to borrow the money to carry on the conflict, and, second, by the financial interdependence of the various nations. As for the first, we saw General Huerta losing steadily. We read daily dispatches from Washington to the effect that he was bankrupt and could hold out no longer, and still we saw his fighting capacity diminished only by defeat and not by lack of money. We have seen the Balkan allies — probably the poorest nations on earth-finance a modern war which cannot be classed as small, and we have seen the poorest of South American Republics constantly financing wars and revolutions. If we care to glance into history, we would find that never has there been a war, no matter how unequal the struggle at its incipiency, but that both sides were able to secure money at the start. This has been so with nations where victory seemed impossible.

The nation most often pointed out as one which could not again make war on account of its poverty, is Japan. Yet Japan, not as well prepared financially as Russia at the beginning of the war, was victorious. When money was desired for this war, recourse was made to loans, the first being an inner loan of $50,000,000, five per cent, at 95. This loan was four times oversubscribed. The second loan, an outer loan of $50,000,000, six per cent, at 932, repayable at par in 1911, was oversubscribed thirty times. Next an inner loan of seven-year treasury bonds at 92 was issued, also for $50,000,000, this being three

times oversubscribed, and shortly after, a similar issue of $40,000,000 of these bonds was two and one-half times oversubscribed. Just before the conclusion of the war, another inner loan of $150,000,000 was oversubscribed. In fact, a complete story of Japan's finances throughout the war would be but a repetition of facts similar to the above. The Japanese war loans caused the national debt to be increased by only twenty-two per cent, and there is no reason why an increase of less than one-quarter in the national debt should destroy the great capacity which Japan showed for raising money. As a matter of fact, Japan, since the Russian War, has been spending money on military establishments in a manner that is in itself no trifle and which indicates that her future expenses in war will be at a minimum, owing to much of the preparation having previously been made (Plate 3).

How absurd, then, to suppose that Japan, with everything pointing to victory, with the possible exception of money, could not borrow the funds for the war with the United States. By no means is the United States so sure of its position that it could count on foreign friendship, and, in fact, such friendship plays but little part in such loans. It would be logical for financiers to reason as follows: Japan, at present, has the naval strategical advantage on the Pacific Ocean; Japan has many times more powerful and efficient an army; Japan lacks nought but money;

JAPANESE FINANCIAL COMPARISONS

SHOWING (1) COMPARATIVE SIZE OF JAPANESE NATIONAL DEBT BEFORE AND
AFTER RUSSIAN WAR.

(2) EXCESS OF BORROWING POWER OVER AMOUNT NEEDED AS
SHOWN BY OVER SUBSCRIPTION OF BOND ISSUES DURING RUS-
SIAN WAR.

(3) REDUCED BORROWING POWER DUE TO INCREASED DEBT, COM-
PARED TO COST OF A WAR FOUR TIMES AS COSTLY AS RUSSIAN
WAR.

90 VIMU AIMBORLIAD

that supplied and Japan will win. When one looks at the unequal struggles that have been financed in the past, such a reasoning seems comparatively sound. It has always been only when a nation was facing final and hopeless defeat that it became absolutely impossible to raise funds, and many nations, in the midst of war, when the outlook seemed darkest, have been able to secure finances for a last attempt, in some almost unaccountable manner.

Hamilton-Grace in his book Finance and War con

cludes:

That no nation will be stopped from plunging into war by dearth of money. War loans contracted by a people who are thoroughly prepared for war are a sound national investment (vide 1870).

That loans will always be forthcoming to provide the sinews of war.*

Not only is this so, but the expense of war is not the same in different nations. Japan, for instance, subsists her soldiers at much less cost than does the United States, and Japan pays them but a fraction of the pay of the United States soldier. This is also true of Germany, of England, France, and other European nations. Exactly as Japanese laborers can underbid the American laborer in California, so can a Japanese soldier serve his nation for much less than can an American soldier serve the United

* Finance and War, Hamilton-Grace, Hugh Rees, Ltd., London.