system is
re-established and mutual confidence restored, and until industry and
commerce have adjusted themselves to the new situation. The volume of
employment in this country during the war will have been swollen by
temporary demands for war supplies which will cease when the war ends;
foreign trade will be uncertain; a larger number of soldiers will be thrown
on the labour market than ever before. It would seem, therefore, that in
the absence of special steps, the volume of unemployment at the close of
the war will be a good deal greater than during the progress of the war[2].

[Footnote 1: The number must be larger than this, as the mobilisation of
the armies of neutral states should be taken into account.]

[Footnote 2: It is thought by some that the war will be followed by a short
boom, when Europe will make good the necessities of industry and
civilised life, but it is at least doubtful whether there will be a rapid
reproduction of these commodities, owing to the conditions, already
described, which will obtain at the close of the war. In any case, however,
it will be merely a flash in the pan, and there will follow the gloom of a
deep depression, unless there is clear-sighted State action.]

It is just conceivable, though one hopes not probable, that the economic
effects of the war will be complicated by the imposition of war
indemnities. The indemnity is really a means of obtaining booty from a
vanquished State, and has been looked upon as a justifiable means of
further humiliating an already beaten enemy. It has been pointed out[1],
however, that the advantages derived from an indemnity are not an unmixed
gain. The indemnity recoils on the heads of those who impose it. It is
unnecessary here to enter into a consideration of the detailed effects
of huge payments by defeated nations; though it may be remarked that the
ramifications of such payments are so intricate and often so incapable of
measurement, whilst other economic influences are at work at the same
time, that it is impossible to draw an accurate conclusion as to the net
advantage or disadvantage of indemnities to the State which levies them.
But the point to be borne in mind is that the addition of a great debt to
the already large burden of an unsuccessful war reacts upon all countries
with which the defeated state enters into business relations. The losses
due to this cause will not necessarily be counterbalanced by gains from
increased trade with