rst div. of the american expeditionary force, under gen. bullard, relieved two french divisions in the picardy section of the allied front. the german line ran west of montdicdier, and, immediately facing the american front, formed a small salient of which cantigny was the nucleus. it was decided to reduce the salient, and for this task the 28th regt. with 150 men of the rst engineers were detailed, supported by french tanks. on may 28, at 6.45 a.m., after an hour’s artil- lery preparation, the u.s. infantry advanced on a front of 2,200 yd., and in 45 min. they had overcome the german defences, capturing 250 prisoners. ‘the germans made ficrce counter- attacks, extending over three days, but failed to retake the posi- tion. ‘the total casualties sustained by the american forces in this operation were 45 officers and 1,022 men, (sce german offensive). canton, china (see 5.218), suffered perhaps more damage as a result of the chinese internal wars of 1924 and 1925 than any other chinese city. under the governorship of dr. sun yat- sen (q.v.), heavy taxes were imposed for the upkeep of the army. these were naturally detrimental to the city’s trade, though the important silk exports were maintained. many merchants, however, gave up business here and transferred their opcra- tions to hongkong. since 1910 a new quarter has sprung up west of the river, and a bridge has been built between canton and honam. the popula- tion in 1925 was variously estimated between 500,000 and go9,000. the canton christian college, begun in 1905, sub- sequently expanded until it possessed about so buildings on a site of 350 acres. the women’s department was opened in 1973, the college of arts and sciences in r915 and that of agriculture inzg21. inror4 a board of conservancy works of kwangtung, appointed particularly to deal with flood prevention, was started by the chinese govt. the diificulties of canton as a port having become more and more obvious. thereafter a sluice was built on the north river and a floodgate on the east river, and about 18 m. of dikes were dug. plans for improving the harbour and ap- proach, and regulating the west and north rivers, were under consideration at the end of 1925, and several miles of quays had been constructed. the railway of hankow reached shihwan in 1919, but at the close of 1925 it was in a very bad state of cantigny—cape province repair, while the working of the line to kowloon, opened in ror1, was constantly interrupted for military purposes during the stormy days of 1924 and 1925. in 1924 there was a severe out- break of smallpox, and other diseases were brought by the troops, among whom they were rife. a health department which was started failed owing to the disturbed conditions and financial difficulties. disorder in the city.~—civil war was carried on in and around the city from 1921 onwards, and in 1924 there were conflicts between the troops of sun yat-sen, holding the city, and the cantonese merchant volunteers, who banded themselves to- gether to resist the orgy of taxation imposed to pay for the large numbers of troops, and declared a general strike, which spread all over the province, in may. in oct. the merchant volunteers were attacked by the government troops in the most crowded part of the city with artillery; over 400 houses were burnt and a number of noncombatants killed. the volunteers, who were greatly outnumbered, were dcfeated and disarmed. the com- munist element, in a loosely organised trades union, obtained control. during the fighting in the city some 50,000,000 dollars’ worth of damage was done. by the end of 1925 effective connec- tion with peking had been severed and a boycott on british shipping from hongkong had been declared, supplies being received from vladivostok. | capek, karel (1890- }, czech dramatist and novelist, was born at male svatonvice in bohemia (yugoslavia) jan. 9 1890. he is perhaps best known as the author of the successful play r.u.r. (1920; eng. trans. 1923), in which he satirises the mechanical tendencies of modern civilisation, and the life of the iusects (1921; eng. trans. 1923), a spectacular play written in collaboration with his brother josef, and satirising various phases of modern society. he also attracted much attention with the makropulos affair (1922), a play dealing with longevity. of his fiction the best is contained in painful tales, a collection of short stories which deserve comparison with maupassant, and in his two novels, the manufacture of the absolute (1923) and krakatit (1924, eng. trans. 1923). he achieved considerable success with his series of fcuilletons, letters from england (1924; eng. trans. 1925), letters from italy and concerning the nearest things (1926), all of which are distinguished by powerful imagi- nation and sparkling wit. capello, luigi (1859- ), italian soldier, was born on april 14 1859. his career until he became a general officer was passed in the infantry. during the world war he conducted in aug. 1916 the attack which led to the capture of gorizia, as commander of the gorizia zone it. (viii., vi. and ii. corps) he conducted the first phase of the italian offensive in may 1917. in june he was given command of the ii. army and in aug. he directed the attack on the bainsizza plateau, but his desire to continue the attack led to differences with cadorna, his com- mander-in-chief, who favoured a defensive disposition. it is probable that capello’s faith in his own method of meeting the enemy counter-attack prevented his wholehearted co-operation with cadorna. after his retirement in july 1918 he took some part in politics and supported fascism but later joined the opposition and, in nov. 1925, was arrested on a charge of com- plicity with zaniboni in the plot against the life of mussolini. cape province (see 5.225), the largest and most thinly populated of the provinces of the union of south africa, has an area of 276,966 sq. miles. population (1911) 2,564,965; (1921) 2,782,719. in 1921 the white inhabitants numbered 650,609, an increase of 68,232 since 1911, roughly 28,c00 males and 40,000 females. the discrepancy in the increase was due to a steady migration of men from the cape to other provinces of the union, chiefly the transvaal. of the 2,132,110 non-white inhabitants in 1921, asiatics numbered 7,696, bantus 1,640,162 and mixed or other races 484,252. the “ coloured persons,” as they are official- ly called, form a distinct and important element in the com- munity. of the bantus 938,990 lived in the transkei, a purely native area under special jurisdiction. many parts of the prov- ince are arid or semi-arid and, the transkei apart, the population is mainly in the fertile south and southeast coast regions. cape town—capital, export of administration.—the affairs of the province are managed by a provincial council elected for three years and not subject to dissolution save by effluxion of time. the council elects its own chairman and an executive committee of four, not necessarily members of the council. it has powers of legislation on subjects specifically assigned to it; its enactments are called ordinances and are not valid if repugnant to any act of the union parlia- ment. there is no separate judiciary or police force or civil serv- ice, and harbours and railways are under the control of a separate department of state. the new cape railway from worcester to mossel bay, 209 m. long, the chief privately owned line in the union, was bought by the govt. in aug. 1925. the chief execu- tive officer, styled the administrator, is appointed by the union ministry. he holds offtce for five years and 1s irremovable. the union ministry also appoints the provincial auditor and an attorney-general as legal adviser. _, the first administrator was sir frederic de waal, who had been colonial secretary in the last ministry of cape colony. he was twice reappointed, being succeeded in 1926 by mr. adrian p. j. fourie, nationalist member of parliament for som- erset east. during the period r910-25 the province showed a progressive spirit, particularly as regards education. there arose, however, such an increase in provincial expenditure (not in the cape alone) that the union parliament passed an act in 1922 limiting the subsidy to be paid to not more than 3% over the amount due in the preceding year. in the schools the bilingual requirements gave rise to a little friction; in 1921 the council passed an ordinance providing that the medium of instruction up to standard iv. should be the “ home language ” of the scholar. in place of high dutch, the local form of the language, called afrikaans, is taught. education for all european children be- tween the ages of 7 and 16 is compulsory; primary education, since 1920, has been free up to and including standard vi. both primary and secondary education is provided for all races. in 1924 there were 137,000 white and 167,000 non-white pupils. there was, in the period 1910-25, considerable agricultural and industrial development, as well as a period of unhealthy inflation after the world war, followed by reaction. an event which caused a deep and lasting impression on the public mind was an epi- demic of influenza in 1918. it was estimated that a quarter of the inhabitants of the province suffered, and the deaths were very numerous. in 1925 much opposition was aroused by gen. hertzog’s proposal to withdraw the franchise from the natives, as it was in the cape only that natives had the right to vote. finance.—the revenue, apart from the subsidy, is derived mainly from transfer duties, licences (trade, liquor, motor, etc.) and a provincial property’ tax. the average revenue 1915-6 to igig-20 was £567,000; it had risen to £1,261,000 in 1922-3. the union govt. subsidy in 1915-9 averaged £1,085,000, and was {1,569,000 in 1922-3. the sudden rise in the figures was the re- flection of educational demands. the average expenditure on education in 1915-6 to 1919-20 was £1,224,000; in 1922~3 it was £2,514,000. see south africa. see also the following reports issued at pretoria by the union govt.: report of the provincial administration commission 1915 (1917); report of the provincial finances commission (1923). (f. r. c.) cape town (see 5.252b), capital of the cape province, and seat of the legislature of the union of south africa. in 1913 all the suburban municipalities except wynberg were incor- porated in the city, which extends for 17 m. across the cape peninsula, from table bay to false bay, and has an area of 59 square miles. the population, including suburbs, was 161,570 in ig1i and 207,404 in 1921 (of whom 113,202 were whites). the chief feature of the period since rg10 has been the development of the suburbs and the making more accessible the natural beauties of the peninsula, enterprises in which the municipality took the lead. cape town in the season (oct.—march) is the chief pleasure resort of south africa. in oct. 1918 iniluenza caused over 7,000 deaths in the city in three weeks. on the sea front at table bay a promenade pier (1,500 ft. long) and esplanade (1,000 yd.) were completed in 1914. the 519 pier replaces the old central jetty, and is in‘a line with adderley street and government avenge, the principal thoroughfares. to the houses of parliament, in government avenue, a new wing was added (1910). at the foot of the avenue is the national art gallery. the max michaelis collection of flemish and dutch masters——presented to the union in 1912 is in ‘* the old town iiouse,” in greenmarket square. the building, a fine example of colonial dutch 18th-century architecture, was transferred to the govt. in 1916. the castle has been cleared of disfiguring addi- tions and restored approximately to its 18th-century condition. rondebosch, five miles from the centre of the city, is the chief residential suburb. it contains groote schuur, formerly the property of cecil rhodes, since roro the official residence of the prime minister of the union. in 1918, on the incorporation of the south african college (founded in cape town in 1829) as the university of cape town, a site for new buildings was granted in the grounds of groote schuur. building operations began in 1921. in 1925 the prince of wales was installed as chancellor of the university. in 1912 a rhodes memorial was unveiled at groote schuur by earl grey. in front of the me- morial, a granite temple in the doric stvle approached by a flight of steps, is the equestrian statue of “ physical energy ” by g. ¥. watts. in the temple is a bust of rhodes. not far from rondebosch, at kirstenbosch, are the national botanical gardens, established 1913. since 1913 cape town has ranked second to durban as a sca- port in respect to cargo, but it retains first position for passenger traffic and, as the port whence the raw gold from the transvaal is shipped, its exports greatly exceed in value those of durban. long-needed improvements in table bay harbour were under- taken in 1924. in 1913 the tonnage of ships entering table bay was 3,965,000 (3,251,000 being british); in 1923 the figures were 4,007,000 (3,209,c00 british); in 1924 they were 3,964,000 (3,202,000 british). see juta’s directory af cupe town (cape town, 1926.) (ir. r. c.) cape town, university of.—the foundation dates from april 2 1918, when the council, created by act 14 of 1016, re- ceived a bequest from sir julius wernher of £250,000 and a dona- tion of £250,000 from mr. otto beit, who added {50,000 to a lapsed bequest by mr. alfred beit. by 1921 a special appeal for funds had raised about £280,000, inclusive of £50,000 for the jameson memorial hall. pending the erection of buildings on the site provided by the government at groote schuur, the university carries on its work in the buildings formerly occupied by the university of the cape of good hope, of which it is the successor. the university created in 1925 chairs in commerce, fine art and accounting. the faculty of law was strengthened by a third professorship and arrangements were made to take over classes in.architecture, hitherto conducted by the cape institute of architects and the school of art controlled by the education department. capital, export of.—this expression denotes investment of capital abroad by a country or its inhabitants. the term may be applied either broadly to the gross amount of capital so in- vested during a given period, or more narrowly to the net amount, represented by an excess of capital invested externally over capi- tal concurrently invested in the country from outside. export of capital is not an export in the ordinary sense, since it is rarely possible to indicate particular goods which represent the invest- ment of capital; it is to be regarded rather as an item in the inter- national trading balance sheet of a country. british investments abroad. british investments abroad were built up by an almost unintermittent export of capital between the end of the napoleonic wars and the outbreak of the great war. str george paish estimated that at the end of ro1r3 the amount of capital publicly invested by british citizens in the colonies and foreign countrics amounted to over £3,700,000,000, to which should be added a large amount invested privately, bringing the total to about £4,c00,000,000. of the amount pub- licly invested, sir george paish found that some £1,780,000,000 was invested in british dominions and possessions, some £754,- 000,000 in the united states, and some £764,000,000 in other 520 foreign countries on the american continent. a comparatively small amount (less than £200,009,000) was invested in european countries—mainly russia, spain and turkey. sir george paish estimated that no less than {£1,521,000,000 was invested in rail- ways; {959,000,000 in government securities; £273,000,000 in mines; {244,000,000 in land, investment and finance companies; £147,000,000 in municipal loans; and £145,000,000 in commercial and industrial securities. other european countries —several other european coun- tries emerged as exporters of capital during the roth century. apart from holland, which had established her position earlicr as an investing country, these included france, germany, bel- gium and switzerland. the amount of french capital invested externally was estimated in 1912 at some fr. 40,000,000,000 to fr. 42,000,000,000. french investors tended to concentrate their investments in europe, egypt and the french african colonics; and showed a marked preference for government bonds including russian government issues which were held very extensively. they also held considerable investments in south america, mexico and the transvaal. the amount of german investments was variously estimated at {£1,000,000,000 to £{1,250,000,000 before the world war: a large part was represented by russian bonds, railway and indus- trial securities; and german investors had large interests in austria-hungary, italy, rumania and the balkans. ‘they also had substantial interests farther afield, in the united states and canada, south america and the far east. the position then before the world war was that great brit- ain, and to a smaller extent france, germany and some other european countries, had built up substantial external invest- ments and were in the habit of adding to them year by year through the export of capital. apart from these no other coun- tries exported capital on balance, though some capital importing countries also invested capital abroad. united states —among these countries was the united states, which, during the two decades before the war, had invested con- sidcrable sums in the development of industries in canada, in mexico and cuba; and had also repurchased from europe con- siderable amounts of american railway securities. the flow of capital, however, continued, on balance, to be into the united states, at the outbreak of the war in 1914 european holdings of american securities were probably between $1,500,000,000 and $5,000,000,000.. american external investments probably did not exceed one-third of this amount. changes due to the var—the war wrought cnormous changes in the sphere of international indebtedness, changes, the extent of which cannot even now be precisely gauged. ‘the initial shock to the credit system at the outbreak of war caused an immediate stoppage in the normal flow of capital from lending to borrowing countries and gave rise to demands on the part of the former for the repayment of maturing obligations. the borrowing coun- tries experienced at first great difliculty in making remittances, as was indicated by the position of the exchanges. later, as purchases of war supplies by the belligerents in- creased, this difficulty disappeared and the exchanges turned in favour of the borrowing countries. from that time the euro- pean belligerent countries were confronted with an increasingly serious problem of financing their purchases abroad. it was a problem much more serious for the allies than for the central powers, because the latter were largely cut. off from the possi- bility of importing from countrics out of europe; but it applied to the central powers in connection with their purchases from european neutrals. great britain bore a large part of the burden of financing the external purchases of the allies prior to the entry of the united states into the war, and an account of the arrangements made forms part of the history of british war finance (see great britain). so far as purchases could not be paid for out of ordi- nary credit items in the trade account they were met out of money obtained (a) byselling abroad holdings of foreign securities (b) by borrowing abroad on the market or (c) by borrowing from foreign or dominion governments. each method was adopted capital, export of so far as practicable, the last becoming commoner as more coun- tries joined the allies. in view of the magnitude of british investments overseas it might have appeared that vast sums could be raised abroad by the sale of securities if not by borrowing. the extent to which investments could be realised was, however, in fact comparatively small. only exceptionally did it prove possible to sell any of the sterling securities which represented the bulk of british holdings, and sales were for the most part limited to securities expressed in (or convertible into) foreign currencies—particularly american dollar securities. the sale of these securities proceeded to some extent in response to ordinary economic motives, and subsequent- ly the british government itself organised the acquisition, by purchase or on loan, of suitable dollar and other securities which could either be sold abroad or used as collateral for advances. in the course of its operations the so-called american dollar securities committee purchased american and canadian dollar securities to the value of £184,266,540, and obtained the deposit on loan of others valued at £100,290,052. more important in amount than the sale of american and other securities was the direct borrowing by the floating of loans abroad and by arrange- ments with foreign bankers or with governments. the aggregate external debt of the british government amounted at march 31 1919 to £1,364,850,000 at par of exchange. of this £840,822,000 represented debt owing to the united states government, for1,- 808,000 was owing to the canadian government and £113,500~ 000 represented loans from certain allied governments, which could be regarded as available to be set off against debts owed by the same governments to great britain. britain, france and germany as creditor nations.—while dol- lar securities were being sold abroad and money was being bor- rowed, advances were being made to european allies and to certain of the dominions, the aggregate nominal amount of these advances being undoubtedly in excess of the amount raised abroad by selling securities and by borrowing. regarded as a commercial asset, however, these advances are by no means equivalent in value to the amount realised by the sales of dollar securities and by external borrowings. their commercial value cannot even yet be exactly estimated. on the whole, it is clear that the creditor position of great britain at the end of the war was considerably, though certainly not fundamentally, impaired. the effects of the war upon the creditor position of france were more <lisastrous owing to the extent to which french capital had been invested in russia and other countries affected by the war. in addition to incurring considerable debts to private in- terests abroad, the french government borrowed very heavily from the british and united states governments. a settlement with regard to the latter debts had not been made in 1926. germany, like france, had large investments in russia which were lost. she also suffered from the sequestration of german property and enterprises in the territory of hostile countries, though to some extent this was set off against property of those countries in germany sequestrated by the german government. like the allies, germany incurred heavy debts in certain forcign countries, notably holland, sweden and switzerland; and she mobilised salable foreign securitics with a view to effecting payments abroad. on the other hand, she advanced large sums to her allies, but had to forego her claims to repayment as one of the conditions of peace. her defeat in the war resulted in the loss of her position as a capital exporting country. position of neutrals —the urgent demands of the european belligerents for supplies of many kinds provided an exceptional opportunity for countries which were in a position to take ad- vantage of it. this applied to a considerable extent to some of the neutral countries of europe, especially holland, sweden and switzerland; but their capacity to furnish supplies on loan or otherwise was restricted by economic difficulties resulting from their position in the war area. it was estimated neverthe- less with regard to switzerland that by the end of t918 she had lent the allies fr. 400,000,000 and the central powers fr. 200,- 000,000, and that she had at the same time repurchased securities in french, german, english and austrian hands to the value of capital, export of at least 800,000,000 francs. the experience of holland and sweden was not dissimilar. the united states as a creditor country.—the country which above all others was in a position to furnish supplies on credit and to repurchase securities was the united states. it has al- ready been indicated that for some years before the war, america had been investing capital abroad, although she was not a balance and capital exporting country. clearly, however, her financial strength was increasing and it was only the great demand for capital for internal development which kept her from becoming a capital exporting country. the war greatly hastened her prog- ress in that direction. she was able to repurchase with ease from europe large amounts of american securities, the aggregate being estimated at $2,000,000,000 up to the end of 1918. private loans were also floated in the united states to the amount of $1,500,000,000 while advances by the united states govt. to the governments associated with it in the war exceeded $7,300,000,000 at the end of 1918. the exact commercial value of the government advances remained to be determined and is not yet completely settled. it was clear, however, at the end of 1918 that the united states was no longer on balance as a debtor. during the following years she rapidly established her position as a great creditor. after the armistice europe needed large quantities of foodstuffs and othcr supplies for which payment could not be made in cash. the united states was able and will- ing to furnish the goods and did so to a large extent on open credits from the banks. these advances were subsequently in large part funded in various ways. to some extent they were hquidated by further sales of european owned dollar securities, of which it is estimated that $500,000,000 were repurchased in 191g and 1920. a certain quantity of south american, canadian and other sterling securities were also purchased in america. flotations of capitat.—flotations of capital were effected in the united states to a vast aggregate amount on behalf of foreign governments and municipalities whether canadian, south american, european or other; and large sums were invested in industrial undertakings especially in canada and south america. the amount of new flotations of capital in each year from 1920 to 1925 1s computed by the financial and commercial chronicle to have been as follows:—-: 521 by far the greater part of these investments has been made since 1914, and when account is taken of the fact that forcign holdings of investments in america have been reduced to com- paratively small proportions by the repurchase of some $2,500,- 000,000 of securities, and further of the debts owing by european governments, the magnitude of the change which has occurred in the financial position of the united states is clearly apparent. new york has in fact been for some years the principal centre of the world’s capital market and has been able to provide im- mense quantities of capital to borrowers of all nations. whether america will continue to export capital at the same rate or whether a rising standard of consumption and the demand for capital for internal purposes will restrict the amount invested abroad is by no means certain. france and germany in post-war finance.—for the time being at any rate europe has ceased to be able to provide large amounts of capital for other parts of the world, and on the whole the flow is at present rather into than away from europe. the resources of france have been fully taken up with the restoration of the devastated areas. germany has been borrowing heavily for reconstruction, and having regard to reparation payments is not likely to bein a position to invest capital abroad for many years. recovery of the london market.—on the other hand, great britain has been in a position to resume the export of capital, though on a reduced scale. the external debt incurred during the war was reduced by over £200,000,000 between march 191g and march rg21, since when further substantial reduc- tions have been made. during 1920 considerable blocks of south american, chinese and other foreign securities were purchased at low prices from the cortinent, although at the same time other securities were being sold to the united states and also to canada until the imposition by the latter country in the au- tumn of 1920 of an embargo on importation of securities. con- siderable flotations of capital were also made for british posses- sions and foreign countries, as indicated by figures compiled by the economist, shown in tabular form: “‘new capital issues in london.” estimates of the actual export of capital based upon an anal- ysis of the balance of trade indicate that in 1920 the nominal amount may have been as high as in the years immediately _foreten issues placed in u.s.a. excluding refunding loans (in thousands of dollars) 1920 canada and canadian provinces and municipal- ities . ; . : 45,780 other foreign govt. and municipal : oe g00 total foreign govt. and municipal . . 236,780 canadian ce orporate issues, las : 107,795 other foreign corporate issues 39,925 grand total ; 384,500 the flotation of new foreign capital issucs fell off markedly in 1923, owing largely to distrust arising out of the french occupa- tion of the ruhr. following the settlement on the lines of the dawes report, which increased confidence in the stability of europe, the amount of new issues rose to unprecedented figures in 1924 and 1925, when very large sums were icnt to luropcan governments and municipalities as well as to industrial enter- prises. parts of these new issues were, however, subsequently sold back to europe. american foreign investments (exclusive of debts owing by foreign governments to the united states govt.) are estimated | in 1925 to have been as follows:— ecurities ee iii and direct total a investments canada and new- $ | 4 $ foundland t,125,000,000 | 1,420,000,000 | 2,545,000,000 latin america 915,000,000 | 3,225,000,000 | 4,1.£0,000,000 europe . 1 ,665,000,000 450,000,000 | 2,115,000,00c asia and oceana 442,000,000 | 280,000,000 ee 000,000 totals 4,147,000,000 | 5,.375,000,000 | 9,522,000,000 government uaneem | = es = 1921 1922 1923 iq24 1925 75,982 98,984 26,308 132,365 49,158 329,270 416,305 186,845 570,945 540,781 405,252 515,289 213,153 703,310 589,939 106,115 40,476 29,631 97,850 04/511 15,150 80,445 24,100 195,410 398,735 526,517 636,210 266,884 996,570 1,083,185 preceding the war, when it approached {200,000,000 per annum. in the following years, however, the amount fell off, reaching only £153,000,000 in 1923, £63,000,000 in 1924 and {28,000,000 in 1925. the general depression of trade has affected british new capital issues in london for british | for foreign possessions | countries total £ £ £ 1920... 31,639,800 7,888,400 39,528,200 1920 ¢ 90,577,800 | 22,223,900 | 112,801,700 ig22 . . - | 74,924,200 | 55,233,100 | 130,157,300 1923 . ; . | 92,722,900 | 44,754,700 | 137,477,000 wo24: 3 : : : 72.276, goo 52,430,800 | 124,713,700 1925 69,919,000 16,276,500 77,195,500 industry severely, and while the aggregate accumulation of cap- ital has certainly been much reduced, it is probable that a much larger proportion has been invested in great britain. during the greater part of 1925 it was felt to be necessary to maintain an embargo upon the issue of new foreign and colonial loans in london, this was consequent upon the measures taken 522 to restore the gold standard and was intended to prevent a strain on the forcign exchanges at a time when owing to incomplete adjustment of internal prices imports into the united kingdom were likely to be unusually great and exports unusually small. the embargo was not statutory, but was effected by arrange- ment with the bank of england which used its influence with the big issuing houses. in nov. 1925 the embargo was held to be no longer necessary and was withdrawn. its withdrawal was followed by the placing of a large number of new foreign and colonial issues in london. whether this is the beginning of a revival of the export of capital remains to be seen, but there can be little doubt that such a revival will result sooner or later from a recovery of world pros- perity which will cause a renewed demand for british exports. rrbliograaphy.—c. k. hobson, the export of capital (1914); a. w. kirkaldy, british finance ror4—21 (1921); bullock, wiliams and tucker, ‘ study of the balance of trade of the united states,” in the review of economic statistics (harvard, july 1919). (c. ke) capitalism.—upon the concept of “ capital ” in political economy theoretical dispute is interminable. to mixin that dis- cussion is not to the present purpose. “ capital” is most briefly described as wealth used in producing more wealth; and ‘‘ capi- talism,” as the system directing that process. this latter term came into gencral use during the second half of the 19th century as a word, chiefly signifying the world-wide modern system of organising production and trade by private enterprise free to seek profit and fortune by employing for wages the mass of human labour. no satisfactory definition of the term has yet been found, though nothing is more familiar or important than the thing itsclf. arthur young (1792) calls capitalists “‘ moneyed men.” coleridge as early as 1823 distinguishes them as having “ labour at command.” this aspect, scized upon by karl marx, is emphasised as a main distinction by economists whether favourable or hostile to individualist enterprise. the expression ‘‘ capitalism ” is of socialist origin and was used at first with an implication of reproach. it has been accepted with increasing confidence by those whom ‘it meant to stigmatise; and is now the name—as opposed to socialism—of a predomi- nant economic system, always improving its sinewy and flexible organisation, adopting higher social ideas, and strongly pro- gressive in effect. as the ruling alternative to socialism it claims to be more modern in thought, more creative in method, more fertile in result, surer of the future because more capable of raising the average level of material prosperity and happiness, while enhancing the vigour, variety and zest of life by a richer play of personal initiative. in this sense the economics of capitalism are so deeply in- volved with politics and all sociology that it was regarded until lately as a subject unfitted for scientific treatment. while the socialist indictments were elaborately considered, the statement of the positive case for capitalism was much neglected. only in recent years has it begun to be found under a separate heading in works of reference. it is still excluded from the latest re-issue of the english dictionary of political economy. after some hesitation it has been rightly included and treated at length in the new post-war edition of the massive german compilation, handworterbuch der staatswissenschafien. it was not amongst the thousands of headings in the eleventh edition of the ency- clopedia britannica, though introduced into the supplement of 1922. it demands unquestionably a separate article in an encyclopaedia not confined to economics,as more narrowly interpreted, but dealing with all the aspects of life. 1. capitalism in action.—it is extraordinary that the reality and practice of capitalism have received not a tithe of the attention devoted in our time to socialist theory. science has been defined as accurate description of observed results. modern capitalism offers to accurate description a subject to be studied like physiology. it is more nearly a universal force than any other, spiritual or material, yet known. it operates and extends amidst all races, colours and sects. it is active more or less in all nations. even soviet russia, after plunging through catastrophe capitalism in the hope of fulfilling the anti-capitalist dream has found itself compelled to recognise private ownership of the land—including the superiority of richer peasants over poorer—and to restore private trade to a considerable extent in towns. the only anti- capitalist government is driven to seek loans from capitalist nations. in consequence of these lesssons, the socialist and com- munist pleas for the overthrow of the existing system of private property and free enterprise are more decisively rejected by a large majority of the world. capitalism prevails more strongly than ever, in at least six-sevenths of the world. in the remaining part—the immense eurasian territories of the soviet republics, more truly called the soviet empire—a still more complete reversion to private ownership and trade is to be expected, though the residue of state control seems likely to remain larger in the russian system than in western societies. elsewhere private enterprise animates economic life in all the continents and impels their interlinking traffic. it is the strongest factor and the pervading influence in the daily affairs of all civilised peoples. everywhere the soil which feeds all other human activities is in the hands of private owners whose numbers have largely in- creased, especially in eastern europe and russia, since the world war. mines everywhere are worked by capitalist enter- prise. transport by land, sea, inland waterways and air is con- ducted generally by private direction utilising the funds supplied by hosts of individual investors. the dense towns and cities with their factories and workshops; with their swarming popu- lations sustained by work for wages; with their myriad agencies of distribution by middlemen; with their conditions of housing, supply and conveyance—all these are creations of modern capitalism. it is the agency whereby the intellectual achieve- ments of thought and invention enter into the practical service of human life in all its forms at all its moments by means of an inconceivable number and innumerable varicty of mechanisms ranging from engines of giant mass and power to the most minute and delicate devices. the tall chimney appears as a symbol at rome and athens, at jerusalem and benares, at peking and tokyo. this enormous enhancement of the pro- ductivity of human hands has brought into being some hundreds of millions of civilised populations who could not have existed and subsisted without it. as it has enlarged and altered out of recognition the white societies, capitalism reaches into the depths of the newer continents and is stirring the most ancient asiatic peoples. as an agency working ever more widely, yet ever more intensely, to transform by creative. revolution the activities and conditions of mankind, to change ideas and stimulate effort over all the world, history has never known any- thing to approach the material power and saturating influence of modern capitalism in bringing applied science to bear on life in the machine-age. 2. freedom of individual enterprise —this freedom to under- take risk and accumulate possession, is the breath and the life- blood of this system. its edifices, its productive plant, the inter- connecting chains of traffic and networks of communication by which goods and services are exchanged, different needs in all their multiplicity mutually supplied—all these to an over- whelming extent are created at the cost of private persons; and the complex organisations of human intelligence and labour required to work this system function under private ownership and control. governments may facilitate and assist—as they may hamper and impede—the exertions of free enterprise; but governments derive their own funds from taxes levied directly or indirectly on individual effort; nowhere has the state itself become a separate wealth-making power; nowhere has socialism been able to make itself in the least degree a working substi- tute for modern capitalism. the bolshevik experiment rejected in agriculture by that 90°%4 of the russian people whosc prefer- ence for private ownership is invincible, is especially inferior in industrial efficiency. this is why the russian communists by paradox feel the need of foreign capital for loans to postpone the collapse of anti-capitalism or disguise the reversion to its opposite. capitalism 3. rise of machine indusiry—the impartial history of capitalism, not yet written, deserves many volumes by a gibbon of economics. only recent phases can be dealt with in this place. a golden age of equality and harmony is a dream of the future, but has never been a reality of the past. in dimmest prehistoric times the exceptionally competent individual must have been relatively more powerful than now; useful enough to be deified by his fellows. the superior craitsman and artist, possibly the superior director of average labour, emerged in the making of flint weapons and tools. acquisition like leadership went with strength and skill. from the beginnings of recorded history, rich and poor appear. kings and chiefs, able warriors and civil administrators, priests, merchants commanded the labour and services of the mass of men. jn that sense, egypt and baby- lonia, greece and rome were full of capitalism and of every kind of private ownership including its extreme form, slavery. the middle ages passed through feudalism and serfage. the renais- sance and the reformation alike carried capitalism and the wages-system into wider development and more detailed activi- ties. on the one hand the renaissance enriched all creative ideas and multiplied desires; while the voyages of discovery opened the epoch of world-trade with its new classes of mer- chants and makers and its necessary retinue of middlemen superseding more and more the direct contact of producer and consumer usual in the more local intercourse of medieval times. on the other hand, acute economists have insisted that after the reformation the spirit of calvinism and puritanism de- veloped thrift, exertion, method, diligence, and all the other efficient qualities of what we call acquisitive individualism, to a degree, which prepared the ground for modern capitalism. then in the latter half of the 18th century came the industrial revolution which has worked and spread with cumulative effect through five generations of invention and social change. fixed and mobile machines, steam-power, oil-power and _ electric energy with its long-distance transmission of signs, sounds, light, heat and propulsion—these, purchased and directed by free enterprise in the economic sphere, are the present instru- ments of capitalist organisation in the 2oth century as already very generally described. there is as much difference between the contemporary world and the world of a little more than a century ago as between the 18th century and the higher stone- age of ten thousand years before. the strong characteristics of the present phase are as follows: first the magnitude of capitalist operations far exceeds former example: the vigilance of their intelligence-departments must reach to the ends of the earth; trade and investment are international; every manu- facturing nation, even the united states with all its self-supply- ing resources, seeks to derive raw material or choice commodities from every region of the globe and to find in every one of them a market for goods or money. second, larger aggregates of labour are directed by larger corporations and companies, amal- gamated or federated. with its trusts and syndicates and other ways of consolidating interests, capitalist management is form- ing into fewer but more massive units. the relations between employers and employed depend more and more upon impersonal system, less and less upon individual attachments or dislike; though exceptional personality as in the case of mr. henry ford is more important than ever for progressive efficiency of pro- duction on the capitalist side and for promoting payment, wel- fare-work and other encouraging conditions in the way most likely to induce labour to give its best effort. thirdly, though capitalism concentrates the control while extending the scope of its operations as karl marx foresaw, the company-system confounds his chief expectation by immensely increasing the number of participating investors—multiplying small share- holders, and widening the social basis of the system. 4. early abuses and surviving prejudice—the sharpest points of socialist criticism were originally thrust against ad- mitted and gross abuses in a period which has passed away. the worst of these evils have been remedied in most countries and remaining defects are as remediable. the positive case claims that capitalism to-day in its altered working is not only 523 the most productive economic system possible in the present state of society but that it is the most conducive to social wel- fare and progress. during the last few decades and especially since the world war, the improvement in the character of the system has been in fact sweeping. that when the marxist creed was framed much of his terrible indictment was true must be confessed by those who think his constructive theories fantastic. machine- industry still in the crude beginnings of its evolution was like milton’s animals emerging at creation, half in the earth and half out of it. many of its aspects were deformed and its effects vile. swarming populations were huddled into mazes of mean streets, alleys and courts, put up and linked on without civic plan and regardless of health and decency. throughout great britain the foul slums had already appeared and presented a scene of ugliness and squalor such as civilisation had never beheld. the large majority of the adult workers, and more than half their children, were totally uneducated. the factory acts were only just beginning to build up what became one of the finest codes of humanitarian legislation in the world. before the first act was passed, parliamentary committees had exposed the horrors of child-slavery in the mills; women stood at the loom from morning to night sometimes for 15 and 16 hours. as the common soldiers had been called “‘ food for cannon ”’ in war, the common people at this time were “‘ food for factories ”’ in peace. the defensive efforts of trades unionism were still scattered and feeble. the employer was in an absolute sense the ‘“‘master.”” as profits rose and fell hands were thrown on the streets or taken on again. the hours of all labour were cruelly long and wages wretchedly low. capitalism at that phase was in fact a wrongful exploitation of flesh and blood. we must not lay all the blame on the capitalists. narrow lights were usually all they had. the prevailing classical economists taught that unrestrained competition was the spring of effort and the key of progress; that the poor in the lump must always be cheap; that labour by fatalism would always breed fast enough to keep wages at the lowest level required for human subsistence. in the leading industrial nations these conditions and ideas have been swept away long since in a manner that marx could not foresee; but the memory of former wrongs and evils still preju- dices the name of capitalism. 5. lhe creativeness of capitalism.—now, while much remains to be done the working of the system is incomparably more satisfactory and enlightened maintaining the industrial masses of most white communities, but above all in america, at a higher level of prosperity and convenience than ever was reached before. temporary post-war conditions shadow the european picture; but it is true even in europe that the workers generally are better paid for shorter hours than in any previous period; that they are better fed and educated, housed and clothed; that they are better secured against all the preventable ills of human life; and that their opportunities for advancement and enjoyment have largely increased. take first the question of creative success. capitalism claims that however great may be the rewards it acquires for itself, it results in higher earnings, cheaper con- sumption and more yarious advantages than labour could have obtained otherwise; and this because, by ceaselessly seeking extension, improvement, novelty, by seizing on every idea likely 1o cheapen costs and enlarge turnover, by looking vigilantly for the ablest persons, the system is dynamic and progressive through the rule of its nature. more surely and quickly than ever before the backward or stationary methods in business are eliminated by energetic and resourceful rivalry. freedom of enterprise is the creative ele- ment in economic life. it stimulates the originality of idea, ingenuity of method, boldness of attempt that the routine of public administration tends to fetter or stifle. the capitalist in this way shares the spirit of the adventurer, to whom pursuit of the personal idea is the breath of his being, and of the artist for whom freedom of individual expression is the vital condition of creativeness. capitalism swarms with imagination in action. every day thousands of heads in business relying on their own 524 perception and courage are taking decisions and risks from which any public official or committee would shrink. fresh initiative and invention never can be the characteristics of government departments, least of all under democratic condi- tions where the dread of hostile criticism is a continual deterrent from attempting any purpose, however successful in the long run, which at first only appeals to a few or to one. again the swift use of time is part of the essence of success in private enterprise. public officials and offices have to wait until ‘ opin- ion is ripe ’’—until they can count upon the approval of the many, and that commonly takes a long while. for these reasons, capitalism gives to economic life a vigour of impulse and creative fertility which no other method yet suggested seems likely to supply in anything like the same degree. by com- parison—argue the modern advocates of individual ownership and direction—socialism would mean at least arrested develop- ment, and probably an actual decline in general prosperity and welfare. many a great undertaking employing thousands of workers has sprung from the idea of a single mind or from the intrepid judgment of a single character finding beforehand amongst other men little support or none. 6. vital elasticity of capitalist organisation. — further, capitalist enterprise large and small concentrates in a million ways particular minds on particular problems. the needs, desires of every day in a civilised society, the new wishes always being awakened by new things offered, these are as the sands for number and as the sea for endless changes of shade and motion. consider the numbers of capitalist persons who are engaged on making in gross and detail the countless adjustments between supply and demand in their infinite variety. conceive all the different processes of specialised intelligence that are involved. [it becomes impossible to imagine in the present state of science how this living maze of private activities, each bent upon some one part of supply and demand, could be replaced under any form of socialism by officials and committees without the same scope for personal initiative and contrivance—thus jacking the acute attention and supple adaptability that the present system on the whole compels. this is a chief ground for the conviction of thoughtful interpreters of capitalism in every great indus- trialised nation that private enterprise is not only the most powerful force of economic creativeness but also the most clastic means of economic organisation for adjusting supply and demand. private capitalism makes overseas investments. in any country it may provide funds for developing the productiveness of other countries; of regions thousands of miles away; building railways, opening mines and oil-fields, financing plantations— as for rubber—founding banks. british investments, for in- stance, in north and south america, in asia, africa and aus- tralia—above all in united states railwavs during the generation after the civil war—have done more than anything else to provide british labour with an abundance of cheap and varied food on the one hand, and on the other with cheap raw material to the benefit of employment and wages. once more, we find it not easy to see how any kind of socialist state could make over- seas investments in this way, or conduct inter-connected bank- ing, or maintain the present complex and sensitive mechanism of credit—that most wonderful achievement of creative capi- talism—or provide and allocate the fresh capital required for enterprise and industry, for employment and wages. under the present system, that fresh capital is furnished by the private accumulations made possible by freedom of private action. 4, progress of labour-enhancing equipment.—turn to an- other aspect—progressiveness in equipment. modern capitalism results from the steam-driven or electric machine dependent on coal, oil or water-fall. the rapid increase in our own time of the part played by mechanism in comparison with hand-labour is not jess marvellous than were the beginnings of industrial in- vention. it is stated, for example, that in the most modern engineering shops 80°% of the work is done by the machines and only 20% by the attendants. one attendant may now keep in play several machines doing the former work of scores of men. the eagerness of private capital to perfect equipment has capitalism | given increasing stimulus to invention. in any socialist state political pressure arising from fear of unemployment would have prevented that state, were its democratic opinion genuinely free, from pushing technical progress to the utmost as capi- talism largely does. by the astonishing increase of miracles in metal, performing their intricate processes as though actuated by a mysterious intelligence of their own, the present produc- tiveness of manual effort is enormously raised by contrast even with the latter part of the 19th century. this means that supply is cheapened, demand widened, the conveniences of life made more numerous and accessible, while employment is steadily enlarged in civilisation as a whole, and human well-being is energetically advanced in all material respects. other characteristics of capitalism, especially in the united states, where it shows its highest powers of technical progres- sivencss and many of its best effects on the conditions of work, are the standardisation of models and parts, the speeding-up of processes, and the elimination of waste whether of material or time. these things are now made the subject of close and even subtle study. nothing human we know ever can be finally perfect; ideas always advance beyond achievement. but when we look at such large effects of capitalism as are unquestionably good, every dispassionate thinker must admit that the system is as prodigious in ingenuity as tremendous in power. the present writer holds it to be altogether improbable that production and exchange in the modern world could have been as progressively organised by any other means. 8. the human factor and the american example.— we pass here to another and deeper part of the examination. we have studied the working of modern capitalism as a means of ant- mating production and facilitating exchange, stimulating demand and adapting supply; and we have seen reason to think that any extensive attempt to replace it by public ownership and management would mean something far less plastic and fertile, incapable of the same degree of wealth-making power and distributed prosperity. but what is the effect of capitalism on the labour it employs—that is upon the large majority of human beings where the system prevails? how far does it serve the greatest good of the greatest number? again we must note —though ideals must always move ahead however far practical improvement marches—that since the time when socialism formulated its charges and framed its dogmas, there has been a surprising change for the better in the principal matters of wages, hours and provisions for personal health and physical security. a steady gencral movement has reduced working time, and raised money-earnings, still more real earnings as measured by purchasing-power. that any sysiem of public ownership and official control could enable a less amount of labour to enjoy an equal buying-power is an assertion out of the region of proof and any man is free to think it as far beyond credibility. this is, of course, a central point in the discussion. it cannot be said any longer that capital habitually and neces- sarily extracts from labour an undue effort for an unjust reward; that manual workers are demonstrably and usually paid less than that part of the value which they contribute to the selling- price of the common product; or that average labour could hope to earn more or as much per hour if the creative aid of free enterprise were abolished. ‘ exploitation,” in the sense of the old-fashioned socialist phrase, when the evil fact prevailed, is no longer a ruling accompaniment of the economic system in the leading capitalist nations. no doubt, the success of labour in securing the utmost proportion of the selling-price compatible with production at a profit differs much in different countries. on the european continent, as in germany, wages on the whole bear a lower ratio to profit than in great britain where various convergent influences—trade unionist pressure reinforced by political power on the one hand, and on the other, a unique degree of freedom from indirect taxation coupled with large contributions by the minority of direct taxpayers to popular benefits—enable the working-classes to exact as full a payment in proportion to output as can be given without threatening the disappearance of profit and the debility of enterprise. capitalism in america, however, where what we may cail the new or reformed capitalism is in operation on the largest scale, high wages are accepted and welcomed as a vital principle of creative capacity in a way that europe is only just beginning to compre- hend. but what is the inference? obviously that capitalism everywhere can follow where america leads—that capitalism as a system is by way of becoming a more willing and vigorous instrument for the greatest good of the greatest number than original socialism could imagine. in the united states over a hundred millions of people have reached common standards of comfort and enjoyment far above the best known in europe and immeasurably above any social achievement in the world’s history. as has been said this gigantic example in the united states of wealth-making with a large-minded distribution of the proceeds, is the result of equipping man-power with all the mightiest and nicest aids of machine power. models and parts of the things to be made are standardised to cheapen repetition and replacement; all unserviceable complications are cut out; the processes of production are speeded up while more and more waste is eliminated. far as that remarkable process has already gone, its further possibilities are seen to be very wide. profits are sought not by making high prices an object in themselves but by reducing prices in order to enlarge demand and quicken turnover. in american enterprise individual abilities find the freest scope, the promptest recognition and the amplest reward. the welfare of the workers is seen to by bringing into the fac- tory system more safety and health, more lightness and bright- ness. expert research into the possibility of improving mechanism, processes and use of materials is more widely and liberally en- couraged than anywhere else. the spectacle of hosts of ameri- can workmen with their own motor-cars is a thing that would have staggered karl marx, most of whose gencralisations drawn from the temporary conditions of mid-victorian england are confounded by 2oth century america in general and particularly by the methods of mr. henry ford. as an instance of the extent to which material progress may increase moral resources it may be noted that more money is spent in america on education than in all the other nations together. it need hardly be said that we must not conceive a too ideal picture even of the united states. not all the fields of american industry are elysian fields. american thinkers assert that in some coal-areas in america relations between capitalism and labour are harsher than in western europe; and that in other industries the example of the most progressive employers is far from being sufficiently followed. some european experts protest that superabundance of wealth and material are still causing more wastefulness in certain direc- tions than the scientific anti-waste movement is removing in other ways. but on the whole the american scene is magnificent in economic achievement and full of human promise. as against the culmination of the success of private enterprise in the united states, the only example of thorough socialist attempt on a large scale is russia as we see it. 9. the widening soctal basis of capitalism —above all, perhaps in significance for social advantage are the modern facts which refute the prediction that wealth would be con- centrated in fewer and fewer hands until capitalism more and more isolated was either terminated by helpless surrender or overthrown by the insurgent violence of the exploited masses. taking civilisation as a whole the relative numbers of those personally interested in the maintenance of private enterprise grow every day. under the company system we have seen continual and accelerating reinforcements of the ranks of small investors and owners of every kind. hosts of people who work for salaries and fees prefer the private system and decisively reject the other, many of them no doubt as much desiring the further reform of capitalism as opposed to its abolition. this movement has begun to act on labour proper in a manner that is one of the more suggestive revelations of our time. the united states is far ahead on this line also but it only leads the progressive ideas of capitalism elsewhere. it is estimated that tne number of small stockholders in the united states will be 20,000,000 in a few years more. large numbers of workers have 525 holdings in the concerns which employ them. in some cases, thousands of workers contribute their savings to nourish capi- talist enterprises and are members of the corporations they serve. in one large motor concern over 90° % of the employees are buying stock on the instalment plan. in another business the investments of the workers give controlling power. yet another company’s employees doubled in one year their holdings of its stock. it would seem difficult to overestimate the importance of several influences belonging to this novel development. with bigger wages for bigger output there is incentive to thrift; a spur to energy and aspiration; a discipline of character; an interest in the business as a whole and in the wider life which it serves; a stimulus of economic intelligence; an added sense of responsibility; and a gain to the spirit of existence. it must be remembered that the actual majority of the population in france are small capitalists whether as property owners or rentiers. in great britain, on the one hand individual investors in company shares are a big aggregate; while, on the other hand, many millions of the working-class population, probably a third of the whole, are interested in the public funds through the war certificates and savings banks deposits. lively in- terest is aroused by plans for profit-sharing and co-partnership. the familiar instalment system in the united states and building societies in great britain have induced some millions of per- sons in the last half-decade to become private owners by buying the houses they live in. in great britain as in germany the schemes for associating labour by consultative committees with the management of industry are more or less officially encour- aged, while in the united states the voluntary action of capital has made a beginning with the same method. this movement as yet is rather an experiment than a power; but later, in con- nection with stock-holding by labour and other methods of profit-sharing, the method of joint councils may well arrive at epoch-making results. 10. summary of the present position.—we may now state the salient features of a full view. capitalism generally in its worldwide undertakings has risen to this height and breadth of productive and distributive success. where capitalism is most powerful, as in the united states, labour is more prosperous than at any previous phase of history and asserts a better individual status. where wealth thus created is most abundant, either the provision for education is more liberal, as in the united states, or as in britain the evils belonging, amongst the workers, to sickness, accident, disablement, widowhood, orphanage and old age, are mitigated by state-aid maintained by increased taxation chiefly levied on the capitalist classes. while capitalism does in fact tend to concentrate into fewer and larger organisations the total number of investors has grown rapidly. the capitalist system is indeed built pyramidwise, but instead of coming to a last hopeless attempt to stand upon its apex, according to the marxist vision, it broadens its basis more than it raises its alt tude. the original socialist predictions have been falsified, with the usual irony of human anticipation. tt. capitalism and unemployment.—none the less we must take account of revised socialist criticism and inquire into its validity. charges to some extent contradictory have been partly answered in passing. capitalism is still accused of responsibility for avoidable unemployment, arising from the periodic alterna- tions of climaxes and depressions in trade activity, of ‘‘ booms ”’ and “ slumps,”’ to use the coarse but telling jargon. it is certain, however, that though there must always be some tidal move- ment of rise and fall, the former violence of these rhythms is now much abated in times of peace owing to longer experience and fuller knowledge; to swifter information in every part of the globe of what is happening in every other; to quicker transport, the better-calculated control exercised by the great trusts and syndicates as indirectly by the great banking combinations; and to the better adjustment altogether of the world-forces of sup- ply and demand. these improving tendencies, we must note, belong in their nature to a condition of peace. general war in the modern world is a catastrophe necessarily followed by an exceptional mass of unemployment in the countries where trade 526 and finance have been most severely dislocated by hostilities. extreme socialists blame capitalism for war as for every evil. they are deluded. racial passions, fears and claims are main causes of war far older than capitalism, which though in some of its forms sharing and even stimulating the bad or mad feelings existing without it, is on the whole amongst the more pacific influences, especially in its form of international finance. before the war chronic unemployment in a country like germany had been reduced to about 2% of a volume of labour continually expanding. this shows that the higher figure in great britain was not due to any defect necessarily inherent in capitalism. the united states at the same time was subject as it were to larger and looser forces which have since been restrained. unem- ployment is far from being only a question of economics. it is profoundly affected by biology in the shape of a lower or higher birth-rate and by policy in the shape of more or less restricted emigration or of tariffs. psychology plays its part, as in the changes of taste and fashion, which throw out particular bodies of workers from time to time. as nothing suggests that official management of industry could have created the extent of em- ployment now existing in the world, so there ts no reason to believe that the most complete state control could make the movements of rise and fall in trade milder than they have be- come. no human system, let us repeat, can hope to be perfect. before modern capitalism existed—for instance, in medieval times often absurdly regarded as a golden age—the chronic unemployed abounded as beggars and vagabonds; while every bad harvest diminished work in the towns; and recurrent famine meant disaster for urban labour as well as rural. 12. the questions of speeding-up, subdivision and monotony.— frequently capitalism still is accused of injuring the physique of the worker by the modern intensity of speeding-up in machine production; the mind and moral being of the worker by a re- morseless monotony. the first indictment generally seems untrue, and the second very exaggerated. as regards human health the statistics for many manufacturing centres are more favourable than they have ever been in history. for instance, the industrialisation of germany after 1871 was followed by an increase of longevity. the average duration of individual life was raised from about 37 years in the decade 1871-80 to about 47 years in 1900-10. though sanitation plays its part here, capitalism is evidently no obstacle to the progress of sanitation any more than to education or of any other good human purpose. the wealth it makes supports these things. but then it is repeated that machine-industry at least injures the mind and spirit of the worker by extreme subdivision of effort, involving an eternal repetition of work on small parts and thereby a soul- killing monotony. we come toa very interesting discussion where the worst conclusion of the argument would cut both ways. in fact this general injury to the cheerfulness of the workers is not to be observed. their demeanour at football or baseball matches and at the cinema or on any of their holiday occasions does not confirm the theory of their psychic depression. on the one hand, those workers who execute with their own hands and repeat endlessly only one small part of a process of manufacture are in sight of the manifold and stirring organisation of the whole. more and more, as in america, the miracles of the machine quicken their intelligence, especially as their education advances. again, millions of the more expert artisans work in teams, as it were, on mechanisms of colossal power and intricate cunning which are always dramatic. the linotype operator, yet again, repudiates the suggestion that he is a more soul-less being than the old compositor who set type by hand, while no chauffeur will admit that he is less intelligent than the old coachman. 13. * socialism no solution ”’—capitalism or “ erewhon.”?— in any case this particular argument against capitalism is a tool which turns its other edge against the user. so far as the modern subdivision of machine industry is disadvantageous, that is evidently the result of the whole modern movement of technical science and not of the capitalist application. under socialism a factory would be still a factory. public ownership would have to take over the buildings and plant, and pursue the same meth- capitalism ods of mechanical efficiency, with all such monotonies of minute repetition as are now denounced. without destroying the basis of industrial employment and of the manufacturing towns socialism could not do otherwise; and therefore by no possibility could it make such large changes for the better in the average conditions of human life as it is accustomed to assume. some anti-capitalist thinkers say, indeed, that the whole system of industrial civilisation is a mistake; that it has brought into being excessive masses of people who are only a higher kind of automatic machines; that man loses his true happiness and deepest faculties and strongest character when divorced from nature and the soil; that the country originates the abilities which the town devours; and that the true solution, as in that profound satire ‘‘ erewhon,” is to destroy the machines, pro- hibit their revival, and to return to agriculture and handicraft. this is a fascinating vision of ideal romance, and it sounds a moving chord to the ear of imagination; but as a practical argu- ment it offers no escape. it comes too late. the industrial revo- lution is there, far advanced, and irreversible except by some catastrophe which would engulf all white civilisation. labour on the soil means monotony and repetition of another kind with a harder life. variety and leisure are far from the traits of the french peasant’s existence. no average town-worker afflicted by the evils imputed to capitalism is willing to go back to the spade and the plough. on the contrary, agricultural labour is more attracted by the towns; while, further, the prosperity of farming and pasture depend on supplying the swarming popu- lations called into being by capitalist industry. these inter- relations of machine civilisation must be accepted. the real problem is to make the best of them. 14. reformed capitalism likely to prevatl—the russian example and the failure of socialism everywhere to reach any kind of constructive success have resulted in a ruling and strengthening conviction that the suppression of private enter- prise and its replacement by official control would be a leap in the dark with the presumption of coming to grief. the old- fashioned centralising socialism with its army of bureaucratic agents would mean a slow sterilising regime fatally influenced by political patronage, discouraging initiative and repressing inde- pendent personality. that this plan would be unendurable is felt by the younger socialists. their guild system, however, with self-rule for each industry, raises many more difficulties than it solves. hzow could the same work in the same factory become more pleasurable than now because the state or a guild owned it? human nature is not so constructed. how could the big guilds adjust their exchanges, their relative claims to impor- tance and reward, without formidable disputes? what would happen to the smaller miscellancous industries? to picture this theory as a key to natural harmony is a myth. who would entrust savings, did they continue practicable, to socialist banks, and who would invest by preference in a socialist country? private accumulation being impeded or prevented, how could democratic ownership and control keep in flow the supplies of fresh capital always needed for progressive industry and enlarg- ing employment? if any national total of such fresh capital were available at all, how could it be allocated to meet the com- peting claims of different publicly owned industries? if the present possessing classes were abolished, so that annual revenue could not be raised from them as now, and direct taxation conse- quently were applied to the multitude, how would the people like that change? would not hope be frustrated and subversive discontent aroused when it was found immediately that the part of the social dividend distributed to the average worker was disappointingly limited, low indeed, by comparison with the dream, and lower than the highest rates of wages now paid? the large majority of thoughtful men acquainted with the crea- tion and management of business are utterly persuaded that every imaginative alternative to capitalism yet proposed for advanced societies, would either be a practical recipe for chaos or for a cruder order amounting to a throwback in civilised or- ganisation. it is thus probable that for a long time to come social progress will seek its goal not in socialist proposals inspired capitalism by obsolete criticism of former conditions now so largely removed or remedied or shown to be remediable under the system of private enterprise; but rather in the development of the present tendencies of what we have called the new or reformed capitalism. 15. remaining defects and problems.—some of the strongest defenders of capitalism as the best system are yet amongst the frankest analysts of its remaining defects and abuses. these defects and abuses are in the way of correction by the conver- gent power of several growing forces—scientific thought, public criticism, the political power of democracy, the consequent pressure of legislation and the enlightened self-interest of capi- talism itself. more and more subject in society to the conscious sovercignty of the greatest number secking their greater good, intelligent capitalism sees that it must set itself in every way to serve the common interest. it must work so that its preserva- tion shall be recognised as a vital part of the common interest. one broad remaining defect is that very many employers every- where, especially of the older school, still fail to recognise that where capitalism stakes money, labour, taken as a whole, to a vastly larger extent, stakes life. labour on the initiative of wise capitalism must be taken more and more into partnership by profit-sharing schemes, by extending stockholding amongst employees, by joint councils not impeding the executive, but entitled to discuss general questions of policy or management and furnished with all details of costs and profits. evasion of publicity with regard to costs of production and real profits is the mother of suspicion. a more hardy frankness must come. in some countries, certainly in great britain, the chief com- plaint against excessive profits comes rather from the consumers. they complain of middlemen even more than of ‘ rings ”’; and political action in great britain distinctly tends toward restrain- ing prices thought unfair. the threat of interference is in itself some deterrent; and the consumers have no belief that labour control would mean cheaper supply. yet public opinion insists strongly that trusts and syndicates shall not exploit the con- sumer in the temper of the old monopolies. capitalist concen- tration may safely result in any extent of profit to the promoters so long as, by lower not higher prices, and by more assiduous services, it conduces to the plain advantage of the general com- munity. other evident and even glaring problems are inherited wealth, the “‘idle rich’; pretentious and wasteful ostentation or what is called “ prurient luxury ”’; efforts to acquire oligarchi- cal or even pro-consular power over the nominal forms of politi- cal democracy by the influences of money. all these things the rightly judging majority of capitalists condemn as wrong in principle and most dangerous to the system. the man who makes his own wealth is looked upon with approval or tolerance by public opinion, and the most dazzling fortune personally achieved is apt to be admired rather than censured. but it seems tolerably certain that democracy will restrict severely the possibilities of passive inheritance; and will prevent or limit the enjoyment of the advantages of wealth by those not contributing to its creation by personal usefulness. even on this question, which affords a facile means of appealing to popular indignation, we must discriminate. we must remember as a rule the “idle rich ” do not represent idle riches. their money is for the most part invested in productive enterprise, and their personal waste in its effect upon the community is by comparison an inconsiderable mischief. nevertheless wealth without work, however its actual evil may be magnified in popular imagination, is seriously obnoxious to democratic susceptibility. the case for active capitalism is fortified by every measure public and private tending to restrain the power of money in the hands of indolence. that excess of personal indulgence described as “ prurient luxury ” has been known in all ages under all systems, and occurs in the present day under capitalism, bolshevism, fascism, kemalism as an abuse not only of the corrupting possibilities of private wealth but of the equally corrupting possibilities of every kind of political and social influence wherever those who possess it seck to gratify a vicious habit. this immemorial disease has no moral relevance to modern capitalism as a system, and could not be cured by the 027 abolition of private wealth. it is a problem of personal morals which has recurred under every social system, and can only be grap- pled with by methods not inspired by economic considerations. lastiy, it must be recognised that a different kind of abuse is the broadest blot on the capitalist system. in cases no longer so common but still not infrequent, the providers of capital, taking no part whatever in the active management of business, are content to receive big dividends without extending any kind of profit-sharing or co-partnership to the salaried experts and workers for wages who in combination produce the dividends. the principle promising to spread in the future is that the interest on passive capital should be limited to some definite though not grudging figure; and that the bulk of the profit should be divided amongst those whose exertions and contrivance create it. 16. the future of capitalism.—while prophecy is vain, ‘““ probability is the guide of life.””, we must frame our estimate of what is probable, as well as of what is attainable and ought to be attained. as socialism inspires vivid dreams, capitalism for its moral vindication must have ideals as definite and more practicable. there is a rising supremacy of liberalising public influence. advanced social thinkers who are yet strongly opposed to socialism believe that private enterprise which they hold to be the best wealth-creating force is in gradual process of becom- ing also the best wealth-distributing system in a way that will raise the average of human prosperity to the highest attainable level. they anticipate therefore that the interest on money itself will be limited by maximum rates never so low as to dis- courage saving and investment; that the directing ability of active capital must remain entitled as now to large rewards in proportion to success in enterprise; but that as the education of democracy progresses labour will not only receive wages steadily increasing relatively to profits, but will everywhere share in the division of profits; while becoming more and more associated in consultative councils with the management of industry, and enjoying every possible opportunity to rise from the ranks. in this fashion, therefore, capitalism would realise in the end all that is really sound in the practical ideals of socialism while preserving that creative play of free ambition and adventure which is most surely stimulated by the chances and prizes of personal success expressed in terms of high income and acquired fortune whether large or small. to consider private profit in itself as sordid or immoral is superficial. artists as usually as capitalists dream of large gains and splendid habits. poets, dramatists and novelists, painters and architects, musicians, actors, still seek, or at least readily receive, as in fact they always have done, the largest personal gains that the demand for their achievements can bring. on the basis of more and more intimate partnership between capital and labour as here contemplated, methods of arbitration and conciliation would prevail and the lingering barbarism of strikes and lock-outs would disappear. the total yield of industry would be so largely enhanced by the fullest energy and harmony of common effort, that the earnings of the average might be far higher than now but the rewards of exceptional success not less ample nor even less dazzling. that freedom which maintains inequality does in fact lift the general level of existence, which forced equality would depress. never- theless, there is an ardent tendency throughout civilisation to insist that the privileges of society shall only be enjoyed by those who sufficiently participate in its activities and duties; that up to a reasonable age personal work must go with wealth. nor is this all. as capitalism for its own sake must be an in- strument for applying the results of science to the general advan- tage, its function in that respect is becoming ever more effectual and hopeful. from the dirt and crudity, the utilitarian ugliness and social miseries of the generations immediately following the beginning of the machine-age, we are moving towards a smoke- less civilisation commanding more sovereign and more subtle powers than we yet possess. the disappearing smoke is a physi- cal symbol of the disappearance of moral evils in human relations and conditions. the machine which in some industries already does four-fifths of the work must come to perform nine-tenths of it in most industries. it is bound to eliminate the coarser 528 kinds of heavy manual toil. we may reasonably expect that amongst the advanced industrial nations whom amcrica is lead- ing, every worker will become on the one hand a skilled man using fine touch with understanding, and on the other hand an associate of capital, taken into counsel on the general conduct of business, sharing profit and responsibility. evolution in this manner seems more likely to be the gencral way of the world instead of revolution whether by legislation or violence. while maintaining all the energy and nimbleness of free private enter- prise, enlightened capitalism, consciously working everywhere towards the ideals here described, can bring about so large an improvement upon the best social conditions at present existing that socialism, no longer able to promise a new heaven and a new earth by comparison, will cease to think it worth while to seek a change. not conflict between capital and labour but their real partnership in counsel and profits is the sure path of social vision between theories leading into the unknown or violence that either plunges into a morass or heads for a precipice. one of the deep problems is not economic. capitalism in the past has contributed too much to ugliness in the world. the capi- talism of the future must seek to enter into the service of art and beauty. bibliography.—the classic work on economic freedom is adam smith's wealth of nations (1776). much of his argument as to the value of private enterprise and initiative remains valid. alfred marshall’s principles of economics (8th ed., 1920) and industry and trade, 2nd ed. (1919), contain a masterly analysis of the principles underlying the existing economic system. in a brilliant essay on “the social possibilities of economic chivalry,’’ published in memorials of alfred marshall (1925), he contrasts the sterility and the deadening influence in the long run of governmental management of industry with the elasticity of private enterprise. an excellent account of economic tendencies and their practical operation 1s given in a recent work by an american economist, pro- fessor f. w. taussig—principles of economics (1921-2). besides these general treatises, other recent works which bear directly on the form of the economic system, and which are written from a scientific standpoint, include: edwin cannan, the economic outlook (1912); r. g. hawtrey, the economic problem (1926); d. h. robertson, 7ke control of industry (1923); j. h. jones, sectal economics (1920). m.h. dobb in capttalist enterprise and social progress (1925) makes an acute critical analysis of the place of the entreprencurs in the evolution of the present industrial system. the above-mentioned books are all academic in outlook and treat- ment. very few of those who are or have been engaged in industrial or commercial enterprises have utilised their experience and practical knowledge to write in defence of capitalism against the onslaughts of its socialistic critics. amongst such works the following are of special importance: my life and work (1922), by henry j. ford and s. crowther, gives a very valuable first-hand account of the methods by which one of the greatest and most successful modern businesses has been built up. both in confessions of a capitalist (1925), by sir e. j. benn, and in the case for capitalism, by hartley withers (1920), a vigorous de- fence of capitalism is put forward from a practical point of view. a. shadwell in the socialist movement, 2 vol. (1921), urges the superi- ority of private enterprise. a number of important books dealing with the history and theory of capitalism have appeared in german, of which the following may be mentioned here: fritz gerlich, geschichte und theorie des kapitul- ismus (leipzig, 1913); j. strieder, studien sur geschichte kapitalis- tischer organisationsformen (munich, 1914); werner sombart, der moderne kapitalismus, 2nd ed. (leipzig, 1919); this is a very com- prehensive work characterised by much originality of ideas and clear- ness of exposition, in which is set out the history of modern capital- ism down to the end of the 18th century, together with a brilliant analysis of the chief psychological and other factors governing its origin and progress. richard passow, kapitalismus (jena, 1918); karl biicher, die entstehung der volkswirtschaft (1918-9); georg von below, probleme der wirthschaftsgeschichte (1920); o. spann, der wahre staat (1921); l. pohle, kapiiatismus und sozialismus, 3rd ed. (leipzig, 1923), a good defence by the professor of economics at leipzig of capitalism on economic and general grounds, and a critical account of the theoretical but especially of the practical errors of socialism. august pieper, kapiialismus und sozialismus als seelisches problem (1924); j. walcher, ford oder marx (berlin, 1925), a com- parison of the consequences to the whole community, and above all to the working classes, that would result from the adoption on the one hand of the principles advocated and applied by henry ford, and on the other of the destructive and barren tenets of karl marx. among french and italian works consult: c. gide, princtpes d’economte politique (1910); d. bellet, la machine et la main- dwuvre humaine (1912) and crises economiques (1918); a. aftalion, capital levy crises periadiques des surproductions (1913); yves-guvot, l’industrie et les industriefs (1914); n. colajanni, £2 progresso economica (1913); g. arias, princtpii di economia commerciale (1917). ce ge capital levy.— during the first year of the world war it was thought in great britain that a loan policy should take the first burden of its cost, but as soon as it became obvious that the war would be a long one, it was equally clear that the amount of the war debt would reach figures quite unprecedented in financial history. there was the apparent impossibility of meeting the cost from current resources, either by taxation or by loan, and also a strong desire to avoid the evils of currency inflation. great britain had so long been regarded as a very wealthy country that it seemed that its accumulated wealth might well be laid under toll. early suggestions for a levy.—the first suggestions for a levy in great britain seem to have been made by mr. w. watson rutherford (nov. 19 1914) in the house of commons. he proposed a 5% tax on capital, which would produce {£500,c00,000 and be taken in kind in the case of shares or real estate. he thought that the majority of persons would gladly pay if they understood that the levy was to take the place of a high income tax. it was put forward therefore as a sound business proposi- tion. sir thomas p. whittaker, m.p.,in may 1915 proposed a 24% levy to raise £250,000,000, which was described as an attractive proposal, but very difficult to carry out. professor a. c. pigou, one of the earliest academic supporters of the scheme, incor- porated a detailed proposal for the special taxation of earned in- come to balance the special levy on objective wealth and thus make the whole scheme logical. development of the plan.—the theory of “ commutation,” or the “‘ business deal,”’ did not, however, long hold the ficld. a considerable degree of inflation was taking place, and many were preoccupied with the inevitable fall in prices expected after the war. it was obvious that the repayment of £1,000,000,000 of debt at such a time involved far less real production and effort than the repayment of a similar amount when the price level should be lower in years to come. moreover, what was a toler- able burden of interest at a high level of prices would become intolerable at some future period at a much lower level. it was sald that “‘ where we had borrowed one pair of boots we should really be repaying two,” for, the debt being in sterling, sterling would in future have a much greater purchasing power with a lower price level. the proportion of the debt charge to the na- tional income at that time was probably not more than one- eleventh or one-twelfth, whereas if the price level went back to its pre-war position that same sterling debt charge might repre- sent one-sixth or one-seventh of the same real national income. everything else in the national income might go down with the price level, but the debt charge could not. it was urged, there- fore, that the opportunity to make a very substantial reduction in the indebtedness by a special levy on individual fortunes should not be missed. during the last two years of the war the case for the levy became reinforced by two powerful semi-ethical considerations. in the first place enormous fortunes were being made, despite heavy taxation by income tax, super-tax and excess profits duty, at a time when large numbers of people were impoverished through the war, and it was considered to be wholly unjust that people who were able to avoid the fighting line should in addition secure a much greater personal wealth than they had at the beginning of the war. moreover, conscription brought into prominence the so-called contrast between “ life ” and “‘ wealth,” and it was said that con- scription of life on the part of the able-bodied should be matched by conscription of wealth on the part of the rich. simultaneously, the argument arose that the war was one brought about by the old and fought by the young, that the old would chiefly benefit, and that it was unfair for the young to bear first the burden of fighting, and then, for the rest of their lives, by a toll on their effort and production, the burden of interest payments to those who had never borne their physical share of the conilict. these and other arguments led to considerable discussion. capital levy approval of the principle of the levy was at first not confined to any particular political party. mr. bonar law at one time showed a definite leaning towards the proposal, and a small group of economists were in favour of it on broad grounds. the chief battle-ground of controversy was the question of the practicabil- ity of carrying through so gigantic a financial operation without dislocating the delicate financial mechanism of the country, bringing about a wholesale slump in stock exchange prices, rob- bing industry of credit, and generally undermining the whole foundation of stable values upon which the idea of the levy rested. proposed levy on war wealth—after the war the discussion took a specific direction, viz., it proposed to confine the levy to ““war fortunes.” it was realised that a capital levy would tax two fortunes of £20,000 identically, although one might have been reduced from £50,000 owing to the war, while the other might have been built up from practically nothing. the capital levy, therefore, was seen to work considerable injustice, judged from purely ethical standpoints. the proposal for the moment thus became limited to the levying of a tax upon fortunes, which by a common public sentiment were regarded as specially fit for such a burden. it was soon, however, agreed to be administratively impracticable to examine every individual circumstance and to decide in which particular cases the increase was actually due to the war, so that a new proposition was put forward that anybody who had had an increment in his fortune between 1914 and 1919 would probably be a suitable subject for such a tax. report of a select commitiee.—early in 1920 post-war inflation and the great amount of the floating debt, with its continual renewal in cost and competition, created a difficult and dangerous situation. it was thought that a special levy would raise from £500,000,0c00 to £750,000,000 and, by reducing the floating in- debtedness, would conduce to stability. a select committee of the house of commons considered the question early in 1920. its report was not conclusive, but, in any case by may 1020, the financial situation had definitely turned, prices declined, and it was thought to be positively dangerous to adopt such a highly difficult expedient at such an unpropitious time. resumption of the capital levy propusal—under those con- ditions the financial objections to a general capital levy became stronger and more pronounced on many sides. apart from a few supporters in academic circles, the programme became almost entirely identified with the labour party, and the grounds upon which it was put forward were also gradually shifted. it was no longer specially urged as a composition by the taxpayer for his own future liabilities. the main dynamic argument with the labour party was the fact that the heavy interest charges in- cluded in the budget necessitated such high rates of direct taxa- tion and such pressure for reductions in taxation that it became impossible to budget for any substantial new programmes for social reform, and to incur greater expenditure on housing, education, pensions, etc.; it was clear that the burden might de- lay expansion indefinitely. it was thus desired to relieve the budget of a large part of its annual interest on the expenditure side, in order to allow room for expenditure on other objects. on coming into power the labour party appointed a special committee to consider questions relating to national debt and taxation (the colwyn committee). eminent academic witnesses who had previously supported the scheme assumed that the opportune moment had passed, and others, because it appeared that the net yield would be inadequate, having regard to the disturbance and risk entailed relinquished the idea. summary.—the chief financial and economic contentions on the two sides for and against a levy may now be set out. the ethical considerations that once loomed so large became later less prominent. the chief objections may be classified as follows:— 1. repetition.—a successful levy, although definitely aimed at relieving war debt, can give no guarantee against repetition for other purposes in the future, and possibly even in the near future. no ordinary assurance against this possibility is of any use because no government can bind its successor. indeed the more successful the levy, the greater may be the incentive to repeat it. the consequence of this would be that under a fear of repetition the accumulation of capital would be restricted and slow, and, in consequence, all indus- trial progress must be retarded. 529 against this view it has been contended that repetition is not a thing to be feared, because no one would think of imposing a special charge of this character except in a great emergency. in the event of a great emergency it would be a positive advantage to have the national accounts cleared of such indebtedness, and to be able to enter upon a war without a colossal debt. all war loans have condi- tions attached to them which are honourably observed by govern- ments, and there is no reason to suppose that a similar assurance cannot be given to the taxpayer so that any economic effects through fear of repctition could be avoided. 2. effects on prices—the sccond main contention is that the financial operation would be so huge, that the attempts to carry it out on practical simultaneous lines must destroy its own basis by depressing prices. if the treasury were satisfied to take only cash this would involve putting large blocks of shares on the market, for which there would be no ready sale, panic prices would ensue, and confidence would be destroyed. if, in order to avoid forced sales, the government were to take stocks and shares in payment, they would find themselves with large miscellaneous holdings in industry which they could not realise without disastrous consequences. the mere passive holding of securities is no relief to the budget. it has been rejoined that the notion that a large quantity of se- curities must be put on the market and result in depressing it, is quite mistaken. it is merely a matter of synchronising the supply of securities with the demand, for whenever debt is redeemed an in- vestor will be ready in the market to buy securities that are on sale, either by taxpayers or the government. it is true that the banks and finance houses could talk the market into a state of panic, but if they were determined to support the scheme with their good-will, depression of prices would be quite unnecessary. 3. damage to individual bustnesses—the third contention is that the ordinary business in private hands could not pay a large levy without encompassing its own destruction. it could not divide its business, and would be forced to raise mortgages or debentures which, in view of the uncertain financial future, could only be obtained on onerous terms. a counter contention to this takes the following form: if a busi- ness were really valued at a figure necessitating a payment to the (government, it would also have sufficient credit to ratse a mortgage and the charge or levy would be evidence of the fact. the money for this would be forthcoming in the market because of the funds set free by the redemption of debt. the utmost difficulty that could arise would be some slight redirection of capital. in all cases of hardship, or where a business was likely to be inconvenienced, the government would grant payment by instalments. against this it has been replied that a levy honeycombed with instalments and special cases would be very similar to a special income tax, but levied on an insecure and unfair basis. such a system, it 1s urged, would take 10 or 20 years to bring to a definite conclusion. 4. valuations impracticable—the next contention is that so much of the wealth of the country is held in contingent titles, such as life interests and reversions, and that the valuation of these would make an insoluble problem. however actually correct the valuation may be at the time, the results would be belied by subsequent events, and wherever duty was being paid by instalments there would be overwhelming demands for adjustments. these would be sufficiently important to reduce the levy to chaos. 5. repayment of part of the debt makes the repayment of the re- mainder more difficult.—the fifth argument relates to the deflation- ary effect of the levy itself. it is stated in some financial circles that the sudden cancellation of £3,000,000,000 of debt according to the programme of the labour party, would remove from businesses a very large amount of collateral security. this would cause credit to be withdrawn and restricted. in other cases credit would be with- held, and prices would fluctuate with disastrous effects on business enterprise and employment. against this it is contended that the argument is a gross exaggera- tion. only a small proportion of the war loan is used as the actual basis of credit operations, and many people who so use it have other securities which can be used instead. again, credit is much more largely personal, and does not depend upon collateral of this kind. moreover, others contend that deflation can only be brought about by operations through the bank of england, and the inability of an individual borrower to be granted a loan means that, in practice, a loan is given to someone clse because the banks have this credit available. the total amount of effective credit, it is said, cannot be affected by the demands of the particular borrowers. 6. future saving impaired.—the sixth contention relates to the effects of redistribution of wealth upon future saving. the idea that the wealth-accumulating classes would have not only to give up a part of their existing fortune, but also to suffer rates of tax in future as high, or higher, would, it is said, strike at the root of all thrift and lead to national wastefulness, because the other classes of the community would not themselves save an equivalent sum. against this it is stated, however, that the outlook is too serious for any ordinary arguments about the redistribution of wealth to avail. money must be taken where it is to be found. whatever the immediate disadvantageous effects of the levy, the dynamic effects in future are by far the more important. greater good to the commu- nity would come about by relieving the worker and the middle classes 039 of some of the burden of taxation or by expending state funds on proper social purposes. this would lead to greater productivity, to lower rates of taxation and to greater general average prosperity. 7. the price level argument.—in the next placc, the price level contention is disputed. the idea that it will be an advantage to repay debt before the price level falls, must be qualified by the fact that the operation of the levy itself would bring about lower prices and thus make the remaining £4,000,000,000 sterling of the debt charge a much more onerous charge than would otherwise be. in view, however, of the denial that the price level will be necessarily lower in the long run, this contention is not accepted. but in so far as it might prove to be true, it is said that it would be so much to the advantage of the workers to have higher real value in their earnings that the whole country would gain. it is said that there are more factors making for a rise in prices than for a fall in the long run, and therefore future repayment may be easier than present repayment. 8. the net annual relief.—in the last place the opponents of the levy say that the whole basis of the programme is fallacious, because it has been assumed that the effect would be to set free the whole of the interest on £3,000,000,000 of debt, say {150,000,000 a year, and allow of expenditure programme to this amount, or of a reduction of taxation pro tanto. it is stated that this view ignores the progressive features in the existing income tax, supertax and death duty schemes. taking large sums away from individual fortunes would reduce their taxpaying power in future, and the revenue side of the budget would also be scriously affected, so that all that could be reckoned upon would be a certain zef saving. one authority has estimated that, in the long run, out of a saving of expenditure of £140,000,000, something be- tween {90,000,000 and {98,000,000 per annum would have to be set aside to make good the effects of the levy on future revenue, so that the net advantage to the budget would have to be reduced to some {42,000,000 or {50,000,000 a year. no effective counter statistics have been so far put forward to alter this result. the rate of levy—the proposals of the labour party were that persons with less than £5,000 should pay nothing, but that those owning more than that sum should pay on the following scale: % f %, 6,000 . ‘ : 4 45 50,000 . » 35 8,000 . ‘ . « lo 100,000. : ; 5 ao 10,000... ets*ctss 200,000\" 4 “5 -% +45 15,000° ££ «@ « «20 §00,000 . wwtiacsd 20,0004 #. % ~<#. «a 25 1,000,000. . «o55 30,000. . . 30 above 1,000,000 ‘ . 60 some authorities doubt whether the capital wealth of the country is sufficient for the operation of this scale to produce the £3,000,000,000 assumed. the levy in other countries —there have been no first-class experiments abroad illustrating all the features of the levy as proposed for the united kingdom. in 1920 in czechoslovakia a levy was introduced which was to bring in {63,000,000 or about £5 per head of the population, with a low limit of exemption, 1.¢., 10,000 crowns free, 1% on the first 25,c00 crowns, and then ona progressive scale up to 30% on amounts over 10,000,000 crowns. the actual yield was £17,000,000 in the first two years, and the instalment system which was allowed gave it, as a matter of fact, the character of a heavy income tax. the results have been regarded as disappointing, and the consequent arrears in income tax are heavy. in switzerland in 1922 the socialist party proposed a levy with the idea of devoting the proceeds mainly to social purposes. on a referendum the proposal was rejected in every canton, but while it was under discussion the effects upon financial conditions were very obvious. brpiiograriy.—f. w. pethick lawrence, a levy on capital (1918); prof. a. c. pigou, a capital levy and a levy on war wealth (1920); sir josiah stamp, wealth and taxable capacity (1922); hugh dalton, the capital levy explained (1923); sir. j. stamp, current problems in finance and government (1924); evidence before com- mittee on taxation and the national debt (stationery office, london, 1926). cj. 53.) capitulations (see 5.283)—for the most part the old capitulatory system was swept away by the world war no- where more notably than in turkey, where for centuries it had been the cause of endless disputes among the european powers themselves as well as between those powers severally and the porte. the post-war position of capitulations may be briefly stated. capitulations are still in force in abyssinia, china, capitulations—caporetto, battle of egypt, morocco and persia; they may be said to exist in bul- garia, as art. 175 of the treaty of neuilly provides that the immunities and privileges of foreigners as well as the rights of jurisdiction and of consular protection enjoyed by the allies and associated powers in bulgaria by virtue of the capitulations, usages and treaties, may form the subject of special conventions between each of the allied and associated powers and bulgaria; great britian possesses extra-territorial jurisdiction in bahrein, hejaz, kuwait and muscat. the capitulations still in force may be thus summarised according to countries. abyssinia.—austria, belgium, france, germany, great britain, hungary, italy and the united states have consular jurisdiction. china.—extra-territorial jurisdiction is enjoyed by belgium, brazil, chile, denmark, france, great britain, italy, japan, mexico, the netherlands, norway, peru, portugal, spain, sweden, switzerland and the united states. fgvpt.—capitulatory rights are possessed by belgium, denmark, france, great britain, greece, italy, the netherlands, norway, por- tugal, russia, spain, sweden and the united states. rumania has limited capitulatory rights, and persia has a consular court. morocco.—great britain and the united states retain capitula- tory rights in the french zone; italy and the united states in the tangier zone. inthe spanish zone great britain, japan, the nether- lands, switzerland and the united states retain these rights. persia.—extra-territorial rights are possessed by argentine, belgium, brazil, chile, denmark, france, germany, great britain, italy, mexico, the netherlands, norway, spain, sweden, switzerland, the united states and uruguay. since 1911 capitulatory rights have been abandoned in very many countries, notably as the result of the political and ter- ritorial changes effected by the war. in one instance alone— tripolitania—were such rights relinquished prior to the war. the following summary reveals the extent to which capitulations have been abandoned since 1911 :-—— albania.—by great britain, feb. 6 1926. china.—ry austria, germany and the soviet union. extra- territorial rights have also been lost by the subjects or citizens of the succession states (poland, czechoslovakia, etc.), formed as a con- sequence of the dissolution of the austro-hungarian and russian empires. crete.—by great britain, aug. 25 1914. egypt.—by austria, germany and hungary. greece —by great britain aug. 2 1914 in territories acquired by greece after the balkan wars of 1912-3. morocco.—\\n the french zone by belgium, bolivia, costa rica, denmark, greece, italy, japan, the netherlands, norway, portugal, russia, spain, sweden and switzerland. in the spanish zone by belgium, denmark, france, greece, italy, norway, portugal, russia and sweden. austria, by articles 96-98 of the treaty of saint-germain, sept. 10 1919; germany, by articles 141-143 of the treaty of versailles, june 28 1919; and hungary, by articles 80-82 of the treaty of trianon, june 4 1920, have renounced their capitu- latory rights. persia.—by austria, the soviet union and turkey. by the termination in may 1924 of the greco-persian commercial treaty of oct. 28 1861 greek rights in persia lapsed. siam.—the protocol relating to jurisdiction, annexed to the general treaty with siam of july 14 1925, has abolished the system of jurisdiction heretofore established in siam for british subjects, who now become amenable to the siamese courts. in the interests of, justice, however, cases may be evoked from the siamese courts and be dealt with by a british diplomatic or consular ofhcer in accordance with english law (see siam). tripolitania.—by great britain in oct. 1911. turkey.—by those signatories to the treaty of lausanne, july 24 1923, who possessed capitulatory rights in turkey at the out- break of the european war; and by germany, persia and the soviet union. the united states have agreed to abrogation in the (as yet unratified) treaty signed at lausanne, aug. 6 1923. bibliograpily.—for the texts of the treaties mentioned, excepting that with siam, see h. w. v. temperley, the history of the peace conference at paris, vol. 6. (i. f. d. m.) capok: sce cellulose; fibres. caporetto, battle of.—the italian offensive of aug.— sept. 1917 had reduced boroevi¢’s armies to the limit of re- sistance, so much so that, as ludendorff records, “ the responsi- ble military and political authorities of the dual monarchy were convinced that they would not be able to stand a continua- tion of the battle and a 12th attack on the isonzo. . . . in the 1the chinese govt. do not recognise chile’s right to extra- territorial privileges; the question is still (1926) in dispute. caporetto, battle of 12°30\" battle of caporetto english miles 5 10 kilometres ts af by tla a sy alo aslee oe ae ne aa ee ~ ad a et ‘ at ~ » ry. ie es : 5) > lo ! es fart 3 on bans ear | py am. fas a lf 7 spp, an veep borca® ne a pca alz gen \\ ar oie be tb 3 3 =p vetr ny ainifie2zo,, “nee oy) ey, ais : i ee a tonia cal aa valoegoll sy z *: oe jat ~ fe any ox il da \\ z pa ne ainsidza prag wt iatente%e~ h middle of sept. it became necessary to decide for the attack on italy in order to prevent the collapse of austria-itungary.” there was a clear difference of opinion on the italian side as to the best way of meeting the forthcoming attack. cadorna felt he must stand on the defensive. capello, who commanded the ii. army, was anxious to anticipate the enemy’s move by an attack northeast from his positions on the bainsizza plateau. his army was in the main aligned for attack, for a continuation of the offensive which had been broken off in sept. and he judged it impossible, given the difficulty of communications and the risk of imminent attack, to take up the positions best adapted for defence. in this idea he had the support of more than one of his corps commanders, but cadorna did not think that he could throw in the forces necessary for such an attack when he was uncertain as to the direction of the forthcoming blow. i. the austro-german attack disposition of italian forces-—cadorna had received satis- factory reports concerning the morale of his troops. he had enough men, though a number of his units were below strength; and he had enough guns, in spite of the withdrawal of the allied bat- teries, though he would have been glad of more heavy artillery. between monte rombone and monte san gabriele, capello had some 2,200 guns and nearly 800 trench mortars. north of tol- mino the line on the left bank of the isonzo was held by cava- ciocchi’s iv. corps, whose left wing held the plezzo basin and was in contact with the carnia force on monte rombone. next came badoglio’s nxvii. corps, whose left wing, the roth div., raised to the strength of an army corps, held the lines opposite tolmino. the other three divisions which completed the xx vii. corps were across the river south of the lom plateau. behind cavaciocchi’s right and the roth div., on the mountains west of the isonzo, lay the vii. corps, newly reconstituted with units from other corps, and commanded by general buongiovannt. on the right of the xxvili., holding the line as far as monte santo, were caviglia’s xxiv. corps and albricci’s ii. corps. the weak point of the italian line was the tolmino sector; the weakest part of this sector was at the junction of the xxvii. corps (roth div.) with the lv. (46th div.), and the weakest position of all was that held by the right of the 46th div., which was clinging to the slopes of sleme and mrzlivrh completely dominated by the enemy, and badly off for communications with its neighbours. the volmino sector was chosen for the main enemy attack, and here, owing to a complex of circumstances, the austro-german forces won a success that led to a great italian disaster.” the italian preparations were much handicapped by the illness of capello. the attack launched.—the main attack came in the direction anticipated, between monte rombone and south of tolmino, and was conducted by a mixed german and austrian army under general otto von below. the army, which was known as the xiv. army, consisted of nine austrian divisions and seven ger- man, in four groups. the northern group of four divisions (three austrian and one german jiiger) was commanded by krauss, who had been called back from the bukovina. next came a group of three divisions (one austrian and two german) under the german von stein, and a group of two german divisions un- der the german von berrer. south of these two central groups was a mixed group (one austrian and two german) under the austrian von scotti. east of tolmino lay four divisions in re- serve. boroevic had 20 divisions in his two isonzo armies between auzza and the sea. below and henriquez (2nd isonzo army) had some 2,500 guns and 500 trench mortars. the bombardment began at 2 o’clock on the morning of oct. 24 in wild autumn ,weather. there was a drizzle of snow on the high ridges, rain below, and mist everywhere. towards dawn the fire died down, and it was thought on some parts of the defending front that the bad weather hacl counselled a delay in the attack. but the attackers were to make skilful use of the weather conditions, and only on monte rombone, on krauss’s extreme right, an attack in conjunction with the icft wing of krobatin’s x. army had to be given up owing to the snow. 332 krauss’s main attack was a straight drive through the italian lines in the plezzo basin, his first objective the saga defile. but he meant to reach without delay the ridge of the stol (6,467 ft.), which stood athwart a further direct advance. for this attack he detailed the 22nd schiitzen div., followed by a kaiserjiger and a kaiserschiitzen battalion, which were to go straight for the stol, and by six battalions of the 3rd (edelweiss) div., which were to make for the val fella by way of the wal d’uccena. krauss’s left wing, the 55th (bosnian) div., attacked the vreic- vrata ridge, with the object of breaking through to the isonzo and caporetto. krauss’s drive, after hard fighting, broke through the three front lines held by the italian soth div., but the attacking troops were checked at the saga defile. when evening fell, this position was still in the hands of the italians, but the battle had gone badly for the defenders farther south, and a retreat 1o the stol became necessary. krauss’s bosnians had met with no success against the left wing of the italian 43rd div., but stein’s group had carried all before it. stein opened his attack with his right wing, the austrian soth div., at 7:30 a.m., attacking the italian 46th div. between monte nero and vodil. a little later the bavarian alpenkorps, advancing from tolmino, attacked the ridges east of the passo di zogradan, while berrer and scotti attacked farther south, success of the silestans.—when both stein’s initial attacks were under way, the 12th silesian div., under gen. von lequis, was sent in between them. lequis attacked in two columns, one on each side of the river, making for caporetto, where it was hoped he would join with krauss’s bosnians. both columns were com- pletely successful. the right-hand column, aided by the strong attacks of the austrian soth div., pierced the extreme right of the italian 46th div., and pushed northwest with all speed. across the river, where the alpenkorps was making good head- way on’ the slopes above the road, lequis’s left-hand column quickly reached the italian second line, where the valley narrows below the hamlet of foni. this line had been held until the eve of the battle by a brigade of the iv. corps, but at the last mo- ment the sector was transferred to the nn vii. corps, and the napoli brigade was given to badoglio to hold this important point. only one battalion, however, was placed near the river. the rest of this regiment (the 76th) lay at the zogradan [pass high on the ridge to the southwest, and the other regiment of the brigade (the 75th), together with the brigade command, was nearly 3 m. away, on the western slopes below zogradan. the single battalion, of which only a platoon was on the road, seems to have been taken completely by surprise. it was*run over by the silesians, who proceeded on their way up the valley practically unmolested. meanwhile, the alpenkorps, berrer’s two divisions and scotti’s right wing were breaking up badoglio’s left, while the latter’s right, across the river, and caviglia’s corps were being strongly attacked by scotti’s left and henriquez’s right. the attack from tolmino had been carried out with skill, speed and resolution, and by a capital error which has never been satisfac- torily explained the italian guns remained silent until too late. definite orders had been given both by cadorna and by capello that immediately upon the opening of the enemy’s bombardment the italian artillery should open fire on the enemy’s trenches and zones of concentration and that they should lay down a heavy barrage as soon as there were signs of movement. these orders were not carried out and, owing to great destruction of telephone wires, when the guns finally began, their fire was fitful and uncertain. and they were too late: the enemy’s attack had al- ready developed. taken by surprise, puzzled by the comparative silence of their own guns and blinded by mist, the troops of the roth div. opposed only a weak resistance to the austro-german attack. henriquez’s attack on the bainsizza plateau, although it met with some initial success, was readily repulsed. badoglio had hoped to hold the enemy attack from tolmino and turn the scale by a counter-attack on the lom plateau with his three divisions on the left bank of the isonzo. but he was not afforded the caporetto, battle of chance of attempting any such manoeuvre. it was long before he received any news of how the day was going on the front of the 19th div., and from the beginning of the action he was unable to communicate with his divisions across the river. in a message sent to army headquarters at 4 p.m. he reported the enemy success south of jeza, but said that he had no news from the com- mands of the rgth div. and the 1y. corps, and that he was unable to communicate with anyone. by 4 p.m. lequis’s silesians were approaching caporetto. the left-hand column was unmolested on its march. the right-hand column, which had cut in behind the italian 43rd div., was making the task of the austrian 50th comparatively casy and brushing aside the spasmodic opposition of such small detach- ments as came in its way. cavaciocchi had filled his front lines too full, and sent practically all his reserves across the river, in immediate support of the 43rd and 46th divisions. iy. the italian retreat by evening the situation was very favourable to the attacking forces. stein was pouring troops through the breach made by the silesians and was making good headway with the austrian seth div. on their right, while the alpenkorps, berrer and scotti, had in several places gained the high ridges dominating the head of the judrio valley. krauss was still held up at saga and polounik and his bosnians had gained no more ground. but the break- through between tolmino and caporetto had made the italian positions untenable. at cividale, where capello had his headquarters, and at the comando supremo in uline, the first news that came from the iv. corps and the absence of news from the xxnvii. made a grave impression. capello sent up the army reserves by the valley roads and dispatched montuori to direct the “‘ left wing ”’ (the lv. and vii. corps). by evening it was clear that the enemy had won a big success, though it was not yet clear to what an extent the whole italian left was crumbling. there seemed good reason to hope that the advance might be blocked in the narrow valleys west of the isonzo. but by nightfall both the iv. corps and the roth div. were practically broken in pieces. the vii. corps was beginning to be attacked at luico, and its right was uncovered by the destruction of most of the roth division. the right wing of the roth was still holding on globocak and down to the river, and troops were being brought back from the left bank to strengthen this line. but it was obvious that the positions on the bainsizza could not be obtained, and orders were given to caviglia, who had taken over badoglio’s troops beyond the river, to prepare for a retreat across the isonzo. at the moment the most dangerous point appeared to be the extreme left wing, where it was clear that krauss would try and push through the val «d’uccea, the shortest way to the taglia- mento. two alpine groups had been dispatched to this sector the day before, and cadorna gave orders that the val d'uccea must be blocked at all costs. he sent out orders for resistance on three successive lines, all radiating from monte maggiore, which was the key position, but at the same time, as a precaution, he directed that plans and orders should be drawn up for a general retreat to the tagliamenta. the news on the morning of oct. 25 was increasingly grave. krauss was pressing upon the stol, and finding a weak resistance; no stand was being made at creda; monte matajur had fallen, practically undefended. other positions were seriously threat- ened, and there was no confidence that they would be held, for it was now known in cividale and udine that the behaviour of some of the troops in the line had been very unsatisfactory, and that this unexpected lack of spirit was communicating itself to some of the reserves. these had a difficult task in getting to the scene of action, for as they marched up the narrow mountain © roads they were met by ever-increasing masses of fugitives, the bulk of whom belonged to the non-combatant services. this un- fortunate state of affairs undoubtedly hastened the break-up of capello’s whole left wing. preparations for retreat.-—on the afternoon of oct. 25 capello, who could fight no more against his illness, and had been told by caporetto, battle of the chief medical officer of the army that he must resign his command, proposed an immediate retreat to the tagliamento, arguing that it was useless to send more reserves into the chaos among the hills west of the isonzo. cadorna felt that unless he could delay the enemy advance down the natisone and judrio valleys he ran the risk of having his centre and right cut off. montuori, who now succeeded capello in command of the i. army, thought that he could hold on a line from monte mag- giore to monte carnizza and thence across the valleys to monte korada. cadorna decided to attempt a further stand while warning tassoni (carnia force), di robilant (iv. army) and the duke of aosta to hold themselves in readiness for retreat, but at midnight on oct. 26 he was wakened to hear that monte maggiore had fallen. he at once drew up the orders for a general retreat beyond the tagliamento and his plans were already matured for the longer retreat across the piave which he foresaw would be necessary in order to get to a shorter line. the retreat began on oct. 27, and two days later provisional orders and plans were issued for the further retirement to the piave. fortunately for italy, and for the cause of the entente, the germans and austrians were outrunning their transport. krauss complained that only he and krafft von delmensingen, below’s chief-of-staff, had been inspired by adequate ambitions for the attack. the objective had been cividale, or at best the taglia- mento. krafit thought they should have had the adige in view. krauss expressed the opinion that the real objective should have been lyons. it must be remembcred, however, that the trans- port difficulties were very great. germany could not spare troops or material for an unlimited effort here and the unex- pectedly weak resistance of the italian it. army could hardly have entered into the calculations of those who were bound not to take too many risks. krauss admits that if cavaciocchi had held the stol in force his own move would have been frustrated. the critical days for the italians were oct. 30 and 31, when the pressure from north and east threatened the flank and rear of the iii. army, whose task had been made more difficult by the pre- mature blowing up, owing to a false alarm, of the permanent bridges at casarsa and by the fact that the tagliamento had come down in sudden and violent flood. but by the evening of nov. 1 the last of the duke of aosta’s troops had been success- fully withdrawn across the river. . cadorna’s weakest point was the stretch of the river west of tarcento, for which krauss and stein were making with all speed. two divisions under di giorgio had been dispatched to hold this line, but their march athwart the line of the retreat had been very difficult. stein’s troops were repulsed with heavy loss, but on the evening of nov. 2 krauss’s bosnians succeeded! in cross- ing at cornino and the following morning di giorgio was strongly attacked at pinzana. two days later his left was pushed back still farther, endangering the line of retreat for the carnia force and once more threatening the whole italian line with envelop- ment from the north. on the morning of nov. 4 cadorna ordered the retreat to the piave and that night the troops holding the line of the taglia- mento resumed their march westward. the iv. army in cadore was now in a difficult position but di giorgio and the other cover- ing troops of the worn-out ii. army slowed down the enemy’s acvance and gave time for most of di robilant’s troops to get away from cadore and come into line between the i. and iii. armies. but the greater part of tassoni’s carnia force was caught between krauss’s troops and krobatin’s x. army. il. the recovery on the piave new iialian positions —by nov. 8 the bulk of the iv. army was in line. on nov. 9 and 10 the last covering troops of the li. and iii. armies crossed the piave from pederobba to the sea. the line chosen to defend the fortunes of italy implied a with- drawal of the right wing of the i. army. pecori-giraldt retired from asiago and gallio and based his right on the fortified lines of the meletta group, giving up the xviii. corps to di robilant, who held the line from the brenta to the piave and the short stretch of the river as far as the montello. 533 reserves were coming in fast from the depots, including the young class of 1899. french and british divisions were already in italy and others were on the way. but diaz, who took over the command from cadorna on nov. 9, had to face a situation that seemed almost desperate. the italian armies had lost some 320,000 men in killed, wounded and missing, the number of prisoners being estimated at 265,000. the bulk of the ii. army had to be counted out altogether and the total number of troops to be reorganised and refitted was over 300,000. more than 3,000 guns had been lost and over 1,700 trench mortars. it seemed very doubtful whether these greatly weakened forces could resist the renewed attacks of the victorious armies which had followed so closely on their heels. fortunately, the plans for defence had been well and truly laid by cadorna in the limited time that was available and still more fortunately, as a result of the danger in 1916, he had caused elaborate preparations to be made in the grappa sector. it was due to this forethought that resistance on the line now chosen was possible. diaz had little breathing space, though some days elapsed be- fore the enemy could prepare for an attack in force on the new line, for conrad, on the trentino front, saw a chance and, though he was short of troops, struck at once while calling for reinforcements. he attacked pecori’s troops on nov. 10 as they were preparing to come back to the line already indicated and continued his attack on the new positions. but 10 days’ fighting brought heavy losses and no success. meanwhile, boroevie had tested the river defences. he got troops across in two places but failed to make further progress, and on nov. 16 an attack in force failed completely, the austrians losing some 1,s00 killed and nearly as many prisoners. conrad and boroevie were making no headway, but a very dangerous attack was being conducted by krauss, between the brenta and the piave. attempts to break through by the valley roads were quickly frustrated and persistent efforts to capture the all-important ridge of monte tomba-monfenera, which runs down from the grappa massif to the piave, failed to pierce the thin italian lines. ‘the struggle at this point lasted for five days, nov. 18-22, and the italian ix. corps, under ruggeri laderchi, fought a great fight. the critical day was nov. 22, when krauss’s bosnians and german jager made a final effort to break through. the attacking columns reached the crest of monte tomba, but their bolt was shot. in the evening, ruggeri laderchi counter-attacked and drove the enemy off the ridge, except at one point. next day reserves arrived and the line was firmly established. meanwhile, in the grappa sector, krauss had attacked on nov. 21 with his centre and right, but after a week’s fighting, in spite of reinforcements drawn from stein and krobatin, he had tocallahalt. a fresh attack was preparing when the situation was eased by the arrival of the british and french divisions which had hitherto been waiting in reserve. on dec. 2 three british divisions under gen. the earl of cavan, took over the montello sector and a similar french force under gen. duchesne relieved the ix. corps in the monte tomba region, it was ex- pected that both these points would be the object of early attack, but as it turned out they were both left unmolested. conrad and krauss continued their attempts on the mountain front, but krauss confined his efforts to the grappa sector. krauss could not immediately renew his attack, but on dec. 3 conrad, rein- forced but still complaining that he was starved for means of attack, opened a heavy bombardment on the curve of the italian front from monte sisemol to east of monte badenecche. next day he pinched up the meletta-badenecche salient and took monte fior and castelgomberto in the rear and the day following he pushed down towards foza. the position was critical, but the italians succeeded in establishing a new line farther south, covering valstagna and the mouth of the frenzela valley. on dec. 23 after careful preparation, conrad launched a new attack on the lines between monte sisemol and the frenzela vajley. he gained a big initial success, taking both col dell ‘orso and monte melago and cutting off a large number of prisoners. the next day the italians counter-attacked and retook both the 334 hills. they established themselves firmly in their reserve lines and repulsed another attack, the last, on christmas day. krauss’s final effort—meanwhile, between conrad’s two efforts, krauss had made a determined attempt to drive the ital- ians off monte grappa. his command had been increased to 10 divisions, six austro-hungarian and four german and he did not spare his troops. he opened his attack on dec. 11 by a push on each wing; from the brenta valley and monte pertica against col della berretta, and against both sides of the col dell ’orso-solaro- lo salient. on the left, in spite of repeated attacks that lasted 10 days, his german divisions made little headway, but on the right, at the end of four days’ hard fighting, he had taken col caprile and col della berretta. four days more and he was in possession of monte asolone, which looks down the valle di santa felicita to the longed-for haven of the plain. this was the term of the austrian advance. on dec. 20 the italians counter- attacked and won back a good deal of the lost ground, the last move in the long struggle. krauss accepted failure for the mo- ment, hoping for an early spring offensive farther west. five days later the snow came, the heavy winter fall that was a month late. the invaders had been favoured by the tardy coming of winter, which greatly prolonged the strain on the sorely-tried armies of italy. but it gave also to the defending troops the chance to remake at once a shaken reputation. they took the chance and their recovery was a remarkable feat of courage. concluston.—the narrative has indicated briefly the causes which led to the italian disaster. the defending troops were subjected to a very severe trial; but it would seem clear that failure and disaster might have been largely averted if the prepa- rations against the austro-german attack and the actual conduct of the defence had been different. to sum up, there were too many troops in the front lines and too few in the “ battle posi- tions.” cadorna had not succeeded in making all his subordinates grasp the principles of defence in depth or of “ elastic ” defence. and, given the erroneous dispositions of the defensive lines, the reserves were too far back. the italian armies on the julian front had been constantly on the offensive. they had had no recent practice in meeting an attack on the grand scale. it was this lack of practice, no doubt and a false confidence based on obsolete experience, which led to the belief that even if the opening phases of the battle were unfavourable to the defence, there would be ample time to restore the situation. when retreat became inevitable, the prospects might well have seemed desperate to those who had to organise it. for the army, long used to the war of positions that had been the rule for 28 months, was in no condition to move. the retreat, with all its confusion, its mistakes and its tragedies, remains an astonishing achievement. the resistance which followed it, when the retiring armies turned and stood at bay on the mountains and on the piave, was the greatest of italian victories. braiiograpny.—w. ortel, vormarsch in oberitalien, vom isonzo zur piave (1917) (1918); v. coda, dalla bainsisca al piave (oct.-now. fot7) {19o19); ly, cadorna, la guerra alla fronte italiana (1921). see also world war: bibliography. (w. k. mcc.) capps, edward (1866- ), american classical scholar, was born at jacksonville, [ll., dec. 21 1866. he was educated at illinois college, where he took the degree of a.b. in 1887, and at yale university, where he received that of ph.d. in 1891. in 1890 he was appointed tutor at yale. he was professor of greek language and literature at the university of chicago from 1892 to 1907. in 1903 he was special lecturer at ilarvard, and during the next two years studied at athens, and halle, germany. during 1906-7 he was managing editor of classical philology and in 1907 was called to princeton university as professor of classics. in 1914 he was president of the american philological assn. and in 1917 was turnbull lecturer on poetry at johns hopkins university. in 1918 he was appointed head of the american red cross commission to greece, and became also chairman of the managing committee of the american school of classical studies at athens. in 1920 he was appointed minis- ter to greece, resigning in march 1921, and returning to prince- ton. he is a leading authority on the greek theatre. capps—carbon, syntheses of his works include: the greek stage according to the extant dramas (1891); #rom homer to theocritus (1901); the introduction of comedy anito the city dionysia; a chronological study in greek literary history (1903); and four plays of menander (1910). he was editor- in-chief of the university of chicago decennial publications, 2 vol., and became the american editor of the loeb classical library. capus, alfred (1858~10922), french author (see 5.296), produced his last play, l’viastitut de beante, in 1913 and was elected a member of the academie francaise inthe following year. he dicd in paris nov. 1 1922.",
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