In World War II, if it comes, some nations may avoid fighting. But they will certainly not go untouched. Just as modern warfare is no respecter of lives, soldier or civilian, so it is no respecter of the pocketbooks of neutrals. To every neutral nation that has risen above the level of primitive handicrafts, a world war is an economic explosion. As a neutral such a nation enjoys the traditional lot of innocent bystander.
World War I proved it. In 1914 many nations refused to stake their political fate in the quarrel between the Triple Entente and the Triple Alliance. But one & all—Switzerland, the Scandinavian countries, Holland, Spain and notably the U. S.—found their economic destiny involved. For World War I profoundly altered every important economy in two hemispheres.
War Babies v. War Orphans. Before German troops marched into Belgium the tramp of their boots could be heard in neutral stock exchanges. Investors in Great Britain and France in a financial panic dumped securities indiscriminately. On July 31, 1914, four days before England declared war, the New York Stock Exchange closed its doors to keep the bottom from dropping out of the market.
Commodity price levels began at once to get out of whack. Countries which had wheat to spare—particularly the U. S., which was blessed with a bumper crop in 1914—suddenly discovered themselves in a strong seller's market, with the price per bushel rising from 85¢ in July to $1.28 in December. Rye went up; so did lard; so did sugar. But no general inflation of prices occurred immediately. It was as if someone had turned on a strange magnetic current which attracted certain commodities, repelled others.
Among commodities that rose in price were most of the metals. Copper soared from 13¢ a pound in early 1914 to 35¢ in 1917. But as wheat, sugar and copper went up, cotton (little of which was used for gun cotton) fell from 13¢ a pound to 8¢ in six months. Coffee and tobacco followed the price pattern set by cotton. Cotton piled up in U. S. warehouses, coffee clogged the docks of Santos in Brazil.
There were two reasons for this: 1) The warring nations were forced to get along with old clothes, to drink coffee substitutes, to cut down smoking. But they desperately needed food and war supplies. The relative demand for various goods had completely changed. 2) The costs of transportation changed just as radically. There were few ships available to carry cotton, coffee and tobacco. More important, the cost of insuring these staples in transit through mine-and-submarine-infested waters rose to affect commerce in the same way as if new tariff barriers had been erected. Rubber, for example, zoomed to 90¢ a pound in New York during the War, but in Singapore, it brought growers only 20¢ wholesale.