EXCHANGES, FOREIGN

the main reason why we pay anything for a foreign currency is of course that this currency represents in the foreign country a purchasing power which can be used for acquiring the goods or for paying for the services of that country. thus, it ts clear that the amount we can pay for the unit of the foreign currency must, broadly speak- ing, be in direct proportion to the internal purchasing power of that currency, 7.e., in inverse proportion to the country’s general level of prices. on the other hand, it is clear that we can afford to pay more in our own currency the more abundant this currency is, 7.e., the lower its internal purchasing power, and the higher the general level of home prices. this is easily seen if we reflect on the fact that the price paid for a foreign currency is ultimately a price for foreign commodities, a price which must stand in a certain rela- tion to the prices of commodities on the home market. thus we arrive at the conclusion that the rate of exchange between two currencies must depend essentially on the quotient of the internal purchasing powers of these currencies. again, the internal pur- chasing power of a currency must essentially depend upon the supply of means of payment in that currency. by unlimited sup- ply any price could be paid for goods and a currency could have no definite purchasing power. a certain restriction of the sup- ply of means of payment 1s therefore necessary, and the scarcity of this supply determines the purchasing power of the currency. thus the rate of exchange between two currencies is ultimately dependent upon the limitation of the supply of means of payment in both countries. the fact that the rate of exchange is determined by the quo- tient of the purchasing powers of the currencies is most obvious in the case of independent paper standards, where no other basis can be found for the determination of the exchange. but the principle applies equally well to the exchange between gold standards. the essential reason why the pound sterling before the war was worth about 25 fr. in french currency was that the internal purchasing power of the pound was about 25 times as large as that of the french franc. it is true that the existence of a gold standard in both countries determines a certain gold parity. but it would be impossible to keep up the gold standard if the purchasing powers of the currencies were not maintained at a corresponding level and if the supply of means of payment in both countries were not regulated to that end. exchanges, foreign if, however, we wish to apply our principle to exact calcula- tions we are faced with the difficulty that the absolute purchasing power of a currency cannot strictly be compared with that of another currency. of course, if all prices in the country b are ro times as high as those in the country a, it is obvious that the purchasing power of the b currency is one tenth of that of the a currency. ifsome prices in b are somewhat more and some prices somewhat less than 10 times the corresponding prices in a, we may still say that the purchasing power of the b currency is, broadly speaking, one tenth of the a currency. but this formula will no longer be exact. now this is precisely the case with which we always have to dealin making international comparisons. for an international exchange of goods can only exist if the constella- tion of relative prices in one country is different from that in the other country. in the simple case of only two countries, a and b, exchanging goods with one another, their international trade will come to an equilibrium at a certain rate of exchange determined by the condition that there must be equality in value between a’s imports from b and exports to b. this equilibrium rate 1s determined essentially by the internal purchasing powers of the two currencies and, in the second instance, by the constella- tion of relative prices in each country and by the conclitions pre- vailing for the interchange of goods between them. assuming the latter factors to be given, the equilibrium rate of exchange will be determined exclusively by the quotient of the internal purchasing powers of the currencies. if the internal purchasing power of one currency is doubled and that of the other remains constant, the value in exchange of the former currency will likewise be doubled. in order to emphasise this dominating influence of the internal purchasing power in fixing the equili- brium rate of exchange, we call this rate, as here defined, the purchasing power parity between the two currencics. it is always possible to find such a rate of exchange as will establish equilibrium in the international trade. thus a country can never be excluded from international trade by being handi- capped with regard to costs of production. high prices will always be counteracted by a sufficiently low valuation of the country’s currency, and the rate of exchange will always stabilise itself at a point where all disadvantages are counterbalanced and where, therefore, the country is able to export just as much as it imports. this observation is sufficient to show the usefulness of the purchasing power parity theory for a clear exposition of the theory of international trade. the internal purchasing power of the two currencies con- templated determines only the equilibrium of the rate of ex- change. the actual rate generally shows deviations from this equilibrium. when more is paid for a foreign currency than would correspond to its purchasing power parity, the currency is said to be over-valued. again, when less is paid, the currency is under-valued. if a currency is over-valued, foreign currencies are under-valued in that currency. the result is that the export trade of the country is handicapped and that the import trade receives an artificial stimulus. in the case of an under-valued currency, the effect is of course the reverse. after the outbreak of the world war, radical revolutions took place in the internal purchasing powers of all the currencies of the world. these revolutions were reflected in corresponding rev- olutions in the exchanges, which could naturally be explained only by a theory giving the internal purchasing power of the different currencies its due place as the fundamental factor in the forma- tion of exchanges. in fact, the history of exchanges after 1914 affords the most complete illustration to the paramount rele of the purchasing power parity in the determination of exchanges as well as to the deviations of actual exchanges from this equilibrium and the causes and effects of such deviations. in order to finance the war, the belligerent countries had recourse to a creation of purchasing power by the aid of note- printing and book credits with central banks. neutral countries soon followed suit, partly in order to finance extraordinary ex- penses in connection with the war, and partly in order to grant extensive credits to the belligerents. as nothing was produced to exchanges, be set up against this extra purchasing power, the result was a rise in prices. at the higher level of prices a correspondingly greater supply of means of payment was required and was there- fore retained by the public. the creation of fresh purchasing power, however, was continually repeated, and the result was a continual rise in prices and an equally continual increase in the amount of means of payment in use. these two quantities grew in proportion to one another, but the ultimate cause of this movement was the continual creation of fresh purchasing power. we call such a movement “‘inflation.”” thus inflation is a rise in the general level of prices caused by creation of artificial pur- chasing power in the form of a superabundant supply of means of payment. a country may of course sce its supply of com- modities reduced and its gencral level of prices raised in con- sequence of such a scarcity of commodities. but if the supply of commodities is reduced, say to three-fourths—which means a very serious deprivation indeed—the corresponding rise in prices is only as 3 to 4, and this is not very much in comparison with the tremendous rise in prices which has taken place in so many coun- tries since 1914. the essential cause of rising prices has, there- fore, always been an inflation. further, from a more rigorous point of view, we must say that a country which sees its supply of commodities diminishing, ought to reduce its supply of means of payment in the same proportion. if this 1s done, the scarcity of commodities can cause no general rise in prices and the price level will remain intact. therefore, strictly speaking, every rise in the general level of prices is a result of a too abundant supply of means of payment and may consequently be described as an “‘ inflation ” in a wider sense. the most conspicuous case of inflation was that of germany. the inflation in that country began on a small scale in the be- ginning of the war, and as it proceeded meant a continual deterioration of the german mark. this deterioration was, of course, according to the purchasing power parity theory, re- flected in a corresponding fall of the german exchange in the international market. however, people in germany were very reluctant to acknowledge that a real deterioration of their own currency had taken place, and thcy resorted to all sorts of more popular explanations of the fall of the exchange. particularly, it was held that the extraordinary difficulties of germany’s foreign trade were a suflicient explanation of the unfavourable development of the rate of exchange. in this case, however, later events were to prove the complete incapacity of the popular market-theory of exchanges to explain alterations in the exchanges brought about by a raclical alteration of the internal value of the currency. german inflation, under the influence of the revolution and under the pressure of the treaty and particularly of the ruhr occupation, surpassed all limits and ultimately brought down the value of the german mark to a millionth of a millionth of its pre-war value. ‘this catastrophe opened the eyes of even the blindest, and people began to realise both that the internal value of the mark had been deteriorated and that the external value as expressed in the exchanges essentially only reflected this internal deterioration. what was truth in the case of germany had gradually to be acknowledged as truth also with regard to other countries. in fact, inflation has taken place in all countries, although not to such a fantastic extent as in germany. generally people have been extremely unwilling to admit the existence of a deteriora- tion of their own currency. but statistical figures put the fact beyond all doubt. for most countries the maximum of inflation was reached in 1920, when such price index figures were at- tained as 366 for sweden, 588 for france and 670 for italy. in the united states the price level reached its highest point jn may 1920 with 264 and in the same month the british price index reached its maximum with 336. the two last figures are those given by the fedcral reserve board of the united states, which calculates index numbers particularly for purposes of international comparison. it is important to observe that inflation did not reach its maximum before 1920, whereas the war came to an end in nov. 1918. this shows that the enhancement of prices and the foreign 1087 disturbances of the exchanges which took place during the war were not, as many people had believed, merely a result of the conditions of the war. inflation went on as long as the false methods of finance and the unsound monetary policy originated during the war were continued. in most countries a deflation has since taken place and substantially lowered the general jevel of prices. nevertheless, in all countries the general level of prices remains considerably above the pre-war level. this is so even where the pre-war gold standard has been restored, the price indexes of the united states and england being, for in- stance, for june 1925, 163 and 164 respectively. thus value of gold in 1925 was only about 60°% of the pre-war value. what, now, has been the effect on the exchanges of all these revolutions of the internal values of the currencies? we may calculate the new equilibrium of the exchange between two cur- rencies, if we start from their pre-war purchasing power parity and multiply it by the quotient of the degrecs of inflation of both currencies. we thus arrive at a new purchasing power parity which represents the new equilibrium of the exchange. if, e.g., inflation has brought the gencral level of prices in a up to six times the pre-war height, but in b only to four times that height, the new purchasing power parity between the a currency and the b currency will be two-thirds of the pre-war purchasing power parity, and therefore the equilibrium rate of exchange of the a cur- rency as expressed in the b currency will be two-thirds of the nor- mal rate of pre-war time. strictly speaking, this new equilibrium can be expected to establish itself only when normal conditions of international commerce similar to those which existed before the war have been restored. however, experience seems to show that this requirement is in most cases already beginning to be fulfilled in a measure sufficient to make the application of the principle here enunciated possible, at least in a broad sense. the calculation is most reliable in the case of england and the united states. in may 1920, when, as mentioned above, the price level of these countries reached their maximum with 336 and 264 respectively, the purchasing power parity between them could be calculated by multiplying the pre-war parity, $4.87 for {1 with the quotient of 264 and 336. we thus arrive at the result that in may 1920 the purchasing power parity of the pound sterling was $3.83. the mean actual rate of exchange for the month was almost exactly the same ($3.85). consequently, at that time the depression of the sterling-dollar exchange was exclusively a result of alterations in the internal purchasing power of the currencies concerned. in june 1925, when the price indexes of both countries were practically equal, the exchange had also returned to practically the pre-war par. of course the actual exchanges do not always so closely coin- cide with the purchasing power parities. in the present case a particularly noteworthy deviation was caused during the war by the so-called “ pegging ” of the sterling-dollar exchange. this meant that the pound sterling was by a deliberate policy kept very nearly to its pre-war par, namely, at the constant value of about $4.76, and this result was obtained during a period when inflation in england had gone so much further than in the united states that the purchasing power parity of the pound was considerably lower. the possibility of stabilising an exchange at such an artificial height is explained by the fact that not only were the immense financial resources of the united states placed at disposal for the purpose in the form of almost unlimited credits to the british govt. but also private trade between the countries was severely restricted. after the armis- tice, it was soon found impossible to continue such a policy and the exchange was “ unpegged ” in march ro1g, with the result that there was a considerable fall in the rate which for april 1919 showed a mean figure of $4.66. since that time, the actual exchange has oscillated round the purchasing power parity. the deviations have seldom exceeded 10° and have usually been much smaller; for the whole period after march 1919 the mean deviation of the actual exchange from the purchasing power parity has been almost nil. a closer study of the deviations, however, is of considerable interest. it reveals the fact that the main cause of such devia- 1088 tions has been the movement of capital between the countries. when dollar credits have been granted on a large scale and when the rate of interest in new york has been lower than that 125 —_p 3 percentage parity ’ ° —_* 5 e % s * 1} > 4 % bf x on” pian 9s ‘- vi wa ¥ f i / ‘#88 £25 nae zee = | = bre 1920 192) 1922 1923 1924 —_ 0 i913 1914 19s «1916 «(sif = 19/8 = 1919 year fic. 1. the changes in the rates of exchange of the currencies of certain selected countries from 1913 to 1925, as compared with the dollar, are here shown as percentages above or below parity. the rate for each year is the daily average of cable transfer rates in new york: the rate in 1925 is therefore the average for the year, not the rate on december 31 1925. no figures are available for belgium from 1914 to 1918 owing to the occupation of the country by the germans: the average rate for 1914 1s thercfore linked up with that for 1919 by a straight line in order to make a continuous graph. figures are not available for germany and austria for 1918, and the rates for 1917 and 1919 aresimilarly linked up. the most striking features are the appreciation of the currencies of sweden, the netherlands and argentina during the war period, and the startling collapse of the austrian and german currencies after the war. the rates for these two countries during 1925 are not shown, as new currencies, which remained practically at par during the year, were introduced. the chart is based on figures in ‘“‘ the review of economic statistics ” (statistical record 1924 supplement) of the harvard economic serv- ice, and in the united states department of commerce survey of current statistics (semiannual number, feb. 1926). 1925 in london, this has created an abundance of dollars in england, which has exerted some pressure on the value of the dollar in terms of sterling. at such periods we can observe a clear under- valuation of the dollar. again, in periods when america has restricted its credit-giving to europe and when a comparatively exchanges, foreign high rate of interest has prevailed in the united states, a certain scarcity of dollars has made itself felt in europe, resulting in an over-valuation of the dollar. after the dawes scheme for the reorganisation of the german currency and for the payment of reparations had been finally adopted and the dawes loan had been floated in the autumn of 1924, america displayed her restored confidence in europe by a very considerably increased grant of credits, resulting in an under-valuation of the dollar, which lasted for the first four months of 1925. this under-valuation, which may also be regarded as an over- valuation of the pound sterling in terms of dollars, was strength- ened by the expectation of an early restoration of the gold stand- ard in england, which of course would mean the raising of the pound to the old parity with the dollar. in fact, this restoration of the gold standard was carried through on april 29 1925, when the large gold resources of the bank of england and huge dollar credits in the united states were placed at disposal for stabilising the sterling-dollar exchange in the neighbourhood of the old parity, $4.87. when this was done, however, the english cur- rency was not yet in full parity with gold in regard to internal purchasing power. the dollar exchange, therefore, meant an over-valuation of the pound. naturally, the gold standard could not be founded on such an over-valuation, but had to be built on the more solid basis of a raising of the internal purchasing power of the pound to the official parity with the dollar. this meant that prices in england had to be forced down by 4 or 5%. this was in fact what was done. during a time when the american price level stood nearly constant at 163, the english price level was brought down from 171 in april to 166 in may, and to 164 in june. thus the internal purchasing power of the eng- lish currency had practically been brought to a level with that of the dollar. in this case it seems clear enough that the artificial raising of the external value of the pound, which was accomplished by the restoration of the gold standard, has to some extent drawn the internal value of the pound with it. clearly, the artificial de- pression of the exchange value of the dollar cheapened imports and had some depressing influence on the prices of british exports, and in both these ways helped to bring down the general level of prices in england. such a process, however, is of an extraordi- nary nature, and is only possible when vast resources are at dis- posal for raising the currency’s external value which is normally determined by the internal purchasing power. in the long run, an increase of this purchasing power is possible only when sup- ported by a suitable restriction of the supply of means of pay- ment. as a prcliminary measure for the restoration of the gold standard, the bank of england in fact raised its rate from 4 to 5° on march 5 1925. the effect showed itself immediately. the british price level, which had been rising from sept. 1924 and which had attained a maximum of 178 for jan. and feb. 1925, was in march pressed down to 175, and, as has already been mentioned, right down to 164 for july. how far this fall in prices is to be ascribed to the raising of the international value of the pound and how far to the pressure of the higher rate of discount, it is hardly possible exactly to decide. the artificial over-valuation of the pound, which was a result of the restoration of the gold standard in april, meant of course a handicap to british producers who had to face foreign compe- tition without being able immediately to reduce their sterling costs of production in proportion to the increase in the inter- national value of the pound. some authors laid great stress on this disadvantage, and on that account not only opposed the restoration of the gold standard, but also, after the reform had been carricd out, made it responsible for the prevailing unem- ployment and other economic difficulties. this argument was doubtless much exaggerated. the over-valuation of the pound caused by the restoration of the gold standard was, as our figures show, not very considerable, and, at any rate, as it disappeared as early as in july, it cannot reasonably be made responsible for more permanent economic difhculties. in cases of continued inflation the deviations of exchanges from their purchasing power parities have been much greater, when, exhibition e.g., the internal purchasing power of the german currency, in consequence of continued inflation, showed a regular fall, month after month, this fall was discounted on the international market, which generally paid a price considerably below the pur- chasing power parity of the german currency, but still a price corresponding to the internal purchasing power which that currency was to possess some months later. this under-valua- tion of the german currency made it possible for foreigners to buy goods in germany at an unreasonably low price, or, what is the same, for german producers to sell their goods on foreign markets at prices ruinous for their foreign competitors. both consequences called forth counteracting measures. in germany exports were prohibited except under licence, and every endeavour was made to force foreigners to pay more for german goods than the germans did themselves. of course, such measures diminished the value of the german mark for foreigners and the under-valuation grew still worse. in other countries the cheap german exports were regarded as a form of “ dumping,” and efforts were made to safeguard industries against competition from countries having a depreciated cur- rency. such measures, again, tended further to accentuate the under-valuation of the german currency, as its employment for the import of german goods was made more difficult. thus, again, german competition was strengthened. it should also be observed that the exports of a country are artificially stimu- lated only by the under-valuation of its currency. the mere fact that the currency is depreciated gives no advantage to the exporter, provided the exchange value of the currency corre- sponds to its internal purchasing power. a considerable over-valuation of a currency has sometimes taken place when it has been believed that the internal value of the currency was to be raised from a depreciated level to a pre-war gold parity. this was particularly the case with the danish and norwegian currencies during the second half of 1925. the over-valuation which in these cases has been sup- ported by a strong international speculation has of course been a great drawback to the export trade of the countries concerned, and has also contributed to a general fall in prices within those countrics and to a consequent serious economic depression. the only way out of all these difficulties is, of course, to stabil- ise the internal values of the currencies and to bring back such normal conditions as will make exchanges correspond to these internal values. after the violent disturbances of its monetary systems which the world had witnessed the only practical pos- sibility of attaining general stabilisation of currencies and a corresponding stability of exchanges was without doubt a re- turn to the gold standard. currencies which were very near to their pre-war gold parity could be restored to that parity, but for other currencies a new lower gold par had to be chosen, in conformity with the already existent purchasing power parity. a series of currencies have already been stabilised on this prin- ciple, and it seems certain that other countries which have hith- erto been hesitating with regard to the ultimate aim of their monetary policy will soon come to a decision in favour of a sim- ilar stabilisation. the adoption of the gold standard has the effect of compelling the purchasing power of the currency to be kept in a definite relation to that of gold and, therefore, the purchasing power parity between two gold standard currencies will always remain in the neighbourhood of the gold par. still, smaller deviations of exchanges from the purchasing power parities are possible on account of fluctuations in the market. such deviations, however, will always call forth an adjustment in the demand and supply of the currencies concerned, tending to restore the equilibrium of the market. the main factor in this adjustment is the move- ment of capital, which is made profitable by the abnormal rate of exchange. of course, an over-valuation of the currency of a country also calls forth an increase in the imports to that coun- try and hampers its exports. but these movements are much slower than the corresponding movements of securities and the transfers of short-term credits, and are, therefore, under normal conditions, of only secondary importance for the adjustment of 10&9g the exchanges to their purchasing power parities. see also currency. | biblliography.—h. t. easton, afoney exchanges and banking (1907); hl. withers, afoney changing (1913); w. f. spalding, foreign exchange and foreign bills (1915); a. c. whitaker, foreign exchange (1919); c. clare, a.b.c. of foreign exchanges (1921); t. le. gregory, foreign exchange (1921); g. cassel, afoney and foreign exchange after 1924 (1922); h.s. jevons, future of exchange and the indian currency (1922); i. b. cross, domestic and foreign exchange, theory and practice (1923); g. w. edwards, international trade finance (1924). see also proceedings of the brussels conference, 5 vol. (1921); in vol. 5 is included g. cassel’s ‘‘ memorandum on the world's monetary problems.” (g. c.) exhibition (sce 10.67).—following on the great exhibi- tion of london, under the influence of ruskin and morris, the first tendencies towards the emancipation of decorative art made themselves evident. the movement took root in france, and led in 1863 to the creation of the union centrale des arts decoratifs, which was in time to achieve the formation, modelled on the south kensington museum, of the musee des arts decora- tifs. in the end the decorative artists won the right of citation in the artistic salons, in 1892 and 1895. they participated in the two great exhibitions of 1889 and 1900. in ceramics, in jewellery, in metal working, the creations of a chapelet, a lalique, a brateau, and a galle met with the highest esteem. the manufacture of furniture, characterised by the «lescrip- tion “modern style,” stirred the lively hostility of the public. this modern style was in its wavy a protest against the copying of the antique, and marked the break with all the secular traditions which had been the glory of furniture; and it created a fashion in reaction and in contrast rather than a style truly representa- tive of contemporary life. opposed by lovers of the antique, treated as suspect by the mass of the public, its vogue was brief. the effort pursued since 1900 rests on a more solid basis and on more durable ideas. it strives to associate in one common work both the artist, the creator of models, and the commercial firm, the former contributing his original conception, the latter his capital, equipment and clientele. this alliance, which was achieved in germany by the foundation of the werkbund in 1907, required more laborious efforts for its realisation in france. it is in a way the charter of modern decorative art. it was the guiding principle of the paris exhibition of 1925. the exhibitions which took place after 1900 in different capi- tals reserved space, restricted, no doubt, but still very signifi- cant, for modern decorators. they had their salon at turin in 1902, at st. louis in rogo4, at liege in 1905, at milan in 1906, london in 1908, at copenhagen in 1909, at brussels in roto, and at turin in r911, where the union centrale des arts decora- tifs showed in its pavilion all the advances made up to then. important exhibitions —the turin exhibition was to have been the overtureof the exposition des arts decoratifs modernes. but the war delayed its realisation for ro years. various exhi- bitions in the interval called attention to the advances made in certain special branches. the anglo-latin exhibition in london in 1912 gave hospitality notably to france, italy and the south american republics. the ghent exhibition of 1913 renewed and surpassed the results already achieved at liege and brussels. three groups were devoted to letters, to science and to art, in a vast palace which covered an area of 20,000 sq. metres. the urban exhibition at lyon in 1914 covered the vast and com- plex problems which, in our day, are raised by the systematic expansion, and the life itself, of urban agglomerations: vital statistics, protection of childhood, home and school hygiene, organisation of labour, water supply, thoroughfares, transport and town amenities. all these aspects of life were set out, along a great avenue lined with 60 pavilions. leipzig, in the same year, offered an exhibition of the advances made in the graphic arts and the book industry. in 1915, in the midst of war-time activi- ties, france, belgium and italy accepted the invitation of the united states, which was then organising an exhibition at san francisco to celebrate the opening of the panama canal. the french pavilion there reproduced the palace of the legion of ffonour. 1090 post war exhibitions——the return of peace allowed the revival of regular exhibitions, national and international. among the first may be mentioned the exhibition at strasbourg in 1919, intended to re-establish the necessary contact between france and the restored provinces. in 1922, an international exhibition in celebration of the centenary of brazilian independence was held at rio de janciro. two great colonial exhibitions, french and british, took place in 1922 and 1924 respectively. the marseilles exhibition made a survey of french colonial expansion. from 1870, onward it drew up, as it were, an economic in- ventory of france’s overseas empire. it paid tribute to the colonising methods of france, and to the attachment of the native races, who, in the course of the war, had sacrificed their lives in the common cause. the exhibition held at wembley in 1924, and revived in 1925, was evidence of the vast extent and the great resources of the british empire in all regions of the globe. in 1923 italy inaugurated at the monza palace, the ver- sailles of milan, an exhibition devoted to the art of housing. made a biennial function, it was renewed with equal success, its scheme comprising furniture, bronzes, ironwork, jewellery, ceramics, glass and textiles. every region of italy had con- tributed to this effort of modern art, and a french section also took part. in the same year a similar display was organised at barcelona, on the hill of montjuich, destined to become the site of perma- nent palaces to house specialised exhibitions covering successively various aspects of modern life. the first was devoted to fur- nishing and interior decoration, and comprised three sections, one retrospective, the second for modern interiors, the third for special furnishings for offices, schools and public services. in 1925 france could show two great exhibitions. at grenoble was held the exhibition of elcctric power and of touring facilities. one palace was reserved for the applied uses of electricity and the means of its conveyance. a dwelling-house was equipped to show its application to domestic life, and a farm exhibited its possibilities in rural communities. the touring section had two palaces, the first devoted to administrative organisations, the office du tourisme, the touring club, the local information bureaux, while the second displayed advances in the industries connected with the influx of tourists. the capital of the french alps was thus combining in one exhibition the advance in the transportation of energy and its uses in modern life. the paris exhibition at the same time paris was exhibiting on both banks of the seine, on the champs-elysees and on the esplanade des invalides, the creations of modern decorative art. this long-awaited exhibition, delayed for 10 years by the world war, covered all the ensemble of the background of our life. architecture, furnishings, clothing, theatre, street and garden, education—the works displayed were all to be exclusively modern. no retrospective work was admitted. for the first time modern art was offered by itself to public judgment. the experiment was favourable and its success was fulfilled, and even surpassed what was hoped for. more than 16,000,000 visitors thronged enthusiastically the magical spectacle, to which a special character, at once alluring and impressive, was given by the waters of the seine and the lighting effects. ob- jects were presented as much as possible in their proper settings. special settings were designed so as to reproduce the actual con- ditions of life. pavilions, separate rooms, shops and _ stores, rivalled each other in their realism. a great advance was achieved in the art of presentation. and the exhibition marked also, in a final manner, the alliance of art and industry in prac- tice, an alliance adumbrated in 1900 towards which the move- ment had been working ever since. this exhibition was international and specialised. it had not the vast extent of the old great exhibitions, but it was shown to be more sharply instructive in effect within the scope assigned to it. specialisation tends to show itself, not only in restriction of programmes, but in that of geographical range also. all countries are returning to the old-fashioned formula of city fairs, annual or biennial. paris, lyon and dijon in france have adopted these regular demonstrations. they take place likewise exhibition, british empire in london, milan, riga, leipzig, nijni novgorod and many other cities, in various forms and under varying conditions. it seems as if here, as elsewhere, progress sometimes returns to old conceptions, modified to the ideas of our generation. an annual exhibition of national scope is the canadian national exhibition held each autumn on permanently equipped premises at toronto, canada. international co-operation.—the need for assuring a certain unity among institutions of such varied characters brought about the meeting at berlin, in 1912, of a diplomatic conference in which 16 states took part. the conference defined and classi- fied the various sorts of general or specialised exhibitions, official or private, national or international. it fixed the rules govern- ing the participation of states and limiting the number of exhi- bitions and their duration, the modes of issuing invitations, the procedures for adjudicating bodies, the scale of awards. this work is continued by the international federation of the perma- nent committees of exhibitions. . thus these great institutions have their regular place in the lives of the peoples. if they have lost the vastness and all- embracing range of former times, the limitation of their scope seems, on the other hand, to make for their increased efficacy, and for their becoming a permanent instrument of economic ex- pansion and social progress. (sce decorative art.) bibliography. board of trade report on the participation of great britain in great international exhibitions, cd. 3772 (1907), report of the royal commissioners for the international exhibitions at brussels, rome and turin in rgro-11, cd. 6607 (1911); lbrd (1912); sir w. joynson-hicks, report on british empire exhibition, cd. 1799 (1923). see also l’filustration, exposition des arts decoratifs (june 1925). (p. ln.) exhibition, british empire.—the british empire ex- hibition, held at wembley, middlesex, in 1924 and 1925, was the largest exhibition of its kind ever held in great britain. the site chosen lies about 10 m. west-north-west of the city, and is served by the metropolitan, l.n.e. and l.m.s. railways. the construction of the exhibition was begun in january 1922, and the exhibition was opened by the king on april 23 1924. the first season lasted till nov. ¢ 1924; and at a banquet held at the guildhall on nov. to the prime minister indicated the intention of the govt. to re-open the exhibition the following year. a second season was accordingly undertaken. this lasted from may 9 1925 to oct. 31; and the buildings and other para- phernalia of the exhibition were shortly afterwards put in the hands of liquidators for sale. the aims and objects of the exhibition, as sect out in early exhibition literature, were as follows:— to find in the development and utilisation of the raw materials of the empire new sources of imperial wealth. to foster intra-imperial trade and open fresh world markets for dominion and home products. to make the different races of the british empire better known to each other and to demonstrate to the people of britain the almost illimitable possibilities of the dominions, colonies and dependencies overseas. in the 1924 season imperial exhibits came from australia, bermuda, british guiana, burmah, canada, ceylon, cyprus, east africa (nyasaland, seychelles and zanzibar), fiji, hong kong, india, malaya, malta, newfoundland, new zealand, palestine, sarawak, south africa, west africa (nigeria, gold coast and sicrra leone), west indian and atlantic group (barbados, british honduras, falkland is., jamaica, leeward is., saint lucia, trinidad and tobago). in addition to these exhibits, in each of which were displayed as far as possible the main characteristics of the life and po- tentialities of the dominion or dependency in question, there were various industrial and commercial exhibits of importance, such as the palace of industry, the palace of arts, and the palace of engineering, the last being changed in 1925 to the palace of housing and transport. the pavilion of h. m. govt. was an enterprise without precedent. in addition to its function of presenting some ac- count of the nation’s public services, its purpose was to illuminate and epitomise the imperial idea. the pavilion was british civ- exploration ilisation in microcosm. to that civilisation each of the countries brought its share and the function of the pavilion was to illus- trate the broad result. defence was represented by the navy, army and air force; health by the exhibits of the tropical health and hygiene com- mittee, and the ministry of health; public services by such departments as the post office, royal mint, dept. of overseas trade, committee of overseas settlement, ministry of agri- culture, stationery office, ete. the following statistical records will be of interest:— total area , : 220 acres cost of construction nearly {3,000,000 total attendance, 1924 ; 17,403,119 total attendance, 1925 : ; ; , ‘ - 9,699,231 cash paid for admission, 1924 £991,000 cash paid for admission, 1925. . 3 . =. ~—.ss £428,000 labour employed on construction (in man weeks) . 444,800 approximate number of people employed daily, 1924 24,200 approximate number of people employed daily, 1925 21,000 on monday, dec. 1 1925 the auditors to the british empire exhibition issued a statement of accounts and an interim certificate. according to their figures, it was estimated that the financial loss on the exhibition for the two seasons would be £1,581,905. the various guarantors, of whom the british govt. was by far the largest, were on dec. 5 1925 officially called upon to pay as an immediate call rss. in the £ on the amount of their guarantees, the liquidators reserving the right to fix later the ultimate and final liability of the guarantors. (j. h. t.) exploration.—the explorers of previous centuries had the poles to reach, great blank spaces on the maps to fill in, the source of the nile to trace and other major topographical facts to de- termine. the progress of exploration has brought the accomplish- ment of one after another of these primary tasks, but has opened up many more, involving more intensive work. detailed topo- graphical surveys are still needed for many regions, even if the major lines of mountain and valley and ocean abyss are known. and from topography the explorer proceeds to structure and physiography on the one hand, to climate and ecology of plants, animals and man on the other. the progress of exploration is in- volving a gradual change of emphasis in geographical research from topographical work to an understanding of the earth as the scene of man’s activities (see human geography). polar regions——some of the primary tasks relating to polar regions are still far from being achieved, and we need only re- mark that the exploration of the atmosphere in the polar regions is leading to valuable conclusions promoting a more satisfactory knowledge of the world’s climates in general. the exploration of sub-polar regions has been pursued with some vigour, partly for economic reasons. the coal and other possibilities of spits- bergen have received attention, and stefansson has emphasised stock-raising potentialities of the prairies of arctic america for reindeer and musk-ox, while he also claims to have shown the possibility of entrusting oneself to the sea-ice of the frozen seas (see arctic regions; polar exploration). asia.—the immense interior of asia, though known in a broad sense, has large areas which lacked even topographical investt- gation until the present century, when explorations of these regions have been numerous. stein’s many-sided work has in- cluded much mapping, and sven hedin has also published a great deal, chiefly for southern tibet. the courses of the great rivers from eastern tibet toward china, further india and as- sam, have been investigated and gencral lincs on our maps are replaced by far more accurate ones, especially as regards the tsang-po and its continuation, the brahmaputra. structure and physiography in this region have received much attention from the same explorers, as well as from dainelli, who, in the reports of the filippi expedition to the himalaya, karakorum, ctc., brings forward important evidence for a series of extended glaciations of those mountain ranges analogous with several of those of the alps. inner asia,—the ecology and climate of inner asia have been the subject of much discussion. huntington has advanced the view that the climate has long varied cyclically with alter- 1091 nating wetter and drier phases, but he thinks that successive wet phases have meant less and less moisture for the land (see climate; geology). his opinions have been attacked by several explorers, who have pointed out the caprice of rivers in a dry region with loose soil, and the consequent liability to accident from which irrigation systems may have suffered in the past. there is at least much reason to suppose that decay of irrigation systems from both physical and human causes may account for many ruined cities of central asia, quite apart from possible increase of drought. stein has advanced the very probable view that even after the passing away of the great ice age large stores of water remained locked up as ice on the central asiatic moun- tain ranges, and their melting gave supplies of moisture to the lowlands. the drought, in his view, would have become intensi- fied when these supplies suffered marked reduction at some period not far removed from the beginning of the christian era. from these references it will be seen that attention is turning increas- ingly toward investigation of the environment of man, though this type of work has long accompanied that of topographical surveying. besides stein’s and sven hedin’s works, we may mention among recent contributions, a. d. carruthers’ writings on mongolia and dzungaria, baddeley’s book on russia, mon- golia and china, dr. legendre’s work on the upper yalung in western china, kingdon ward’s from china to hkamti long and among many others j. w. gregory and teichman on eastern tibet. behind all these lies the great work of von richthofen on china, which opened up to modern science many problems of central and eastern asia. younghusband’s entry into tibet must also be mentioned. the filippi expedition, as well as that of stein, contributed fresh data concerning races and peoples in the regions visited and our knowledge of central asia is growing in all directions. the geological exploration of china, begun by von richthofen, has been pursued under the aegis of the japanese geological survey, and it seems likely that, with the growing discussion of new views of the history of the earth’s surface, much re-examination of geological facts of central asia will be undertaken in the next generation. expeditions are at work in mongolia on both geo- logical and ecological problems, and are also hunting for traces of early man. (see mongolia, palaeontological discoveries in.) western asia—the area between the caspian sea and the sahara has long interested students as a home of ancient civilisa- tion, and great military and political interest has turned scien- tific attention to it in the 20th century. surveys and mapping in mesopotamia have progressed a great deal, and numerous de- tails have been gleaned concerning arabia. h. st. j. philby’s heart of arabia is one of the most important books on the region since a. g. doughty’s arabia deserta, and it gives both direct knowledge of the oasis fortress towns of central arabia and in- formation gleaned about the great southern desert. besides this, there has been great activity in exploration of ancient sites at susa, kish, ur of the chaldees, in palestine, and as always, in egypt, resulting in new knowledge, especially of the develop- mental background of ancient egypt and babylonia. (see archaeology.) our knowledge of ancient hittite civilisation has grown through explorations in asia minor and near the upper euphrates, and the beginnings of decipherment of ilittite writing show that it had indo-european links, which had prob- ably come into it from the russian steppe via thrace and the bosporus. this idea of movements of influence from europe to asia in remote times is a rather new one. the site of anau, some distance from the southeastern corner of the caspian sea, has also yiclded valued indications of very early settlement, and students of the finds have urged that prob- ably nomad herdsmen of the great grasslands and deserts of inner asia are less the descendants of ancient nomad hunters than people who gradually cut adrift from a humble settled life as they acquired power over the herds of those grasslands. in egypt, the exploration of ancient cultures in some of the oases and the opening of new tombs in the valley of the kings, leading to the rich finds in the tomb of tutankhamun, have been the greatest achievements in this field. the long-continued 1092 discussion of the origins of elements of civilisation has by no means closed. on the whole, of late years, the view that egypt orig- inated civilisation has been heavily attacked, and evidence has come forward pointing to the importance of the fertile crescent from syria round via palmyra to mesopotamia in the earliest stages. the region of ancient civilisations has been seized upon by modern man with the idea of re-creating its ancient wealth. mesopotamia has been explored by irrigation engineers with a view to cotton planting, and schemes of the same kind are going forward in the anglo-egyptian sudan (see irrigation engineer- ing). explorations for oil have been made and widely discussed, and routes for motor-cars between syria and mesopotamia have been planned and established. europe.—the construction of detailed topographical maps in europe is of too old standing for any notable addition to have been made in this respect yet. explorations have been of more intensive kind for scientific, economic or social purposes. ‘the re-examination of the alps by argand and staub and their col- leagues had led to the formulation of a new view of the origin of the chain (see geography), and if these fresh theories are main- tained there will be need to re-explore several other mountain lands of europe. engineering surveys have been conducted in several lands, and notably in norway and sweden, south ger- many, switzerland, north italy and southeast france, to find and utilise sources of hydroelectric power (see hydroelectric engineering). north italy, with its glacier-fed streams giving a good steady power supply in summer and its juxtaposed city sites on the plain, gains greatly from this combination of physical advantages with the possession of an able and industrious population in old, established cities. early man in europe.—there has been much exploration of europe for traces of ancient man and the beginnings of our civi- lisation. the french caves have continued to yield traces of art of the old stone age, and the wealth of spain in this respect has been further demonstrated, while the rock-drawings of eastern spain have been shown to relate to another early culture of african origin. the evidences of the importance of spain when metal was first coming into use have been explored, especially by bosch-gimpera and obermaier. the re-exploration of stone- henge has shown that the ‘‘ foreign stones ’? which form a part of that monument were brought in prehistoric times from pem- brokeshire, probably by sea rather than by land, and this is one of many indications pointing to an antiquity of sea faring along the western shores of europe much greater than had previously been supposed; this form of activity in our region is now thought to go back to 2,000 b.c. or earlier. the exploration of the lake village at glastonbury has brought much knowledge of the early iron age in britain; and caves in the mendips, especially aveline’s hole, have given information about life in britain not long after the end of the great ice age. the finding of the piltdown skull and of the skull under the new lloyd's building in the city of london has shown that variant types existed already in very early periods, and skeletons found at predmost in czechoslovakia and near the caucasus as well as in galilee seem likely to give indications of the evolution of modern types of man. (see man, evoltution of.) sir arthur evans continued the publication of his famous researches on ancient crete, and intervals in war duties led officers to begin explorations in macedonia, which were subsequently continued. beginnings of promising re-explorations of ancient sites in the danube basin and transylvania are noteworthy. north afi ica.—in north africa a number of detailed explora- tions have been made in morocco, algeria and tunisia, and the site of ancient carthage, for example, has been studied, but the less-known desert behind has been the scene of most important work. augieras has described the intensely desert character of the western sahara, with few oases save on the periphery and with extremes of tempcrature, because the land lies low and the dunes lose heat quickly. tilho has explored tibesti, borkou and ennedi. the first, as a belt of highland between tunis and dar- fur, probably plaved a great part in southward spreads of fauna and flora in miocene and pliocene times. mrs. rosita iorbes exploration travelled across from the cyrenaica to kufara oasis, the senuss headquarters; and hassanein bey gathered valuable geological, cartographical and other data for all this region and the desert toward darfur. his accounts of two oases connected with a route from south-west egypt into darfur aroused much interest. in the west of the sahara, experiments have been made towards the establishment of motor transport with caterpillar attachments to overcome the sand. central and south africa-——though equatorial and southern africa have witnessed less of the primary type of exploration, that of major topographical features, in the last generation a great deal of more intensive work was done. it has been shown that there have been changes of level of victoria and albert nyanza, changes concordant with the variations of sunspots. there have been numerous surveys of race-types and studies of native society. explorers have examined parts of africa for cotton soils and mineral products in several regions, and uganda promises to yield a good cotton crop. the controversies concerning natives, indians and whites in east africa, especially in kenya, led to inquiries culminating, officially, in a report of the east africa commission to the colonial office. farther south, macliver claimed that the famous zimbabwe ruins are essentially african and not more than 400 years old. (see archaeology: africa, soutrr and central). the finding of a very interesting skull of ancient type but possibly of relatively recent date at broken till, rhodesia, opened up a large problem. north america.—explorations in north america accompanied the delimitation of the boundary between canada and alaska, and there have been studies of geomorphology in central ameri- ca, contributing to establish the theory of the eastward folding of the cordillera and to bring out its relation to the antillean arcs. of more general interest were stefansson’s explorations in arctic canada, leading to topographical mapping around the difficult ice-bound coasts and to arguments on his part in favour of using the arctic for herds of reindeer and musk-ox. british columbia has been explored for economic purposes, and espe- cially for sources of hydroelectric power. south america.—in south america there was exploration at- tendant upon the delimitation of bolivia’s frontiers ro11-3, and at about the same time some detailed studies were made in south- ern peru and the cordilleran fringe of argentina. topographical maps, geological and physiographical conclusions, and social studies have resulted from this work. rice mapped in detail the unique cassequaire stream which conducts water from the upper orinoco to the rio negro, a northern affluent of the amazon. koch griinberg studied the same district. in economic exploration an important step was taken in the appointment of a british committee, which reported in 1920 upon the reserves of the dependencies of the falkland is., such as south georgia and south shetland. occania.—in the pacific, the mystery of easter i. has been ex- amined afresh by mr. and mrs. routledge, and galapagos has been studied by william beebe. haddon has added to his many explorations by examining papuan pcoples and their cultures and wollaston and chinnery have also contributed to knowledge of this part of the world, while both dutch and british have made progress toward a better understanding of the corrugations of the sea-floor in the east indies. the work of scientific exploration of the sea, which owes so much to the initiative and the help of the late prince of monaco, has been continued; and much work has been done in european waters by fisheries commissions (see oceanography). this brief survey of some of the better known work of the carly part of the 2oth century illustrates the point that surveying for major topographical features has largely given place to detailed work, with increasing attention and application of scientific methods to economic and social exploration. the increased de- pendence of the industrial areas of the world upon tropical prod- ucts has made the latter types of work very important, and more and more effort is likely to be concentrated in this clirection. along with this goes medical exploration, such as that leading to delimitation of ily-belts and te the combating of fly-borne dis- ex plosives eases, especially in africa. the success of medical efforts during the cutting of the panama canal altered estimates of the white man’s adaptability to the tropics, but it is generally admitted that the problem remains a scrious one, even if parasitic discases are conquered by medical science (sce parasitology; tropical medicine). bibliography.—f. von richthofen, china, 5 vol. (1877-1912); d. r. maclver, afedieval rhodesia (1906); e, huntington, the pulse of asta (1907); r. pumpelly, explorations in turkestan, 19004 (1908); rev. j. roscoe, the baganda (1911); a. d. m. carruthers, unknown mongolia, a record of travel and exploration in mongolia and dsungaria, 2 vol. (1913); i. bowman, the andes of southern peru (1916); sven hedin, southern thibet, 10 vol. text, 3 vol. maps (1917-22); capt. augiecras, le sahara occidental (1919); j. f. baddeley, russia, mongolia, and china (1919); kx. routledge, the afystery of easter island (1919); r. n. rudmose brown, spitsbergen (1920); sir a. j. evans, the palace of amfinos (1921); f. nansen, spitzbergen (1921); m. w. hl. simpson, the /irhl-folk of ctlgeria (1921); v. stefansson, the friendly arctic (1921); sir m. a. stein, serindia (1921); sir w. t. grenfell, labrador (1922); sir h. johnston, cam parative study of the bantu languages (1922); 11, st. j. b. philby, the fleart of arabia, 2 vol. (1922); a. schweitzer, the edge of the primaeval forest (1922); e. teichman, travels 7m eastern tibet (1922); j. w. gregory, the alps of chinese thibet (1923); sir fi. lugard, the dual mandate in british tropical africa (1923): h. ober- maier, fossil man in spain (1924); rev. j. roscoe, bakitara (1923), banyankole (1923); sir m. a. stein, memoir on maps of chinese turkestan (1923); w. beebe, galapagos (1924); n. leys, kevya (1924); rev. j. roscoe, bagesz (1924); r. staub, der bau der alpen (1924); f. k. ward, from china to iitkamti long (1924); a. m. hassanein bey, the lost oases (1925); a. c. haddon, jour. roy. anth. inst. (1920); j. tilho, ‘‘ exploration tibesti, ete.’’ geog. jour., vol. 56 (1920); a. c. haddon, geog. teacher (1921); a. h. rice, ‘ rio negro,’? geog. jour., vol. 58 (1921); a. legendre, la geographie (march 1924); and cambridge anthropological [x pedt- tion te torres straits reports, ed. by a. c. haddon (1904, 1907, 1908, 1912); british antarctic expedition 1910-13 report (1919-23); spedizione ltaliana filippi, ed. g. dainelli, ser. 2, geology and geog- raphy (1922, etc.); report on the dependencies of the falkiand islands, 1920 (1923); oxford university expedition to spitsbergen, 1021, report (1925); report east africa commntission (1925); geological mfap of china, tokio geographical society, n.d. (hy j bs)