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diff --git a/.gitattributes b/.gitattributes new file mode 100644 index 0000000..6833f05 --- /dev/null +++ b/.gitattributes @@ -0,0 +1,3 @@ +* text=auto +*.txt text +*.md text diff --git a/17294-8.txt b/17294-8.txt new file mode 100644 index 0000000..3f99763 --- /dev/null +++ b/17294-8.txt @@ -0,0 +1,6592 @@ +The Project Gutenberg EBook of Essays in Liberalism, by Various + +This eBook is for the use of anyone anywhere at no cost and with +almost no restrictions whatsoever. You may copy it, give it away or +re-use it under the terms of the Project Gutenberg License included +with this eBook or online at www.gutenberg.org + + +Title: Essays in Liberalism + Being the Lectures and Papers Which Were Delivered at the + Liberal Summer School at Oxford, 1922 + +Author: Various + +Release Date: December 12, 2005 [EBook #17294] + +Language: English + +Character set encoding: ISO-8859-1 + +*** START OF THIS PROJECT GUTENBERG EBOOK ESSAYS IN LIBERALISM *** + + + + +Produced by Melissa Er-Raqabi, Jonathan Niehof, Ted Garvin +and the Online Distributed Proofreading Team at +https://www.pgdp.net + + + + + +ESSAYS +IN +LIBERALISM + +_Being the Lectures and Papers which were +delivered at the Liberal Summer School +at Oxford, 1922_ + + +LONDON: 48 PALL MALL +W. COLLINS SONS & CO. LTD. +GLASGOW MELBOURNE AUCKLAND +Copyright 1922 + + +_Manufactured in Great Britain_ + + + + +PREFACE + + +The papers contained in this volume are summaries--in some cases, owing +to the defectiveness of the reports, very much abridged summaries--of a +series of discourses delivered at the Liberal Summer School at Oxford in +the first ten days of August, 1922. In two cases ("The State and +Industry" and "The Machinery of Government") two lectures have been +condensed into a single paper. + +The Summer School was not arranged by any of the official organisations +of the Liberal party, nor was any part of its expenses paid out of party +funds. It was the outcome of a spontaneous movement among a number of +men and women who, believing that Liberalism is beyond all other +political creeds dependent upon the free discussion of ideas, came to +the conclusion that it was desirable to create a platform upon which +such discussion could be carried on, in a manner quite different from +what is usual, or indeed practicable, at ordinary official party +gatherings. From the first the movement received cordial support and +encouragement from the leaders of the party, who were more than content +that a movement so essentially Liberal in character should be carried +on quite independently of any official control. The meetings were +inaugurated by an address by Mr. Asquith, and wound up by a valediction +from Lord Grey, while nearly all the recognised leaders of the party +presided at one or more of the meetings, or willingly consented to give +lectures. In short, while wholly unofficial, the meetings drew together +all that is most vital in modern Liberalism. + +In some degree the Summer School represented a new departure in +political discussion. Most of the lectures were delivered, not by active +politicians, but by scholars and experts whose distinction has been won +in other fields than practical politics. One or two of the speakers +were, indeed, not even professed Liberals. They were invited to speak +because it was known that on their subjects they would express the true +mind of modern Liberalism. Whatever Lord Robert Cecil, for example, may +call himself, Liberals at any rate recognise that on most subjects he +expresses their convictions. + +As a glance at the list of contents will show, the papers cover almost +the whole range of political interest, foreign, domestic, and imperial, +but the greatest emphasis is laid upon the problems of economic and +industrial organisation. Yet, since it is impossible to survey the +universe in ten days, there are large and important themes which remain +unexplored, while many subjects of vital significance are but lightly +touched upon. Perhaps the most notable of these omissions is that of any +treatment of local government, and of the immensely important +subjects--education, public health, housing, and the like--for which +local authorities are primarily held responsible. These subjects are +held over for fuller treatment in later schools; and for that reason two +papers--one on local government and one on education--which were +delivered at Oxford have not been included in the present volume. + +It must be obvious, from what has been said above, that these papers +make no pretence to define what may be called an official programme or +policy for the Liberal party. It was with study rather than with +programme-making that the School was concerned, and its aim was the +stimulation of free inquiry rather than the formulation of dogmas. Every +speaker was, and is, responsible for the views expressed in his paper, +though not for the form which the abridged report of it has assumed; and +there are doubtless passages in this book which would not win the assent +of all Liberals, for Liberalism has always encouraged and welcomed +varieties of opinion. + +Nevertheless, taken as a whole, these papers do fairly represent the +outlook and temper of modern Liberalism. And the candid reader will not +fail to recognise in them a certain unity of tone and temper, in spite +of the diversity of their authorship and subject-matter. Whether the +subject is foreign politics, or imperial problems, or government, or +industry, the same temper shows itself--a belief in freedom rather than +in regimentation; an earnest desire to substitute law for force; a +belief in persuasion rather than in compulsion as the best mode of +solving difficult problems; an eagerness to establish organised methods +of discussion and co-operation as the best solvent of strife, in +international relations and in industrial affairs quite as much as in +the realm of national politics, to which these methods have long since +been applied. + +That is the spirit of modern Liberalism, which gives unity to the +diversity of this little volume. As has often been said, Liberalism is +an attitude of mind rather than a body of definitely formulated +doctrine. It does not claim to know of any formula which will guide us +out of all our troubles, or of any panacea that will cure every social +ill. It recognises that we are surrounded in every field of social and +political life by infinitely difficult problems for which there is no +easy solution. It puts its trust in the honest inquiry and thought of +free men who take their civic responsibilities seriously. + + + + +CONTENTS + + PAGE +Preface v + +The League of Nations and the +Rehabilitation of Europe _Rt. Hon. Lord Robert Cecil_ 1 + +The Balance of Power _Professor A.F. Pollard_ 19 + +International Disarmament _Sir Frederick Maurice_ 37 + +Reparations and Inter-Allied Debt _John Maynard Keynes_ 51 + +The Outlook for National Finance _Sir Josiah Stamp_ 59 + +Free Trade _Rt. Hon. J.M. Robertson_ 74 + +India _Sir Hamilton Grant_ 92 + +Egypt _J.A. Spender_ 111 + +The Machinery of Government _Ramsay Muir_ 120 + +The State and Industry _W.T. Layton_ 145 + +The Regulation of Wages _Professor L.T. Hobhouse_ 165 + +Unemployment _H.D. Henderson_ 176 + +The Problem of the Mines _Arnold D. McNair_ 194 + +The Land Question _A.S. Comyns Carr_ 212 + +Agricultural Questions _Rt. Hon. F.D. Acland_ 227 + + + + +THE LEAGUE OF NATIONS AND THE REHABILITATION OF EUROPE + +BY THE RT. HON. LORD ROBERT CECIL + +K.C., M.P., Assistant Secretary of State for Foreign Affairs, 1918. +Minister of Blockade, 1916-1918. Representative of Union of South Africa +at Assembly of League of Nations. + + +Lord Robert Cecil said:--I ought to explain that I am here rather by +accident. The speaker who was to have addressed you was my great +personal friend, Professor Gilbert Murray, and you have greatly suffered +because he is not present. He is prevented by being at Geneva on a +matter connected with the League, and he suggested that I might take his +place. I was very glad to do so, for, let me say quite frankly, I am +ready to advocate the League of Nations before any assembly, certainly +not least an assembly of Liberals. But not only an assembly of +Liberals--I should be ready to advocate it even before an assembly of +"Die-Hards." + +Your chairman has said, and said truly, that the League is not a party +question. We welcome, we are anxious for support from every one. We have +seen in another great country the very grave danger that may accrue to +the cause of the League if it unhappily becomes identified with party +politics. We welcome support, yes, I will say even from the Prime +Minister; indeed no one will reject the support of the Prime Minister of +England for any cause. I am bound to admit when I first read the speech +to which reference has already been made, I was a little reminded of the +celebrated letter of Dr. Johnson to Lord Chesterfield. Lord Chesterfield +only began to recognise the value of Johnson's works when Johnson had +already succeeded, and in one of the bitter phrases Dr. Johnson then +used he said, "Is not a patron one who looks with unconcern on a man +struggling for life in the water, and when he has reached ground +incommodes him with help?" That was a passing phase in my mind, and I am +a little ashamed of it, because, after all, we cannot say the League has +reached ground as yet. We need and are grateful for the help of any one +who will genuinely come to its assistance. I hope we may look not only +for words, but for deeds. The League needs all the support it can get in +the very perilous and menacing times which are before us. I was glad to +note that the Government has announced--it is one of the great test +questions--that not only is it in favour of the entry of Germany into +the League, but it would support the election of Germany to the Council +of the League. That is an earnest of what we trust may be a real League +policy from the Government of this country. And yet, though I have +thought it right to emphasise the non-party aspect of this question, I +am conscious, and I am sure all of you are, there are two ways in which +the League is regarded. It is not only that, as your chairman would +say, some people have more faith than others, but there is really a +distinct attitude of mind adopted by some supporters of the League from +that adopted by others. + + +THE TWO VIEWS OF THE LEAGUE + +There is what I may call the empirical view of the League. There are +those of us in this country, and indeed all over the world, who, +profoundly impressed with the horrors of war, hating war from the bottom +of their hearts as an evil thing--a company which must include, as far +as I can see, all Christian men and women--these people, impressed with +the horrors of war, look about for some means of keeping it away, some +safeguard against its renewal. And they say: "We have tried everything +else, we have tried the doctrine of the preparation for war as a great +safeguard of peace; we have tried the doctrine of the Balance of Power; +we have tried the doctrine of making one State or group of States so +powerful that it can enforce its will on the rest of the world. We have +tried all these expedients, and we are driven to the conclusion that +they lead not to peace, but to war. Is there anything else?" And then +they come quite legitimately to the League as their last hope of +preserving the peace of the world. I was talking to a distinguished +Frenchman the other day, and that was his attitude. It is the attitude +of a great many people. In my judgment it is quite sound as far as it +goes. But it is not inspiring. It depends in the last resort merely on +a frank appeal to the terrors of mankind. + +Against that view you may set the more fundamental way of approaching +this question. You may say if you are to have peace in the world it is +not enough merely to provide safeguards against war. You must aim at +creating a new international spirit, a new spirit in international +affairs; you must build from the very foundations. That is the positive +as opposed to the negative way of approaching this question. It is not +enough to cast out the war spirit and leave its habitation swept and +garnished. You have to replace the war spirit by a spirit of +international co-operation. And that is the way of regarding this great +movement which some people think can be disposed of by describing it as +idealism--a favourite term of abuse, I learn, now, but which seems to me +not only good politics and good morality, but common sense as well. + + +THE NEGATIVE AND THE POSITIVE + +These two points of view do represent undoubtedly fundamental +differences of political attitude, and you will find that the two sets +of advocates or supporters of the League whom I have tried to describe, +will inevitably regard with different emphasis the provisions of the +Covenant, and even the achievements of the League. For if you read the +Covenant you will find two sets of provisions in that document. It does +recognise the two schools, as it were, that I have been describing. It +has a set of provisions which deal with the enforcement, the +safeguarding of peace, and a set of provisions which deal with the +building up of international co-operation. You will notice the two sets +of provisions. There are those aiming directly at the settlement of +disputes without war. This is the central part of the League. It is the +first thing before you can hope to do anything else. Before you can +begin to build up your international spirit you must get rid as far as +you can of the actual menace of war; and in that sense this is the +central part of the Covenant. But, in my view, the most enduring and +perhaps the most important part is that set of provisions which cluster +round the group of articles beginning with Article 10 perhaps, certainly +Article 12, and going on to Article 17--the group which says in effect +that before nations submit their disputes to the arbitrament of war they +are bound to try every other means of settling their differences. It +lays down first the principle that every dispute should come to some +kind of arbitration, either by the new Court of International +Justice--one of the great achievements of the League--or discussion +before a specially constituted Arbitration Court, or failing both, then +discussion before the Council of the League; and Articles 15 and 16 +provide that until that discussion has taken place, and until adequate +time has been allowed for the public opinion of the world to operate on +the disputants as the result of that examination, no war is to take +place, and if any war takes place the aggressor is to be regarded as +perhaps what may be called an international outlaw. + +Before you begin to build you must have freedom from actual war, and +the provisions have been effective. They are not merely theoretic. I am +not sure whether it is generally recognised, even in so instructed an +assembly as this, how successful these provisions have actually been in +practice. Let me give you briefly two illustrations: the dispute between +Sweden and Finland, and the much more urgent case of the dispute between +Serbia and Albania. In the first case you had a dispute about the +possession of certain islands in the Baltic. It was boiling up to be a +serious danger to the peace of the world. It was referred to the League +for discussion. It was before the existence of the International Court. +A special tribunal was constituted. The matter was threshed out with +great elaboration; a decision was come to which, it is interesting to +observe, was a decision against the stronger of the two parties. It was +accepted, not with enthusiasm by the party that lost, but with great +loyalty. It has been adopted, worked out in its details by other organs +of the League, and as far as one can tell, as far as it is safe to +prophesy about anything, it has absolutely closed that dispute, and the +two countries are living in a greater degree of amity than existed +before the dispute became acute. + +But the Albanian case is stronger. You had a very striking case: a small +country only just struggling into international existence. Albania had +only just been created before the war as an independent State, and +during the war its independence had in effect vanished. The first thing +that happened was its application for membership of the League. That +was granted, and thereby Albania came into existence really for the +first time as an independent State. Then came its effort to secure the +boundaries to which it was entitled, which had been provisionally +awarded to it before the war. While that dispute was still unsettled, +its neighbour, following some rather disastrous examples given by +greater people in Europe, thought to solve the question by seizing even +more of the land of Albania than it already occupied. Thereupon the +Articles of the Covenant were brought into operation. The Council was +hastily summoned within a few days. It was known that this country was +prepared to advocate before that Council the adoption of the coercive +measures described in Article 16. The Council met, and the aggressive +State immediately recognised that as a member of the League it had no +course open but to comply with its obligations, and that as a prudent +State it dared not face the danger which would be caused to it by the +operation of Article 16. Immediately, before the dispute had actually +been developed, before the Council, the Serbians announced that they +were prepared to withdraw from Albanian territory, and gave orders to +their troops to retire beyond the boundary. Let us recognise that this +decision having been come to, it was carried out with absolute loyalty +and completeness. The troops withdrew. The territory was restored to +Albania without a hitch. No ill-feeling remains behind, and the next +thing we hear is that a commercial treaty is entered into between the +two States, so that they can live in peace and amity together. + + +THE SPIRIT OF THE LEAGUE + +I want to emphasise one point about these two cases. It is not so much +that the coercive powers provided in the Covenant were effectively used. +In Sweden and Finland they never came into the question at all, and in +the other case there was merely a suggestion of their operation. What +really brought about a settlement of these two disputes was that the +countries concerned really desired peace, and were really anxious to +comply with their obligations as members of the League of Nations. That +is the essential thing--the League spirit. And if you want to see how +essential it is you have to compare another international incident: the +dispute between Poland and Lithuania, where the League spirit was +conspicuous by its absence. There you had a dispute of the same +character. But ultimately you did secure this: that from the date of the +intervention of the League till the present day--about two years--there +has been no fighting; actual hostilities were put an end to. Though that +is in itself an immensely satisfactory result, and an essential +preliminary for all future international progress, yet one must add that +the dispute still continues, and there is much recrimination and +bitterness between the two countries. The reason why only partial +success has been attained is because one must say Poland has shown a +miserable lack of the true spirit of the League. + +Let me turn to the other parts of the Covenant--those which aim +directly at building up international co-operation. I am not sure that +it is always sufficiently realised that that is not only an implicit but +also an explicit object of the Covenant--that it is the main purpose for +which the League exists. International co-operation are the very first +words of the preamble to the Covenant. This is the fundamental idea I +cannot insist on too strongly, because it does really go down to the +very foundations of my whole creed in political matters. International +co-operation, class co-operation, individual co-operation--that is the +essential spirit if we are to solve the difficulties before us. Let me +remind you of the two instances of the action of the League in dealing +with the threat of epidemics to Europe. A conference was called at +Washington to consider what could be done to save Europe from the danger +of epidemics coming from the East. What is interesting is that in that +conference you had present not only members of the League considering +and devising means for the safety of Europe, but you had representatives +of Germany and Russia--a splendid example of the promotion of +international co-operation extending even beyond the limits of the +membership of the League. Admirable work was done. All countries +co-operated quite frankly and willingly under the presidency of a +distinguished Polish scientist. + +That is one example of what we mean by international co-operation. +Perhaps an even more striking example was the great work of Dr. Nansen +in liberating the prisoners of war who were in Russia. He was entrusted +with the work on behalf of the League. The prisoners of war belonged to +all nationalities, including our enemies in the late war. He +accomplished his work because he went about it in the true spirit of the +League, merely anxious to promote the welfare of all, leaving aside all +prejudices whether arising from the war or from any other cause. Dr. +Nansen is in my judgment the incarnation of the spirit of the League, +and his work, immensely successful, restored to their homes some 350,000 +persons, and he did it for less money than he originally estimated it +would cost. + +Do not put me down as a facile optimist in this matter. In the matter of +international co-operation we have a long way to go before we reach our +goal, and we can already see one or two serious failures. I deeply +deplore that last year the League found itself unable, through the +instructions given by the Governments which composed it, to do anything +effective on behalf of the famine in Russia. It was a most deplorable +failure for the League, and still more deplorable for this country. It +was a great opportunity for us to show that we really did mean to be +actuated by a new spirit in international affairs, and that we did +recognise that the welfare of all human beings was part--if you like to +put it so--of our national interests. We failed to make that +recognition. We have been trying feebly and unsuccessfully to repair +that great mistake ever since, and for my part I do not believe there is +any hope of a solution of the Russian difficulty until we absolutely +acknowledge the failure we then made, and begin even at this late hour +to retrace the false step we then took. + +I could give other instances of failure, but I do not wish to depress +you, and there are cheering things we may look at. It is a matter of +great relief and congratulation that the policy of mandates really does +appear to be becoming effective, and one of the greatest activities of +the League. Nothing is better than the conception which the mandate +clause embodies, that the old ideas of conquest are to be put aside; +that you are not to allow nations to go out and take chunks of territory +for themselves; that they must hold new territory not for themselves, +but on behalf of and for the benefit of mankind at large. This is at the +bottom of mandates. Since I am speaking on behalf of Professor Murray, I +ought to remind you of the provisions of the Covenant for the protection +of racial linguistic minorities, and minorities in different countries. +It has not yet become an effective part of the machinery of the League, +but I look forward to the time when we shall have established the +doctrine that all racial minorities are entitled to be treated on a +footing absolutely equal with other nationals of the country in which +they live. If that could be established, one of the great difficulties +in the way of international co-operation in the spirit of peace will be +removed. + + +THE MISTAKE OF VERSAILLES + +These are the two aspects I wanted to bring before you. If we are to get +down to the root of the matter; if we are to uproot the old jungle +theory of international relations, we must recognise that the chief +danger and difficulty before us is what may be described as excessive +nationalism. We have to recognise in this and other countries that a +mere belief in narrow national interests will never really take you +anywhere. You must recognise that humanity can only exist and prosper as +a whole, and that you cannot separate the nation in which you live, and +say you will work for its prosperity and welfare alone, without +considering that its prosperity and welfare depend on that of others. +And the differences on that point go right through a great deal of the +political thought of the day. + +Take the question of reparations. I am not going to discuss in detail +what ought to be done in that difficult and vexed question, but I want +to call your attention to the mistake which was originally made, and +which we have never yet been able to retrieve. The fundamental error of +Versailles was the failure to recognise that even in dealing with a +conquered enemy you can only successfully proceed by co-operation. That +was the mistake--the idea that the victorious Powers could impose their +will without regard to the feelings and desires and national sentiment +of their enemy, even though he was beaten. For the first time in the +history of peace conferences, the vanquished Power was not allowed to +take part in any real discussion of the terms of the treaty. The +attitude adopted was, "These are our terms, take or leave them, but you +will get nothing else." No attempt was made to appreciate, or even +investigate the view put forward by the Germans on that occasion. And +last, but not least, they were most unfortunately excluded from +membership of the League at that time. I felt profoundly indignant with +the Germans and their conduct of the war. I still believe it was due +almost exclusively to the German policy and the policy of their rulers +that the war took place, and that it was reasonable and right to feel +profound indignation, and to desire that international misdeeds of that +character should be adequately punished. But what was wrong was to think +that you could as a matter of practice or of international ethics try to +impose by main force a series of provisions without regard to the +consent or dissent of the country on which you were trying to impose +them. That is part of the heresy that force counts for everything. I +wish some learned person in Oxford or elsewhere would write an essay to +show how little force has been able to achieve in the world. And the +curious and the really remarkable thing is that it was this heresy which +brought Germany herself to grief. It is because of the false and immoral +belief in the all-powerfulness of force that Germany has fallen, and yet +those opposed to Germany, though they conquered her, adopted only too +much of her moral code. + +It was because the Allies really adopted the doctrine of the mailed fist +that we are now suffering from the terrible economic difficulties and +dangers which surround us. I venture to insist on that now, because +there are a large number of people who have not abandoned that view. +There are still a number of people who think the real failure that has +been committed is not that we went wrong, as I think, in our +negotiations at Versailles, but that we have not exerted enough force, +and that the remedy for the present situation is more threats of force. +I am sure it won't answer. I want to say that that doctrine is just as +pernicious when applied to France as when applied to Germany. You have +made an agreement. You have signed and ratified a treaty; you are +internationally bound by that treaty. It is no use turning round and +with a new incarnation of the policy of the mailed fist threatening one +of your co-signatories that they are bound to abandon the rights which +you wrongly and foolishly gave to them under that treaty. + +I am against a policy based on force as applied to Germany. I am equally +opposed to a policy based on force as applied to France. If we really +understand the creed for which we stand, we must aim at co-operation all +round. If we have made a mistake we must pay for it. If we are really +anxious to bring peace to the world, and particularly to Europe, we must +be prepared for sacrifices. We have got to establish economic peace, and +if we don't establish it in a very short time we shall be faced with +economic ruin. In the strictest, most nationalistic interests of this +country, we have to see that economic war comes to an end. We have got +to make whatever concessions are necessary in order to bring that peace +into being. + + +ECONOMIC PEACE + +That is true not only of the reparation question; it is true of our +whole economic policy. We have been preaching to Europe, and quite +rightly, that the erection of economic barriers between countries is a +treachery to the whole spirit of the League of Nations, and all that it +means, and yet with these words scarcely uttered we turn round and pass +through Parliament a new departure in our economic system which is the +very contradiction of everything we have said in international +conference. + +The Safeguarding of Industries Act is absolutely opposed to the whole +spirit and purpose which the League of Nations has in view. A reference +was made by your chairman to Lord Grey, and I saw in a very +distinguished organ of the Coalition an attack on his recent speech. We +are told that he ought not at this crisis to be suggesting that the +present Government is not worthy of our confidence, but how can we trust +the present Government? How is it possible to trust them when one finds +at Brussels, at Genoa, at the Hague, and elsewhere they preach the +necessity of the economic unity of Europe, and then go down to the House +of Commons and justify this Act on the strictest, the baldest, the most +unvarnished doctrine of economic particularism for this country? Nor +does it stop there. I told you just now that for me this doctrine on +which the League is based goes right through many other problems than +those of a strictly international character. You will never solve +Indian or Egyptian difficulties by a reliance on force and force alone. +I believe that the deplorable, the scandalous condition to which the +neighbouring island of Ireland has been reduced is largely due to the +failure to recognise that by unrestricted unreasoning, and sometimes +immoral force, you cannot reach the solution of the difficulties of that +country. + +And in industry it is the same thing. If you are really to get a +solution of these great problems, depend upon it you will never do it by +strikes and lock-outs. I am an outsider in industrial matters. I am +reproached when I venture to say anything about them with the +observation that I am no business man. I can only hope that in this case +lookers-on may sometimes see most of the game. But to me it is +profoundly depressing when I see whichever section of the industrial +world happens to have the market with it--whether employers or +wage-earners--making it its only concern to down the other party as much +as it can. You will never reach a solution that way. You have to +recognise in industrial as in international affairs that the spirit of +co-operation, the spirit of partnership, is your only hope of salvation. + + +THE TWO CAUSES OF UNREST + +What is the conclusion of what I have tried to say to you? There are at +the present time two great causes of fighting and hostility. There used +to be three. There was a time when men fought about religious doctrine, +and though I do not defend it, it was perhaps less sordid than some of +our fights to-day. Now the two great causes of fighting are greed and +fear. Generally speaking, I think we may say that greed in international +matters is a less potent cause of hostility than fear. The disease the +world is suffering from is the disease of fear and suspicion. You see it +between man and man, between class and class, and most of all between +nation and nation. People reproach this great country and other great +countries with being unreasonable or unwilling to make concessions. If +you look deeply into it you will find always the same cause. It is not +mere perversity; it is fear and fear alone that makes men unreasonable +and contentious. It is no new thing; it has existed from the foundation +of the world. The Prime Minister the other day said, and said quite +truly, that the provisions of the Covenant, however admirable, were not +in themselves sufficient to secure the peace of the world. He made an +appeal, quite rightly, to the religious forces and organisations to +assist. I agree, but after all something may be done by political +action, and something by international organisation. In modern medicine +doctors are constantly telling us they cannot cure any disease--all they +can do is to give nature a chance. No Covenant will teach men to be +moral or peace-loving, but you can remove, diminish, or modify the +conditions which make for war, and take obstacles out of the way of +peace. We advocate partnership in industry and social life. We advocate +self-government, international co-operation. We recognise that these are +no ends in themselves; they are means to the end; they are the +influences which will facilitate the triumph of the right and impede the +success of the wrong. + +But looking deeper into the matter, to the very foundations, we +recognise, all of us, the most devoted adherents of the League, and all +men of goodwill, that in the end we must strive for the brotherhood of +man. We admit we can do comparatively little to help it forward. We +recognise that our efforts, whether by covenant or other means, must +necessarily be imperfect; but we say, and say rightly, that we have been +told that perfect love casteth out fear, and that any step towards that +love, however imperfect, will at any rate mitigate the terrors of +mankind. + + + + +THE BALANCE OF POWER + +BY PROFESSOR A.F. POLLARD + +Hon. Litt.D.; Fellow of All Souls' College, Oxford; F.B.A.; Professor of +English History in the University of London; Chairman of the Institute +of Historical Research. + + +Professor Pollard said:--The usual alternative to the League of Nations, +put forward as a means of averting war by those who desire or profess to +desire permanent peace, but dislike or distrust the League of Nations, +is what they call the Balance of Power. It is a familiar phrase; but the +thing for which the words are supposed to stand, has, if it can save us +from war, so stupendous a virtue that it is worth while inquiring what +it means, if it has any meaning at all. For words are not the same as +things, and the more a phrase is used the less it tends to mean: verbal +currency, like the coinage, gets worn with use until in time it has to +be called in as bad. The time has come to recall the Balance of Power as +a phrase that has completely lost the value it possessed when originally +it was coined. + +Recent events have made an examination of the doctrine of the Balance of +Power a matter of some urgency. The Allies who won the war concluded a +pact to preserve the peace, but in that pact they have not yet been able +to include Germany or Russia or the United States, three Powers which +are, potentially at any rate, among the greatest in the world. So, some +fifty years ago, Bismarck, who won three wars in the mid-Victorian age, +set himself to build up a pact of peace. But his Triple Alliance was not +only used to restrain, but abused to repress, the excluded Powers; and +that abuse of a pact of peace drove the excluded Powers, France and +Russia, into each other's arms. There resulted the Balance of Power +which produced the war we have barely survived. And hardly was the great +war fought and won than we saw the wheel beginning to revolve once more. +The excluded Powers, repressed or merely restrained, began to draw +together; others than Turkey might gravitate in the same direction, +while the United States stands in splendid isolation as much aloof as we +were from the Triple Alliance and the Dual Entente a generation ago. +Another Balance of Power loomed on the horizon. "Let us face the facts," +declared the _Morning Post_ on 22nd April last, "we are back again to +the doctrine of the Balance of Power, whatever the visionaries and the +blind may say." I propose to deal, as faithfully as I can in the time at +my disposal, with the visionaries and the blind--when we have discovered +who they are. + +By "visionaries" I suppose the _Morning Post_ means those who believe in +the League of Nations; and by the "blind" I suppose it means them, too, +though usually a distinction is drawn between those who see too much and +those who cannot see at all. Nor need we determine whether those who +believe in the Balance of Power belong rather to the visionaries or to +the blind. A man may be receiving less than his due when he is asked +whether he is a knave or a fool, because the form of the question seems +to preclude the proper answer, which may be "both." Believers in the +Balance of Power are visionaries if they see in it a guarantee of peace, +and blind if they fail to perceive that it naturally and almost +inevitably leads to war. The fundamental antithesis is between the +Balance of Power and the League of Nations. + + +BALANCE OR LEAGUE? + +That antithesis comes out wherever the problem of preserving the peace +of the world is seriously and intelligently discussed. Six years ago, +when he began to turn his attention to this subject, Lord Robert Cecil +wrote and privately circulated a memorandum in which he advocated +something like a League of Nations. To that memorandum an able reply was +drafted by an eminent authority in the Foreign Office, in which it was +contended that out of the discussion "the Balance of Power emerges as +the fundamental factor." That criticism for the time being checked +official leanings towards a League of Nations. But the war went on, +threatening to end in a balance of power, which was anything but welcome +to those who combined a theoretical belief in the Balance of Power with +a practical demand for its complete destruction by an overwhelming +victory for our Allies and ourselves. Meanwhile, before America came +in, President Wilson was declaring that, in order to guarantee the +permanence of such a settlement as would commend itself to the United +States, there must be, not "a Balance of Power but a Community of +Power." + +Opinion in England was moving in the same direction. The League of +Nations Society (afterwards called "Union") had been formed, and at a +great meeting on 14th May, 1917, speeches advocating some such league as +the best means of preventing future wars were delivered by Lord Bryce, +General Smuts, the Archbishop of Canterbury, Lord Hugh Cecil, and +others. Labour was even more emphatic; and, responding to popular +opinion, the Government, at Christmas, 1917, appointed a small committee +to explore the historical, juridical, and diplomatic bearings of the +suggested solution. A brief survey sufficed to show that attempts to +guarantee the peace of the world resolved themselves into three +categories: (1) a Monopoly of Power, (2) Balance of Power, and (3) +Community of Power. Rome had established the longest peace in history by +subjugating all her rivals and creating a _Pax Romana_ imposed by a +world-wide Empire. That Empire lasted for centuries, and the idea +persisted throughout the middle ages. In modern times Philip II. of +Spain, Louis XIV. of France, Napoleon, and even the Kaiser were +suspected of attempting to revive it; and their efforts provoked the +counter idea, first of a Balance of Power, and then in these latter days +of a Community of Power. The conception of a Monopoly of Power was by +common consent abandoned as impossible and intolerable, after the rise +of nationality, by all except the particular aspirants to the monopoly. +The Balance of Power and the Community of Power--in other words, the +League of Nations--thus became the two rival solutions of the problem of +permanent peace. + + +THE THEORY OF BALANCE + +The discussion of their respective merits naturally led to an inquiry +into what the alternative policies really meant. But inasmuch as the +Foreign Office committee found itself able to agree in recommending some +form of League of Nations, the idea of the Balance of Power was not +subjected to so close a scrutiny or so searching an analysis as would +certainly have been the case had the committee realised the possibility +that reaction against an imperfect League of Nations might bring once +more to the front the idea of the Balance of Power. The fact was, +however, elicited that the Foreign Office conception of the Balance of +Power is a conception erroneously supposed to have been expressed by +Castlereagh at the time of the Congress of Vienna, and adopted as the +leading principle of nineteenth century British foreign policy. + +Castlereagh was not, of course, the author of the phrase or of the +policy. The phrase can be found before the end of the seventeenth +century; and in the eighteenth the policy was always pleaded by +potentates and Powers when on the defensive, and ignored by them when in +pursuit of honour or vital interests. But Castlereagh defined it afresh +after the colossal disturbance of the balance which Napoleon effected; +and he explained it as "a just repartition of force amongst the States +of Europe." They were, so to speak, to be rationed by common agreement. +There were to be five or six Great Powers, whose independence was to be +above suspicion and whose strength was to be restrained by the jealous +watchfulness of one another. If any one State, like France under +Napoleon, grew too powerful, all the rest were to combine to restrain +it. + +Now, there is a good deal in common between Castlereagh's idea and that +of the League of Nations. Of course, there are obvious differences. +Castlereagh's Powers were monarchies rather than peoples; they were +limited to Europe; little regard was paid to smaller States, whose +independence sometimes rested on no better foundation than the inability +of the Great Powers to agree about their absorption; and force rather +than law or public opinion was the basis of the scheme. But none of +these differences, important though they were, between Castlereagh's +Balance of Power and the League of Nations is so fundamental as the +difference between two things which are commonly regarded as identical, +viz., Castlereagh's idea of the Balance of Power and the meaning which +has since become attached to the phrase. There are at least two senses +in which it has been used, and the two are wholly incompatible with one +another. The League of Nations in reality resembles Castlereagh's +Balance of Power more closely than does the conventional notion of that +balance; and a verbal identity has concealed a real diversity to the +confusion of all political thought on the subject. + +Castlereagh's Balance of Power is what I believe mathematicians call a +multiple balance. It was not like a pair of scales, in which you have +only two weights or forces balanced one against the other. It was rather +like a chandelier, in which you have five or six different weights +co-operating to produce a general stability or equilibrium. In +Castlereagh's scheme it would not much matter if one of the weights were +a little heavier than the others, because there would be four or five of +these others to counterbalance it; and his assumption was that these +other Powers would naturally combine for the purpose of redressing the +balance and preserving the peace. But a simple balance between two +opposing forces is a very different thing. If there are only two, you +have no combination on which you can rely to counteract the increasing +power of either, and the slightest disturbance suffices to upset the +balance. Castlereagh's whole scheme therefore presupposed the continued +and permanent existence of some five or six great Powers always +preserving their independence in foreign policy and war, and +automatically acting as a check upon the might and ambition of any +single State. + + +THE CHANGE SINCE CASTLEREAGH + +Now, it was this condition, essential to the maintenance of +Castlereagh's Balance of Power, which completely broke down during the +course of the nineteenth century. Like most of the vital processes in +history, the change was gradual and unobtrusive, and its significance +escaped the notice of politicians, journalists, and even historians. Men +went on repeating Castlereagh's phrases about the Balance of Power +without perceiving that the circumstances, which alone had given it +reality, had entirely altered. The individual independence and automatic +action of the Great Powers in checking the growing ambitions and +strength of particular States were impaired, if not destroyed, by +separate Alliances, which formed units into groups for the purposes of +war and foreign policy, and broke up the unity of the European system, +just as a similar tendency threatens to break up the League of Nations. +There was a good deal of shifting about in temporary alliances which +there is no need to recount; but the ultimate upshot was the severance +of Europe into the two great groups with which we are all familiar, the +Triple Alliance of Germany, Austria, and Italy on one side, and the +Triple Entente between Russia, France, and Great Britain on the other. +The multiple Balance of Power was thus changed into a simple balance +between two vast aggregations of force, and nothing remained outside to +hold the balance, except the United States, which had apparently +forsworn by the Monroe Doctrine the function of keeping it even. + +And yet men continued to speak of the Balance of Power as though there +had been no change, and as though Castlereagh's ideas were as applicable +to the novel situation as they had been to the old! That illustrates +the tyranny of phrases. Cynics have said that language is used to +conceal our thoughts. It is difficult to resist the conclusion that +phrases are used to save us the trouble of thinking. We are always +giving things labels in order to put them away in their appropriate +pigeon-holes, and then we talk about the labels without thinking about +them, and often forgetting (if we ever knew) the things for which they +stand. So we Pelmanised the Balance of Power, and continued to use the +phrase without in the least troubling to ask what it means. When I asked +at the Foreign Office whether diplomatists meant by the Balance of Power +the sort of simple balance between two great alliances like the Triple +Alliance and the Triple Entente, I was told "yes"; and there was some +surprise--since the tradition of Castlereagh is strong in the +service--when I pointed out that that was an entirely different balance +from that of which Castlereagh had approved as a guarantee of peace. You +remember the Cheshire cat in _Alice in Wonderland_--an excellent +text-book for students of politics--and how the cat gradually faded away +leaving only its grin behind it to perplex and puzzle the observer. So +the body and the substance of Castlereagh's Balance of Power passed +away, and still men talk of the grin and look to the phrase to save them +from war. Whether to call them visionaries or the blind, I do not know. + + +MISCHIEVOUS HALLUCINATION + +In either case, it is a mischievous hallucination; for the simple +Balance of Power between two great combinations is not only no guarantee +of peace, but the great begetter of fear, of the race for armaments, and +of war. Consider for a moment. If you want a balance, you want to have +it perfect. What is a perfect balance between two opposing weights or +forces? It is one which the addition of a feather-weight to either scale +will at once and completely upset. Now what will that equipoise produce? +The ease with which the balance may be destroyed will produce either on +one side the temptation to upset it, and on the other fear lest it be +upset, or fear on both sides at once. What indeed was it but this even +balance and consequent fear which produced the race for armaments? And +what does the race for armaments result in but in war? If we want war, +we need only aim at a Balance of Power, and it will do the rest. So far +from being a guarantee of peace, the Balance of Power is a sovereign +specific for precipitating war. + +Of course, there are arguments for a Balance of Power. Plenty of them, +alas! though they are not often avowed. It produces other things than +war. For one thing, it makes fortunes for munition firms. For another, +it provides careers for those who have a taste for fighting or for +military pomp. Thirdly, in order to maintain armies and navies and +armaments, it keeps up taxation and diverts money from social, +educational, and other reforms which some people want to postpone. +Fourthly, it gratifies those who believe that force is the ultimate +sanction of order, and, by necessitating the maintenance of large forces +for defensive purposes, incidentally provides means for dealing with +domestic discontent. Fifthly, it panders to those who talk of prestige +and think that prestige depends upon the size of a nation's armaments. +For the sake of these things many would be willing to take the risk of +war which the Balance of Power involves. But most of those who use the +phrase are unconscious of these motives, and use it as they use many +another phrase, simply because they know not what it means. For, +assuredly, no sane person who had examined the Balance of Power, as it +existed before the war, could ever advocate it as a means of peace. + +Indeed, whenever there has been the prospect of a practical Balance of +Power, its votaries have shown by their action that they knew their +creed was nonsense. The late war, for instance, might have been ended in +1916 on the basis of a Balance of Power. There were a few who believed +that that was the best solution; but they were not our latter-day +believers in the Balance of Power. Their cry was all for a fight to a +finish and a total destruction of the Balance of Power by an +overwhelming victory for the Allies, and their one regret is that a +final blow by Marshal Foch did not destroy the last vestige of a German +army. What is the point of expressing belief in the Balance of Power +when you indignantly repudiate your own doctrine on every occasion on +which you might be able to give it effect? And what is the point of the +present advocacy of the Balance of Power by those who think themselves +neither visionaries nor blind? Do they wish to restore the military +strength of Germany and of Russia and to see an Alliance between them +confronting a Franco-British union, compelled thereby to be militarist +too? Is it really that they wish to be militarists and that the League +of Nations, with its promise of peace, retrenchment, and reform, is to +them a greater evil than the Balance of Power? + + +WHERE THE LINE IS DRAWN + +There is yet another fatal objection to the Balance of Power due to the +change in circumstances since the days of Castlereagh. He could afford +to think only of Europe, but we have to think of the world; and if our +specific has any value it must be of world-wide application. We cannot +proclaim the virtues of the Balance of Power and then propose to limit +it to the land or to any particular continent. Now, did our believers in +the Balance of Power ever wish to see power balanced anywhere else than +on the continent of Europe? That, if we studied history in any other +language than our own, we should know was the gibe which other peoples +flung at our addiction to the Balance of Power. We wanted, they said, to +see a Balance of Power on the continent of Europe, to see one half of +Europe equally matched against the other, because the more anxiously +Continental States were absorbed in maintaining their Balance of Power, +the keener would be their competition for our favour, and the freer +would be our hands to do what we liked in the rest of the world. + +Was that a baseless slander? Let us test it with a question or two. Did +we ever want a Balance of Power at sea? British supremacy, with a +two-to-one or at least a sixteen-to-ten standard was, I fancy, our +minimum requirement. Is British supremacy what we mean by a Balance of +Power? Again, did we ever desire a Balance of Power in Africa, America, +or Asia? We may have talked of it sometimes, but only when we were the +weaker party and feared that another might claim in those continents the +sort of Balance of Power we claimed on the sea. We never spoke of the +Balance of Power in the interests of any nation except ourselves and an +occasional ally. We cannot speak in those terms to-day. If we demand a +Balance of Power on land, we must expect others to claim it at sea; if +we urge it on Europe as a means of peace, we cannot object if others +turn our own argument against us in other quarters of the globe; and +wherever you have a Balance of Power you will have a race for armaments +and the fear of war. + +The Balance of Power is, in fact, becoming as obsolete as the Monopoly +of Power enjoyed by the Roman Empire. It is a bankrupt policy which went +into liquidation in 1914, and the high court of public opinion demands a +reconstruction. The principle of that reconstruction was stated by +President Wilson, a great seer whose ultimate fame will survive the +obloquy in which he has been involved by the exigencies of American +party-politics and the short-sightedness of public opinion in Europe. We +want, he said, a Community of Power, and its organ must be the League of +Nations. Nations must begin to co-operate and cease to counteract. + +I am not advocating the League of Nations except in the limited way of +attempting to show that the Balance of Power is impossible as an +alternative unless you can re-create the conditions of a century ago, +restore the individual independence of a number of fairly equal Powers, +and guarantee the commonwealth of nations against privy conspiracy and +sedition in the form of separate groups and alliances. But there is one +supreme advantage in a Community of Power, provided it remains a +reality, and that is that it need never be used. Its mere existence +would be sufficient to ensure the peace; for no rebel State would care +to challenge the inevitable defeat and retribution which a Community of +Power could inflict. It has even been urged, and I believe it myself, +that Germany would never have invaded Belgium had she been sure that +Great Britain, and still less had she thought that America, would +intervene. It was the Balance of Power that provoked the war, and it was +the absence of a Community of Power which made it possible. + + +BASIS OF SECURITY + +But no one who thinks that power--whether a Monopoly, a Balance, or even +a Community of Power is the ultimate guardian angel of our peace, has +the root of the matter in him. Men, said Burke, are not governed +primarily by laws, still less by force; and behind all power stands +opinion. To believe in public opinion rather than in might excludes the +believer from the regular forces of militarism and condemns him as a +visionary and blind. For advocates of the Balance of Power bear a +striking resemblance to the Potsdam school; and even so moderate a +German as the late Dr. Rathenau declared in his unregenerate days before +the war that Germans were not in the habit of reckoning with public +opinion. Nevertheless, there is a frontier in the world which for a +century and more has enjoyed a security which all the armaments of +Prussian militarism could not give the German Fatherland; and the +absolute security of that frontier rests not upon a monopoly nor a +community, still less upon a balance of power, but on the opinion held +on both sides of that frontier that all power is irrational and futile +as a guarantee of peace between civilised or Christian people. + +Let us look at that frontier for a moment. It is in its way the most +wonderful thing on earth, and it holds a light to lighten the nations +and to guide our feet into the way of peace. It runs, of course, between +the Dominion of Canada and the United States of America across the great +lakes and three thousand miles of prairie; and from the military and +strategic point of view it is probably the worst frontier in the world. +Why then is it secure? Is it because of any monopoly or community or +balance of power? Is it because the United States and the British +Empire are under a common government, or because there is along that +frontier a nicely-balanced distribution of military strength? No, it is +secure, not in spite of the absence of force, but because of the absence +of force; and if you want to destroy the peace of that frontier from end +to end, all you need to do is to send a regiment to protect it, launch a +_Dreadnought_ on those lakes, and establish a balance of power. For +every regiment or warship on one side will produce a regiment or warship +on the other; and then your race for armaments will begin, and the +poison will spread until the whole of America becomes like Europe, an +armed camp of victims to the theory of strategic frontiers and of the +Balance of Power. + +Those theories, their application, and their consequences recently cost +the world thirty million casualties and thousands of millions of pounds +within a brief five years, and yet left the frontiers of Europe less +secure than they were before. Three thousand miles of frontier in North +America have in more than a hundred years cost us hardly a life, or a +limb, or a penny. As we put those details side by side we realise +_quantula regitur mundus sapientia_--with how little wisdom do men rule +the world. Yet the truth was told us long ago that he that ruleth his +spirit is better than he that taketh a city, and we might have learnt by +our experience of the peace that the only conquest that really pays is +the conquest of oneself. + +The real peace of that North American frontier is due to no conquest of +Americans by Canadians or of Canadians by Americans, but to their +conquest of themselves and of that foolish pride of "heathen folk who +put their trust in reeking tube and iron shard." Let us face the facts, +whatever the visionaries and the blind may say. So be it. The war is a +fact, and so is the desolation it has wrought. But that Anglo-American +frontier is also a fact, and so is that century of peace which happily +followed upon the resolution to depend for the defence of that frontier +on moral restraint instead of on military force. Verily, peace hath her +victories not less renowned than those of war. + + +THE ALTERNATIVE + +We have, indeed, to face the facts, and the facts about the Balance of +Power must dominate our deliberations and determine the fate of our +programmes. There may be no more war for a generation, but there can be +no peace with a Balance of Power. There can be nothing better than an +armed truce; and an armed truce, with super-dreadnoughts costing from +four to eight times what they did before the war, is fatal to any +programme of retrenchment and reform. We are weighted enough in all +conscience with the debt of that war without the burden of preparation +for another; and a Balance of Power involves a progressive increase in +preparations for war. + +Unless we can exorcise fear, we are doomed to repeat the sisyphean +cycles of the past and painfully roll our programmes up the hill, only +to see them dashed to the bottom, before we get to the top, by the +catastrophe of war. Fear is fatal to freedom; it is fear which alone +gives militarism its strength, compels nations to spend on armaments +what they fain would devote to social reform, drives them into secret +diplomacy and unnatural alliances, and leads them to deny their just +liberties to subject populations. Fear is the root of reaction as faith +is the parent of progress; and the incarnation of international fear is +the Balance of Power. + + + + +INTERNATIONAL DISARMAMENT + +BY MAJOR-GENERAL SIR FREDERICK MAURICE, K.C.M.G., C.B. + +Director of Military Operations--Imperial General Staff, 1915-16. + + +Sir Frederick Maurice said:--This problem of the reduction of armaments +is one of the most urgent of the international and national problems of +the day. It is urgent in its economic aspect, urgent also as regards its +relation to the future peace of the world. The urgency of its economic +aspect was proclaimed two years ago at the Brussels conference of +financiers assembled by the League of Nations. These experts said quite +plainly and definitely that, so far as they could see, the salvation of +Europe from bankruptcy depended upon the immediate diminution of the +crushing burden of expenditure upon arms. That was two years ago. Linked +up with this question is the whole question of the economic +reconstruction of Europe. Linked up with it also is that deep and grave +problem of reparations. It is no longer the case to-day, if it has ever +been the case since the war, which I doubt, that sober opinion in France +considers it necessary for France to have large military forces in order +to protect her from German aggression in the near future. For the past +two years, however, it has been the custom of those who live upon alarms +to produce the German menace. There is a great body of opinion in +France at this moment which feels that unless France is able to put the +pistol to Germany's head, it will never be able to get a penny out of +Germany. + +You have the further connection of the attitude of America to the +problem. America said, officially through Mr. Hoover and unofficially +through a number of her leading financiers, that she was not ready to +come forward and take her share in the economic restoration of Europe so +long as Europe is squandering its resources upon arms. The connection is +quite definitely and explicitly recognised in the Covenant of the League +of Nations. Article 8 begins: "The principles of the League recognise +that the maintenance of peace requires reduction of national armaments +to the lowest point consistent with national safety, and the enforcement +by common action of international obligations." These words were +promulgated in 1919. Personally, I find myself in complete agreement +with what Lord Robert Cecil said this morning, and what Lord Grey said a +few days ago at Newcastle, that one of the prime causes of the war was +Prussian militarism. By that I mean the influence of that tremendous +military machine, which had been built up through years of labour in +Germany, in moulding the public opinion of that country. + + +A GROUP OF NEW ARMIES + +Well, how do we stand in regard to that to-day? We stand to-day in the +position that the armaments of Germany, Austria, Hungary, Bulgaria, have +all been compulsorily drastically reduced, but in their place you have a +whole group of new armies. You have armies to-day which did not exist +before the war, in Finland, Esthonia, Poland, Lithuania, and +Czecho-Slovakia, and the sum total is that at this moment there are more +armed men in time of peace in Europe than in 1913. Is there no danger +that this machine will mould the minds of some other peoples, just as +the German machine moulded the minds of the Germans? This is the +position as regards the peace establishments of Europe to-day in their +relation to the future peace of the world. What about the economic +position? I have mentioned that certain Powers have had their forces +drastically reduced, and that has brought with it a drastic reduction of +expenditure, but I have before me the naval, military, and air force +estimates of the eight principal Powers in Europe, leaving out Germany, +Austria, and Bulgaria, whose forces have been compulsorily reduced. + +At the economic conference of financiers in Brussels in 1920 it was +mentioned with horror that 20 per cent. of the income of Europe was then +being devoted to arms. I find that to-day 25 per cent. of the total +income of these eight Powers is devoted to arms. I find, further, that +of these eight Powers who have budgeted for a smaller service, only +one--Yugo-Slavia--has managed to balance her budget, and the others have +large deficits which are many times covered by their expenditure on +arms. And this is going on at a time when all these eight nations are +taxed almost up to their limit, when the whole of their industries are +suffering in consequence, and when the danger of bankruptcy, which +horrified the financiers in 1920, is even more imminent. + +That being the case, what has been done in the last few years to remedy +this matter, and why is more not being done? As you all know, this +question is in the forefront of the programme of the League of Nations. +And the League began to deal with it at once. Lord Robert Cecil will +agree with me that the framers of the Covenant, of which he is one of +the chief, could not foresee everything, and they did not foresee at the +time the Covenant was framed, that machinery would be required to deal +with this extraordinarily complex question of armaments. They created an +organisation then called a Permanent Military Command, still in +existence, to advise the Council of the League on all military matters. +But when these gentlemen got to work upon such questions as reduction of +armaments, they at once found themselves dealing with matters entirely +beyond their competence, because into this problem enter problems of +high politics and finance, and a thousand other questions of which +soldiers, sailors, and airmen know nothing whatever. + + +THE LEAGUE'S COMMISSION + +The first step was to remedy an oversight in the machinery, and that was +done at the first meeting of the Assembly. The first meeting of the +Assembly created a temporary mixed commission on armaments, which was +composed of persons of recognised competence in political, social, and +economic matters. It consisted of six members of the old Permanent +Commission, and in addition a number of statesmen, employers, and +representatives of labour. This body started to tackle this grave +question. Before it began the first Assembly of the League had suggested +one line of approach--that there should be an agreement to limit +expenditure; that an attempt should be made to limit armaments by +limiting budgets; and nations were asked to agree that they would not +exceed in the two years following the acceptance of the resolution the +budgeted expenditure on armaments of the current year. + +That proposal did not meet with great success. It was turned down by +seven Powers, notably by France and Spain. On the whole, I think France +and Spain and the other Powers had some reason on their side, because it +is not possible to approach this problem solely from the financial +standpoint. You cannot get a financial common denominator and apply it +to armaments. The varying costs of a soldier in Europe and in Japan have +no relation to each other. The cost of a voluntary soldier in Great +Britain has no relation to the cost of a conscript on the Continent. +Therefore, that line of approach, when applied too broadly, is not +fruitful. I think myself it is quite possible that you may be able to +apply financial limitations to the question of material, the +construction of guns and other weapons of war, because the cost of these +things in foreign countries tends much more to a common level. I think +this is a possible line of approach, but to try to make a reduction of +armaments by reducing budgets on a wholesale scale I do not think will +lead us anywhere at all. I may safely say that for the present that line +of approach has been abandoned. + +The Temporary Mixed Commission got to work, and in its first year, +frankly, I cannot say it did very much. It concerned itself very largely +with the accumulation of information and the collection of statistics, +bearing rather the same relation to world problems as a Royal Commission +does to our domestic problems. By the time the second Assembly met +practically nothing had been done by the Commission. But other people +had been at work, and our own League of Nations Union had put forward a +proposal--a line of approach, rather, I would say, to this +problem--which I for one think is extremely useful. It began by +inquiring as to what armaments were for, which after all is a useful way +of beginning, and the inquiry came to the conclusion that nations +required them for three purposes--to maintain internal order; as a last +resort for the enforcement of law and order; and to protect overseas +possessions. After these purposes were served there was a large residuum +left. That residuum could only be required for one purpose--to protect +the country in question from foreign aggression. When you had gone thus +far in your reasoning, you had obviously got into the zone where +bargaining becomes possible, because it is obvious that by agreement you +can get the force by which a nation is liable to become reduced. That +line of approach received the general blessing at the second Assembly of +the League of Nations. Things began to move, primarily because the +Dominion of South Africa took a keen interest in this problem of the +reduction of armaments, and South Africa appointed Lord Robert Cecil as +its representative, and instructed him to press the matter on, and he +did. The Assembly definitely instructed this temporary mixed Commission +that by the time the third Assembly met plans should be prepared and +concrete proposals put on paper. + + +WASHINGTON + +Soon after that came the Washington Conference--a great landmark in the +history of this problem. For reasons I need not go into in detail, the +naval problem is very much easier than the military or air problem. You +have as the nucleus of naval forces something quite definite and +precise--the battleship--and it also happens that that particular unit +is extremely costly, and takes a long time to build, and no man has yet +ever succeeded in concealing the existence of a battleship. There you +had three important points--a large and important unit in the possession +of everybody concerned, very costly, so that by reducing it you make +great reductions in expenditure. There was no possibility of avoiding an +agreement about the construction of battleships, and it is to these +facts mainly that the happy results of the Washington Conference were +due. + +But for the furtherance of the problem the point is this. The Washington +Conference definitely established the principle of reduction of +armaments on a great ratio. The ratio for battleships between Great +Britain, the United States, Japan, France, and Italy, was settled as to +5, 5, 3, and 1.75. They all agreed on a definite ratio. All agreed to +scrap a certain number of ships, to bring their tonnage down to a +certain figure, and by doing that relatively they were left in the same +position as before, with this advantage--that they at once obtained an +enormous reduction in expenditure on armaments. + +That opened up a new line of approach for the attack on this problem +from the military and air standpoint. And the next development took +place in February this year at the meeting of the Temporary Mixed +Commission on armaments, when the Esher proposals were presented. There +has been a great deal of talk about the Esher proposals, and I am glad +of it, because the one thing wanted in this question is public interest. +The Esher proposals were an endeavour to apply to land armaments this +principle of reduction on a great ratio. And the line taken was this. It +was necessary to find some unit in land armaments which corresponded +with the battleships, and the unit selected by Lord Esher was the +300,000 regular soldiers of the peace armies in France, England, and +Spain. It was selected because it happened to be the number to which the +Austrian army was reduced by treaty, and with that unit he proposed a +ratio for the armies of Europe, which would leave everybody relatively +in much the same position as before, but would obtain an immediate +reduction in numbers of standing armies and a great reduction of +expenditure. + +This proposal was subjected to a great deal of criticism, and I am sorry +to say nine-tenths of the criticism appears to emanate from persons who +have never read the proposal at all. It is a proposal which lends itself +to a great deal of criticism, and the most effective criticism which +could have been applied at the time it was presented was that it put the +cart before the horse, and approached the problem from the wrong +direction, for, as Lord Robert Cecil has said here this morning, what +nations require is security. Some of them have clear ideas as to the way +of obtaining it, but they all want it, and before you can expect people +to reduce their armaments, which are, after all, maintained mainly for +the purpose of providing security, you must give them something that +will take the place of armaments. + + +A GENERAL DEFENSIVE PACT + +In June an important development took place in this Temporary +Commission. It was increased by the addition of a number of statesmen, +and, amongst others, of men who ought to have been on it long ago. Lord +Robert Cecil was added, and he at once proceeded to remedy what was a +real difficulty in Lord Esher's proposals. He put forward a plan for +providing security in the form, as the Assembly of the League had asked, +of a definite written proposal--really a brief treaty. The purport of +that treaty is included in the form of resolutions, which are roughly as +follows:--No scheme for the reduction of armaments can be effective +unless it is general; that in the present state of the world no +Government can accept the responsibility for a serious reduction of +armaments unless it is given some other equally satisfactory guarantee +of the safety of its country; such guarantee can only be found in a +general defensive agreement of all the countries concerned, binding them +all to come to the assistance of any one of them if attacked. + +A general defensive pact, with a proviso! It is obviously unreasonable +to expect the States of the American continent to be ready to come over +at any moment to help in Europe. It is obviously unreasonable to expect +the States of Europe to bind themselves to come and fight in Asia. +Therefore, there was this proviso added that an obligation to come to +the assistance of the attacked country should be limited to those +countries which belonged to the same quarter of the globe. Thus, you +see, you are getting the obligation of the League into regional +application. Personally my own conviction is that this is the line upon +which many of the functions of the League will develop. + +The main point of the situation as it is to-day is that you have got a +committee working out in detail a general pact, which when it is +formulated will be far more complete and satisfactory than the very +general and vague Clause 10 of the Covenant. We have reached the +position when practical proposals are beginning to emerge. What more is +wanted? How can we help on this work? You will have gathered from what I +said that it is my own conviction that with this problem of reduction of +armaments is so closely linked up the problem of economic reconstruction +and reparations that the whole ought to be taken together. I believe one +of the reasons why so little progress has been made is that the economic +problems have been entrusted, with the blessing of our and other +Governments, to perambulating conferences, while the disarmament problem +has been left solely to the League of Nations. I believe if you could +get the whole of these problems considered by one authority--and there +is one obvious authority--progress would be far more rapid. + +There is another matter which concerns us as citizens--the attitude of +our own Government to this question. I was delighted to see recently an +announcement made by a Minister in the House of Commons that the +Government was seriously in favour of a reduction of armaments on a +great ratio. I was delighted to read the other day a speech, to which +reference has already been made, by the Prime Minister. We have had a +great many words on this question. The time has come for action, and +quite frankly the action of our Government in the past two years with +regard to this question has been neutral, and not always one of +benevolent neutrality. Our official representatives at Geneva have been +very careful to stress the difficulties, but up to the present I am +unaware that our Government has ever placed its immense resources as +regards information at the disposal of the one Englishman who has been +striving with all his power and knowledge to get a definite solution. I +believe there is going to be a change; I hope so. In any case, the best +thing we can do is to see that it is changed, and that Lord Robert Cecil +is not left to fight a lone battle. + + +THE APPEAL TO PUBLIC OPINION + +There is something more. There is something wanted from each of us. +Personally, I am convinced myself that this problem is soluble on the +lines by which it is now being approached. I speak to you as a +professional who has given some study to the subject. I am convinced +that on the lines of a general pact as opposed to the particular pact, a +general defensive agreement as opposed to separate alliances, followed +by reduction on a great ratio, the practicability of which has been +proved at Washington, a solution can be reached. Given goodwill--that is +the point. At the last Assembly of the League of Nations a report was +presented by the Commission, of which Lord Robert Cecil was a member, +and it wound up with these words: "Finally, the committee recognises +that a policy of disarmament, to be successful, requires the support of +the population of the world. Limitation of armaments will never be +imposed by Governments on peoples, but it may be imposed by peoples on +Governments." That is absolutely true. How are we going to apply it? +Frankly, myself, I do not see that there is a great deal of value to be +got by demonstrations which demand no more war. I have every sympathy +with their object, but we have got to the stage when we want to get +beyond words to practical resolutions. We want definite concrete +proposals, and you won't get these merely by demonstrations. They are +quite good in their way, but they are not enough. What you want in this +matter is an informed public opinion which sees what is practical and +insists on having it. + +I am speaking to you as one who for a great many years believed +absolutely that preparation for war was the means of securing peace. In +1919--when I had a little time to look round, to study the causes of the +war and the events of the war--I changed my opinion. I then came quite +definitely to the conclusion that preparation for war, carried to the +point to which it had been carried in 1914, was a direct cause of war. I +had to find another path, and I found it in 1919. Lord Robert may +possibly remember that in the early days of the Peace Conference I came +to him and made my confession of faith, and I promised to give him what +little help I could. I have tried to keep my promise, and I believe this +vital problem, upon which not only the economic reconstruction of Europe +and the future peace of the world, but also social development at home +depend, can be solved provided you will recognise that the problem is +very complex; that there is fear to be overcome; that you are content +with what is practical from day to day, and accept each practical step +provided it leads forward to the desired goal. I therefore most +earnestly trust that the Liberal party will take this question up, and +translate it into practical politics. For that is what is required. + + + + +REPARATIONS AND INTER-ALLIED DEBT + +BY JOHN MAYNARD KEYNES + +M.A., C.B.; Fellow of King's College, Cambridge; Editor of _Economic +Journal_ since 1912; principal representative of the Treasury at the +Paris Peace Conference, and Deputy for the Chancellor of the Exchequer +on the Supreme Economic Council, Jan.-June, 1919. + + +Mr. Keynes said:--I do not complain of Lord Balfour's Note, provided we +assume, as I think we can, that it is our first move, and not our last. +Many people seem to regard it as being really addressed to the United +States. I do not agree. Essentially it is addressed to France. It is a +reply, and a very necessary reply, to the kites which M. Poincaré has +been flying in _The Times_ and elsewhere, suggesting that this country +should sacrifice all its claims of every description in return +for--practically nothing at all, certainly not a permanent solution of +the general problem. The Note brings us back to the facts and to the +proper starting-point for negotiations. + +In this question of Reparations the position changes so fast that it may +be worth while for me to remind you just how the question stands at this +moment. There are in existence two inconsistent settlements, both of +which still hold good in law. The first is the assessment of the +Reparation Commission, namely, 132 milliard gold marks. This is a +capital sum. The second is the London Settlement, which is not a capital +sum at all, but a schedule of annual payments calculated according to a +formula; but the capitalised value of these annual payments, worked out +on any reasonable hypothesis, comes to much less than the Reparation +Commission's total, probably to not much more than a half. + + +THE BREAKDOWN OF GERMANY + +But that is not the end of the story. While both the above settlements +remain in force, the temporary régime under which Germany has been +paying is different from, and much less than, either of them. By a +decision of last March Germany was to pay during 1922 £36,000,000 (gold) +in cash, _plus_ deliveries in kind. The value of the latter cannot be +exactly calculated, but, apart from coal, they do not amount to much, +with the result that the 1922 demands are probably between a third and a +quarter of the London Settlement, and less than one-sixth of the +Reparation Commission's original total. It is under the weight of this +reduced burden that Germany has now broken down, and the present crisis +is due to her inability to continue these reduced instalments beyond the +payment of July, 1922. In the long run the payments due during 1922 +should be within Germany's capacity. But the insensate policy pursued by +the Allies for the last four years has so completely ruined her +finances, that for the time being she can pay nothing at all; and for a +shorter or longer period it is certain that there is now no alternative +to a moratorium. + +What, in these circumstances, does M. Poincaré propose? To judge from +the semi-official forecasts, he is prepared to cancel what are known as +the "C" Bonds, provided Great Britain lets France off the whole of her +debt and forgoes her own claims to Reparation. What are these "C" Bonds? +They are a part of the London Settlement of May, 1921, and, roughly +speaking, they may be said to represent the excess of the Reparation +Commission's assessment over the capitalised value of the London +Schedule of Payments, and a bit more. That is to say, they are pure +water. They mainly represent that part of the Reparation Commission's +total assessment which will not be covered, even though the London +Schedule of Payments is paid in full. + +In offering the cancellation of these Bonds, therefore, M. Poincaré is +offering exactly nothing. If Great Britain gave up her own claims to +Reparations, and the "C" Bonds were cancelled to the extent of France's +indebtedness to us, France's claims against Germany would be actually +greater, even on paper, than they are now. For the demands under the +London Settlement would be unabated, and France would be entitled to a +larger proportion of them. The offer is, therefore, derisory. And it +seems to me to be little short of criminal on the part of _The Times_ to +endeavour to trick the people of this country into such a settlement. + +Personally, I do not think that at this juncture there is anything +whatever to be done except to grant a moratorium. It is out of the +question that any figure, low enough to do Germany's credit any good +now, could be acceptable to M. Poincaré, in however moderate a mood he +may visit London next week. Apart from which, it is really impossible at +the present moment for any one to say how much Germany will be able to +pay in the long run. Let us content ourselves, therefore, with a +moratorium for the moment, and put off till next year the discussion of +a final settlement, when, with proper preparations beforehand, there +ought to be a grand Conference on the whole connected problem of +inter-Governmental debt, with representatives of the United States +present, and possibly at Washington. + + +THE ILLUSION OF A LOAN + +The difficulties in the way of any immediate settlement now are so +obvious that one might wonder why any one should be in favour of the +attempt. The explanation lies in that popular illusion, with which it +now pleases the world to deceive itself--the International Loan. It is +thought that if Germany's liability can now be settled once and for all, +the "bankers" will then lend her a huge sum of money by which she can +anticipate her liabilities and satisfy the requirements of France. + +In my opinion the International Loan on a great scale is just as big an +illusion as Reparations on a great scale. It will not happen. It cannot +happen. And it would make a most disastrous disturbance if it did +happen. The idea that the rest of the world is going to lend to +Germany, for her to hand over to France, about 100 per cent. of their +liquid savings--for that is what it amounts to--is utterly preposterous. +And the sooner we get that into our heads the better. I am not quite +clear for what sort of an amount the public imagine that the loan would +be, but I think the sums generally mentioned vary from £250,000,000 up +to £500,000,000. The idea that any Government in the world, or all of +the Governments in the world in combination, let alone bankrupt Germany, +could at the present time raise this amount of new money (that is to +say, for other purposes than the funding or redemption of existing +obligations) from investors in the world's Stock Exchanges is +ridiculous. + +The highest figure which I have heard mentioned by a reliable authority +is £100,000,000. Personally, I think even this much too high. It could +only be realised if subscriptions from special quarters, as, for +example, German hoards abroad, and German-Americans, were to provide the +greater part of it, which would only be the case if it were part of a +settlement which was of great and obvious advantage to Germany. A loan +to Germany, on Germany's own credit, yielding, say, 8 to 10 per cent., +would not in my opinion be an investor's proposition in any part of the +world, except on a most trifling scale. I do not mean that a larger +anticipatory loan of a different character--issued, for example, in +Allied countries with the guarantees of the Allied Government, the +proceeds in each such country being handed over to the guaranteeing +Government, so that no new money would pass--might not be possible. But +a loan of this kind is not at present in question. + +Yet a loan of from £50,000,000 to £100,000,000--and I repeat that even +this figure is very optimistic except as the result of a settlement of a +kind which engaged the active goodwill of individual Germans with +foreign resources and of foreigners of German origin and +sympathies--would only cover Germany's liabilities under the London +Schedule for four to six months, and the temporarily reduced payments of +last March for little more than a year. And from such a loan, after +meeting Belgian priorities and Army of Occupation costs, there would not +be left any important sum for France. + +I see no possibility, therefore, of any final settlement with M. +Poincaré in the immediate future. He has now reached the point of saying +that he is prepared to talk sense in return for an enormous bribe, and +that is some progress. But as no one is in a position to offer him the +bribe, it is not much progress, and as the force of events will compel +him to talk sense sooner or later, even without a bribe, his bargaining +position is not strong. In the meantime he may make trouble. If so, it +can't be helped. But it will do him no good, and may even help to bring +nearer the inevitable day of disillusion. I may add that for France to +agree to a short moratorium is not a great sacrifice since, on account +of the Belgian priority and other items, the amount of cash to which +France will be entitled in the near future, even if the payments fixed +last March were to be paid in full, is quite trifling. + + +A POLICY FOR THE LIBERAL PARTY + +So much for the immediate situation and the politics of the case. If we +look forward a little, I venture to think that there is a clear, simple, +and practical policy for the Liberal Party to adopt and to persist in. +Both M. Poincaré and Mr. Lloyd George have their hands tied by their +past utterances. Mr. Lloyd George's part in the matter of Reparations is +the most discreditable episode in his career. It is not easy for him, +whose hands are not clean in the matter, to give us a clean settlement. +I say this although his present intentions appear to be reasonable. All +the more reason why others should pronounce and persist in a clear and +decided policy. I was disappointed, if I may say so, in what Lord Grey +had to say about this at Newcastle last week. He said many wise things, +but not a word of constructive policy which could get any one an inch +further forward. He seemed to think that all that was necessary was to +talk to the French sympathetically and to put our trust in international +bankers. He puts a faith in an international loan as the means of +solution which I am sure is not justified. We must be much more concrete +than that, and we must be prepared to say unpleasant things as well as +pleasant ones. + +The right solution, the solution that we are bound to come to in the +end, is not complicated. We must abandon the claim for pensions and +bring to an end the occupation of the Rhinelands. The Reparation +Commission must be asked to divide their assessment into two parts--the +part that represents pensions and separation allowances and the rest. +And with the abandonment of the former the proportion due to France +would be correspondingly raised. If France would agree to this--which is +in her interest, anyhow--and would terminate the occupation it would be +right for us to forgive her (and our other Allies) all they owe us, and +to accord a priority on all receipts in favour of the devastated areas. +If we could secure a real settlement by these sacrifices, I think we +should make them completely regardless of what the United States may say +or do. + +In declaring for this policy in the House of Commons yesterday, Mr. +Asquith has given the Liberal Party a clear lead. I hope that they will +make it a principal plank in their platform. This is a just and +honourable settlement, satisfactory to sentiment and to expediency. +Those who adopt it unequivocally will find that they have with them the +tide and a favouring wind. But no one must suppose that, even with such +a settlement, any important part of Germany's payments can be +anticipated by a loan. Any small loan that can be raised will be +required for Germany herself, to put her on her legs again, and enable +her to make the necessary annual payments. + + + + +THE OUTLOOK FOR NATIONAL FINANCE + +BY SIR JOSIAH STAMP, K.B.E., D.SC. + +Assistant Secretary Board of Inland Revenue, 1916-19. Member of Royal +Commission on Income Tax, 1919. + + +Sir Josiah Stamp said:--In discussing the problem of National Finance we +have to decide which problem we mean, viz., the "short period" or the +"long period," for there are distinctly two issues. I can, perhaps, +illustrate it best by the analogy of the household in which the chief +earner or the head of the family has been stricken down by illness. It +may be that a heavy doctor's bill or surgeon's fee has to be met, and +that this represents a serious burden and involves the strictest economy +for a year or two; that all members of the household forgo some +luxuries, and that there is a cessation of saving and perhaps a "cut" +into some past accumulations. But once these heroic measures have been +taken and the burden lifted, and the chief earner resumes his +occupation, things proceed on the same scale and plan as before. It may +be, however, that the illness or operation permanently impairs his +earning power, and that the changes which have to be made must be more +drastic and permanent. Then perhaps would come an alteration of the +whole ground plan of the life of that family, the removal to a smaller +house with lower standing charges and a changed standard of living. What +I call the "short period" problem involves a view only of the current +year and the immediate future for the purpose of ascertaining whether we +can make ends meet by temporary self-denial. What I term the "long +distance" problem involves an examination of the whole scale upon which +our future outlay is conditioned for us. + +The limit of further economies on the lines of the "Geddes' cut" that +can become effective in 1923, would seem to be some 50 or 60 millions, +because every 10 per cent. in economy represents a much more drastic and +difficult task than the preceding, and it cuts more deeply into your +essential national services. On the other side of the account one sees +the probable revenue diminish to an almost similar extent, having regard +to the effect of reductions in the rate of tax and the depression in +trade, with a lower scale of profits, brought about by a lower price +level, entering into the income-tax average. It looks as though 1923 may +just pay its way, but if so, then, like the current year, it will make +no contribution towards the reduction of the debt. So much for the +"short period." Our worst difficulties are really going to be +deep-seated ones. + + +THE TWO PARTS OF A BUDGET + +Now a national budget may consist of two parts, one of which I will call +the "responsive" and the other the "non-responsive" portion. The +responsive portion is the part that may be expected to answer sooner or +later--later perhaps rather than sooner--to alterations in general +conditions, and particularly to price alterations. If there is a very +marked difference in general price level, the salaries--both by the +addition or remission of bonuses and the general alteration in scales +for new entrants--may be expected to alter, at any rate, in the same +direction, and that part of the expense which consists of the purchase +of materials will also be responsive. The second, or non-responsive +part, is the part that has a fixed expression in currency, and does not +alter with changed conditions. This, for the most part, is the capital +and interest for the public debt. + +Now the nature and gravity of the "long distance" problem is almost +entirely a question of the proportions which these two sections bear to +each other. If the non-responsive portion is a small percentage of the +total the problem will not be important, but if it is larger, then the +question must be faced seriously. Suppose, for example, that you have +now a total budget of 900 million pounds, and that, in the course of +time, all values are expressed at half the present currency figure. +Imagine that the national income in this instance is 3600 million +pounds. Then the burden, on a first approximation, is 25 per cent. Now, +if the whole budget is responsive, we may find it ultimately at 450 +million pounds out of a national income of 1800 million pounds, _i.e._ +still 25 per cent. But let the non-responsive portion be 400 million +pounds, then your total budget will be 650 million pounds out of a +national income of about 2000 million pounds, or 33-1/3 per cent., and +every alteration in prices--or what we call "improvement" in the cost of +living--becomes an extraordinarily serious matter as a burden upon new +enterprise in the future. + +Let me give you a homely and familiar illustration. During the war the +nation has borrowed something that is equivalent to a pair of boots. +When the time comes for paying back the loan it repays something which +is equivalent to two pairs or, possibly, even to three pairs. If the +total number of boots produced has not altered, you will see what an +increasing "pull" this is upon production. There are, of course, two +ways in which this increasing pull--while a great boon to the person who +is being repaid--must be an increased burden to the individual. Firstly, +if the number of people making boots increases substantially, it may +still be only one pair of boots for the same volume of production, if +the burden is spread over that larger volume. Secondly, even supposing +that the number of individuals is not increased, if the arts of +production have so improved that two pairs can be produced with the same +effort as was formerly necessary for one, then the debt may be repaid by +them without the burden being actually heavier than before. + +Now, coming back to the general problem. The two ways in which the +alteration in price level can be prevented from resulting in a heavier +individual burden than existed at the time when the transaction was +begun, are a large increase in the population with no lower average +wealth, or a large increase in wealth with the same population--which +involves a greatly increased dividend from our complex modern social +organism with all its mechanical, financial, and other differentiated +functions. Of course, some of the debt burden is responsive, so far as +the annual charge is concerned, on that part of the floating debt which +is reborrowed continually at rates of interest which follow current +money rates, but, even so, the burden of capital repayment remains. An +opportunity occurs for putting sections of the debt upon a lower annual +charge basis whenever particular loans come to maturity, and there may +be some considerable relief in the annual charge in the course of time +by this method. + +What are the prospects of the two methods that I have mentioned coming +to our rescue in this "long distance" problem? It is a problem to which +our present "short distance" contribution is, you will admit, a very +poor one, for we have not so far really made any substantial +contribution from current revenue towards the repayment of the debt. + + +A CENTURY OF THE NATIONAL DEBT + +Historical surveys and parallels are notoriously risky, particularly +where the conditions have no precedent. They ought, however, to be made, +provided that we keep our generalisations from them under careful +control. Now, after the Napoleonic wars we had a national debt somewhat +comparable in magnitude in its relation to the national wealth and +income with the present debt. What happened to that as a burden during +the 100 years just gone by? If it was alleviated, to what was the +alleviation due? I would not burden you with a mass of figures, but I +would just give you one or two selected periods. You can find more +details in my recent book on _Wealth and Taxable Capacity_. We had a +total debt of-- + +850 million pounds in 1817 +841 " " " 1842 +836 " " " 1857 +659 " " " 1895 +800 " " " 1903 + +and before this last war it had been reduced to 707 million pounds. In +1920, of course, it was over 8000 million pounds. Such incidents as the +Crimean and the Boer wars added materially to the debt, but apart +therefrom you will see that there is no tremendous relief by way of +capital repayment to the original debt. Similarly, in a hundred years, +even if we have no big wars, it is quite possible we may have additions +to the national debt from smaller causes. Yet the volume of the debt per +head fell from £50 to £15.7, so you will see that the increasing +population made an enormous difference. The real burden of the debt is +of course felt mainly in its annual charge. I will take this, therefore, +rather than the capital:-- + +In 1817 the charge was 32 million pounds +" 1842 " " " 28 " " +" 1857 " " " 28.8 " " +In 1895 the charge was 25 million pounds +" 1903 " " " 27 " " +" 1914 " " " 24 " " + +Here you will see that the reduction from 32 to 24 was 25 per cent. or a +much greater reduction than the reduction of the _total_ capital debt, +and this, of course, was contributed to by the lower rates of interest +which had been brought about from time to time. When we take the annual +charge per head the fall is much more striking. In the hundred years it +decreased from 37s. to 10s. This, however, was a money reduction, and +the _real_ burden per head can only be judged after we have considered +what the purchasing power of that money was. Now, the charge per head, +reduced to a common basis of purchasing power, fell as follows:-- + + Index figure +1817 260 +1842 242 +1857 191 +1895 210 +1914 118 + +In the year 1920 the charge per head was £7.16 and my purchasing power +index figure 629. You will see that the _real_ burden in commodities +moved down much less violently than the _money_ burden, and the relief +was not actually so great as it looks, because prices were far lower in +1914 than they were early in the nineteenth century. + +In view of the fact that our debt is approximately ten times that of the +last century, let us ask ourselves the broad question: "Can we look +forward to nothing better than the reduction of our debt by 450 +millions in thirty-seven years?" + +The nineteenth century was one long contest between two opposing forces. +The increase in the population, together with the power to make wealth, +were together enormously effective in decreasing the burden. Against +them was the ultimate tendency to lower prices, and the former of these +two forces slowly won the day. + +I hesitate to say that we can expect anything at all comparable with the +wonderful leap forward in productive power during the early Victorian +era. I hope that in this I may prove to be wrong. Anyway I do not think +that in our lifetime we can expect these islands to double their +population. + + +THE CAPITAL LEVY + +If we cannot look forward to any great measure of relief through these +channels, to what then must we look? By far the most important +alternative remedy which has been put to us is that of a Capital Levy; +it has the enormous virtue that it would repay on one level of prices +the debts incurred at that level; in short, it would give back one pair +of boots at once for every pair it has borrowed, instead of waiting and +stretching out over future generations the burden of two pairs. It is so +attractive that one cannot wonder there is a tendency to slur over its +less obvious difficulties. + +Advocates of this scheme fall into two camps, whom I would distinguish +broadly as the economist group and the Labour Party, and if you will +examine their advocacy carefully, you will see that they support it by +two different sets of contentions, which are not easily reconciled. The +economists lay stress upon the fact that you not only pay off at a less +onerous cost in real goods, but that it may, considered arithmetically +or actuarially, be "good business" for a payer of high income-tax to +make an outright payment now and have a lighter income-tax in future. +Very much of the economists' case rests indeed upon the argument drawn +from the outright cut and the arithmetical relief. It will be seen that +this case depends upon two assumptions. The first is that the levy in +practice as well as in theory is an outright cut, and the second, that +it is not repeated, or rather that the income-tax is really effectively +reduced. But if you look at the programme of the other supporters of the +Capital Levy you will not find any convincing guarantees of its +non-repetition. I have not seen anywhere any scheme by which we can feel +politically insured against its repetition. You will find plenty of +indication that some intend to have both the levy and a high tax as +well, the new money to be employed for other social purposes. The +arguments based upon arithmetical or actuarial superiority of the levy +for your pocket and for mine may therefore rather go by the board. But I +am not going to discuss either the question of political guarantees or +the possible future socio-financial policy of the Labour Party. I will +merely ask you to consider whether the levy is likely to be in practice +the outright cut that is the basis of the chief and most valid +contention for it. Please understand that I am not attempting to sum up +all the many reasons for and against this proposal, but only to deal +with the particular virtue claimed for it, bearing upon the increasing +burden of the debt as prices decline. + +Any taxation scheme dependent upon general capital valuation, where the +amount to be paid is large--say larger than a year's revenue--falls, in +my judgment, into the second or third rate category of taxation +expedients. Whenever we are living in uncertain times, with no +steadiness of outlook, valuation of many classes of wealth is then a +tremendous lottery, and collection--which takes time--may be no less so. + +The fair face of the outright and graduated levy would be marred in many +ways. First, there are cases affected by valuation. The valuation of a +fixed rate of interest on good security is easy enough. The valuation of +a field or a house in these days presents more difficulty, but is, of +course, practicable. In practice, however, people do not own these +things outright. They have only an interest in them. This is where the +rub comes. A very large part of the property in this country is held in +life interests, and on reversions or contingencies. It is not a question +of saying that a given property is worth £10,000 and that it forms part +of the fortune of Jones, who pays 40 per cent. duty. The point is that +the £10,000 is split between Jones and Robinson. Jones maybe has a life +interest in it, and Robinson a reversionary interest. You value Jones's +wealth by his prospect of life on a life table, and Robinson has the +balance. But the life table does not indicate the actual likelihood of +Jones's life being fifteen years. It only represents the actuarial +average expectation of all the lives. This may be useful enough for +insurance dependent on the total experience, but it may be a shocking +injustice to the individual in taxation. Only some 10 per cent. of the +Joneses will live for the allotted time, and for the rest your valuation +and your tax will be dead wrong, either too much or too little. Jones +will be coming to you two years after he has paid, or rather his +executors will come to you and say: "We paid a tax based on Jones living +15 years, and he has died; this ought, therefore, to be shifted to +Robinson." + + +DIFFICULTIES OF VALUATION + +People often say that a Capital Levy merely imagines everybody dying at +the same time. This parallel is wrong in degree when you are considering +the ease of paying duty or of changing the market values by a glut of +shares, and it is still more wrong when you are thinking of ease of +valuation. When a man is dead, he is dead, and in estimating the death +duty you have not to bother about how long he is going to live! But +every time you value a life interest and take a big slice of it for tax +you are probably doing a double injustice. The charge is incorrect for +two taxpayers. On a flat rate of tax this difficulty might be made less, +but the essence of any effective levy is a progressive scale. Moreover, +whether you are right or wrong about Robinson's tax, he has nothing in +hand with which to pay it. He has either to raise a mortgage on his +expectation (on which he pays _annual_ interest) or pay you by +instalments. So far as his burden is concerned, therefore, there is no +outright cut. You will be getting an annual figure over nearly the whole +class of life interests and reversions. It is difficult to see how one +can escape making adjustments year after year for some time in the light +of the ascertained facts, until the expiry of, say, nine or ten years +has reduced the disparities between the estimated valuations and the +facts of life to smaller proportions. + +Next come those valuations which depend for their accuracy upon being +the true mid-point of probabilities. A given mine may last for five +years in the view of some experts, or it may go on for fifteen in the +view of others, and you may take a mid-point, say ten, and collect your +tax, but, shortly after, this valuation turns out to be badly wrong, +_though all your valuations in the aggregate are correct_. While the +active procedure of collecting the levy is in progress for a number of +years these assessments will simply shout at you for adjustment. There +are other types of difficulty in assessment which involve annual +adjustment, but you will appreciate most the necessity for care in the +collection. Enthusiastic advocates for the levy meet every hard case put +forward where it is difficult to raise money, such as a private +ownership of an indivisible business, by saying: "But that will be made +in instalments, or the man can raise a mortgage." But the extent to +which this is done robs the levy of all the virtues attaching to +outrightness, for each instalment becomes, as the years roll on, +different in its real content upon a shifting price level, and every +payment of interest on the mortgage--to say nothing of the ultimate +repayment of that mortgage--falls to be met as if reckoned upon the +original currency level. Then those classes of wealth which are not +easily realisable without putting down the market price also require +treatment by instalments, and those who wish to put forward a logical +scheme also add a special charge upon salary-earners for some years--a +pseudo-capitalisation of their earning power. + +A really fair and practicable levy would certainly be honeycombed with +annual adjustments and payments for some period of years, and one must +consider how far this would invalidate the economic case of the +"outright cut," and make it no better than a high income-tax; indeed far +worse, for the high income-tax does at least follow closely upon the +annual facts as they change, or is not stereotyped by a valuation made +in obsolete conditions. Imagine three shipowners each with vessels +valued at £200,000, and each called upon to pay 20 per cent., or +£40,000. One owning five small ships might have sold one of them, and +thus paid his bill; the second, with one large ship, might have agreed +to pay £8000 annually (plus interest) for five years; while the third +might have mortgaged his vessel for £40,000, having no other capital at +disposal. At to-day's values each might have been worth, say, £50,000, +but for the tax. The first would actually have ships worth £40,000, so +he would have borne the correct duty of 20 per cent. The second would +have £50,000, bringing in, say, £5000 annually, and would be attempting +to pay £8000 out of it, while the third would be paying £2000 a year out +of his income and still be faced with an 80 per cent. charge on his +fortune! His assessment is computed at one point of time, and liquidated +at another, when its incidence is totally different. + +If one cannot have a levy complete at the time of imposition, it clearly +ought not to be launched at a time of rapidly changing prices. But that +is, perhaps, when the economic case for it is strongest. + + +A DESPERATE REMEDY + +I do not rule the Capital Levy out as impracticable by any means, but as +a taxation expedient I cannot be enthusiastic about it. It is a +desperate remedy. But if our present temper for "annual" tax relief at +all costs continues, we may _need_ a desperate remedy. Without a levy +what kind of position can you look forward to? Make some assumptions, +not with any virtue in their details, but just in order to determine the +possible prospect. If in fifteen to twenty years reparation payments +have wiped out 1000 millions, debt repayments another 1000, and ordinary +reductions by sinking funds another 1000 millions, you will have the +debt down to 5000 millions, and possibly the lower interest then +effective may bring the annual charge down to some 200 or 225 million +pounds. If the population has reached sixty millions the nominal annual +charge will be reduced from £7 16s. by one-half, but if prices have +dropped further, say half-way, to the pre-war level, the comparable +burden will still be £4 10s. per head. + +It is no good talking about "holidays from taxation" and imagining you +can get rid of this thing easily; you won't. We are still in the war +financially. There is the same need of the true national spirit and +heroism as there was then. Thus hard facts may ultimately force us to +some such expedient as the levy, but we should not accept it +light-heartedly, or regard it as an obvious panacea. Perhaps in two or +three years we may tell whether economic conditions are stable enough to +rob it of its worst evils. The question whether the burden of rapidly +relieving debt by this means in an instalment levy over a decade is +actually lighter than the sinking fund method, depends on the relation +of the drop in prices over the short period to the drop over the ensuing +period, with a proper allowance for discount--at the moment an insoluble +problem. I cannot yet with confidence join those who, on purely economic +and non-political grounds, commend the scheme and treat it as "good +business for the income-tax payer." + + + + +FREE TRADE + +BY RT. HON. J.M. ROBERTSON + +P.C.; President of National Liberal Federation since 1920; M.P. (L.), +Tyneside Division, Northumberland, 1906-18; Parliamentary Secretary to +Board of Trade, 1911-15. + + +Mr. Robertson said:--At an early stage of the war Mr. H.G. Wells +published a newspaper article to the effect that while we remained Free +Traders we were determined in future to accord free entry only to the +goods of those States which allowed it to us. The mere state of war, no +doubt, predisposed many to assent to such theses who a few years before +would have remembered that this was but the nominal position of the +average protectionist of the three preceding generations. War being in +itself the negation of Free Trade, the inevitable restrictions and the +war temper alike prepared many to find reasons for continuing a +restrictive policy when the war was over. When, therefore, the Committee +of Lord Balfour of Burleigh published its report, suggesting a variety +of reasons for setting up compromises in a tariffist direction, there +were not wanting professed Free Traders who agreed that the small +tariffs proposed would not do any harm, while others were even anxious +to think that they might do good. + +Yet the policy proposed by Lord Balfour's Committee has not been +adopted by the Coalition Government in anything like its entirety. Apart +from the Dyestuffs Act, and such devices as the freeing of home-made +sugar from excise, we have only had the Safeguarding of Industries Bill, +a meticulously conditional measure, providing for the setting up of +particular tariffs in respect of particular industries which may at a +given moment be adjudged by special committees _ad hoc_ to need special +protection from what is loosely called "dumping." And even the findings +of these committees so far have testified above all things to the lack +of any accepted set of principles of a protectionist character. Six +thousand five hundred articles have been catalogued as theoretically +liable to protective treatment, and some dozen have been actually +protected. They have given protection to certain products and refused it +to others; according it to fabric gloves and glass and aluminium goods +and refusing it to dolls' eyes and gold leaf. + +Finally, the decision in favour of a tariff on fabric gloves has evoked +such a storm of protest from the textile manufacturers who export the +yarns with which foreign fabric gloves are made, that even the +Coalitionist press has avowed its nervousness. When a professed +protectionist like Lord Derby, actually committed to this protectionist +Act, declares that it will never do to protect one industry at the cost +of injuring a much greater one, those of his party who have any +foresight must begin to be apprehensive even when a House of Commons +majority backs the Government, which, hard driven by its tariffists, +decided to back its Tariff Committee against Lancashire. Protectionists +are not much given to the searching study of statistics, but many of +them have mastered the comparatively simple statistical process of +counting votes. + + +THE "NEW CIRCUMSTANCES" CRY + +In a sense, there are new fiscal "circumstances." But I can assure my +young friends that they are just the kind of circumstances which were +foreseen by their seniors in pre-war days as sure to arise when any +attempt was made to apply tariffist principles to British industry. As a +German professor of economics once remarked at a Free Trade Conference, +it is not industries that are protected by tariffs: it is firms. When a +multitude of firms in various industries subscribed to a large Tariff +Reform fund for election-campaign purposes, they commanded a large +Conservative vote; but when for platform tariff propaganda, dealing in +imaginative generalities and eclectic statistics, there are substituted +definite proposals to meddle with specified interests, the real troubles +of the tariffist begin. You might say that they began as soon as he met +the Free Trader in argument; but that difficulty did not arise with his +usual audiences. It is when he undertakes to protect hides and hits +leather, or to protect leather and hits boot-making, or to help shipping +and hits shipbuilding that he becomes acutely conscious of difficulties. +Now he is in the midst of them. The threat of setting up a general +tariff which will hit everybody alike seems so far to create no alarm, +because few traders now believe in it. Still, it would be very unwise to +infer that the project will not be proceeded with. It served as a party +war-cry in Opposition for ten years, and nearly every pre-war +Conservative statesman was committed to it--Earl Balfour and Lord +Lansdowne included. Even misgivings about Lancashire may fail to deter +the tariffist rump. + +Some of the people who even yet understand nothing of Free Trade +economics are still found to argue that, if only the duty on imported +gloves is put high enough, sufficient gloves will be made at home to +absorb all the yarns now exported to German glove-makers. They are still +blind, that is to say, to the elementary fact that since Germany +manufactures for a much larger glove-market than the English, the +exclusion of the German gloves means the probable loss to the +yarn-makers of a much larger market than England can possibly offer, +even if we make all our own gloves. In a word, instead of having to +furnish new Free Trade arguments to meet a new situation, we find +ourselves called upon to propound once more the fundamental truths of +Free Trade, which are still so imperfectly assimilated by the nation. + +So far as I can gather, the circumstances alleged to constitute a new +problem are these; the need to protect special industries for war +purposes; and the need to make temporary fiscal provision against +industrial fluctuation set up by variations in the international money +exchanges. Obviously, the first of these pleas has already gone by the +board, as regards any comprehensive fiscal action. One of the greatest +of all war industries is the production of food; and during the war some +supposed that after it was over, there could be secured a general +agreement to protect British agriculture to the point at which it could +be relied on to produce at least a war ration on which the nation could +subsist without imports. That dream has already been abandoned by +practical politicians, if any of them ever entertained it. The effective +protection of agriculture on that scale has been dismissed as +impossible; and we rely on foreign imports as before. Whatever may be +said as to the need of subsidising special industries for the production +of certain war material is nothing further to the fiscal purpose, +whether the alleged need be real or not. The production of war material +is a matter of military policy on all fours with the maintenance of +Government dockyards, and does not enter into the fiscal problem +properly so called. But to the special case of dyes, considered as a +"key" or "pivotal" industry, I will return later. + +How then stands the argument from the fluctuations of the exchanges? If +that argument be valid further than to prove that _all_ monetary +fluctuations are apt to embarrass industry, why is it not founded on for +the protection of _all_ industries affected by German competition? The +Prime Minister in his highly characteristic speech to the Lancashire +deputation, admitted that the fall of the mark had not had "the effect +which we all anticipated"--that is, which he and his advisers +anticipated--and this in the very act of pretending that the _further_ +fall of the mark is a reason for adhering to the course of taxing +fabric gloves. All this is the temporising of men who at last realise +that the case they have been putting forward will bear no further +scrutiny. The idea of systematically regulating an occasional tariff in +terms of the day-to-day fluctuations of the exchanges is wholly +chimerical. A tariff that is on even for one year and may be off the +next is itself as disturbing a factor in industry as any exchange +fluctuations can be. + +Nor is there, in the nature of things, any possibility of continuous +advantage in trade to any country through the low valuation of its +currency. The Prime Minister confesses that Germany is _not_ obtaining +any export trade as the result of the fall. Then the whole argument has +been and is a false pretence. The plea that the German manufacturer is +advantaged because his wages bill does not rise as fast as the mark +falls in purchasing power is even in theory but a statement of one side +of a fluctuating case, seeing that when the mark rises in value his +wages bill will not fall as fast as the mark rises, and he is then, in +the terms of the case, at a competitive disadvantage. + +But the worst absurdity of all in the tariffist reasoning on this topic +is the assumption that in no other respect than wage-rates is German +industry affected by the fall of the mark. The wiseacres who point +warningly to the exchanges as a reason for firm action on fabric gloves +never ask how a falling currency relates to the process of purchasing +raw materials from abroad. So plainly is the falling mark a bar to such +purchase that there is _prima facie_ no cause to doubt the German +official statement made in June, that foreign goods are actually +underbidding German goods in the German markets, and that the falling +exchange makes it harder and harder for Germany to compete abroad. We +are dealing with a four-square fallacy, the logical implication of which +is that a bankrupt country is the best advantaged for trade, that +Austria is even better placed for competition than Germany, and that +Russia is to-day the best placed of all. + + +TARIFFS AND WAGES + +The argument from the exchanges, which is now admitted to be wholly +false in practice, really brings us back to the old tariffist argument +that tariffs are required to protect us against the imports of countries +whose general rate of wages is lower than ours. On the one hand, they +assured us that a tariff was the one means of securing good wages for +the workers in general. On the other, they declared that foreign goods +entered our country to the extent they did because foreign employers in +general sweated their employees. That is to say--seeing that nearly all +our competitors had tariffs--the tariffed countries pay the worst wages; +and we were to raise ours by having tariffs also. But even that pleasing +paralogism did not suffice for the appetite of tariffism in the way of +fallacy. The same propaganda which affirmed the lowness of the rate of +wages paid in tariffist countries affirmed also the _superiority_ of the +rate of wages paid in the United States, whence came much of our +imported goods which the tariffists wished to keep out. In this case, +the evidence for the statement lay in the high wage-rate figures for +three employments in particular--those of engine-drivers, compositors, +and builders' labourers: three industries incapable of protection by +tariffs. + +Thus even the percentage of truth was turned to the account of delusion; +for the wages in the protected industries of the States were so far from +being on the scale of the others just mentioned, that they were reported +at times to be absolutely below those paid in the same industries in +Britain. For the rest, _costs of living_ were shown by all the official +statistics to be lower with us than in any of the competing tariffed +countries; and in particular much lower than in the United States. There +were thus established the three facts that wages were higher in the Free +Trade country than in the European tariffed countries; that real wages +here were higher than those of the protected industries in the United +States, and that Protection was thus so far from being a condition of +good wages as to be ostensibly a certain condition of bad. All the same, +high wages in America and low wages on the Continent were alike given as +reasons why we should have a protective tariff. + +There stands out, then, the fact that the payment of lower wages by the +protected foreign manufacturer was one of the tariffist arguments of the +pre-war period, when there was no question of unequal currency +exchanges. To-day, the argument from unequal currency exchanges is that +in the country where the currency value is sinking in terms of other +currencies the manufacturer is getting his labour cheaper, seeing that +wages are slow to follow increase in cost of living. Both pleas alike +evade the primary truth that if country A trades with country B at all, +it must receive _some_ goods in payment for its exports, save in a case +in which, for a temporary purpose, it may elect to import gold. But that +fact is vital and must be faced if the issue is to be argued at all. +Unless, then, the defender of the occasional tariff system contends that +that system will rectify trade conditions by keeping out goods which are +made at an artificial advantage, amounting to what is called "unfair +competition," and letting in only the goods not so produced, he is not +facing the true fiscal problem at all. Either he admits that exports and +freight charges and other credit claims must be balanced by imports or +he denies it. If he denies it, the discussion ceases: there is no use in +arguing further. If he admits it, and argues that by his tariff he can +more or less determine _what_ shall be imported, the debate soon narrows +itself to one issue. + +The pre-war tariffist argued, when he dealt with the problem, that +tariffs would suffice at will to keep out manufactured goods and let in +only raw material. To that the answer was simple. An unbroken conversion +of the whole yield of exports and freight returns and interest on +foreign investments into imported raw material to be wholly converted +into new products, mainly for export, was something utterly beyond the +possibilities. It would mean a rate of expansion of exports never +attained and not only not attainable but not desirable. On such a +footing, the producing and exporting country would never concretely +taste of its _profit_, which is to be realised, if at all, only in +consumption of imported goods and foods. It is no less plainly +impossible to discriminate by classes between kinds of manufactured +imports on the plea that inequality in the exchanges gives the foreign +competitor an advantage in terms of the relatively lower wage-rate paid +by him while his currency value is falling. Any such advantage, in the +terms of the case, must be held to accrue to all forms of production +alike, and cannot possibly be claimed to accrue in the manufacture of +one thing as compared with another, as fabric gloves in comparison with +gold leaf. In a word, the refusal of protection to gold leaf is an +admission that the argument from inequality of currency exchanges counts +for nothing in the operation of the Safeguarding of Industries Bill. In +the case of any other import, then, the argument falls. + + +MEMBERS ONE OF ANOTHER + +But that is not all. The case of Russia alone has brought home to all +capable of realising an economic truth the fact that the economic +collapse of any large mass of population which had in the past entered +into the totality of international trade is a condition of proportional +impoverishment to all the others concerned. He who sees this as to +Russia cannot conceivably miss seeing it as to Germany; even tariffist +hallucinations about a "losing trade" under German tariffs cannot shut +out the fact that our trade with Russia and the United States was +carried on under still higher hostile tariffs. The unalterable fact +remains that industrial prosperity rises and falls in the measure of the +total mass of goods handled; and men who realise the responsibility of +all Governments for the material wellbeing of their populations can come +to only one conclusion. Trade must be facilitated all round for our own +sake. + +Once more we come in sight of the truth that the industrial health of +every trading country depends on the industrial health of the rest--a +Free Trade truth that is perceptibly of more vital importance now than +ever before. It is in the exchange of commodities, and the extension of +consumption where that is required on a large scale, that the prosperity +of the industrial nations consists. And to say that, is to say that +until the trade exchanges of the world in general return to something +like the old footing, there cannot be a return of the old degree of +industrial wellbeing. Not that industrial wellbeing is to be secured by +the sole means of industrial re-expansion: the question of the need of +restriction of rate of increase of population is now being more and more +widely recognised as vital. But the present argument is limited to the +fiscal issue; and it must suffice merely to indicate the other as being +of the highest concurrent importance. + +Adhering, then, to the fiscal issue, we reach the position that, just as +foreign trade has been a main source of British wealth in the past, and +particularly in the Free Trade era, the wealth consumed in the war is +recoverable only on the same lines. It is not merely that British +shipping--at present so lamentably paralysed and denuded of earning +power--cannot be restored to prosperity without a large resumption of +international exchanges: a large proportion of industrial employment +unalterably depends upon that resumption. And it is wholly impossible to +return to pre-war levels of employment by any plan of penalising +imports. + + +THE DYESTUFFS ACT + +How then does the persistent Free Trader relate to the special case of +the "key industry," of which we heard so much during the war, and hear +so little to-day? I have said that the question of maintaining any given +industry on the score that it is essential for the production of war +material is a matter of military administration, and not properly a +matter of fiscal policy at all. But the plea, we know, has been made the +ground of a fiscal proceeding by the present Government, inasmuch as the +special measure known as the Dyestuffs (Import Regulation) Act of 1920 +forbids for ten years the importation of dyestuffs into this country +except under licence of the Board of Trade. Dyestuffs include, by +definition, all the coal-tar dyes, colours, and colouring matter, and +all organic intermediate products used in the manufacture of these--the +last category including a large number of chemicals such as +formaldehyde, formic acid, acetic acid, and methyl alcohol. The +argument is, in sum, that all this protective control is necessary to +keep on foot, on a large scale, an industry which in time of war has +been proved essential for the production of highly important munitions. + +What has actually happened under this Act I confess I am unable to tell. +Weeks ago I wrote to the President of the Board of Trade asking if, +without inconvenience, he could favour me with a general account of what +had been done in the matter of issuing licences, and my letter was +promised attention, but up to the moment of delivering this address I +have had no further reply. I can only, then, discuss the proposed policy +on its theoretic merits.[1] The theoretic issues are fairly clear. +Either the licensing power of the Board of Trade has been used to +exclude competitive imports or it has not. If it has been so used, it is +obvious that we have no security whatever for the maintenance of the +industry in question in a state of efficiency. In the terms of the case, +it is enabled to persist in the use of plant and of methods which may be +inferior to those used in the countries whose competition has been +excluded. Then the very object posited as the justification for the Act, +the securing of a thoroughly efficient key industry necessary to the +production of munitions, is not attained by the fiscal device under +notice. If, on the other hand, there has been no barring of imports +under the licence system, the abstention from use of it is an admission +that it was either unnecessary or injurious or was felt to be useless +for its purpose. + +[Footnote 1: The promised statistics were soon afterwards sent to Mr. +Robertson by the Board of Trade. They will be found in the _Liberal +Magazine_ for September, 1922, p. 348.--ED.] + +And the common-sense verdict on the whole matter is that if continuous +and vigilant research and experiment in the chemistry of dye-making is +held to be essential to the national safety, the proper course is for +the Government to establish and maintain a department or arsenal for +such research and experiment, unhampered by commercial exigencies. Such +an institution may or may not be well managed. But a dividend-earning +company, necessarily concerned first and last with dividend earning, and +at the same time protected against foreign competition in the sale of +its products, cannot be for the purpose in question well managed, being +expressly enabled and encouraged to persist in out-of-date practices. + +This being so, the whole argument for protection of key industries goes +by the board. It has been abandoned as to agriculture, surely the most +typical key industry of all; and it has never even been put forward in +regard to shipbuilding, the next in order of importance. For the +building of ships of war the Government has its own dockyards: let it +have its own chemical works, if that be proved to be necessary. +Protection cannot avail. If the Dyestuffs Act is put in operation so as +to exclude the competition of foreign chemicals, it not only keeps our +chemists in ignorance of the developments of the industry abroad: it +raises the prices of dyestuffs against the dye-using industries at home, +and thereby handicaps them dangerously in their never-ending competition +with the foreign industries, German and other, which offer the same +goods in foreign markets. + +The really fatal competition is never that of goods produced at low +wages-cost. It is that of superior goods; and if foreign textiles have +the aid of better dyes than are available to our manufacturers our +industry will be wounded incurably. It appears in fact to be the +superior quality of German fabric gloves, and not their cheapness, that +has hitherto defeated the competition of the native product. To protect +inferior production is simply the road to ruin for a British industry. +Delicacy in dyes, in the pre-war days, gave certain French woollen goods +an advantage over ours in our own markets; yet we maintained our vast +superiority in exports by the free use of all the dyes available. Let +protection operate all round, and our foreign markets will be closed to +us by our own political folly. Textiles which are neither well-dyed nor +cheap will be unsaleable against better goods. + + +THE PARIS RESOLUTIONS + +It is of a piece with that prodigy of self-contradiction that, when the +Liberal leaders in the House of Commons expose the absurdity of +professing to rectify the German exchanges by keeping out German fabric +gloves, a tariffist leader replies by arguing that the Paris Resolutions +of the first Coalition Government, under Mr. Asquith, conceded the +necessity of protecting home industries against unfair competition. Men +who are normally good debaters seem, when they are fighting for a +tariff, to lose all sense of the nature of argument. As has been +repeatedly and unanswerably shown by my right hon. friend the Chairman, +the Paris Resolutions were expressly framed to guard against a state of +things which has never supervened--a state of things then conceived as +possible after a war without a victory, but wholly excluded by the +actual course of the war. And those Resolutions, all the same, expressly +provided that each consenting State should remain free to act on them +upon the lines of its established fiscal system, Britain being thus left +untrammelled as to its Free Trade policy. + +Having regard to the whole history, Free Traders are entitled to say +that the attempt of tariffists to cite the Paris Resolutions in support +of the pitiful policy of taxing imports of German fabric gloves, or the +rest of the ridiculous "litter of mice" that has thus far been yielded +by the Safeguarding of Industries Act, is the crowning proof at once of +the insincerity and ineptitude of tariffism where it has a free hand, +and of the adamantine strength of the Free Trade case. If any further +illustration were needed, it is supplied by the other tariffist +procedure in regard to the promise made five years ago to Canada that +she, with the other Dominions, should have a relative preference in our +markets for her products. In so far as that plan involved an advantage +to our own Dominions over the Allies who, equally with them, bore with +us the heat and burden of the war, it was as impolitic as it was unjust, +and as unflattering as it was impolitic, inasmuch as it assumed that the +Dominions wanted a "tip" as a reward for their splendid comradeship. + +As it turns out, the one concession that Canada really wanted was the +removal of the invidious embargo on Canadian store cattle in our ports. +And whereas a promise to that effect was actually given by the tariffist +Coalition during the war, it is only after five years that the promise +is about to be reluctantly fulfilled. It was a promise, be it observed, +of _free importation_, and it is fulfilled only out of very shame. It +may be surmised, indeed, that the point of the possible lifting of the +Canadian embargo was used during the negotiations with Ireland to bring +the Sister State to terms; and that its removal may lead to new trouble +in that direction. But that is another story, with which Free Traders +are not concerned. Their withers are unwrung. + + +SCIENCE AND EXPERIENCE + +On the total survey, then, the case for Free Trade is not only unshaken, +it is stronger than ever before, were it only because many of the enemy +have visibly lost faith in their own cause. The Coalition, in which +professed Liberals were prepared to sacrifice something of Free Trade to +colleagues who were pledged in the past to destroy it, has quailed +before the insuperable practical difficulties which arise the moment the +scheme of destruction is sought to be framed. + +All that has resulted, after four and a half years, is a puerile +tinkering with three or four small industries--a tinkering that is on +the face of it open to suspicion of political corruption. To intelligent +Free Traders there is nothing in it all that can give the faintest +surprise. They knew their ground. The doctrine of Free Trade is +_science_, or it is nothing. It is not a passing cry of faction, or a +survival of prejudice, but the unshakable inference of a hundred years +of economic experience verifying the economic science on which the great +experiment was founded. + +On the other hand, let me say, the tactic of tinkering with Free Trade +under a system of special committees who make decisions that only the +House of Commons should ever be able to make, is a "felon blow" at +self-government. It puts national affairs under the control of cliques, +amenable to the pressures of private interests. Millions of men and +women are thus taxable in respect of their living-costs at the caprice +of handfuls of men appointed to do for a shifty Government what it is +afraid to do for itself. It is a vain thing to have secured by statute +that the House of Commons shall be the sole authority in matters of +taxation, if the House of Commons basely delegates its powers to +unrepresentative men. Here, as so often in the past, the Free Trade +issue lies at the heart of sound democratic politics; and if the nation +does not save its liberties in the next election it will pay the price +in corrupted politics no less than in ruined trade. + + + + +INDIA + +BY SIR HAMILTON GRANT + +K.C.S.I., K.C.I.E.; Chief Commissioner, North-West Frontier Province, +India; Deputy Commissioner of various Frontier districts; Secretary to +Frontier Administration; Foreign Secretary, 1914-19; negotiated Peace +Treaty with Afghanistan, 1919. + + +Sir Hamilton Grant said:--I have been asked to address you on the +subject of India, that vast, heterogeneous continent, with its varied +races, its Babel of languages, its contending creeds. There are many +directions in which one might approach so immense a topic, presenting, +as it does, all manner of problems, historical, ethnological, +linguistic, scientific, political, economic, and strategic. I do not +propose, however, to attempt to give you any general survey of those +questions, or to offer you in tabloid form a resumé of the matters that +concern the government of India. I propose to confine my remarks to two +main questions which appear to be of paramount importance at the present +time, and which, I believe, will be of interest to those here present +to-day, namely, the problems of the North-West Frontier, and the +question of internal political unrest. + +Let me deal first with the North-West Frontier. As very few schoolboys +know, we have here a dual boundary--an inner and an outer line. The +inner line is the boundary of the settled districts of the North-West +Frontier Province, the boundary, in fact, of British India proper, and +is known as the Administrative border. The outer line is the boundary +between the Indian Empire and Afghanistan, and is commonly known as the +Durand line, because it was settled by Sir Mortimer Durand and his +mission in 1895 with the old Amir Abdur Rahman. These two lines give us +three tracts to be dealt with--first, the tract inside the inner line, +the settled districts of the North-West Frontier Province, inhabited for +the most part by sturdy and somewhat turbulent Pathans; second, the +tract between the two lines, that welter of mountains where dwell the +hardy brigand hillmen: the tribes of the Black Mountain, of Swat and +Bajur, the Mohmands, the Afridis, the Orakzais, the Wazirs, the Mahsuds, +and a host of others, whose names from time to time become familiar +according as the outrageousness of their misconduct necessitates +military operations; third, the country beyond the outer line, "the +God-granted kingdom of Afghanistan and its dependencies." + +Now each of these tracts presents its own peculiar problems, though all +are intimately inter-connected and react one on the other. In the +settled districts we are confronted with the task of maintaining law and +order among a backward but very virile people, prone to violence and +impregnated with strange but binding ideas of honour, for the most part +at variance with the dictates of the Indian Penal Code. For this reason +there exists a special law called the Frontier Crimes Regulation, a most +valuable enactment enabling us to deal with cases through local +Councils of Elders, with the task of providing them with education, +medical relief etc., in accordance with their peculiar needs, and above +all with the task of affording them protection from the raids and forays +of their neighbours from the tribal hills. In the tribal area we are +faced with the task of controlling the wild tribesmen. This control +varies from practically direct administration as in the Lower Swat and +Kurram valleys to the most shadowy political influence, as in the remote +highlands of Upper Swat and the Dir Kohistan, where the foot of white +man has seldom trod. Our general policy, however, with the tribes is to +leave them independent in their internal affairs, so long as they +respect British territory and certain sacrosanct tracts beyond the +border, such as the Khyber road, the Kurram, and the Tochi. The problem +is difficult, because when hardy and well-armed hereditary robbers live +in inaccessible mountains which cannot support the inhabitants, +overlooking fat plains, the temptation to raid is obviously +considerable: and when this inclination to raid is reinforced by +fanatical religion, there must be an ever-present likelihood of trouble. + + +FRONTIER RAIDS + +Few people here in England reading of raids on the North-West Frontier +in India realise the full horror of these outrages. What generally +happens is that in the small hours of the morning, a wretched village is +suddenly assailed by a gang of perhaps 50, perhaps 200, well-armed +raiders, who put out sentries, picket the approaches, and conduct the +operation on the most skilful lines. The houses of the wealthiest men +are attacked and looted; probably several villagers are brutally +murdered--and probably one or two unhappy youths or women are carried +off to be held up to ransom. Sometimes the raid is on a larger scale, +sometimes it is little more than an armed dacoity. But there is nearly +always a tale of death and damage. Not infrequently, however, our +troops, our militia, our frontier constabulary, our armed police, or the +village _chigha_ or hue-and-cry party are successful in repelling and +destroying the raiders. Our officers are untiring in their vigilance, +and not infrequently the district officers and the officers of their +civil forces are out three or four nights a week after raiding gangs. +Statistics in such matters are often misleading and generally dull, but +it may be of interest to state that from the 1st April, 1920, to the +31st March, 1921, when the tribal ebullition consequent on the third +Afghan war had begun to die down, there were in the settled districts of +the North-West Frontier Province 391 raids in which 153 British subjects +were killed and 157 wounded, in which 310 British subjects were +kidnapped and some £20,000 of property looted. These raids are often led +by outlaws from British territory; but each tribe is responsible for +what emanates from or passes through its limits--and when the bill +against a tribe has mounted up beyond the possibility of settlement, +there is nothing for it but punitive military operations. Hence the +large number of military expeditions that have taken place on this +border within the last half century. + +Now this brings us to the question so often asked by the advocates of +what is called the Forward policy: "If the tribes give so much trouble, +why not go in and conquer them once and for all and occupy the country +up to the Durand line?" It sounds an attractive solution, and it has +frequently been urged on paper by expert soldiers. But the truth is that +to advance our frontier only means advancing the seat of trouble, and +that the occupation of tribal territory by force is a much more +formidable undertaking than it sounds. We have at this moment before us +a striking proof of the immense difficulty and expense of attempting to +tame and occupy even a comparatively small tract of tribal territory in +the Waziristan operations. Those operations have been going on for two +and a half years. At the start there were ample troops, ample equipment, +and no financial stringency. The operations were conducted, if a layman +may say so, with skill and determination, and our troops fought +gallantly. But what is the upshot? We managed to advance into the heart +of the Mahsud country on a single line, subjected and still subject to +incessant attacks by the enemy; but we are very little nearer effective +occupation than when we started; and now financial stringency has +necessitated a material alteration in the whole programme, and we are +reverting more or less to the methods whereby we have always controlled +the tribes, namely, tribal levies or _khassadars_ belonging to the +tribe itself, frontier militia or other armed civil force, backed by +troops behind. + + +FRONTIER POLICY + +And for my own part I believe this is the best solution. We must not +expect a millennium on the North-West Frontier. The tribal lion will not +lie down beside the district lamb in our time, and we must deal with the +problem as best we can in accordance with our means, and to this end my +views are briefly as follows:-- + +(1) We should do everything possible to provide the younger trans-border +tribesmen with all honourable employment for which they are suited: +service in the army, in the frontier civil forces, and in the Indian +police or similar forces overseas, and we should give labour and +contracts as far as possible to tribesmen for public works in their +vicinity. For the problem is largely economic. Unless the lion gets +other food he is bound to cast hungry eyes on the lamb. + +(2) We should do all that is possible to establish friendly relations +with the tribal elders through selected and sympathetic political +officers, to give them, by means of subsidies for service, an interest +in controlling the hot-bloods of their tribe, and, where possible, to +give them assistance in education and enlightenment. We must remember +that we have duties to the tribes as well as rights against them. + +(3) We should extend the _khassadar_ or levy system; that is, we should +pay for tribal corps to police their own borders, arming themselves and +providing their own ammunition and equipment. In this way we give +honourable employment and secure an effective safeguard against raiders +without pouring more arms into tribal territory. + +(4) We must have efficient irregular civil forces, militia, frontier +constabulary, and police, well paid and contented. + +(5) We should revert to the old system of a separate frontier force in +the army, specially trained in the work of guarding the marches. Those +who remember the magnificent old Punjab frontier force will agree with +me in deploring its abolition in pursuance of a scheme of army +reorganisation. + +(6) We should improve communications, telephones, telegraphs, and +lateral M.T. roads. + +(7) We should give liberal rewards for the interception and destruction +of raiding gangs, and the rounding up of villages from which raids +emanate. + +(8) We should admit that the Amir of Afghanistani for religious reasons +exercises a paramount influence over our tribes, and we should get him +to use that influence for the maintenance of peace on our common border. +It has been the practise of our statesmen to adopt the attitude that +because the Amir was by treaty precluded from interfering with our +tribes, therefore he must have nothing to do with them. This is a +short-sighted view. We found during the Great War the late Amir's +influence, particularly over the Mahsuds, of the greatest value, when he +agreed to use it on our behalf. + +(9) Finally, there is a suggestion afoot that the settled districts of +the North-West Frontier Province should be re-amalgamated with the +Punjab. I have shown, I think, clearly, how inseparable are the problems +of the districts, the tribal area, and of Afghanistan; and any attempt +to place the districts under a separate control could only mean +friction, inefficiency, and disaster. The proposal is, indeed, little +short of administrative lunacy. There is, however, an underlying method +in the madness that has formulated it, namely, the self-interest of a +clever minority, which I need not now dissect. I trust that if this +proposal should go further it will be stoutly resisted. + + +AFGHANISTAN + +Let me now turn to Afghanistan. Generally speaking, the story of our +dealings with that country has been a record of stupid, arrogant muddle. +From the days of the first Afghan war, when an ill-fated army was +despatched on its crazy mission to place a puppet king, Shah Shuja, on +the throne of Afghanistan, our statesmen have, with some notable +exceptions, mishandled the Afghan problem. And yet it is simple enough +in itself. For we want very little of Afghanistan, and she does +not really want much of us. All we want from the Amir is +good-neighbourliness; that he should not allow his country to become the +focus of intrigue or aggression against us by Powers hostile to us, and +that he should co-operate with us for the maintenance of peace on our +common border. All he wants of us is some assistance in money and +munitions for the internal and external safeguarding of his realm, +commercial and other facilities, and honourable recognition, for the +Afghan, like the Indian, has a craving for self-respect and the respect +of others. + +Now, where our statesmen have failed is in regarding Afghanistan as a +petty little State to be browbeaten and ordered about at our pleasure, +without recognising the very valuable cards that the Amir holds against +us. He sees his hand and appraises it at its value. He knows, in the +first place, that nothing can be more embarrassing to us than the +necessity for another Afghan war, and the despatch of a large force to +the highlands of Kabul, to sit there possibly for years as an army of +occupation, in a desolate country, incapable of affording supplies for +the troops, at enormous cost which could never be recovered, and at the +expense of much health and life, with no clear-cut policy beyond. He +knows, in the second place, that such a war would be the signal for the +rising of practically every tribe along our frontier. The cry of _Jehad_ +would go forth, as in the third Afghan war, and we should be confronted +sooner or later with an outburst from the Black Mountain to +Baluchistan--a formidable proposition in these days. He knows, in the +third place, that with Moslem feeling strained as it is to-day on the +subject of Turkey, there would be sympathy for him in India, and among +the Moslem troops of the Indian army. Now these are serious +considerations, but I do not suggest that they are so serious as to make +us tolerate for a moment an offensive or unreasonable attitude on the +part of the Amir. If the necessity should be forced on us, which God +forbid, we should face the position with promptitude and firmness and +hit at once; and apart from an advance into Afghanistan we have a +valuable card in the closing of the passes and the blockade of that +country. + +All I suggest is that in negotiating with Afghanistan, we should +remember these things and should not attempt to browbeat a proud and +sensitive ruler, who, however inferior in the ordinary equipment for +regular war, holds such valuable assets on his side. And my own +experience is that the Afghans are not unreasonable. Like every one +else, they will "try it on," but if handled courteously, kindly, with +geniality, and, above all, with complete candour, they will generally +see reason. And remember one thing. In spite of all that has happened, +our mistakes, our bluster, our occasional lapses from complete +disingenuousness, the Afghans still like us. Moreover, their hereditary +mistrust of Russia still inclines them to lean on us. We have lately +concluded a treaty with Afghanistan--not by any means a perfect treaty, +but the best certainly that could be secured in the circumstances, and +we have sent a Minister to Kabul, Lt.-Colonel Humphrys, who was one of +my officers on the frontier. A better man for the post could not, I +believe, be found in the Empire. Unless unduly hampered by a hectoring +diplomacy from Whitehall, he will succeed in establishing that goodwill +and mutual confidence which between Governments is of more value than +all the paper engagements ever signed. One word more of the Afghans. +There is an idea that they are a treacherous and perfidious people. +This, I believe, is wicked slander, so far as the rulers are concerned. +In 1857, during the Indian Mutiny, the Amir Dost Muhammed was true to +his bond, when he might have been a thorn in our side; and during the +Great War the late Amir Halilullah, in the face of appalling +difficulties, maintained the neutrality of his country, as he promised, +and was eventually murdered, a martyr to his own good faith to us. + + +INTERNAL UNREST + +Let me now turn to our second question: internal political unrest. In +clubs and other places where wise men in arm-chairs lay down the law +about affairs of state, one constantly hears expressions of surprise and +indignation that there should be any unrest in India at all. "We have," +say the die-hard wiseacres, "governed India jolly well and jolly +honestly, and the Indians ought to be jolly grateful instead of kicking +up all this fuss. If that meddlesome Montagu had not put these wicked +democratic ideas into their heads, and stirred up all this mud, we +should have gone on quite comfortable as before." But if we face the +facts squarely, we shall see that the wonder is not that there has been +so much, but that there has been so comparatively little unrest, and +that India should, on the whole, have waited so patiently for a definite +advance towards self-government. + +What are the facts? They are these. Partly by commercial enterprise, +partly by adroit diplomacy, partly by accident, largely by the valour of +our arms, we have obtained dominion over the great continent of India. +We have ruled it for more than a century through the agency of a handful +of Englishmen, alien in creed, colour, and custom from the people whom +they rule--men who do not even make their permanent homes in the land +they administer. Now, however efficient, however honest, however +impartial, however disinterested such a rule may be, it cannot obviously +be really agreeable to the peoples ruled. This is the fundamental +weakness of our position. That our rule on these lines has lasted so +long and has been so successful is due not to the fact alone that it has +been backed by British bayonets, but rather to the fact that it has been +remarkably efficient, honest, just, and disinterested--and, above all, +that we have in the past given and secured goodwill. + +Superimposed on this underlying irritant, there have been of late years +a number of other more direct causes of unrest. Education, which we gave +to India and were bound to give, had inevitably bred political +aspiration, and an _intelligensia_ had grown up hungry for political +rights and powers. Simultaneously the voracious demands of a centralised +bureaucracy for reports and returns had left the district officer little +leisure for that close touch with the people which in the past meant +confidence and goodwill. Political restlessness had already for some +years begun to manifest itself in anarchical conspiracies and crimes of +violence, when the Great War began. In India, as elsewhere, the reflex +action of the war was a disturbing element. High prices, stifled trade, +high taxation, nationalist longings and ideas of self-determination and +self-government served to reinforce subterranean agitation. + +But throughout the war India not only remained calm and restrained, but +her actual contribution to the war, in men and material, was colossal +and was ungrudgingly given. She had a right to expect in return generous +treatment; but what did she get? She got the Rowlatt Bill. Now, of +course, there was a great deal of wicked, lying nonsense talked by +agitators about the provisions of the Rowlatt Bill, and the people were +grossly misled. But the plain fact remains that when India had emerged +from the trying ordeal of the war, not only with honour untarnished, but +having placed us under a great obligation, our first practical return +was to pass a repressive measure, for fear, forsooth, that if it was not +passed then it might be pigeon-holed and forgotten. India asked for +bread and we gave her a stone--a stupid, blundering act, openly +deprecated at the time by all moderate unofficial opinion in India. What +was the result? The Punjab disturbances and the preventive massacre of +the Jallianwala Bagh. I do not propose to dwell on this deplorable and +sadly mishandled matter, save to say that so far from cowing agitation, +it has left a legacy of hate that it will take years to wipe out; and +that the subsequent action of a number of ill-informed persons in +raising a very large sum of money for the officer responsible for that +massacre has further estranged Indians and emphasised in their eyes the +brand of their subjection. + + +THE RISE OF GHANDI + +To India, thus seething with bitterness over the Punjab disturbances, +there was added the Moslem resentment over the fate of Turkey. I was +myself in London and Paris in a humble capacity at the Peace Conference, +and I know that our leading statesmen were fully informed of the Moslem +attitude and the dangers of unsympathetic and dilatory action in this +matter. But an arrogant diplomacy swept all warnings aside and scorned +the Moslem menace as a bogey. What was the result? Troubles in Egypt, in +Mesopotamia, Kurdistan, Afghanistan, and the Khilifat movement in India. +Hindu agitators were not slow to exploit Moslem bitterness, and for the +first time there was a genuine, if very ephemeral, _entente_ between the +two great rival creeds. + +It was in this electric atmosphere that Ghandi, emerging from his +ascetic retirement, found himself an unchallenged leader. Short of +stature, frail, with large ears, and a gap in his front teeth, he had +none of the outward appearance of dominance. His appeal lay in the +simplicity of his life and character, for asceticism is still revered in +the East. But his intellectual equipment was mediocre, his political +ideas nebulous and impracticable to a degree, his programme archaic and +visionary; and from the start he was doomed to fail. The _Hijrat_ +movement which he advocated brought ruin to thousands of Moslem homes; +his attack on Government educational establishments brought disaster to +many youthful careers; non-co-operation fizzled out. Government servants +would not resign their appointments, lawyers would not cease to +practise, and title-holders, with a few insignificant exceptions, would +not surrender their titles; the "back to the spinning-wheel" call did +not attract, and the continual failure of Ghandi's predictions of the +immediate attainment of complete _Swaraj_ or self-government, which he +was careful never to define, like hope deferred turned the heart sick. + +From being a demi-god Ghandi gradually became a bore, and when he was at +last arrested, tragic to relate, there was hardly a tremor of resentment +through the tired political nerves of India. The arrest was indeed a +triumph of wise timing that does credit to the sagacity of the +Government of India. Had the arrest been effected when the name of +Ghandi was at its zenith, there would have been widespread trouble and +bloodshed. As it was, people were only too glad to be rid of a gadfly +that merely goaded them into infructuous bogs. + +I apologise for this long excursus on the somewhat threadbare subject of +the causes of unrest in India. But I want those here present to realise +what potent forces have been at work and to believe that the Indian +generally is not the ungrateful, black-hearted seditionist he is painted +by the reactionary press. India is going through an inevitable stage of +political transition, and we must not hastily judge her peoples--for the +most part so gallant, so kindly, so law-abiding, so lovable--by the +passing tantrums of political puberty. + + +THE PRESENT SITUATION + +As things stand at present, there is a remarkable lull. It would be +futile to predict whether it will last. It is due in part, as I have +suggested, to general political weariness, in part to the drastic action +taken against the smaller agitating fry, in part to the depletion of the +coffers of the extremists, in part to the fact that the extremists are +quarrelling amongst themselves as to their future programme. Some are +for continuing a boycott of the Councils; others are for capturing all +the seats and dominating the legislature; others are for re-beating the +dead horse of non-co-operation. Meanwhile, with disunion in the +extremist camp, the Councils conduct their business on moderate lines, +and, so far as one can judge, with marked temperance and sanity. + +The work of the first Councils has indeed been surprisingly good, and +augurs well for the future. India has not yet, of course, by any means +grasped the full significance of representative government. The party +system is still in embryo, although two somewhat vague and nebulous +parties calling themselves the "Nationalists" and the "Democrats" do +exist. But these parties have no clear-cut programme, and they do not +follow the lead of the Ministers, who are regarded, not as representing +the elected members of the Council, but as newly-appointed additional +members of the official bureaucracy. There will doubtless in time be +gradual sorting of politicians into definite groups, but there are two +unbridgeable gulfs in the Indian social system which must always +militate against the building up of a solid political party system: +first, the gulf between Hindu and Moslem, which still yawns as wide as +ever, and second, the gulf between the Brahman and the "untouchables" +who, by the way, have found their fears that they would be downtrodden +under the new Councils completely baseless. + +There are and must be breakers ahead. Some we can see, and there are +doubtless others still bigger which we cannot yet glimpse over the +welter of troubled waters. What we can see is this: first, there is a +danger that unless Government and the Councils together can before the +next elections in 1923-24 take definite steps towards the industrial +development and the self-defence of India, the extremist party are +likely to come in in full force and to create a deadlock in the +administration; second, unless the Councils continue to accept a fiscal +policy in accordance with the general interests of Great Britain and the +Empire, there will be trouble. The fiscal position is obscure, but it is +the crux, for the Councils can indirectly stultify any policy +distasteful to them, and this too may mean a deadlock; third, there is a +danger that the Indianisation of the Services will advance much more +rapidly than was ever contemplated, or than is desirable in the +interests of India for many years to come, for the simple reason that +capable young Englishmen of the right stamp will not, without adequate +guarantees for their future, accept employment in India. Those +guarantees can be given satisfactorily by one authority alone, and that +is by the Indian Legislatures voicing popular opinion. For a complex +administration bristling with technical questions, administrative, +political, and economic, it is essential that India should have for many +years to come the assistance of highly-educated Britons with the +tradition of administration in their blood. The Councils will be wise to +recognise this and make conditions which will secure for them in the +future as in the past the best stamp of adventurous Briton. + +Finally, the Montagu-Chelmsford scheme, though a capable and +conscientious endeavour to give gradual effect to a wise and generous +policy, has of necessity its weak points. The system of diarchy--of +allotting certain matters to the bureaucratic authority of the Viceroy +and of the Provincial Governors and other matters to the representatives +of the people--is obviously a stop-gap, which is already moribund. The +attempt to fix definite periods at which further advances towards +self-government can be considered is bound to fail: you cannot give +political concessions by a stop-watch; the advance will either be much +more rapid or much slower than the scheme anticipates. Again, the +present basis of election is absurdly small, but any attempt to broaden +it must tend towards adult suffrage, which in itself would appear +impracticable with a population of over 200 millions. + + +OUR DUTY TO INDIA + +It is a mistake, however, in politics to look too far ahead. Sufficient +unto the day. For the time being we may be certain of one thing, and +that is that we cannot break the Indian connection and leave India. Both +our interests and our obligations demand that we should remain at the +helm of Indian affairs for many years to come. That being so, let us +accept our part cheerfully and with goodwill as in the past. Let us try +to give India of our best, as we have done heretofore. Let us regive and +regain, above all things, goodwill. Let us not resent the loss of past +privilege, the changes in our individual status, and let us face the +position in a practical and good-humoured spirit. Let us abandon all +talk of holding India by the sword, as we won it by the sword--because +both propositions are fundamentally false. Let us realise that we have +held India by integrity, justice, disinterested efficiency--and, above +all, by goodwill--and let us continue to co-operate with India in India +for India on these same lines. + + + + +EGYPT + +BY J.A. SPENDER + +Editor of the _Westminster Gazette_, 1896 to 1922; Member of the Special +Mission to Egypt, 1919-1920. + + +Mr. Spender said:--The Egyptian problem resembles the Indian and all +other Eastern problems in that there is no simple explanation or +solution of it. Among the many disagreeable surprises which awaited us +after the war, none was more disagreeable than the discovery in March, +1919, that Egypt was in a state of rebellion. For years previously we +had considered Egypt a model of imperial administration. We had pulled +her out of bankruptcy and given her prosperity. We had provided her with +great public works which had enriched both pasha and fellah. We had +scrupulously refrained from exploiting her in our own interests. No man +ever worked so disinterestedly for a country not his own as Lord Cromer +for Egypt, and if ever a Nationalist movement could have been killed by +kindness, it should have been the Egyptian. Nor were the Egyptian people +ungrateful. I have talked to Egyptian Nationalists of all shades, and +seldom found any who did not handsomely acknowledge what Great Britain +had done for Egypt, but they asked for one thing more, which was that +she should restore them their independence. "We won it from the Turks," +they said, "and we cannot allow you to take it from us." + +This demand was no new thing, but it was brought to a climax by events +during and after the war. When the war broke out, our representative in +Egypt was still only "Agent and Consul-General," and was theoretically +and legally on the same footing with the representative of all other +Powers; when it ended, he was "High Commissioner," governing by martial +law under a system which we called a "protectorate." This to the +Egyptians seemed a definite and disastrous change for the worse. +Throughout the forty years of our occupation we have most carefully +preserved the theory of Egyptian independence. We have occupied and +administered the country, but we have never annexed it or claimed it to +be part of the British Empire. We intervened in 1882 for the purpose of +restoring order, and five years later we offered to withdraw, and were +only prevented from carrying out our intention because the Sultan of +Turkey declined, at the instigation of another Power, to sign the Firman +which gave us the right of re-occupying the country if order should +again be disturbed. In the subsequent years we gave repeated assurances +to Egyptians and to foreign Powers that we had no intention of altering +the status of the country as defined in its theoretical government by +Khedive, Egyptian Ministers, and Egyptian Council or Assembly. And +though it was true that in virtue of the army of occupation we were in +fact supreme, by leaving the forms of their government untouched and +refraining from all steps to legalise our position we reassured the +Egyptians as to our ultimate objects. + +In the eyes of the Egyptians the proclamation of the Protectorate and +the conversion of the "Agent and Consul-General" into a "High +Commissioner" armed with the weapons of martial law seriously prejudiced +this situation, and though they acquiesced for the period of the war, +they were determined to have a settlement with us immediately it was +over, and took us very seriously at our word when we promised to review +the whole situation when that time came. The truth about the +"Protectorate" was that we adopted it as a way out of the legal +entanglement which would otherwise have converted the Egyptians into +enemy aliens when their suzerain, the Sultan of Turkey, entered the war +against us, and we did it deliberately as the preferable alternative to +annexing the country. But we have neither explained to the Egyptians nor +made clear to ourselves what exactly we meant by it, and in the absence +of explanations it was interpreted in Egypt as a first step to the +extinction of Egyptian nationality. + + +AFTER-WAR MISTAKES + +Had we acted wisely and expeditiously at the end of the war we might +even then have avoided the trouble that followed. But when Egyptian +ministers asked leave to come to London in December, 1918, we answered +that the time was not opportune for these discussions, and when the +Nationalist leaders proposed to send a delegation, we said that no good +purpose could be served by their coming to Europe. This heightened the +alarm, and the Nationalists retorted by raising their claims from +"complete autonomy" to "complete independence," and started a violent +agitation. The Government retaliated by deporting Zaghlul to Malta, +whereupon the country broke into rebellion. Lord Allenby now came upon +the scene, and, while suppressing the rebellion, released Zaghlul and +gave him and his delegation the permission to go to Europe which had +been refused in January. It was now decided to send out the Milner +Mission, but there was a further delay of seven months before it +started, and during all that time agitation continued. + +When the Mission arrived it quickly discovered that there was no +possible "Constitution under the Protectorate" which would satisfy the +Egyptians, and that the sole alternatives were further suppression or +the discovery of some means of settlement which dispensed with the +Protectorate. The Mission unanimously came to the conclusion that though +the first was mechanically possible if the cost and discredit were +faced, the second was not only feasible but far preferable, and that the +right method was a treaty of Alliance between Great Britain and Egypt, +recognising Egypt as a sovereign State, but affording all necessary +guarantees for imperial interests. Working on those lines the Mission +gradually broke down the boycott proclaimed against them, convinced the +Egyptians of their goodwill, induced all parties of Egyptian +Nationalists to come to London, and there negotiated the basis of the +Treaty which was described in the Report. The main points were that +there must be a British force in the country--not an army of occupation, +but a force to guard Imperial communications--that there must be British +liaison officers for law and order and finance, that the control of +foreign policy must remain in the hands of Great Britain, and that the +Soudan settlement of 1898 must remain untouched, but that with these +exceptions the Government of Egypt should be in fact what it had always +been in theory: a Government of Egyptians by Egyptians. + +Had the Government accepted this in December, 1920 (instead of in March, +1922), and instructed Lord Milner to go forward and draft a treaty on +this basis, it is extremely probable that a settlement would have been +reached in a few weeks; but Ministers, unhappily, were unable to make up +their minds, and there was a further delay of three months before the +Egyptian Prime Minister, Adli Pasha, was invited to negotiate with the +Foreign Office. By this time the Nationalist parties which the Mission +had succeeded in uniting on a common platform had fallen apart, and the +extremists once more started a violent agitation and upbraided the +moderates for tamely waiting on the British Government, which had +evidently meant to deceive them. The situation had, therefore, changed +again for the worse when Adli came to London in April, 1921, and it was +made worse still by what followed. The negotiations dragged over six +months, and finally broke down for reasons that have never been +explained, but the probability is that Egypt had now got entangled in +Coalition domestic politics, and that the "Die-Hards" claimed to have +their way in Egypt in return for their consent to the Irish settlement. +The door was now banged in the face of all schools of Egyptian +Nationalists, and Lord Allenby was instructed to send to the Sultan the +unhappy letter in which Egypt was peremptorily reminded that she was a +"part of the communications of the British Empire," and many other +things said which were specially calculated to wound Egyptian +susceptibilities. + +The Egyptian Prime Minister resigned, and for the next five months Lord +Allenby endeavoured to govern the country by martial law without an +Egyptian Ministry. Then he came to London with the unanimous support of +British officials in Egypt to tell the Government that the situation was +impossible and a settlement imperative. The Government gave way and +British policy was again reversed, but three opportunities had now been +thrown away, and at the fourth time of asking the difficulties were +greatly increased. The Nationalists were now divided and the Moderates +in danger of being violently attacked if they accepted a moderate +solution. It was found necessary to deport Zaghlul Pasha and to put +several of his chief adherents on trial. Suspicions had been aroused by +the delays and vacillations of the British Government. A settlement by +treaty was now impossible, and Lord Allenby had to give unconditionally +the recognition of sovereignty which the Mission intended to be part of +the treaty, putting the Egyptians under an honourable pledge to respect +British rights and interests. In the circumstances there was nothing +else to do, but it is greatly to be desired that when the constitution +has been completed and the new Assembly convened, an effort should be +made to revert to the method of the treaty which particularly suited the +Egyptian character and would be regarded as a binding obligation by +Egyptians. + + +THE HOPE OF THE FUTURE + +In regard to the future, there is only one thing to do and that is to +work honestly to its logical conclusion the theory now adopted, that +Egypt is a self-governing independent State. Egyptians must be +encouraged to shoulder the full responsibilities of a self-governing +community. It would be folly to maintain a dual system which enabled an +Egyptian Government to shunt the difficult or disagreeable part of its +task on to a British High Commissioner. Whatever the system of +Government, there is no escape for either party from the most intimate +mutual relations. Geography and circumstances decree them, but there is +no necessary clash between the imperial interests which require us to +guard the highway to the East that runs through Egyptian territory, and +the full exercise of their national rights by Egyptians. Egyptians must +remember that for many years to come the world will hold us responsible +for law and order and solvency in Egypt, and we on our part must +remember that Egyptians have the same pride in their country as other +peoples, and that they will never consent to regard it as merely and +primarily "a communication of the British Empire." In any wise solution +of the question any sudden breach with the past will be avoided, and +Egyptians will of their own free will enlist the aid of British +officials who have proved their devotion to the country by loyal and +skilful service. The hope of the future lies in substituting a free +partnership for a domination of one race by the other, and with a genial +and good-humoured people, such as the Egyptians essentially are, there +should be no difficulty in restoring friendship and burying past +animosities. But there must be a real determination on both sides to +make Egyptian independence a success and no disposition on either to +give merely a reluctant consent to the conditions agreed upon by them +and then to throw the onus of failure on the others. + +I deeply regret the schism between the different schools of Nationalists +in Egypt. As we have seen in Ireland, Nationalism is threatened from +within as well as from without, and it is a great misfortune that in +settling the Egyptian problem we missed the moment in 1920 when the +different Nationalist parties were all but united on a common platform. +Extremist leaders have the power of compelling even their friends to +deport them and treat them as enemies, and I assume that Zaghlul put +Lord Allenby under this compulsion, when he decided that his deportation +was necessary. But Zaghlul was one of the few Nationalist leaders who +were of peasant origin, and his followers stand for something that needs +to be strongly represented in the Government if it is not to take its +complexion merely from the towns and the wealthy interests. The fellah +is a very different man from what he was in the days of Ismail, and it +is improbable that he will again submit to oppression as his forefathers +did but it is eminently desirable that there should be in the Government +men whom he would accept as leaders and whom he could trust to speak for +him. + +Above all, it is to be hoped that, having conceded the independence of +Egypt, we shall not slip back into governing the country by martial law +with the aid of one party among the Egyptians. That would be merely an +evasion of the difficulty and a postponement of troubles. There are a +good many difficulties yet to be overcome, and the progress of events +will need careful watching by Liberals in and out of the House of +Commons, but if at length we steer a straight course and bring political +good sense to the details of the problem, there is no reason why we +should not satisfy the Egyptians and put Anglo-Egyptian relations on a +good and enduring basis. In dealing with Egypt as with all Eastern +countries, it should constantly be borne in mind that manners, +character, and personality are a chief part of good politics. To a very +large extent the estrangement has been caused by a failure to understand +and respect the feelings of the Egyptian people, and here, as in India, +it is important to understand that the demand of the Eastern man is not +only for self-government, but also for a new status which will enable +him to maintain his self-respect in his dealings with the West. + + + + +THE MACHINERY OF GOVERNMENT + +BY RAMSAY MUIR + +Professor of Modern History in the University of Manchester, 1913 to +1921. + + +Mr. Ramsay Muir said:--One of the most marked, and one of the most +ominous, features of the political situation to-day is that there is an +almost universal decline of belief in and respect for our system of +government. This undermining of the confidence that a healthy community +ought to feel in its institutions is a perturbing fact which it is the +plain duty of all good Liberals to consider seriously. We need not be +deterred by the old gibe that Liberalism has always cared more about +political machinery than about social reorganisation. The gibe was never +true. But, in any case, no projects of social reorganisation have much +chance of success unless the political machinery by means of which they +have to be carried into effect is working efficiently. Moreover, since +most of the projects of social reform which are being urged upon our +attention involve an enlargement of the activities of the State, it is +obvious that we shall be running the risk of a breakdown unless we make +sure that the machinery of the State is capable of meeting the demands +which are made upon it. We must be satisfied that our engine has +sufficient power before we require it to draw a double load. In truth, +one reason why the engine of government is not working well is that it +has been required to do a great deal more work than it was designed for. +The time has come to consider carefully the character and capacity of +our machinery of government in view of the increased demands which are +certain to be made upon it in the future. + +Our national political system may be divided into two parts. On the one +hand, there is the working machine, which goes on, year in, year out, +whether Parliament is sitting or not, and which would still go on quite +well for a time if Parliament never met again. We call it the +Government, and we habitually and rightly hold it responsible for every +aspect of national policy and action, for legislation and finance as +well as for foreign policy and internal administration. On the other +hand, there is what Burke used to call "the control on behalf of the +nation," mainly exercised through Parliament, whose chief function is to +criticise and control the action of Government, and to make the +responsibility of Government to the nation a real and a felt +responsibility. The discontents of to-day apply to both parts of the +system, and I propose to deal with them in turn, first inquiring what is +wrong with the working machine of government and how it can be amended, +and then turning to consider how far the control on behalf of the nation +is working badly, and how it can be made more efficient. + +In what I have called the "working machine" of government there are two +distinct elements. First, there is the large, permanent, professional +staff, the Civil Service; secondly, there is the policy-directing body, +the Cabinet. Both of these are the objects of a great deal of +contemporary criticism. On the one hand, we are told that we are +suffering from "bureaucracy," which means that the permanent officials +have too much independent and uncontrolled, or imperfectly controlled, +authority. On the other hand, we are told that we are suffering from +Cabinet dictatorship, or, alternatively, that the Cabinet system is +breaking down and being replaced by the autocracy of the Prime Minister. +There is a good deal of _prima facie_ justification for all these +complaints. + + +THE GROWTH OF THE CIVIL SERVICE + +First, as to bureaucracy. It is manifest that there has been an immense +increase in the number, the functions, and the power of public +officials. This is not merely due to the war. It has been going on for a +long time--ever since, in fact, we began the deliberate process of +national reconstruction in the years following 1832. In itself this +increase has not been a bad thing; on the contrary, it has been the only +possible means of carrying into effect the great series of reforms which +marked the nineteenth century. And may I here underline the fact that we +Liberals, in particular, have no right to criticise the process, since +we have been mainly responsible for it, at any rate in all its early +stages. When our predecessors set up the first Factory Inspectors in +1833, and so rendered possible the creation of a whole code of factory +laws; when they created the first rudimentary Education Office in 1839, +and so set to work the men who have really moulded our national system +of education; when they set up a bureaucratic Poor Law Board in 1841, +which shaped our Poor Law Policy, and a Public Health Board in 1848, +which gradually worked out our system of Public Health--when they did +these things, they were beginning a process which has been carried +further with every decade. If you like, they were laying the foundations +of bureaucracy; but they were also creating the only machinery by which +vast, beneficial and desperately needed measures of social reform could +be carried into effect. + +And there is yet another thing for which Liberalism must assume the +responsibility. When Gladstone instituted the Civil Service Commission +in 1853, and the system of appointment by competitive examination in +1870, he freed the Civil Service from the reputation for corruption and +inefficiency which had clung to it; and he ensured that it should +attract, as it has ever since done, much of the best intellect of the +nation. But this very fact inevitably increased the influence of the +Civil Service, and encouraged the expansion of its functions. If you put +a body of very able men in charge of a department of public service, it +is certain that they will magnify their office, take a disproportionate +view of its claims, and incessantly strive to increase its functions and +its staff. This is not only natural, it is healthy--so long as the +process is subjected to efficient criticism and control. + +But the plain fact is that the control is inadequate. The vast machine +of government has outgrown the power of the controlling mechanism. + +We trust for the control of the immense bureaucratic machine, almost +entirely to the presence, at the head of each department, of a political +minister directly responsible to Parliament. We hold the minister +responsible for everything that happens in his office, and we regard +this ministerial responsibility as one of the keystones of our system. +But when we reflect that the minister is distracted by a multitude of +other calls upon his time, and that he has to deal with officials who +are generally his equals in ability, and always his superiors in special +knowledge; when we realise how impossible it is that a tithe of the +multifarious business of a great department should come before him, and +that the business which does come before him comes with the +recommendations for action of men who know ten times more about it than +he does, it must be obvious that the responsibility of the minister must +be quite unreal, in regard to the normal working of the office. One +thing alone he can do, and it is an important thing, quite big enough to +occupy his attention. He can make sure that the broad policy of the +office, and its big new departures, are in accord with the ideas of the +majority in Parliament, and are co-ordinated, through the Cabinet, with +the policy of the other departments. That, indeed, is the true function +of a minister; and if he tries to make his responsibility real beyond +that, he may easily neglect his main work. Beyond this consideration of +broad policy, I do not hesitate to say that the theory of ministerial +responsibility is not a check upon the growth of bureaucracy, but is +rather the cover under which bureaucracy has grown up. For the position +of the minister enables him, and almost compels him, to use his +influence in Parliament for the purpose of diverting or minimising +parliamentary criticism. + + +A CHECK UPON BUREAUCRACY + +How can this growth of inadequately controlled official power be +checked? Is it not apparent that this can only be done if a clear +distinction is drawn between the sphere of broad policy, in which the +minister both can be and ought to be responsible, and the sphere of +ordinary administrative work for which the minister cannot be genuinely +responsible? If that distinction is accepted, it ought not to be +impossible for Parliament without undermining ministerial or cabinet +responsibility, to devise a means of making its control over the +ordinary working of the departments effective, through a system of +committees or in other ways. + +The current complaints of bureaucracy, however, are not directed mainly +against the ineffectiveness of the machinery of control, but against the +way in which public work is conducted by government officials--the +formalism and red-tape by which it is hampered, the absence of +elasticity and enterprise; and the methods of government departments are +often compared, to their disadvantage, with those of business firms. But +the comparison disregards a vital fact. The primary function of a +government department is not creative or productive, but regulative. It +has to see that laws are exactly carried out, and that public funds are +used for the precise purposes for which they were voted; and for this +kind of work a good deal of red-tape is necessary. Moreover, it is +essential that those who are charged with such functions should be above +all suspicion of being influenced by fear or favour or the desire to +make profit; and for this purpose fixed salaries and security of tenure +are essential. + +In short, the fundamental principles upon which government departments +are organised are right for the regulative functions which they +primarily exist to perform. But they are altogether wrong for creative +and productive work, which demands the utmost elasticity, adaptability, +and freedom for experiment. And it is just because the ordinary +machinery of government has been used on a large scale for this kind of +work that the outcry against bureaucracy has recently been so vehement. +It is not possible to imagine a worse method of conducting a great +productive enterprise than to put it under the control of an evanescent +minister selected on political grounds, and supported by a body of men +whose work is carried on in accordance with the traditions of the Civil +Service. + +If we are to avoid a breakdown of our whole system, we must abstain from +placing productive enterprises under the control of the ordinary +machinery of government--Parliament, responsible political ministers, +and civil service staffs. But it does not follow that no productive +concern ought ever to be brought under public ownership and withdrawn +from the sphere of private enterprise. As we shall later note, such +concerns can, if it be necessary, be organised in a way which would +avoid these dangers. + + +THE CABINET + +We turn next to the other element in the working machine of government, +the Cabinet, or policy-directing body, which is the very pivot of our +whole system. Two main functions fall to the Cabinet. In the first +place, it has to ensure an effective co-ordination between the various +departments of government; in the second place, it is responsible for +the initiation and guidance of national policy in every sphere, subject +to the watchful but friendly control of Parliament. + +Long experience has shown that there are several conditions which must +be fulfilled if a Cabinet is to perform these functions satisfactorily. +In the first place, its members must, among them, be able to speak for +every department of government; failing this, the function of +co-ordination cannot be effectively performed. This principle was +discarded in the later stages of the war, when a small War Cabinet was +instituted, from which most of the ministers were excluded. The result +was confusion and overlapping, and the attempt to remedy these evils by +the creation of a staff of _liaison_ officers under the control of the +Prime Minister had very imperfect success, and in some respects only +added to the confusion. In the second place, the Cabinet must be +coherent and homogeneous, and its members must share the same ideals of +national policy. National business cannot be efficiently transacted if +the members of the Cabinet are under the necessity of constantly arguing +about, and making compromises upon, first principles. That is the +justification for drawing the members of a Cabinet from the leaders of a +single party, who think alike and understand one another's minds. +Whenever this condition has been absent, confusion, vacillation and +contradiction have always marked the conduct of public affairs, and +disastrous results have followed. + +In the third place, the procedure of the Cabinet must be intimate, +informal, elastic, and confidential; every member must be able to feel +that he has played his part in all the main decisions of policy, whether +they directly concern his department or not, and that he is personally +responsible for these decisions. Constitutional usage has always +prescribed that it is the duty of a Cabinet Minister to resign if he +differs from his colleagues on any vital matter, whether relating to his +department or not, and this usage is, in truth, the main safeguard for +the preservation of genuine conjoint responsibility, and the main +barrier against irresponsible action by a Prime Minister or a clique. +When the practice of resignation in the sense of giving up office is +replaced by the other kind of resignation--shrugging one's shoulders and +letting things slide--the main virtue of Cabinet government has been +lost. In the fourth place, in order that every minister may fully share +in every important discussion and decision, it is essential that the +Cabinet should be small. Sir Robert Peel, in whose ministry of 1841-6 +the system probably reached perfection, laid it down that nine was the +maximum number for efficiency, because not more than about nine men can +sit round a table in full view of one another, all taking a real share +in every discussion. When the membership of a Cabinet largely exceeds +this figure, it is inevitable that the sense of joint and several +responsibility for every decision should be greatly weakened. + + +MODERN CHANGES IN THE CABINET + +I do not think any one will deny that the Cabinet has in a large degree +lost these four features which we have laid down as requisite for full +efficiency. The process has been going on for a long time, but during +the last six years it has been accelerated so greatly that the Cabinet +of to-day is almost unrecognisably different from what it was fifty +years ago. To begin with, it has grown enormously in size, owing to the +increase in the number of departments of government. This growth has +markedly diminished the sense of responsibility for national policy as a +whole felt by the individual members, and the wholesome practice of +resignation has gone out of fashion. It has led to frequent failures in +the co-ordination of the various departments, which are often seen +working at cross purposes. It has brought about a new formality in the +proceedings of the Cabinet, in the establishment of a Cabinet +Secretariat. + +The lack of an efficient joint Cabinet control has encouraged a very +marked and unhealthy increase in the personal authority of the Prime +Minister and of the clique of more intimate colleagues by whom he is +surrounded; and this is strengthened by the working of the new +Secretariat. All these unhealthy features have been intensified by the +combination of the two strongest parties in Parliament to form a +coalition; for this has deprived the Cabinet of homogeneity and made it +the scene not of the definition of a policy guided by clear principles, +but rather the scene of incessant argument, bargaining, and compromise +on fundamentals. Finally, the responsibility of the Cabinet to +Parliament has been gravely weakened; it acts as the master of +Parliament, not as its agent, and its efficiency suffers from the fact +that its members are able to take their responsibility to Parliament +very lightly. + +All these defects in the working of the Cabinet system have been much +more marked since the war than at any earlier time. But the two chief +among them--lessened coherence due to unwieldiness of size, and +diminished responsibility to Parliament--were already becoming apparent +during the generation before the war. On the question of responsibility +to Parliament we shall have something to say later. But it is worth +while to ask whether there is any means whereby the old coherence, +intimacy and community of responsibility can be restored. If it cannot +be restored, the Cabinet system, as we have known it, is doomed. I do +not think that it can be restored unless the size of the Cabinet can be +greatly reduced, without excluding from its deliberations a responsible +spokesman for each department of government. + +But this will only be possible if a considerable regrouping of the great +departments can be effected. I do not think that such a regrouping is +impracticable. Indeed, it is for many reasons desirable. If it were +carried out, a Cabinet might consist of the following members, who would +among them be in contact with the whole range of governmental activity. +There would be the Prime Minister; there would be the Chancellor of the +Exchequer, responsible for national finance; there would be the Minister +for Foreign Affairs; there would be a Minister for Imperial Affairs, +speaking for a sub-Cabinet which would include Secretaries for the +Dominions, for India, and for the Crown Colonies and Protectorates; +there would be a Minister of Defence, with a sub-Cabinet including +Ministers of the Navy, the Army, and the Air Force; there would be a +Minister for Justice and Police, performing most of the functions both +of the Home Office and of the Lord Chancellor, who would cease to be a +political officer and be able to devote himself to his judicial +functions; there would be a Minister of Agriculture, Industry, and +Commerce, with a sub-Cabinet representing the Board of Trade, the Board +of Agriculture, the Ministry of Mines, the Ministry of Labour, and +perhaps other departments. + +Ministers of Public Health and of Education would complete the list of +active administrative chiefs; but one or two additional members, not +burdened with the charge of a great department might be added, such as +the Lord President of the Council, and one of these might very properly +be a standing representative upon the Council of the League of Nations. +The heads of productive trading departments--the Post Office and the +Public Works Department--should, I suggest, be excluded from the +Cabinet, and their departments should be separately organised in such a +way as not to involve a change of personnel when one party succeeded +another in power. These departments have no direct concern with the +determination of national policy. + +On such a scheme we should have a Cabinet of nine or ten members, +representing among them all the departments which are concerned with +regulative or purely governmental work. And I suggest that a +rearrangement of this kind would not only restore efficiency to the +Cabinet, but would lead to very great administrative reforms, better +co-ordination between closely related departments, and in many respects +economy. But valuable as such changes may be, they would not in +themselves be sufficient to restore complete health to our governmental +system. In the last resort this depends upon the organisation of an +efficient and unresting system of criticism and control. + + +THE HOUSE OF COMMONS + +In any modern State the control of the action of Government is largely +wielded by organs not formally recognised by law--by the general +movement of public opinion; by the influence of what is vaguely called +"the city"; by the resolutions of such powerful bodies as trade union +congresses, federations of employers, religious organisations, and +propagandist bodies of many kinds; and, above all, by the Press. No +review of our system would be complete without some discussion of these +extremely powerful and in some cases dangerous influences. We cannot, +however, touch upon them here. We must confine ourselves to the formal, +constitutional machinery of national control over the actions of +Government, that is, to Parliament, as the spokesman of the nation. + +An essential part of any full discussion of this subject would be a +treatment of the Second Chamber problem. But that would demand a whole +hour to itself; and I propose to pass it over for the present, and to +ask you to consider the perturbing fact that the House of Commons, which +is the very heart of our system, has largely lost the confidence and +belief which it once commanded. + +Why has the House of Commons lost the confidence of the nation? There +are two main reasons, which we must investigate in turn. In the first +place, in spite of the now completely democratic character of the +electorate, the House is felt to be very imperfectly representative of +the national mind. And in the second place, it is believed to perform +very inefficiently its primary function of criticising and controlling +the action of Government. + +First of all, why do men vaguely feel that the House of Commons is +unrepresentative? I think there are three main reasons. The first is to +be found in the method of election. Since 1885 the House has been +elected by equal electoral districts, each represented by a single +member. Now, if we suppose that every constituency was contested by two +candidates only, about 45 per cent. of the voters must feel that they +had not voted for anybody who sat at Westminster; while many of the +remaining 55 per cent. must feel that they had been limited to a choice +between two men, neither of whom truly represented them. But if in many +constituencies there are no contests, and in many others there are three +or more candidates, the number of electors who feel that they have not +voted for any member of the House may rise to 60 per cent. or even 70 +per cent. of the total. + +The psychological effect of this state of things must be profound. And +there is another consideration. The very name of the House of Commons +(Communes, not common people) implies that it represents organised +communities, with a character and personality and tradition of their +own--boroughs or counties. So it did until 1885. Now it largely +represents totally unreal units which exist only for the purpose of the +election. The only possible means of overcoming these defects +of the single member system is some mode of proportional +representation--perhaps qualified by the retention of single members in +those boroughs or counties which are just large enough to be entitled to +one member. + +The main objection taken to proportional representation is that it would +probably involve small and composite majorities which would not give +sufficient authority to ministries. But our chief complaint is that the +authority of modern ministries is too great, their power too unchecked. +In the middle of the nineteenth century, when our system worked most +smoothly, parties _were_ composite, and majorities were small--as they +usually ought to be, if the real balance of opinion in the country is to +be reflected. The result was that the control of Parliament over the +Cabinet was far more effective than it is to-day; the Cabinet could not +ride roughshod over the House; and debates really influenced votes, as +they now scarcely ever do. The immense majorities which have been the +rule since 1885 are not healthy. They are the chief cause of the growth +of Cabinet autocracy. And they are due primarily to the working of the +single-member constituency. + +The second ground of distrust is the belief that Parliament is unduly +dominated by party; that its members cannot speak and vote freely; that +the Cabinet always gets its way because it is able to hold over members, +_in terrorem_, the threat of a general election, which means a fine of +£1000 a head; and that (what creates more suspicion than anything) the +policy of parties is unduly influenced by the subscribers of large +amounts to secret party funds. I am a profound believer in organised +parties as essential to the working of our system. But I also believe +that there is real substance in these complaints, though they are often +exaggerated. What is the remedy? First, smaller majorities, and a +greater independence of the individual member, which would follow from a +change in the methods of election. And, secondly, publicity of accounts +in regard to party funds. There is no reason why an honest party should +be ashamed of receiving large gifts for the public ends it serves, and +every reason why it should be proud of receiving a multitude of small +gifts. I very strongly hold that in politics, as in industry, the best +safeguard against dishonest dealings, and the surest means of restoring +confidence, is to be found in the policy of "Cards on the table." Is +there any reason why we Liberals should not begin by boldly adopting, in +our own case, this plainly Liberal policy? + + +REPRESENTATION OF "INTERESTS" + +There is a third reason for dissatisfaction with the composition of the +House of Commons, which has become more prominent in recent years. It is +that, increasingly, organised interests are making use of the +deficiencies of our electoral system to secure representation for +themselves. If I may take as instances two men whom, in themselves, +everybody would recognise as desirable members of the House, Mr. J.H. +Thomas plainly is, and is bound to think of himself as, a representative +of the railwaymen rather than of the great community of Derby, while Sir +Allan Smith as plainly represents engineering employers rather than +Croydon. There used to be a powerful trade which chose as its motto "Our +trade is our politics." Most of us have regarded that as an unsocial +doctrine, yet the growing representation of interests suggests that it +is being widely adopted. + +Indeed, there are some who contend that we ought frankly to accept this +development and universalise it, basing our political organisation upon +what they describe (in a blessed, Mesopotamic phrase) as "functional +representation." The doctrine seems to have, for some minds, a strange +plausibility. But is it not plain that it could not be justly carried +out? Who could define or enumerate the "functions" that are to be +represented? If you limit them to economic functions (as, in practice, +the advocates of this doctrine do), will you provide separate +representation, for example, for the average-adjusters--a mere handful +of men, who nevertheless perform a highly important function? But you +cannot thus limit functions to the economic sphere without distorting +your representation of the national mind and will. If you represent +miners merely as miners, you misrepresent them, for they are also +Baptists or Anglicans, dog-fanciers, or lovers of Shelley, +prize-fighters, or choral singers. The notion that you can represent the +mind of the nation on a basis of functions is the merest moonshine. The +most you can hope for is to get a body of 700 men and women who will +form a sort of microcosm of the more intelligent mind of the nation, and +trust to it to control your Government. Such a body will consist of men +who follow various trades. But the conditions under which they are +chosen ought to be such as to impress upon them the duty of thinking of +the national interest as a whole in the first instance, and of their +trade interests only as they are consistent with that. The fundamental +danger of functional representation is that it reverses this principle, +and impresses upon the representative the view that his trade is his +politics. + +But it is useless to deplore or condemn a tendency unless you see how it +can be checked. Why has this representation of economic interests become +so strong? Because Parliament is the arena in which important industrial +problems are discussed and settled. It is not a very good body for that +purpose. If we had a National Industrial Council charged, not with the +final decision, but with the most serious and systematic discussion of +such problems, they would be more wisely dealt with. And, what is quite +as important, such a body would offer precisely the kind of sphere +within which the representation of interests as such would be altogether +wholesome and useful; and, once it became the main arena of discussion, +it would satisfy the demand for interest-representation, which is +undermining the character of Parliament. In other words, the true +alternative to functional representation in Parliament is functional +devolution under the supreme authority of Parliament. + +But still more important than the dissatisfaction aroused by the +composition of the House is the dissatisfaction which is due to the +belief that its functions are very inefficiently performed. It is +widely believed that, instead of controlling Government, Parliament is +in fact controlled by it. The truth is that the functions imposed upon +Parliament by increased legislative activity and the growth of the +sphere of Government are so vast and multifarious that no part of them +_can_ be adequately performed in the course of sessions of reasonable +length; and if the sessions are not of reasonable length--already they +are too long--we shall be deprived of the services of many types of men +without whom the House would cease to be genuinely representative of the +mind of the nation. + +Consider how the three main functions of Parliament are +performed--legislation, finance, and the control of administration. The +discussion of legislation by the whole House has been made to seem +futile by the crack of the party whip, by obstruction, and by the +weapons designed to deal with obstruction--the closure, the guillotine, +the kangaroo. A real amendment has been brought about in this sphere by +the establishment of a system of committees to which legislative +proposals of various kinds are referred, and this is one of the most +hopeful features of recent development. But there is still one important +sphere of legislation in which drastic reform is necessary: the costly +and cumbrous methods of dealing with private bills promoted by +municipalities or by railways and other public companies. It is surely +necessary that the bulk of this work should be devolved upon subordinate +bodies. + +When we pass to finance, the inefficiency of parliamentary control +becomes painfully clear. It is true that a good deal of parliamentary +time is devoted to the discussion of the estimates. But how much of this +time is given to motions to reduce the salary of the Foreign Secretary +by £100 in order to call attention to what is happening in China? +Parliament never, in fact, attempts any searching analysis of the +expenditure in this department or that. It cannot do so, because the +national accounts are presented in a form which makes such discussion +very difficult. The establishment of an Estimates Committee is an +advance. But even an Estimates Committee cannot do such work without the +aid of a whole series of special bodies intimately acquainted with the +working of various departments. In short, the House of Commons has +largely lost control over national expenditure. As for the control of +administration, we have already seen how inadequate that is, and why it +is inadequate. + +These deficiencies must be corrected if Parliament is to regain its +prestige, and if our system of government is to attain real efficiency. +For this purpose two things are necessary: in the first place, +substantial changes in the procedure of Parliament; in the second place, +the delegation to subordinate bodies of such powers as can be +appropriately exercised by them without impairing the supreme authority +of Parliament as the mouthpiece of the nation. I cannot here attempt to +discuss these highly important matters in any detail. In regard to +procedure, I can only suggest that the most valuable reform would be the +institution of a series of committees each concerned with a different +department of Government. The function of these committees would be to +investigate and criticise the organisation and normal working of the +departments, not to deal with questions of broad policy; for these ought +to be dealt with in relation to national policy as a whole, and they +must, therefore, be the concern of the minister and of the Cabinet, +subject to the overriding authority of Parliament as a whole. In order +to secure that this distinction is maintained, and in order to avoid the +defects of the French committee system under which independent +_rapporteurs_ disregard and override the authority of the ministers, and +thus gravely undermine their responsibility, it would be necessary not +only that each committee should include a majority of supporters of +Government, but that the chair should be occupied by the minister or his +deputy. + + +DEVOLUTION + +Nor can I stop to dwell upon the very important subject of the +delegation or devolution of powers by Parliament to subordinate bodies. +I will only say that devolution may be, and I think ought to be, of two +kinds, which we may define as regional and functional. To regional +bodies for large areas (which might either be directly elected or +constituted by indirect election from the local government authorities +within each area) might be allotted much of the legislative power of +Parliament in regard to private Bills, together with general control +over those public functions, such as Education and Public Health, which +are now mainly in the hands of local authorities. Of functional +devolution the most important expression would be the establishment of a +National Industrial Council and of a series of councils or boards for +various industries endowed with quasi-legislative authority; by which I +mean that they should be empowered by statute to draft proposals for +legislation of a defined kind, which would ultimately receive their +validity from Parliament, perhaps without necessarily passing through +the whole of the elaborate process by which ordinary legislation is +enacted. I believe there are many who share my conviction that a +development in this direction represents the healthiest method of +introducing a real element of industrial self-government. But for the +moment we are concerned with it as a means of relieving Parliament from +some very difficult functions which Parliament does not perform +conspicuously well, without qualifying its supreme and final authority. + +One final point. If it is true, as I have argued, that the decay of the +prestige and efficiency of Parliament is due to the fact that it is +already overloaded with functions and responsibilities, it must be +obvious that to add to this burden the responsibility for controlling +the conduct of great industries, such as the railways and the mines, +would be to ensure the breakdown of our system of government, already on +the verge of dislocation. In so far as it may be necessary to undertake +on behalf of the community the ownership and conduct of any great +industrial or commercial concern, I submit that it is essential that it +should not be brought under the direct control of a ministerial +department responsible to Parliament. Yet the ultimate responsibility +for the right conduct of any such undertaking (_e.g._ the telephones, +electric supply, or forests) must, when it is assumed by the State, rest +upon Parliament. How is this ultimate responsibility to be met? Surely +in the way in which it is already met in the case of the Ecclesiastical +Commissioners or the Port of London Authority--by setting up, under an +Act of Parliament, an appropriate body in each case, and by leaving to +it a large degree of freedom of action, subject to the terms of the Act +and to the inalienable power of Parliament to alter the Act. In such a +case the Act could define how the authority should be constituted, on +what principles its functions should be performed, and how its profits, +if it made profits, should be distributed. And I suggest that there is +no reason why the Post Office itself should not be dealt with in this +way. + +It is only a fleeting and superficial survey which I have been able to +give of the vast and complex themes on which I have touched; and there +is no single one of them with which I have been able to deal fully. My +purpose has been to show that in the political sphere as well as in the +social and economic spheres vast tasks lie before Liberalism, and, +indeed, that our social and economic tasks are not likely to be +efficiently performed unless we give very serious thought to the +political problem. Among the heavy responsibilities which lie upon our +country in the troubled time upon which we are entering, there is none +more heavy than the responsibility which rests upon her as the pioneer +of parliamentary government--the responsibility of finding the means +whereby this system may be made a respected and a trustworthy instrument +for the labours of reconstruction that lie before us. + + + + +THE STATE AND INDUSTRY + +BY W.T. LAYTON + +M.A., C.H., C.B.E.; Editor of the _Economist_, 1922; formerly Member of +Munitions Council, and Director of Economic and Financial Section of the +League of Nations; Director of Welwyn Garden City; Fellow of Gonville +and Caius College, Cambridge, 1910. + + +Mr. Layton said:--The existing system of private enterprise has been +seriously attacked on many grounds. For my present purpose I shall deal +with four: (1) The critic points to the extreme differences of wealth +and poverty which have emerged from this system of private enterprise; +(2) it has produced and is producing to-day recurrent periods of +depression which result in insecurity and unemployment for the worker; +(3) the critics say the system is producing great aggregations of +capital and monopolies, and that by throwing social power into the hands +of those controlling the capital of the country, it leads to +exploitation of the many by industrial and financial magnates; (4) it +produces a chronic state of internal war which saps industrial activity +and the economic life of the community. + +I shall not attempt to minimise the force of these objections; but in +order to get our ideas into correct perspective it should be observed +that the first two of these features are not new phenomena arising out +of our industrial system. You find extreme inequalities of distribution +in practically all forms of society--in the slave state, the feudal +state, in India and in China to-day. Nor is this the first period of +history in which there has been insecurity. If you look at any primitive +community, and note the effect of harvest fluctuations and the +inevitable famine following upon them, you will recognise that the +variations of fortune which affect such communities are more disastrous +in their effect than the trade variations of the modern world. + +But after all qualifications have been made these four indictments are +sufficiently serious and must be met, for it is these and similar +considerations which have driven many to desire the complete abolition +of the system. Some wish to abolish private property, and desire a +Communist solution. Others practically attack the system of private +enterprise, and wish to substitute either the community in some form or +another (_e.g._ state socialism), or some corporate form of industry +(_e.g._ guild socialism). + + +THE LIBERAL BIAS + +Liberals, on the other hand, reject these solutions, and desire not to +end the present system but to mend it. The grounds for this conclusion +need to be clearly expressed, for after all it is the fundamental point +of doctrine which distinguishes them from the Labour party. In the first +place, there is the fact that Liberals attach a special importance to +the liberty of the individual. The general relation of the individual +to the State is rather outside my subject, but we start from the fact +that the bias of Liberals is towards liberty in every sphere, on the +ground that spiritual and intellectual progress is greatest where +individuality is least restricted by authority or convention. Variety, +originality in thought and action, are the vital virtues for the +Liberal. It is still true that "in this age the mere example of +Nonconformity, the mere refusal to bow the knee to custom, is itself a +service." The Liberal who no longer feels at the bottom of his heart a +sympathy with the rebel who chafes against the institutions of society, +whether religious, political, social or economic, is well on the road to +the other camp. But the dynamic force of Liberty, that great motive +power of progress, though a good servant, may be a bad master; and the +perennial problem of society is to harmonise its aims with those of the +common good. + +When we come to the more specific problem of industry, which is our +immediate concern, a glance at history shows that the era of most rapid +economic progress the world has ever seen has been the era of the +greatest freedom of the individual from statutory control in economic +affairs. The features of the last hundred years have been the rapidity +of development in industrial technique, and constant change in the form +of industrial organisation and in the direction of the world's trade. +Could any one suppose that in these respects industry, under the +complete control of the State or of corporations representing large +groups of wage earners and persons engaged in trade, could have +produced a sufficiently elastic system to have permitted that progress +to be made? In reply to this it may be said that though this was true +during the industrial revolution, it does not apply to-day; that our +industries have become organised; that methods of production, +population, and economic conditions generally are stabilised, and that +we can now settle down to a new and standard form of industrial +organisation. But this agreement is based on false premises. The +industrial revolution is far from complete. We are to-day in the full +flood of it. Look at the changes in the last four decades--the evolution +of electricity, the development of motor transport, or the discoveries +in the chemical and metallurgical industries. Consider what lies ahead; +the conquest of the air, the possible evolution of new sources of power, +and a hundred other phases which are opening up in man's conquest of +nature, and you will agree that we are still at the threshold of +industrial revolution. + +I may mention here a consideration which applies practically to Great +Britain. We are a great exporting country, living by international +trade, the world's greatest retail shopkeeper whose business is +constantly changing in character and direction. The great structure of +international commerce on which our national life depends is essentially +a sphere in which elasticity is of the utmost importance, and in which +standardised or stereotyped methods of control of production or exchange +would be highly disastrous. Liberal policy, therefore, aims at keeping +the field of private enterprise in business as wide as possible. But in +the general discussion of political or personal liberty in economic +affairs, we have to consider how far and in what way the freedom of +private enterprise needs to be limited or curtailed for the common good. +We must solve that problem. For Liberals there is no inherent sanctity +in the conceptions of private property, or of private enterprise. They +will survive, and we can support them only so long as they appear to +work better in the public interest than any possible alternatives. + + +RETROSPECT AND PROSPECT + +My object, then, is to show how a system which embodies a large amount +of private enterprise can be made tolerable and acceptable to modern +ideas of equity. For this purpose we need to consider (1) what have we +done in that direction in the past? (2) what is the setting of the +economic problem to-day, and (3) what is to be our policy for the +future? + +Dealing first with wealth and wages, the whole field of social +legislation has a bearing upon them, including particularly education, +elementary and technical, the Factory Acts, and a great mass of +legislation which has affected the earning powers of the worker and the +conditions under which he labours. Just before the war we had come to +the point of fixing a minimum wage in the mines, but an even more +important factor was that we had introduced the Trade Board system, +which had begun to impose a minimum wage in certain trades where wages +were particularly low. But the most important direct attack upon the +unequal distribution of wealth was by taxation in accordance with the +Liberal policy of a graduated and differential income-tax, and still +more important by taxes upon inheritance; for it has long been +recognised that though it may be desirable to allow men to accumulate +great wealth during their lifetime, it by no means follows that they +should be entitled to control the distribution of wealth in the next +generation and launch their children on the world with a great advantage +over their fellows of which they may be quite unworthy. On the question +of insecurity it cannot be said that any serious attack has been made on +the problem of how to diminish fluctuations of trade, but again the +Liberal solution for dealing with that difficulty was to remedy not the +cause but its effects by insurance. + +On the question of monopolies and exploitation, though we hear a great +deal of the growth of capitalistic organisation, in fact we find that, +of the three greatest industrial countries in the world, Great Britain +is the least trust-ridden, mainly because of its free trade system. In +the case of enterprises not subject to foreign competition, we had begun +to develop a fairly satisfactory system of control of public utility +services which were of a monopolistic character. + +Finally, there had been growing up a complete system of collective +bargaining and conciliation, and though we always heard of it whenever +there was dispute and strife, the ordinary public did not know that this +machinery was working and developing in many great and important +industries a feeling of co-operation or at all events of conciliation +between the two sides. I only mention these points very briefly in +passing in order to show that with the evolution of modern industry we +were already feeling our way, haltingly and far too slowly, it is true, +towards a solution of its most serious defects. + +Turning to the present situation, we have to face the fact that Great +Britain is to-day faced with one of the most serious positions in its +economic history. We must make allowances for the readily understood +pessimism of a miners' leader, but it should arrest attention that Mr. +Frank Hodges has recently described the present situation as the coming +of the great famine in England. For nearly two decades before the war +there was occurring a slight fall in the real wages of British +workpeople. Food was becoming dearer, as the world's food supply was not +increasing as fast as the world's industrial population, and the +industrial workers of the world had, therefore, to offer more of their +product to secure the food they needed. Hence the cost of living was +rising faster than wages, except in trades where great technical +advances were being made. There is some reason to fear that the war may +have accentuated this tendency. + +For some years the distant countries of the world have had to do without +European manufactured goods. You are all aware of the tendency, for +example, of India, Australia, and Canada to develop their own steel +resources and to create manufacturing industries of all kinds. Moreover, +we have lost part of our hold on the food-producing countries of the +world by the sale of our capital investments in those countries to pay +for the war. These and other considerations all suggest that we may find +it increasingly difficult to maintain our position as one of the main +suppliers of the manufactured goods of the world. In such circumstances +we shall be hard put to it to maintain, far less raise, the pre-war +standard of living. + +How then are we to cope with this problem of retaining our economic +position? We can only hope to do it if the present financial +difficulties and obstructions working through the exchanges, by which +international commerce is restricted and constrained, are removed. We +can only do it if and so long as the conception of international +division of labour is maintained. And we can only do it if--granted that +we can induce the world to accept this principle of international +division of labour--we can prove ourselves, by our economic and +productive efficiency, to be the best and cheapest producer of those +classes of goods in which our skilled labour and fixed capital is +invested. + +Assuming the financial difficulty is overcome, and that the old régime +of international specialisation revives, can we still show to the world +that it is more profitable for them to buy goods and services from us +than from other people? Can we compete with other industrial countries +of the world? The actual output of our labour in most cases is far less +than its potential capacity, partly because of technical conservatism, +and partly for reasons connected with the labour situation. How are we +to mobilise these reserve resources. I have only space to deal with the +second of these problems. In Germany labour is well disciplined, and has +the military virtues of persistence and obedience to orders in the +factory. But we cannot hope to call forth the utmost product of our +labouring population by drill-sergeant methods. + +In America this problem is a different one, because the American +employer is often able to take full advantage of his economic position. +For he has a labouring population of mixed nationality, which does not +readily combine, and he can play off one section against the other. +British employers cannot, if they would, deal with British labour on the +principle of Divide and Rule. There is only one method by which we can +hope to call forth this great reserve capacity of British labour, and +that is by securing its confidence. If Free Trade is one of the legs on +which British prosperity rests, the other is goodwill and active +co-operation between the workman and his employer. How is that goodwill +to be gained? + +The solution of that problem is only partly in the hands of the +politician; that is one of the reasons why it is extremely difficult to +suggest an industrial policy which is going to hold out the hope of +reaching Utopia in a short time. But it is obviously essential somehow +or another to develop, particularly among employers, the sense of +trusteeship--the sense that a man who controls a large amount of capital +is in fact not merely an individual pursuing his own fortune, but is +taking the very great responsibility of controlling a fragment of the +nation's industrial resources. And we have also to develop a conception +of partnership and joint enterprise between employer and employed. + + +STATE OWNERSHIP: FOR AND AGAINST + +What policy in the political field can be adopted to further these +objects? Reverting once more to the fourfold division which I made at +the outset, but taking the points in a different order, there is first +the question whether there should be a great extension of State +ownership, management, or control of monopolies and big business. In +spite of the experience of the war, I suggest tentatively that no case +has been made out for any wide or general extension of the field of +State management in industry. This, however, is not a matter of +principle, but of expediency, where each case must be considered on its +merits. Liberals should, indeed, keep an open mind in this connection +and not be afraid to face an enlargement of the field of State +management from time to time. There are, however, two special cases to +be considered: the mines and the railways. As to the mines, the solution +Mr. McNair puts forward is on characteristically Liberal lines, because +it will endeavour to harmonise the safeguarding of the interests of the +State with the maximum freedom to private enterprise and the maximum +scope for variety in methods of management. As to transport, we have +recently passed an Act altering the form of control of British railways. + +Personally I think the question whether railways should or should not +be nationalised is very much on the balance. It is obviously one of the +questions where objections to State management are less serious than in +most other cases. On the other hand, we may be able to find methods of +control which may be even better than State management. I do not think +the Act of last year fulfils the conditions which Liberals would have +imposed on the railways, for the principle of guaranteeing to a monopoly +a fixed income practically without any means of securing its efficiency, +is the wrong way to control a public utility service. If we are going to +leave public utilities in the hands of private enterprise, the principle +must be applied that profit should vary in proportion to the services +rendered to the community. In this connection the old gas company +principle developed before the war is an admirable one. Under it the gas +companies were allowed to increase their dividends in proportion as they +lowered their prices to the community. That is a key principle, and some +adaptation of it is required wherever such services are left in private +hands. My own view is that an amended form of railway control should +first be tried, and if that fails we should be prepared for some form of +nationalisation. + + +TRUSTS AND MONOPOLIES + +But if we refuse at present to enlarge the sphere of State management, +we are still faced with the problem of dealing with trusts and +monopolies. In this matter, as in so many other instances, the right +policy has already been worked out. Under the stimulating conditions +which obtained during the war, when old-established methods of thought +had been rudely shaken, progressive ideas had unusually free play; and +you will find in the general economic policy adumbrated during and +immediately after the war much that Liberals are looking for. On this +question of monopolies, we should put into force the recommendation of +the Committee on Trusts of 1919, with one qualification. The policy I +suggest is the policy of the majority, namely, that we should give very +much enlarged powers of inquiry to the Board of Trade, and that a +Tribunal should be set up by which investigations could be made. But I +would go further, and, taking one item from the Minority Report, I would +add that either to this Tribunal or to the Board of Trade department +concerned there should be given in reserve the power in special cases to +regulate prices. I do not think it would be necessary often to use that +power, indeed the mere inquiry and publicity of results would be +sufficient to modify the action of monopolies. But such a power in +reserve, even though price-fixing in ordinary circumstances is usually +mischievous and to be deprecated, would have a very salutary effect. + +In the case of public utilities of a standard kind, into which the +element of buying and selling profits does not greatly enter, we should +endeavour to start the experiment of putting representatives of the +workpeople on the boards of directors, but in carefully selected cases, +and not as a general rule. My own view is that if we are ready with the +machinery of investigation, and are prepared to deal in these ways with +public utilities at home where foreign competition is absent, we have +little to fear from trusts. + + +DISTRIBUTION + +As regards distribution and wages, in the first place we should adhere +to our traditional policy, developing the system of differential and +graduated taxation, and we should be prepared, if unequal distribution +of wealth continues, to limit further the right of inheritance. This is +not a new Liberal doctrine: it is many decades old. On the question of +wages we have to recognise that unless we can secure an increase in +terms of food and other commodities of the national production the State +cannot radically modify the general standard of living in the country; +or by administrative action raise the level of wages which economic +conditions are imposing on us. But the State can and should enforce a +minimum in certain industries, provided that minimum is reasonably in +harmony with the competitive level of wages. Such action can prevent +workers whose economic position is not a strong one--and this applies +particularly to many women's employment--from being compelled to accept +wages substantially less than the current standard. I therefore welcome +the gradual extension of the Trade Board system, provided it follows the +general principle recommended in the Cave Report--that the community +should use its full powers of compulsion only in regard to the minimum, +and that so far as all other classes of wages are concerned, the State +should encourage collective bargaining. With this proviso, compulsory +enforcement of a minimum could also be extended to the workpeople +covered by Whitley Councils. + +As regards all wages above the minimum the Cave Committee recommended +that, provided they are reached by agreement on the Board, and provided +that a sufficiently large proportion of the Board concur, the wage so +determined shall be enforced by civil process, whereas in the cases of +the minimum, the rates would be determined if necessary by arbitration +of the State-appointed members of the Board, and non-payment would be a +penal offence. The Trade Boards now cover three million workers. Two +million are in occupations for which Trade Boards are under +consideration, and there are a further two million under Industrial +Councils or Whitley Councils. If State powers are to be employed in +trades employing seven millions of the eighteen million wage-earners of +the country, the scope of those powers needs to be very carefully +defined. + + +THE CASE FOR PROFIT-SHARING + +Many Liberals are, however, asking whether this is sufficient and +whether it is not possible for the State to intervene to alter the +distribution of the product of industry in favour of the wage-earner. In +particular, they are wondering whether it is possible to secure the +universal application of some system of profit-sharing. The underlying +principle of profit-sharing is indeed one which we must look to if the +whole-hearted assistance of labour is to be enlisted behind the +productive effort of the country. But the profit we have to consider is +the profit over which the worker has some influence. There is no merit +in inviting him to share in purely commercial profits or losses which +may be due to some one else's speculation or business foresight. It is +futile to imagine you can reverse the functions of labour and capital, +and say that capital should have a fixed wage, and that the employee +should bear all the risks of the industry. + +Again, in some cases it is suitable that profits should be considered in +regard to a whole industry, but in others only in regard to a particular +firm or section; and finally the rate of profit suitable to various +trades varies between very wide limits. In short, there can be no +universal rule in this matter which can be enforced by Act of +Parliament. + +Nevertheless, we must all desire to proceed along the lines of +associating the pecuniary interests of the worker in the success of the +enterprise, and if any one can suggest a way in which direct assistance +to that end can be given by political action, as distinct from +industrial, he will be doing a great service. I may add that there is an +argument in favour of profit-sharing which is of the utmost importance +and which was recently expressed by a prominent industrialist: who +declared to me that at long last and after much opposition he has come +round to believe in profit-sharing, _because it enables him to show his +men the balance sheet_. The solution adopted last year in the mining +industry contains the sort of elements we wish to see adopted in +principle. The men are given, through their officials, the results of +the industry. They see that they cannot get more than the industry can +pay, and though the present economic conditions are putting the men in a +desperate state to-day, the miners, who were often regarded before the +war as the most pugnacious in the country, are not burning their +employers' houses, but are studying how the economic conditions of the +industry can be improved for the benefit of themselves and their +employers. + + +INDUSTRIAL PUBLICITY + +This brings me to the question of publicity, which is at the root of the +whole problem. We desire the principle of private enterprise to remain. +The one thing that can destroy it is secrecy. We argue that the +self-interest of the investor makes capital flow into those channels +where economic conditions need it most. But how can the investor know +where it should go when the true financial condition of great industrial +companies is a matter of guesswork? Again, we rely upon our bankers to +check excessive industrial fluctuations. How can they do this if they do +not know the facts of production? The public should know what great +combines are doing, but they do not know; and how can we expect the man +in the street to be satisfied when his mind is filled with suspicions +that can be neither confirmed nor removed? + +It is of the utmost importance to seek for greater publicity on two +main lines. The illustration of the mines suggests one--production and +wage data. There are only three industries in this country--coal, steel, +and ships--in which production statistics exist. I suggest that in many +of our great staple industries a few simple data with regard to +production should be published promptly, say every three months. The +data I have in mind are the wages bill, the cost of materials, and the +value of the product. It is desirable that this should be done, and I +believe it can be done, for almost every great industry in the country. +These three facts alone will bring the whole wages discussion down to +earth. + +Then on finance, I suggest that one of the first things a Liberal +Government should do should be to appoint a commission to overhaul the +whole of our Company Law. This is not the occasion to enter in detail +into a highly technical problem. But I would call attention to the +following points: There is no compulsion on any joint-stock company to +publish a balance sheet. It is almost the universal practice to do so; +but as it is not an obligation, the Company Law lays down no rules as to +what published balance sheets must contain. Again, the difference +between private and public companies must be considered; a private +company which employs a great mass of capital and large numbers of +work-people--a concern which may cover a whole town or district--should +in the public interest be subject to the same rules as a public company. +Thirdly, in view of the amalgamation of industry, the linking up of +company with company, there must be reconsideration as regards publicity +in the case of subsidiary companies. Finally, I think we have been wrong +in assuming that a law applicable to a company with a modest little +capital is suitable to regulate the publicity of a great combine +controlling tens of millions of capital. Some attempt should therefore +be made to differentiate between what must be told by the big and by the +little concerns respectively. I am well aware of the myriad difficulties +that this demand for publicity will encounter. But difficulties exist to +be overcome. And they must be overcome, for of this I feel certain: that +if the system of private enterprise dies, it will be because the canker +of secrecy has eaten into its vitals. + + +A NATIONAL INDUSTRIAL COUNCIL + +I have left very little time for dealing specifically with the question +of industrial relations, though much that I have said has a bearing upon +it. There has been great disappointment with the results of the Whitley +Council movement. Many thought they were going to bring in a new era. +But they have not lived up to these hopes, firstly, because they came +into being at a time of unexampled economic difficulty, and, secondly, +because they were introduced into industries where there was no +tradition of co-operative action--being established mainly in industries +lying between the entirely unorganised and the highly organised trades. +But we must persist in encouraging Whitley Councils, and still more in +the associated objective of encouraging works committees. The basis of +industrial peace is in the individual works. Co-operation cannot be +created by Act of Parliament, but depends upon the development of +opinion among employers and workmen. Starting from Works Councils up +through the Whitley Council, Trade Boards, or National Trade Union +machinery for the negotiation of wages, we arrive at the National +Industrial Council, which is the point at which the Government can most +directly assist the movement towards more cordial relations. The plan of +this Council is ready. It was proposed and developed in 1919, and I +personally do not want to change that plan very much. + +But I think it is of the utmost importance that we should embody in our +Liberal programme the institution of a National Industrial Council or +Parliament representing the trade organisations on both sides. Whether +it should represent the consumers, I, personally, am doubtful. It should +be consulted before economic and particularly industrial legislation is +introduced into Parliament. It should be the forum on which we should +get a much better informed discussion of industrial problems than is +possible in Parliament or through any other agency in the country. The +National Council also needs to have specific work to do. I would be +prepared to see transferred to it many of the functions of the Ministry +of Labour, or rather that it should be made obligatory for the Minister +of Labour to consult this Council on such questions as whether it should +hold a compulsory inquiry into an industrial dispute. I would also +throw upon it the duty of advising Parliament exactly how my proposals +as to publicity are to be carried out, and would give it responsibility +for the Ministry of Labour index figures of the cost of living upon +which so many industrial agreements depend. I believe if we could set +out a series of specific functions to give the plan vitality, in +addition to the more nebulous duty of advising the Government on +industrial questions, we should have created an important device for +promoting the mutual confidence of which I have spoken. + +The suggestions I have made are perhaps not very new, but they seem to +me to be in the natural line of evolution of Liberal traditions. Above +all, if they are accepted they should be pursued unflinchingly and +persevered with, not as a concession to this or that section which may +happen to be strong at the moment, but as a corporate policy, which aims +at combining the interests of us all in securing increased national +wealth with justice to the component classes of the commonwealth. + + + + +THE REGULATION OF WAGES + +BY PROFESSOR L.T. HOBHOUSE + +Professor of Sociology, London University. + + +Professor Hobhouse said:--The wages, hours, and general conditions of +industrial workers are of interest to the community from two points of +view. So far as the less skilled and lower paid workers are concerned, +it is to the interest and it is the duty of the community to protect +them from oppression, and to secure that every one of its members, who +is willing and able to contribute honest and industrious work to the +service of others, should be able in return to gain the means of a +decent and civilised life. In this relation the establishment of a +minimum wage is analogous to the restriction of hours or the provision +for safety and health secured by Factory Legislation, and carries +forward the provision for a minimum standard of life. The problem is to +determine upon the minimum and adjust its enforcement to the conditions +of trade in such wise as to avoid industrial dislocation and consequent +unemployment. + +With regard to workers of higher skill, who command wages or salaries on +a more generous scale, the interest of the community is of a different +kind. Such workers hardly stand in need of any special protection. They +are well able to take care of themselves, and sometimes through +combination are, in fact, the stronger party in the industrial bargain. +In this region the interest of the community lies in maintaining +industrial peace and securing the maximum of goodwill and co-operation. +The intervention of the community in industrial disputes, however, has +never been very popular with either party in the State. Both sides to a +dispute are inclined to trust to their own strength, and are only ready +to submit to an impartial judgment when convinced that they are +momentarily the weaker. Nor is it easy when we once get above the +minimum to lay down any general principles which a court of arbitration +could apply in grading wages. + +For these reasons the movement for compulsory arbitration has never in +this country advanced very far. We have an Industrial Court which can +investigate a dispute, find a solution which commends itself as +reasonable, and publish its finding, but without any power of +enforcement. The movement has for the present stuck there, and is likely +to take a long time to get further. Yet every one recognises the damage +inflicted by industrial disputes, and would admit in the abstract the +desirability of a more rational method of settlement than that of +pitting combination against combination. Such a method may, I would +suggest, grow naturally out of the system which has been devised for the +protection of unskilled and unorganised workers, of which a brief +account may now be given. + + +THE ESTABLISHMENT OF TRADE BOARDS + +Utilising experience gained in Australia, Parliament in 1909 passed an +Act empowering the Board of Trade (now the Ministry of Labour) to +establish a Trade Board in any case where the rate of wages prevailing +in any branch was "exceptionally low as compared with that in other +employments." The Board consisted of a number of persons selected by the +Minister as representatives of employers, an equal number as +representatives of the workers, with a chairman and generally two +colleagues not associated with the trade, and known as the Appointed +Members. These three members hold a kind of casting vote, and can in +general secure a decision if the sides disagree. + +No instruction was given in the statute as to the principles on which +the Board should determine wages, but the Board has necessarily in mind +on the one side the requirements of the worker, and on the other the +economic position of the trade. The workers' representatives naturally +emphasise the one aspect and the employers the other, but the appointed +members and the Board as a whole must take account of both. They must +consider what the trade in general can afford to pay and yet continue to +prosper and to give full employment to the workers. They must also +consider the rate at which the worker can pay his way and live a decent, +civilised life. Mere subsistence is not enough. It is a cardinal point +of economic justice that a well-organised society will enable a man to +earn the means of living as a healthy, developed, civilised being by +honest and useful service to the community. I would venture to add that +in a perfectly organised society he would not be able--charitable +provision apart--to make a living by any other method. There is nothing +in these principles to close the avenues to personal initiative or to +deny a career to ability and enterprise. On the contrary, it is a point +of justice that such qualities should have their scope, but not to the +injury of others. For this, I suggest with confidence to a Liberal +audience, is the condition by which all liberty must be defined.[1] + +[Footnote 1: I may perhaps be allowed to refer to my _Elements of Social +Justice_, Allen & Unwin, 1921, for the fuller elaboration of these +principles.] + +If we grant that it is the duty of the Boards to aim at a decent +minimum--one which in Mr. Seebohm Rowntree's phrase would secure the +"human needs" of labour--we have still some very difficult points of +principle and of detail to settle. First and foremost, do we mean the +needs of the individual worker or of a family, and if of the latter, how +large a family? It has been generally thought that a man's wages should +suffice for a family on the ground that there ought to be no economic +compulsion--though there should be full legal and social liberty--for +the mother to eke out deficiencies in the father's payment by going out +to work. It has also been thought that a woman is not ordinarily under a +similar obligation to maintain a family, so that her "human needs" would +be met by a wage sufficient to maintain herself as an independent +individual. + +These views have been attacked as involving a differentiation unfair in +the first instance to women, but in the second instance to men, because +opening a way to undercutting. The remedy proposed is public provision +for children under the industrial age, and for the mother in return for +her work in looking after them. With this subvention, it is conceived, +the rates for men or women might be equalised on the basis of a +sufficiency for the individual alone. This would certainly simplify the +wages question, but at the cost of a serious financial question. I do +not, myself, think that "human needs" can be fully met without the +common provision of certain essentials for children. One such +essential--education, has been long recognised as too costly to be put +upon the wages of the worker. We may find that we shall have to add to +the list if we are to secure to growing children all that the community +would desire for them. On the other hand, the main responsibility for +directing its own life should be left to each family, and this carries +the consequence, that the adult-man's wage should be based not on +personal but on family requirements. + + +WOMEN'S WAGES + +But the supposed injustice to woman is illusory. Trade Boards will not +knowingly fix women's rates at a point at which they can undercut men. +Nor if women are properly represented on them will they fix their rates +at a point at which women will be discarded in favour of male workers. +In industries where both sexes are employed, if the women workers are of +equal value with the men in the eyes of the employer, they will receive +equal pay; if of less value, then, but only then, proportionately less +pay. It is because women have received not proportionately but quite +disproportionately less pay that they have been undercutting men, and +the Trade Boards are--very gradually, I admit--correcting this error. +For well-known historical reasons women have been at an economic +disadvantage, and their work has secured less than its worth as compared +with the work of men. The tendency of any impartial adjustment of wages +is to correct this disadvantage, because any such system will attempt to +secure equality of opportunity for employment for all the classes with +which it is dealing. But it is admitted that there is a "lag" in women's +wages which has been but partially made good. + +If the standard wage must provide for a family, what must be the size of +the family? Discussion on the subject generally assumes a "statistical" +family of man and wife and three children under age. This is criticised +on the ground that it does not meet the human needs of larger families +and is in excess for smaller ones. The reply to this is that a general +rate can only meet general needs. Calculation easily shows that the +minimum suited for three children is by no means extravagant if there +should be but two children or only one, while it gives the bachelor or +newly married couple some small chance of getting a little beforehand +with the world. On the other hand, it is impossible to cater on general +principles for the larger needs of individuals. The standard wage gives +an approximation to what is needed for the ordinary family, and the +balance must be made good by other provision, whether public or private +I will not here discuss. I conclude that for adult men the minimum is +reasonably fixed at a figure which would meet the "human needs" of a +family of five, and that for women it should be determined by the value +of their services relatively to that of men.[1] + +[Footnote 1: I am assuming that this value is sufficient to cover the +needs of the independent woman worker. If not, these needs must also be +taken into account. As a fact both considerations are present to the +minds of the Trade Boards. A Board would not willingly fix a wage which +would either (_a_) diminish the opportunity of women to obtain +employment, or (_b_) enable them to undercut men, or (_c_) fail to +provide for them if living alone.] + +How far have Trade Boards actually succeeded in fixing such a minimum? +Mr. Seebohm Rowntree has put forward two sets of figures based on +pre-war prices, and, of course, requiring adjustment for the changes +that have subsequently taken place. One of these figures was designed +for a subsistence wage, the other for a "human needs" wage. The latter +was a figure which Mr. Rowntree himself did not expect to see reached in +the near future. I have compared these figures with the actual minima +for unskilled workers fixed by the Boards during 1920 and 1921, and I +find that the rates fixed are intermediate between the two. The +subsistence rate is passed, but the higher rate not attained, except for +some classes of skilled workers. The Boards have in general proceeded +with moderation, but the more serious forms of underpayment have been +suppressed so far as inspection has been adequately enforced. The ratio +of the female to the male minimum averages 57.2 per cent., which may +seem unduly low, but it must be remembered that in the case of women's +wages a much greater leeway had to be made good, and there can be little +doubt that the increases secured for female workers considerably +exceeded those obtained for men. + + +THE QUESTION OF A SINGLE MINIMUM + +Criticism of Trade Boards has fastened on their power to determine +higher rates of wages for skilled workers, one of the additional powers +that they secured under the Act of 1918. There are many who agree that a +bare minimum should be fixed by a statutory authority with legal powers, +but think that this should be the beginning and end of law's +interference. As to this, it must be said, first, that the wide margin +between a subsistence wage and a human needs wage, brought out by Mr. +Rowntree's calculations, shows that there can be no question at present +of a single minimum. To give the "human needs" figure legislative +sanction would at present be Utopian. Very few Trade Boards ventured so +far even when trade was booming. The Boards move in the region between +bare subsistence and "human needs," as trade conditions allow, and can +secure a better figure for some classes of their clients when they +cannot secure it for all. They therefore need all the elasticity which +the present law gives them. + +On the other hand, it is contended with some force by the Cave Committee +that it is improper for appointed members to decide questions of +relatively high wages for skilled men or for the law to enforce such +wages by criminal proceedings, and the Committee accordingly propose to +differentiate between higher and lower minima both as regards the method +of determination and of enforcement. I have not time here to discuss the +details of their proposal, but I wish to say a word on the retention--if +in some altered shape--of the powers given by the Act of 1918. The Trade +Board system has been remarkable for the development of understanding +and co-operation between representatives of employers and workers. +Particularly in the work of the administrative committees, matters of +detail which might easily excite controversy and passion are habitually +handled with coolness and good sense in the common interest of the +trade. A number of the employers have not merely acquiesced in the +system, but have become its convinced supporters, and this attitude +would be more common if certain irritating causes of friction were +removed. The employer who desires to treat his workers well and maintain +good conditions is relieved from the competition of rivals who care +little for these things, and what he is chiefly concerned about is +simplicity of rules and rigid universality of enforcement. It is this +section of employers who have prevented the crippling of the Boards in a +time of general reaction. It is blindness to refuse to see in such +co-operation a possible basis of industrial peace, and those were right +who in 1918 saw in the mechanism of the Boards the possibility, not +merely of preventing industrial oppression and securing a minimum living +wage, but of advancing to a general regulation of industrial relations. +At that time it was thought that the whole of industry might be divided +between Trade Boards and Whitley Councils, the former for the less, the +latter for the more organised trades. In the result the Whitley Councils +have proved to be hampered if not paralysed by the lack of an +independent element and of compulsory powers. + + +TRADE BOARDS HOLDING THE FIELD + +The Trade Board holds the field as the best machinery for the +determination of industrial conditions. It is better than unfettered +competition, which leaves the weak at the mercy of the strong. It is +better than the contest of armed forces, in which the battle is decided +with no reference to equity, to permanent economic conditions, or to the +general good, by the main strength of one combination or the other in +the circumstances of the moment. It is better than a universal +State-determined wages-law which would take no account of fluctuating +industrial conditions, and better than official determinations which are +exposed to political influences and are apt to ignore the technicalities +which only the practical worker or employer understands. It is better +than arbitration, which acts intermittently and incalculably from +outside, and makes no call on the continuous co-operation of the trade +itself. + +My hope is that as the true value of the Trade Board comes to be better +understood, its powers, far from being jealously curtailed, or confined +to the suppression of the worst form of underpayment, will be extended +to skilled employments, and organised industries, and be used not merely +to fulfil the duty of the community to its humblest members, but to +serve its still wider interest in the development of peaceful industrial +co-operation. + + + + +UNEMPLOYMENT + +BY H.D. HENDERSON + +M.A.; Fellow of Clare College, Cambridge; Lecturer in Economics; +Secretary to the Cotton Control Board from 1917-1919. + + +Mr. Henderson said:--From one point of view the existence of an +unemployment problem is an enigma and a paradox. In a world, where even +before the war the standard of living that prevailed among the mass of +the people was only what it was, even in those countries which we termed +wealthy, it seems at first sight an utterly astonishing anomaly that at +frequent intervals large numbers of competent and industrious +work-people should find no work to do. The irony of the situation cannot +be more tersely expressed than in the words, which a man is supposed to +have uttered as he watched a procession of unemployed men: "No work to +do. Set them to rebuild their own houses." + +But, if we reflect just a shade more deeply, nothing should surprise us +less than unemployment. We have more reason for surprise that it is +usually upon so small a scale. The economic system under which we live +in the modern world is very peculiar and only our familiarity with it +keeps us from perceiving how peculiar it is. In one sense it is highly +organised; in another sense it is not organised at all. There is an +elaborate differentiation of functions--the "division of labour," to +give it its time-honoured name, under which innumerable men and women +perform each small specialised tasks, which fit into one another with +the complexity of a jig-saw puzzle, to form an integral whole. Some men +dig coal from the depths of the earth, others move that coal over land +by rail and over the seas in ships, others are working in factories, at +home and abroad, which consume that coal, or in shipyards which build +the ships; and it is obvious, not to multiply examples further, that the +numbers of men engaged on those various tasks must somehow be adjusted, +_in due proportions_ to one another. It is no use, for instance, +building more ships than are required to carry the stuff there is to +carry. + +Adjustment, co-ordination, must somehow be secured. Well, how is it +secured? Who is it that ordains that, say, a million men shall work in +the coal-mines, and 600,000 on the railways, and 200,000 in the +shipyards, and so on? Who apportions the nation's labour power between +the innumerable different occupations, so as to secure that there are +not too many and not too few engaged in any one of them relatively to +the others? Is it the Prime Minister, or the Cabinet, or Parliament, or +the Civil Service? Is it the Trade Union Congress, or the Federation of +British Industries, or does any one suppose that it is some hidden cabal +of big business interests? No, there is no co-ordinator. There is no +human brain or organisation responsible for fitting together this vast +jig-saw puzzle; and, that being so, I say that what should really excite +our wonder is the fact that that puzzle should somehow get fitted +together, usually with so few gaps left unfilled and with so few pieces +left unplaced. + +It would, indeed, be a miracle, if it were not for the fact that those +old economic laws, whose impersonal forces of supply and demand, whose +existence some people nowadays are inclined to dispute, or to regard as +being in extremely bad taste, really do work in a manner after all. They +are our co-ordinators, the only ones we have; and they do their work +with much friction and waste, only by correcting a maladjustment after +it has taken place, by slow and often cruel devices, of which one of the +most cruel is, precisely, unemployment and all the misery it entails. + + +THE CAUSES OF TRADE DEPRESSIONS + +I do not propose to deal with such branches of the problem of +unemployment as casual labour or seasonal fluctuations. I confine myself +to what we all, I suppose, feel to be the really big problem, to +unemployment which is not special to particular industries or districts, +but which is common to them all, to a general depression of almost every +form of business and industrial activity. General trade depressions are +no new phenomenon, though the present depression is, of course, far +worse than any we have experienced in modern times. They used to occur +so regularly that long before the war people had come to speak of +cyclical fluctuations, or to use a phrase which is now common, the trade +cycle. That is a useful phrase, and a useful conception. It is well that +we should realise, when we speak of those normal pre-war conditions, to +which we hope some day to revert, that in a sense trade conditions never +were normal; that, at any particular moment you care to take, we were +either in full tide of a trade boom, with employment active and prices +rising, and order books congested; or else right on the crest of the +boom, when prices were no longer rising generally, though they had not +yet commenced to fall, when employment was still good, but when new +orders were no longer coming in; or else in the early stages of a +depression, with prices falling, and every one trying to unload stocks +and failing to do so, and works beginning to close down; or else right +in the trough of the depression where we are to-day; that we were at one +or other of the innumerable stages of the trade cycle, without any +prospect of remaining there for very long, but always, as it were, in +motion, going round and round and round. + +What are the root causes which bring every period of active trade to an +inevitable end? There are two which are almost invariably present +towards the end of every boom. First, the general level of prices and +wages has usually become too high; it is straining against the limits of +the available supplies of currency and credit, and, unless inflation is +to be permitted, a restriction of credit is inevitable which will bring +on a trade depression. In those circumstances, a reduction of the +general level of prices and wages is an essential condition of a trade +revival. A reduction of prices _and wages_. That point has a +significance to which I will return. + +The second cause is the distorted balance which grows up in every boom +between different branches of industrial activity. When trade is good, +we invariably build ships, produce machinery, erect factories, make +every variety of what are termed "constructional goods" upon a scale +which is altogether disproportionate to the scale upon which we are +making "consumable goods" like food and clothes. And that condition of +things could not possibly endure for very long. If it were to continue +indefinitely, it would lead in the end to our having, say, half a dozen +ships for every ton of wheat or cotton which there was to carry. You +have there a maladjustment, which must be corrected somehow; and the +longer the readjustment is postponed, the bigger the readjustment that +will ultimately be inevitable. Now that means, first on the negative +side, that, when you are confronted with a trade depression, it is +hopeless to try to cure it by looking for some device by which you can +give a general stimulus to all forms of industry. Devices of that nature +may be very useful in the later stages of a trade depression, when the +necessary readjustments both of the price-level and of the relative +outputs of different classes of commodities have already been effected, +and when trade remains depressed only because people have not yet +plucked up the necessary confidence to start things going again. But in +the early stages of a depression, an indiscriminating stimulus to +industry in general will serve only to perpetuate the maladjustments +which are the root of the trouble. It will only put off the evil day, +and make it worse when it comes. The problem is not one of getting +everybody back to work on their former jobs. It is one of getting them +set to work on the _right_ jobs; and that is a far more difficult +matter. + +On the positive side, what this really comes to is, that if you wish to +prevent depressions occurring you must prevent booms taking the form +they do. You must prevent prices rising so much, and so many +constructional goods being made during the period of active trade; and I +am not going to pretend that that is an easy thing to do. It's all very +well to say that the bankers, through their control of the credit +system, might endeavour to guide industry and keep it from straying out +of the proper channels. But the bankers would have to know much more +than they do about these matters, and, furthermore, the problem is not +merely a national one--it is a world-wide problem. It would be of little +use to prevent an excess of ships being built here, if that only meant +that still more ships were built, say, in the United States. + +I do not say that even now the banks might not do something which would +help; still less do I wish to convey the impression that mankind must +always remain passive and submissive, impotent to control these forces +which so vitally affect his welfare. But I say that for any serious +attempt to master this problem, the necessary detailed knowledge has +still to be acquired, and the rudiments of organisation have still to be +built up; and the problem is not one at this stage for policies and +programmes. What you can do by means of policies and programmes lies, at +present, in the sphere of international politics. In that sphere, +though you cannot achieve all, you might achieve much. To reduce the +problem to its pre-war dimensions would be no small result; and that +represents a big enough objective, for the time being, for the +concentration of our hardest thinking and united efforts. But into that +sphere I am not going to enter. I pass to the problem of unemployment +relief. + + +THE SCALE OF RELIEF + +The fundamental difficulty of the problem of relieving unemployment is a +very old one. It turns upon what used to be called, ninety years ago, +"the principle of less eligibility," the principle that the position of +the man who is unemployed and receiving support from the community +should be made upon the whole less eligible, less attractive than that +of the man who is working and living upon the wages that he earns. That +is a principle which has been exposed to much criticism and denunciation +in these modern days. We are told that it is the false and antiquated +doctrine of a hard-hearted and coarse-minded age, which thought that +unemployment was usually a man's own fault, which saw a malingerer in +every recipient of relief, which was obsessed by the bad psychology of +pains and penalties and looked instinctively for a deterrent as the cure +for every complex evil. + +But, however that may be, this principle of less eligibility is one +which you cannot ignore. It is not merely or mainly a matter of the +effect on the character of the workmen who receive relief. The danger +that adequate relief will demoralise the recipient has, I agree, been +grossly exaggerated in the past. Prolonged unemployment is always in +itself demoralising. But, given that a man is unemployed, it will not +demoralise him more that he should receive adequate relief rather than +inadequate relief or no relief at all. On the contrary, on balance, it +will, I believe, demoralise him less. For nothing so unfits a man for +work as that he should go half-starved, or lack the means to maintain +the elementary decencies of life. + +But there are other considerations which you have to take into account. +If you get a situation such that the man who loses his job becomes +thereby much better-off than the man who remains at work, I do not say +that the former man will necessarily be demoralised, but I do say that +the latter man will become disgruntled. I do not want to put that +consideration too high. At the present time there are many such +anomalies; in a great many occupations, the wages that the men at work +are receiving amount to much less than the money they would obtain if +they lost their jobs and were labelled unemployed. But they have stuck +to their jobs, they are carrying on, with a patience and good humour +that are beyond all praise. Yes, but that state of affairs is so +anomalous, so contrary to our elementary sense of fairness that, as a +permanent proposition it would prove intolerable. We cannot go on for +ever with a system under which in many trades men receive much more when +they are unemployed than when they are at work. On the other hand, the +attempt to avoid such anomalies leads us, so long as we have a uniform +scale of relief, against an alternative which is equally intolerable. +Wages vary greatly from trade to trade; and, if the scale of relief is +not to exceed the wages paid in _any_ occupation it must be very low +indeed. That is the root dilemma of the problem of unemployment +relief--how if your scale of relief is not to be too high for equity and +prudence it is not to be too low for humanity and decency. We have not, +as some people imagine, done anything in recent years to escape from it, +we have merely exchanged one horn of the dilemma for the other. + +In any satisfactory system the scale of relief must vary from occupation +to occupation, in accordance with the normal standard of wages ruling in +each case. But it is very difficult, in fact I think it would always be +impracticable to do that under any system of relief, administered by the +State, either the Central Government or the local authorities. It must +be done on an industrial basis; each industry settling its own scale, +finding its own money, and managing its own scheme. That is an idea +which has received much ventilation in the last few years. But the +really telling arguments in favour of it do not seem to me to have +received sufficient stress. + +Foremost among them I place the consideration I have just indicated: +that in this way, and in this way alone, it becomes possible for +work-people who receive high wages when they are at work, and where +habits of expenditure and standards of family living are built up on +that basis, to receive when unemployed, adequate relief without that +leading to anomalies which in the long run would prove intolerable. But +there are many other arguments. + + +A MODEL SCHEME FROM LANCASHIRE + +About five years ago I had the opportunity of witnessing at very close +quarters the working of an unemployment scheme on an industrial basis. +The great Lancashire cotton industry was faced during the war with a +very serious unemployment problem, owing to the difficulty of +transporting sufficient cotton from America. It met that situation with +a scheme of unemployment relief, devised and administered by one of +those war Control Boards, which in this case was essentially a +representative joint committee of employers and employed. The money was +raised, every penny of it, from the employers in the industry itself; +the Cotton Control Board laid down certain rules and regulations as to +the scale of benefits, and the conditions entitling a worker to receive +it; and the task of applying those rules and paying the money out was +entrusted to the trade unions. + +Well, I was in a good position to watch that experiment. I do not think +I am a particularly credulous person, or one prone to indulge in easy +enthusiasms, and I certainly don't believe in painting a fairy picture +in glowing colours by way of being encouraging. But I say deliberately +that there has never been an unemployment scheme in this country or in +any other country which has worked with so little abuse, with so few +anomalies, with so little demoralisation to any one, and at the same +time which has met so adequately the needs of a formidable situation, or +given such general satisfaction all round as that Cotton Control Board +scheme. + +I cannot describe as fully as I should like to do the various features +which made that scheme attractive, and made it a success. I will take +just one by way of illustration. It is technically possible in the +cotton trade to work the mills with relays of workers, so that if a mill +has 100 work-people, and can only employ 80 work-people each week, the +whole 100 can work each for four weeks out of the five, and "play off," +as it is called, in regular sequence for the fifth week. And that was +what was done for a long time. It was called the "rota" system; and the +"rota" week of "playing off" became a very popular institution. Under +that system, benefits which would have been far from princely as the +sole source of income week after week--they never amounted to more than +30/- for a man and 18/- for a woman--assumed a much more liberal aspect. +For they came only as the occasional variants of full wages; and they +were accompanied not by the depressing circumstances of long-continued +unemployment, but by what is psychologically an entirely different and +positively exhilarating thing, a full week's holiday. That meant that +the available resources--and one of the difficulties of any scheme of +unemployment relief is that the resources available are always +limited--did much more to prevent misery and distress, and went much +further towards fulfilling all the objects of an unemployment scheme +than would have been possible otherwise. + +That system was possible in the cotton trade; in other trades it might +be impossible for technical reasons, or, where possible, it might in +certain circumstances be highly undesirable. The point I wish to stress +is that under an industrial scheme you have an immense flexibility, you +can adapt all the details to the special conditions of the particular +industry, and by that means you can secure results immeasurably superior +to anything that is possible under a universal State system. Moreover, +if certain features of the scheme should prove in practice +unsatisfactory, they can be altered with comparatively little +difficulty. You don't need to be so desperately afraid of the +possibility of making a mistake as you must when it is a case of a great +national scheme, which can only be altered by Act of Parliament. + + +THE MORAL OBLIGATION OF INDUSTRIES + +I do not underrate the difficulty of applying this principle of +industrial relief over the whole field of industry. There is the great +difficulty of defining an industry, or drawing the lines of demarcation +between one trade and another. I have not time to elaborate those +difficulties, but I consider that they constitute an insuperable +obstacle to anything in the nature of an Act of Parliament, which would +impose forcibly upon each industry the obligation to work out an +unemployment scheme. The initiative must come from within the industry; +the organisations of employers and employed must get together and work +out their own scheme, on their own responsibility and with a free hand. +And, if it happens in this way--one industry taking the lead and others +following--these difficulties of demarcation become comparatively +unimportant. You can let an industry define itself more or less as it +likes, and it does not matter much if its distinctions are somewhat +arbitrary. It is not a fatal drawback if some firms and work-people are +left outside who would like to be brought in. And if there are two +industries which overlap one another, each of which is contemplating a +scheme of the kind, it is a comparatively simple matter for the +responsible bodies in the two industries to agree with one another as to +the lines of demarcation between them, as was actually done during the +war by the Cotton Control Board and the Wool Control Board, with +practically no difficulty whatever. But for such agreements to work +smoothly it is essential that the industries concerned should be anxious +to make their schemes a success; and that is another reason why you +cannot impose this policy by _force majeure_ upon a reluctant trade. It +is in the field of industry that the real move must be made. + +But I think that Parliament and the Government might come in to the +picture. In the first place, the ordinary national system of +unemployment relief, which must in any case continue, might be so framed +as to encourage rather than to discourage the institution of industrial +schemes. Under the Insurance Act of 1920 "contracting out" was provided +for, but it was penalised, while at the present moment it is prohibited +altogether. I say that it should rather be encouraged, that everything +should be done, in fact, to suggest that not a legal but a moral +obligation lies upon each industry to do its best to work out a +satisfactory unemployment scheme. And, when an industry has done that, I +think the State should come in again. I think that the representative +joint committee, formed to administer such a scheme, might well be +endowed by statute with a formal status, and certain clearly-defined +powers--such as the Cotton Control Board possessed during the war--of +enforcing its decisions. + +But--and, of course, there is a "but"--we cannot expect very much from +this in the near future. We must wait for better trade conditions before +we begin; and, as I have already indicated, the prospects of really good +trade in the next few years are none too well assured. For a long time +to come, it is clear, we must rely upon the ordinary State machinery for +the provision of unemployment relief; and, of course, the machinery of +the State will always be required to cover a large part of the ground. +The liability which an industry assumes must necessarily be strictly +limited in point of time; and there are many occupations in which it +will probably always prove impracticable for the occupation to assume +even a temporary liability. For the meantime, at any rate, we must rely +mainly upon the State machinery. Is it possible to improve upon the +present working of this machinery? I think it is. By the State machinery +I mean not merely the Central Government, but the local authorities and +the local Boards of Guardians. + + +THE PRESENT MACHINERY OF RELIEF + +At present what is the situation? Most unemployed work-people are +entitled to receive certain payments from the Employment Exchanges under +a so-called Insurance scheme, which is administered on a national basis; +some weeks they are entitled to receive those payments, other weeks they +are not; but in any case those payments afford relief which is +admittedly inadequate, and they are supplemented--and very materially +supplemented--by sums varying from one locality to another, but within +each locality on a uniform scale, which are paid by the Boards of +Guardians in the form of outdoor relief. Now that situation is highly +unsatisfactory. The system of outdoor relief and the machinery of the +Guardians are not adapted for work of this kind. They are designed to +meet the problem of individual cases of distress, not necessarily +arising from unemployment, but in any event individual cases to be dealt +with, each on its own merits, after detailed inquiry into the special +circumstances of the case. That is the function which the Guardians are +fitted to perform, and it is a most important function, which will still +have to be discharged by the Guardians, or by similar local bodies, +whatever the national system of unemployment relief may be. But for +dealing with unemployment wholesale, for paying relief in accordance +with a fixed scale and without regard to individual circumstances--for +that work the Guardians are a most inappropriate body. They possess no +qualification for it which the Central Government does not possess, +while they have some special and serious disqualifications. + +In any case, it is preposterous that you should have two agencies, each +relieving the same people in the same wholesale way, the Employment +Exchanges with their scale, asking whether a man is unemployed, and how +many children he has to support, and paying him so much, and the +Guardians with their scale, asking only the same questions and paying +him so much more. It would obviously be simpler, more economical, and +more satisfactory in every way, if one or other of those agencies paid +the man the whole sum. And I have no hesitation in saying that that +agency should be the Central Government. Perhaps the strongest argument +in favour of that course is that, when relief is given locally, the +money must be raised by one of the worst taxes in the whole of our +fiscal system, local rates, which are tantamount to a tax, in many +districts exceeding 100 per cent., upon erection of houses and buildings +generally. It is foolish to imagine that any useful end is served by +keeping down taxes at the expense of rates. + +Serious as is the problem of national finance, the fiscal resources of +the Central Government are still far more elastic and less objectionable +than those which the local authorities possess. I suggest, accordingly, +as a policy for the immediate future, the raising of the scale of +national relief to a more adequate level, coupled with the abolition of +what I have termed wholesale outdoor relief in the localities. What it +is right to pay on a uniform scale should be paid entirely by the +Central Government, and local outdoor relief should be restricted to its +proper function of the alleviation of cases of exceptional distress +after special inquiries into the individual circumstances of each case. + +One final word to prevent misconception. I have said that our present +system of relief is unsatisfactory, and I have indicated certain +respects in which I think it could be improved. But I am far from +complaining that relief is being granted throughout the country as a +whole upon too generous a scale. Anomalies there are which, if they +continued indefinitely, would prove intolerable. But we have been +passing through an unparalleled emergency. Unemployment in the last two +years has been far more widespread and intense than it has ever been +before in modern times, and never was it less true that the men out of +work have mainly themselves to blame. But it has meant far less +distress, far less destruction of human vitality, and I will add far +less demoralisation of human character than many of the bad years we had +before the war. That is due to the system of doles, the national and +local doles; and in the circumstances I prefer that system with all its +anomalies to the alternative of a substantially lower scale of relief. +We are still in the midst of that emergency; and if we are faced, as I +think for this decade we must expect to be faced, with that dilemma +which I indicated earlier, I should prefer, and I hope that every +Liberal will prefer, to err by putting the scale of relief somewhat too +high for prudence and equity rather than obviously too low for humanity +and decency. + + + + +THE PROBLEM OF THE MINES + +BY ARNOLD D. MCNAIR + +M.A., LL.M., C.B.E.; Fellow of Gonville and Caius College, Cambridge; +Secretary of Coal Conservation Committee, 1916-1918; Secretary of +Advisory Board of Coal Controller, 1917-1919; Secretary of Coal Industry +Commission, 1919 (Sankey Commission). + + +Mr. McNair said:--Need I labour the point that there _is_ a problem of +the Mines? Can any one, looking back on the last ten years, when time +after time a crisis in the mining industry has threatened the internal +peace and equilibrium of the State, deny that there is something +seriously wrong with the present constitution of what our chairman has +described as this great pivotal industry? What is it that is wrong? If I +may take a historical parallel, will you please contrast the political +situation and aspirations of the working-class population at the close +of the Napoleonic wars with their industrial situation and aspirations +now. Politically they were a hundred years ago unenfranchised; more or +less constant political ferment prevailed until the Reform Bill, and +later, extensions of the franchise applied the Liberal solution of +putting it within the power of the people, if they wished it, to take an +effective share in the control of political affairs. + +Industrially, their situation to-day is not unlike their political +situation a hundred years ago. Such influence as they have got is +exerted almost entirely outside the constitution of industry, and very +often in opposition to it. Their trade unions, workers' committees, +councils of action, triple alliances, and so forth, are not part of the +regular industrial machine, and too often are found athwart its path. +They are members of an industry with substantially no constitutional +control over it, just as a hundred years ago they were members of a +State whose destinies they had no constitutional power to direct. + +This does not mean that a hundred years ago every working man wanted the +political vote, nor that now he wants to sit on a committee and control +his industry. It meant that a substantial number of the more enlightened +and ambitious did--a large enough number to be a source of permanent +discontent until they got it. The same is true to-day in the case of +many industries. Many men in all classes of society are content to do +their job, take their money, go home and work in their gardens, or +course dogs or fly pigeons. They are very good citizens. Many others, +equally good citizens, take a more mental and active interest in their +job, and want to have some share in the direction of it. This class is +increasing and should not be discouraged. They constitute our problem. +The Liberal solution of a gradually extended franchise has cured the +political ferment. Political controversy is still acute, and long may it +remain so, as it is the sign of a healthy political society. But the +ugly, ominous, revolutionary features of a hundred years ago in the +sphere of politics have substantially gone or been transferred to the +industrial sphere. + + +THE LIBERALISATION OF INDUSTRY + +The same solution must be applied to that sphere. This does not mean +transferring the machinery of votes and elections to industry. It means +finding channels in industry whereby every person may exercise his +legitimate aspiration, if he should feel one, of being more than a mere +routine worker while still perhaps doing routine work, and of +contributing in an effective manner his ideas, thoughts, suggestions, +experience, to the direction and improvement of the industry. We have +satisfied the desire for self-expression as citizens, and we have now to +find some means of satisfying a similar desire for self-expression as +workers in industry. That is all very vague. Does it mean +co-partnership, profit-sharing, co-operative societies, joint +committees, national wages boards, guild socialism, nationalisation? It +may mean any or all of these things--one in one industry, one in +another, or several different forms in the same industry--whatever +experiment may prove to be best suited to each industry. But it must +mean opportunity of experiment, and experiment by all concerned. It must +mean greater recognition by employers of their trusteeship on behalf of +their work-people as well as their shareholders; greater recognition of +the public as opposed to the purely proprietary view of industry; and +recognition that the man who contributes his manual skill and labour +and risks his life and limb is as much a part of the industry as a man +who contributes skill in finance, management, or salesmanship, or the +man who risks his capital. + +Coming to the mines, that is, the coal mining industry (with a few +incidental mines such as stratified ironstone, fireclay, etc., which +need not complicate our argument), the first step to the solution of the +problem of the mines, _i.e._ the collieries, the mining industry, is the +solution of the problem of the minerals. This distinction is not at +first sight obvious to all, but it is fundamental. The ownership and +leasing of the coal is one thing, the business or industry of mining it +is quite another. State ownership of the former does not involve State +ownership of the latter. That is elementary and fundamental. It lies at +the root of what is to follow. + +Will you picture to yourself a section of the coal-mining industry in +the common form of the pictures one sees of an Atlantic liner cut neatly +in two so as to expose to view what is taking place on each deck. On top +you have the landowner, under the surface of whose land coal, whether +suspected or not, has been discovered. He may decide to mine the coal +himself, but more frequently--indeed, usually--he grants to some persons +or company a lease to mine that coal on payment of what is called a +royalty of so much for every ton extracted. Thereupon he is called the +mineral-owner or royalty-owner, and the persons or company who actually +engage in the business or industry of coal mining and pay him the +royalties we shall call the colliery-owners. Do not be misled by the +confusing term "coal-owners." Very frequently the colliery-owners are +called the "coal-owners," and their associations "coal-owners' +associations." That is quite a misnomer. The real _coal_-owner is the +landowner, the royalty-owner, though it may well happen that the two +functions of owning the minerals and mining them may be combined in the +same person. Below the colliery-owners we find the managerial staff; +below them what may be called the non-commissioned officers of the mine, +such as firemen or deputies, who have most important duties as to +safety, and below them the miners as a whole, that is, both the actual +coal-getters or hewers or colliers and all the other grades of labour +who are essential to this the primary operation. + + +THE QUESTION OF ROYALTIES + +Coming back to the royalty-owner, you will see his functions are not +very onerous. He signs receipts for his royalties and occasionally +negotiates the terms of a lease. But as regards the coal-mining +industry, he "toils not, neither does he spin." I do not say that +reproachfully, for he (and his number has been estimated at 4000) is +doubtless a good husband, a kind father, a busy man, and a good citizen. +But as regards this industry he performs no essential function beyond +allowing the colliery-owners to mine his coal. + +What is the total amount annually paid in coal royalties? We can arrive +at an approximate estimate in this way: Average output of coal for five +years before the war, roughly, 270,000,000 tons; average royalty, 51/2d. +per ton, which means, after deducting coal for colliery consumption and +the mineral rights duty paid to the State by the royalty-owner, roughly +£5,500,000 per annum paid in coal royalties. Regarding this as an +annuity, the capital value is 70 millions sterling if we allow a +purchaser 8 per cent. on his money (12.5 years' purchase), or 551/2 +millions sterling if we allow him 10 per cent. (10 years' purchase). For +all practical purposes the annuity may be regarded as perpetual. + +Now the State must acquire these royalties. That is the only practicable +solution, and a condition precedent to any modification in the structure +of the coal-mining industry so long as the participants in that industry +continue unwilling or unable to agree upon those modifications +themselves. _Why and how?_ (1) First and foremost because until then the +State is not master in its own house, and cannot make those experiments +in modifying conditions in the industry which I believe to be essential +to bring it into a healthy condition instead of being a standing menace +to the equilibrium of the State--as it was before the war, and during +the war, and has been since the war; (2) the technical difficulties and +obstacles resulting from the ownership of the minerals being in the +hands of several thousand private landowners and preventing the economic +working of coal are enormous. You will find abundant evidence of this +second statement in the testimony given by Sir Richard Redmayne and the +late Mr. James Gemmell and others before the Sankey Commission in 1919. + +How is the State to acquire them? Not piece-meal, but once and for all +in one final settlement, by an Act of Parliament providing adequate +compensation in the form of State securities. The assessment of the +compensation is largely a technical problem, and there is nothing +insuperable about it. It is being done every day for the purpose of +death duties, transfer on sale, etc. Supposing, for the sake of +argument, 551/2 millions sterling is the total capital value of the +royalties, an ingenious method which has been recommended is to set +aside that sum not in cash but in bonds and appoint a tribunal to divide +it equitably amongst all the mineral-owners. That is called "throwing +the bun to the bears." The State then knows its total commitments, is +not involved in interminable arbitrations, and can get on with what lies +ahead at once, leaving the claimants to fight out the compensation +amongst themselves. This does not mean that the State will have to find +551/2 millions sterling in cash. It means this, in the words of Sir +Richard Redmayne: "The State would in effect say to each owner of a +mineral tract: The value of your property to a purchaser is in present +money £x, and you are required to lend to the State the amount of this +purchase price at, say, 5 per cent. per annum, in exchange for which you +will receive bonds bearing interest at that rate in perpetuity, which +bonds you can sell whenever you like." + +The minerals or royalties being acquired by the State, what then? For +the first time the State would be placed in a strategic position for +the control and development of this great national asset. Having +acquired the minerals and issued bonds to compensate the former owners, +the State enters into the receipt of the royalty payments, and these +payments will be kept alive. We must now decide between at least two +courses: (_a_) Is the State to do nothing more and merely wait for +existing leases to expire and fall in, and then attach any new +conditions it may consider necessary upon receiving applications for +renewals? Or (_b_) is the State to be empowered by Parliament to +determine the existing leases at any time and so accelerate the time +when it can attach new conditions, make certain re-grouping of mines, +etc.? My answer is that the latter course (_b_) must be adopted. The +same Act of Parliament which vests the coal and the royalties in the +State, or another Act passed at the same time, should give the State +power to determine the then existing leases if and when it chooses, +subject to just compensation for disturbance in the event of the +existing lessees refusing to take a fresh lease. + +Why is course (_b_) recommended? (i) Most leases are granted for terms +varying from thirty to sixty years. They are falling in year by year, +but we cannot afford to wait until they have all fallen in if we are +effectively to deal with a pressing problem. (ii) The second objection +to merely waiting is that some colliery-owners (not many) might make up +their minds not to apply for a renewal of their leases, and might +consequently be tempted to neglect the necessary development and +maintenance work, over-concentrating on output, and thus allowing the +colliery to get into a backward state from which it would cost much time +and money to recover it--a state of affairs which could and would be +provided against in future leases, but which the framers of existing +leases may not have visualised. I do not suggest that upon the +acquisition by the State of the minerals all the existing leases should +automatically determine. But the State should have power to determine +them on payment of compensation for disturbance. + + +A NATIONAL MINING BOARD + +At the same time a National Mining Board consisting of representatives +of all the interested elements, colliery-owners, managerial and +technical staffs, miners, and other grades of workers, and coal +consumers would be formed (the Mines Department already has a National +Advisory Committee); the mining engineering element must be strongly +represented, and provision must be made for first-class technical advice +being always available. It would then be the business of the National +Mining Board to work out its policy and decide upon the broad principles +which it wishes to weave into the existing structure of the coal-mining +industry by means of its power of granting leases. The following +principles will readily occur to most people, and are supported by +evidence which is, in my humble judgment, convincing, given before the +various commissions and committees which have inquired into this +industry during recent years. + +Firstly, More Amalgamation or Unification of Collieries. At present +there are about 3000 pits owned by about 1500 companies or individuals, +and producing an aggregate output of about 250 million tons per annum. +Already there have been many large amalgamations. (i) Many fortunately +situated small pits making a good profit will be found, but on the whole +small collieries are economically unsound. In many cases at present the +units are too small, having regard to the class of work being done, to +the cost of up-to-date machinery and upkeep and to the variableness of +the trade. Broadly I believe it to be true that the larger collieries +are as a general rule more efficient than the smaller ones. (ii) In +respect of co-operation in pumping, larger units would frequently make +for efficiency and reduced cost; Sir Richard Redmayne, speaking of South +Staffordshire before the Sankey Commission, said that we had already +lost a large part of that coalfield through disagreement between +neighbouring owners as to pumping. (iii) The advantages of larger units +in facilitating the advantageous buying of timber, ponies, rails, +machinery and the vast amount of other materials required in a colliery +will be obvious to most business men. + +I do not propose to chop up the coalfields into mathematical sections +and compulsorily unify the collieries in those sections. I am merely +laying down the broad principle that to get the best out of our national +asset the National Mining Board must bring about through its power of +granting leases the formation of larger working units than at present +usually exist. The geological and other conditions in the different +coalfields vary enormously, and these form a very relevant factor in +deciding upon the ideal unit of size. It is conceivable that in certain +districts all the colliery-owners in the district, with the aid of the +National Mining Board, would form a statutory company on the lines of +the District Coal Board, described in the Report made by Sir Arthur +Duckham as a member of the Sankey Commission. One advantage accruing +from unification (to which recent events have given more prominence) is +that it mitigates the tendency for the wages of the district to be just +those which the worst situated and the worst managed colliery can pay +and yet keep going, and no more. This tendency seems to be recognised +and mitigated in the Agreement of June, 1921, on which the mines are now +being worked. Secondly, Provision for Progressive Joint Control, that +is, for enabling all the persons engaged in the mining industry either +in money, in brains, or in manual labour, or a combination of those +interests, gradually to exercise an effective voice in the direction of +their industry. + +Some of the arguments for this principle appear to me to be (i) that, as +indicated in my opening remarks, a sufficiently large number of the +manual or mainly manual workers in the industry ardently desire a +progressively effective share in the control of the industry; (ii) that +this desire is natural and legitimate, having regard to the great +increase in the education of the workers and the improvement in their +status as citizens, and that so far from being repressed it should be +encouraged; (iii) that it is the natural development of the system of +Conciliation Boards and (occasionally) Pit Committees which has +prevailed in the industry for many years, though more highly developed +in some parts of the country than others. So far, these organs have been +mainly used for purposes of consultation and negotiation; the time has +come when with a more representative personnel, while not usurping the +functions of a mine manager or, on a larger scale, the managing +director, they must be developed so as to exercise some effective share +in controlling the industry. (iv) While working conditions are not so +dangerous and unpleasant as the public are sometimes asked to believe, +the workers in this industry are exposed to an unusually high risk of +injury and loss of life, and thus have a very direct interest in +devising and adopting measures for increased safety. These measures +nearly always mean expenditure, and thus an increased cost of working, +and so long as their adoption (except in so far as made compulsory by +the Mines Department) rests solely with bodies on which capital alone is +represented and labour not at all, there will be fruitful cause for +suspicion and discontent. The miners are apt to argue that dividends and +safety precautions are mutually antipathetic, and will continue to do so +as long as they have no part or lot in the reconciliation of these +competing obligations. The question is not whether this argument of the +miners is well-founded or not: the point is that their suspicion is +natural, and any excuse for it should be removed. (v) The exceptionally +large items which wages form in the total cost of coal production +indicates the important contribution made by the miners to the welfare +of the industry and justifies some share in the direction of that +industry. + +Upon the basis of typical pre-war years, the value of the labour put +into the coal mining industry is 70 per cent. of the capital employed, +and 70 per cent. of the annual saleable value of the coal, and yet this +large labour interest has no share in the management of the industry. + + +THE MYSTERY AS TO PROFITS + +Thirdly, More Financial Publicity. Secrecy as to profits, which always +suggests that they are as large as to make one ashamed of them, has been +the bane of the coal-mining industry. For nearly half a century wages +have borne some relation to _selling prices_, and there have been +quarterly audits of typical selected mines in each district by joint +auditors appointed by the owners and the miners. But over _profits_ a +curtain was drawn, except in so far as the compulsory filing at Somerset +House by public companies of a document called a Statement in the form +of a balance sheet, enabled the curious to draw not very accurate +conclusions. It is not easy for the plain man to read a balance sheet or +estimate profits, especially when shares are being subdivided, or when +bonus shares are being issued, or large sums carried to reserve. The +result has been continual and natural suspicion on the part of the +miners, who doubtless imagined the colliery-owners' profits to be much +larger than they were. The miners knew that whenever they asked for an +increase in their wages they were liable to be told that such an +increase would turn a moderate profit into a substantial loss, but the +amount of the profit they had to take on trust. Selling prices, yes, but +profits, no. + +The war and coal control partly killed that, and it must not return. By +the settlement of June, 1921, for the first time the miners have +established the principle of the adjustment of their wages in accordance +with the proceeds of the industry "as ascertained by returns to be made +by the owners, checked by a joint test audit of the owners' books +carried out by independent accountants appointed by each side." That is +an important step, but does not go anything like far enough. + +At least two good results would accrue if colliery-owners conducted +their business more in public: (i) a great deal of the suspicion and +mistrust of the miners would be removed, and they would realise why and +when their wages must undergo fluctuations, and the value of the many +other factors besides wages which went to make up the pit-head cost of +coal; (ii) publicity coupled with _costing returns_ would make it +possible to draw comparative conclusions as to the cost of production in +different mines and districts, which would be a fruitful source of +experiment and improvement. Publicity does not involve publication of +lists of customers, British or foreign. + + +THE LESSEES OF THE FUTURE + +How far will the lessees to whom the National Mining Board will grant +leases to work the coal be the same persons and companies as the present +lessees? In this matter it is desirable to maintain the maximum amount +of flexibility and variety. I do not think we have yet discovered the +ideal unit, the ideal organisation for the development of our principal +national asset. So much do our coalfields differ in geological +formation, in tradition, in the subdivision and classification of +labour, in outlet for trade, that it is unlikely that any single unit or +organisation will be the ideal one for every coalfield. So we must +resist any attempt, especially an early attempt, at stereotyping or +standardising the type of lessee. By trial and error we shall learn +much. + +All the following types of lessee seem likely, sooner or later, to +demand the attention of the National Mining Board. (I shall not touch on +the question of distribution, inland and export. That is another and +quite separate question):-- + +(i) _The Present Lessees._--I see no reason to doubt that in the vast +majority of cases the present lessees would be prepared to continue to +operate their mines, paying royalties to the State instead of to the +present royalty-owner. Where the unit is sufficiently large and the +management efficient, the National Mining Board would probably grant a +fresh lease, incorporating such conditions as to unification, joint +control, and publicity as they might consider necessary. If the present +lessees do not want the lease, there are others who will. + +(ii) _Larger Groups._--In a great many cases, however, the Board would +decline to grant separate leases in respect of each of a number of small +collieries, and would indicate that they were only prepared to receive +applications for leases by groups of persons or companies prepared to +amalgamate themselves into a corporation representing an output of x +tons _per annum_. This figure would vary in each coalfield. In South +Staffordshire, in particular, divided ownership has had most prejudicial +effects in the matter of pumping. + +(iii) _District Coal Boards._--Sir Arthur Duckham's scheme of statutory +companies known as District Coal Boards requires consideration. Without +necessarily adopting his districts or his uniformity of type throughout +the country, there are many areas where it might be found that voluntary +amalgamation was impracticable, and that the desired result could only +be attained by an Act of Parliament providing for the compulsory +amalgamation of persons and companies working a specified area and the +issue of shares in the new corporation in exchange for the previous +holdings. + +(iv) _Public Authorities._--I should very much like to see, sooner or +later, in some area, a lessee in the form of an organisation which, +though not national--not the State--should be at any rate +public--something on the lines of the Port of London Authority. + +It may well be that in one or more of our coalfields a public authority +of this type, though with larger labour representation upon it and with +a large measure of joint control from top to bottom, would be a +suitable lessee of the minerals in that area. The important point is +that public management need not mean bureaucratic State-management with +the disadvantages popularly associated with it. + +(v) I have mentioned several types of possible lessees, but it will be +noticed that there is nothing in these suggestions which would prevent +the National Mining Board from making the experiment of working a few +mines themselves. + +To sum up. There _is_ a problem of the Mines. No sensible person should +be deceived by the quiescence of the last twelve abnormal months. +Without using extravagant language, the coal-mining industry is a +volcano liable at any moment to erupt and involve the whole community in +loss and suffering. Therefore, as a body of citizens, we are under a +duty to seek a solution which can be effected between the occurrence of +the recurring crises. As a body of Liberal citizens we shall naturally +seek a Liberal solution, and the foregoing suggestions (for which no +originality is claimed) are inspired by the Liberal point of view. They +apply to the industrial sphere principles which have been tried and +proved in the political sphere, both in the central and the local +government. Apart from State acquisition of the minerals, about which +there can surely be no question, these suggestions merely develop +tendencies and organisations already existing within the industry. They +involve no leap in the dark, such as has been attributed by some to +nationalisation of the whole industry, and they provide for great +flexibility and experimentation. The fact that the official spokesmen of +neither miners nor colliery-owners may like them need not deter us. They +have had numerous opportunities of settling the problem amongst +themselves, but the "die-hards" in both camps have always prevented it. +It is time that the general public outside the industry took the matter +in hand and propounded a solution likely to be acceptable to the vast +body of sensible and central feeling within the industry. + + + + +THE LAND QUESTION + +BY A.S. COMYNS CARR + +Member of Acquisition of Land Committee, 1918. + + +Mr. Comyns Carr said:--The Land Question I believe to be the most +important subject in purely domestic politics to-day, as it was in 1914. +At that date we were embarking, under the especial leadership of one who +has now deserted us, upon a comprehensive campaign dealing with that +question in all its aspects. The present Government has filled a large +portion of the Statute Book with legislation bearing on the land; it is +not the quantity we have to complain of, but the quality. In 1914 we had +already achieved one signal victory in carrying against the House of +Lords the Land Clauses of the Budget of 1909-10, and although many of us +were never satisfied with the form which those clauses took, they were +valuable both as a step in the direction of land taxation and for the +machinery of valuation which they established. Mr. Lloyd George in his +present alliance with the Tories has sunk so low as not only to repeal +those clauses, but actually to refund to the landlords every penny which +they have paid in taxation under them. + +The campaign which was inaugurated in 1913 did not deal with the +question of taxation only, and for my part, although I am an enthusiast +on this branch of the subject, I have never thought that other aspects +should be neglected. We put forward proposals for dealing with leases +both in town and country. The present Government has carried and +repealed again a series of statutes dealing with agriculture. Their +original policy was to offer to the farmer guaranteed prices for his +produce, if necessary at the expense of the tax-payer, and to the +labourer guaranteed wages, to be fixed and enforced by Wages Boards. +Before this policy was fully in operation it was repealed. The farmer +got some cash compensation for his losses; the labourer has got nothing +but voluntary Conciliation Boards, with no power to do more than pass +pious resolutions. There has, however, survived this welter of +contradictory legislation, a series of clauses which do confer upon the +tenant farmer a substantial part of the rights in his dealings with his +landlord for which we were agitating in 1914. The town lease-holder, on +the other hand, has got nothing, and it is one of the first duties of +the Liberal Party to provide him with security against the confiscation +of his improvements and goodwill, to give him reasonable security of +tenure, and to put an end once for all to the pestilent system of +building leases which extends all over London and to about half the +other towns of England. The evils of this system are especially to be +found in those older parts of our great cities where the original leases +are drawing to a close. In such cases a kind of blight appears to settle +on whole neighbourhoods, and no improvements can be carried out by +either party because the landlord cannot obtain possession, and the +tenant has not, and is unable to obtain, a sufficient length of term to +make it worth his while to risk his capital upon them. + + +HOUSING + +The branch of the land question to which the Government called the +greatest attention in their election promises was Housing. On this +subject the Government have placed many pages of legislation on the +Statute Book. One can only wish that the houses occupied as much space. +They began by informing us, probably accurately, that up to the time of +the Armistice there was an accumulated shortage of 500,000 houses; in +pre-war days new working-class houses were required, and to a certain +extent provided, although the shortage had then already begun, to an +average number of 90,000 a year. According to the official figures in +July last, 123,000 houses had been completed by Local Authorities and +Public Utility Societies; 37,000 by private builders with Government +subsidies; 36,000 were under construction, and as the Government have +now limited the total scheme (thereby causing the resignation of Dr. +Addison, its sponsor) there remain 17,000 to be built. This is the +record of four years, so clearly the Government have not even succeeded +in keeping pace with the normal annual demand, and the shortage has not +been attacked, but actually accentuated. + +The cause of the failure was mainly financial. Without attacking the +roots of the evil in our land and rating system, and without attempting +to control the output and supply of materials and building in the way in +which munitions were controlled during the war, the Government brought +forward gigantic schemes to be financed from the supposedly bottomless +purse of the tax-payer. At the same time the demand for building +materials and labour in every direction was at its maximum, and +unfortunately both employers and employed in the building and allied +industries took the fullest advantage of the position to force up prices +without regard to the unfortunate people who wanted houses. The Trade +Unions concerned seem to have overlooked the fact that if wages were +raised and output reduced houses would become so dear that their +fellow-workmen who needed them could not attempt to pay the rents +required, and the tax-payer would revolt against the burdens imposed +upon him; thus the golden era for their own trade was bound to come to a +rapid end, and, so far from employment being increased and prolonged, +unemployment on a large scale was bound to result. With the Anti-Waste +panic and the Geddes Axe, social reform was cut first, and, in their +hurry to stop the provision of homes for heroes, the Government is +indulging in such false economies as leaving derelict land acquired and +laid out at enormous cost, even covering over excavations already made, +and paying out to members of the building trade large sums in +unemployment benefit, while the demand for the houses on which they +might be employed is left wholly unsatisfied. + + +LAND FOR PUBLIC PURPOSES + +The Acquisition and Valuation of Land for the purpose of public +improvements is a branch of the question to which a great deal of +attention was drawn during and immediately after the war. The Government +appointed a Committee, of which the present Solicitor-General was +chairman, and which, in spite of a marked scarcity of advanced land +reformers amongst its members, produced a series of remarkably unanimous +and far-reaching recommendations. These recommendations dealt with four +main topics:-- + +(_a_) Improvements in the machinery by which powers may be obtained by +public and private bodies for the acquisition of land for improvements +of a public character; + +(_b_) Valuation of land which it is proposed to acquire; + +(_c_) Fair adjustment as between these bodies and the owners of other +land, both of claims by owners for damage done by the undertaking to +other lands, and of claims by the promoting bodies for increased value +given by their undertaking to other lands; and + +(_d_) The application of these principles to the special subject of +mining. + +The Government in the Acquisition of Land Act, 1919, has adopted a great +part of the Committee's recommendations under the second head, and this +Act has undoubtedly effected an enormous improvement in the prices paid +by public bodies for land which they require, although, most +unfortunately, the same immunity from the extortion of the land-owner +and the land speculator has not been extended to private bodies such as +railway companies who need land for the improvement of public services. +Moreover, it has not attempted to bring the purchase price of land into +any relation with its taxing valuation. + +The whole of the rest of the Committee's recommendations dealing with +the other three points which I have mentioned, the Government has wholly +ignored. Powers for public development can still only be obtained by the +slow, costly and antiquated processes in vogue before the war; private +owners of lands adjoining works of a public character are still in a +position to put into their own pockets large increases in value due to +public improvements to which they have contributed nothing, and which +they may even have impeded; the development of minerals is still +hampered by the veto of unreasonable owners, by the necessity of leaving +unnecessary barriers between different properties, and by other +obstacles which were dealt with in detail in the Committee's report. An +illustration of the importance of this aspect of the question was put +before the Committee and has been emphasised by recent events. It was +stated on behalf of the railway companies that they were prepared with +schemes for the extension of their systems in various parts of the +country, which would not only provide temporary employment for a large +number of men on construction, and permanent employment to a smaller +number on the working of the lines, but would also open up new +residential and industrial districts, but that it was impossible for +them to find the necessary funds unless they could have some guarantee +that at least any loss upon the cost of construction would be charged +upon the increased value of land in the new districts which would be +created by the railway extensions. Remarkable instances were given of +the way in which the value of land had been multiplied many-fold by the +promotion of new railways, which, nevertheless, had never succeeded in +paying a dividend to their shareholders, and the capital cost of which +had been practically lost. + +On the other hand, the Committee were assured that, given a charge on +the increased value of land likely to be created, there would be no +difficulty in obtaining the necessary funds without Government +assistance. When the pressure of the unemployment problem became acute, +and not before--and then it was, of course, too late--the Government +turned their attention to this problem, and have guaranteed the interest +upon new capital to be expended on a few of these railway extensions, +but instead of charging the guarantee upon the increased value of land, +they have charged it upon the pocket of the tax-payer. The most striking +instance is that of the tube railway from Charing Cross to Golders +Green, now being extended under Government guarantee to Edgware. Those +who provided the original capital have never received any return upon +their money, yet millions have been put into the pockets of the owners +of what was undeveloped land now served by the line, and now that the +extension is being carried out with the tax-payers' guarantee, the +land-owners will again reap the benefit untaxed. + +The development of the natural resources of our country was one of the +promises held out by Mr. Lloyd George to the electors in 1918. Schemes +were ready, and are still in the official pigeon-holes, for the +production of electricity on a very large scale both from water power +and from coal, which would not only provide employment, but cheapen the +cost of production in all our industries. France, Italy, and other +countries are at this moment carrying out similar schemes whereby they +will relieve themselves to a large extent from dependence on British +coal. But here, four years of Coalition Government have left us +practically where we were. In France, although in many respects her +social system seems to me less enlightened than our own, the power of +the land-owner to obstruct enterprise and development is by no means so +great. Land Reform in this country is a necessary preliminary to the +fulfilment of Mr. Lloyd George's promises. Development at the public +expense without such reforms will result chiefly in further burdens upon +the tax-payer and further enrichment of the landowner. + + +RATING RELIEF FOR IMPROVEMENTS + +This brings me to the last, and in my opinion the most important branch +of the Land Question, that relating to the reform of our system of +rating and taxation. I am myself an ardent supporter of the policy which +I think has been rather unfortunately named the Taxation of Land +Values. The vital point about this policy is not so much that we should +tax land values, as that we should leave off taxing buildings and other +improvements of land. The policy would be better described as the Relief +of Improvements from Taxation. Its economic merits seem to me so obvious +as hardly to require examination. It is only because the present system +has been in force for over 300 years that it can find any supporters. If +any one were to propose as a useful means of encouraging the steel trade +or the boot trade, or as a desirable method of taxation, that a tax of, +say, 50 per cent. should be imposed upon the value of every ton of steel +or every pair of boots turned out in our factories, he would be rightly +and universally denounced as a lunatic. Yet this is the system which +ever since the days of Queen Elizabeth has been in force with regard to +the building trade and all other industries which result in the +production of improvements upon land. + +As long as land remains unused it pays no rates or taxes, whatever its +immediate potential value. But the moment it is brought into use, as +soon as a house, a factory, or a railway is built upon it, or it is +drained or planted--rates and taxes, which in these days often exceed 50 +per cent. of its improved value, have to be paid, without regard even to +the question whether its use is successful in yielding profits or not. +Familiarity with this system, instead of breeding the contempt which it +deserves, has bred a kind of passive acquiescence which is exceedingly +difficult to shake. Even such a champion of our land system as the Duke +of Bedford years ago in his book, _The Story of a Great Agricultural +Estate_, perceived the absurdity, although he was apparently blind to +the remedy and to the application of it to some of his estates which are +not agricultural. He converted an ordinary arable field into a fruit +garden, and discovered that his rates were promptly trebled by reason of +his expenditure. Striking, but, nevertheless, everyday examples may be +found if we see how the system works out in urban districts. If a new +factory is built, rates and taxes are immediately levied on the full +annual value of the building, which is a direct charge upon production, +and has to be paid before a single person can be employed in the +factory. It therefore not only restricts the possibilities of +employment, but has to be added to the price at which the goods can be +sold. + + +THE LESSON OF THE SLUMS + +Or take the illustration of a slum area. Each tumble-down tenement is +rated and taxed on the assessment based upon its annual rental value. In +many places in the central parts of towns the total of these assessments +is less than the sum for which the whole site could be sold as a +building area, nevertheless if all the tenements fall or are pulled down +the site may remain vacant for years and no rates or taxes are paid. But +if substantial and decent buildings are erected on the site, immediately +the assessment is raised to their full annual value. The individual or +public body that has cleared away the slum and erected something decent +in its place is thus immediately punished for doing so, with the result +that such a thing is seldom done except at the public expense. The +remedy for all these absurdities is quite a simple one. No one disputes +that the sums necessary for municipal and imperial taxation have got to +be provided. The question is, in so far as they are to be raised from +lands and buildings, how can they be assessed most fairly and with the +least injury to trade and commerce? They should be assessed upon the +value of land which is not due to any effort of the owner or occupier; +they should not be assessed upon nor increased because of any buildings +which he may have erected or any improvements which he may have carried +out. + +This question was closely investigated by the Land Enquiry Committee +appointed by Mr. Lloyd George in 1913. They were unanimous in condemning +the existing system and in regarding the one which I have just described +as the ideal. They were, however, met by great difficulties in its +immediate practical application, because, owing to the long prevalence +of the wrong system, an immediate and total change would bring about +rather startling alterations in the value of existing properties. The +Committee closely considered these objections, and a number of +alternative methods of bringing the change into operation gradually and +without these drastic changes in value were put forward. The one which +immediately suggested itself as the simplest, and from many points of +view the most desirable, was to leave the rates and taxes of existing +properties on their present basis, to impose them at their present rate +on the annual value of all unoccupied land, but to exempt from rates and +taxes all future buildings and improvements of every kind. + +To illustrate the way in which this would work, let us revert to the +case of a block of slum property. As long as it remained in its present +condition the existing valuation based upon the annual rent obtainable +for it would apply, but any parts of it which now are or may hereafter +become unoccupied, would, instead of escaping as they do now from all +rates and taxes, contribute on the basis of the value of their sites, +which would be assessed at an annual rent for the purpose of comparison +with the existing valuations, at least until the capital values of the +whole rating area could be ascertained. If any improvements were carried +out the assessments would not be raised on that account, as they would +be under present conditions, and if a whole area were pulled down, +replanned and rebuilt, the assessment instead of being based, as it +would be to-day, on the annual value of the reconstructed property, +would be based upon the site value alone. Gradually in this way site +value would become the prevalent basis of assessment. "It is obvious," +as the Committee said in 1913, "that unrating of future improvements is +from the economic point of view of far more importance than the unrating +of existing improvements; if we want to encourage new buildings and new +improvements, what is really important is to ensure that new +improvements (not old ones) shall be exempt from the burden of rates." +The Committee were, however, compelled to reject this suggestion at that +time on the ground that "it would cause an unfair differentiation +between the man who had already put up buildings or improvements, and +the man who put up buildings or improvements after the passing of the +Act." But as between buildings and improvements which existed before the +war and those which come into existence under post-war conditions no +such unfairness could operate, because the increase in the cost of +building even to-day is greater than the benefit which would accrue from +the unrating of improvements. The present is therefore the unique +opportunity for bringing into force this much-needed reform in the most +effective way, free from the difficulties which had to be met in 1913. +If it had been carried out immediately after the Armistice it would, in +my opinion, have done more than anything else to solve the housing +problem, and even now it is not too late. In fact, in view of the +present unemployment it would be most opportune. Incidentally it would +soon render unnecessary the renewal of the Rent Restriction Act. I +understand that something on these lines has been introduced in New York +to meet a similar problem. + + +A RATE AND A TAX UPON SITE VALUES + +The Committee of 1913 were obliged to turn their attention to other +suggestions. They proposed: + +(_a_) That all future increases in the expenditure of each Local +Authority which had to be met out of rates should be met by a rate upon +site values instead of upon the existing assessments; and + +(_b_) That existing expenditure should be met to a small extent +compulsorily, and to a larger extent at the option of the Local +Authority, in the same manner. + +There is no reason why these proposals should not be brought into force +simultaneously with that relating to new buildings and improvements. +They made these proposals conditional upon a substantial increase in the +grants in aid to Local Authorities, especially in necessitous areas, +from the Imperial Exchequer; and they suggested, although they did not +definitely recommend, that a part at least of this increased grant might +be raised by means of an additional tax upon site values. This, I think, +should certainly be done, and such a tax might be wholly or partially +substituted for the present Land Tax and Income-Tax Schedule A, which +are assessed on the wrong basis. + +These proposals would, of course, involve the revival and revision of +the National Land Valuation established by the Finance Act, 1909-10, +which should be made the basis of all taxation and rating relating to +real property. This would be both a reform and an economy, because there +are at present several overlapping systems of valuation by Central and +Local Authorities, none of which are really satisfactory even on the +present unsatisfactory basis of assessment. The existence of such a +valuation frequently revised and kept up to date, and independent of +local influences, would be invaluable not only for purposes of rating +and taxation, but also in arriving at a fair price for the acquisition +of land for public purposes, and for the levying of special charges upon +the increased value due to particular public improvements, such as +railway extensions, with which I have already dealt. + +I am not one of those who claim for these reforms that they would cure +all the evils from which the community is at present suffering, but I do +believe that there is no other and no better way of removing the +unfairness and the restrictions of our present methods of rating and +taxation or of setting free and stimulating the energies of our people +in the development of the resources of our country. + + + + +AGRICULTURAL QUESTIONS + +BY RT. HON. F.D. ACLAND + +P.C.; M.P. (L.) North-West Cornwall; Financial Secretary, War Office, +1908-10; Under-Secretary of State for Foreign Affairs, 1911-15; +Financial Secretary to Treasury, Feb.-June, 1915; Secretary to the Board +of Agriculture, 1915-16; a Forestry Commissioner. Chairman of the +Agricultural Organisation Society. + + +Mr. Acland said:--I begin by laying down in a didactic form five points +which one would like to see firmly established in our rural life: (i) +intensive production; (ii) plenty of employment at good wages; (iii) +easy access to land, and a good chance of rising upon the land; (iv) +real independence in rural life; (v) co-operative association for many +purposes. + +Intensive production is most important. It is so easy to say the farmer +_can_ get more out of the land, and the farmer _should_ get more out of +the land, that we are tempted to continue and say that the farmer _must +be made_ to get more out of the land. But it isn't so easy. It has been +tried and failed, and when any subject in our British political life has +been brought up to the boiling-point, and yet nothing effective has been +done, it is extremely difficult to bring it to the boil a second time. + +It is worth while tracing out what has actually happened. The +Government's Agriculture Act of 1921 contained four great +principles:--(i) that we must have more food produced in this country +(_a_) as an insurance against risk of war, (_b_) so as to meet our +post-war conditions as a debtor nation by importing less of our food +supplies; (ii) that as the most productive farming is arable farming, +and as by maintaining a proper proportion of arable we can on emergency +make ourselves independent for our food supplies for an indefinite time, +farmers should be guaranteed against loss on their arable rotations; +(iii) that if farmers are to be required to produce more they must have +clear legal rights to farm their land in the most productive way, a +greater compensation for disturbance; (iv) that as the first three +principles give security to the nation and to the farmer, it is +desirable also to give security to the worker by permanently continuing +the war-time system of Agricultural Wages Boards. + +These principles were duly embodied in the Bill as it left the House of +Commons:-- + +(i) The Ministry of Agriculture, acting through the County Agricultural +Committees, was given powers to insist on a certain standard of arable +cultivation, as well as in minor matters, such as control of weeds and +of rabbits; + +(ii) The difference between the ascertained market price and the +estimated cost of production on his wheat and oat acreage was guaranteed +to the farmer, the guarantee not to be altered except after four years' +notice; + +(iii) The landlord had to forfeit a year's rent if a tenant was +disturbed except for bad farming, or four years' rent if the disturbance +was capricious; + +(iv) The existing Wages Board system was continued. + + +THE DESTRUCTION OF A POLICY + +The gradual destruction of this policy began in the House of Lords. They +allowed themselves to be swept away by the popular cry against +Government interference with industry, and cut out the power of control +of cultivation. The Prime Minister had said that this was an absolutely +essential part of the Bill, and of the Government's policy, but the +Government quietly and characteristically accepted the Lords' amendment +and the Bill was passed. + +Then troubles began. Other industries began to ask why the Government +satisfied agriculture and not them, and as the Government could not +plead their control of agriculture in justification, no real reply was +possible. Also the cold fit came on as regards national expenditure. The +Bill for the corn subsidies threatened to be very high. Though Europe +was starving, it could not buy, so cheap American grain flooded our +markets; but cost of production here was still at its peak, and, for +oats especially, the amount to be paid to the farmer threatened to be +large. It was realised that it might cost 25-30 millions to implement +the guarantees for the first year, and perhaps 10-12 millions a year +later. In short, the guarantees had to go. Instead of four years' notice +of any change, a Bill to repeal the great Act was introduced five months +after it had been passed. And it was unfortunately part of the bargain +with the farmers who received for the single season perhaps six or +eight millions less than they might have been entitled to under the Act, +that the Wages Boards should be abolished--and they were. There remained +of the original structure only the depreciation of the value of all +agricultural landowners' property by about one-twentieth, owing to the +extra compensation for disturbance. + +Every one felt that they had been had, and they had been. The industry +which had lately been talked up and made much of was dumped into the +dustbin. The farmers had lost their guarantees on the strength of which, +in many cases, they had bought their farms dear or planned their +rotations. The labourers, who particularly needed the protection of +Wages Boards during a time of fall in cost of living and unemployment, +had lost all legal protection. The landlords, willing enough to give +what was asked of them if any national purpose was to be served, found +that their loss brought no corresponding national gain. Agriculture +retired as far as it could from any contact with perfidious Governments, +to lick its wounds. + +That is not a good basis upon which to build intensive cultivation or +any other active policy. There being now no legal or patriotic call to +intensive production, we are driven back to ask, "Does intensive +production pay?" and the broad answer is that at a time of low prices it +does not. There is no doubt that slowly and steadily education will +gradually improve farming, and that farmers will learn to find out what +parts of their business pay best and to concentrate upon them. There is +also no doubt that even at low prices there is plenty of scope for +better farming, and that better manuring, particularly of grass land, +will pay. But the farmer is faced with an economic principle--the law of +diminishing returns. It may be stated thus: beyond a certain point which +rises and falls directly with the value of the product, extra doses of +labour and manure do not give a corresponding return. It is this +principle which accounts for what we see everywhere--that farmers are +tending to economise as much as they can on their labour and to let +arable land go back to grass. + +And if this is clear to farmers who are thinking of intensive arable +farming, still more is it true in comparing arable with grass. If you +take the same sort of quantity of arable and grass farms, farmed by men +of the same skill and diligence, over a range of seasons under low world +prices for farm produce, you will, I believe, find something like this: +grass land needs half the capital and one-third of the labour of arable; +it produces three-quarters the receipts with half the payments, and +yields double the profit per acre and four times the profit on capital. +The moral of all this is clear. Unless the nation is willing to go back +to protection for agriculture, which I am glad to believe in the general +interest unthinkable, and unless it is willing to guarantee the farmer +against loss from that method of agriculture which means most production +and most employment, we must let the farmer set the tune and farm in the +way it best suits him to farm. We must try, in fact, not to talk too +much nonsense about intensive production as the cure for agricultural +depression. It is useful to remember that all countries overseas which +combine high wages with agricultural prosperity have a very low output +per acre judged by our standards. + + +EMPLOYMENT AND WAGES + +It follows directly from what I have just said that a time of high costs +and low prices like the present, like the time of lower costs but still +lower prices of the late '80's and early '90's, is not a favourable time +for expecting employment to be brisk or wages high. And reasons other +than those which we have yet considered make the farmer feel his labour +to be specially burdensome at present. He finds that the prices he gets +on the average are one and one-third times what they were before the +war: what he has to buy costing from one and a half to one and +two-thirds what it cost before the war; and he is expected in very many +counties in England and Wales to pay his workers about double what he +paid before the war. This is a strong point for him. But the labourers' +position is just as strong. "I was not sufficiently well paid before the +war. If this is to be recognised in any way at all, I must at the +present cost of living (185) have double my pre-war wages." It is +certainly beyond all question that 30/- a week, which is the present +wage over a large part of England, is not, even with only 3/- a week +rent for house and garden, enough to keep a man and his wife and family +in a state of real efficiency. Yet I know from personal experience that +this fact is not properly recognised in practice. If one tries to pay +more one is regarded as a very rich man, and an extremely stupid one--an +idea erroneous as to one's wealth and possibly exaggerated as to one's +mentality. + +How have the two conflicting views of farmer and labourer been +reconciled in practice. I can only say that so far as my own knowledge +extends--bearing in mind that the farmer has not the business man's +habit of cheerfully setting off a bad year against a good (for the +business man knows that trade must improve some time, and then he will +make profits, while the farmer has no certainty that things will +improve)--things might well have been worse. There has been a good deal +of mutual consideration and desire to make the best of difficult +circumstances. I have, however, little doubt that it would have been +better had the Wages Boards, which had controlled the rise in wages +during the rise in the cost of living, regulated the fall in wages +during its fall--relaxing control perhaps later when things became more +stable. + +The reason why I think that things might have been worse is that the +District Wages Committee left a good legacy to the voluntary +Conciliation Committees which followed them--the men serving on the +latter were those who under the Wages Board system had learned to +negotiate with and to know and respect the workers--generally some of +the best farmers in their districts--and they genuinely tried not to let +the workers down with too much of a bump; on the other hand, they knew +that the only value their recommendations could have was that they +should be voluntarily observed, and therefore they took care not to +recommend rates higher than those which the least favourably situated +farmers in the district could manage to pay--which meant rates lower +than many might have been willing to give. This means that any general +rate agreed to voluntarily will be rather on the low side. But I would +rather have a rate which is generally observed, even if it is rather +low, than that every farmer should be a law unto himself. If there is no +recognised standard, and one man with impunity pays a lower rate than +his neighbours, other rates also tend to come down, and then the process +begins over again. + +Looking to the future, the only thing that I can say with any certainty +about the wages question is that it needs very careful watching. Let us +be sure first of our principle, that the first charge on land, as on any +other industry, should be a reasonable standard of living for the +workers. Then let us be sure of the fact that there is over a very large +part of England and Wales no certain prospect of an improvement in the +condition of the labourer compared with conditions ten years ago. The +dangers to be feared are that in the present lamentable weakness of the +men's unions large sections of farmers may break away from the +recommendations of their leaders; and that if depression continues and +war savings become depleted farmers will tend to push wages down in +self-preservation. These things must be watched. If the general +condition of agriculture improves without a corresponding improvement in +the workers' condition, or if conditions get worse and the brunt of the +burden is transferred to the labourer, we ought to be prepared to +advocate a return to the old Wages Boards or the adoption of a Trade +Board system. It must, I think, be a cardinal point of our Liberal faith +that though it is better to leave industrial questions to be adjusted as +much as possible by the parties concerned in the industry, the State +must be ready to step in in any case in which the workers have not +developed the power by their own combination to secure reasonable +conditions and prospects. It is to the prospects that I now turn. + + +ACCESS TO THE LAND + +I mean by this that there should be as many chances as possible for men +and women who have an inclination for country pursuits to take up +cultivation of the soil; the freest opportunity for experiment in making +a living out of the land; and good chances for those who have started on +the land ladder to rise to the top of it. + +The three things which stand in the way are:-- + +(i) The cost of building and equipment; + +(ii) The practice under which the cultivator provides all the movable +capital; + +(iii) The handicap on free use of land imposed upon its owners by the +compensation clauses of the Agriculture Act. + +These obstacles do real harm, in the first place, because a very large +proportion of farms in this country are the wrong size: too large for a +man to work with his hands, and too much for him to work with his head, +as Sir Thomas Middleton has well said. Figures show quite conclusively +that whether you take production per acre or production per man, the +farm of from 100 to 150 acres is economically the worst-sized unit. +Probably more than half of our farms lie between 70 and 100 acres. We +should get far more out of the land if all were either below 80--so that +a man and his family could manage them--or above 180, so that there +would be a chance of applying to production the most scientific methods +and up-to-date machinery. + +But movement, either towards breaking up existing holdings or throwing +them together, will be extremely slow. The one process means building +new houses and buildings, which is prohibitive in price; and the other, +also fresh building and the abandonment of hearths and homes, which is +prohibited both by price and by sentiment. Any change in either +direction is almost prohibitive to the new poor landowner class, because +if one makes any change, except when a tenant dies or moves of his own +accord, one forfeits a year's rent. + +I have not yet mentioned the difficulty about capital. Under our British +method, if a man wants a farm he must have capital--about £10 per arable +acre and about £5 for grass. This is a great bar to freedom of +experiment and the greatest bar on the way up the agricultural ladder. +There ought to be free access to our farms by town brains, which can +often strike out new and profitable lines if given a chance. It is not +good for agriculture, and it does not promote that sympathy and contact +and interchange which should exist between town and country, that a +start in farming should need a heavy supply of capital. If our +landlords were better off they might well try some of the continental +systems, under which the landlord provides not only the farm and +buildings, but the stock and equipment, and receives in addition to a +fair rent for the land half the profits of the farm. But it is vain to +hope for this under present conditions, and, for good or ill, the newly +rich does not buy land. He knows too much, and he can get what he wants +without it. He may lease a house, he does take shooting, but he won't +buy an estate. + +When thinking of the importance of freedom of experiment and of a ladder +with no missing rungs, I have my mind on the possibility of the owner of +one estate of from 5,000 to 10,000 acres throwing all the farms and many +of the fields together and making his best tenants fellow-directors with +him of a joint enterprise, one doing the buying and selling, one looking +after the power and the tractors and implements, one planning the +agricultural processes, one directing the labour and so on. This gives a +prospect of the greatest production and the greatest profit, and it +gives a really good labourer a chance which at present he has not got. +At present, unless he leaves the land, in nine cases out of ten once a +labourer always a labourer. My vision would give him a chance to become, +first, foreman, then assistant manager, manager, director, and +managing-director. It ought to be tried--but how one's tenants would +loathe it, and quite natural too! At present if things go wrong, if it's +not the fault of the Government or the weather, it's the farmer's own +fault. On my joint-stock estate every director and manager would feel +that all his colleagues were letting him down and destroying his +profits. It is hard to make people accept at all readily, in practice, +the teaching that they are their brothers' keeper. + +The scheme could hardly be started with men accustomed to the present +methods, and the cost of obtaining vacant possession of land would make +it difficult to try with new men. I am sure, however, that something of +the sort is a good and hopeful idea, and the best way of making the +ladder complete. And I am emboldened to think that something of the sort +will be tried gradually in some places, when I see the number of +landlords' sons who are in this and other universities taking the best +courses they can get in the science and economics of agriculture. They +know this is the only way to retain a remnant of the old acres. It is +quite new since the war--and a most hopeful sign. + + +INDEPENDENCE + +I need not urge the importance in our villages of real independence of +life. It was the absence of independence combined with long working +hours and little occupation for the hours of leisure, which, more than +low wages, caused the pre-war exodus from the country. Should the +prospects of industry improve, but agriculture remain depressed, there +will be another exodus from the country-side of the best of the young +men who have come back to it after the war. It is of first-class +importance, both from the national and from the agricultural point of +view, that they should stay, for there was a real danger before the war +that agriculture might become a residual industry, carried on mainly by +them, too lethargic in mind and body to do anything else. + +In a preface which he wrote to Volume I of the Land Report, as chairman +of Lloyd George's Land Inquiry Committee (it seems a long time ago now +that Lloyd George was a keen land reformer), my father sketched out the +idea of setting up commissions to report parish by parish in each +county, in the same way that commissions have reported on the parochial +charities. They would record how the land was distributed, whether the +influence of the landowners told for freedom or against it, whether +there was a chance for the labourer to get on to the land and to mount +the ladder. Whether there was an efficient village institute, whether +there were enough allotments conveniently situated, whether the +cottagers were allowed to keep pigs and poultry, and what the health and +housing were like. + +It is a good idea, and should be borne in mind. I confess I do not know +enough to know whether it is now as desirable as it seemed to be before +the war. I would fain hope not, but I am not sure. I believe that there +is a good deal more real independent life in the villages now than there +was ten years ago. There are, I think, now fewer villages like some in +North Yorkshire before the war, in which the only chance for a Liberal +candidate to have a meeting was to have it in the open-air, after dark +on a night with no moon, and even then he needed a big voice--for his +immediate audience was apt to be two dogs and a pig. Now, it seems to me +that people like having political meetings going on, but do not bother +to listen to any of them. + +As to the present, there has been lately, within my knowledge, a great +building of village institutes. There has been a tremendous development +of football. Village industries, under the wise encouragement of the +Development Commission, are reviving. Motor buses make access to town +amusements much easier, and cinemas come out into the village. There is +revived interest and very keen competition in the allotment and cottage +garden shows. Thus it is, at any rate, down our way--but no one can know +more than his own bit of country. On these and similar matters we ought +to think and watch and meet together to report and discuss. We need more +Maurice Hewletts and Mrs. Sturge Grettons to tell us how things really +are, for nothing is so difficult to visualise as what is going on slowly +in one's own parish. + + +CO-OPERATION + +I come lastly to co-operation. You will think me biased when I speak of +its possibilities. I am. I have been for eighteen years on the governing +body of the Agricultural Organisation Society, and happen now to be its +chairman, and am therefore closely in touch with the work of organising +co-operative effort. One sees fairly clearly how difficult it is to make +any class of English agriculturists combine for any mutual purpose, how +worth while it is, and what almost unexpected opportunities of useful +work still exist. Thanks largely to untiring work by Sir Leslie +Scott--who gave up the chairmanship of the society on his recent +appointment as Solicitor-General--the country is now fairly covered by +societies for purchasing requirements co-operatively--principally +fertilisers, feeding-stuffs, and seeds. There are also affiliated to the +movement I have mentioned, many useful co-operative auction marts, +slaughter-house societies, bacon factories, wool societies, egg and +poultry societies, and fruit and garden produce societies (but not +nearly enough), besides a thousand or so societies of allotment holders +which, thanks largely to our friend, George Nicholls, set all the others +an example in keenness and loyalty to their parent body. + +The _ideal_ is that where a society exists the main raw materials of the +industry shall be bought wholesale instead of retail, and the main +products of the industry sold retail instead of wholesale; that thereby +middlemen's and other profits shall be reduced to a reasonable figure, +and that the consumer shall get the most efficient possible service with +regard to his supplies. It is also the ideal that farmers and others +shall learn more comradeship and brotherhood; that the big and small men +alike shall become one community bound together for many common +purposes, and that thus the cultivators of the soil shall lose that +isolation and selfishness which is a reproach against them. The ideal +is, however, not always realised. The farmer likes to have a +co-operative society to keep down other people's prices, but, having +helped to form a society, he does not see why he should be loyal to it +if a trader offers him anything a shilling a ton cheaper. A good +committee is formed, but the members think they hold their offices +mainly in order to get first cut for themselves at some good bargain the +society has made, and they start with the delusion that they are good +men of business. Things, therefore, get into the hands of the manager, +and it is astonishing how much more quickly a bad manager can lose money +than a good one can make it. And if in these and other ways it is uphill +work with farmers' societies, the work is still more uphill with +small-holders. It is the breath of their nostrils to bargain +individually, and if a society is started they will only send their +stuff to be sold when they and every one else have a glut, ungraded and +badly packed--and then they grumble at getting a low price. + +But all co-operative work is abundantly worth while. And the field of +co-operation is not limited to the purchase of supplies or the sale of +produce. It ought to cover the use of tractors and threshing sets and +the installation and distribution of power. And if agriculture gets a +chance of settling down to a moderate amount of stability and +prosperity, it would not be beyond the bounds of hope that part, at any +rate, of the profits of co-operative enterprise should be used to +develop the amenities of the common life of the community--to provide +prizes for the sports and the flower show--the capital to start an +industry for the winter evenings, and even seats for the old people +round the village green. + +Times are not propitious for increasing the productivity of our land, +excepting by the slow processes of education--which work particularly +slowly in agriculture. Nor are they immediately propitious for raising +the workers' standard of life, though we should never leave go of this +as an essential. But many of us can, if we will, help a good man to +start on the land, or help a man who has made good on the land to do +better. Many of us can help to develop real independence of life in the +villages and, through co-operation, those kindly virtues of friendliness +and helpfulness to others and willingness to work for common ends which +are sometimes not so common as they might be. And those who _can_ do any +of these things _should_, without waiting for legislation--for the +legislator is a bruised reed. + +[Transcriber's Notes: +The following apparent printer's errors have been corrected for this +electronic edition: + +misconduct necessitates military operations; +was "operations:" + +and if he tries to make his responsibility real +was "responsiblity" + +things slide--the main virtue of Cabinet +was "virture" + +are two which are almost invariably present towards +was "invarably"] + + + + + + +End of the Project Gutenberg EBook of Essays in Liberalism, by Various + +*** END OF THIS PROJECT GUTENBERG EBOOK ESSAYS IN LIBERALISM *** + +***** This file should be named 17294-8.txt or 17294-8.zip ***** +This and all associated files of various formats will be found in: + https://www.gutenberg.org/1/7/2/9/17294/ + +Produced by Melissa Er-Raqabi, Jonathan Niehof, Ted Garvin +and the Online Distributed Proofreading Team at +https://www.pgdp.net + + +Updated editions will replace the previous one--the old editions +will be renamed. + +Creating the works from public domain print editions means that no +one owns a United States copyright in these works, so the Foundation +(and you!) can copy and distribute it in the United States without +permission and without paying copyright royalties. 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You may copy it, give it away or +re-use it under the terms of the Project Gutenberg License included +with this eBook or online at www.gutenberg.org + + +Title: Essays in Liberalism + Being the Lectures and Papers Which Were Delivered at the + Liberal Summer School at Oxford, 1922 + +Author: Various + +Release Date: December 12, 2005 [EBook #17294] + +Language: English + +Character set encoding: ISO-8859-1 + +*** START OF THIS PROJECT GUTENBERG EBOOK ESSAYS IN LIBERALISM *** + + + + +Produced by Melissa Er-Raqabi, Jonathan Niehof, Ted Garvin +and the Online Distributed Proofreading Team at +https://www.pgdp.net + + + + + + +</pre> + +<h1><a name="Page_iii" id="Page_iii"></a><span class="pagenum" title="iii"></span>ESSAYS +IN +LIBERALISM</h1> + +<p class="center"><em>Being the Lectures and Papers which were +delivered at the Liberal Summer School +at Oxford, 1922</em></p> + + +<p class="center">LONDON: 48 PALL MALL<br /> +W. COLLINS SONS & CO. LTD.<br /> +GLASGOW MELBOURNE AUCKLAND</p> +<p class="center"><a name="Page_iv" id="Page_iv"></a><span class="pagenum" title="iv"></span>Copyright 1922</p> + + +<p class="center"><em>Manufactured in Great Britain</em> +</p> + +<hr style="width: 65%;" /> +<h2><a name="Page_v" id="Page_v"></a><span class="pagenum" title="v"></span><a name="PREFACE" id="PREFACE"></a>PREFACE</h2> + + +<p>The papers contained in this volume are summaries—in +some cases, owing to the defectiveness of +the reports, very much abridged summaries—of a +series of discourses delivered at the Liberal Summer +School at Oxford in the first ten days of August, +1922. In two cases (“The State and Industry” +and “The Machinery of Government”) two lectures +have been condensed into a single paper.</p> + +<p>The Summer School was not arranged by any +of the official organisations of the Liberal party, +nor was any part of its expenses paid out of party +funds. It was the outcome of a spontaneous movement +among a number of men and women who, +believing that Liberalism is beyond all other +political creeds dependent upon the free discussion +of ideas, came to the conclusion that it was desirable +to create a platform upon which such discussion +could be carried on, in a manner quite different +from what is usual, or indeed practicable, at +ordinary official party gatherings. From the +first the movement received cordial support and +encouragement from the leaders of the party, who +were more than content that a movement so +<a name="Page_vi" id="Page_vi"></a><span class="pagenum" title="vi"></span>essentially Liberal in character should be carried +on quite independently of any official control. +The meetings were inaugurated by an address by +Mr. Asquith, and wound up by a valediction from +Lord Grey, while nearly all the recognised leaders +of the party presided at one or more of the meetings, +or willingly consented to give lectures. In short, +while wholly unofficial, the meetings drew together +all that is most vital in modern Liberalism.</p> + +<p>In some degree the Summer School represented +a new departure in political discussion. Most of +the lectures were delivered, not by active politicians, +but by scholars and experts whose distinction has +been won in other fields than practical politics. +One or two of the speakers were, indeed, not even +professed Liberals. They were invited to speak +because it was known that on their subjects they +would express the true mind of modern Liberalism. +Whatever Lord Robert Cecil, for example, may +call himself, Liberals at any rate recognise that on +most subjects he expresses their convictions.</p> + +<p>As a glance at the list of contents will show, the +papers cover almost the whole range of political +interest, foreign, domestic, and imperial, but the +greatest emphasis is laid upon the problems of +economic and industrial organisation. Yet, since +it is impossible to survey the universe in ten days, +there are large and important themes which remain +<a name="Page_vii" id="Page_vii"></a><span class="pagenum" title="vii"></span>unexplored, while many subjects of vital significance +are but lightly touched upon. Perhaps the most +notable of these omissions is that of any treatment +of local government, and of the immensely important +subjects—education, public health, housing, +and the like—for which local authorities are +primarily held responsible. These subjects are +held over for fuller treatment in later schools; and +for that reason two papers—one on local government +and one on education—which were delivered +at Oxford have not been included in the present +volume.</p> + +<p>It must be obvious, from what has been said +above, that these papers make no pretence to +define what may be called an official programme +or policy for the Liberal party. It was with study +rather than with programme-making that the +School was concerned, and its aim was the stimulation +of free inquiry rather than the formulation +of dogmas. Every speaker was, and is, responsible +for the views expressed in his paper, though not +for the form which the abridged report of it has +assumed; and there are doubtless passages in this +book which would not win the assent of all Liberals, +for Liberalism has always encouraged and welcomed +varieties of opinion.</p> + +<p>Nevertheless, taken as a whole, these papers do +fairly represent the outlook and temper of modern +<a name="Page_viii" id="Page_viii"></a><span class="pagenum" title="viii"></span>Liberalism. And the candid reader will not fail +to recognise in them a certain unity of tone and +temper, in spite of the diversity of their authorship +and subject-matter. Whether the subject is +foreign politics, or imperial problems, or government, +or industry, the same temper shows itself—a +belief in freedom rather than in regimentation; +an earnest desire to substitute law for force; a +belief in persuasion rather than in compulsion as +the best mode of solving difficult problems; an +eagerness to establish organised methods of discussion +and co-operation as the best solvent of +strife, in international relations and in industrial +affairs quite as much as in the realm of national +politics, to which these methods have long since +been applied.</p> + +<p>That is the spirit of modern Liberalism, which +gives unity to the diversity of this little volume. +As has often been said, Liberalism is an attitude of +mind rather than a body of definitely formulated +doctrine. It does not claim to know of any formula +which will guide us out of all our troubles, or of any +panacea that will cure every social ill. It recognises +that we are surrounded in every field of social and +political life by infinitely difficult problems for +which there is no easy solution. It puts its trust +in the honest inquiry and thought of free men who +take their civic responsibilities seriously.</p> + +<hr style="width: 65%;" /> +<h2><a name="Page_ix" id="Page_ix"></a><span class="pagenum" title="ix"></span><a name="CONTENTS" id="CONTENTS"></a>CONTENTS</h2> + +<table class="toc" border="0" cellspacing="5%" summary="Table of Contents" title="Table of Contents"> +<tr><td class="toctitle"></td><td class="toctitle"></td><td class="tocpg" style="font-size: smaller;">PAGE</td></tr> +<tr><td class="toctitle"><a href="#PREFACE">Preface</a></td><td class="toctitle"></td><td class="tocpg"><a href="#Page_v">v</a></td></tr> +<tr><td class="toctitle"><a href="#THE_LEAGUE_OF_NATIONS">The League of Nations and the Rehabilitation of Europe</a></td><td class="toctitle"><em>Rt. Hon. Lord Robert Cecil</em></td><td class="tocpg"><a href="#Page_1">1</a></td></tr> +<tr><td class="toctitle"><a href="#THE_BALANCE_OF_POWER">The Balance of Power</a></td><td class="toctitle"><em>Professor A.F. Pollard</em></td><td class="tocpg"><a href="#Page_19">19</a></td></tr> +<tr><td class="toctitle"><a href="#INTERNATIONAL_DISARMAMENT">International Disarmament</a></td><td class="toctitle"><em>Sir Frederick Maurice</em></td><td class="tocpg"><a href="#Page_37">37</a></td></tr> +<tr><td class="toctitle"><a href="#REPARATIONS_AND_INTER-ALLIED">Reparations and Inter-Allied Debt</a></td><td class="toctitle"><em>John Maynard Keynes</em></td><td class="tocpg"><a href="#Page_51">51</a></td></tr> +<tr><td class="toctitle"><a href="#THE_OUTLOOK_FOR_NATIONAL">The Outlook for National Finance</a></td><td class="toctitle"><em>Sir Josiah Stamp</em></td><td class="tocpg"><a href="#Page_59">59</a></td></tr> +<tr><td class="toctitle"><a href="#FREE_TRADE">Free Trade</a></td><td class="toctitle"><em>Rt. Hon. J.M. Robertson</em></td><td class="tocpg"><a href="#Page_74">74</a></td></tr> +<tr><td class="toctitle"><a href="#INDIA">India </a></td><td class="toctitle"><em>Sir Hamilton Grant</em></td><td class="tocpg"><a href="#Page_92">92</a></td></tr> +<tr><td class="toctitle"><a href="#EGYPT">Egypt</a></td><td class="toctitle"><em>J.A. Spender</em></td><td class="tocpg"><a href="#Page_111">111</a></td></tr> +<tr><td class="toctitle"><a href="#THE_MACHINERY">The Machinery of Government</a></td><td class="toctitle"><em>Ramsay Muir</em></td><td class="tocpg"><a href="#Page_120">120</a></td></tr> +<tr><td class="toctitle"><a href="#THE_STATE_AND_INDUSTRY">The State and Industry</a></td><td class="toctitle"><em>W.T. Layton</em></td><td class="tocpg"><a href="#Page_145">145</a></td></tr> +<tr><td class="toctitle"><a href="#THE_REGULATION_OF_WAGES">The Regulation of Wages</a></td><td class="toctitle"><em>Professor L.T. Hobhouse</em></td><td class="tocpg"><a href="#Page_165">165</a></td></tr> +<tr><td class="toctitle"><a href="#UNEMPLOYMENT">Unemployment</a></td><td class="toctitle"><em>H.D. Henderson</em></td><td class="tocpg"><a href="#Page_176">176</a></td></tr> +<tr><td class="toctitle"><a href="#THE_PROBLEM_OF_THE_MINES">The Problem of the Mines</a></td><td class="toctitle"><em>Arnold D. McNair</em></td><td class="tocpg"><a href="#Page_194">194</a></td></tr> +<tr><td class="toctitle"><a href="#THE_LAND_QUESTION">The Land Question</a></td><td class="toctitle"><em>A.S. Comyns Carr</em></td><td class="tocpg"><a href="#Page_212">212</a></td></tr> +<tr><td class="toctitle"><a href="#AGRICULTURAL_QUESTIONS">Agricultural Questions</a></td><td class="toctitle"><em>Rt. Hon. F.D. Acland</em></td><td class="tocpg"><a href="#Page_227">227</a></td></tr> +</table> + +<p><a name="Page_x" id="Page_x"></a><span class="pagenum" title="x"></span></p> +<hr style="width: 65%;" /> +<h2><a name="Page_1" id="Page_1"></a><span class="pagenum" title="1"></span><a name="THE_LEAGUE_OF_NATIONS" id="THE_LEAGUE_OF_NATIONS"></a>THE LEAGUE OF NATIONS +AND THE +REHABILITATION OF EUROPE</h2> + +<h3>By the Rt. Hon. Lord Robert Cecil</h3> + +<h4>K.C., M.P., Assistant Secretary of State for Foreign Affairs, +1918. Minister of Blockade, 1916-1918. Representative +of Union of South Africa at Assembly of League +of Nations.</h4> + + +<p>Lord Robert Cecil said:—I ought to explain +that I am here rather by accident. The speaker +who was to have addressed you was my great +personal friend, Professor Gilbert Murray, and you +have greatly suffered because he is not present. +He is prevented by being at Geneva on a matter +connected with the League, and he suggested that +I might take his place. I was very glad to do so, +for, let me say quite frankly, I am ready to advocate +the League of Nations before any assembly, certainly +not least an assembly of Liberals. But not only +an assembly of Liberals—I should be ready to +advocate it even before an assembly of “Die-Hards.”</p> + +<p>Your chairman has said, and said truly, that +the League is not a party question. We welcome, +we are anxious for support from every one. We +have seen in another great country the very grave +danger that may accrue to the cause of the League +if it unhappily becomes identified with party +<a name="Page_2" id="Page_2"></a><span class="pagenum" title="2"></span>politics. We welcome support, yes, I will say even +from the Prime Minister; indeed no one will reject +the support of the Prime Minister of England for +any cause. I am bound to admit when I first +read the speech to which reference has already +been made, I was a little reminded of the celebrated +letter of Dr. Johnson to Lord Chesterfield. Lord +Chesterfield only began to recognise the value of +Johnson’s works when Johnson had already succeeded, +and in one of the bitter phrases Dr. Johnson +then used he said, “Is not a patron one who looks +with unconcern on a man struggling for life in the +water, and when he has reached ground incommodes +him with help?” That was a passing phase in my +mind, and I am a little ashamed of it, because, +after all, we cannot say the League has reached +ground as yet. We need and are grateful for the +help of any one who will genuinely come to its +assistance. I hope we may look not only for words, +but for deeds. The League needs all the support +it can get in the very perilous and menacing times +which are before us. I was glad to note that the +Government has announced—it is one of the great +test questions—that not only is it in favour of the +entry of Germany into the League, but it would +support the election of Germany to the Council of +the League. That is an earnest of what we trust +may be a real League policy from the Government +of this country. And yet, though I have thought +it right to emphasise the non-party aspect of this +question, I am conscious, and I am sure all of you +are, there are two ways in which the League is +regarded. It is not only that, as your chairman +<a name="Page_3" id="Page_3"></a><span class="pagenum" title="3"></span>would say, some people have more faith than others, +but there is really a distinct attitude of mind +adopted by some supporters of the League from +that adopted by others.</p> + + +<h3>The Two Views of the League</h3> + +<p>There is what I may call the empirical view of +the League. There are those of us in this country, +and indeed all over the world, who, profoundly +impressed with the horrors of war, hating war +from the bottom of their hearts as an evil thing—a +company which must include, as far as I can see, +all Christian men and women—these people, impressed +with the horrors of war, look about for some +means of keeping it away, some safeguard against +its renewal. And they say: “We have tried +everything else, we have tried the doctrine of the +preparation for war as a great safeguard of peace; +we have tried the doctrine of the Balance of Power; +we have tried the doctrine of making one State or +group of States so powerful that it can enforce its +will on the rest of the world. We have tried all +these expedients, and we are driven to the conclusion +that they lead not to peace, but to war. +Is there anything else?” And then they come +quite legitimately to the League as their last hope +of preserving the peace of the world. I was talking +to a distinguished Frenchman the other day, and +that was his attitude. It is the attitude of a great +many people. In my judgment it is quite sound +as far as it goes. But it is not inspiring. It depends +<a name="Page_4" id="Page_4"></a><span class="pagenum" title="4"></span>in the last resort merely on a frank appeal to the +terrors of mankind.</p> + +<p>Against that view you may set the more fundamental +way of approaching this question. You +may say if you are to have peace in the world it is +not enough merely to provide safeguards against +war. You must aim at creating a new international +spirit, a new spirit in international affairs; you +must build from the very foundations. That is the +positive as opposed to the negative way of approaching +this question. It is not enough to cast out the +war spirit and leave its habitation swept and +garnished. You have to replace the war spirit by +a spirit of international co-operation. And that +is the way of regarding this great movement which +some people think can be disposed of by describing +it as idealism—a favourite term of abuse, I learn, +now, but which seems to me not only good +politics and good morality, but common sense as +well.</p> + + +<h3>The Negative and the Positive</h3> + +<p>These two points of view do represent undoubtedly +fundamental differences of political attitude, and +you will find that the two sets of advocates or supporters +of the League whom I have tried to describe, +will inevitably regard with different emphasis the +provisions of the Covenant, and even the achievements +of the League. For if you read the Covenant +you will find two sets of provisions in that document. +It does recognise the two schools, as it were, that +I have been describing. It has a set of provisions +<a name="Page_5" id="Page_5"></a><span class="pagenum" title="5"></span>which deal with the enforcement, the safeguarding +of peace, and a set of provisions which deal with +the building up of international co-operation. +You will notice the two sets of provisions. There +are those aiming directly at the settlement of +disputes without war. This is the central part of +the League. It is the first thing before you can +hope to do anything else. Before you can begin +to build up your international spirit you must get +rid as far as you can of the actual menace of war; +and in that sense this is the central part of the +Covenant. But, in my view, the most enduring +and perhaps the most important part is that set of +provisions which cluster round the group of articles +beginning with Article 10 perhaps, certainly Article +12, and going on to Article 17—the group which +says in effect that before nations submit their +disputes to the arbitrament of war they are bound +to try every other means of settling their differences. +It lays down first the principle that every dispute +should come to some kind of arbitration, either by +the new Court of International Justice—one of the +great achievements of the League—or discussion +before a specially constituted Arbitration Court, +or failing both, then discussion before the Council +of the League; and Articles 15 and 16 provide that +until that discussion has taken place, and until +adequate time has been allowed for the public +opinion of the world to operate on the disputants +as the result of that examination, no war is to take +place, and if any war takes place the aggressor is +to be regarded as perhaps what may be called an +international outlaw.</p> + +<p><a name="Page_6" id="Page_6"></a><span class="pagenum" title="6"></span>Before you begin to build you must have freedom +from actual war, and the provisions have been +effective. They are not merely theoretic. I am +not sure whether it is generally recognised, even +in so instructed an assembly as this, how successful +these provisions have actually been in practice. +Let me give you briefly two illustrations: the +dispute between Sweden and Finland, and the +much more urgent case of the dispute between +Serbia and Albania. In the first case you had a +dispute about the possession of certain islands in +the Baltic. It was boiling up to be a serious +danger to the peace of the world. It was referred +to the League for discussion. It was before the +existence of the International Court. A special +tribunal was constituted. The matter was threshed +out with great elaboration; a decision was come +to which, it is interesting to observe, was a decision +against the stronger of the two parties. It was +accepted, not with enthusiasm by the party that +lost, but with great loyalty. It has been adopted, +worked out in its details by other organs of the +League, and as far as one can tell, as far as it is +safe to prophesy about anything, it has absolutely +closed that dispute, and the two countries are +living in a greater degree of amity than existed +before the dispute became acute.</p> + +<p>But the Albanian case is stronger. You had a +very striking case: a small country only just +struggling into international existence. Albania +had only just been created before the war as an +independent State, and during the war its independence +had in effect vanished. The first thing that +<a name="Page_7" id="Page_7"></a><span class="pagenum" title="7"></span>happened was its application for membership of +the League. That was granted, and thereby Albania +came into existence really for the first time as an +independent State. Then came its effort to secure +the boundaries to which it was entitled, which had +been provisionally awarded to it before the war. +While that dispute was still unsettled, its neighbour, +following some rather disastrous examples +given by greater people in Europe, thought to solve +the question by seizing even more of the land of +Albania than it already occupied. Thereupon the +Articles of the Covenant were brought into operation. +The Council was hastily summoned within +a few days. It was known that this country was +prepared to advocate before that Council the +adoption of the coercive measures described in +Article 16. The Council met, and the aggressive +State immediately recognised that as a member of +the League it had no course open but to comply +with its obligations, and that as a prudent State it +dared not face the danger which would be caused +to it by the operation of Article 16. Immediately, +before the dispute had actually been developed, +before the Council, the Serbians announced that +they were prepared to withdraw from Albanian +territory, and gave orders to their troops to retire +beyond the boundary. Let us recognise that this +decision having been come to, it was carried out +with absolute loyalty and completeness. The +troops withdrew. The territory was restored to +Albania without a hitch. No ill-feeling remains +behind, and the next thing we hear is that a commercial +treaty is entered into between the two +<a name="Page_8" id="Page_8"></a><span class="pagenum" title="8"></span>States, so that they can live in peace and amity +together.</p> + + +<h3>The Spirit of the League</h3> + +<p>I want to emphasise one point about these two +cases. It is not so much that the coercive powers +provided in the Covenant were effectively used. +In Sweden and Finland they never came into the +question at all, and in the other case there was +merely a suggestion of their operation. What +really brought about a settlement of these two +disputes was that the countries concerned really +desired peace, and were really anxious to comply +with their obligations as members of the League of +Nations. That is the essential thing—the League +spirit. And if you want to see how essential it is +you have to compare another international incident: +the dispute between Poland and Lithuania, where +the League spirit was conspicuous by its absence. +There you had a dispute of the same character. +But ultimately you did secure this: that from the +date of the intervention of the League till the +present day—about two years—there has been no +fighting; actual hostilities were put an end to. +Though that is in itself an immensely satisfactory +result, and an essential preliminary for all future +international progress, yet one must add that +the dispute still continues, and there is much +recrimination and bitterness between the two countries. +The reason why only partial success has been +attained is because one must say Poland has shown +a miserable lack of the true spirit of the League.</p> + +<p><a name="Page_9" id="Page_9"></a><span class="pagenum" title="9"></span>Let me turn to the other parts of the Covenant—those +which aim directly at building up international +co-operation. I am not sure that it is +always sufficiently realised that that is not only an +implicit but also an explicit object of the Covenant—that +it is the main purpose for which the League +exists. International co-operation are the very +first words of the preamble to the Covenant. This +is the fundamental idea I cannot insist on too +strongly, because it does really go down to the +very foundations of my whole creed in political +matters. International co-operation, class co-operation, +individual co-operation—that is the essential +spirit if we are to solve the difficulties before us. +Let me remind you of the two instances of the +action of the League in dealing with the threat of +epidemics to Europe. A conference was called at +Washington to consider what could be done to +save Europe from the danger of epidemics coming +from the East. What is interesting is that in that +conference you had present not only members of the +League considering and devising means for the +safety of Europe, but you had representatives of +Germany and Russia—a splendid example of the +promotion of international co-operation extending +even beyond the limits of the membership of the +League. Admirable work was done. All countries +co-operated quite frankly and willingly under the +presidency of a distinguished Polish scientist.</p> + +<p>That is one example of what we mean by international +co-operation. Perhaps an even more +striking example was the great work of Dr. Nansen +in liberating the prisoners of war who were in +<a name="Page_10" id="Page_10"></a><span class="pagenum" title="10"></span>Russia. He was entrusted with the work on behalf +of the League. The prisoners of war belonged to +all nationalities, including our enemies in the late +war. He accomplished his work because he went +about it in the true spirit of the League, merely +anxious to promote the welfare of all, leaving aside +all prejudices whether arising from the war or from +any other cause. Dr. Nansen is in my judgment +the incarnation of the spirit of the League, and his +work, immensely successful, restored to their +homes some 350,000 persons, and he did it for +less money than he originally estimated it would +cost.</p> + +<p>Do not put me down as a facile optimist in this +matter. In the matter of international co-operation +we have a long way to go before we reach our goal, +and we can already see one or two serious failures. +I deeply deplore that last year the League found +itself unable, through the instructions given by the +Governments which composed it, to do anything +effective on behalf of the famine in Russia. It was +a most deplorable failure for the League, and still +more deplorable for this country. It was a great +opportunity for us to show that we really did mean +to be actuated by a new spirit in international +affairs, and that we did recognise that the welfare +of all human beings was part—if you like to put it +so—of our national interests. We failed to make +that recognition. We have been trying feebly +and unsuccessfully to repair that great mistake +ever since, and for my part I do not believe there +is any hope of a solution of the Russian difficulty +until we absolutely acknowledge the failure we +<a name="Page_11" id="Page_11"></a><span class="pagenum" title="11"></span>then made, and begin even at this late hour to +retrace the false step we then took.</p> + +<p>I could give other instances of failure, but I do +not wish to depress you, and there are cheering +things we may look at. It is a matter of great +relief and congratulation that the policy of mandates +really does appear to be becoming effective, and one +of the greatest activities of the League. Nothing +is better than the conception which the mandate +clause embodies, that the old ideas of conquest +are to be put aside; that you are not to allow +nations to go out and take chunks of territory for +themselves; that they must hold new territory not +for themselves, but on behalf of and for the benefit +of mankind at large. This is at the bottom of +mandates. Since I am speaking on behalf of +Professor Murray, I ought to remind you of the +provisions of the Covenant for the protection of +racial linguistic minorities, and minorities in +different countries. It has not yet become an +effective part of the machinery of the League, but +I look forward to the time when we shall have +established the doctrine that all racial minorities +are entitled to be treated on a footing absolutely +equal with other nationals of the country in which +they live. If that could be established, one of the +great difficulties in the way of international co-operation +in the spirit of peace will be removed.</p> + + +<h3>The Mistake of Versailles</h3> + +<p>These are the two aspects I wanted to bring +before you. If we are to get down to the root of +<a name="Page_12" id="Page_12"></a><span class="pagenum" title="12"></span>the matter; if we are to uproot the old jungle +theory of international relations, we must recognise +that the chief danger and difficulty before us is +what may be described as excessive nationalism. +We have to recognise in this and other countries +that a mere belief in narrow national interests +will never really take you anywhere. You must +recognise that humanity can only exist and prosper +as a whole, and that you cannot separate the +nation in which you live, and say you will work for +its prosperity and welfare alone, without considering +that its prosperity and welfare depend on that +of others. And the differences on that point go +right through a great deal of the political thought +of the day.</p> + +<p>Take the question of reparations. I am not going +to discuss in detail what ought to be done in that +difficult and vexed question, but I want to call +your attention to the mistake which was originally +made, and which we have never yet been able to +retrieve. The fundamental error of Versailles was +the failure to recognise that even in dealing with +a conquered enemy you can only successfully +proceed by co-operation. That was the mistake—the +idea that the victorious Powers could impose +their will without regard to the feelings and desires +and national sentiment of their enemy, even +though he was beaten. For the first time in the +history of peace conferences, the vanquished Power +was not allowed to take part in any real discussion +of the terms of the treaty. The attitude adopted +was, “These are our terms, take or leave them, +but you will get nothing else.” No attempt +<a name="Page_13" id="Page_13"></a><span class="pagenum" title="13"></span>was made to appreciate, or even investigate +the view put forward by the Germans on that +occasion. And last, but not least, they were most +unfortunately excluded from membership of the +League at that time. I felt profoundly indignant +with the Germans and their conduct of the war. +I still believe it was due almost exclusively to the +German policy and the policy of their rulers that +the war took place, and that it was reasonable and +right to feel profound indignation, and to desire +that international misdeeds of that character +should be adequately punished. But what was +wrong was to think that you could as a matter of +practice or of international ethics try to impose by +main force a series of provisions without regard to +the consent or dissent of the country on which you +were trying to impose them. That is part of the +heresy that force counts for everything. I wish +some learned person in Oxford or elsewhere would +write an essay to show how little force has been +able to achieve in the world. And the curious and +the really remarkable thing is that it was this +heresy which brought Germany herself to grief. +It is because of the false and immoral belief in +the all-powerfulness of force that Germany has +fallen, and yet those opposed to Germany, though +they conquered her, adopted only too much of +her moral code.</p> + +<p>It was because the Allies really adopted the +doctrine of the mailed fist that we are now suffering +from the terrible economic difficulties and dangers +which surround us. I venture to insist on that +now, because there are a large number of people +<a name="Page_14" id="Page_14"></a><span class="pagenum" title="14"></span>who have not abandoned that view. There are +still a number of people who think the real failure +that has been committed is not that we went wrong, +as I think, in our negotiations at Versailles, but +that we have not exerted enough force, and that +the remedy for the present situation is more threats +of force. I am sure it won’t answer. I want to say +that that doctrine is just as pernicious when applied +to France as when applied to Germany. You have +made an agreement. You have signed and ratified +a treaty; you are internationally bound by that +treaty. It is no use turning round and with a new +incarnation of the policy of the mailed fist threatening +one of your co-signatories that they are bound +to abandon the rights which you wrongly and +foolishly gave to them under that treaty.</p> + +<p>I am against a policy based on force as applied +to Germany. I am equally opposed to a policy +based on force as applied to France. If we really +understand the creed for which we stand, we must +aim at co-operation all round. If we have made +a mistake we must pay for it. If we are really +anxious to bring peace to the world, and particularly +to Europe, we must be prepared for sacrifices. We +have got to establish economic peace, and if we +don’t establish it in a very short time we shall be +faced with economic ruin. In the strictest, most +nationalistic interests of this country, we have to +see that economic war comes to an end. We have +got to make whatever concessions are necessary +in order to bring that peace into being.</p> + + +<h3><a name="Page_15" id="Page_15"></a><span class="pagenum" title="15"></span>Economic Peace</h3> + +<p>That is true not only of the reparation question; +it is true of our whole economic policy. We have +been preaching to Europe, and quite rightly, that +the erection of economic barriers between countries +is a treachery to the whole spirit of the League of +Nations, and all that it means, and yet with these +words scarcely uttered we turn round and pass +through Parliament a new departure in our economic +system which is the very contradiction of everything +we have said in international conference.</p> + +<p>The Safeguarding of Industries Act is absolutely +opposed to the whole spirit and purpose which the +League of Nations has in view. A reference was +made by your chairman to Lord Grey, and I saw in +a very distinguished organ of the Coalition an +attack on his recent speech. We are told that he +ought not at this crisis to be suggesting that the +present Government is not worthy of our confidence, +but how can we trust the present Government? +How is it possible to trust them when one finds at +Brussels, at Genoa, at the Hague, and elsewhere they +preach the necessity of the economic unity of +Europe, and then go down to the House of Commons +and justify this Act on the strictest, the baldest, +the most unvarnished doctrine of economic particularism +for this country? Nor does it stop +there. I told you just now that for me this doctrine +on which the League is based goes right through +many other problems than those of a strictly +international character. You will never solve +<a name="Page_16" id="Page_16"></a><span class="pagenum" title="16"></span>Indian or Egyptian difficulties by a reliance on +force and force alone. I believe that the deplorable, +the scandalous condition to which the neighbouring +island of Ireland has been reduced is largely due +to the failure to recognise that by unrestricted +unreasoning, and sometimes immoral force, you +cannot reach the solution of the difficulties of that +country.</p> + +<p>And in industry it is the same thing. If you are +really to get a solution of these great problems, +depend upon it you will never do it by strikes and +lock-outs. I am an outsider in industrial matters. +I am reproached when I venture to say anything +about them with the observation that I am no +business man. I can only hope that in this case +lookers-on may sometimes see most of the game. +But to me it is profoundly depressing when I see +whichever section of the industrial world happens +to have the market with it—whether employers or +wage-earners—making it its only concern to down +the other party as much as it can. You will never +reach a solution that way. You have to recognise +in industrial as in international affairs that the +spirit of co-operation, the spirit of partnership, is +your only hope of salvation.</p> + + +<h3>The Two Causes of Unrest</h3> + +<p>What is the conclusion of what I have tried to +say to you? There are at the present time two +great causes of fighting and hostility. There used +to be three. There was a time when men fought +about religious doctrine, and though I do not +<a name="Page_17" id="Page_17"></a><span class="pagenum" title="17"></span>defend it, it was perhaps less sordid than some of +our fights to-day. Now the two great causes of +fighting are greed and fear. Generally speaking, +I think we may say that greed in international +matters is a less potent cause of hostility than fear. +The disease the world is suffering from is the +disease of fear and suspicion. You see it between +man and man, between class and class, and most +of all between nation and nation. People reproach +this great country and other great countries with +being unreasonable or unwilling to make concessions. +If you look deeply into it you will find always the +same cause. It is not mere perversity; it is fear +and fear alone that makes men unreasonable and +contentious. It is no new thing; it has existed from +the foundation of the world. The Prime Minister +the other day said, and said quite truly, that the +provisions of the Covenant, however admirable, were +not in themselves sufficient to secure the peace of +the world. He made an appeal, quite rightly, to +the religious forces and organisations to assist. I +agree, but after all something may be done by +political action, and something by international +organisation. In modern medicine doctors are +constantly telling us they cannot cure any disease—all +they can do is to give nature a chance. No +Covenant will teach men to be moral or peace-loving, +but you can remove, diminish, or modify +the conditions which make for war, and take +obstacles out of the way of peace. We advocate +partnership in industry and social life. We advocate +self-government, international co-operation. We +recognise that these are no ends in themselves; +<a name="Page_18" id="Page_18"></a><span class="pagenum" title="18"></span>they are means to the end; they are the influences +which will facilitate the triumph of the right and +impede the success of the wrong.</p> + +<p>But looking deeper into the matter, to the very +foundations, we recognise, all of us, the most +devoted adherents of the League, and all men of +goodwill, that in the end we must strive for the +brotherhood of man. We admit we can do comparatively +little to help it forward. We recognise +that our efforts, whether by covenant or other +means, must necessarily be imperfect; but we say, +and say rightly, that we have been told that perfect +love casteth out fear, and that any step towards +that love, however imperfect, will at any rate +mitigate the terrors of mankind.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_19" id="Page_19"></a><span class="pagenum" title="19"></span><a name="THE_BALANCE_OF_POWER" id="THE_BALANCE_OF_POWER"></a>THE BALANCE OF POWER</h2> + +<h3>By Professor A.F. Pollard</h3> + +<h4>Hon. Litt.D.; Fellow of All Souls’ College, Oxford; +F.B.A.; Professor of English History in the +University of London; Chairman of the Institute +of Historical Research.</h4> + + +<p>Professor Pollard said:—The usual alternative +to the League of Nations, put forward as a means +of averting war by those who desire or profess to +desire permanent peace, but dislike or distrust the +League of Nations, is what they call the Balance of +Power. It is a familiar phrase; but the thing for +which the words are supposed to stand, has, if it +can save us from war, so stupendous a virtue that +it is worth while inquiring what it means, if it has +any meaning at all. For words are not the same +as things, and the more a phrase is used the less it +tends to mean: verbal currency, like the coinage, +gets worn with use until in time it has to be +called in as bad. The time has come to recall the +Balance of Power as a phrase that has completely +lost the value it possessed when originally it was +coined.</p> + +<p>Recent events have made an examination of the +doctrine of the Balance of Power a matter of some +urgency. The Allies who won the war concluded +a pact to preserve the peace, but in that pact they +have not yet been able to include Germany or +<a name="Page_20" id="Page_20"></a><span class="pagenum" title="20"></span>Russia or the United States, three Powers which +are, potentially at any rate, among the greatest in +the world. So, some fifty years ago, Bismarck, +who won three wars in the mid-Victorian age, set +himself to build up a pact of peace. But his Triple +Alliance was not only used to restrain, but abused +to repress, the excluded Powers; and that abuse +of a pact of peace drove the excluded Powers, +France and Russia, into each other’s arms. There +resulted the Balance of Power which produced the +war we have barely survived. And hardly was +the great war fought and won than we saw +the wheel beginning to revolve once more. The +excluded Powers, repressed or merely restrained, +began to draw together; others than Turkey might +gravitate in the same direction, while the United +States stands in splendid isolation as much aloof +as we were from the Triple Alliance and the Dual +Entente a generation ago. Another Balance of +Power loomed on the horizon. “Let us face the +facts,” declared the <em>Morning Post</em> on 22nd April +last, “we are back again to the doctrine of the +Balance of Power, whatever the visionaries and +the blind may say.” I propose to deal, as faithfully +as I can in the time at my disposal, with the +visionaries and the blind—when we have discovered +who they are.</p> + +<p>By “visionaries” I suppose the <em>Morning Post</em> +means those who believe in the League of Nations; +and by the “blind” I suppose it means them, too, +though usually a distinction is drawn between +those who see too much and those who cannot see +at all. Nor need we determine whether those who +<a name="Page_21" id="Page_21"></a><span class="pagenum" title="21"></span>believe in the Balance of Power belong rather to +the visionaries or to the blind. A man may be +receiving less than his due when he is asked whether +he is a knave or a fool, because the form of the +question seems to preclude the proper answer, +which may be “both.” Believers in the Balance +of Power are visionaries if they see in it a guarantee +of peace, and blind if they fail to perceive that it +naturally and almost inevitably leads to war. +The fundamental antithesis is between the Balance +of Power and the League of Nations.</p> + + +<h3>Balance or League?</h3> + +<p>That antithesis comes out wherever the problem +of preserving the peace of the world is seriously +and intelligently discussed. Six years ago, when +he began to turn his attention to this subject, +Lord Robert Cecil wrote and privately circulated +a memorandum in which he advocated something +like a League of Nations. To that memorandum +an able reply was drafted by an eminent authority +in the Foreign Office, in which it was contended +that out of the discussion “the Balance of Power +emerges as the fundamental factor.” That criticism +for the time being checked official leanings +towards a League of Nations. But the war went +on, threatening to end in a balance of power, +which was anything but welcome to those who +combined a theoretical belief in the Balance of +Power with a practical demand for its complete +destruction by an overwhelming victory for our +Allies and ourselves. Meanwhile, before America +<a name="Page_22" id="Page_22"></a><span class="pagenum" title="22"></span>came in, President Wilson was declaring that, in +order to guarantee the permanence of such a +settlement as would commend itself to the United +States, there must be, not “a Balance of Power +but a Community of Power.”</p> + +<p>Opinion in England was moving in the same +direction. The League of Nations Society (afterwards +called “Union”) had been formed, and at +a great meeting on 14th May, 1917, speeches +advocating some such league as the best means of +preventing future wars were delivered by Lord +Bryce, General Smuts, the Archbishop of Canterbury, +Lord Hugh Cecil, and others. Labour was +even more emphatic; and, responding to popular +opinion, the Government, at Christmas, 1917, +appointed a small committee to explore the historical, +juridical, and diplomatic bearings of the suggested +solution. A brief survey sufficed to show that +attempts to guarantee the peace of the world +resolved themselves into three categories: (1) a +Monopoly of Power, (2) Balance of Power, and +(3) Community of Power. Rome had established +the longest peace in history by subjugating all +her rivals and creating a <em>Pax Romana</em> imposed +by a world-wide Empire. That Empire lasted +for centuries, and the idea persisted throughout +the middle ages. In modern times Philip II. +of Spain, Louis XIV. of France, Napoleon, and +even the Kaiser were suspected of attempting to +revive it; and their efforts provoked the counter +idea, first of a Balance of Power, and then in these +latter days of a Community of Power. The conception +of a Monopoly of Power was by common consent +<a name="Page_23" id="Page_23"></a><span class="pagenum" title="23"></span>abandoned as impossible and intolerable, after the +rise of nationality, by all except the particular +aspirants to the monopoly. The Balance of Power +and the Community of Power—in other words, +the League of Nations—thus became the two rival +solutions of the problem of permanent peace.</p> + + +<h3>The Theory of Balance</h3> + +<p>The discussion of their respective merits naturally +led to an inquiry into what the alternative +policies really meant. But inasmuch as the Foreign +Office committee found itself able to agree in +recommending some form of League of Nations, +the idea of the Balance of Power was not subjected +to so close a scrutiny or so searching an +analysis as would certainly have been the case +had the committee realised the possibility that +reaction against an imperfect League of Nations +might bring once more to the front the idea of +the Balance of Power. The fact was, however, +elicited that the Foreign Office conception of the +Balance of Power is a conception erroneously +supposed to have been expressed by Castlereagh +at the time of the Congress of Vienna, and adopted +as the leading principle of nineteenth century +British foreign policy.</p> + +<p>Castlereagh was not, of course, the author of the +phrase or of the policy. The phrase can be found +before the end of the seventeenth century; and +in the eighteenth the policy was always pleaded +by potentates and Powers when on the defensive, +and ignored by them when in pursuit of honour or +<a name="Page_24" id="Page_24"></a><span class="pagenum" title="24"></span>vital interests. But Castlereagh defined it afresh +after the colossal disturbance of the balance which +Napoleon effected; and he explained it as “a just +repartition of force amongst the States of Europe.” +They were, so to speak, to be rationed by common +agreement. There were to be five or six Great +Powers, whose independence was to be above +suspicion and whose strength was to be restrained +by the jealous watchfulness of one another. If +any one State, like France under Napoleon, grew +too powerful, all the rest were to combine to +restrain it.</p> + +<p>Now, there is a good deal in common between +Castlereagh’s idea and that of the League of Nations. +Of course, there are obvious differences. Castlereagh’s +Powers were monarchies rather than peoples; +they were limited to Europe; little regard was +paid to smaller States, whose independence sometimes +rested on no better foundation than the +inability of the Great Powers to agree about their +absorption; and force rather than law or public +opinion was the basis of the scheme. But none of +these differences, important though they were, +between Castlereagh’s Balance of Power and the +League of Nations is so fundamental as the +difference between two things which are commonly +regarded as identical, viz., Castlereagh’s idea of the +Balance of Power and the meaning which has since +become attached to the phrase. There are at least +two senses in which it has been used, and the two +are wholly incompatible with one another. The +League of Nations in reality resembles Castlereagh’s +Balance of Power more closely than does the +<a name="Page_25" id="Page_25"></a><span class="pagenum" title="25"></span>conventional notion of that balance; and a verbal +identity has concealed a real diversity to the +confusion of all political thought on the subject.</p> + +<p>Castlereagh’s Balance of Power is what I believe +mathematicians call a multiple balance. It was not +like a pair of scales, in which you have only two +weights or forces balanced one against the other. It +was rather like a chandelier, in which you have five +or six different weights co-operating to produce a +general stability or equilibrium. In Castlereagh’s +scheme it would not much matter if one of the +weights were a little heavier than the others, +because there would be four or five of these others +to counterbalance it; and his assumption was +that these other Powers would naturally combine +for the purpose of redressing the balance and +preserving the peace. But a simple balance between +two opposing forces is a very different thing. If +there are only two, you have no combination on +which you can rely to counteract the increasing +power of either, and the slightest disturbance +suffices to upset the balance. Castlereagh’s whole +scheme therefore presupposed the continued and +permanent existence of some five or six great +Powers always preserving their independence in +foreign policy and war, and automatically acting +as a check upon the might and ambition of any +single State.</p> + + +<h3>The Change since Castlereagh</h3> + +<p>Now, it was this condition, essential to the maintenance +of Castlereagh’s Balance of Power, which +<a name="Page_26" id="Page_26"></a><span class="pagenum" title="26"></span>completely broke down during the course of the +nineteenth century. Like most of the vital processes +in history, the change was gradual and unobtrusive, +and its significance escaped the notice of politicians, +journalists, and even historians. Men went on +repeating Castlereagh’s phrases about the Balance +of Power without perceiving that the circumstances, +which alone had given it reality, had entirely +altered. The individual independence and automatic +action of the Great Powers in checking the growing +ambitions and strength of particular States were +impaired, if not destroyed, by separate Alliances, +which formed units into groups for the purposes +of war and foreign policy, and broke up the unity +of the European system, just as a similar tendency +threatens to break up the League of Nations. +There was a good deal of shifting about in +temporary alliances which there is no need to +recount; but the ultimate upshot was the severance +of Europe into the two great groups with which we +are all familiar, the Triple Alliance of Germany, +Austria, and Italy on one side, and the Triple +Entente between Russia, France, and Great Britain +on the other. The multiple Balance of Power was +thus changed into a simple balance between two +vast aggregations of force, and nothing remained +outside to hold the balance, except the United +States, which had apparently forsworn by the +Monroe Doctrine the function of keeping it +even.</p> + +<p>And yet men continued to speak of the Balance +of Power as though there had been no change, and +as though Castlereagh’s ideas were as applicable +<a name="Page_27" id="Page_27"></a><span class="pagenum" title="27"></span>to the novel situation as they had been to the old! +That illustrates the tyranny of phrases. Cynics +have said that language is used to conceal our +thoughts. It is difficult to resist the conclusion +that phrases are used to save us the trouble of +thinking. We are always giving things labels in +order to put them away in their appropriate pigeon-holes, +and then we talk about the labels without +thinking about them, and often forgetting (if we +ever knew) the things for which they stand. So +we Pelmanised the Balance of Power, and continued +to use the phrase without in the least troubling to +ask what it means. When I asked at the Foreign +Office whether diplomatists meant by the Balance +of Power the sort of simple balance between two +great alliances like the Triple Alliance and the +Triple Entente, I was told “yes”; and there was +some surprise—since the tradition of Castlereagh +is strong in the service—when I pointed out that +that was an entirely different balance from that +of which Castlereagh had approved as a guarantee +of peace. You remember the Cheshire cat in +<em>Alice in Wonderland</em>—an excellent text-book for +students of politics—and how the cat gradually +faded away leaving only its grin behind it to perplex +and puzzle the observer. So the body and the +substance of Castlereagh’s Balance of Power passed +away, and still men talk of the grin and look to the +phrase to save them from war. Whether to call +them visionaries or the blind, I do not know.</p> + + +<h3><a name="Page_28" id="Page_28"></a><span class="pagenum" title="28"></span>Mischievous Hallucination</h3> + +<p>In either case, it is a mischievous hallucination; +for the simple Balance of Power between two great +combinations is not only no guarantee of peace, but +the great begetter of fear, of the race for armaments, +and of war. Consider for a moment. If you want +a balance, you want to have it perfect. What is a +perfect balance between two opposing weights or +forces? It is one which the addition of a feather-weight +to either scale will at once and completely +upset. Now what will that equipoise produce? +The ease with which the balance may be destroyed +will produce either on one side the temptation to +upset it, and on the other fear lest it be upset, or +fear on both sides at once. What indeed was it but +this even balance and consequent fear which produced +the race for armaments? And what does the +race for armaments result in but in war? If we +want war, we need only aim at a Balance of +Power, and it will do the rest. So far from being +a guarantee of peace, the Balance of Power is a +sovereign specific for precipitating war.</p> + +<p>Of course, there are arguments for a Balance of +Power. Plenty of them, alas! though they are not +often avowed. It produces other things than war. +For one thing, it makes fortunes for munition +firms. For another, it provides careers for those +who have a taste for fighting or for military pomp. +Thirdly, in order to maintain armies and navies +and armaments, it keeps up taxation and diverts +money from social, educational, and other reforms +<a name="Page_29" id="Page_29"></a><span class="pagenum" title="29"></span>which some people want to postpone. Fourthly, +it gratifies those who believe that force is the ultimate +sanction of order, and, by necessitating the maintenance +of large forces for defensive purposes, +incidentally provides means for dealing with +domestic discontent. Fifthly, it panders to those +who talk of prestige and think that prestige depends +upon the size of a nation’s armaments. For the +sake of these things many would be willing to take +the risk of war which the Balance of Power involves. +But most of those who use the phrase are unconscious +of these motives, and use it as they use many +another phrase, simply because they know not +what it means. For, assuredly, no sane person +who had examined the Balance of Power, as it +existed before the war, could ever advocate it as +a means of peace.</p> + +<p>Indeed, whenever there has been the prospect +of a practical Balance of Power, its votaries have +shown by their action that they knew their creed +was nonsense. The late war, for instance, might +have been ended in 1916 on the basis of a Balance +of Power. There were a few who believed that +that was the best solution; but they were not our +latter-day believers in the Balance of Power. +Their cry was all for a fight to a finish and a total +destruction of the Balance of Power by an overwhelming +victory for the Allies, and their one regret +is that a final blow by Marshal Foch did not destroy +the last vestige of a German army. What is the +point of expressing belief in the Balance of Power +when you indignantly repudiate your own doctrine +on every occasion on which you might be able to +<a name="Page_30" id="Page_30"></a><span class="pagenum" title="30"></span>give it effect? And what is the point of the present +advocacy of the Balance of Power by those who +think themselves neither visionaries nor blind? +Do they wish to restore the military strength of +Germany and of Russia and to see an Alliance +between them confronting a Franco-British union, +compelled thereby to be militarist too? Is it +really that they wish to be militarists and that the +League of Nations, with its promise of peace, +retrenchment, and reform, is to them a greater +evil than the Balance of Power?</p> + + +<h3>Where the Line is Drawn</h3> + +<p>There is yet another fatal objection to the Balance +of Power due to the change in circumstances since +the days of Castlereagh. He could afford to think +only of Europe, but we have to think of the world; +and if our specific has any value it must be of world-wide +application. We cannot proclaim the virtues +of the Balance of Power and then propose to limit +it to the land or to any particular continent. Now, +did our believers in the Balance of Power ever +wish to see power balanced anywhere else than on +the continent of Europe? That, if we studied +history in any other language than our own, we +should know was the gibe which other peoples flung +at our addiction to the Balance of Power. We +wanted, they said, to see a Balance of Power on the +continent of Europe, to see one half of Europe +equally matched against the other, because the +more anxiously Continental States were absorbed +in maintaining their Balance of Power, the keener +<a name="Page_31" id="Page_31"></a><span class="pagenum" title="31"></span>would be their competition for our favour, and the +freer would be our hands to do what we liked in +the rest of the world.</p> + +<p>Was that a baseless slander? Let us test it with +a question or two. Did we ever want a Balance +of Power at sea? British supremacy, with a +two-to-one or at least a sixteen-to-ten standard +was, I fancy, our minimum requirement. Is +British supremacy what we mean by a Balance of +Power? Again, did we ever desire a Balance of +Power in Africa, America, or Asia? We may have +talked of it sometimes, but only when we were the +weaker party and feared that another might claim +in those continents the sort of Balance of Power +we claimed on the sea. We never spoke of the +Balance of Power in the interests of any nation +except ourselves and an occasional ally. We +cannot speak in those terms to-day. If we demand +a Balance of Power on land, we must expect others +to claim it at sea; if we urge it on Europe as a +means of peace, we cannot object if others turn +our own argument against us in other quarters of +the globe; and wherever you have a Balance of +Power you will have a race for armaments and the +fear of war.</p> + +<p>The Balance of Power is, in fact, becoming as +obsolete as the Monopoly of Power enjoyed by the +Roman Empire. It is a bankrupt policy which +went into liquidation in 1914, and the high court +of public opinion demands a reconstruction. The +principle of that reconstruction was stated by +President Wilson, a great seer whose ultimate +fame will survive the obloquy in which he has been +<a name="Page_32" id="Page_32"></a><span class="pagenum" title="32"></span>involved by the exigencies of American party-politics +and the short-sightedness of public opinion +in Europe. We want, he said, a Community of +Power, and its organ must be the League of Nations. +Nations must begin to co-operate and cease to +counteract.</p> + +<p>I am not advocating the League of Nations +except in the limited way of attempting to show +that the Balance of Power is impossible as an +alternative unless you can re-create the conditions +of a century ago, restore the individual independence +of a number of fairly equal Powers, and +guarantee the commonwealth of nations against +privy conspiracy and sedition in the form of separate +groups and alliances. But there is one supreme +advantage in a Community of Power, provided it +remains a reality, and that is that it need never +be used. Its mere existence would be sufficient to +ensure the peace; for no rebel State would care to +challenge the inevitable defeat and retribution +which a Community of Power could inflict. It +has even been urged, and I believe it myself, that +Germany would never have invaded Belgium had +she been sure that Great Britain, and still less had +she thought that America, would intervene. It +was the Balance of Power that provoked the war, +and it was the absence of a Community of Power +which made it possible.</p> + + +<h3>Basis of Security</h3> + +<p>But no one who thinks that power—whether +a Monopoly, a Balance, or even a Community of +<a name="Page_33" id="Page_33"></a><span class="pagenum" title="33"></span>Power is the ultimate guardian angel of our peace, +has the root of the matter in him. Men, said Burke, +are not governed primarily by laws, still less by force; +and behind all power stands opinion. To believe in +public opinion rather than in might excludes the +believer from the regular forces of militarism and +condemns him as a visionary and blind. For +advocates of the Balance of Power bear a striking +resemblance to the Potsdam school; and even so +moderate a German as the late Dr. Rathenau +declared in his unregenerate days before the war +that Germans were not in the habit of reckoning +with public opinion. Nevertheless, there is a frontier +in the world which for a century and more has +enjoyed a security which all the armaments of +Prussian militarism could not give the German +Fatherland; and the absolute security of that +frontier rests not upon a monopoly nor a community, +still less upon a balance of power, but on +the opinion held on both sides of that frontier that +all power is irrational and futile as a guarantee of +peace between civilised or Christian people.</p> + +<p>Let us look at that frontier for a moment. It is +in its way the most wonderful thing on earth, and +it holds a light to lighten the nations and to guide +our feet into the way of peace. It runs, of course, +between the Dominion of Canada and the United +States of America across the great lakes and three +thousand miles of prairie; and from the military +and strategic point of view it is probably the worst +frontier in the world. Why then is it secure? Is +it because of any monopoly or community or +balance of power? Is it because the United States +<a name="Page_34" id="Page_34"></a><span class="pagenum" title="34"></span>and the British Empire are under a common government, +or because there is along that frontier a nicely-balanced +distribution of military strength? No, it +is secure, not in spite of the absence of force, but +because of the absence of force; and if you want +to destroy the peace of that frontier from end to +end, all you need to do is to send a regiment to +protect it, launch a <em>Dreadnought</em> on those lakes, +and establish a balance of power. For every +regiment or warship on one side will produce a +regiment or warship on the other; and then your +race for armaments will begin, and the poison +will spread until the whole of America becomes +like Europe, an armed camp of victims to the theory +of strategic frontiers and of the Balance of Power.</p> + +<p>Those theories, their application, and their +consequences recently cost the world thirty million +casualties and thousands of millions of pounds +within a brief five years, and yet left the frontiers +of Europe less secure than they were before. Three +thousand miles of frontier in North America have +in more than a hundred years cost us hardly a life, +or a limb, or a penny. As we put those details +side by side we realise <em>quantula regitur mundus +sapientia</em>—with how little wisdom do men rule the +world. Yet the truth was told us long ago that he +that ruleth his spirit is better than he that taketh +a city, and we might have learnt by our experience +of the peace that the only conquest that really pays +is the conquest of oneself.</p> + +<p>The real peace of that North American frontier +is due to no conquest of Americans by Canadians +or of Canadians by Americans, but to their conquest +<a name="Page_35" id="Page_35"></a><span class="pagenum" title="35"></span>of themselves and of that foolish pride of “heathen +folk who put their trust in reeking tube and iron +shard.” Let us face the facts, whatever the visionaries +and the blind may say. So be it. The war is +a fact, and so is the desolation it has wrought. +But that Anglo-American frontier is also a fact, +and so is that century of peace which happily +followed upon the resolution to depend for the +defence of that frontier on moral restraint instead +of on military force. Verily, peace hath her +victories not less renowned than those of war.</p> + + +<h3>The Alternative</h3> + +<p>We have, indeed, to face the facts, and the facts +about the Balance of Power must dominate our deliberations +and determine the fate of our programmes. +There may be no more war for a generation, but +there can be no peace with a Balance of Power. +There can be nothing better than an armed truce; +and an armed truce, with super-dreadnoughts +costing from four to eight times what they did +before the war, is fatal to any programme of +retrenchment and reform. We are weighted enough +in all conscience with the debt of that war without +the burden of preparation for another; and a +Balance of Power involves a progressive increase +in preparations for war.</p> + +<p>Unless we can exorcise fear, we are doomed to +repeat the sisyphean cycles of the past and painfully +roll our programmes up the hill, only to see them +dashed to the bottom, before we get to the top, by +the catastrophe of war. Fear is fatal to freedom; +<a name="Page_36" id="Page_36"></a><span class="pagenum" title="36"></span>it is fear which alone gives militarism its strength, +compels nations to spend on armaments what +they fain would devote to social reform, drives +them into secret diplomacy and unnatural alliances, +and leads them to deny their just liberties to subject +populations. Fear is the root of reaction as faith +is the parent of progress; and the incarnation of +international fear is the Balance of Power.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_37" id="Page_37"></a><span class="pagenum" title="37"></span><a name="INTERNATIONAL_DISARMAMENT" id="INTERNATIONAL_DISARMAMENT"></a>INTERNATIONAL DISARMAMENT</h2> + +<h3>By Major-General Sir Frederick Maurice, +K.C.M.G., C.B.</h3> + +<h4>Director of Military Operations—Imperial General Staff, +1915-16.</h4> + + +<p>Sir Frederick Maurice said:—This problem of +the reduction of armaments is one of the most urgent +of the international and national problems of the +day. It is urgent in its economic aspect, urgent +also as regards its relation to the future peace of +the world. The urgency of its economic aspect +was proclaimed two years ago at the Brussels +conference of financiers assembled by the League +of Nations. These experts said quite plainly and +definitely that, so far as they could see, the salvation +of Europe from bankruptcy depended upon the +immediate diminution of the crushing burden of +expenditure upon arms. That was two years ago. +Linked up with this question is the whole question +of the economic reconstruction of Europe. Linked +up with it also is that deep and grave problem of +reparations. It is no longer the case to-day, if it +has ever been the case since the war, which I doubt, +that sober opinion in France considers it necessary +for France to have large military forces in order to +protect her from German aggression in the near +future. For the past two years, however, it has +been the custom of those who live upon alarms +<a name="Page_38" id="Page_38"></a><span class="pagenum" title="38"></span>to produce the German menace. There is a great +body of opinion in France at this moment which +feels that unless France is able to put the pistol to +Germany’s head, it will never be able to get a +penny out of Germany.</p> + +<p>You have the further connection of the attitude +of America to the problem. America said, officially +through Mr. Hoover and unofficially through a +number of her leading financiers, that she was not +ready to come forward and take her share in the +economic restoration of Europe so long as Europe +is squandering its resources upon arms. The +connection is quite definitely and explicitly recognised +in the Covenant of the League of Nations. +Article 8 begins: “The principles of the League +recognise that the maintenance of peace requires +reduction of national armaments to the lowest +point consistent with national safety, and the +enforcement by common action of international +obligations.” These words were promulgated in +1919. Personally, I find myself in complete agreement +with what Lord Robert Cecil said this morning, +and what Lord Grey said a few days ago at Newcastle, +that one of the prime causes of the war was +Prussian militarism. By that I mean the influence +of that tremendous military machine, which had +been built up through years of labour in Germany, +in moulding the public opinion of that +country.</p> + + +<h3><a name="Page_39" id="Page_39"></a><span class="pagenum" title="39"></span>A Group of New Armies</h3> + +<p>Well, how do we stand in regard to that to-day? +We stand to-day in the position that the armaments +of Germany, Austria, Hungary, Bulgaria, have all +been compulsorily drastically reduced, but in their +place you have a whole group of new armies. You +have armies to-day which did not exist before the +war, in Finland, Esthonia, Poland, Lithuania, and +Czecho-Slovakia, and the sum total is that at this +moment there are more armed men in time of +peace in Europe than in 1913. Is there no danger +that this machine will mould the minds of some +other peoples, just as the German machine moulded +the minds of the Germans? This is the position +as regards the peace establishments of Europe +to-day in their relation to the future peace of the +world. What about the economic position? I +have mentioned that certain Powers have had +their forces drastically reduced, and that has +brought with it a drastic reduction of expenditure, +but I have before me the naval, military, and air +force estimates of the eight principal Powers in +Europe, leaving out Germany, Austria, and Bulgaria, +whose forces have been compulsorily reduced.</p> + +<p>At the economic conference of financiers in +Brussels in 1920 it was mentioned with horror +that 20 per cent. of the income of Europe was +then being devoted to arms. I find that to-day +25 per cent. of the total income of these eight +Powers is devoted to arms. I find, further, that of +these eight Powers who have budgeted for a smaller +<a name="Page_40" id="Page_40"></a><span class="pagenum" title="40"></span>service, only one—Yugo-Slavia—has managed to +balance her budget, and the others have large deficits +which are many times covered by their expenditure +on arms. And this is going on at a time when all +these eight nations are taxed almost up to their +limit, when the whole of their industries are suffering +in consequence, and when the danger of bankruptcy, +which horrified the financiers in 1920, is even more +imminent.</p> + +<p>That being the case, what has been done in the +last few years to remedy this matter, and why is +more not being done? As you all know, this +question is in the forefront of the programme of the +League of Nations. And the League began to deal +with it at once. Lord Robert Cecil will agree with +me that the framers of the Covenant, of which he +is one of the chief, could not foresee everything, +and they did not foresee at the time the Covenant +was framed, that machinery would be required to +deal with this extraordinarily complex question of +armaments. They created an organisation then +called a Permanent Military Command, still in +existence, to advise the Council of the League on +all military matters. But when these gentlemen +got to work upon such questions as reduction of +armaments, they at once found themselves dealing +with matters entirely beyond their competence, +because into this problem enter problems of high +politics and finance, and a thousand other questions +of which soldiers, sailors, and airmen know nothing +whatever.</p> + + +<h3><a name="Page_41" id="Page_41"></a><span class="pagenum" title="41"></span>The League’s Commission</h3> + +<p>The first step was to remedy an oversight in the +machinery, and that was done at the first meeting +of the Assembly. The first meeting of the Assembly +created a temporary mixed commission on armaments, +which was composed of persons of recognised +competence in political, social, and economic matters. +It consisted of six members of the old Permanent +Commission, and in addition a number of statesmen, +employers, and representatives of labour. +This body started to tackle this grave question. +Before it began the first Assembly of the +League had suggested one line of approach—that +there should be an agreement to limit expenditure; +that an attempt should be made to limit armaments +by limiting budgets; and nations were asked to +agree that they would not exceed in the two years +following the acceptance of the resolution the +budgeted expenditure on armaments of the current +year.</p> + +<p>That proposal did not meet with great success. +It was turned down by seven Powers, notably by +France and Spain. On the whole, I think France +and Spain and the other Powers had some reason +on their side, because it is not possible to approach +this problem solely from the financial standpoint. +You cannot get a financial common denominator +and apply it to armaments. The varying costs of +a soldier in Europe and in Japan have no relation +to each other. The cost of a voluntary soldier in +Great Britain has no relation to the cost of a +<a name="Page_42" id="Page_42"></a><span class="pagenum" title="42"></span>conscript on the Continent. Therefore, that line +of approach, when applied too broadly, is not +fruitful. I think myself it is quite possible that +you may be able to apply financial limitations to +the question of material, the construction of guns +and other weapons of war, because the cost of these +things in foreign countries tends much more to a +common level. I think this is a possible line of +approach, but to try to make a reduction of armaments +by reducing budgets on a wholesale scale +I do not think will lead us anywhere at all. I may +safely say that for the present that line of approach +has been abandoned.</p> + +<p>The Temporary Mixed Commission got to work, +and in its first year, frankly, I cannot say it did +very much. It concerned itself very largely with +the accumulation of information and the collection +of statistics, bearing rather the same relation to +world problems as a Royal Commission does to our +domestic problems. By the time the second +Assembly met practically nothing had been done +by the Commission. But other people had been at +work, and our own League of Nations Union had +put forward a proposal—a line of approach, rather, +I would say, to this problem—which I for one think +is extremely useful. It began by inquiring as to +what armaments were for, which after all is a useful +way of beginning, and the inquiry came to the +conclusion that nations required them for three +purposes—to maintain internal order; as a last +resort for the enforcement of law and order; and +to protect overseas possessions. After these purposes +were served there was a large residuum left. That +<a name="Page_43" id="Page_43"></a><span class="pagenum" title="43"></span>residuum could only be required for one purpose—to +protect the country in question from foreign +aggression. When you had gone thus far in your +reasoning, you had obviously got into the zone +where bargaining becomes possible, because it is +obvious that by agreement you can get the force +by which a nation is liable to become reduced. +That line of approach received the general blessing +at the second Assembly of the League of Nations. +Things began to move, primarily because the +Dominion of South Africa took a keen interest in +this problem of the reduction of armaments, and +South Africa appointed Lord Robert Cecil as its +representative, and instructed him to press the +matter on, and he did. The Assembly definitely +instructed this temporary mixed Commission that +by the time the third Assembly met plans should +be prepared and concrete proposals put on paper.</p> + + +<h3>Washington</h3> + +<p>Soon after that came the Washington Conference—a +great landmark in the history of this problem. +For reasons I need not go into in detail, the naval +problem is very much easier than the military or +air problem. You have as the nucleus of naval +forces something quite definite and precise—the +battleship—and it also happens that that particular +unit is extremely costly, and takes a long time to +build, and no man has yet ever succeeded in concealing +the existence of a battleship. There you +had three important points—a large and important +unit in the possession of everybody concerned, +<a name="Page_44" id="Page_44"></a><span class="pagenum" title="44"></span>very costly, so that by reducing it you make great +reductions in expenditure. There was no possibility +of avoiding an agreement about the construction +of battleships, and it is to these facts mainly that +the happy results of the Washington Conference +were due.</p> + +<p>But for the furtherance of the problem the point +is this. The Washington Conference definitely +established the principle of reduction of armaments +on a great ratio. The ratio for battleships between +Great Britain, the United States, Japan, France, +and Italy, was settled as to 5, 5, 3, and 1.75. They +all agreed on a definite ratio. All agreed to scrap +a certain number of ships, to bring their tonnage +down to a certain figure, and by doing that +relatively they were left in the same position as +before, with this advantage—that they at once +obtained an enormous reduction in expenditure on +armaments.</p> + +<p>That opened up a new line of approach for the +attack on this problem from the military and air +standpoint. And the next development took place +in February this year at the meeting of the Temporary +Mixed Commission on armaments, when the +Esher proposals were presented. There has been +a great deal of talk about the Esher proposals, and +I am glad of it, because the one thing wanted in +this question is public interest. The Esher proposals +were an endeavour to apply to land armaments this +principle of reduction on a great ratio. And the +line taken was this. It was necessary to find some +unit in land armaments which corresponded with +the battleships, and the unit selected by Lord +<a name="Page_45" id="Page_45"></a><span class="pagenum" title="45"></span>Esher was the 300,000 regular soldiers of the peace +armies in France, England, and Spain. It was +selected because it happened to be the number to +which the Austrian army was reduced by treaty, +and with that unit he proposed a ratio for the +armies of Europe, which would leave everybody +relatively in much the same position as before, but +would obtain an immediate reduction in numbers +of standing armies and a great reduction of expenditure.</p> + +<p>This proposal was subjected to a great deal of +criticism, and I am sorry to say nine-tenths of the +criticism appears to emanate from persons who +have never read the proposal at all. It is a proposal +which lends itself to a great deal of criticism, and +the most effective criticism which could have been +applied at the time it was presented was that it +put the cart before the horse, and approached the +problem from the wrong direction, for, as Lord +Robert Cecil has said here this morning, what +nations require is security. Some of them have +clear ideas as to the way of obtaining it, but they +all want it, and before you can expect people to +reduce their armaments, which are, after all, +maintained mainly for the purpose of providing +security, you must give them something that will +take the place of armaments.</p> + + +<h3>A General Defensive Pact</h3> + +<p>In June an important development took place +in this Temporary Commission. It was increased +by the addition of a number of statesmen, and, +<a name="Page_46" id="Page_46"></a><span class="pagenum" title="46"></span>amongst others, of men who ought to have been +on it long ago. Lord Robert Cecil was added, and +he at once proceeded to remedy what was a real +difficulty in Lord Esher’s proposals. He put forward +a plan for providing security in the form, as the +Assembly of the League had asked, of a definite +written proposal—really a brief treaty. The +purport of that treaty is included in the form of +resolutions, which are roughly as follows:—No +scheme for the reduction of armaments can be +effective unless it is general; that in the present +state of the world no Government can accept the +responsibility for a serious reduction of armaments +unless it is given some other equally satisfactory +guarantee of the safety of its country; such +guarantee can only be found in a general defensive +agreement of all the countries concerned, binding +them all to come to the assistance of any one of +them if attacked.</p> + +<p>A general defensive pact, with a proviso! It is +obviously unreasonable to expect the States of the +American continent to be ready to come over at +any moment to help in Europe. It is obviously +unreasonable to expect the States of Europe to +bind themselves to come and fight in Asia. Therefore, +there was this proviso added that an obligation +to come to the assistance of the attacked country +should be limited to those countries which belonged +to the same quarter of the globe. Thus, you see, +you are getting the obligation of the League into +regional application. Personally my own conviction +is that this is the line upon which many +of the functions of the League will develop.</p> + +<p><a name="Page_47" id="Page_47"></a><span class="pagenum" title="47"></span>The main point of the situation as it is to-day +is that you have got a committee working out in +detail a general pact, which when it is formulated +will be far more complete and satisfactory than +the very general and vague Clause 10 of the +Covenant. We have reached the position when +practical proposals are beginning to emerge. +What more is wanted? How can we help on this +work? You will have gathered from what I said +that it is my own conviction that with this problem +of reduction of armaments is so closely linked +up the problem of economic reconstruction and +reparations that the whole ought to be taken +together. I believe one of the reasons why so little +progress has been made is that the economic +problems have been entrusted, with the blessing +of our and other Governments, to perambulating +conferences, while the disarmament problem has +been left solely to the League of Nations. I believe +if you could get the whole of these problems +considered by one authority—and there is one +obvious authority—progress would be far more +rapid.</p> + +<p>There is another matter which concerns us as +citizens—the attitude of our own Government to +this question. I was delighted to see recently an +announcement made by a Minister in the House +of Commons that the Government was seriously +in favour of a reduction of armaments on a great +ratio. I was delighted to read the other day a +speech, to which reference has already been made, +by the Prime Minister. We have had a great many +words on this question. The time has come for +<a name="Page_48" id="Page_48"></a><span class="pagenum" title="48"></span>action, and quite frankly the action of our Government +in the past two years with regard to this +question has been neutral, and not always one of +benevolent neutrality. Our official representatives +at Geneva have been very careful to stress the +difficulties, but up to the present I am unaware +that our Government has ever placed its immense +resources as regards information at the disposal of +the one Englishman who has been striving with all +his power and knowledge to get a definite solution. +I believe there is going to be a change; I hope so. +In any case, the best thing we can do is to see that +it is changed, and that Lord Robert Cecil is not left +to fight a lone battle.</p> + + +<h3>The Appeal to Public Opinion</h3> + +<p>There is something more. There is something +wanted from each of us. Personally, I am convinced +myself that this problem is soluble on the lines by +which it is now being approached. I speak to you +as a professional who has given some study to the +subject. I am convinced that on the lines of a +general pact as opposed to the particular pact, a +general defensive agreement as opposed to separate +alliances, followed by reduction on a great ratio, +the practicability of which has been proved at +Washington, a solution can be reached. Given +goodwill—that is the point. At the last Assembly +of the League of Nations a report was presented +by the Commission, of which Lord Robert Cecil +was a member, and it wound up with these words: +“Finally, the committee recognises that a policy +<a name="Page_49" id="Page_49"></a><span class="pagenum" title="49"></span>of disarmament, to be successful, requires the +support of the population of the world. Limitation +of armaments will never be imposed by Governments +on peoples, but it may be imposed by peoples +on Governments.“ That is absolutely true. How +are we going to apply it? Frankly, myself, I do +not see that there is a great deal of value to be +got by demonstrations which demand no more war. +I have every sympathy with their object, but we +have got to the stage when we want to get beyond +words to practical resolutions. We want definite +concrete proposals, and you won’t get these merely +by demonstrations. They are quite good in their +way, but they are not enough. What you want +in this matter is an informed public opinion +which sees what is practical and insists on +having it.</p> + +<p>I am speaking to you as one who for a great +many years believed absolutely that preparation +for war was the means of securing peace. In 1919—when +I had a little time to look round, to study +the causes of the war and the events of the war—I +changed my opinion. I then came quite definitely +to the conclusion that preparation for war, carried +to the point to which it had been carried in 1914, +was a direct cause of war. I had to find another path, +and I found it in 1919. Lord Robert may possibly +remember that in the early days of the Peace +Conference I came to him and made my confession +of faith, and I promised to give him what little +help I could. I have tried to keep my promise, and +I believe this vital problem, upon which not only +the economic reconstruction of Europe and the +<a name="Page_50" id="Page_50"></a><span class="pagenum" title="50"></span>future peace of the world, but also social development +at home depend, can be solved provided you +will recognise that the problem is very complex; +that there is fear to be overcome; that you are +content with what is practical from day to day, +and accept each practical step provided it leads +forward to the desired goal. I therefore most +earnestly trust that the Liberal party will take +this question up, and translate it into practical +politics. For that is what is required.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_51" id="Page_51"></a><span class="pagenum" title="51"></span><a name="REPARATIONS_AND_INTER-ALLIED" id="REPARATIONS_AND_INTER-ALLIED"></a>REPARATIONS AND INTER-ALLIED +DEBT</h2> + +<h3>By John Maynard Keynes</h3> + +<h4>M.A., C.B.; Fellow of King’s College, Cambridge; Editor +of <em>Economic Journal</em> since 1912; principal representative +of the Treasury at the Paris Peace Conference, +and Deputy for the Chancellor of the Exchequer on +the Supreme Economic Council, Jan.-June, 1919.</h4> + + +<p>Mr. Keynes said:—I do not complain of Lord +Balfour’s Note, provided we assume, as I think +we can, that it is our first move, and not our last. +Many people seem to regard it as being really +addressed to the United States. I do not agree. +Essentially it is addressed to France. It is a reply, +and a very necessary reply, to the kites which M. +Poincaré has been flying in <em>The Times</em> and elsewhere, +suggesting that this country should sacrifice +all its claims of every description in return for—practically +nothing at all, certainly not a permanent +solution of the general problem. The Note brings +us back to the facts and to the proper starting-point +for negotiations.</p> + +<p>In this question of Reparations the position +changes so fast that it may be worth while for me +to remind you just how the question stands at +this moment. There are in existence two inconsistent +settlements, both of which still hold good +in law. The first is the assessment of the Reparation +<a name="Page_52" id="Page_52"></a><span class="pagenum" title="52"></span>Commission, namely, 132 milliard gold marks. +This is a capital sum. The second is the London +Settlement, which is not a capital sum at all, but +a schedule of annual payments calculated according +to a formula; but the capitalised value of these +annual payments, worked out on any reasonable +hypothesis, comes to much less than the Reparation +Commission’s total, probably to not much more +than a half.</p> + + +<h3>The Breakdown of Germany</h3> + +<p>But that is not the end of the story. While both +the above settlements remain in force, the temporary +régime under which Germany has been paying is +different from, and much less than, either of them. +By a decision of last March Germany was to pay +during 1922 £36,000,000 (gold) in cash, <em>plus</em> +deliveries in kind. The value of the latter cannot +be exactly calculated, but, apart from coal, they +do not amount to much, with the result that the +1922 demands are probably between a third and a +quarter of the London Settlement, and less than +one-sixth of the Reparation Commission’s original +total. It is under the weight of this reduced burden +that Germany has now broken down, and the +present crisis is due to her inability to continue +these reduced instalments beyond the payment of +July, 1922. In the long run the payments due +during 1922 should be within Germany’s capacity. +But the insensate policy pursued by the Allies for +the last four years has so completely ruined her +finances, that for the time being she can pay nothing +<a name="Page_53" id="Page_53"></a><span class="pagenum" title="53"></span>at all; and for a shorter or longer period it is certain +that there is now no alternative to a moratorium.</p> + +<p>What, in these circumstances, does M. Poincaré +propose? To judge from the semi-official forecasts, +he is prepared to cancel what are known as the +“C” Bonds, provided Great Britain lets France +off the whole of her debt and forgoes her own +claims to Reparation. What are these “C” Bonds? +They are a part of the London Settlement of May, +1921, and, roughly speaking, they may be said to +represent the excess of the Reparation Commission’s +assessment over the capitalised value of the London +Schedule of Payments, and a bit more. That is to +say, they are pure water. They mainly represent +that part of the Reparation Commission’s total +assessment which will not be covered, even though +the London Schedule of Payments is paid in full.</p> + +<p>In offering the cancellation of these Bonds, +therefore, M. Poincaré is offering exactly nothing. +If Great Britain gave up her own claims to Reparations, +and the “C” Bonds were cancelled to the +extent of France’s indebtedness to us, France’s +claims against Germany would be actually greater, +even on paper, than they are now. For the demands +under the London Settlement would be unabated, +and France would be entitled to a larger proportion +of them. The offer is, therefore, derisory. And +it seems to me to be little short of criminal on the +part of <em>The Times</em> to endeavour to trick the people +of this country into such a settlement.</p> + +<p>Personally, I do not think that at this juncture +there is anything whatever to be done except to +grant a moratorium. It is out of the question +<a name="Page_54" id="Page_54"></a><span class="pagenum" title="54"></span>that any figure, low enough to do Germany’s credit +any good now, could be acceptable to M. Poincaré, +in however moderate a mood he may visit London +next week. Apart from which, it is really impossible +at the present moment for any one to say how +much Germany will be able to pay in the long run. +Let us content ourselves, therefore, with a moratorium +for the moment, and put off till next year +the discussion of a final settlement, when, with +proper preparations beforehand, there ought to be +a grand Conference on the whole connected problem +of inter-Governmental debt, with representatives +of the United States present, and possibly at +Washington.</p> + + +<h3>The Illusion of a Loan</h3> + +<p>The difficulties in the way of any immediate +settlement now are so obvious that one might +wonder why any one should be in favour of the +attempt. The explanation lies in that popular +illusion, with which it now pleases the world +to deceive itself—the International Loan. It is +thought that if Germany’s liability can now be +settled once and for all, the “bankers” will then +lend her a huge sum of money by which she can +anticipate her liabilities and satisfy the requirements +of France.</p> + +<p>In my opinion the International Loan on a great +scale is just as big an illusion as Reparations on a +great scale. It will not happen. It cannot happen. +And it would make a most disastrous disturbance +if it did happen. The idea that the rest of the +<a name="Page_55" id="Page_55"></a><span class="pagenum" title="55"></span>world is going to lend to Germany, for her to +hand over to France, about 100 per cent. of their +liquid savings—for that is what it amounts to—is +utterly preposterous. And the sooner we get that +into our heads the better. I am not quite clear +for what sort of an amount the public imagine +that the loan would be, but I think the sums +generally mentioned vary from £250,000,000 up to +£500,000,000. The idea that any Government in +the world, or all of the Governments in the world +in combination, let alone bankrupt Germany, +could at the present time raise this amount of new +money (that is to say, for other purposes than the +funding or redemption of existing obligations) +from investors in the world’s Stock Exchanges is +ridiculous.</p> + +<p>The highest figure which I have heard mentioned +by a reliable authority is £100,000,000. Personally, +I think even this much too high. It could only be +realised if subscriptions from special quarters, as, +for example, German hoards abroad, and German-Americans, +were to provide the greater part of it, +which would only be the case if it were part of a +settlement which was of great and obvious advantage +to Germany. A loan to Germany, on Germany’s +own credit, yielding, say, 8 to 10 per cent., would +not in my opinion be an investor’s proposition in +any part of the world, except on a most trifling +scale. I do not mean that a larger anticipatory +loan of a different character—issued, for example, +in Allied countries with the guarantees of the Allied +Government, the proceeds in each such country +being handed over to the guaranteeing Government, +<a name="Page_56" id="Page_56"></a><span class="pagenum" title="56"></span>so that no new money would pass—might not be +possible. But a loan of this kind is not at present +in question.</p> + +<p>Yet a loan of from £50,000,000 to £100,000,000—and +I repeat that even this figure is very optimistic +except as the result of a settlement of a kind which +engaged the active goodwill of individual Germans +with foreign resources and of foreigners of German +origin and sympathies—would only cover Germany’s +liabilities under the London Schedule for four to +six months, and the temporarily reduced payments +of last March for little more than a year. And +from such a loan, after meeting Belgian priorities +and Army of Occupation costs, there would not be +left any important sum for France.</p> + +<p>I see no possibility, therefore, of any final settlement +with M. Poincaré in the immediate future. +He has now reached the point of saying that he is +prepared to talk sense in return for an enormous +bribe, and that is some progress. But as no one is +in a position to offer him the bribe, it is not much +progress, and as the force of events will compel +him to talk sense sooner or later, even without a +bribe, his bargaining position is not strong. In +the meantime he may make trouble. If so, it can’t +be helped. But it will do him no good, and may +even help to bring nearer the inevitable day of +disillusion. I may add that for France to agree to +a short moratorium is not a great sacrifice since, +on account of the Belgian priority and other items, +the amount of cash to which France will be entitled +in the near future, even if the payments fixed last +March were to be paid in full, is quite trifling.</p> + + +<h3><a name="Page_57" id="Page_57"></a><span class="pagenum" title="57"></span>A Policy for the Liberal Party</h3> + +<p>So much for the immediate situation and the +politics of the case. If we look forward a little, I +venture to think that there is a clear, simple, and +practical policy for the Liberal Party to adopt and +to persist in. Both M. Poincaré and Mr. Lloyd +George have their hands tied by their past utterances. +Mr. Lloyd George’s part in the matter of +Reparations is the most discreditable episode in +his career. It is not easy for him, whose hands +are not clean in the matter, to give us a clean +settlement. I say this although his present +intentions appear to be reasonable. All the +more reason why others should pronounce and +persist in a clear and decided policy. I was +disappointed, if I may say so, in what Lord Grey +had to say about this at Newcastle last week. +He said many wise things, but not a word of +constructive policy which could get any one an +inch further forward. He seemed to think that all +that was necessary was to talk to the French +sympathetically and to put our trust in international +bankers. He puts a faith in an international loan +as the means of solution which I am sure is not +justified. We must be much more concrete than +that, and we must be prepared to say unpleasant +things as well as pleasant ones.</p> + +<p>The right solution, the solution that we are +bound to come to in the end, is not complicated. +We must abandon the claim for pensions and bring +to an end the occupation of the Rhinelands. The +<a name="Page_58" id="Page_58"></a><span class="pagenum" title="58"></span>Reparation Commission must be asked to divide +their assessment into two parts—the part that +represents pensions and separation allowances +and the rest. And with the abandonment of the +former the proportion due to France would be +correspondingly raised. If France would agree to +this—which is in her interest, anyhow—and would +terminate the occupation it would be right for +us to forgive her (and our other Allies) all they owe +us, and to accord a priority on all receipts in favour +of the devastated areas. If we could secure a real +settlement by these sacrifices, I think we should +make them completely regardless of what the +United States may say or do.</p> + +<p>In declaring for this policy in the House of +Commons yesterday, Mr. Asquith has given the +Liberal Party a clear lead. I hope that they will +make it a principal plank in their platform. This +is a just and honourable settlement, satisfactory +to sentiment and to expediency. Those who +adopt it unequivocally will find that they have +with them the tide and a favouring wind. But no +one must suppose that, even with such a settlement, +any important part of Germany’s payments can +be anticipated by a loan. Any small loan that can +be raised will be required for Germany herself, to +put her on her legs again, and enable her to make +the necessary annual payments.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_59" id="Page_59"></a><span class="pagenum" title="59"></span><a name="THE_OUTLOOK_FOR_NATIONAL" id="THE_OUTLOOK_FOR_NATIONAL"></a>THE OUTLOOK FOR NATIONAL +FINANCE</h2> + +<h3>By Sir Josiah Stamp, K.B.E., D.Sc.</h3> + +<h4>Assistant Secretary Board of Inland Revenue, 1916-19. +Member of Royal Commission on Income Tax, 1919.</h4> + + +<p>Sir Josiah Stamp said:—In discussing the problem +of National Finance we have to decide which +problem we mean, viz., the “short period” or +the “long period,” for there are distinctly two +issues. I can, perhaps, illustrate it best by the +analogy of the household in which the chief earner +or the head of the family has been stricken down +by illness. It may be that a heavy doctor’s bill +or surgeon’s fee has to be met, and that this +represents a serious burden and involves the +strictest economy for a year or two; that all +members of the household forgo some luxuries, and +that there is a cessation of saving and perhaps +a “cut” into some past accumulations. But once +these heroic measures have been taken and the +burden lifted, and the chief earner resumes his +occupation, things proceed on the same scale and +plan as before. It may be, however, that the +illness or operation permanently impairs his earning +power, and that the changes which have to be made +must be more drastic and permanent. Then +perhaps would come an alteration of the whole +ground plan of the life of that family, the removal +<a name="Page_60" id="Page_60"></a><span class="pagenum" title="60"></span>to a smaller house with lower standing charges +and a changed standard of living. What I call the +“short period” problem involves a view only of +the current year and the immediate future for the +purpose of ascertaining whether we can make +ends meet by temporary self-denial. What I term +the “long distance” problem involves an examination +of the whole scale upon which our future +outlay is conditioned for us.</p> + +<p>The limit of further economies on the lines of +the “Geddes’ cut” that can become effective in +1923, would seem to be some 50 or 60 millions, +because every 10 per cent. in economy represents +a much more drastic and difficult task than the +preceding, and it cuts more deeply into your +essential national services. On the other side of +the account one sees the probable revenue diminish +to an almost similar extent, having regard to the +effect of reductions in the rate of tax and the +depression in trade, with a lower scale of profits, +brought about by a lower price level, entering +into the income-tax average. It looks as though +1923 may just pay its way, but if so, then, like +the current year, it will make no contribution +towards the reduction of the debt. So much for +the “short period.” Our worst difficulties are +really going to be deep-seated ones.</p> + + +<h3>The Two Parts of a Budget</h3> + +<p>Now a national budget may consist of two parts, +one of which I will call the “responsive” and the +<a name="Page_61" id="Page_61"></a><span class="pagenum" title="61"></span>other the “non-responsive” portion. The responsive +portion is the part that may be expected to +answer sooner or later—later perhaps rather than +sooner—to alterations in general conditions, and +particularly to price alterations. If there is a very +marked difference in general price level, the salaries—both +by the addition or remission of bonuses and +the general alteration in scales for new entrants—may +be expected to alter, at any rate, in the same +direction, and that part of the expense which +consists of the purchase of materials will also be +responsive. The second, or non-responsive part, +is the part that has a fixed expression in currency, +and does not alter with changed conditions. This, +for the most part, is the capital and interest for the +public debt.</p> + +<p>Now the nature and gravity of the “long +distance” problem is almost entirely a question of +the proportions which these two sections bear to +each other. If the non-responsive portion is a +small percentage of the total the problem will not +be important, but if it is larger, then the question +must be faced seriously. Suppose, for example, +that you have now a total budget of 900 million +pounds, and that, in the course of time, all values +are expressed at half the present currency figure. +Imagine that the national income in this instance +is 3600 million pounds. Then the burden, on a +first approximation, is 25 per cent. Now, if the +whole budget is responsive, we may find it ultimately +at 450 million pounds out of a national income of +1800 million pounds, <em>i.e.</em> still 25 per cent. But let +the non-responsive portion be 400 million pounds, +<a name="Page_62" id="Page_62"></a><span class="pagenum" title="62"></span>then your total budget will be 650 million pounds +out of a national income of about 2000 million +pounds, or 33-1/3 per cent., and every alteration in +prices—or what we call “improvement” in the +cost of living—becomes an extraordinarily serious +matter as a burden upon new enterprise in the +future.</p> + +<p>Let me give you a homely and familiar illustration. +During the war the nation has borrowed +something that is equivalent to a pair of boots. +When the time comes for paying back the loan it +repays something which is equivalent to two pairs +or, possibly, even to three pairs. If the total number +of boots produced has not altered, you will see +what an increasing “pull” this is upon production. +There are, of course, two ways in which this increasing +pull—while a great boon to the person +who is being repaid—must be an increased burden +to the individual. Firstly, if the number of people +making boots increases substantially, it may still +be only one pair of boots for the same volume +of production, if the burden is spread over +that larger volume. Secondly, even supposing +that the number of individuals is not increased, if +the arts of production have so improved that two +pairs can be produced with the same effort as was +formerly necessary for one, then the debt may be +repaid by them without the burden being actually +heavier than before.</p> + +<p>Now, coming back to the general problem. The +two ways in which the alteration in price level +can be prevented from resulting in a heavier individual +burden than existed at the time when the +<a name="Page_63" id="Page_63"></a><span class="pagenum" title="63"></span>transaction was begun, are a large increase in the +population with no lower average wealth, or a +large increase in wealth with the same population—which +involves a greatly increased dividend +from our complex modern social organism with all +its mechanical, financial, and other differentiated +functions. Of course, some of the debt burden is +responsive, so far as the annual charge is concerned, +on that part of the floating debt which is reborrowed +continually at rates of interest which follow current +money rates, but, even so, the burden of capital +repayment remains. An opportunity occurs for +putting sections of the debt upon a lower annual +charge basis whenever particular loans come to +maturity, and there may be some considerable +relief in the annual charge in the course of time by +this method.</p> + +<p>What are the prospects of the two methods that +I have mentioned coming to our rescue in this +“long distance” problem? It is a problem to +which our present “short distance” contribution +is, you will admit, a very poor one, for we have not +so far really made any substantial contribution +from current revenue towards the repayment of +the debt.</p> + + +<h3>A Century of the National Debt</h3> + +<p>Historical surveys and parallels are notoriously +risky, particularly where the conditions have no +precedent. They ought, however, to be made, +provided that we keep our generalisations from +them under careful control. Now, after the +<a name="Page_64" id="Page_64"></a><span class="pagenum" title="64"></span>Napoleonic wars we had a national debt somewhat +comparable in magnitude in its relation to the +national wealth and income with the present debt. +What happened to that as a burden during the 100 +years just gone by? If it was alleviated, to what +was the alleviation due? I would not burden you +with a mass of figures, but I would just give you +one or two selected periods. You can find more +details in my recent book on <em>Wealth and Taxable +Capacity</em>. We had a total debt of—</p> + +<table summary="Debt 1817-1903" title="Debt 1817-1903"> +<tr><td>850</td><td>million</td><td>pounds</td><td>in</td><td>1817</td></tr> +<tr><td>841</td><td>"</td><td>"</td><td>"</td><td>1842</td></tr> +<tr><td>836</td><td>"</td><td>"</td><td>"</td><td>1857</td></tr> +<tr><td>659</td><td>"</td><td>"</td><td>"</td><td>1895</td></tr> +<tr><td>800</td><td>"</td><td>"</td><td>"</td><td>1903</td></tr> +</table> + +<p class="noind">and before this last war it had been reduced to +707 million pounds. In 1920, of course, it was over +8000 million pounds. Such incidents as the Crimean +and the Boer wars added materially to the debt, +but apart therefrom you will see that there is no +tremendous relief by way of capital repayment +to the original debt. Similarly, in a hundred years, +even if we have no big wars, it is quite possible +we may have additions to the national debt from +smaller causes. Yet the volume of the debt per +head fell from £50 to £15.7, so you will see that the +increasing population made an enormous difference. +The real burden of the debt is of course felt mainly +in its annual charge. I will take this, therefore, +rather than the capital:—</p> + +<table summary="Debt Charge 1817-1857" title="Debt Charge 1817-1857"> +<tr><td>In</td><td>1817</td><td>the</td><td>charge</td><td>was</td><td>32</td><td>million</td><td>pounds</td></tr> +<tr><td>"</td><td>1842</td><td>"</td><td>"</td><td>"</td><td>28</td><td>"</td><td>"</td></tr> +<tr><td>"</td><td>1857</td><td>"</td><td>"</td><td>"</td><td>28.8</td><td>"</td><td>"</td></tr> +</table> + +<p><a name="Page_65" id="Page_65"></a><span class="pagenum" title="65"></span></p> +<table summary="Debt Charge 1817-1857" title="Debt Charge 1895-1914"> +<tr><td>In</td><td>1895</td><td>the</td><td>charge</td><td>was</td><td>25</td><td>million</td><td>pounds</td></tr> +<tr><td>"</td><td>1903</td><td>"</td><td>"</td><td>"</td><td>27</td><td>"</td><td>"</td></tr> +<tr><td>"</td><td>1914</td><td>"</td><td>"</td><td>"</td><td>24</td><td>"</td><td>"</td></tr> +</table> + +<p class="noind">Here you will see that the reduction from 32 to 24 +was 25 per cent. or a much greater reduction than +the reduction of the <em>total</em> capital debt, and this, of +course, was contributed to by the lower rates of +interest which had been brought about from time +to time. When we take the annual charge per +head the fall is much more striking. In the hundred +years it decreased from 37s. to 10s. This, however, +was a money reduction, and the <em>real</em> burden per +head can only be judged after we have considered +what the purchasing power of that money was. +Now, the charge per head, reduced to a common +basis of purchasing power, fell as follows:—</p> + +<table summary="Index figure 1817-1914" title="Index figure 1817-1914"> +<tr><td> </td><td>Index figure</td></tr> +<tr><td>1817</td><td>260</td></tr> +<tr><td>1842</td><td>242</td></tr> +<tr><td>1857</td><td>191</td></tr> +<tr><td>1895</td><td>210</td></tr> +<tr><td>1914</td><td>118</td></tr> +</table> + +<p class="noind">In the year 1920 the charge per head was £7.16 +and my purchasing power index figure 629. You +will see that the <em>real</em> burden in commodities moved +down much less violently than the <em>money</em> burden, +and the relief was not actually so great as it looks, +because prices were far lower in 1914 than they +were early in the nineteenth century.</p> + +<p>In view of the fact that our debt is approximately +ten times that of the last century, let us ask +ourselves the broad question: “Can we look +forward to nothing better than the reduction of +<a name="Page_66" id="Page_66"></a><span class="pagenum" title="66"></span>our debt by 450 millions in thirty-seven +years?”</p> + +<p>The nineteenth century was one long contest +between two opposing forces. The increase in +the population, together with the power to make +wealth, were together enormously effective in +decreasing the burden. Against them was the +ultimate tendency to lower prices, and the former +of these two forces slowly won the day.</p> + +<p>I hesitate to say that we can expect anything at +all comparable with the wonderful leap forward in +productive power during the early Victorian era. I +hope that in this I may prove to be wrong. Anyway +I do not think that in our lifetime we can +expect these islands to double their population.</p> + + +<h3>The Capital Levy</h3> + +<p>If we cannot look forward to any great measure +of relief through these channels, to what then must +we look? By far the most important alternative +remedy which has been put to us is that of a Capital +Levy; it has the enormous virtue that it would +repay on one level of prices the debts incurred at +that level; in short, it would give back one pair +of boots at once for every pair it has borrowed, +instead of waiting and stretching out over future +generations the burden of two pairs. It is so +attractive that one cannot wonder there is a tendency +to slur over its less obvious difficulties.</p> + +<p>Advocates of this scheme fall into two camps, +whom I would distinguish broadly as the economist +group and the Labour Party, and if you will +<a name="Page_67" id="Page_67"></a><span class="pagenum" title="67"></span>examine their advocacy carefully, you will see +that they support it by two different sets of contentions, +which are not easily reconciled. The +economists lay stress upon the fact that you not +only pay off at a less onerous cost in real goods, but +that it may, considered arithmetically or actuarially, +be “good business” for a payer of high income-tax +to make an outright payment now and have +a lighter income-tax in future. Very much of the +economists’ case rests indeed upon the argument +drawn from the outright cut and the arithmetical +relief. It will be seen that this case depends upon +two assumptions. The first is that the levy in +practice as well as in theory is an outright cut, and +the second, that it is not repeated, or rather that +the income-tax is really effectively reduced. But +if you look at the programme of the other supporters +of the Capital Levy you will not find any convincing +guarantees of its non-repetition. I have not seen +anywhere any scheme by which we can feel politically +insured against its repetition. You will find +plenty of indication that some intend to have both +the levy and a high tax as well, the new money to be +employed for other social purposes. The arguments +based upon arithmetical or actuarial superiority of +the levy for your pocket and for mine may therefore +rather go by the board. But I am not going to +discuss either the question of political guarantees +or the possible future socio-financial policy of the +Labour Party. I will merely ask you to consider +whether the levy is likely to be in practice the +outright cut that is the basis of the chief and most +valid contention for it. Please understand that I +<a name="Page_68" id="Page_68"></a><span class="pagenum" title="68"></span>am not attempting to sum up all the many reasons +for and against this proposal, but only to deal with +the particular virtue claimed for it, bearing upon +the increasing burden of the debt as prices decline.</p> + +<p>Any taxation scheme dependent upon general +capital valuation, where the amount to be paid is +large—say larger than a year’s revenue—falls, in +my judgment, into the second or third rate category +of taxation expedients. Whenever we are living in +uncertain times, with no steadiness of outlook, +valuation of many classes of wealth is then a tremendous +lottery, and collection—which takes time—may +be no less so.</p> + +<p>The fair face of the outright and graduated levy +would be marred in many ways. First, there are +cases affected by valuation. The valuation of a +fixed rate of interest on good security is easy +enough. The valuation of a field or a house in +these days presents more difficulty, but is, of course, +practicable. In practice, however, people do not +own these things outright. They have only an +interest in them. This is where the rub comes. +A very large part of the property in this country +is held in life interests, and on reversions or contingencies. +It is not a question of saying that a +given property is worth £10,000 and that it forms +part of the fortune of Jones, who pays 40 per cent. +duty. The point is that the £10,000 is split between +Jones and Robinson. Jones maybe has a life +interest in it, and Robinson a reversionary interest. +You value Jones’s wealth by his prospect of life +on a life table, and Robinson has the balance. But +the life table does not indicate the actual likelihood +<a name="Page_69" id="Page_69"></a><span class="pagenum" title="69"></span>of Jones’s life being fifteen years. It only represents +the actuarial average expectation of all the lives. +This may be useful enough for insurance dependent +on the total experience, but it may be a shocking +injustice to the individual in taxation. Only some +10 per cent. of the Joneses will live for the allotted +time, and for the rest your valuation and your +tax will be dead wrong, either too much or too +little. Jones will be coming to you two years after +he has paid, or rather his executors will come to +you and say: “We paid a tax based on Jones +living 15 years, and he has died; this ought, therefore, +to be shifted to Robinson.”</p> + + +<h3>Difficulties of Valuation</h3> + +<p>People often say that a Capital Levy merely +imagines everybody dying at the same time. This +parallel is wrong in degree when you are considering +the ease of paying duty or of changing the market +values by a glut of shares, and it is still more wrong +when you are thinking of ease of valuation. When +a man is dead, he is dead, and in estimating the +death duty you have not to bother about how long +he is going to live! But every time you value a life +interest and take a big slice of it for tax you are +probably doing a double injustice. The charge is +incorrect for two taxpayers. On a flat rate of tax +this difficulty might be made less, but the essence +of any effective levy is a progressive scale. Moreover, +whether you are right or wrong about +Robinson’s tax, he has nothing in hand with which +to pay it. He has either to raise a mortgage on +<a name="Page_70" id="Page_70"></a><span class="pagenum" title="70"></span>his expectation (on which he pays <em>annual</em> interest) +or pay you by instalments. So far as his burden +is concerned, therefore, there is no outright cut. +You will be getting an annual figure over nearly +the whole class of life interests and reversions. +It is difficult to see how one can escape making +adjustments year after year for some time in the +light of the ascertained facts, until the expiry of, +say, nine or ten years has reduced the disparities +between the estimated valuations and the facts +of life to smaller proportions.</p> + +<p>Next come those valuations which depend for +their accuracy upon being the true mid-point of +probabilities. A given mine may last for five +years in the view of some experts, or it may go on +for fifteen in the view of others, and you may take +a mid-point, say ten, and collect your tax, but, +shortly after, this valuation turns out to be badly +wrong, <em>though all your valuations in the aggregate +are correct</em>. While the active procedure of collecting +the levy is in progress for a number of years these +assessments will simply shout at you for adjustment. +There are other types of difficulty in assessment +which involve annual adjustment, but you will +appreciate most the necessity for care in the +collection. Enthusiastic advocates for the levy +meet every hard case put forward where it is +difficult to raise money, such as a private ownership +of an indivisible business, by saying: “But +that will be made in instalments, or the man can +raise a mortgage.” But the extent to which this +is done robs the levy of all the virtues attaching +to outrightness, for each instalment becomes, as +<a name="Page_71" id="Page_71"></a><span class="pagenum" title="71"></span>the years roll on, different in its real content upon +a shifting price level, and every payment of interest +on the mortgage—to say nothing of the ultimate +repayment of that mortgage—falls to be met as +if reckoned upon the original currency level. +Then those classes of wealth which are not easily +realisable without putting down the market price +also require treatment by instalments, and those who +wish to put forward a logical scheme also add a +special charge upon salary-earners for some years—a +pseudo-capitalisation of their earning power.</p> + +<p>A really fair and practicable levy would certainly +be honeycombed with annual adjustments and +payments for some period of years, and one must +consider how far this would invalidate the economic +case of the “outright cut,” and make it no better +than a high income-tax; indeed far worse, for the +high income-tax does at least follow closely upon +the annual facts as they change, or is not stereotyped +by a valuation made in obsolete conditions. +Imagine three shipowners each with vessels valued +at £200,000, and each called upon to pay 20 per +cent., or £40,000. One owning five small ships +might have sold one of them, and thus paid his +bill; the second, with one large ship, might have +agreed to pay £8000 annually (plus interest) for +five years; while the third might have mortgaged +his vessel for £40,000, having no other +capital at disposal. At to-day’s values each might +have been worth, say, £50,000, but for the tax. The +first would actually have ships worth £40,000, so he +would have borne the correct duty of 20 per cent. +The second would have £50,000, bringing in, say, +<a name="Page_72" id="Page_72"></a><span class="pagenum" title="72"></span>£5000 annually, and would be attempting to pay +£8000 out of it, while the third would be paying +£2000 a year out of his income and still be faced +with an 80 per cent. charge on his fortune! His +assessment is computed at one point of time, and +liquidated at another, when its incidence is totally +different.</p> + +<p>If one cannot have a levy complete at the time +of imposition, it clearly ought not to be launched +at a time of rapidly changing prices. But that is, +perhaps, when the economic case for it is strongest.</p> + + +<h3>A Desperate Remedy</h3> + +<p>I do not rule the Capital Levy out as impracticable +by any means, but as a taxation expedient +I cannot be enthusiastic about it. It is a desperate +remedy. But if our present temper for “annual” tax +relief at all costs continues, we may <em>need</em> a desperate +remedy. Without a levy what kind of position +can you look forward to? Make some assumptions, +not with any virtue in their details, but just in +order to determine the possible prospect. If in +fifteen to twenty years reparation payments have +wiped out 1000 millions, debt repayments another +1000, and ordinary reductions by sinking funds +another 1000 millions, you will have the debt +down to 5000 millions, and possibly the lower +interest then effective may bring the annual charge +down to some 200 or 225 million pounds. If the +population has reached sixty millions the nominal +annual charge will be reduced from £7 16s. by +one-half, but if prices have dropped further, say +<a name="Page_73" id="Page_73"></a><span class="pagenum" title="73"></span>half-way, to the pre-war level, the comparable +burden will still be £4 10s. per head.</p> + +<p>It is no good talking about “holidays from +taxation” and imagining you can get rid of this +thing easily; you won’t. We are still in the war +financially. There is the same need of the true +national spirit and heroism as there was then. +Thus hard facts may ultimately force us to some +such expedient as the levy, but we should not +accept it light-heartedly, or regard it as an obvious +panacea. Perhaps in two or three years we may +tell whether economic conditions are stable enough +to rob it of its worst evils. The question whether +the burden of rapidly relieving debt by this means +in an instalment levy over a decade is actually +lighter than the sinking fund method, depends on +the relation of the drop in prices over the short +period to the drop over the ensuing period, with +a proper allowance for discount—at the moment +an insoluble problem. I cannot yet with confidence +join those who, on purely economic and non-political +grounds, commend the scheme and treat +it as “good business for the income-tax payer.”</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_74" id="Page_74"></a><span class="pagenum" title="74"></span><a name="FREE_TRADE" id="FREE_TRADE"></a>FREE TRADE</h2> + +<h3>By Rt. Hon. J.M. Robertson</h3> + +<h4>P.C.; President of National Liberal Federation since +1920; M.P. (L.), Tyneside Division, Northumberland, +1906-18; Parliamentary Secretary to Board of Trade, +1911-15.</h4> + + +<p>Mr. Robertson said:—At an early stage of the +war Mr. H.G. Wells published a newspaper +article to the effect that while we remained Free +Traders we were determined in future to accord +free entry only to the goods of those States which +allowed it to us. The mere state of war, no doubt, +predisposed many to assent to such theses who a +few years before would have remembered that this +was but the nominal position of the average protectionist +of the three preceding generations. War +being in itself the negation of Free Trade, the +inevitable restrictions and the war temper alike +prepared many to find reasons for continuing a +restrictive policy when the war was over. When, +therefore, the Committee of Lord Balfour of +Burleigh published its report, suggesting a variety +of reasons for setting up compromises in a tariffist +direction, there were not wanting professed Free +Traders who agreed that the small tariffs proposed +would not do any harm, while others were even +anxious to think that they might do good.</p> + +<p>Yet the policy proposed by Lord Balfour’s +<a name="Page_75" id="Page_75"></a><span class="pagenum" title="75"></span>Committee has not been adopted by the Coalition +Government in anything like its entirety. Apart +from the Dyestuffs Act, and such devices as the +freeing of home-made sugar from excise, we have +only had the Safeguarding of Industries Bill, a +meticulously conditional measure, providing for the +setting up of particular tariffs in respect of particular +industries which may at a given moment +be adjudged by special committees <em>ad hoc</em> to need +special protection from what is loosely called +“dumping.” And even the findings of these +committees so far have testified above all things +to the lack of any accepted set of principles of a +protectionist character. Six thousand five hundred +articles have been catalogued as theoretically liable +to protective treatment, and some dozen have been +actually protected. They have given protection +to certain products and refused it to others; +according it to fabric gloves and glass and aluminium +goods and refusing it to dolls’ eyes and gold +leaf.</p> + +<p>Finally, the decision in favour of a tariff on fabric +gloves has evoked such a storm of protest from the +textile manufacturers who export the yarns with +which foreign fabric gloves are made, that even +the Coalitionist press has avowed its nervousness. +When a professed protectionist like Lord Derby, +actually committed to this protectionist Act, +declares that it will never do to protect one industry +at the cost of injuring a much greater one, those +of his party who have any foresight must begin to +be apprehensive even when a House of Commons +majority backs the Government, which, hard +<a name="Page_76" id="Page_76"></a><span class="pagenum" title="76"></span>driven by its tariffists, decided to back its Tariff +Committee against Lancashire. Protectionists are +not much given to the searching study of statistics, +but many of them have mastered the comparatively +simple statistical process of counting votes.</p> + + +<h3>The “New Circumstances” Cry</h3> + +<p>In a sense, there are new fiscal “circumstances.” +But I can assure my young friends that they are +just the kind of circumstances which were foreseen +by their seniors in pre-war days as sure to arise +when any attempt was made to apply tariffist +principles to British industry. As a German +professor of economics once remarked at a Free +Trade Conference, it is not industries that are +protected by tariffs: it is firms. When a multitude +of firms in various industries subscribed to a large +Tariff Reform fund for election-campaign purposes, +they commanded a large Conservative vote; but +when for platform tariff propaganda, dealing in +imaginative generalities and eclectic statistics, +there are substituted definite proposals to meddle +with specified interests, the real troubles of the +tariffist begin. You might say that they began as +soon as he met the Free Trader in argument; but +that difficulty did not arise with his usual audiences. +It is when he undertakes to protect hides and hits +leather, or to protect leather and hits boot-making, +or to help shipping and hits shipbuilding that he +becomes acutely conscious of difficulties. Now he +is in the midst of them. The threat of setting +up a general tariff which will hit everybody alike +<a name="Page_77" id="Page_77"></a><span class="pagenum" title="77"></span>seems so far to create no alarm, because few +traders now believe in it. Still, it would be very +unwise to infer that the project will not be proceeded +with. It served as a party war-cry in Opposition +for ten years, and nearly every pre-war Conservative +statesman was committed to it—Earl Balfour and +Lord Lansdowne included. Even misgivings about +Lancashire may fail to deter the tariffist rump.</p> + +<p>Some of the people who even yet understand +nothing of Free Trade economics are still found to +argue that, if only the duty on imported gloves is +put high enough, sufficient gloves will be made at +home to absorb all the yarns now exported to +German glove-makers. They are still blind, that +is to say, to the elementary fact that since Germany +manufactures for a much larger glove-market than +the English, the exclusion of the German gloves +means the probable loss to the yarn-makers of a +much larger market than England can possibly +offer, even if we make all our own gloves. In a +word, instead of having to furnish new Free Trade +arguments to meet a new situation, we find ourselves +called upon to propound once more the +fundamental truths of Free Trade, which are still +so imperfectly assimilated by the nation.</p> + +<p>So far as I can gather, the circumstances alleged +to constitute a new problem are these; the need +to protect special industries for war purposes; +and the need to make temporary fiscal provision +against industrial fluctuation set up by variations +in the international money exchanges. Obviously, +the first of these pleas has already gone by the +board, as regards any comprehensive fiscal action. +<a name="Page_78" id="Page_78"></a><span class="pagenum" title="78"></span>One of the greatest of all war industries is the +production of food; and during the war some +supposed that after it was over, there could be +secured a general agreement to protect British +agriculture to the point at which it could be relied +on to produce at least a war ration on which the +nation could subsist without imports. That dream +has already been abandoned by practical politicians, +if any of them ever entertained it. The effective +protection of agriculture on that scale has been +dismissed as impossible; and we rely on foreign +imports as before. Whatever may be said as to +the need of subsidising special industries for the +production of certain war material is nothing +further to the fiscal purpose, whether the alleged +need be real or not. The production of war material +is a matter of military policy on all fours with the +maintenance of Government dockyards, and does +not enter into the fiscal problem properly so called. +But to the special case of dyes, considered as a +“key” or “pivotal” industry, I will return later.</p> + +<p>How then stands the argument from the fluctuations +of the exchanges? If that argument be +valid further than to prove that <em>all</em> monetary +fluctuations are apt to embarrass industry, why is +it not founded on for the protection of <em>all</em> industries +affected by German competition? The Prime +Minister in his highly characteristic speech to the +Lancashire deputation, admitted that the fall of +the mark had not had “the effect which we all +anticipated”—that is, which he and his advisers +anticipated—and this in the very act of pretending +that the <em>further</em> fall of the mark is a reason for +<a name="Page_79" id="Page_79"></a><span class="pagenum" title="79"></span>adhering to the course of taxing fabric gloves. +All this is the temporising of men who at last +realise that the case they have been putting forward +will bear no further scrutiny. The idea of systematically +regulating an occasional tariff in terms of the +day-to-day fluctuations of the exchanges is wholly +chimerical. A tariff that is on even for one year +and may be off the next is itself as disturbing a +factor in industry as any exchange fluctuations +can be.</p> + +<p>Nor is there, in the nature of things, any possibility +of continuous advantage in trade to any +country through the low valuation of its currency. +The Prime Minister confesses that Germany is <em>not</em> +obtaining any export trade as the result of the fall. +Then the whole argument has been and is a false +pretence. The plea that the German manufacturer +is advantaged because his wages bill does not rise +as fast as the mark falls in purchasing power is +even in theory but a statement of one side of a +fluctuating case, seeing that when the mark rises +in value his wages bill will not fall as fast as the +mark rises, and he is then, in the terms of the case, +at a competitive disadvantage.</p> + +<p>But the worst absurdity of all in the tariffist +reasoning on this topic is the assumption that in +no other respect than wage-rates is German industry +affected by the fall of the mark. The wiseacres +who point warningly to the exchanges as a reason +for firm action on fabric gloves never ask how a +falling currency relates to the process of purchasing +raw materials from abroad. So plainly is the +falling mark a bar to such purchase that there is +<a name="Page_80" id="Page_80"></a><span class="pagenum" title="80"></span><em>prima facie</em> no cause to doubt the German official +statement made in June, that foreign goods are +actually underbidding German goods in the German +markets, and that the falling exchange makes it +harder and harder for Germany to compete abroad. +We are dealing with a four-square fallacy, the +logical implication of which is that a bankrupt +country is the best advantaged for trade, that +Austria is even better placed for competition than +Germany, and that Russia is to-day the best placed +of all.</p> + + +<h3>Tariffs and Wages</h3> + +<p>The argument from the exchanges, which is now +admitted to be wholly false in practice, really brings +us back to the old tariffist argument that tariffs +are required to protect us against the imports of +countries whose general rate of wages is lower +than ours. On the one hand, they assured us that +a tariff was the one means of securing good wages +for the workers in general. On the other, they +declared that foreign goods entered our country to +the extent they did because foreign employers in +general sweated their employees. That is to say—seeing +that nearly all our competitors had tariffs—the +tariffed countries pay the worst wages; and +we were to raise ours by having tariffs also. But +even that pleasing paralogism did not suffice for +the appetite of tariffism in the way of fallacy. +The same propaganda which affirmed the lowness +of the rate of wages paid in tariffist countries +affirmed also the <em>superiority</em> of the rate of wages +<a name="Page_81" id="Page_81"></a><span class="pagenum" title="81"></span>paid in the United States, whence came much of +our imported goods which the tariffists wished to +keep out. In this case, the evidence for the statement +lay in the high wage-rate figures for three +employments in particular—those of engine-drivers, +compositors, and builders’ labourers: three industries +incapable of protection by tariffs.</p> + +<p>Thus even the percentage of truth was turned +to the account of delusion; for the wages in the +protected industries of the States were so far from +being on the scale of the others just mentioned, +that they were reported at times to be absolutely +below those paid in the same industries in Britain. +For the rest, <em>costs of living</em> were shown by all the +official statistics to be lower with us than in any of +the competing tariffed countries; and in particular +much lower than in the United States. There were +thus established the three facts that wages were +higher in the Free Trade country than in the +European tariffed countries; that real wages here +were higher than those of the protected industries +in the United States, and that Protection was +thus so far from being a condition of good wages +as to be ostensibly a certain condition of bad. +All the same, high wages in America and low wages +on the Continent were alike given as reasons why +we should have a protective tariff.</p> + +<p>There stands out, then, the fact that the payment +of lower wages by the protected foreign manufacturer +was one of the tariffist arguments of the pre-war +period, when there was no question of unequal +currency exchanges. To-day, the argument from +unequal currency exchanges is that in the country +<a name="Page_82" id="Page_82"></a><span class="pagenum" title="82"></span>where the currency value is sinking in terms of +other currencies the manufacturer is getting his +labour cheaper, seeing that wages are slow to +follow increase in cost of living. Both pleas alike +evade the primary truth that if country A +trades with country B at all, it must receive <em>some</em> +goods in payment for its exports, save in a case in +which, for a temporary purpose, it may elect to +import gold. But that fact is vital and must be +faced if the issue is to be argued at all. Unless, +then, the defender of the occasional tariff system +contends that that system will rectify trade conditions +by keeping out goods which are made at +an artificial advantage, amounting to what is +called “unfair competition,” and letting in only +the goods not so produced, he is not facing the +true fiscal problem at all. Either he admits that +exports and freight charges and other credit claims +must be balanced by imports or he denies it. If he +denies it, the discussion ceases: there is no use in +arguing further. If he admits it, and argues that +by his tariff he can more or less determine <em>what</em> +shall be imported, the debate soon narrows itself +to one issue.</p> + +<p>The pre-war tariffist argued, when he dealt with +the problem, that tariffs would suffice at will to +keep out manufactured goods and let in only raw +material. To that the answer was simple. An +unbroken conversion of the whole yield of exports +and freight returns and interest on foreign investments +into imported raw material to be wholly +converted into new products, mainly for export, +was something utterly beyond the possibilities. +<a name="Page_83" id="Page_83"></a><span class="pagenum" title="83"></span>It would mean a rate of expansion of exports never +attained and not only not attainable but not +desirable. On such a footing, the producing and +exporting country would never concretely taste of +its <em>profit</em>, which is to be realised, if at all, only in +consumption of imported goods and foods. It +is no less plainly impossible to discriminate by +classes between kinds of manufactured imports +on the plea that inequality in the exchanges gives +the foreign competitor an advantage in terms of +the relatively lower wage-rate paid by him while +his currency value is falling. Any such advantage, +in the terms of the case, must be held to accrue to +all forms of production alike, and cannot possibly +be claimed to accrue in the manufacture of one thing +as compared with another, as fabric gloves in +comparison with gold leaf. In a word, the refusal +of protection to gold leaf is an admission that the +argument from inequality of currency exchanges +counts for nothing in the operation of the Safeguarding +of Industries Bill. In the case of any +other import, then, the argument falls.</p> + + +<h3>Members One of Another</h3> + +<p>But that is not all. The case of Russia alone +has brought home to all capable of realising an +economic truth the fact that the economic collapse +of any large mass of population which had in the +past entered into the totality of international trade +is a condition of proportional impoverishment to +all the others concerned. He who sees this as +to Russia cannot conceivably miss seeing it as to +<a name="Page_84" id="Page_84"></a><span class="pagenum" title="84"></span>Germany; even tariffist hallucinations about a +“losing trade” under German tariffs cannot shut +out the fact that our trade with Russia and the +United States was carried on under still higher +hostile tariffs. The unalterable fact remains that +industrial prosperity rises and falls in the measure +of the total mass of goods handled; and men who +realise the responsibility of all Governments for the +material wellbeing of their populations can come +to only one conclusion. Trade must be facilitated +all round for our own sake.</p> + +<p>Once more we come in sight of the truth that +the industrial health of every trading country +depends on the industrial health of the rest—a +Free Trade truth that is perceptibly of more vital +importance now than ever before. It is in the +exchange of commodities, and the extension of +consumption where that is required on a large +scale, that the prosperity of the industrial nations +consists. And to say that, is to say that until the +trade exchanges of the world in general return to +something like the old footing, there cannot be a +return of the old degree of industrial wellbeing. +Not that industrial wellbeing is to be secured by +the sole means of industrial re-expansion: the +question of the need of restriction of rate of increase +of population is now being more and more widely +recognised as vital. But the present argument is +limited to the fiscal issue; and it must suffice +merely to indicate the other as being of the highest +concurrent importance.</p> + +<p>Adhering, then, to the fiscal issue, we reach the +position that, just as foreign trade has been a +<a name="Page_85" id="Page_85"></a><span class="pagenum" title="85"></span>main source of British wealth in the past, and particularly +in the Free Trade era, the wealth consumed +in the war is recoverable only on the same lines. +It is not merely that British shipping—at present +so lamentably paralysed and denuded of earning +power—cannot be restored to prosperity without +a large resumption of international exchanges: +a large proportion of industrial employment unalterably +depends upon that resumption. And it +is wholly impossible to return to pre-war levels of +employment by any plan of penalising imports.</p> + + +<h3>The Dyestuffs Act</h3> + +<p>How then does the persistent Free Trader relate +to the special case of the “key industry,” of which +we heard so much during the war, and hear so little +to-day? I have said that the question of maintaining +any given industry on the score that it is +essential for the production of war material is a +matter of military administration, and not properly +a matter of fiscal policy at all. But the plea, we +know, has been made the ground of a fiscal proceeding +by the present Government, inasmuch as +the special measure known as the Dyestuffs (Import +Regulation) Act of 1920 forbids for ten years the +importation of dyestuffs into this country except +under licence of the Board of Trade. Dyestuffs +include, by definition, all the coal-tar dyes, colours, +and colouring matter, and all organic intermediate +products used in the manufacture of these—the +last category including a large number of chemicals +such as formaldehyde, formic acid, acetic acid, and +<a name="Page_86" id="Page_86"></a><span class="pagenum" title="86"></span>methyl alcohol. The argument is, in sum, that +all this protective control is necessary to keep on +foot, on a large scale, an industry which in time of +war has been proved essential for the production +of highly important munitions.</p> + +<p>What has actually happened under this Act I +confess I am unable to tell. Weeks ago I wrote to +the President of the Board of Trade asking if, +without inconvenience, he could favour me with +a general account of what had been done in the +matter of issuing licences, and my letter was +promised attention, but up to the moment of +delivering this address I have had no further reply. +I can only, then, discuss the proposed policy on its +theoretic merits.<a name="FNanchor_1_1" id="FNanchor_1_1"></a><a href="#Footnote_1_1" class="fnanchor">[1]</a> The theoretic issues are fairly +clear. Either the licensing power of the Board of +Trade has been used to exclude competitive imports +or it has not. If it has been so used, it is obvious +that we have no security whatever for the maintenance +of the industry in question in a state of efficiency. +In the terms of the case, it is enabled to persist in +the use of plant and of methods which may be +inferior to those used in the countries whose competition +has been excluded. Then the very object +posited as the justification for the Act, the securing +of a thoroughly efficient key industry necessary to +the production of munitions, is not attained by the +fiscal device under notice. If, on the other hand, +there has been no barring of imports under the +licence system, the abstention from use of it is an +<a name="Page_87" id="Page_87"></a><span class="pagenum" title="87"></span>admission that it was either unnecessary or injurious +or was felt to be useless for its purpose.</p> + +<p>And the common-sense verdict on the whole +matter is that if continuous and vigilant research +and experiment in the chemistry of dye-making +is held to be essential to the national safety, the +proper course is for the Government to establish +and maintain a department or arsenal for such +research and experiment, unhampered by commercial +exigencies. Such an institution may or +may not be well managed. But a dividend-earning +company, necessarily concerned first and last with +dividend earning, and at the same time protected +against foreign competition in the sale of its products, +cannot be for the purpose in question well +managed, being expressly enabled and encouraged +to persist in out-of-date practices.</p> + +<p>This being so, the whole argument for protection +of key industries goes by the board. It has been +abandoned as to agriculture, surely the most typical +key industry of all; and it has never even been put +forward in regard to shipbuilding, the next in order +of importance. For the building of ships of war +the Government has its own dockyards: let it +have its own chemical works, if that be proved to +be necessary. Protection cannot avail. If the +Dyestuffs Act is put in operation so as to exclude +the competition of foreign chemicals, it not only +keeps our chemists in ignorance of the developments +of the industry abroad: it raises the prices +of dyestuffs against the dye-using industries at +home, and thereby handicaps them dangerously +in their never-ending competition with the foreign +<a name="Page_88" id="Page_88"></a><span class="pagenum" title="88"></span>industries, German and other, which offer the +same goods in foreign markets.</p> + +<p>The really fatal competition is never that of +goods produced at low wages-cost. It is that of +superior goods; and if foreign textiles have the +aid of better dyes than are available to our manufacturers +our industry will be wounded incurably. +It appears in fact to be the superior quality of +German fabric gloves, and not their cheapness, +that has hitherto defeated the competition of the +native product. To protect inferior production is +simply the road to ruin for a British industry. +Delicacy in dyes, in the pre-war days, gave certain +French woollen goods an advantage over ours in +our own markets; yet we maintained our vast +superiority in exports by the free use of all the +dyes available. Let protection operate all round, +and our foreign markets will be closed to us by +our own political folly. Textiles which are neither +well-dyed nor cheap will be unsaleable against +better goods.</p> + +<p class="footnote"><a name="Footnote_1_1" id="Footnote_1_1"></a><span class="label"><a href="#FNanchor_1_1">[1]</a></span> The promised statistics were soon afterwards sent to +Mr. Robertson by the Board of Trade. They will be found +in the <em>Liberal Magazine</em> for September, 1922, p. 348.—<span class="smcap">Ed</span>.</p> + + +<h3>The Paris Resolutions</h3> + +<p>It is of a piece with that prodigy of self-contradiction +that, when the Liberal leaders in the House +of Commons expose the absurdity of professing to +rectify the German exchanges by keeping out +German fabric gloves, a tariffist leader replies by +arguing that the Paris Resolutions of the first +Coalition Government, under Mr. Asquith, conceded +the necessity of protecting home industries +against unfair competition. Men who are normally +<a name="Page_89" id="Page_89"></a><span class="pagenum" title="89"></span>good debaters seem, when they are fighting for a +tariff, to lose all sense of the nature of argument. +As has been repeatedly and unanswerably shown +by my right hon. friend the Chairman, the Paris +Resolutions were expressly framed to guard against +a state of things which has never supervened—a +state of things then conceived as possible after a +war without a victory, but wholly excluded by +the actual course of the war. And those Resolutions, +all the same, expressly provided that each consenting +State should remain free to act on them upon the +lines of its established fiscal system, Britain being +thus left untrammelled as to its Free Trade policy.</p> + +<p>Having regard to the whole history, Free Traders +are entitled to say that the attempt of tariffists +to cite the Paris Resolutions in support of the +pitiful policy of taxing imports of German fabric +gloves, or the rest of the ridiculous “litter of mice” +that has thus far been yielded by the Safeguarding +of Industries Act, is the crowning proof at once of +the insincerity and ineptitude of tariffism where +it has a free hand, and of the adamantine strength +of the Free Trade case. If any further illustration +were needed, it is supplied by the other tariffist +procedure in regard to the promise made five +years ago to Canada that she, with the other +Dominions, should have a relative preference in +our markets for her products. In so far as that +plan involved an advantage to our own Dominions +over the Allies who, equally with them, bore with +us the heat and burden of the war, it was as impolitic +as it was unjust, and as unflattering as it was +impolitic, inasmuch as it assumed that the Dominions +<a name="Page_90" id="Page_90"></a><span class="pagenum" title="90"></span>wanted a “tip” as a reward for their splendid +comradeship.</p> + +<p>As it turns out, the one concession that Canada +really wanted was the removal of the invidious +embargo on Canadian store cattle in our ports. +And whereas a promise to that effect was actually +given by the tariffist Coalition during the war, it +is only after five years that the promise is about +to be reluctantly fulfilled. It was a promise, be it +observed, of <em>free importation</em>, and it is fulfilled +only out of very shame. It may be surmised, +indeed, that the point of the possible lifting of the +Canadian embargo was used during the negotiations +with Ireland to bring the Sister State to terms; +and that its removal may lead to new trouble in +that direction. But that is another story, with +which Free Traders are not concerned. Their +withers are unwrung.</p> + + +<h3>Science and Experience</h3> + +<p>On the total survey, then, the case for Free Trade +is not only unshaken, it is stronger than ever before, +were it only because many of the enemy have +visibly lost faith in their own cause. The Coalition, +in which professed Liberals were prepared to +sacrifice something of Free Trade to colleagues +who were pledged in the past to destroy it, has +quailed before the insuperable practical difficulties +which arise the moment the scheme of destruction +is sought to be framed.</p> + +<p>All that has resulted, after four and a half years, +is a puerile tinkering with three or four small +<a name="Page_91" id="Page_91"></a><span class="pagenum" title="91"></span>industries—a tinkering that is on the face of it open +to suspicion of political corruption. To intelligent +Free Traders there is nothing in it all that can give +the faintest surprise. They knew their ground. +The doctrine of Free Trade is <em>science</em>, or it is nothing. +It is not a passing cry of faction, or a survival of +prejudice, but the unshakable inference of a hundred +years of economic experience verifying the economic +science on which the great experiment was founded.</p> + +<p>On the other hand, let me say, the tactic of +tinkering with Free Trade under a system of special +committees who make decisions that only the +House of Commons should ever be able to make, +is a “felon blow” at self-government. It puts +national affairs under the control of cliques, amenable +to the pressures of private interests. Millions of +men and women are thus taxable in respect of their +living-costs at the caprice of handfuls of men appointed +to do for a shifty Government what it is +afraid to do for itself. It is a vain thing to have +secured by statute that the House of Commons +shall be the sole authority in matters of taxation, +if the House of Commons basely delegates its +powers to unrepresentative men. Here, as so often +in the past, the Free Trade issue lies at the heart +of sound democratic politics; and if the nation +does not save its liberties in the next election it +will pay the price in corrupted politics no less than +in ruined trade.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_92" id="Page_92"></a><span class="pagenum" title="92"></span><a name="INDIA" id="INDIA"></a>INDIA</h2> + +<h3>By Sir Hamilton Grant</h3> + +<h4>K.C.S.I., K.C.I.E.; Chief Commissioner, North-West +Frontier Province, India; Deputy Commissioner of +various Frontier districts; Secretary to Frontier +Administration; Foreign Secretary, 1914-19; negotiated +Peace Treaty with Afghanistan, 1919.</h4> + + +<p>Sir Hamilton Grant said:—I have been asked +to address you on the subject of India, that vast, +heterogeneous continent, with its varied races, its +Babel of languages, its contending creeds. There +are many directions in which one might approach +so immense a topic, presenting, as it does, all +manner of problems, historical, ethnological, linguistic, +scientific, political, economic, and strategic. +I do not propose, however, to attempt to give you +any general survey of those questions, or to offer +you in tabloid form a resumé of the matters that +concern the government of India. I propose to +confine my remarks to two main questions which +appear to be of paramount importance at the +present time, and which, I believe, will be of interest +to those here present to-day, namely, the problems +of the North-West Frontier, and the question of +internal political unrest.</p> + +<p>Let me deal first with the North-West Frontier. +As very few schoolboys know, we have here a dual +boundary—an inner and an outer line. The inner +line is the boundary of the settled districts of the +<a name="Page_93" id="Page_93"></a><span class="pagenum" title="93"></span>North-West Frontier Province, the boundary, in +fact, of British India proper, and is known as the +Administrative border. The outer line is the +boundary between the Indian Empire and Afghanistan, +and is commonly known as the Durand line, +because it was settled by Sir Mortimer Durand +and his mission in 1895 with the old Amir Abdur +Rahman. These two lines give us three tracts to +be dealt with—first, the tract inside the inner line, +the settled districts of the North-West Frontier +Province, inhabited for the most part by sturdy +and somewhat turbulent Pathans; second, the +tract between the two lines, that welter of +mountains where dwell the hardy brigand hillmen: +the tribes of the Black Mountain, of Swat and +Bajur, the Mohmands, the Afridis, the Orakzais, +the Wazirs, the Mahsuds, and a host of others, +whose names from time to time become familiar +according as the outrageousness of their misconduct +necessitates military operations<a name="typo_1" id="typo_1"></a>; third, the country +beyond the outer line, “the God-granted kingdom +of Afghanistan and its dependencies.”</p> + +<p>Now each of these tracts presents its own peculiar +problems, though all are intimately inter-connected +and react one on the other. In the settled districts +we are confronted with the task of maintaining +law and order among a backward but very virile +people, prone to violence and impregnated with +strange but binding ideas of honour, for the most +part at variance with the dictates of the Indian +Penal Code. For this reason there exists a special +law called the Frontier Crimes Regulation, a most +valuable enactment enabling us to deal with cases +<a name="Page_94" id="Page_94"></a><span class="pagenum" title="94"></span>through local Councils of Elders, with the task +of providing them with education, medical relief +etc., in accordance with their peculiar needs, +and above all with the task of affording them +protection from the raids and forays of their neighbours +from the tribal hills. In the tribal area we +are faced with the task of controlling the wild +tribesmen. This control varies from practically +direct administration as in the Lower Swat and +Kurram valleys to the most shadowy political +influence, as in the remote highlands of Upper +Swat and the Dir Kohistan, where the foot of white +man has seldom trod. Our general policy, however, +with the tribes is to leave them independent in +their internal affairs, so long as they respect British +territory and certain sacrosanct tracts beyond the +border, such as the Khyber road, the Kurram, and +the Tochi. The problem is difficult, because when +hardy and well-armed hereditary robbers live in +inaccessible mountains which cannot support the +inhabitants, overlooking fat plains, the temptation +to raid is obviously considerable: and when +this inclination to raid is reinforced by fanatical +religion, there must be an ever-present likelihood +of trouble.</p> + + +<h3>Frontier Raids</h3> + +<p>Few people here in England reading of raids on +the North-West Frontier in India realise the full +horror of these outrages. What generally happens +is that in the small hours of the morning, a wretched +village is suddenly assailed by a gang of perhaps +<a name="Page_95" id="Page_95"></a><span class="pagenum" title="95"></span>50, perhaps 200, well-armed raiders, who put out +sentries, picket the approaches, and conduct the +operation on the most skilful lines. The houses of +the wealthiest men are attacked and looted; +probably several villagers are brutally murdered—and +probably one or two unhappy youths or +women are carried off to be held up to ransom. +Sometimes the raid is on a larger scale, sometimes +it is little more than an armed dacoity. But there +is nearly always a tale of death and damage. Not +infrequently, however, our troops, our militia, our +frontier constabulary, our armed police, or the +village <em>chigha</em> or hue-and-cry party are successful +in repelling and destroying the raiders. Our officers +are untiring in their vigilance, and not infrequently +the district officers and the officers of their civil +forces are out three or four nights a week after +raiding gangs. Statistics in such matters are often +misleading and generally dull, but it may be of +interest to state that from the 1st April, 1920, to +the 31st March, 1921, when the tribal ebullition +consequent on the third Afghan war had begun to +die down, there were in the settled districts of the +North-West Frontier Province 391 raids in which +153 British subjects were killed and 157 wounded, +in which 310 British subjects were kidnapped and +some £20,000 of property looted. These raids are +often led by outlaws from British territory; but +each tribe is responsible for what emanates from +or passes through its limits—and when the bill +against a tribe has mounted up beyond the possibility +of settlement, there is nothing for it but +punitive military operations. Hence the large +<a name="Page_96" id="Page_96"></a><span class="pagenum" title="96"></span>number of military expeditions that have taken +place on this border within the last half century.</p> + +<p>Now this brings us to the question so often asked +by the advocates of what is called the Forward +policy: “If the tribes give so much trouble, why +not go in and conquer them once and for all and +occupy the country up to the Durand line?” It +sounds an attractive solution, and it has frequently +been urged on paper by expert soldiers. But the +truth is that to advance our frontier only means +advancing the seat of trouble, and that the +occupation of tribal territory by force is a much +more formidable undertaking than it sounds. We +have at this moment before us a striking proof of +the immense difficulty and expense of attempting +to tame and occupy even a comparatively small +tract of tribal territory in the Waziristan operations. +Those operations have been going on for two and a +half years. At the start there were ample troops, +ample equipment, and no financial stringency. +The operations were conducted, if a layman may +say so, with skill and determination, and our troops +fought gallantly. But what is the upshot? We +managed to advance into the heart of the Mahsud +country on a single line, subjected and still subject +to incessant attacks by the enemy; but we are +very little nearer effective occupation than when +we started; and now financial stringency has +necessitated a material alteration in the whole +programme, and we are reverting more or less to +the methods whereby we have always controlled +the tribes, namely, tribal levies or <em>khassadars</em> +<a name="Page_97" id="Page_97"></a><span class="pagenum" title="97"></span>belonging to the tribe itself, frontier militia or +other armed civil force, backed by troops behind.</p> + + +<h3>Frontier Policy</h3> + +<p>And for my own part I believe this is the best +solution. We must not expect a millennium on the +North-West Frontier. The tribal lion will not lie +down beside the district lamb in our time, and we +must deal with the problem as best we can in +accordance with our means, and to this end my +views are briefly as follows:—</p> + +<p>(1) We should do everything possible to provide +the younger trans-border tribesmen with all honourable +employment for which they are suited: +service in the army, in the frontier civil forces, +and in the Indian police or similar forces overseas, +and we should give labour and contracts as far as +possible to tribesmen for public works in their +vicinity. For the problem is largely economic. +Unless the lion gets other food he is bound to cast +hungry eyes on the lamb.</p> + +<p>(2) We should do all that is possible to establish +friendly relations with the tribal elders through +selected and sympathetic political officers, to give +them, by means of subsidies for service, an interest +in controlling the hot-bloods of their tribe, and, +where possible, to give them assistance in education +and enlightenment. We must remember that we +have duties to the tribes as well as rights against +them.</p> + +<p>(3) We should extend the <em>khassadar</em> or levy +system; that is, we should pay for tribal corps to +<a name="Page_98" id="Page_98"></a><span class="pagenum" title="98"></span>police their own borders, arming themselves and +providing their own ammunition and equipment. +In this way we give honourable employment and +secure an effective safeguard against raiders without +pouring more arms into tribal territory.</p> + +<p>(4) We must have efficient irregular civil forces, +militia, frontier constabulary, and police, well paid +and contented.</p> + +<p>(5) We should revert to the old system of a +separate frontier force in the army, specially +trained in the work of guarding the marches. +Those who remember the magnificent old Punjab +frontier force will agree with me in deploring its +abolition in pursuance of a scheme of army +reorganisation.</p> + +<p>(6) We should improve communications, telephones, +telegraphs, and lateral M.T. roads.</p> + +<p>(7) We should give liberal rewards for the interception +and destruction of raiding gangs, and the +rounding up of villages from which raids emanate.</p> + +<p>(8) We should admit that the Amir of Afghanistani +for religious reasons exercises a paramount +influence over our tribes, and we should get him to +use that influence for the maintenance of peace on +our common border. It has been the practise of +our statesmen to adopt the attitude that because +the Amir was by treaty precluded from interfering +with our tribes, therefore he must have nothing to +do with them. This is a short-sighted view. We +found during the Great War the late Amir’s influence, +particularly over the Mahsuds, of the greatest value, +when he agreed to use it on our behalf.</p> + +<p>(9) Finally, there is a suggestion afoot that the +<a name="Page_99" id="Page_99"></a><span class="pagenum" title="99"></span>settled districts of the North-West Frontier Province +should be re-amalgamated with the Punjab. +I have shown, I think, clearly, how inseparable are +the problems of the districts, the tribal area, and of +Afghanistan; and any attempt to place the districts +under a separate control could only mean friction, +inefficiency, and disaster. The proposal is, indeed, +little short of administrative lunacy. There is, +however, an underlying method in the madness +that has formulated it, namely, the self-interest +of a clever minority, which I need not now dissect. +I trust that if this proposal should go further it +will be stoutly resisted.</p> + + +<h3>Afghanistan</h3> + +<p>Let me now turn to Afghanistan. Generally +speaking, the story of our dealings with that +country has been a record of stupid, arrogant +muddle. From the days of the first Afghan war, +when an ill-fated army was despatched on its crazy +mission to place a puppet king, Shah Shuja, on the +throne of Afghanistan, our statesmen have, with +some notable exceptions, mishandled the Afghan +problem. And yet it is simple enough in itself. +For we want very little of Afghanistan, and she +does not really want much of us. All we want +from the Amir is good-neighbourliness; that he +should not allow his country to become the focus +of intrigue or aggression against us by Powers +hostile to us, and that he should co-operate with +us for the maintenance of peace on our common +border. All he wants of us is some assistance in +<a name="Page_100" id="Page_100"></a><span class="pagenum" title="100"></span>money and munitions for the internal and external +safeguarding of his realm, commercial and other facilities, +and honourable recognition, for the Afghan, +like the Indian, has a craving for self-respect and +the respect of others.</p> + +<p>Now, where our statesmen have failed is in +regarding Afghanistan as a petty little State to be +browbeaten and ordered about at our pleasure, +without recognising the very valuable cards that +the Amir holds against us. He sees his hand and +appraises it at its value. He knows, in the first +place, that nothing can be more embarrassing to us +than the necessity for another Afghan war, and +the despatch of a large force to the highlands of +Kabul, to sit there possibly for years as an army +of occupation, in a desolate country, incapable of +affording supplies for the troops, at enormous cost +which could never be recovered, and at the expense +of much health and life, with no clear-cut policy +beyond. He knows, in the second place, that such +a war would be the signal for the rising of practically +every tribe along our frontier. The cry of <em>Jehad</em> +would go forth, as in the third Afghan war, and +we should be confronted sooner or later with an +outburst from the Black Mountain to Baluchistan—a +formidable proposition in these days. He +knows, in the third place, that with Moslem feeling +strained as it is to-day on the subject of Turkey, +there would be sympathy for him in India, and +among the Moslem troops of the Indian army. +Now these are serious considerations, but I do not +suggest that they are so serious as to make us +tolerate for a moment an offensive or unreasonable +<a name="Page_101" id="Page_101"></a><span class="pagenum" title="101"></span>attitude on the part of the Amir. If the necessity +should be forced on us, which God forbid, we +should face the position with promptitude and +firmness and hit at once; and apart from an +advance into Afghanistan we have a valuable card +in the closing of the passes and the blockade of +that country.</p> + +<p>All I suggest is that in negotiating with Afghanistan, +we should remember these things and should +not attempt to browbeat a proud and sensitive +ruler, who, however inferior in the ordinary equipment +for regular war, holds such valuable assets +on his side. And my own experience is that the +Afghans are not unreasonable. Like every one +else, they will “try it on,” but if handled courteously, +kindly, with geniality, and, above all, with complete +candour, they will generally see reason. And remember +one thing. In spite of all that has happened, +our mistakes, our bluster, our occasional lapses +from complete disingenuousness, the Afghans still +like us. Moreover, their hereditary mistrust of +Russia still inclines them to lean on us. We have +lately concluded a treaty with Afghanistan—not +by any means a perfect treaty, but the best +certainly that could be secured in the circumstances, +and we have sent a Minister to Kabul, +Lt.-Colonel Humphrys, who was one of my officers +on the frontier. A better man for the post could +not, I believe, be found in the Empire. Unless +unduly hampered by a hectoring diplomacy from +Whitehall, he will succeed in establishing that +goodwill and mutual confidence which between +Governments is of more value than all the paper +<a name="Page_102" id="Page_102"></a><span class="pagenum" title="102"></span>engagements ever signed. One word more of the +Afghans. There is an idea that they are a treacherous +and perfidious people. This, I believe, is +wicked slander, so far as the rulers are concerned. +In 1857, during the Indian Mutiny, the Amir Dost +Muhammed was true to his bond, when he might +have been a thorn in our side; and during the +Great War the late Amir Halilullah, in the face of +appalling difficulties, maintained the neutrality of +his country, as he promised, and was eventually +murdered, a martyr to his own good faith to us.</p> + + +<h3>Internal Unrest</h3> + +<p>Let me now turn to our second question: internal +political unrest. In clubs and other places where +wise men in arm-chairs lay down the law about +affairs of state, one constantly hears expressions +of surprise and indignation that there should be +any unrest in India at all. “We have,” say the +die-hard wiseacres, “governed India jolly well and +jolly honestly, and the Indians ought to be jolly +grateful instead of kicking up all this fuss. If that +meddlesome Montagu had not put these wicked +democratic ideas into their heads, and stirred up +all this mud, we should have gone on quite comfortable +as before.” But if we face the facts squarely, +we shall see that the wonder is not that there has +been so much, but that there has been so comparatively +little unrest, and that India should, on +the whole, have waited so patiently for a definite +advance towards self-government.</p> + +<p>What are the facts? They are these. Partly +<a name="Page_103" id="Page_103"></a><span class="pagenum" title="103"></span>by commercial enterprise, partly by adroit diplomacy, +partly by accident, largely by the valour of +our arms, we have obtained dominion over the +great continent of India. We have ruled it for +more than a century through the agency of a +handful of Englishmen, alien in creed, colour, and +custom from the people whom they rule—men +who do not even make their permanent homes in +the land they administer. Now, however efficient, +however honest, however impartial, however disinterested +such a rule may be, it cannot obviously +be really agreeable to the peoples ruled. This is +the fundamental weakness of our position. That +our rule on these lines has lasted so long and has +been so successful is due not to the fact alone that +it has been backed by British bayonets, but rather +to the fact that it has been remarkably efficient, +honest, just, and disinterested—and, above all, +that we have in the past given and secured goodwill.</p> + +<p>Superimposed on this underlying irritant, there +have been of late years a number of other more +direct causes of unrest. Education, which we gave +to India and were bound to give, had inevitably +bred political aspiration, and an <em>intelligensia</em> had +grown up hungry for political rights and powers. +Simultaneously the voracious demands of a centralised +bureaucracy for reports and returns had +left the district officer little leisure for that close +touch with the people which in the past meant +confidence and goodwill. Political restlessness +had already for some years begun to manifest itself +in anarchical conspiracies and crimes of violence, +<a name="Page_104" id="Page_104"></a><span class="pagenum" title="104"></span>when the Great War began. In India, as elsewhere, +the reflex action of the war was a disturbing +element. High prices, stifled trade, high taxation, +nationalist longings and ideas of self-determination +and self-government served to reinforce subterranean +agitation.</p> + +<p>But throughout the war India not only remained +calm and restrained, but her actual contribution +to the war, in men and material, was colossal and +was ungrudgingly given. She had a right to expect +in return generous treatment; but what did she +get? She got the Rowlatt Bill. Now, of course, +there was a great deal of wicked, lying nonsense +talked by agitators about the provisions of the +Rowlatt Bill, and the people were grossly misled. +But the plain fact remains that when India had +emerged from the trying ordeal of the war, not +only with honour untarnished, but having placed +us under a great obligation, our first practical +return was to pass a repressive measure, for fear, +forsooth, that if it was not passed then it might be +pigeon-holed and forgotten. India asked for bread +and we gave her a stone—a stupid, blundering act, +openly deprecated at the time by all moderate +unofficial opinion in India. What was the result? +The Punjab disturbances and the preventive massacre +of the Jallianwala Bagh. I do not propose +to dwell on this deplorable and sadly mishandled +matter, save to say that so far from cowing agitation, +it has left a legacy of hate that it will take years to +wipe out; and that the subsequent action of a +number of ill-informed persons in raising a very +large sum of money for the officer responsible for +<a name="Page_105" id="Page_105"></a><span class="pagenum" title="105"></span>that massacre has further estranged Indians and +emphasised in their eyes the brand of their subjection.</p> + + +<h3>The Rise of Ghandi</h3> + +<p>To India, thus seething with bitterness over the +Punjab disturbances, there was added the Moslem +resentment over the fate of Turkey. I was myself +in London and Paris in a humble capacity at the +Peace Conference, and I know that our leading +statesmen were fully informed of the Moslem +attitude and the dangers of unsympathetic and +dilatory action in this matter. But an arrogant +diplomacy swept all warnings aside and scorned +the Moslem menace as a bogey. What was the +result? Troubles in Egypt, in Mesopotamia, +Kurdistan, Afghanistan, and the Khilifat movement +in India. Hindu agitators were not slow to exploit +Moslem bitterness, and for the first time there was +a genuine, if very ephemeral, <em>entente</em> between the +two great rival creeds.</p> + +<p>It was in this electric atmosphere that Ghandi, +emerging from his ascetic retirement, found himself +an unchallenged leader. Short of stature, frail, +with large ears, and a gap in his front teeth, he had +none of the outward appearance of dominance. +His appeal lay in the simplicity of his life and +character, for asceticism is still revered in the +East. But his intellectual equipment was mediocre, +his political ideas nebulous and impracticable to a +degree, his programme archaic and visionary; and +from the start he was doomed to fail. The <em>Hijrat</em> +<a name="Page_106" id="Page_106"></a><span class="pagenum" title="106"></span>movement which he advocated brought ruin to +thousands of Moslem homes; his attack on Government +educational establishments brought disaster +to many youthful careers; non-co-operation fizzled +out. Government servants would not resign their +appointments, lawyers would not cease to practise, +and title-holders, with a few insignificant exceptions, +would not surrender their titles; the “back +to the spinning-wheel” call did not attract, and the +continual failure of Ghandi’s predictions of the +immediate attainment of complete <em>Swaraj</em> or self-government, +which he was careful never to define, +like hope deferred turned the heart sick.</p> + +<p>From being a demi-god Ghandi gradually became +a bore, and when he was at last arrested, tragic to +relate, there was hardly a tremor of resentment +through the tired political nerves of India. The +arrest was indeed a triumph of wise timing that +does credit to the sagacity of the Government of +India. Had the arrest been effected when the name +of Ghandi was at its zenith, there would have been +widespread trouble and bloodshed. As it was, +people were only too glad to be rid of a gadfly that +merely goaded them into infructuous bogs.</p> + +<p>I apologise for this long excursus on the somewhat +threadbare subject of the causes of unrest in India. +But I want those here present to realise what potent +forces have been at work and to believe that the +Indian generally is not the ungrateful, black-hearted +seditionist he is painted by the reactionary +press. India is going through an inevitable stage +of political transition, and we must not hastily +judge her peoples—for the most part so gallant, +<a name="Page_107" id="Page_107"></a><span class="pagenum" title="107"></span>so kindly, so law-abiding, so lovable—by the +passing tantrums of political puberty.</p> + + +<h3>The Present Situation</h3> + +<p>As things stand at present, there is a remarkable +lull. It would be futile to predict whether it will +last. It is due in part, as I have suggested, to +general political weariness, in part to the drastic +action taken against the smaller agitating fry, in +part to the depletion of the coffers of the extremists, +in part to the fact that the extremists are quarrelling +amongst themselves as to their future programme. +Some are for continuing a boycott of the Councils; +others are for capturing all the seats and dominating +the legislature; others are for re-beating the +dead horse of non-co-operation. Meanwhile, with +disunion in the extremist camp, the Councils +conduct their business on moderate lines, and, so +far as one can judge, with marked temperance +and sanity.</p> + +<p>The work of the first Councils has indeed been +surprisingly good, and augurs well for the future. +India has not yet, of course, by any means grasped +the full significance of representative government. +The party system is still in embryo, although two +somewhat vague and nebulous parties calling +themselves the “Nationalists” and the “Democrats” +do exist. But these parties have no clear-cut +programme, and they do not follow the lead of +the Ministers, who are regarded, not as representing +the elected members of the Council, but as +newly-appointed additional members of the official +<a name="Page_108" id="Page_108"></a><span class="pagenum" title="108"></span>bureaucracy. There will doubtless in time be +gradual sorting of politicians into definite groups, +but there are two unbridgeable gulfs in the Indian +social system which must always militate against +the building up of a solid political party system: +first, the gulf between Hindu and Moslem, which +still yawns as wide as ever, and second, the gulf +between the Brahman and the “untouchables” +who, by the way, have found their fears that they +would be downtrodden under the new Councils +completely baseless.</p> + +<p>There are and must be breakers ahead. Some +we can see, and there are doubtless others still +bigger which we cannot yet glimpse over the welter +of troubled waters. What we can see is this: +first, there is a danger that unless Government and +the Councils together can before the next elections +in 1923-24 take definite steps towards the industrial +development and the self-defence of India, the +extremist party are likely to come in in full force +and to create a deadlock in the administration; +second, unless the Councils continue to accept a +fiscal policy in accordance with the general interests +of Great Britain and the Empire, there will be +trouble. The fiscal position is obscure, but it is +the crux, for the Councils can indirectly stultify +any policy distasteful to them, and this too may +mean a deadlock; third, there is a danger that +the Indianisation of the Services will advance much +more rapidly than was ever contemplated, or than +is desirable in the interests of India for many +years to come, for the simple reason that capable +young Englishmen of the right stamp will not, +<a name="Page_109" id="Page_109"></a><span class="pagenum" title="109"></span>without adequate guarantees for their future, accept +employment in India. Those guarantees can be +given satisfactorily by one authority alone, and +that is by the Indian Legislatures voicing popular +opinion. For a complex administration bristling +with technical questions, administrative, political, +and economic, it is essential that India should have +for many years to come the assistance of highly-educated +Britons with the tradition of administration +in their blood. The Councils will be wise to +recognise this and make conditions which will +secure for them in the future as in the past the best +stamp of adventurous Briton.</p> + +<p>Finally, the Montagu-Chelmsford scheme, though +a capable and conscientious endeavour to give +gradual effect to a wise and generous policy, has of +necessity its weak points. The system of diarchy—of +allotting certain matters to the bureaucratic +authority of the Viceroy and of the Provincial +Governors and other matters to the representatives +of the people—is obviously a stop-gap, which is +already moribund. The attempt to fix definite +periods at which further advances towards self-government +can be considered is bound to fail: +you cannot give political concessions by a stop-watch; +the advance will either be much more +rapid or much slower than the scheme anticipates. +Again, the present basis of election is absurdly +small, but any attempt to broaden it must tend +towards adult suffrage, which in itself would appear +impracticable with a population of over 200 +millions.</p> + + +<h3><a name="Page_110" id="Page_110"></a><span class="pagenum" title="110"></span>Our Duty To India</h3> + +<p>It is a mistake, however, in politics to look too +far ahead. Sufficient unto the day. For the time +being we may be certain of one thing, and that is +that we cannot break the Indian connection and +leave India. Both our interests and our obligations +demand that we should remain at the helm of +Indian affairs for many years to come. That +being so, let us accept our part cheerfully and with +goodwill as in the past. Let us try to give India +of our best, as we have done heretofore. Let +us regive and regain, above all things, goodwill. +Let us not resent the loss of past privilege, the +changes in our individual status, and let us face +the position in a practical and good-humoured +spirit. Let us abandon all talk of holding India +by the sword, as we won it by the sword—because +both propositions are fundamentally false. Let +us realise that we have held India by integrity, +justice, disinterested efficiency—and, above all, by +goodwill—and let us continue to co-operate with +India in India for India on these same lines.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_111" id="Page_111"></a><span class="pagenum" title="111"></span><a name="EGYPT" id="EGYPT"></a>EGYPT</h2> + +<h3>By J.A. Spender</h3> + +<h4>Editor of the <em>Westminster Gazette</em>, 1896 to 1922; Member +of the Special Mission to Egypt, 1919-1920.</h4> + + +<p>Mr. Spender said:—The Egyptian problem resembles +the Indian and all other Eastern problems +in that there is no simple explanation or solution +of it. Among the many disagreeable surprises +which awaited us after the war, none was more +disagreeable than the discovery in March, 1919, that +Egypt was in a state of rebellion. For years +previously we had considered Egypt a model of +imperial administration. We had pulled her out +of bankruptcy and given her prosperity. We had +provided her with great public works which had +enriched both pasha and fellah. We had scrupulously +refrained from exploiting her in our own +interests. No man ever worked so disinterestedly +for a country not his own as Lord Cromer for +Egypt, and if ever a Nationalist movement could +have been killed by kindness, it should have been +the Egyptian. Nor were the Egyptian people +ungrateful. I have talked to Egyptian Nationalists +of all shades, and seldom found any who did not +handsomely acknowledge what Great Britain had +done for Egypt, but they asked for one thing more, +which was that she should restore them their +independence. “We won it from the Turks,” +<a name="Page_112" id="Page_112"></a><span class="pagenum" title="112"></span>they said, “and we cannot allow you to take it +from us.”</p> + +<p>This demand was no new thing, but it was +brought to a climax by events during and after the +war. When the war broke out, our representative +in Egypt was still only “Agent and Consul-General,” +and was theoretically and legally on the same +footing with the representative of all other Powers; +when it ended, he was “High Commissioner,” +governing by martial law under a system which +we called a “protectorate.” This to the Egyptians +seemed a definite and disastrous change for the +worse. Throughout the forty years of our occupation +we have most carefully preserved the theory +of Egyptian independence. We have occupied +and administered the country, but we have never +annexed it or claimed it to be part of the British +Empire. We intervened in 1882 for the purpose +of restoring order, and five years later we offered +to withdraw, and were only prevented from carrying +out our intention because the Sultan of Turkey declined, +at the instigation of another Power, to sign +the Firman which gave us the right of re-occupying +the country if order should again be disturbed. +In the subsequent years we gave repeated assurances +to Egyptians and to foreign Powers that we had +no intention of altering the status of the country +as defined in its theoretical government by Khedive, +Egyptian Ministers, and Egyptian Council or +Assembly. And though it was true that in virtue +of the army of occupation we were in fact supreme, +by leaving the forms of their government untouched +and refraining from all steps to legalise our position +<a name="Page_113" id="Page_113"></a><span class="pagenum" title="113"></span>we reassured the Egyptians as to our ultimate +objects.</p> + +<p>In the eyes of the Egyptians the proclamation +of the Protectorate and the conversion of the +“Agent and Consul-General” into a “High Commissioner” +armed with the weapons of martial +law seriously prejudiced this situation, and though +they acquiesced for the period of the war, they +were determined to have a settlement with us +immediately it was over, and took us very seriously +at our word when we promised to review the whole +situation when that time came. The truth about +the “Protectorate” was that we adopted it as a +way out of the legal entanglement which would +otherwise have converted the Egyptians into enemy +aliens when their suzerain, the Sultan of Turkey, +entered the war against us, and we did it deliberately +as the preferable alternative to annexing the +country. But we have neither explained to the +Egyptians nor made clear to ourselves what exactly +we meant by it, and in the absence of explanations +it was interpreted in Egypt as a first step to the +extinction of Egyptian nationality.</p> + + +<h3>After-War Mistakes</h3> + +<p>Had we acted wisely and expeditiously at the +end of the war we might even then have avoided +the trouble that followed. But when Egyptian +ministers asked leave to come to London in +December, 1918, we answered that the time was +not opportune for these discussions, and when the +Nationalist leaders proposed to send a delegation, +<a name="Page_114" id="Page_114"></a><span class="pagenum" title="114"></span>we said that no good purpose could be served by +their coming to Europe. This heightened the +alarm, and the Nationalists retorted by raising +their claims from “complete autonomy” to “complete +independence,” and started a violent agitation. +The Government retaliated by deporting Zaghlul +to Malta, whereupon the country broke into +rebellion. Lord Allenby now came upon the scene, +and, while suppressing the rebellion, released +Zaghlul and gave him and his delegation the permission +to go to Europe which had been refused in +January. It was now decided to send out the +Milner Mission, but there was a further delay of +seven months before it started, and during all that +time agitation continued.</p> + +<p>When the Mission arrived it quickly discovered +that there was no possible “Constitution under the +Protectorate” which would satisfy the Egyptians, +and that the sole alternatives were further suppression +or the discovery of some means of settlement +which dispensed with the Protectorate. The +Mission unanimously came to the conclusion that +though the first was mechanically possible if the +cost and discredit were faced, the second was not +only feasible but far preferable, and that the right +method was a treaty of Alliance between Great +Britain and Egypt, recognising Egypt as a sovereign +State, but affording all necessary guarantees for +imperial interests. Working on those lines the +Mission gradually broke down the boycott proclaimed +against them, convinced the Egyptians +of their goodwill, induced all parties of Egyptian +Nationalists to come to London, and there negotiated +<a name="Page_115" id="Page_115"></a><span class="pagenum" title="115"></span>the basis of the Treaty which was described +in the Report. The main points were that there +must be a British force in the country—not an +army of occupation, but a force to guard Imperial +communications—that there must be British liaison +officers for law and order and finance, that the +control of foreign policy must remain in the hands +of Great Britain, and that the Soudan settlement +of 1898 must remain untouched, but that with +these exceptions the Government of Egypt should +be in fact what it had always been in theory: a +Government of Egyptians by Egyptians.</p> + +<p>Had the Government accepted this in December, +1920 (instead of in March, 1922), and instructed +Lord Milner to go forward and draft a treaty on +this basis, it is extremely probable that a settlement +would have been reached in a few weeks; but +Ministers, unhappily, were unable to make up +their minds, and there was a further delay of three +months before the Egyptian Prime Minister, Adli +Pasha, was invited to negotiate with the Foreign +Office. By this time the Nationalist parties which +the Mission had succeeded in uniting on a common +platform had fallen apart, and the extremists once +more started a violent agitation and upbraided +the moderates for tamely waiting on the British +Government, which had evidently meant to deceive +them. The situation had, therefore, changed again +for the worse when Adli came to London in April, +1921, and it was made worse still by what followed. +The negotiations dragged over six months, and +finally broke down for reasons that have never +been explained, but the probability is that Egypt +<a name="Page_116" id="Page_116"></a><span class="pagenum" title="116"></span>had now got entangled in Coalition domestic politics, +and that the “Die-Hards” claimed to have their +way in Egypt in return for their consent to the +Irish settlement. The door was now banged in the +face of all schools of Egyptian Nationalists, and +Lord Allenby was instructed to send to the Sultan +the unhappy letter in which Egypt was peremptorily +reminded that she was a “part of the communications +of the British Empire,” and many other +things said which were specially calculated to +wound Egyptian susceptibilities.</p> + +<p>The Egyptian Prime Minister resigned, and for +the next five months Lord Allenby endeavoured to +govern the country by martial law without an +Egyptian Ministry. Then he came to London with +the unanimous support of British officials in Egypt +to tell the Government that the situation was +impossible and a settlement imperative. The +Government gave way and British policy was +again reversed, but three opportunities had now +been thrown away, and at the fourth time of asking +the difficulties were greatly increased. The Nationalists +were now divided and the Moderates in danger +of being violently attacked if they accepted a +moderate solution. It was found necessary to +deport Zaghlul Pasha and to put several of his +chief adherents on trial. Suspicions had been +aroused by the delays and vacillations of the +British Government. A settlement by treaty was +now impossible, and Lord Allenby had to give +unconditionally the recognition of sovereignty +which the Mission intended to be part of the treaty, +putting the Egyptians under an honourable pledge +<a name="Page_117" id="Page_117"></a><span class="pagenum" title="117"></span>to respect British rights and interests. In the +circumstances there was nothing else to do, but it +is greatly to be desired that when the constitution +has been completed and the new Assembly convened, +an effort should be made to revert to the +method of the treaty which particularly suited +the Egyptian character and would be regarded +as a binding obligation by Egyptians.</p> + + +<h3>The Hope of the Future</h3> + +<p>In regard to the future, there is only one thing +to do and that is to work honestly to its logical +conclusion the theory now adopted, that Egypt is +a self-governing independent State. Egyptians +must be encouraged to shoulder the full responsibilities +of a self-governing community. It would +be folly to maintain a dual system which enabled +an Egyptian Government to shunt the difficult +or disagreeable part of its task on to a British High +Commissioner. Whatever the system of Government, +there is no escape for either party from the +most intimate mutual relations. Geography and +circumstances decree them, but there is no necessary +clash between the imperial interests which require +us to guard the highway to the East that runs +through Egyptian territory, and the full exercise +of their national rights by Egyptians. Egyptians +must remember that for many years to come the +world will hold us responsible for law and order and +solvency in Egypt, and we on our part must remember +that Egyptians have the same pride in +their country as other peoples, and that they will +<a name="Page_118" id="Page_118"></a><span class="pagenum" title="118"></span>never consent to regard it as merely and primarily +“a communication of the British Empire.” In any +wise solution of the question any sudden breach +with the past will be avoided, and Egyptians will +of their own free will enlist the aid of British officials +who have proved their devotion to the country +by loyal and skilful service. The hope of the +future lies in substituting a free partnership for +a domination of one race by the other, and with +a genial and good-humoured people, such as the +Egyptians essentially are, there should be no +difficulty in restoring friendship and burying past +animosities. But there must be a real determination +on both sides to make Egyptian independence +a success and no disposition on either to give merely +a reluctant consent to the conditions agreed upon +by them and then to throw the onus of failure on +the others.</p> + +<p>I deeply regret the schism between the different +schools of Nationalists in Egypt. As we have seen +in Ireland, Nationalism is threatened from within +as well as from without, and it is a great misfortune +that in settling the Egyptian problem we missed +the moment in 1920 when the different Nationalist +parties were all but united on a common platform. +Extremist leaders have the power of compelling +even their friends to deport them and treat them +as enemies, and I assume that Zaghlul put Lord +Allenby under this compulsion, when he decided +that his deportation was necessary. But Zaghlul +was one of the few Nationalist leaders who were +of peasant origin, and his followers stand for +something that needs to be strongly represented +<a name="Page_119" id="Page_119"></a><span class="pagenum" title="119"></span>in the Government if it is not to take its complexion +merely from the towns and the wealthy interests. +The fellah is a very different man from what he was +in the days of Ismail, and it is improbable that he +will again submit to oppression as his forefathers +did but it is eminently desirable that there should +be in the Government men whom he would accept +as leaders and whom he could trust to speak for +him.</p> + +<p>Above all, it is to be hoped that, having conceded +the independence of Egypt, we shall not slip back +into governing the country by martial law with +the aid of one party among the Egyptians. That +would be merely an evasion of the difficulty and a +postponement of troubles. There are a good many +difficulties yet to be overcome, and the progress +of events will need careful watching by Liberals in +and out of the House of Commons, but if at length +we steer a straight course and bring political good +sense to the details of the problem, there is no +reason why we should not satisfy the Egyptians +and put Anglo-Egyptian relations on a good and +enduring basis. In dealing with Egypt as with all +Eastern countries, it should constantly be borne +in mind that manners, character, and personality +are a chief part of good politics. To a very large +extent the estrangement has been caused by a +failure to understand and respect the feelings of +the Egyptian people, and here, as in India, it is +important to understand that the demand of the +Eastern man is not only for self-government, but +also for a new status which will enable him to maintain +his self-respect in his dealings with the West.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_120" id="Page_120"></a><span class="pagenum" title="120"></span><a name="THE_MACHINERY" id="THE_MACHINERY"></a>THE +MACHINERY OF GOVERNMENT</h2> + +<h3>By Ramsay Muir</h3> + +<h4>Professor of Modern History in the University of +Manchester, 1913 to 1921.</h4> + + +<p>Mr. Ramsay Muir said:—One of the most marked, +and one of the most ominous, features of the political +situation to-day is that there is an almost universal +decline of belief in and respect for our system of +government. This undermining of the confidence +that a healthy community ought to feel in its +institutions is a perturbing fact which it is the +plain duty of all good Liberals to consider seriously. +We need not be deterred by the old gibe that +Liberalism has always cared more about political +machinery than about social reorganisation. The +gibe was never true. But, in any case, no projects +of social reorganisation have much chance of +success unless the political machinery by means of +which they have to be carried into effect is working +efficiently. Moreover, since most of the projects +of social reform which are being urged upon our +attention involve an enlargement of the activities +of the State, it is obvious that we shall be running +the risk of a breakdown unless we make sure that +the machinery of the State is capable of meeting +the demands which are made upon it. We must +be satisfied that our engine has sufficient power +<a name="Page_121" id="Page_121"></a><span class="pagenum" title="121"></span>before we require it to draw a double load. In +truth, one reason why the engine of government +is not working well is that it has been required to +do a great deal more work than it was designed for. +The time has come to consider carefully the character +and capacity of our machinery of government in +view of the increased demands which are certain +to be made upon it in the future.</p> + +<p>Our national political system may be divided +into two parts. On the one hand, there is the +working machine, which goes on, year in, year out, +whether Parliament is sitting or not, and which +would still go on quite well for a time if Parliament +never met again. We call it the Government, and +we habitually and rightly hold it responsible for +every aspect of national policy and action, for +legislation and finance as well as for foreign policy +and internal administration. On the other hand, +there is what Burke used to call “the control on +behalf of the nation,” mainly exercised through +Parliament, whose chief function is to criticise +and control the action of Government, and to +make the responsibility of Government to the +nation a real and a felt responsibility. The discontents +of to-day apply to both parts of the system, +and I propose to deal with them in turn, first +inquiring what is wrong with the working machine +of government and how it can be amended, and +then turning to consider how far the control on +behalf of the nation is working badly, and how it +can be made more efficient.</p> + +<p>In what I have called the “working machine” +of government there are two distinct elements. +<a name="Page_122" id="Page_122"></a><span class="pagenum" title="122"></span>First, there is the large, permanent, professional +staff, the Civil Service; secondly, there is the +policy-directing body, the Cabinet. Both of these +are the objects of a great deal of contemporary +criticism. On the one hand, we are told that we +are suffering from “bureaucracy,” which means +that the permanent officials have too much independent +and uncontrolled, or imperfectly controlled, +authority. On the other hand, we are told that +we are suffering from Cabinet dictatorship, or, +alternatively, that the Cabinet system is breaking +down and being replaced by the autocracy of the +Prime Minister. There is a good deal of <em>prima +facie</em> justification for all these complaints.</p> + + +<h3>The Growth of the Civil Service</h3> + +<p>First, as to bureaucracy. It is manifest that +there has been an immense increase in the number, +the functions, and the power of public officials. +This is not merely due to the war. It has been +going on for a long time—ever since, in fact, we +began the deliberate process of national reconstruction +in the years following 1832. In itself +this increase has not been a bad thing; on the +contrary, it has been the only possible means of +carrying into effect the great series of reforms +which marked the nineteenth century. And may +I here underline the fact that we Liberals, in +particular, have no right to criticise the process, +since we have been mainly responsible for it, at +any rate in all its early stages. When our predecessors +set up the first Factory Inspectors in +<a name="Page_123" id="Page_123"></a><span class="pagenum" title="123"></span>1833, and so rendered possible the creation of a +whole code of factory laws; when they created +the first rudimentary Education Office in 1839, and +so set to work the men who have really moulded +our national system of education; when they set +up a bureaucratic Poor Law Board in 1841, which +shaped our Poor Law Policy, and a Public Health +Board in 1848, which gradually worked out our +system of Public Health—when they did these +things, they were beginning a process which has +been carried further with every decade. If you +like, they were laying the foundations of bureaucracy; +but they were also creating the only +machinery by which vast, beneficial and desperately +needed measures of social reform could be carried +into effect.</p> + +<p>And there is yet another thing for which Liberalism +must assume the responsibility. When +Gladstone instituted the Civil Service Commission +in 1853, and the system of appointment by competitive +examination in 1870, he freed the Civil +Service from the reputation for corruption and +inefficiency which had clung to it; and he ensured +that it should attract, as it has ever since done, +much of the best intellect of the nation. But this +very fact inevitably increased the influence of the +Civil Service, and encouraged the expansion of its +functions. If you put a body of very able men +in charge of a department of public service, it is +certain that they will magnify their office, take a +disproportionate view of its claims, and incessantly +strive to increase its functions and its staff. This +is not only natural, it is healthy—so long as the +<a name="Page_124" id="Page_124"></a><span class="pagenum" title="124"></span>process is subjected to efficient criticism and control.</p> + +<p>But the plain fact is that the control is inadequate. +The vast machine of government has outgrown the +power of the controlling mechanism.</p> + +<p>We trust for the control of the immense bureaucratic +machine, almost entirely to the presence, at +the head of each department, of a political minister +directly responsible to Parliament. We hold the +minister responsible for everything that happens +in his office, and we regard this ministerial responsibility +as one of the keystones of our system. +But when we reflect that the minister is distracted +by a multitude of other calls upon his time, and that +he has to deal with officials who are generally his +equals in ability, and always his superiors in special +knowledge; when we realise how impossible it +is that a tithe of the multifarious business of a +great department should come before him, and that +the business which does come before him comes +with the recommendations for action of men who +know ten times more about it than he does, it must +be obvious that the responsibility of the minister +must be quite unreal, in regard to the normal +working of the office. One thing alone he can do, +and it is an important thing, quite big enough to +occupy his attention. He can make sure that the +broad policy of the office, and its big new departures, +are in accord with the ideas of the majority in +Parliament, and are co-ordinated, through the +Cabinet, with the policy of the other departments. +That, indeed, is the true function of a minister; +and if he tries to make his <a name="typo_2" id="typo_2"></a>responsibility real beyond +that, he may easily neglect his main work. Beyond +<a name="Page_125" id="Page_125"></a><span class="pagenum" title="125"></span>this consideration of broad policy, I do not hesitate +to say that the theory of ministerial responsibility +is not a check upon the growth of bureaucracy, +but is rather the cover under which bureaucracy +has grown up. For the position of the minister +enables him, and almost compels him, to use his +influence in Parliament for the purpose of diverting +or minimising parliamentary criticism.</p> + + +<h3>A Check upon Bureaucracy</h3> + +<p>How can this growth of inadequately controlled +official power be checked? Is it not apparent that +this can only be done if a clear distinction is drawn +between the sphere of broad policy, in which the +minister both can be and ought to be responsible, +and the sphere of ordinary administrative work for +which the minister cannot be genuinely responsible? +If that distinction is accepted, it ought not to be +impossible for Parliament without undermining +ministerial or cabinet responsibility, to devise a +means of making its control over the ordinary +working of the departments effective, through a +system of committees or in other ways.</p> + +<p>The current complaints of bureaucracy, however, +are not directed mainly against the ineffectiveness +of the machinery of control, but against +the way in which public work is conducted by +government officials—the formalism and red-tape +by which it is hampered, the absence of elasticity +and enterprise; and the methods of government +departments are often compared, to their disadvantage, +with those of business firms. But the +<a name="Page_126" id="Page_126"></a><span class="pagenum" title="126"></span>comparison disregards a vital fact. The primary +function of a government department is not creative +or productive, but regulative. It has to see that +laws are exactly carried out, and that public funds +are used for the precise purposes for which they +were voted; and for this kind of work a good deal +of red-tape is necessary. Moreover, it is essential +that those who are charged with such functions +should be above all suspicion of being influenced +by fear or favour or the desire to make profit; and +for this purpose fixed salaries and security of tenure +are essential.</p> + +<p>In short, the fundamental principles upon which +government departments are organised are right +for the regulative functions which they primarily +exist to perform. But they are altogether wrong +for creative and productive work, which demands +the utmost elasticity, adaptability, and freedom for +experiment. And it is just because the ordinary +machinery of government has been used on a large +scale for this kind of work that the outcry against +bureaucracy has recently been so vehement. It +is not possible to imagine a worse method of conducting +a great productive enterprise than to put +it under the control of an evanescent minister +selected on political grounds, and supported by a +body of men whose work is carried on in accordance +with the traditions of the Civil Service.</p> + +<p>If we are to avoid a breakdown of our whole +system, we must abstain from placing productive +enterprises under the control of the ordinary +machinery of government—Parliament, responsible +political ministers, and civil service staffs. But it +<a name="Page_127" id="Page_127"></a><span class="pagenum" title="127"></span>does not follow that no productive concern ought +ever to be brought under public ownership and +withdrawn from the sphere of private enterprise. +As we shall later note, such concerns can, if it be +necessary, be organised in a way which would +avoid these dangers.</p> + + +<h3>The Cabinet</h3> + +<p>We turn next to the other element in the working +machine of government, the Cabinet, or policy-directing +body, which is the very pivot of our +whole system. Two main functions fall to the +Cabinet. In the first place, it has to ensure an +effective co-ordination between the various departments +of government; in the second place, it is +responsible for the initiation and guidance of +national policy in every sphere, subject to the +watchful but friendly control of Parliament.</p> + +<p>Long experience has shown that there are several +conditions which must be fulfilled if a Cabinet is +to perform these functions satisfactorily. In the +first place, its members must, among them, be able +to speak for every department of government; +failing this, the function of co-ordination cannot +be effectively performed. This principle was discarded +in the later stages of the war, when a small +War Cabinet was instituted, from which most of +the ministers were excluded. The result was +confusion and overlapping, and the attempt to +remedy these evils by the creation of a staff of +<em>liaison</em> officers under the control of the Prime +Minister had very imperfect success, and in some +<a name="Page_128" id="Page_128"></a><span class="pagenum" title="128"></span>respects only added to the confusion. In the +second place, the Cabinet must be coherent and +homogeneous, and its members must share the same +ideals of national policy. National business cannot +be efficiently transacted if the members of the +Cabinet are under the necessity of constantly +arguing about, and making compromises upon, +first principles. That is the justification for drawing +the members of a Cabinet from the leaders +of a single party, who think alike and understand +one another’s minds. Whenever this condition +has been absent, confusion, vacillation and +contradiction have always marked the conduct +of public affairs, and disastrous results have +followed.</p> + +<p>In the third place, the procedure of the Cabinet +must be intimate, informal, elastic, and confidential; +every member must be able to feel that he has +played his part in all the main decisions of policy, +whether they directly concern his department or +not, and that he is personally responsible for these +decisions. Constitutional usage has always prescribed +that it is the duty of a Cabinet Minister +to resign if he differs from his colleagues on any +vital matter, whether relating to his department +or not, and this usage is, in truth, the main safeguard +for the preservation of genuine conjoint +responsibility, and the main barrier against irresponsible +action by a Prime Minister or a clique. +When the practice of resignation in the sense of +giving up office is replaced by the other kind of +resignation—shrugging one’s shoulders and letting +things slide—the main <a name="typo_3" id="typo_3"></a>virtue of Cabinet +<a name="Page_129" id="Page_129"></a><span class="pagenum" title="129"></span>government has been lost. In the fourth place, in +order that every minister may fully share in every +important discussion and decision, it is essential +that the Cabinet should be small. Sir Robert Peel, +in whose ministry of 1841-6 the system probably +reached perfection, laid it down that nine was the +maximum number for efficiency, because not +more than about nine men can sit round a table in +full view of one another, all taking a real share in +every discussion. When the membership of a +Cabinet largely exceeds this figure, it is inevitable +that the sense of joint and several responsibility +for every decision should be greatly weakened.</p> + + +<h3>Modern Changes in the Cabinet</h3> + +<p>I do not think any one will deny that the Cabinet +has in a large degree lost these four features which +we have laid down as requisite for full efficiency. +The process has been going on for a long time, but +during the last six years it has been accelerated so +greatly that the Cabinet of to-day is almost unrecognisably +different from what it was fifty years +ago. To begin with, it has grown enormously in +size, owing to the increase in the number of departments +of government. This growth has markedly +diminished the sense of responsibility for national +policy as a whole felt by the individual members, +and the wholesome practice of resignation has +gone out of fashion. It has led to frequent failures +in the co-ordination of the various departments, +which are often seen working at cross purposes. +It has brought about a new formality in the +<a name="Page_130" id="Page_130"></a><span class="pagenum" title="130"></span>proceedings of the Cabinet, in the establishment +of a Cabinet Secretariat.</p> + +<p>The lack of an efficient joint Cabinet control has +encouraged a very marked and unhealthy increase +in the personal authority of the Prime Minister +and of the clique of more intimate colleagues +by whom he is surrounded; and this is strengthened +by the working of the new Secretariat. All +these unhealthy features have been intensified by +the combination of the two strongest parties in +Parliament to form a coalition; for this has deprived +the Cabinet of homogeneity and made it the scene +not of the definition of a policy guided by clear +principles, but rather the scene of incessant argument, +bargaining, and compromise on fundamentals. +Finally, the responsibility of the Cabinet to Parliament +has been gravely weakened; it acts as the +master of Parliament, not as its agent, and its +efficiency suffers from the fact that its members +are able to take their responsibility to Parliament +very lightly.</p> + +<p>All these defects in the working of the Cabinet +system have been much more marked since the +war than at any earlier time. But the two chief +among them—lessened coherence due to unwieldiness +of size, and diminished responsibility to Parliament—were +already becoming apparent during +the generation before the war. On the question of +responsibility to Parliament we shall have something +to say later. But it is worth while to ask +whether there is any means whereby the old +coherence, intimacy and community of responsibility +can be restored. If it cannot be restored, the +<a name="Page_131" id="Page_131"></a><span class="pagenum" title="131"></span>Cabinet system, as we have known it, is doomed. +I do not think that it can be restored unless +the size of the Cabinet can be greatly reduced, +without excluding from its deliberations a responsible +spokesman for each department of government.</p> + +<p>But this will only be possible if a considerable +regrouping of the great departments can be +effected. I do not think that such a regrouping +is impracticable. Indeed, it is for many reasons +desirable. If it were carried out, a Cabinet might +consist of the following members, who would +among them be in contact with the whole range of +governmental activity. There would be the Prime +Minister; there would be the Chancellor of the +Exchequer, responsible for national finance; there +would be the Minister for Foreign Affairs; there +would be a Minister for Imperial Affairs, speaking +for a sub-Cabinet which would include Secretaries +for the Dominions, for India, and for the Crown +Colonies and Protectorates; there would be a +Minister of Defence, with a sub-Cabinet including +Ministers of the Navy, the Army, and the Air +Force; there would be a Minister for Justice and +Police, performing most of the functions both of +the Home Office and of the Lord Chancellor, who +would cease to be a political officer and be able +to devote himself to his judicial functions; there +would be a Minister of Agriculture, Industry, and +Commerce, with a sub-Cabinet representing the +Board of Trade, the Board of Agriculture, the +Ministry of Mines, the Ministry of Labour, and +perhaps other departments.</p> + +<p><a name="Page_132" id="Page_132"></a><span class="pagenum" title="132"></span>Ministers of Public Health and of Education +would complete the list of active administrative +chiefs; but one or two additional members, not +burdened with the charge of a great department +might be added, such as the Lord President of the +Council, and one of these might very properly be +a standing representative upon the Council of the +League of Nations. The heads of productive +trading departments—the Post Office and the +Public Works Department—should, I suggest, be +excluded from the Cabinet, and their departments +should be separately organised in such a way as +not to involve a change of personnel when one party +succeeded another in power. These departments +have no direct concern with the determination of +national policy.</p> + +<p>On such a scheme we should have a Cabinet of +nine or ten members, representing among them all +the departments which are concerned with regulative +or purely governmental work. And I suggest that +a rearrangement of this kind would not only restore +efficiency to the Cabinet, but would lead to very +great administrative reforms, better co-ordination +between closely related departments, and in many +respects economy. But valuable as such changes +may be, they would not in themselves be sufficient +to restore complete health to our governmental +system. In the last resort this depends upon the +organisation of an efficient and unresting system +of criticism and control.</p> + + +<h3><a name="Page_133" id="Page_133"></a><span class="pagenum" title="133"></span>The House of Commons</h3> + +<p>In any modern State the control of the action +of Government is largely wielded by organs not +formally recognised by law—by the general movement +of public opinion; by the influence of what is +vaguely called “the city”; by the resolutions of +such powerful bodies as trade union congresses, +federations of employers, religious organisations, +and propagandist bodies of many kinds; and, above +all, by the Press. No review of our system would +be complete without some discussion of these +extremely powerful and in some cases dangerous +influences. We cannot, however, touch upon +them here. We must confine ourselves to the +formal, constitutional machinery of national control +over the actions of Government, that is, to Parliament, +as the spokesman of the nation.</p> + +<p>An essential part of any full discussion of this +subject would be a treatment of the Second Chamber +problem. But that would demand a whole hour +to itself; and I propose to pass it over for the +present, and to ask you to consider the perturbing +fact that the House of Commons, which is the very +heart of our system, has largely lost the confidence +and belief which it once commanded.</p> + +<p>Why has the House of Commons lost the confidence +of the nation? There are two main reasons, +which we must investigate in turn. In the first +place, in spite of the now completely democratic +character of the electorate, the House is felt to +be very imperfectly representative of the national +<a name="Page_134" id="Page_134"></a><span class="pagenum" title="134"></span>mind. And in the second place, it is believed to +perform very inefficiently its primary function of +criticising and controlling the action of Government.</p> + +<p>First of all, why do men vaguely feel that the +House of Commons is unrepresentative? I think +there are three main reasons. The first is to be +found in the method of election. Since 1885 the +House has been elected by equal electoral districts, +each represented by a single member. Now, if we +suppose that every constituency was contested by +two candidates only, about 45 per cent. of the +voters must feel that they had not voted for +anybody who sat at Westminster; while many of +the remaining 55 per cent. must feel that they had +been limited to a choice between two men, neither +of whom truly represented them. But if in many +constituencies there are no contests, and in many +others there are three or more candidates, the +number of electors who feel that they have not +voted for any member of the House may rise to +60 per cent. or even 70 per cent. of the total.</p> + +<p>The psychological effect of this state of things +must be profound. And there is another consideration. +The very name of the House of Commons +(Communes, not common people) implies that it +represents organised communities, with a character +and personality and tradition of their own—boroughs +or counties. So it did until 1885. Now +it largely represents totally unreal units which +exist only for the purpose of the election. The only +possible means of overcoming these defects of the +single member system is some mode of proportional +representation—perhaps qualified by the retention +<a name="Page_135" id="Page_135"></a><span class="pagenum" title="135"></span>of single members in those boroughs or counties +which are just large enough to be entitled to one +member.</p> + +<p>The main objection taken to proportional representation +is that it would probably involve +small and composite majorities which would not +give sufficient authority to ministries. But our +chief complaint is that the authority of modern +ministries is too great, their power too unchecked. +In the middle of the nineteenth century, when our +system worked most smoothly, parties <em>were</em> composite, +and majorities were small—as they usually +ought to be, if the real balance of opinion in the +country is to be reflected. The result was that the +control of Parliament over the Cabinet was far +more effective than it is to-day; the Cabinet +could not ride roughshod over the House; and +debates really influenced votes, as they now scarcely +ever do. The immense majorities which have +been the rule since 1885 are not healthy. They are +the chief cause of the growth of Cabinet autocracy. +And they are due primarily to the working of the +single-member constituency.</p> + +<p>The second ground of distrust is the belief that +Parliament is unduly dominated by party; that its +members cannot speak and vote freely; that the +Cabinet always gets its way because it is able to +hold over members, <em>in terrorem</em>, the threat of a +general election, which means a fine of £1000 a +head; and that (what creates more suspicion than +anything) the policy of parties is unduly influenced +by the subscribers of large amounts to secret party +funds. I am a profound believer in organised +<a name="Page_136" id="Page_136"></a><span class="pagenum" title="136"></span>parties as essential to the working of our system. +But I also believe that there is real substance in +these complaints, though they are often exaggerated. +What is the remedy? First, smaller majorities, +and a greater independence of the individual +member, which would follow from a change in the +methods of election. And, secondly, publicity of +accounts in regard to party funds. There is no +reason why an honest party should be ashamed of +receiving large gifts for the public ends it serves, +and every reason why it should be proud of receiving +a multitude of small gifts. I very strongly hold +that in politics, as in industry, the best safeguard +against dishonest dealings, and the surest means +of restoring confidence, is to be found in the policy +of “Cards on the table.” Is there any reason why +we Liberals should not begin by boldly adopting, +in our own case, this plainly Liberal policy?</p> + + +<h3>Representation of “Interests”</h3> + +<p>There is a third reason for dissatisfaction with +the composition of the House of Commons, which +has become more prominent in recent years. It is +that, increasingly, organised interests are making +use of the deficiencies of our electoral system to +secure representation for themselves. If I may take +as instances two men whom, in themselves, everybody +would recognise as desirable members of the +House, Mr. J.H. Thomas plainly is, and is bound +to think of himself as, a representative of the +railwaymen rather than of the great community of +Derby, while Sir Allan Smith as plainly represents +<a name="Page_137" id="Page_137"></a><span class="pagenum" title="137"></span>engineering employers rather than Croydon. There +used to be a powerful trade which chose as its motto +“Our trade is our politics.” Most of us have +regarded that as an unsocial doctrine, yet the +growing representation of interests suggests that +it is being widely adopted.</p> + +<p>Indeed, there are some who contend that we +ought frankly to accept this development and +universalise it, basing our political organisation +upon what they describe (in a blessed, Mesopotamic +phrase) as “functional representation.” The doctrine +seems to have, for some minds, a strange +plausibility. But is it not plain that it could not be +justly carried out? Who could define or enumerate +the “functions” that are to be represented? +If you limit them to economic functions (as, in +practice, the advocates of this doctrine do), will +you provide separate representation, for example, +for the average-adjusters—a mere handful of +men, who nevertheless perform a highly important +function? But you cannot thus limit functions +to the economic sphere without distorting your +representation of the national mind and will. +If you represent miners merely as miners, you +misrepresent them, for they are also Baptists or +Anglicans, dog-fanciers, or lovers of Shelley, prize-fighters, +or choral singers. The notion that you +can represent the mind of the nation on a basis of +functions is the merest moonshine. The most you +can hope for is to get a body of 700 men and women +who will form a sort of microcosm of the more intelligent +mind of the nation, and trust to it to control +your Government. Such a body will consist of +<a name="Page_138" id="Page_138"></a><span class="pagenum" title="138"></span>men who follow various trades. But the conditions +under which they are chosen ought to be such as +to impress upon them the duty of thinking of the +national interest as a whole in the first instance, +and of their trade interests only as they are consistent +with that. The fundamental danger of +functional representation is that it reverses this +principle, and impresses upon the representative +the view that his trade is his politics.</p> + +<p>But it is useless to deplore or condemn a tendency +unless you see how it can be checked. Why has +this representation of economic interests become +so strong? Because Parliament is the arena in +which important industrial problems are discussed +and settled. It is not a very good body for that +purpose. If we had a National Industrial Council +charged, not with the final decision, but with the +most serious and systematic discussion of such +problems, they would be more wisely dealt with. +And, what is quite as important, such a body +would offer precisely the kind of sphere within +which the representation of interests as such would +be altogether wholesome and useful; and, once it +became the main arena of discussion, it would +satisfy the demand for interest-representation, which +is undermining the character of Parliament. In +other words, the true alternative to functional +representation in Parliament is functional devolution +under the supreme authority of Parliament.</p> + +<p>But still more important than the dissatisfaction +aroused by the composition of the House is the +dissatisfaction which is due to the belief that its +functions are very inefficiently performed. It is +<a name="Page_139" id="Page_139"></a><span class="pagenum" title="139"></span>widely believed that, instead of controlling Government, +Parliament is in fact controlled by it. The +truth is that the functions imposed upon Parliament +by increased legislative activity and the growth of +the sphere of Government are so vast and multifarious +that no part of them <em>can</em> be adequately +performed in the course of sessions of reasonable +length; and if the sessions are not of reasonable +length—already they are too long—we shall be +deprived of the services of many types of men +without whom the House would cease to be +genuinely representative of the mind of the +nation.</p> + +<p>Consider how the three main functions of Parliament +are performed—legislation, finance, and the +control of administration. The discussion of legislation +by the whole House has been made to seem +futile by the crack of the party whip, by obstruction, +and by the weapons designed to deal with obstruction—the +closure, the guillotine, the kangaroo. A real +amendment has been brought about in this sphere +by the establishment of a system of committees +to which legislative proposals of various kinds are +referred, and this is one of the most hopeful features +of recent development. But there is still one +important sphere of legislation in which drastic +reform is necessary: the costly and cumbrous +methods of dealing with private bills promoted by +municipalities or by railways and other public +companies. It is surely necessary that the bulk +of this work should be devolved upon subordinate +bodies.</p> + +<p>When we pass to finance, the inefficiency of +<a name="Page_140" id="Page_140"></a><span class="pagenum" title="140"></span>parliamentary control becomes painfully clear. +It is true that a good deal of parliamentary time +is devoted to the discussion of the estimates. But +how much of this time is given to motions to reduce +the salary of the Foreign Secretary by £100 in order +to call attention to what is happening in China? +Parliament never, in fact, attempts any searching +analysis of the expenditure in this department or +that. It cannot do so, because the national accounts +are presented in a form which makes such discussion +very difficult. The establishment of an +Estimates Committee is an advance. But even an +Estimates Committee cannot do such work without +the aid of a whole series of special bodies intimately +acquainted with the working of various departments. +In short, the House of Commons has largely lost +control over national expenditure. As for the +control of administration, we have already seen +how inadequate that is, and why it is inadequate.</p> + +<p>These deficiencies must be corrected if Parliament +is to regain its prestige, and if our system of government +is to attain real efficiency. For this purpose +two things are necessary: in the first place, substantial +changes in the procedure of Parliament; +in the second place, the delegation to subordinate +bodies of such powers as can be appropriately +exercised by them without impairing the supreme +authority of Parliament as the mouthpiece of the +nation. I cannot here attempt to discuss these +highly important matters in any detail. In regard +to procedure, I can only suggest that the most +valuable reform would be the institution of a +<a name="Page_141" id="Page_141"></a><span class="pagenum" title="141"></span>series of committees each concerned with a different +department of Government. The function of +these committees would be to investigate and +criticise the organisation and normal working of +the departments, not to deal with questions of +broad policy; for these ought to be dealt with in +relation to national policy as a whole, and they +must, therefore, be the concern of the minister and +of the Cabinet, subject to the overriding authority +of Parliament as a whole. In order to secure that +this distinction is maintained, and in order to +avoid the defects of the French committee system +under which independent <em>rapporteurs</em> disregard +and override the authority of the ministers, and +thus gravely undermine their responsibility, it +would be necessary not only that each committee +should include a majority of supporters of Government, +but that the chair should be occupied by the +minister or his deputy.</p> + + +<h3>Devolution</h3> + +<p>Nor can I stop to dwell upon the very important +subject of the delegation or devolution of powers +by Parliament to subordinate bodies. I will only +say that devolution may be, and I think ought to +be, of two kinds, which we may define as regional +and functional. To regional bodies for large areas +(which might either be directly elected or constituted +by indirect election from the local government +authorities within each area) might be +allotted much of the legislative power of Parliament +in regard to private Bills, together with +<a name="Page_142" id="Page_142"></a><span class="pagenum" title="142"></span>general control over those public functions, such +as Education and Public Health, which are now +mainly in the hands of local authorities. Of +functional devolution the most important expression +would be the establishment of a National +Industrial Council and of a series of councils or +boards for various industries endowed with quasi-legislative +authority; by which I mean that they +should be empowered by statute to draft proposals +for legislation of a defined kind, which would +ultimately receive their validity from Parliament, +perhaps without necessarily passing through the +whole of the elaborate process by which ordinary +legislation is enacted. I believe there are many +who share my conviction that a development in +this direction represents the healthiest method of +introducing a real element of industrial self-government. +But for the moment we are concerned +with it as a means of relieving Parliament from some +very difficult functions which Parliament does not +perform conspicuously well, without qualifying +its supreme and final authority.</p> + +<p>One final point. If it is true, as I have argued, +that the decay of the prestige and efficiency of +Parliament is due to the fact that it is already +overloaded with functions and responsibilities, it +must be obvious that to add to this burden the +responsibility for controlling the conduct of great +industries, such as the railways and the mines, +would be to ensure the breakdown of our system +of government, already on the verge of dislocation. +In so far as it may be necessary to undertake on +behalf of the community the ownership and conduct +<a name="Page_143" id="Page_143"></a><span class="pagenum" title="143"></span>of any great industrial or commercial concern, I +submit that it is essential that it should not be +brought under the direct control of a ministerial +department responsible to Parliament. Yet the +ultimate responsibility for the right conduct of any +such undertaking (<em>e.g.</em> the telephones, electric +supply, or forests) must, when it is assumed by the +State, rest upon Parliament. How is this ultimate +responsibility to be met? Surely in the way in +which it is already met in the case of the Ecclesiastical +Commissioners or the Port of London +Authority—by setting up, under an Act of Parliament, +an appropriate body in each case, and by +leaving to it a large degree of freedom of action, +subject to the terms of the Act and to the inalienable +power of Parliament to alter the Act. In such +a case the Act could define how the authority should +be constituted, on what principles its functions +should be performed, and how its profits, if it made +profits, should be distributed. And I suggest that +there is no reason why the Post Office itself should +not be dealt with in this way.</p> + +<p>It is only a fleeting and superficial survey which +I have been able to give of the vast and complex +themes on which I have touched; and there is no +single one of them with which I have been able to +deal fully. My purpose has been to show that in +the political sphere as well as in the social and +economic spheres vast tasks lie before Liberalism, +and, indeed, that our social and economic tasks +are not likely to be efficiently performed unless we +give very serious thought to the political problem. +Among the heavy responsibilities which lie upon our +<a name="Page_144" id="Page_144"></a><span class="pagenum" title="144"></span>country in the troubled time upon which we are +entering, there is none more heavy than the responsibility +which rests upon her as the pioneer of +parliamentary government—the responsibility of +finding the means whereby this system may be +made a respected and a trustworthy instrument +for the labours of reconstruction that lie before +us.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_145" id="Page_145"></a><span class="pagenum" title="145"></span><a name="THE_STATE_AND_INDUSTRY" id="THE_STATE_AND_INDUSTRY"></a>THE STATE AND INDUSTRY</h2> + +<h3>By W.T. Layton</h3> + +<h4>M.A., C.H., C.B.E.; Editor of the <em>Economist</em>, 1922; +formerly Member of Munitions Council, and Director +of Economic and Financial Section of the League of +Nations; Director of Welwyn Garden City; Fellow +of Gonville and Caius College, Cambridge, 1910.</h4> + + +<p>Mr. Layton said:—The existing system of private +enterprise has been seriously attacked on many +grounds. For my present purpose I shall deal +with four: (1) The critic points to the extreme +differences of wealth and poverty which have +emerged from this system of private enterprise; +(2) it has produced and is producing to-day recurrent +periods of depression which result in insecurity +and unemployment for the worker; (3) the critics +say the system is producing great aggregations of +capital and monopolies, and that by throwing social +power into the hands of those controlling the +capital of the country, it leads to exploitation of +the many by industrial and financial magnates; +(4) it produces a chronic state of internal war which +saps industrial activity and the economic life of +the community.</p> + +<p>I shall not attempt to minimise the force of these +objections; but in order to get our ideas into +correct perspective it should be observed that the +first two of these features are not new phenomena +arising out of our industrial system. You find +<a name="Page_146" id="Page_146"></a><span class="pagenum" title="146"></span>extreme inequalities of distribution in practically +all forms of society—in the slave state, the feudal +state, in India and in China to-day. Nor is this +the first period of history in which there has been +insecurity. If you look at any primitive community, +and note the effect of harvest fluctuations and the +inevitable famine following upon them, you will +recognise that the variations of fortune which +affect such communities are more disastrous in +their effect than the trade variations of the modern +world.</p> + +<p>But after all qualifications have been made +these four indictments are sufficiently serious and +must be met, for it is these and similar considerations +which have driven many to desire the +complete abolition of the system. Some wish to +abolish private property, and desire a Communist +solution. Others practically attack the system +of private enterprise, and wish to substitute either +the community in some form or another (<em>e.g.</em> state +socialism), or some corporate form of industry +(<em>e.g.</em> guild socialism).</p> + + +<h3>The Liberal Bias</h3> + +<p>Liberals, on the other hand, reject these solutions, +and desire not to end the present system but to +mend it. The grounds for this conclusion need to +be clearly expressed, for after all it is the fundamental +point of doctrine which distinguishes them +from the Labour party. In the first place, there is +the fact that Liberals attach a special importance +to the liberty of the individual. The general +<a name="Page_147" id="Page_147"></a><span class="pagenum" title="147"></span>relation of the individual to the State is rather +outside my subject, but we start from the fact +that the bias of Liberals is towards liberty in every +sphere, on the ground that spiritual and intellectual +progress is greatest where individuality is least +restricted by authority or convention. Variety, +originality in thought and action, are the vital +virtues for the Liberal. It is still true that “in +this age the mere example of Nonconformity, the +mere refusal to bow the knee to custom, is itself a +service.” The Liberal who no longer feels at the +bottom of his heart a sympathy with the rebel +who chafes against the institutions of society, +whether religious, political, social or economic, is +well on the road to the other camp. But the dynamic +force of Liberty, that great motive power of progress, +though a good servant, may be a bad master; and +the perennial problem of society is to harmonise +its aims with those of the common good.</p> + +<p>When we come to the more specific problem of +industry, which is our immediate concern, a glance +at history shows that the era of most rapid economic +progress the world has ever seen has been the era +of the greatest freedom of the individual from +statutory control in economic affairs. The features +of the last hundred years have been the rapidity +of development in industrial technique, and constant +change in the form of industrial organisation +and in the direction of the world’s trade. +Could any one suppose that in these respects +industry, under the complete control of the State +or of corporations representing large groups of +wage earners and persons engaged in trade, could +<a name="Page_148" id="Page_148"></a><span class="pagenum" title="148"></span>have produced a sufficiently elastic system to have +permitted that progress to be made? In reply +to this it may be said that though this was true +during the industrial revolution, it does not apply +to-day; that our industries have become organised; +that methods of production, population, and +economic conditions generally are stabilised, and +that we can now settle down to a new and standard +form of industrial organisation. But this agreement +is based on false premises. The industrial +revolution is far from complete. We are to-day +in the full flood of it. Look at the changes in the +last four decades—the evolution of electricity, the +development of motor transport, or the discoveries +in the chemical and metallurgical industries. Consider +what lies ahead; the conquest of the air, the +possible evolution of new sources of power, and a +hundred other phases which are opening up in +man’s conquest of nature, and you will agree that +we are still at the threshold of industrial revolution.</p> + +<p>I may mention here a consideration which applies +practically to Great Britain. We are a great +exporting country, living by international trade, +the world’s greatest retail shopkeeper whose business +is constantly changing in character and +direction. The great structure of international +commerce on which our national life depends is +essentially a sphere in which elasticity is of the +utmost importance, and in which standardised or +stereotyped methods of control of production or +exchange would be highly disastrous. Liberal +policy, therefore, aims at keeping the field of +private enterprise in business as wide as possible. +<a name="Page_149" id="Page_149"></a><span class="pagenum" title="149"></span>But in the general discussion of political or +personal liberty in economic affairs, we have to +consider how far and in what way the freedom of +private enterprise needs to be limited or curtailed +for the common good. We must solve that problem. +For Liberals there is no inherent sanctity in the +conceptions of private property, or of private +enterprise. They will survive, and we can support +them only so long as they appear to work better +in the public interest than any possible alternatives.</p> + + +<h3>Retrospect and Prospect</h3> + +<p>My object, then, is to show how a system which +embodies a large amount of private enterprise can +be made tolerable and acceptable to modern ideas +of equity. For this purpose we need to consider +(1) what have we done in that direction in the past? +(2) what is the setting of the economic problem to-day, +and (3) what is to be our policy for the future?</p> + +<p>Dealing first with wealth and wages, the whole +field of social legislation has a bearing upon them, +including particularly education, elementary and +technical, the Factory Acts, and a great mass of +legislation which has affected the earning powers +of the worker and the conditions under which he +labours. Just before the war we had come to the +point of fixing a minimum wage in the mines, +but an even more important factor was that we +had introduced the Trade Board system, which +had begun to impose a minimum wage in certain +trades where wages were particularly low. But +the most important direct attack upon the unequal +<a name="Page_150" id="Page_150"></a><span class="pagenum" title="150"></span>distribution of wealth was by taxation in accordance +with the Liberal policy of a graduated and +differential income-tax, and still more important +by taxes upon inheritance; for it has long been +recognised that though it may be desirable to allow +men to accumulate great wealth during their lifetime, +it by no means follows that they should be +entitled to control the distribution of wealth in the +next generation and launch their children on the +world with a great advantage over their fellows +of which they may be quite unworthy. On the +question of insecurity it cannot be said that any +serious attack has been made on the problem of +how to diminish fluctuations of trade, but again +the Liberal solution for dealing with that difficulty +was to remedy not the cause but its effects by +insurance.</p> + +<p>On the question of monopolies and exploitation, +though we hear a great deal of the growth of +capitalistic organisation, in fact we find that, of +the three greatest industrial countries in the world, +Great Britain is the least trust-ridden, mainly +because of its free trade system. In the case of +enterprises not subject to foreign competition, we +had begun to develop a fairly satisfactory system +of control of public utility services which were of +a monopolistic character.</p> + +<p>Finally, there had been growing up a complete +system of collective bargaining and conciliation, +and though we always heard of it whenever there +was dispute and strife, the ordinary public did not +know that this machinery was working and developing +in many great and important industries a +<a name="Page_151" id="Page_151"></a><span class="pagenum" title="151"></span>feeling of co-operation or at all events of conciliation +between the two sides. I only mention +these points very briefly in passing in order to show +that with the evolution of modern industry we +were already feeling our way, haltingly and far too +slowly, it is true, towards a solution of its most +serious defects.</p> + +<p>Turning to the present situation, we have to face +the fact that Great Britain is to-day faced with +one of the most serious positions in its economic +history. We must make allowances for the readily +understood pessimism of a miners’ leader, but it +should arrest attention that Mr. Frank Hodges +has recently described the present situation as +the coming of the great famine in England. For +nearly two decades before the war there was +occurring a slight fall in the real wages of British +workpeople. Food was becoming dearer, as the +world’s food supply was not increasing as fast as +the world’s industrial population, and the industrial +workers of the world had, therefore, to offer more +of their product to secure the food they needed. +Hence the cost of living was rising faster than +wages, except in trades where great technical +advances were being made. There is some reason +to fear that the war may have accentuated this +tendency.</p> + +<p>For some years the distant countries of the world +have had to do without European manufactured +goods. You are all aware of the tendency, for +example, of India, Australia, and Canada to develop +their own steel resources and to create manufacturing +industries of all kinds. Moreover, we have lost +<a name="Page_152" id="Page_152"></a><span class="pagenum" title="152"></span>part of our hold on the food-producing countries +of the world by the sale of our capital investments +in those countries to pay for the war. These and +other considerations all suggest that we may find +it increasingly difficult to maintain our position +as one of the main suppliers of the manufactured +goods of the world. In such circumstances we +shall be hard put to it to maintain, far less raise, +the pre-war standard of living.</p> + +<p>How then are we to cope with this problem of +retaining our economic position? We can only +hope to do it if the present financial difficulties and +obstructions working through the exchanges, by +which international commerce is restricted and +constrained, are removed. We can only do it if +and so long as the conception of international +division of labour is maintained. And we can only +do it if—granted that we can induce the world to +accept this principle of international division of +labour—we can prove ourselves, by our economic +and productive efficiency, to be the best and +cheapest producer of those classes of goods in which +our skilled labour and fixed capital is invested.</p> + +<p>Assuming the financial difficulty is overcome, +and that the old régime of international specialisation +revives, can we still show to the world that it +is more profitable for them to buy goods and +services from us than from other people? Can +we compete with other industrial countries of the +world? The actual output of our labour in most +cases is far less than its potential capacity, partly +because of technical conservatism, and partly for +reasons connected with the labour situation. How +<a name="Page_153" id="Page_153"></a><span class="pagenum" title="153"></span>are we to mobilise these reserve resources. I have +only space to deal with the second of these problems. +In Germany labour is well disciplined, and has the +military virtues of persistence and obedience to +orders in the factory. But we cannot hope to call +forth the utmost product of our labouring population +by drill-sergeant methods.</p> + +<p>In America this problem is a different one, +because the American employer is often able to +take full advantage of his economic position. For +he has a labouring population of mixed nationality, +which does not readily combine, and he can play +off one section against the other. British employers +cannot, if they would, deal with British labour +on the principle of Divide and Rule. There is +only one method by which we can hope to call +forth this great reserve capacity of British labour, +and that is by securing its confidence. If Free +Trade is one of the legs on which British prosperity +rests, the other is goodwill and active co-operation +between the workman and his employer. How is +that goodwill to be gained?</p> + +<p>The solution of that problem is only partly in +the hands of the politician; that is one of the +reasons why it is extremely difficult to suggest an +industrial policy which is going to hold out the +hope of reaching Utopia in a short time. But it +is obviously essential somehow or another to develop, +particularly among employers, the sense of trusteeship—the +sense that a man who controls a large +amount of capital is in fact not merely an individual +pursuing his own fortune, but is taking the very +great responsibility of controlling a fragment of the +<a name="Page_154" id="Page_154"></a><span class="pagenum" title="154"></span>nation’s industrial resources. And we have also +to develop a conception of partnership and joint +enterprise between employer and employed.</p> + + +<h3>State Ownership: For and Against</h3> + +<p>What policy in the political field can be adopted +to further these objects? Reverting once more to +the fourfold division which I made at the outset, +but taking the points in a different order, there is +first the question whether there should be a great +extension of State ownership, management, or +control of monopolies and big business. In spite +of the experience of the war, I suggest tentatively +that no case has been made out for any wide or +general extension of the field of State management +in industry. This, however, is not a matter of +principle, but of expediency, where each case must +be considered on its merits. Liberals should, indeed, +keep an open mind in this connection and not be +afraid to face an enlargement of the field of State +management from time to time. There are, however, +two special cases to be considered: the mines +and the railways. As to the mines, the solution +Mr. McNair puts forward is on characteristically +Liberal lines, because it will endeavour to harmonise +the safeguarding of the interests of the State with +the maximum freedom to private enterprise and the +maximum scope for variety in methods of management. +As to transport, we have recently passed +an Act altering the form of control of British +railways.</p> + +<p>Personally I think the question whether railways +<a name="Page_155" id="Page_155"></a><span class="pagenum" title="155"></span>should or should not be nationalised is very much +on the balance. It is obviously one of the questions +where objections to State management are less +serious than in most other cases. On the other +hand, we may be able to find methods of control +which may be even better than State management. +I do not think the Act of last year fulfils the conditions +which Liberals would have imposed on the +railways, for the principle of guaranteeing to a +monopoly a fixed income practically without any +means of securing its efficiency, is the wrong way +to control a public utility service. If we are going +to leave public utilities in the hands of private +enterprise, the principle must be applied that +profit should vary in proportion to the services +rendered to the community. In this connection +the old gas company principle developed before +the war is an admirable one. Under it the gas +companies were allowed to increase their dividends +in proportion as they lowered their prices to the +community. That is a key principle, and some +adaptation of it is required wherever such services +are left in private hands. My own view is that +an amended form of railway control should first +be tried, and if that fails we should be prepared +for some form of nationalisation.</p> + + +<h3>Trusts and Monopolies</h3> + +<p>But if we refuse at present to enlarge the sphere +of State management, we are still faced with the +problem of dealing with trusts and monopolies. +In this matter, as in so many other instances, the +<a name="Page_156" id="Page_156"></a><span class="pagenum" title="156"></span>right policy has already been worked out. Under +the stimulating conditions which obtained during +the war, when old-established methods of thought +had been rudely shaken, progressive ideas had +unusually free play; and you will find in the +general economic policy adumbrated during and +immediately after the war much that Liberals are +looking for. On this question of monopolies, we +should put into force the recommendation of the +Committee on Trusts of 1919, with one qualification. +The policy I suggest is the policy of the majority, +namely, that we should give very much enlarged +powers of inquiry to the Board of Trade, and that +a Tribunal should be set up by which investigations +could be made. But I would go further, and, taking +one item from the Minority Report, I would add +that either to this Tribunal or to the Board of +Trade department concerned there should be +given in reserve the power in special cases to regulate +prices. I do not think it would be necessary often +to use that power, indeed the mere inquiry and +publicity of results would be sufficient to modify +the action of monopolies. But such a power in +reserve, even though price-fixing in ordinary circumstances +is usually mischievous and to be +deprecated, would have a very salutary effect.</p> + +<p>In the case of public utilities of a standard kind, +into which the element of buying and selling profits +does not greatly enter, we should endeavour to +start the experiment of putting representatives +of the workpeople on the boards of directors, but +in carefully selected cases, and not as a general +rule. My own view is that if we are ready with +<a name="Page_157" id="Page_157"></a><span class="pagenum" title="157"></span>the machinery of investigation, and are prepared +to deal in these ways with public utilities at home +where foreign competition is absent, we have little +to fear from trusts.</p> + + +<h3>Distribution</h3> + +<p>As regards distribution and wages, in the first +place we should adhere to our traditional policy, +developing the system of differential and graduated +taxation, and we should be prepared, if unequal +distribution of wealth continues, to limit further +the right of inheritance. This is not a new Liberal +doctrine: it is many decades old. On the question +of wages we have to recognise that unless we can +secure an increase in terms of food and other +commodities of the national production the State +cannot radically modify the general standard of +living in the country; or by administrative action +raise the level of wages which economic conditions +are imposing on us. But the State can and should +enforce a minimum in certain industries, provided +that minimum is reasonably in harmony with the +competitive level of wages. Such action can +prevent workers whose economic position is not a +strong one—and this applies particularly to many +women’s employment—from being compelled to +accept wages substantially less than the current +standard. I therefore welcome the gradual extension +of the Trade Board system, provided it follows +the general principle recommended in the Cave +Report—that the community should use its full +powers of compulsion only in regard to the +<a name="Page_158" id="Page_158"></a><span class="pagenum" title="158"></span>minimum, and that so far as all other classes of +wages are concerned, the State should encourage +collective bargaining. With this proviso, compulsory +enforcement of a minimum could also be extended +to the workpeople covered by Whitley Councils.</p> + +<p>As regards all wages above the minimum the +Cave Committee recommended that, provided they +are reached by agreement on the Board, and +provided that a sufficiently large proportion of the +Board concur, the wage so determined shall be +enforced by civil process, whereas in the cases of +the minimum, the rates would be determined if +necessary by arbitration of the State-appointed +members of the Board, and non-payment would +be a penal offence. The Trade Boards now cover +three million workers. Two million are in occupations +for which Trade Boards are under consideration, +and there are a further two million under +Industrial Councils or Whitley Councils. If State +powers are to be employed in trades employing +seven millions of the eighteen million wage-earners +of the country, the scope of those powers needs +to be very carefully defined.</p> + + +<h3>The Case for Profit-Sharing</h3> + +<p>Many Liberals are, however, asking whether +this is sufficient and whether it is not possible for +the State to intervene to alter the distribution +of the product of industry in favour of the wage-earner. +In particular, they are wondering whether +it is possible to secure the universal application +of some system of profit-sharing. The underlying +<a name="Page_159" id="Page_159"></a><span class="pagenum" title="159"></span>principle of profit-sharing is indeed one which we +must look to if the whole-hearted assistance of +labour is to be enlisted behind the productive +effort of the country. But the profit we have to +consider is the profit over which the worker has +some influence. There is no merit in inviting +him to share in purely commercial profits or +losses which may be due to some one else’s +speculation or business foresight. It is futile to +imagine you can reverse the functions of labour +and capital, and say that capital should have a +fixed wage, and that the employee should bear all +the risks of the industry.</p> + +<p>Again, in some cases it is suitable that profits +should be considered in regard to a whole industry, +but in others only in regard to a particular firm +or section; and finally the rate of profit suitable +to various trades varies between very wide limits. +In short, there can be no universal rule in this +matter which can be enforced by Act of Parliament.</p> + +<p>Nevertheless, we must all desire to proceed +along the lines of associating the pecuniary interests +of the worker in the success of the enterprise, and +if any one can suggest a way in which direct +assistance to that end can be given by political +action, as distinct from industrial, he will be doing +a great service. I may add that there is an argument +in favour of profit-sharing which is of the utmost +importance and which was recently expressed by +a prominent industrialist: who declared to me +that at long last and after much opposition he has +come round to believe in profit-sharing, <em>because it +enables him to show his men the balance sheet</em>. The +<a name="Page_160" id="Page_160"></a><span class="pagenum" title="160"></span>solution adopted last year in the mining industry +contains the sort of elements we wish to see adopted +in principle. The men are given, through their +officials, the results of the industry. They see +that they cannot get more than the industry can +pay, and though the present economic conditions +are putting the men in a desperate state to-day, +the miners, who were often regarded before the war +as the most pugnacious in the country, are not +burning their employers’ houses, but are studying +how the economic conditions of the industry can +be improved for the benefit of themselves and +their employers.</p> + + +<h3>Industrial Publicity</h3> + +<p>This brings me to the question of publicity, +which is at the root of the whole problem. We +desire the principle of private enterprise to remain. +The one thing that can destroy it is secrecy. We +argue that the self-interest of the investor makes +capital flow into those channels where economic +conditions need it most. But how can the investor +know where it should go when the true financial +condition of great industrial companies is a matter +of guesswork? Again, we rely upon our bankers +to check excessive industrial fluctuations. How +can they do this if they do not know the facts of +production? The public should know what great +combines are doing, but they do not know; and +how can we expect the man in the street to be +satisfied when his mind is filled with suspicions +that can be neither confirmed nor removed?</p> + +<p><a name="Page_161" id="Page_161"></a><span class="pagenum" title="161"></span>It is of the utmost importance to seek for greater +publicity on two main lines. The illustration of +the mines suggests one—production and wage data. +There are only three industries in this country—coal, +steel, and ships—in which production statistics +exist. I suggest that in many of our great staple +industries a few simple data with regard to production +should be published promptly, say every +three months. The data I have in mind are the +wages bill, the cost of materials, and the value of +the product. It is desirable that this should be +done, and I believe it can be done, for almost +every great industry in the country. These three +facts alone will bring the whole wages discussion +down to earth.</p> + +<p>Then on finance, I suggest that one of the first +things a Liberal Government should do should be +to appoint a commission to overhaul the whole of +our Company Law. This is not the occasion to enter +in detail into a highly technical problem. But I +would call attention to the following points: There +is no compulsion on any joint-stock company to +publish a balance sheet. It is almost the universal +practice to do so; but as it is not an obligation, +the Company Law lays down no rules as to what +published balance sheets must contain. Again, the +difference between private and public companies +must be considered; a private company which +employs a great mass of capital and large numbers +of work-people—a concern which may cover a +whole town or district—should in the public +interest be subject to the same rules as a public +company. Thirdly, in view of the amalgamation +<a name="Page_162" id="Page_162"></a><span class="pagenum" title="162"></span>of industry, the linking up of company with company, +there must be reconsideration as regards +publicity in the case of subsidiary companies. +Finally, I think we have been wrong in assuming +that a law applicable to a company with a modest +little capital is suitable to regulate the publicity +of a great combine controlling tens of millions of +capital. Some attempt should therefore be made +to differentiate between what must be told by the +big and by the little concerns respectively. I am +well aware of the myriad difficulties that this +demand for publicity will encounter. But difficulties +exist to be overcome. And they must be overcome, +for of this I feel certain: that if the system of +private enterprise dies, it will be because the canker +of secrecy has eaten into its vitals.</p> + + +<h3>A National Industrial Council</h3> + +<p>I have left very little time for dealing specifically +with the question of industrial relations, though +much that I have said has a bearing upon it. There +has been great disappointment with the results of +the Whitley Council movement. Many thought +they were going to bring in a new era. But they +have not lived up to these hopes, firstly, because +they came into being at a time of unexampled +economic difficulty, and, secondly, because they +were introduced into industries where there was +no tradition of co-operative action—being established +mainly in industries lying between the +entirely unorganised and the highly organised +trades. But we must persist in encouraging +<a name="Page_163" id="Page_163"></a><span class="pagenum" title="163"></span>Whitley Councils, and still more in the associated +objective of encouraging works committees. The +basis of industrial peace is in the individual works. +Co-operation cannot be created by Act of Parliament, +but depends upon the development of +opinion among employers and workmen. Starting +from Works Councils up through the Whitley +Council, Trade Boards, or National Trade Union +machinery for the negotiation of wages, we arrive +at the National Industrial Council, which is the +point at which the Government can most directly +assist the movement towards more cordial relations. +The plan of this Council is ready. It was proposed +and developed in 1919, and I personally do +not want to change that plan very much.</p> + +<p>But I think it is of the utmost importance that +we should embody in our Liberal programme the +institution of a National Industrial Council or +Parliament representing the trade organisations +on both sides. Whether it should represent the +consumers, I, personally, am doubtful. It should be +consulted before economic and particularly industrial +legislation is introduced into Parliament. It should +be the forum on which we should get a much +better informed discussion of industrial problems +than is possible in Parliament or through any +other agency in the country. The National Council +also needs to have specific work to do. I would +be prepared to see transferred to it many of the +functions of the Ministry of Labour, or rather that +it should be made obligatory for the Minister of +Labour to consult this Council on such questions +as whether it should hold a compulsory inquiry +<a name="Page_164" id="Page_164"></a><span class="pagenum" title="164"></span>into an industrial dispute. I would also throw +upon it the duty of advising Parliament exactly +how my proposals as to publicity are to be carried +out, and would give it responsibility for the +Ministry of Labour index figures of the cost of +living upon which so many industrial agreements +depend. I believe if we could set out a series of +specific functions to give the plan vitality, in +addition to the more nebulous duty of advising the +Government on industrial questions, we should +have created an important device for promoting +the mutual confidence of which I have spoken.</p> + +<p>The suggestions I have made are perhaps not +very new, but they seem to me to be in the natural +line of evolution of Liberal traditions. Above all, +if they are accepted they should be pursued unflinchingly +and persevered with, not as a concession +to this or that section which may happen to be +strong at the moment, but as a corporate policy, +which aims at combining the interests of us all in +securing increased national wealth with justice to +the component classes of the commonwealth.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_165" id="Page_165"></a><span class="pagenum" title="165"></span><a name="THE_REGULATION_OF_WAGES" id="THE_REGULATION_OF_WAGES"></a>THE REGULATION OF WAGES</h2> + +<h3>By Professor L.T. Hobhouse</h3> + +<h4>Professor of Sociology, London University.</h4> + + +<p>Professor Hobhouse said:—The wages, hours, +and general conditions of industrial workers are +of interest to the community from two points of +view. So far as the less skilled and lower paid +workers are concerned, it is to the interest and it +is the duty of the community to protect them from +oppression, and to secure that every one of its +members, who is willing and able to contribute +honest and industrious work to the service of others, +should be able in return to gain the means of a +decent and civilised life. In this relation the +establishment of a minimum wage is analogous to +the restriction of hours or the provision for safety +and health secured by Factory Legislation, and +carries forward the provision for a minimum +standard of life. The problem is to determine +upon the minimum and adjust its enforcement +to the conditions of trade in such wise as to avoid +industrial dislocation and consequent unemployment.</p> + +<p>With regard to workers of higher skill, who +command wages or salaries on a more generous +scale, the interest of the community is of a different +kind. Such workers hardly stand in need of any +<a name="Page_166" id="Page_166"></a><span class="pagenum" title="166"></span>special protection. They are well able to take care +of themselves, and sometimes through combination +are, in fact, the stronger party in the industrial +bargain. In this region the interest of the community +lies in maintaining industrial peace and +securing the maximum of goodwill and co-operation. +The intervention of the community in industrial +disputes, however, has never been very popular +with either party in the State. Both sides to a +dispute are inclined to trust to their own strength, +and are only ready to submit to an impartial +judgment when convinced that they are momentarily +the weaker. Nor is it easy when we once get above +the minimum to lay down any general principles +which a court of arbitration could apply in grading +wages.</p> + +<p>For these reasons the movement for compulsory +arbitration has never in this country advanced very +far. We have an Industrial Court which can +investigate a dispute, find a solution which commends +itself as reasonable, and publish its finding, +but without any power of enforcement. The +movement has for the present stuck there, and is +likely to take a long time to get further. Yet every +one recognises the damage inflicted by industrial +disputes, and would admit in the abstract the +desirability of a more rational method of settlement +than that of pitting combination against combination. +Such a method may, I would suggest, grow +naturally out of the system which has been devised +for the protection of unskilled and unorganised +workers, of which a brief account may now be +given.</p> + + +<h3><a name="Page_167" id="Page_167"></a><span class="pagenum" title="167"></span>The Establishment of Trade Boards</h3> + +<p>Utilising experience gained in Australia, Parliament +in 1909 passed an Act empowering the Board +of Trade (now the Ministry of Labour) to establish +a Trade Board in any case where the rate of wages +prevailing in any branch was “exceptionally low +as compared with that in other employments.” +The Board consisted of a number of persons selected +by the Minister as representatives of employers, +an equal number as representatives of the workers, +with a chairman and generally two colleagues not +associated with the trade, and known as the +Appointed Members. These three members hold +a kind of casting vote, and can in general secure a +decision if the sides disagree.</p> + +<p>No instruction was given in the statute as to the +principles on which the Board should determine +wages, but the Board has necessarily in mind on +the one side the requirements of the worker, and +on the other the economic position of the trade. +The workers’ representatives naturally emphasise +the one aspect and the employers the other, but the +appointed members and the Board as a whole must +take account of both. They must consider what +the trade in general can afford to pay and yet +continue to prosper and to give full employment +to the workers. They must also consider the rate +at which the worker can pay his way and live a +decent, civilised life. Mere subsistence is not +enough. It is a cardinal point of economic justice +that a well-organised society will enable a man to +<a name="Page_168" id="Page_168"></a><span class="pagenum" title="168"></span>earn the means of living as a healthy, developed, +civilised being by honest and useful service to the +community. I would venture to add that in a +perfectly organised society he would not be able—charitable +provision apart—to make a living by +any other method. There is nothing in these +principles to close the avenues to personal initiative +or to deny a career to ability and enterprise. On +the contrary, it is a point of justice that such +qualities should have their scope, but not to the +injury of others. For this, I suggest with confidence +to a Liberal audience, is the condition by which all +liberty must be defined.<a name="FNanchor_1_2" id="FNanchor_1_2"></a><a href="#Footnote_1_2" class="fnanchor">[1]</a></p> + +<p>If we grant that it is the duty of the Boards to +aim at a decent minimum—one which in Mr. +Seebohm Rowntree’s phrase would secure the +“human needs” of labour—we have still some +very difficult points of principle and of detail to +settle. First and foremost, do we mean the needs +of the individual worker or of a family, and if of the +latter, how large a family? It has been generally +thought that a man’s wages should suffice for a +family on the ground that there ought to be no +economic compulsion—though there should be +full legal and social liberty—for the mother to +eke out deficiencies in the father’s payment +by going out to work. It has also been thought +that a woman is not ordinarily under a similar +obligation to maintain a family, so that her +“human needs” would be met by a wage +<a name="Page_169" id="Page_169"></a><span class="pagenum" title="169"></span>sufficient to maintain herself as an independent +individual.</p> + +<p>These views have been attacked as involving a +differentiation unfair in the first instance to women, +but in the second instance to men, because opening +a way to undercutting. The remedy proposed is +public provision for children under the industrial +age, and for the mother in return for her work in +looking after them. With this subvention, it is conceived, +the rates for men or women might be equalised +on the basis of a sufficiency for the individual alone. +This would certainly simplify the wages question, +but at the cost of a serious financial question. I do +not, myself, think that “human needs” can be +fully met without the common provision of certain +essentials for children. One such essential—education, +has been long recognised as too costly to be +put upon the wages of the worker. We may find +that we shall have to add to the list if we are to +secure to growing children all that the community +would desire for them. On the other hand, the +main responsibility for directing its own life should +be left to each family, and this carries the consequence, +that the adult-man’s wage should be +based not on personal but on family requirements.</p> + +<p class="footnote"><a name="Footnote_1_2" id="Footnote_1_2"></a><span class="label"><a href="#FNanchor_1_2">[1]</a></span> I may perhaps be allowed to refer to my <em>Elements of Social +Justice</em>, Allen & Unwin, 1921, for the fuller elaboration of +these principles.</p> + + +<h3>Women’s Wages</h3> + +<p>But the supposed injustice to woman is illusory. +Trade Boards will not knowingly fix women’s +rates at a point at which they can undercut men. +Nor if women are properly represented on them +will they fix their rates at a point at which women +<a name="Page_170" id="Page_170"></a><span class="pagenum" title="170"></span>will be discarded in favour of male workers. In +industries where both sexes are employed, if the +women workers are of equal value with the men in +the eyes of the employer, they will receive equal +pay; if of less value, then, but only then, proportionately +less pay. It is because women have +received not proportionately but quite disproportionately +less pay that they have been undercutting +men, and the Trade Boards are—very +gradually, I admit—correcting this error. For well-known +historical reasons women have been at an +economic disadvantage, and their work has secured +less than its worth as compared with the work of +men. The tendency of any impartial adjustment +of wages is to correct this disadvantage, because +any such system will attempt to secure equality +of opportunity for employment for all the classes +with which it is dealing. But it is admitted that +there is a “lag” in women’s wages which has been +but partially made good.</p> + +<p>If the standard wage must provide for a family, +what must be the size of the family? Discussion +on the subject generally assumes a “statistical” +family of man and wife and three children under +age. This is criticised on the ground that it does +not meet the human needs of larger families and +is in excess for smaller ones. The reply to this is +that a general rate can only meet general needs. +Calculation easily shows that the minimum suited +for three children is by no means extravagant if +there should be but two children or only one, while +it gives the bachelor or newly married couple some +small chance of getting a little beforehand with +<a name="Page_171" id="Page_171"></a><span class="pagenum" title="171"></span>the world. On the other hand, it is impossible to +cater on general principles for the larger needs of +individuals. The standard wage gives an approximation +to what is needed for the ordinary family, +and the balance must be made good by other +provision, whether public or private I will not here +discuss. I conclude that for adult men the minimum +is reasonably fixed at a figure which would +meet the “human needs” of a family of five, +and that for women it should be determined by +the value of their services relatively to that of +men.<a name="FNanchor_1_3" id="FNanchor_1_3"></a><a href="#Footnote_1_3" class="fnanchor">[1]</a></p> + +<p>How far have Trade Boards actually succeeded +in fixing such a minimum? Mr. Seebohm Rowntree +has put forward two sets of figures based on pre-war +prices, and, of course, requiring adjustment +for the changes that have subsequently taken place. +One of these figures was designed for a subsistence +wage, the other for a “human needs” wage. The +latter was a figure which Mr. Rowntree himself +did not expect to see reached in the near future. +I have compared these figures with the actual +minima for unskilled workers fixed by the Boards +during 1920 and 1921, and I find that the rates +fixed are intermediate between the two. The subsistence +rate is passed, but the higher rate not +attained, except for some classes of skilled workers. +<a name="Page_172" id="Page_172"></a><span class="pagenum" title="172"></span>The Boards have in general proceeded with moderation, +but the more serious forms of underpayment +have been suppressed so far as inspection has been +adequately enforced. The ratio of the female to +the male minimum averages 57.2 per cent., which +may seem unduly low, but it must be remembered +that in the case of women’s wages a much greater +leeway had to be made good, and there can be +little doubt that the increases secured for female +workers considerably exceeded those obtained for +men.</p> + +<p class="footnote"><a name="Footnote_1_3" id="Footnote_1_3"></a><span class="label"><a href="#FNanchor_1_3">[1]</a></span> I am assuming that this value is sufficient to cover the +needs of the independent woman worker. If not, these needs +must also be taken into account. As a fact both considerations +are present to the minds of the Trade Boards. A Board would +not willingly fix a wage which would either (<em>a</em>) diminish the +opportunity of women to obtain employment, or (<em>b</em>) enable +them to undercut men, or (<em>c</em>) fail to provide for them if living +alone.</p> + + +<h3>The Question of a Single Minimum</h3> + +<p>Criticism of Trade Boards has fastened on their +power to determine higher rates of wages for +skilled workers, one of the additional powers that +they secured under the Act of 1918. There are +many who agree that a bare minimum should be +fixed by a statutory authority with legal powers, +but think that this should be the beginning and +end of law’s interference. As to this, it must be said, +first, that the wide margin between a subsistence +wage and a human needs wage, brought out by +Mr. Rowntree’s calculations, shows that there can +be no question at present of a single minimum. +To give the “human needs” figure legislative +sanction would at present be Utopian. Very few +Trade Boards ventured so far even when trade +was booming. The Boards move in the region +between bare subsistence and “human needs,” +as trade conditions allow, and can secure a better +figure for some classes of their clients when they +<a name="Page_173" id="Page_173"></a><span class="pagenum" title="173"></span>cannot secure it for all. They therefore need all +the elasticity which the present law gives them.</p> + +<p>On the other hand, it is contended with some +force by the Cave Committee that it is improper for +appointed members to decide questions of relatively +high wages for skilled men or for the law to enforce +such wages by criminal proceedings, and the +Committee accordingly propose to differentiate +between higher and lower minima both as regards +the method of determination and of enforcement. +I have not time here to discuss the details of their +proposal, but I wish to say a word on the retention—if +in some altered shape—of the powers given +by the Act of 1918. The Trade Board system +has been remarkable for the development of understanding +and co-operation between representatives +of employers and workers. Particularly in the +work of the administrative committees, matters +of detail which might easily excite controversy +and passion are habitually handled with coolness +and good sense in the common interest of the +trade. A number of the employers have not merely +acquiesced in the system, but have become its +convinced supporters, and this attitude would be +more common if certain irritating causes of friction +were removed. The employer who desires to treat +his workers well and maintain good conditions +is relieved from the competition of rivals who care +little for these things, and what he is chiefly concerned +about is simplicity of rules and rigid universality +of enforcement. It is this section of +employers who have prevented the crippling of +the Boards in a time of general reaction. It is +<a name="Page_174" id="Page_174"></a><span class="pagenum" title="174"></span>blindness to refuse to see in such co-operation a +possible basis of industrial peace, and those were +right who in 1918 saw in the mechanism of the +Boards the possibility, not merely of preventing +industrial oppression and securing a minimum +living wage, but of advancing to a general regulation +of industrial relations. At that time it was thought +that the whole of industry might be divided between +Trade Boards and Whitley Councils, the former +for the less, the latter for the more organised trades. +In the result the Whitley Councils have proved to +be hampered if not paralysed by the lack of an +independent element and of compulsory powers.</p> + + +<h3>Trade Boards Holding the Field</h3> + +<p>The Trade Board holds the field as the best +machinery for the determination of industrial +conditions. It is better than unfettered competition, +which leaves the weak at the mercy of the strong. +It is better than the contest of armed forces, in +which the battle is decided with no reference to +equity, to permanent economic conditions, or to +the general good, by the main strength of one +combination or the other in the circumstances of +the moment. It is better than a universal State-determined +wages-law which would take no account +of fluctuating industrial conditions, and better than +official determinations which are exposed to political +influences and are apt to ignore the technicalities +which only the practical worker or employer understands. +It is better than arbitration, which acts +intermittently and incalculably from outside, and +<a name="Page_175" id="Page_175"></a><span class="pagenum" title="175"></span>makes no call on the continuous co-operation of +the trade itself.</p> + +<p>My hope is that as the true value of the Trade +Board comes to be better understood, its powers, +far from being jealously curtailed, or confined to +the suppression of the worst form of underpayment, +will be extended to skilled employments, and +organised industries, and be used not merely to +fulfil the duty of the community to its humblest +members, but to serve its still wider interest in the +development of peaceful industrial co-operation.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_176" id="Page_176"></a><span class="pagenum" title="176"></span><a name="UNEMPLOYMENT" id="UNEMPLOYMENT"></a>UNEMPLOYMENT</h2> + +<h3>By H.D. Henderson</h3> + +<h4>M.A.; Fellow of Clare College, Cambridge; Lecturer in +Economics; Secretary to the Cotton Control Board +from 1917-1919.</h4> + + +<p>Mr. Henderson said:—From one point of view +the existence of an unemployment problem is an +enigma and a paradox. In a world, where even before +the war the standard of living that prevailed among +the mass of the people was only what it was, even in +those countries which we termed wealthy, it seems +at first sight an utterly astonishing anomaly that +at frequent intervals large numbers of competent +and industrious work-people should find no work +to do. The irony of the situation cannot be more +tersely expressed than in the words, which a man +is supposed to have uttered as he watched a procession +of unemployed men: “No work to do. +Set them to rebuild their own houses.”</p> + +<p>But, if we reflect just a shade more deeply, +nothing should surprise us less than unemployment. +We have more reason for surprise that it is usually +upon so small a scale. The economic system under +which we live in the modern world is very peculiar +and only our familiarity with it keeps us from perceiving +how peculiar it is. In one sense it is highly +organised; in another sense it is not organised +at all. There is an elaborate differentiation of +<a name="Page_177" id="Page_177"></a><span class="pagenum" title="177"></span>functions—the “division of labour,” to give it its +time-honoured name, under which innumerable men +and women perform each small specialised tasks, +which fit into one another with the complexity of +a jig-saw puzzle, to form an integral whole. Some +men dig coal from the depths of the earth, others +move that coal over land by rail and over the seas +in ships, others are working in factories, at home and +abroad, which consume that coal, or in shipyards +which build the ships; and it is obvious, not to +multiply examples further, that the numbers of +men engaged on those various tasks must somehow +be adjusted, <em>in due proportions</em> to one another. +It is no use, for instance, building more ships than +are required to carry the stuff there is to carry.</p> + +<p>Adjustment, co-ordination, must somehow be +secured. Well, how is it secured? Who is it that +ordains that, say, a million men shall work in the +coal-mines, and 600,000 on the railways, and 200,000 +in the shipyards, and so on? Who apportions the +nation’s labour power between the innumerable +different occupations, so as to secure that there are +not too many and not too few engaged in any one +of them relatively to the others? Is it the Prime +Minister, or the Cabinet, or Parliament, or the +Civil Service? Is it the Trade Union Congress, or +the Federation of British Industries, or does any +one suppose that it is some hidden cabal of big +business interests? No, there is no co-ordinator. +There is no human brain or organisation responsible +for fitting together this vast jig-saw puzzle; and, +that being so, I say that what should really excite +our wonder is the fact that that puzzle should +<a name="Page_178" id="Page_178"></a><span class="pagenum" title="178"></span>somehow get fitted together, usually with so few +gaps left unfilled and with so few pieces left unplaced.</p> + +<p>It would, indeed, be a miracle, if it were not for +the fact that those old economic laws, whose impersonal +forces of supply and demand, whose +existence some people nowadays are inclined to +dispute, or to regard as being in extremely bad +taste, really do work in a manner after all. They +are our co-ordinators, the only ones we have; and +they do their work with much friction and waste, +only by correcting a maladjustment after it has +taken place, by slow and often cruel devices, of +which one of the most cruel is, precisely, unemployment +and all the misery it entails.</p> + + +<h3>The Causes of Trade Depressions</h3> + +<p>I do not propose to deal with such branches of +the problem of unemployment as casual labour or +seasonal fluctuations. I confine myself to what +we all, I suppose, feel to be the really big problem, +to unemployment which is not special to particular +industries or districts, but which is common to +them all, to a general depression of almost every +form of business and industrial activity. General +trade depressions are no new phenomenon, though +the present depression is, of course, far worse than +any we have experienced in modern times. They +used to occur so regularly that long before the war +people had come to speak of cyclical fluctuations, +or to use a phrase which is now common, the trade +cycle. That is a useful phrase, and a useful conception. +It is well that we should realise, when +<a name="Page_179" id="Page_179"></a><span class="pagenum" title="179"></span>we speak of those normal pre-war conditions, to +which we hope some day to revert, that in a sense +trade conditions never were normal; that, at any +particular moment you care to take, we were +either in full tide of a trade boom, with employment +active and prices rising, and order books +congested; or else right on the crest of the boom, +when prices were no longer rising generally, though +they had not yet commenced to fall, when employment +was still good, but when new orders were no +longer coming in; or else in the early stages of a +depression, with prices falling, and every one trying +to unload stocks and failing to do so, and works +beginning to close down; or else right in the +trough of the depression where we are to-day; +that we were at one or other of the innumerable +stages of the trade cycle, without any prospect of +remaining there for very long, but always, as it +were, in motion, going round and round and round.</p> + +<p>What are the root causes which bring every +period of active trade to an inevitable end? There +are two which are almost <a name="typo_4" id="typo_4"></a>invariably present towards +the end of every boom. First, the general level of +prices and wages has usually become too high; it +is straining against the limits of the available +supplies of currency and credit, and, unless inflation +is to be permitted, a restriction of credit is inevitable +which will bring on a trade depression. In +those circumstances, a reduction of the general +level of prices and wages is an essential condition of +a trade revival. A reduction of prices <em>and wages</em>. +That point has a significance to which I will return.</p> + +<p>The second cause is the distorted balance which +<a name="Page_180" id="Page_180"></a><span class="pagenum" title="180"></span>grows up in every boom between different branches +of industrial activity. When trade is good, we +invariably build ships, produce machinery, erect +factories, make every variety of what are termed +“constructional goods” upon a scale which is +altogether disproportionate to the scale upon which +we are making “consumable goods” like food and +clothes. And that condition of things could not +possibly endure for very long. If it were to continue +indefinitely, it would lead in the end to our having, +say, half a dozen ships for every ton of wheat or +cotton which there was to carry. You have there +a maladjustment, which must be corrected somehow; +and the longer the readjustment is postponed, +the bigger the readjustment that will +ultimately be inevitable. Now that means, first +on the negative side, that, when you are confronted +with a trade depression, it is hopeless to try to +cure it by looking for some device by which you +can give a general stimulus to all forms of industry. +Devices of that nature may be very useful in the +later stages of a trade depression, when the necessary +readjustments both of the price-level and of the +relative outputs of different classes of commodities +have already been effected, and when trade remains +depressed only because people have not yet plucked +up the necessary confidence to start things going +again. But in the early stages of a depression, an +indiscriminating stimulus to industry in general +will serve only to perpetuate the maladjustments +which are the root of the trouble. It will only put +off the evil day, and make it worse when it comes. +The problem is not one of getting everybody back +<a name="Page_181" id="Page_181"></a><span class="pagenum" title="181"></span>to work on their former jobs. It is one of getting +them set to work on the <em>right</em> jobs; and that is a +far more difficult matter.</p> + +<p>On the positive side, what this really comes to +is, that if you wish to prevent depressions occurring +you must prevent booms taking the form they do. +You must prevent prices rising so much, and so +many constructional goods being made during the +period of active trade; and I am not going to +pretend that that is an easy thing to do. It’s all +very well to say that the bankers, through their +control of the credit system, might endeavour to +guide industry and keep it from straying out of +the proper channels. But the bankers would +have to know much more than they do about these +matters, and, furthermore, the problem is not +merely a national one—it is a world-wide problem. +It would be of little use to prevent an excess of +ships being built here, if that only meant that still +more ships were built, say, in the United States.</p> + +<p>I do not say that even now the banks might +not do something which would help; still less +do I wish to convey the impression that mankind +must always remain passive and submissive, +impotent to control these forces which so vitally +affect his welfare. But I say that for any serious +attempt to master this problem, the necessary +detailed knowledge has still to be acquired, and the +rudiments of organisation have still to be built up; +and the problem is not one at this stage for policies +and programmes. What you can do by means of +policies and programmes lies, at present, in the +sphere of international politics. In that sphere, +<a name="Page_182" id="Page_182"></a><span class="pagenum" title="182"></span>though you cannot achieve all, you might achieve +much. To reduce the problem to its pre-war +dimensions would be no small result; and that +represents a big enough objective, for the time +being, for the concentration of our hardest thinking +and united efforts. But into that sphere I am not +going to enter. I pass to the problem of unemployment +relief.</p> + + +<h3>The Scale of Relief</h3> + +<p>The fundamental difficulty of the problem of +relieving unemployment is a very old one. It +turns upon what used to be called, ninety years +ago, “the principle of less eligibility,” the principle +that the position of the man who is unemployed +and receiving support from the community should +be made upon the whole less eligible, less attractive +than that of the man who is working and living +upon the wages that he earns. That is a principle +which has been exposed to much criticism and +denunciation in these modern days. We are told +that it is the false and antiquated doctrine of a +hard-hearted and coarse-minded age, which thought +that unemployment was usually a man’s own +fault, which saw a malingerer in every recipient of +relief, which was obsessed by the bad psychology +of pains and penalties and looked instinctively +for a deterrent as the cure for every complex evil.</p> + +<p>But, however that may be, this principle of less +eligibility is one which you cannot ignore. It is +not merely or mainly a matter of the effect on +the character of the workmen who receive relief. +<a name="Page_183" id="Page_183"></a><span class="pagenum" title="183"></span>The danger that adequate relief will demoralise +the recipient has, I agree, been grossly exaggerated +in the past. Prolonged unemployment is always +in itself demoralising. But, given that a man is +unemployed, it will not demoralise him more that +he should receive adequate relief rather than +inadequate relief or no relief at all. On the contrary, +on balance, it will, I believe, demoralise him less. +For nothing so unfits a man for work as that he +should go half-starved, or lack the means to maintain +the elementary decencies of life.</p> + +<p>But there are other considerations which you +have to take into account. If you get a situation +such that the man who loses his job becomes +thereby much better-off than the man who remains +at work, I do not say that the former man will +necessarily be demoralised, but I do say that the +latter man will become disgruntled. I do not want +to put that consideration too high. At the present +time there are many such anomalies; in a great +many occupations, the wages that the men at work +are receiving amount to much less than the money +they would obtain if they lost their jobs and were +labelled unemployed. But they have stuck to +their jobs, they are carrying on, with a patience +and good humour that are beyond all praise. Yes, +but that state of affairs is so anomalous, so contrary +to our elementary sense of fairness that, as a +permanent proposition it would prove intolerable. +We cannot go on for ever with a system under +which in many trades men receive much more when +they are unemployed than when they are at work. +On the other hand, the attempt to avoid such +<a name="Page_184" id="Page_184"></a><span class="pagenum" title="184"></span>anomalies leads us, so long as we have a uniform +scale of relief, against an alternative which is +equally intolerable. Wages vary greatly from +trade to trade; and, if the scale of relief is not to +exceed the wages paid in <em>any</em> occupation it must +be very low indeed. That is the root dilemma of +the problem of unemployment relief—how if your +scale of relief is not to be too high for equity and +prudence it is not to be too low for humanity and +decency. We have not, as some people imagine, +done anything in recent years to escape from it, +we have merely exchanged one horn of the dilemma +for the other.</p> + +<p>In any satisfactory system the scale of relief must +vary from occupation to occupation, in accordance +with the normal standard of wages ruling in each +case. But it is very difficult, in fact I think it +would always be impracticable to do that under +any system of relief, administered by the State, +either the Central Government or the local authorities. +It must be done on an industrial basis; each +industry settling its own scale, finding its own +money, and managing its own scheme. That is an +idea which has received much ventilation in the +last few years. But the really telling arguments +in favour of it do not seem to me to have received +sufficient stress.</p> + +<p>Foremost among them I place the consideration +I have just indicated: that in this way, and in +this way alone, it becomes possible for work-people +who receive high wages when they are at work, +and where habits of expenditure and standards of +family living are built up on that basis, to receive +<a name="Page_185" id="Page_185"></a><span class="pagenum" title="185"></span>when unemployed, adequate relief without that +leading to anomalies which in the long run would +prove intolerable. But there are many other +arguments.</p> + + +<h3>A Model Scheme from Lancashire</h3> + +<p>About five years ago I had the opportunity of +witnessing at very close quarters the working of +an unemployment scheme on an industrial basis. +The great Lancashire cotton industry was faced +during the war with a very serious unemployment +problem, owing to the difficulty of transporting +sufficient cotton from America. It met that +situation with a scheme of unemployment relief, +devised and administered by one of those war +Control Boards, which in this case was essentially +a representative joint committee of employers +and employed. The money was raised, every +penny of it, from the employers in the industry +itself; the Cotton Control Board laid down certain +rules and regulations as to the scale of benefits, +and the conditions entitling a worker to receive it; +and the task of applying those rules and paying +the money out was entrusted to the trade unions.</p> + +<p>Well, I was in a good position to watch that +experiment. I do not think I am a particularly +credulous person, or one prone to indulge in easy +enthusiasms, and I certainly don’t believe in +painting a fairy picture in glowing colours by way +of being encouraging. But I say deliberately that +there has never been an unemployment scheme +in this country or in any other country which has +<a name="Page_186" id="Page_186"></a><span class="pagenum" title="186"></span>worked with so little abuse, with so few anomalies, +with so little demoralisation to any one, and at +the same time which has met so adequately the +needs of a formidable situation, or given such +general satisfaction all round as that Cotton Control +Board scheme.</p> + +<p>I cannot describe as fully as I should like to do +the various features which made that scheme +attractive, and made it a success. I will take just +one by way of illustration. It is technically possible +in the cotton trade to work the mills with relays of +workers, so that if a mill has 100 work-people, and +can only employ 80 work-people each week, the +whole 100 can work each for four weeks out of the +five, and “play off,” as it is called, in regular +sequence for the fifth week. And that was what +was done for a long time. It was called the “rota” +system; and the “rota” week of “playing off” +became a very popular institution. Under that +system, benefits which would have been far from +princely as the sole source of income week after +week—they never amounted to more than 30/- for +a man and 18/- for a woman—assumed a much +more liberal aspect. For they came only as the +occasional variants of full wages; and they were +accompanied not by the depressing circumstances +of long-continued unemployment, but by what is +psychologically an entirely different and positively +exhilarating thing, a full week’s holiday. That +meant that the available resources—and one of +the difficulties of any scheme of unemployment +relief is that the resources available are always +limited—did much more to prevent misery and +<a name="Page_187" id="Page_187"></a><span class="pagenum" title="187"></span>distress, and went much further towards fulfilling +all the objects of an unemployment scheme than +would have been possible otherwise.</p> + +<p>That system was possible in the cotton trade; in +other trades it might be impossible for technical +reasons, or, where possible, it might in certain +circumstances be highly undesirable. The point +I wish to stress is that under an industrial scheme +you have an immense flexibility, you can adapt +all the details to the special conditions of the +particular industry, and by that means you can +secure results immeasurably superior to anything +that is possible under a universal State system. +Moreover, if certain features of the scheme should +prove in practice unsatisfactory, they can be +altered with comparatively little difficulty. You +don’t need to be so desperately afraid of the possibility +of making a mistake as you must when it is +a case of a great national scheme, which can only +be altered by Act of Parliament.</p> + + +<h3>The Moral Obligation of Industries</h3> + +<p>I do not underrate the difficulty of applying +this principle of industrial relief over the whole +field of industry. There is the great difficulty of +defining an industry, or drawing the lines of +demarcation between one trade and another. I +have not time to elaborate those difficulties, but +I consider that they constitute an insuperable +obstacle to anything in the nature of an Act of +Parliament, which would impose forcibly upon +each industry the obligation to work out an +<a name="Page_188" id="Page_188"></a><span class="pagenum" title="188"></span>unemployment scheme. The initiative must come +from within the industry; the organisations of +employers and employed must get together and +work out their own scheme, on their own responsibility +and with a free hand. And, if it happens in +this way—one industry taking the lead and others +following—these difficulties of demarcation become +comparatively unimportant. You can let an +industry define itself more or less as it likes, and it +does not matter much if its distinctions are somewhat +arbitrary. It is not a fatal drawback if +some firms and work-people are left outside who +would like to be brought in. And if there are two +industries which overlap one another, each of +which is contemplating a scheme of the kind, it is +a comparatively simple matter for the responsible +bodies in the two industries to agree with one +another as to the lines of demarcation between +them, as was actually done during the war by the +Cotton Control Board and the Wool Control Board, +with practically no difficulty whatever. But for +such agreements to work smoothly it is essential +that the industries concerned should be anxious to +make their schemes a success; and that is another +reason why you cannot impose this policy by +<em>force majeure</em> upon a reluctant trade. It is in +the field of industry that the real move must be +made.</p> + +<p>But I think that Parliament and the Government +might come in to the picture. In the first place, +the ordinary national system of unemployment +relief, which must in any case continue, might be +so framed as to encourage rather than to discourage +<a name="Page_189" id="Page_189"></a><span class="pagenum" title="189"></span>the institution of industrial schemes. Under the +Insurance Act of 1920 “contracting out” was +provided for, but it was penalised, while at the +present moment it is prohibited altogether. I say +that it should rather be encouraged, that everything +should be done, in fact, to suggest that not +a legal but a moral obligation lies upon each industry +to do its best to work out a satisfactory unemployment +scheme. And, when an industry has done +that, I think the State should come in again. I +think that the representative joint committee, +formed to administer such a scheme, might well +be endowed by statute with a formal status, and +certain clearly-defined powers—such as the Cotton +Control Board possessed during the war—of enforcing +its decisions.</p> + +<p>But—and, of course, there is a “but”—we +cannot expect very much from this in the near +future. We must wait for better trade conditions +before we begin; and, as I have already indicated, +the prospects of really good trade in the next few +years are none too well assured. For a long time +to come, it is clear, we must rely upon the ordinary +State machinery for the provision of unemployment +relief; and, of course, the machinery of the State +will always be required to cover a large part of the +ground. The liability which an industry assumes +must necessarily be strictly limited in point of time; +and there are many occupations in which it will +probably always prove impracticable for the occupation +to assume even a temporary liability. For the +meantime, at any rate, we must rely mainly upon +the State machinery. Is it possible to improve upon +<a name="Page_190" id="Page_190"></a><span class="pagenum" title="190"></span>the present working of this machinery? I think +it is. By the State machinery I mean not merely +the Central Government, but the local authorities +and the local Boards of Guardians.</p> + + +<h3>The Present Machinery of Relief</h3> + +<p>At present what is the situation? Most unemployed +work-people are entitled to receive certain +payments from the Employment Exchanges under +a so-called Insurance scheme, which is administered +on a national basis; some weeks they are entitled +to receive those payments, other weeks they are +not; but in any case those payments afford relief +which is admittedly inadequate, and they are +supplemented—and very materially supplemented—by +sums varying from one locality to another, +but within each locality on a uniform scale, which +are paid by the Boards of Guardians in the form +of outdoor relief. Now that situation is highly +unsatisfactory. The system of outdoor relief and +the machinery of the Guardians are not adapted +for work of this kind. They are designed to meet +the problem of individual cases of distress, not +necessarily arising from unemployment, but in +any event individual cases to be dealt with, each +on its own merits, after detailed inquiry into the +special circumstances of the case. That is the +function which the Guardians are fitted to perform, +and it is a most important function, which will still +have to be discharged by the Guardians, or by +similar local bodies, whatever the national system +<a name="Page_191" id="Page_191"></a><span class="pagenum" title="191"></span>of unemployment relief may be. But for dealing +with unemployment wholesale, for paying relief +in accordance with a fixed scale and without +regard to individual circumstances—for that work +the Guardians are a most inappropriate body. +They possess no qualification for it which the +Central Government does not possess, while +they have some special and serious disqualifications.</p> + +<p>In any case, it is preposterous that you should +have two agencies, each relieving the same people +in the same wholesale way, the Employment +Exchanges with their scale, asking whether a man +is unemployed, and how many children he has to +support, and paying him so much, and the Guardians +with their scale, asking only the same questions and +paying him so much more. It would obviously +be simpler, more economical, and more satisfactory +in every way, if one or other of those agencies paid +the man the whole sum. And I have no hesitation +in saying that that agency should be the Central +Government. Perhaps the strongest argument in +favour of that course is that, when relief is given +locally, the money must be raised by one of the +worst taxes in the whole of our fiscal system, local +rates, which are tantamount to a tax, in many +districts exceeding 100 per cent., upon erection of +houses and buildings generally. It is foolish to +imagine that any useful end is served by keeping +down taxes at the expense of rates.</p> + +<p>Serious as is the problem of national finance, the +fiscal resources of the Central Government are still +far more elastic and less objectionable than those +<a name="Page_192" id="Page_192"></a><span class="pagenum" title="192"></span>which the local authorities possess. I suggest, +accordingly, as a policy for the immediate future, +the raising of the scale of national relief to a more +adequate level, coupled with the abolition of what +I have termed wholesale outdoor relief in the +localities. What it is right to pay on a uniform +scale should be paid entirely by the Central +Government, and local outdoor relief should be +restricted to its proper function of the alleviation +of cases of exceptional distress after special +inquiries into the individual circumstances of each +case.</p> + +<p>One final word to prevent misconception. I +have said that our present system of relief is unsatisfactory, +and I have indicated certain respects in +which I think it could be improved. But I am far +from complaining that relief is being granted throughout +the country as a whole upon too generous a +scale. Anomalies there are which, if they continued +indefinitely, would prove intolerable. But +we have been passing through an unparalleled +emergency. Unemployment in the last two years +has been far more widespread and intense than it +has ever been before in modern times, and never +was it less true that the men out of work have +mainly themselves to blame. But it has meant +far less distress, far less destruction of human +vitality, and I will add far less demoralisation of +human character than many of the bad years we +had before the war. That is due to the system of +doles, the national and local doles; and in the +circumstances I prefer that system with all its +anomalies to the alternative of a substantially +<a name="Page_193" id="Page_193"></a><span class="pagenum" title="193"></span>lower scale of relief. We are still in the midst of +that emergency; and if we are faced, as I think +for this decade we must expect to be faced, with +that dilemma which I indicated earlier, I should +prefer, and I hope that every Liberal will prefer, +to err by putting the scale of relief somewhat too +high for prudence and equity rather than obviously +too low for humanity and decency.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_194" id="Page_194"></a><span class="pagenum" title="194"></span><a name="THE_PROBLEM_OF_THE_MINES" id="THE_PROBLEM_OF_THE_MINES"></a>THE PROBLEM OF THE MINES</h2> + +<h3>By Arnold D. McNair</h3> + +<h4>M.A., LL.M., C.B.E.; Fellow of Gonville and Caius +College, Cambridge; Secretary of Coal Conservation +Committee, 1916-1918; Secretary of Advisory Board +of Coal Controller, 1917-1919; Secretary of Coal +Industry Commission, 1919 (Sankey Commission).</h4> + + +<p>Mr. McNair said:—Need I labour the point that +there <em>is</em> a problem of the Mines? Can any one, +looking back on the last ten years, when time after +time a crisis in the mining industry has threatened +the internal peace and equilibrium of the State, +deny that there is something seriously wrong with +the present constitution of what our chairman has +described as this great pivotal industry? What +is it that is wrong? If I may take a historical +parallel, will you please contrast the political +situation and aspirations of the working-class +population at the close of the Napoleonic wars +with their industrial situation and aspirations now. +Politically they were a hundred years ago unenfranchised; +more or less constant political ferment +prevailed until the Reform Bill, and later, extensions +of the franchise applied the Liberal solution of +putting it within the power of the people, if they +wished it, to take an effective share in the control +of political affairs.</p> + +<p>Industrially, their situation to-day is not unlike +their political situation a hundred years ago. Such +<a name="Page_195" id="Page_195"></a><span class="pagenum" title="195"></span>influence as they have got is exerted almost entirely +outside the constitution of industry, and very often +in opposition to it. Their trade unions, workers’ +committees, councils of action, triple alliances, +and so forth, are not part of the regular industrial +machine, and too often are found athwart its +path. They are members of an industry with +substantially no constitutional control over it, +just as a hundred years ago they were members of +a State whose destinies they had no constitutional +power to direct.</p> + +<p>This does not mean that a hundred years ago +every working man wanted the political vote, nor +that now he wants to sit on a committee and control +his industry. It meant that a substantial number +of the more enlightened and ambitious did—a +large enough number to be a source of permanent +discontent until they got it. The same is true to-day +in the case of many industries. Many men in all +classes of society are content to do their job, take +their money, go home and work in their gardens, +or course dogs or fly pigeons. They are very good +citizens. Many others, equally good citizens, take +a more mental and active interest in their job, and +want to have some share in the direction of it. +This class is increasing and should not be discouraged. +They constitute our problem. The +Liberal solution of a gradually extended franchise +has cured the political ferment. Political controversy +is still acute, and long may it remain so, +as it is the sign of a healthy political society. But +the ugly, ominous, revolutionary features of a +hundred years ago in the sphere of politics have +<a name="Page_196" id="Page_196"></a><span class="pagenum" title="196"></span>substantially gone or been transferred to the +industrial sphere.</p> + + +<h3>The Liberalisation of Industry</h3> + +<p>The same solution must be applied to that sphere. +This does not mean transferring the machinery of +votes and elections to industry. It means finding +channels in industry whereby every person may +exercise his legitimate aspiration, if he should feel +one, of being more than a mere routine worker +while still perhaps doing routine work, and of +contributing in an effective manner his ideas, +thoughts, suggestions, experience, to the direction +and improvement of the industry. We have +satisfied the desire for self-expression as citizens, +and we have now to find some means of satisfying +a similar desire for self-expression as workers in +industry. That is all very vague. Does it mean +co-partnership, profit-sharing, co-operative societies, +joint committees, national wages boards, guild +socialism, nationalisation? It may mean any or +all of these things—one in one industry, one in +another, or several different forms in the same +industry—whatever experiment may prove to be +best suited to each industry. But it must mean +opportunity of experiment, and experiment by all +concerned. It must mean greater recognition by +employers of their trusteeship on behalf of their +work-people as well as their shareholders; greater +recognition of the public as opposed to the purely +proprietary view of industry; and recognition +that the man who contributes his manual skill and +<a name="Page_197" id="Page_197"></a><span class="pagenum" title="197"></span>labour and risks his life and limb is as much a part +of the industry as a man who contributes skill in +finance, management, or salesmanship, or the man +who risks his capital.</p> + +<p>Coming to the mines, that is, the coal mining +industry (with a few incidental mines such as +stratified ironstone, fireclay, etc., which need not +complicate our argument), the first step to the +solution of the problem of the mines, <em>i.e.</em> the +collieries, the mining industry, is the solution of +the problem of the minerals. This distinction is +not at first sight obvious to all, but it is fundamental. +The ownership and leasing of the coal is one thing, +the business or industry of mining it is quite another. +State ownership of the former does not involve +State ownership of the latter. That is elementary +and fundamental. It lies at the root of what is to +follow.</p> + +<p>Will you picture to yourself a section of the coal-mining +industry in the common form of the pictures +one sees of an Atlantic liner cut neatly in two so as +to expose to view what is taking place on each deck. +On top you have the landowner, under the surface +of whose land coal, whether suspected or not, +has been discovered. He may decide to mine the +coal himself, but more frequently—indeed, usually—he +grants to some persons or company a lease to +mine that coal on payment of what is called a +royalty of so much for every ton extracted. Thereupon +he is called the mineral-owner or royalty-owner, +and the persons or company who actually +engage in the business or industry of coal mining +and pay him the royalties we shall call the +<a name="Page_198" id="Page_198"></a><span class="pagenum" title="198"></span>colliery-owners. Do not be misled by the confusing +term “coal-owners.” Very frequently the colliery-owners +are called the “coal-owners,” and their +associations “coal-owners’ associations.” That is +quite a misnomer. The real <em>coal</em>-owner is the +landowner, the royalty-owner, though it may well +happen that the two functions of owning the +minerals and mining them may be combined in the +same person. Below the colliery-owners we find +the managerial staff; below them what may be +called the non-commissioned officers of the mine, +such as firemen or deputies, who have most important +duties as to safety, and below them the +miners as a whole, that is, both the actual coal-getters +or hewers or colliers and all the other grades +of labour who are essential to this the primary +operation.</p> + + +<h3>The Question of Royalties</h3> + +<p>Coming back to the royalty-owner, you will see +his functions are not very onerous. He signs +receipts for his royalties and occasionally negotiates +the terms of a lease. But as regards the coal-mining +industry, he “toils not, neither does he +spin.” I do not say that reproachfully, for he (and +his number has been estimated at 4000) is doubtless +a good husband, a kind father, a busy man, and a +good citizen. But as regards this industry he +performs no essential function beyond allowing +the colliery-owners to mine his coal.</p> + +<p>What is the total amount annually paid in coal +royalties? We can arrive at an approximate +<a name="Page_199" id="Page_199"></a><span class="pagenum" title="199"></span>estimate in this way: Average output of coal for +five years before the war, roughly, 270,000,000 +tons; average royalty, 5½d. per ton, which means, +after deducting coal for colliery consumption and +the mineral rights duty paid to the State by the +royalty-owner, roughly £5,500,000 per annum paid +in coal royalties. Regarding this as an annuity, the +capital value is 70 millions sterling if we allow a +purchaser 8 per cent. on his money (12.5 years’ +purchase), or 55½ millions sterling if we allow him +10 per cent. (10 years’ purchase). For all practical +purposes the annuity may be regarded as perpetual.</p> + +<p>Now the State must acquire these royalties. +That is the only practicable solution, and a condition +precedent to any modification in the structure of +the coal-mining industry so long as the participants +in that industry continue unwilling or unable to +agree upon those modifications themselves. <em>Why +and how?</em> (1) First and foremost because until +then the State is not master in its own house, and +cannot make those experiments in modifying +conditions in the industry which I believe to be +essential to bring it into a healthy condition instead +of being a standing menace to the equilibrium of +the State—as it was before the war, and during +the war, and has been since the war; (2) the +technical difficulties and obstacles resulting from +the ownership of the minerals being in the hands +of several thousand private landowners and preventing +the economic working of coal are enormous. +You will find abundant evidence of this second +statement in the testimony given by Sir Richard +Redmayne and the late Mr. James Gemmell +<a name="Page_200" id="Page_200"></a><span class="pagenum" title="200"></span>and others before the Sankey Commission in +1919.</p> + +<p>How is the State to acquire them? Not piece-meal, +but once and for all in one final settlement, +by an Act of Parliament providing adequate +compensation in the form of State securities. The +assessment of the compensation is largely a technical +problem, and there is nothing insuperable about it. +It is being done every day for the purpose of death +duties, transfer on sale, etc. Supposing, for the +sake of argument, 55½ millions sterling is the total +capital value of the royalties, an ingenious method +which has been recommended is to set aside that +sum not in cash but in bonds and appoint a tribunal +to divide it equitably amongst all the mineral-owners. +That is called “throwing the bun to the +bears.” The State then knows its total commitments, +is not involved in interminable arbitrations, +and can get on with what lies ahead at once, leaving +the claimants to fight out the compensation amongst +themselves. This does not mean that the State +will have to find 55½ millions sterling in cash. It +means this, in the words of Sir Richard Redmayne: +“The State would in effect say to each owner of +a mineral tract: The value of your property to +a purchaser is in present money £x, and you are +required to lend to the State the amount of this +purchase price at, say, 5 per cent. per annum, in +exchange for which you will receive bonds bearing +interest at that rate in perpetuity, which bonds +you can sell whenever you like.”</p> + +<p>The minerals or royalties being acquired by the +State, what then? For the first time the State +<a name="Page_201" id="Page_201"></a><span class="pagenum" title="201"></span>would be placed in a strategic position for the +control and development of this great national +asset. Having acquired the minerals and issued +bonds to compensate the former owners, the State +enters into the receipt of the royalty payments, +and these payments will be kept alive. We must +now decide between at least two courses: (<em>a</em>) Is +the State to do nothing more and merely wait for +existing leases to expire and fall in, and then +attach any new conditions it may consider +necessary upon receiving applications for renewals? +Or (<em>b</em>) is the State to be empowered by Parliament +to determine the existing leases at any time and so +accelerate the time when it can attach new conditions, +make certain re-grouping of mines, etc.? My +answer is that the latter course (<em>b</em>) must be adopted. +The same Act of Parliament which vests the coal +and the royalties in the State, or another Act passed +at the same time, should give the State power to +determine the then existing leases if and when it +chooses, subject to just compensation for disturbance +in the event of the existing lessees refusing to +take a fresh lease.</p> + +<p>Why is course (<em>b</em>) recommended? (i) Most leases +are granted for terms varying from thirty to sixty +years. They are falling in year by year, but we +cannot afford to wait until they have all fallen in +if we are effectively to deal with a pressing problem. +(ii) The second objection to merely waiting is that +some colliery-owners (not many) might make up +their minds not to apply for a renewal of their +leases, and might consequently be tempted to +neglect the necessary development and maintenance +<a name="Page_202" id="Page_202"></a><span class="pagenum" title="202"></span>work, over-concentrating on output, and thus +allowing the colliery to get into a backward +state from which it would cost much time and +money to recover it—a state of affairs which could +and would be provided against in future leases, but +which the framers of existing leases may not have +visualised. I do not suggest that upon the acquisition +by the State of the minerals all the existing +leases should automatically determine. But the +State should have power to determine them on +payment of compensation for disturbance.</p> + + +<h3>A National Mining Board</h3> + +<p>At the same time a National Mining Board +consisting of representatives of all the interested +elements, colliery-owners, managerial and technical +staffs, miners, and other grades of workers, and coal +consumers would be formed (the Mines Department +already has a National Advisory Committee); the +mining engineering element must be strongly represented, +and provision must be made for first-class +technical advice being always available. It would +then be the business of the National Mining Board +to work out its policy and decide upon the broad +principles which it wishes to weave into the existing +structure of the coal-mining industry by means of +its power of granting leases. The following principles +will readily occur to most people, and are supported +by evidence which is, in my humble judgment, +convincing, given before the various commissions +and committees which have inquired into this +industry during recent years.</p> + +<p><a name="Page_203" id="Page_203"></a><span class="pagenum" title="203"></span>Firstly, More Amalgamation or Unification of +Collieries. At present there are about 3000 pits +owned by about 1500 companies or individuals, and +producing an aggregate output of about 250 million +tons per annum. Already there have been many +large amalgamations. (i) Many fortunately situated +small pits making a good profit will be found, but +on the whole small collieries are economically +unsound. In many cases at present the units are +too small, having regard to the class of work being +done, to the cost of up-to-date machinery and +upkeep and to the variableness of the trade. +Broadly I believe it to be true that the larger +collieries are as a general rule more efficient than +the smaller ones. (ii) In respect of co-operation in +pumping, larger units would frequently make for +efficiency and reduced cost; Sir Richard Redmayne, +speaking of South Staffordshire before the Sankey +Commission, said that we had already lost a large +part of that coalfield through disagreement between +neighbouring owners as to pumping. (iii) The +advantages of larger units in facilitating the +advantageous buying of timber, ponies, rails, +machinery and the vast amount of other materials +required in a colliery will be obvious to most business +men.</p> + +<p>I do not propose to chop up the coalfields into +mathematical sections and compulsorily unify the +collieries in those sections. I am merely laying +down the broad principle that to get the best out +of our national asset the National Mining Board +must bring about through its power of granting +leases the formation of larger working units than +<a name="Page_204" id="Page_204"></a><span class="pagenum" title="204"></span>at present usually exist. The geological and other +conditions in the different coalfields vary enormously, +and these form a very relevant factor in +deciding upon the ideal unit of size. It is conceivable +that in certain districts all the colliery-owners in +the district, with the aid of the National Mining +Board, would form a statutory company on the +lines of the District Coal Board, described in the +Report made by Sir Arthur Duckham as a member +of the Sankey Commission. One advantage accruing +from unification (to which recent events have +given more prominence) is that it mitigates the +tendency for the wages of the district to be just +those which the worst situated and the worst +managed colliery can pay and yet keep going, and +no more. This tendency seems to be recognised +and mitigated in the Agreement of June, 1921, on +which the mines are now being worked. Secondly, +Provision for Progressive Joint Control, that is, +for enabling all the persons engaged in the mining +industry either in money, in brains, or in manual +labour, or a combination of those interests, gradually +to exercise an effective voice in the direction of +their industry.</p> + +<p>Some of the arguments for this principle appear +to me to be (i) that, as indicated in my opening +remarks, a sufficiently large number of the manual +or mainly manual workers in the industry ardently +desire a progressively effective share in the control +of the industry; (ii) that this desire is natural and +legitimate, having regard to the great increase in +the education of the workers and the improvement +in their status as citizens, and that so far from +<a name="Page_205" id="Page_205"></a><span class="pagenum" title="205"></span>being repressed it should be encouraged; (iii) that +it is the natural development of the system of +Conciliation Boards and (occasionally) Pit Committees +which has prevailed in the industry for +many years, though more highly developed in +some parts of the country than others. So far, +these organs have been mainly used for purposes +of consultation and negotiation; the time has +come when with a more representative personnel, +while not usurping the functions of a mine manager +or, on a larger scale, the managing director, they +must be developed so as to exercise some effective +share in controlling the industry. (iv) While working +conditions are not so dangerous and unpleasant as +the public are sometimes asked to believe, the +workers in this industry are exposed to an unusually +high risk of injury and loss of life, and thus have +a very direct interest in devising and adopting +measures for increased safety. These measures +nearly always mean expenditure, and thus an +increased cost of working, and so long as their +adoption (except in so far as made compulsory by +the Mines Department) rests solely with bodies on +which capital alone is represented and labour not +at all, there will be fruitful cause for suspicion and +discontent. The miners are apt to argue that +dividends and safety precautions are mutually +antipathetic, and will continue to do so as long as +they have no part or lot in the reconciliation of these +competing obligations. The question is not whether +this argument of the miners is well-founded or not: +the point is that their suspicion is natural, and +any excuse for it should be removed. (v) The +<a name="Page_206" id="Page_206"></a><span class="pagenum" title="206"></span>exceptionally large items which wages form in the +total cost of coal production indicates the important +contribution made by the miners to the +welfare of the industry and justifies some share +in the direction of that industry.</p> + +<p>Upon the basis of typical pre-war years, the +value of the labour put into the coal mining +industry is 70 per cent. of the capital employed, +and 70 per cent. of the annual saleable value of +the coal, and yet this large labour interest has no +share in the management of the industry.</p> + + +<h3>The Mystery as to Profits</h3> + +<p>Thirdly, More Financial Publicity. Secrecy as to +profits, which always suggests that they are as +large as to make one ashamed of them, has been +the bane of the coal-mining industry. For nearly +half a century wages have borne some relation to +<em>selling prices</em>, and there have been quarterly audits +of typical selected mines in each district by joint +auditors appointed by the owners and the miners. +But over <em>profits</em> a curtain was drawn, except in so +far as the compulsory filing at Somerset House by +public companies of a document called a Statement +in the form of a balance sheet, enabled the curious +to draw not very accurate conclusions. It is not +easy for the plain man to read a balance sheet or +estimate profits, especially when shares are being +subdivided, or when bonus shares are being issued, +or large sums carried to reserve. The result has +been continual and natural suspicion on the part +<a name="Page_207" id="Page_207"></a><span class="pagenum" title="207"></span>of the miners, who doubtless imagined the colliery-owners’ +profits to be much larger than they were. +The miners knew that whenever they asked for an +increase in their wages they were liable to be told +that such an increase would turn a moderate profit +into a substantial loss, but the amount of the profit +they had to take on trust. Selling prices, yes, but +profits, no.</p> + +<p>The war and coal control partly killed that, and +it must not return. By the settlement of June, +1921, for the first time the miners have established +the principle of the adjustment of their wages in +accordance with the proceeds of the industry “as +ascertained by returns to be made by the owners, +checked by a joint test audit of the owners’ books +carried out by independent accountants appointed +by each side.” That is an important step, but does +not go anything like far enough.</p> + +<p>At least two good results would accrue if colliery-owners +conducted their business more in public: +(i) a great deal of the suspicion and mistrust of the +miners would be removed, and they would realise +why and when their wages must undergo fluctuations, +and the value of the many other factors +besides wages which went to make up the pit-head +cost of coal; (ii) publicity coupled with <em>costing +returns</em> would make it possible to draw comparative +conclusions as to the cost of production in different +mines and districts, which would be a fruitful +source of experiment and improvement. Publicity +does not involve publication of lists of customers, +British or foreign.</p> + + +<h3><a name="Page_208" id="Page_208"></a><span class="pagenum" title="208"></span>The Lessees of the Future</h3> + +<p>How far will the lessees to whom the National +Mining Board will grant leases to work the coal be +the same persons and companies as the present +lessees? In this matter it is desirable to maintain +the maximum amount of flexibility and variety. +I do not think we have yet discovered the ideal +unit, the ideal organisation for the development +of our principal national asset. So much do our +coalfields differ in geological formation, in tradition, +in the subdivision and classification of labour, +in outlet for trade, that it is unlikely that any +single unit or organisation will be the ideal one +for every coalfield. So we must resist any attempt, +especially an early attempt, at stereotyping or +standardising the type of lessee. By trial and error +we shall learn much.</p> + +<p>All the following types of lessee seem likely, +sooner or later, to demand the attention of the +National Mining Board. (I shall not touch on the +question of distribution, inland and export. That is +another and quite separate question):—</p> + +<p>(i) <em>The Present Lessees.</em>—I see no reason to doubt +that in the vast majority of cases the present +lessees would be prepared to continue to operate +their mines, paying royalties to the State instead +of to the present royalty-owner. Where the unit +is sufficiently large and the management efficient, +the National Mining Board would probably grant +a fresh lease, incorporating such conditions as to +unification, joint control, and publicity as they +<a name="Page_209" id="Page_209"></a><span class="pagenum" title="209"></span>might consider necessary. If the present lessees +do not want the lease, there are others who will.</p> + +<p>(ii) <em>Larger Groups.</em>—In a great many cases, however, +the Board would decline to grant separate +leases in respect of each of a number of small +collieries, and would indicate that they were only +prepared to receive applications for leases by +groups of persons or companies prepared to amalgamate +themselves into a corporation representing +an output of x tons <em>per annum</em>. This figure would +vary in each coalfield. In South Staffordshire, in +particular, divided ownership has had most prejudicial +effects in the matter of pumping.</p> + +<p>(iii) <em>District Coal Boards.</em>—Sir Arthur Duckham’s +scheme of statutory companies known as District +Coal Boards requires consideration. Without +necessarily adopting his districts or his uniformity +of type throughout the country, there are many +areas where it might be found that voluntary +amalgamation was impracticable, and that the +desired result could only be attained by an Act of +Parliament providing for the compulsory amalgamation +of persons and companies working a specified +area and the issue of shares in the new corporation +in exchange for the previous holdings.</p> + +<p>(iv) <em>Public Authorities.</em>—I should very much like +to see, sooner or later, in some area, a lessee in the +form of an organisation which, though not national—not +the State—should be at any rate public—something +on the lines of the Port of London Authority.</p> + +<p>It may well be that in one or more of our coalfields +a public authority of this type, though with +larger labour representation upon it and with a +<a name="Page_210" id="Page_210"></a><span class="pagenum" title="210"></span>large measure of joint control from top to bottom, +would be a suitable lessee of the minerals in that +area. The important point is that public management +need not mean bureaucratic State-management +with the disadvantages popularly associated +with it.</p> + +<p>(v) I have mentioned several types of possible +lessees, but it will be noticed that there is nothing +in these suggestions which would prevent the +National Mining Board from making the experiment +of working a few mines themselves.</p> + +<p>To sum up. There <em>is</em> a problem of the Mines. +No sensible person should be deceived by the +quiescence of the last twelve abnormal months. +Without using extravagant language, the coal-mining +industry is a volcano liable at any moment +to erupt and involve the whole community in loss +and suffering. Therefore, as a body of citizens, +we are under a duty to seek a solution which +can be effected between the occurrence of the recurring +crises. As a body of Liberal citizens we +shall naturally seek a Liberal solution, and the +foregoing suggestions (for which no originality is +claimed) are inspired by the Liberal point of view. +They apply to the industrial sphere principles which +have been tried and proved in the political sphere, +both in the central and the local government. +Apart from State acquisition of the minerals, about +which there can surely be no question, these suggestions +merely develop tendencies and organisations +already existing within the industry. They +involve no leap in the dark, such as has been attributed +by some to nationalisation of the whole +<a name="Page_211" id="Page_211"></a><span class="pagenum" title="211"></span>industry, and they provide for great flexibility +and experimentation. The fact that the official +spokesmen of neither miners nor colliery-owners +may like them need not deter us. They have had +numerous opportunities of settling the problem +amongst themselves, but the “die-hards” in both +camps have always prevented it. It is time that +the general public outside the industry took the +matter in hand and propounded a solution likely +to be acceptable to the vast body of sensible and +central feeling within the industry.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_212" id="Page_212"></a><span class="pagenum" title="212"></span><a name="THE_LAND_QUESTION" id="THE_LAND_QUESTION"></a>THE LAND QUESTION</h2> + +<h3>By A.S. Comyns Carr</h3> + +<h4>Member of Acquisition of Land Committee, 1918.</h4> + + +<p>Mr. Comyns Carr said:—The Land Question I +believe to be the most important subject in purely +domestic politics to-day, as it was in 1914. At that +date we were embarking, under the especial leadership +of one who has now deserted us, upon a comprehensive +campaign dealing with that question in all +its aspects. The present Government has filled +a large portion of the Statute Book with legislation +bearing on the land; it is not the quantity we have +to complain of, but the quality. In 1914 we had +already achieved one signal victory in carrying +against the House of Lords the Land Clauses of +the Budget of 1909-10, and although many of us +were never satisfied with the form which those +clauses took, they were valuable both as a step +in the direction of land taxation and for the +machinery of valuation which they established. +Mr. Lloyd George in his present alliance with the +Tories has sunk so low as not only to repeal those +clauses, but actually to refund to the landlords +every penny which they have paid in taxation +under them.</p> + +<p>The campaign which was inaugurated in 1913 +did not deal with the question of taxation only, +<a name="Page_213" id="Page_213"></a><span class="pagenum" title="213"></span>and for my part, although I am an enthusiast on +this branch of the subject, I have never thought +that other aspects should be neglected. We put +forward proposals for dealing with leases both in +town and country. The present Government has +carried and repealed again a series of statutes +dealing with agriculture. Their original policy +was to offer to the farmer guaranteed prices for +his produce, if necessary at the expense of the +tax-payer, and to the labourer guaranteed wages, +to be fixed and enforced by Wages Boards. Before +this policy was fully in operation it was repealed. +The farmer got some cash compensation for his +losses; the labourer has got nothing but voluntary +Conciliation Boards, with no power to do more +than pass pious resolutions. There has, however, +survived this welter of contradictory legislation, +a series of clauses which do confer upon the tenant +farmer a substantial part of the rights in his dealings +with his landlord for which we were agitating in +1914. The town lease-holder, on the other hand, +has got nothing, and it is one of the first duties of +the Liberal Party to provide him with security +against the confiscation of his improvements and +goodwill, to give him reasonable security of tenure, +and to put an end once for all to the pestilent system +of building leases which extends all over London +and to about half the other towns of England. +The evils of this system are especially to be found +in those older parts of our great cities where the +original leases are drawing to a close. In such +cases a kind of blight appears to settle on whole +neighbourhoods, and no improvements can be +<a name="Page_214" id="Page_214"></a><span class="pagenum" title="214"></span>carried out by either party because the landlord +cannot obtain possession, and the tenant has not, +and is unable to obtain, a sufficient length of term +to make it worth his while to risk his capital upon +them.</p> + + +<h3>Housing</h3> + +<p>The branch of the land question to which the +Government called the greatest attention in their +election promises was Housing. On this subject +the Government have placed many pages of +legislation on the Statute Book. One can only +wish that the houses occupied as much space. +They began by informing us, probably accurately, +that up to the time of the Armistice there was an +accumulated shortage of 500,000 houses; in pre-war +days new working-class houses were required, +and to a certain extent provided, although the +shortage had then already begun, to an average +number of 90,000 a year. According to the official +figures in July last, 123,000 houses had been +completed by Local Authorities and Public Utility +Societies; 37,000 by private builders with Government +subsidies; 36,000 were under construction, +and as the Government have now limited the total +scheme (thereby causing the resignation of Dr. +Addison, its sponsor) there remain 17,000 to be built. +This is the record of four years, so clearly the +Government have not even succeeded in keeping +pace with the normal annual demand, and the +shortage has not been attacked, but actually +accentuated.</p> + +<p>The cause of the failure was mainly financial. +<a name="Page_215" id="Page_215"></a><span class="pagenum" title="215"></span>Without attacking the roots of the evil in our land +and rating system, and without attempting to control +the output and supply of materials and building +in the way in which munitions were controlled +during the war, the Government brought forward +gigantic schemes to be financed from the supposedly +bottomless purse of the tax-payer. At the same +time the demand for building materials and labour +in every direction was at its maximum, and unfortunately +both employers and employed in the +building and allied industries took the fullest +advantage of the position to force up prices without +regard to the unfortunate people who wanted +houses. The Trade Unions concerned seem to +have overlooked the fact that if wages were raised +and output reduced houses would become so dear +that their fellow-workmen who needed them could +not attempt to pay the rents required, and the tax-payer +would revolt against the burdens imposed +upon him; thus the golden era for their own trade +was bound to come to a rapid end, and, so far from +employment being increased and prolonged, unemployment +on a large scale was bound to result. +With the Anti-Waste panic and the Geddes Axe, +social reform was cut first, and, in their hurry +to stop the provision of homes for heroes, the +Government is indulging in such false economies +as leaving derelict land acquired and laid out at +enormous cost, even covering over excavations +already made, and paying out to members of +the building trade large sums in unemployment +benefit, while the demand for the houses on which +they might be employed is left wholly unsatisfied.</p> + + +<h3><a name="Page_216" id="Page_216"></a><span class="pagenum" title="216"></span>Land for Public Purposes</h3> + +<p>The Acquisition and Valuation of Land for the +purpose of public improvements is a branch of the +question to which a great deal of attention was +drawn during and immediately after the war. +The Government appointed a Committee, of which +the present Solicitor-General was chairman, and +which, in spite of a marked scarcity of advanced +land reformers amongst its members, produced +a series of remarkably unanimous and far-reaching +recommendations. These recommendations dealt +with four main topics:—</p> + +<p>(<em>a</em>) Improvements in the machinery by which +powers may be obtained by public and private +bodies for the acquisition of land for improvements +of a public character;</p> + +<p>(<em>b</em>) Valuation of land which it is proposed to +acquire;</p> + +<p>(<em>c</em>) Fair adjustment as between these bodies +and the owners of other land, both of claims by +owners for damage done by the undertaking to +other lands, and of claims by the promoting bodies +for increased value given by their undertaking to +other lands; and</p> + +<p>(<em>d</em>) The application of these principles to the +special subject of mining.</p> + +<p>The Government in the Acquisition of Land Act, +1919, has adopted a great part of the Committee’s +recommendations under the second head, and +this Act has undoubtedly effected an enormous +improvement in the prices paid by public bodies +<a name="Page_217" id="Page_217"></a><span class="pagenum" title="217"></span>for land which they require, although, most unfortunately, +the same immunity from the extortion +of the land-owner and the land speculator has not +been extended to private bodies such as railway +companies who need land for the improvement of +public services. Moreover, it has not attempted to +bring the purchase price of land into any relation +with its taxing valuation.</p> + +<p>The whole of the rest of the Committee’s recommendations +dealing with the other three points +which I have mentioned, the Government has wholly +ignored. Powers for public development can still +only be obtained by the slow, costly and antiquated +processes in vogue before the war; private owners +of lands adjoining works of a public character are +still in a position to put into their own pockets +large increases in value due to public improvements +to which they have contributed nothing, and +which they may even have impeded; the development +of minerals is still hampered by the veto of +unreasonable owners, by the necessity of leaving +unnecessary barriers between different properties, +and by other obstacles which were dealt with in +detail in the Committee’s report. An illustration +of the importance of this aspect of the question +was put before the Committee and has been emphasised +by recent events. It was stated on behalf +of the railway companies that they were prepared +with schemes for the extension of their systems +in various parts of the country, which would not +only provide temporary employment for a large +number of men on construction, and permanent +employment to a smaller number on the working +<a name="Page_218" id="Page_218"></a><span class="pagenum" title="218"></span>of the lines, but would also open up new residential +and industrial districts, but that it was impossible +for them to find the necessary funds unless they +could have some guarantee that at least any loss +upon the cost of construction would be charged +upon the increased value of land in the new districts +which would be created by the railway extensions. +Remarkable instances were given of the way in +which the value of land had been multiplied many-fold +by the promotion of new railways, which, nevertheless, +had never succeeded in paying a dividend to +their shareholders, and the capital cost of which +had been practically lost.</p> + +<p>On the other hand, the Committee were assured +that, given a charge on the increased value of +land likely to be created, there would be no difficulty +in obtaining the necessary funds without Government +assistance. When the pressure of the unemployment +problem became acute, and not before—and +then it was, of course, too late—the Government +turned their attention to this problem, and have +guaranteed the interest upon new capital to be +expended on a few of these railway extensions, +but instead of charging the guarantee upon the +increased value of land, they have charged it +upon the pocket of the tax-payer. The most +striking instance is that of the tube railway from +Charing Cross to Golders Green, now being extended +under Government guarantee to Edgware. +Those who provided the original capital have +never received any return upon their money, yet +millions have been put into the pockets of the +owners of what was undeveloped land now served +<a name="Page_219" id="Page_219"></a><span class="pagenum" title="219"></span>by the line, and now that the extension is being +carried out with the tax-payers’ guarantee, the +land-owners will again reap the benefit untaxed.</p> + +<p>The development of the natural resources of +our country was one of the promises held out by +Mr. Lloyd George to the electors in 1918. Schemes +were ready, and are still in the official pigeon-holes, +for the production of electricity on a very large +scale both from water power and from coal, which +would not only provide employment, but cheapen +the cost of production in all our industries. France, +Italy, and other countries are at this moment +carrying out similar schemes whereby they will +relieve themselves to a large extent from dependence +on British coal. But here, four years of Coalition +Government have left us practically where we were. +In France, although in many respects her social +system seems to me less enlightened than our own, +the power of the land-owner to obstruct enterprise +and development is by no means so great. Land +Reform in this country is a necessary preliminary +to the fulfilment of Mr. Lloyd George’s promises. +Development at the public expense without such +reforms will result chiefly in further burdens upon the +tax-payer and further enrichment of the landowner.</p> + + +<h3>Rating Relief for Improvements</h3> + +<p>This brings me to the last, and in my opinion the +most important branch of the Land Question, that +relating to the reform of our system of rating and +taxation. I am myself an ardent supporter of the +policy which I think has been rather unfortunately +<a name="Page_220" id="Page_220"></a><span class="pagenum" title="220"></span>named the Taxation of Land Values. The vital +point about this policy is not so much that we +should tax land values, as that we should leave off +taxing buildings and other improvements of land. +The policy would be better described as the +Relief of Improvements from Taxation. Its +economic merits seem to me so obvious as hardly +to require examination. It is only because the +present system has been in force for over 300 years +that it can find any supporters. If any one were +to propose as a useful means of encouraging the +steel trade or the boot trade, or as a desirable +method of taxation, that a tax of, say, 50 per cent. +should be imposed upon the value of every ton of +steel or every pair of boots turned out in our +factories, he would be rightly and universally +denounced as a lunatic. Yet this is the system +which ever since the days of Queen Elizabeth has +been in force with regard to the building trade and +all other industries which result in the production +of improvements upon land.</p> + +<p>As long as land remains unused it pays no rates +or taxes, whatever its immediate potential value. +But the moment it is brought into use, as soon as +a house, a factory, or a railway is built upon it, or +it is drained or planted—rates and taxes, which in +these days often exceed 50 per cent. of its improved +value, have to be paid, without regard even to the +question whether its use is successful in yielding +profits or not. Familiarity with this system, instead +of breeding the contempt which it deserves, has +bred a kind of passive acquiescence which is exceedingly +difficult to shake. Even such a champion +<a name="Page_221" id="Page_221"></a><span class="pagenum" title="221"></span>of our land system as the Duke of Bedford years +ago in his book, <em>The Story of a Great Agricultural +Estate</em>, perceived the absurdity, although he was +apparently blind to the remedy and to the application +of it to some of his estates which are not +agricultural. He converted an ordinary arable +field into a fruit garden, and discovered that his +rates were promptly trebled by reason of his +expenditure. Striking, but, nevertheless, everyday +examples may be found if we see how the system +works out in urban districts. If a new factory is +built, rates and taxes are immediately levied on +the full annual value of the building, which is a +direct charge upon production, and has to be paid +before a single person can be employed in the +factory. It therefore not only restricts the possibilities +of employment, but has to be added to +the price at which the goods can be sold.</p> + + +<h3>The Lesson of the Slums</h3> + +<p>Or take the illustration of a slum area. Each +tumble-down tenement is rated and taxed on the +assessment based upon its annual rental value. +In many places in the central parts of towns the +total of these assessments is less than the sum for +which the whole site could be sold as a building +area, nevertheless if all the tenements fall or are +pulled down the site may remain vacant for years +and no rates or taxes are paid. But if substantial +and decent buildings are erected on the site, +immediately the assessment is raised to their full +annual value. The individual or public body that +<a name="Page_222" id="Page_222"></a><span class="pagenum" title="222"></span>has cleared away the slum and erected something +decent in its place is thus immediately punished +for doing so, with the result that such a thing is +seldom done except at the public expense. The +remedy for all these absurdities is quite a simple +one. No one disputes that the sums necessary for +municipal and imperial taxation have got to be +provided. The question is, in so far as they are to +be raised from lands and buildings, how can they +be assessed most fairly and with the least injury +to trade and commerce? They should be assessed +upon the value of land which is not due to any +effort of the owner or occupier; they should not +be assessed upon nor increased because of any +buildings which he may have erected or any +improvements which he may have carried out.</p> + +<p>This question was closely investigated by the +Land Enquiry Committee appointed by Mr. Lloyd +George in 1913. They were unanimous in condemning +the existing system and in regarding the +one which I have just described as the ideal. They +were, however, met by great difficulties in its +immediate practical application, because, owing +to the long prevalence of the wrong system, an +immediate and total change would bring about +rather startling alterations in the value of existing +properties. The Committee closely considered these +objections, and a number of alternative methods +of bringing the change into operation gradually +and without these drastic changes in value were +put forward. The one which immediately suggested +itself as the simplest, and from many points of +view the most desirable, was to leave the rates and +<a name="Page_223" id="Page_223"></a><span class="pagenum" title="223"></span>taxes of existing properties on their present basis, +to impose them at their present rate on the annual +value of all unoccupied land, but to exempt from +rates and taxes all future buildings and improvements +of every kind.</p> + +<p>To illustrate the way in which this would work, +let us revert to the case of a block of slum property. +As long as it remained in its present condition the +existing valuation based upon the annual rent +obtainable for it would apply, but any parts of it +which now are or may hereafter become unoccupied, +would, instead of escaping as they do now from all +rates and taxes, contribute on the basis of the value +of their sites, which would be assessed at an annual +rent for the purpose of comparison with the existing +valuations, at least until the capital values of the +whole rating area could be ascertained. If any +improvements were carried out the assessments +would not be raised on that account, as they would +be under present conditions, and if a whole area +were pulled down, replanned and rebuilt, the +assessment instead of being based, as it would be +to-day, on the annual value of the reconstructed +property, would be based upon the site value +alone. Gradually in this way site value would +become the prevalent basis of assessment. “It is +obvious,” as the Committee said in 1913, “that +unrating of future improvements is from the +economic point of view of far more importance +than the unrating of existing improvements; if +we want to encourage new buildings and new +improvements, what is really important is to +ensure that new improvements (not old ones) +<a name="Page_224" id="Page_224"></a><span class="pagenum" title="224"></span>shall be exempt from the burden of rates.” The +Committee were, however, compelled to reject +this suggestion at that time on the ground that +“it would cause an unfair differentiation between +the man who had already put up buildings or +improvements, and the man who put up buildings +or improvements after the passing of the Act.” +But as between buildings and improvements which +existed before the war and those which come +into existence under post-war conditions no such +unfairness could operate, because the increase in +the cost of building even to-day is greater than +the benefit which would accrue from the unrating +of improvements. The present is therefore the +unique opportunity for bringing into force this +much-needed reform in the most effective way, +free from the difficulties which had to be met in +1913. If it had been carried out immediately after +the Armistice it would, in my opinion, have done +more than anything else to solve the housing +problem, and even now it is not too late. In fact, +in view of the present unemployment it would be +most opportune. Incidentally it would soon render +unnecessary the renewal of the Rent Restriction +Act. I understand that something on these lines +has been introduced in New York to meet a similar +problem.</p> + + +<h3>A Rate and a Tax upon Site Values</h3> + +<p>The Committee of 1913 were obliged to turn their +attention to other suggestions. They proposed:</p> + +<p>(<em>a</em>) That all future increases in the expenditure +<a name="Page_225" id="Page_225"></a><span class="pagenum" title="225"></span>of each Local Authority which had to be met out +of rates should be met by a rate upon site values +instead of upon the existing assessments; and</p> + +<p>(<em>b</em>) That existing expenditure should be met to +a small extent compulsorily, and to a larger extent +at the option of the Local Authority, in the same +manner.</p> + +<p>There is no reason why these proposals should +not be brought into force simultaneously with that +relating to new buildings and improvements. They +made these proposals conditional upon a substantial +increase in the grants in aid to Local +Authorities, especially in necessitous areas, from +the Imperial Exchequer; and they suggested, +although they did not definitely recommend, that +a part at least of this increased grant might be +raised by means of an additional tax upon site +values. This, I think, should certainly be done, +and such a tax might be wholly or partially substituted +for the present Land Tax and Income-Tax +Schedule A, which are assessed on the wrong basis.</p> + +<p>These proposals would, of course, involve the +revival and revision of the National Land Valuation +established by the Finance Act, 1909-10, which +should be made the basis of all taxation and rating +relating to real property. This would be both a +reform and an economy, because there are at present +several overlapping systems of valuation by Central +and Local Authorities, none of which are really +satisfactory even on the present unsatisfactory +basis of assessment. The existence of such a +valuation frequently revised and kept up to date, +and independent of local influences, would be +<a name="Page_226" id="Page_226"></a><span class="pagenum" title="226"></span>invaluable not only for purposes of rating and +taxation, but also in arriving at a fair price for the +acquisition of land for public purposes, and for +the levying of special charges upon the increased +value due to particular public improvements, such +as railway extensions, with which I have already +dealt.</p> + +<p>I am not one of those who claim for these reforms +that they would cure all the evils from which the +community is at present suffering, but I do believe +that there is no other and no better way of removing +the unfairness and the restrictions of our present +methods of rating and taxation or of setting free +and stimulating the energies of our people in the +development of the resources of our country.</p> + + + +<hr style="width: 65%;" /> +<h2><a name="Page_227" id="Page_227"></a><span class="pagenum" title="227"></span><a name="AGRICULTURAL_QUESTIONS" id="AGRICULTURAL_QUESTIONS"></a>AGRICULTURAL QUESTIONS</h2> + +<h3>By Rt. Hon. F.D. Acland</h3> + +<h4>P.C.; M.P. (L.) North-West Cornwall; Financial Secretary, +War Office, 1908-10; Under-Secretary of State for +Foreign Affairs, 1911-15; Financial Secretary to +Treasury, Feb.-June, 1915; Secretary to the Board +of Agriculture, 1915-16; a Forestry Commissioner. +Chairman of the Agricultural Organisation Society.</h4> + + +<p>Mr. Acland said:—I begin by laying down in a +didactic form five points which one would like to +see firmly established in our rural life: (i) intensive +production; (ii) plenty of employment at good +wages; (iii) easy access to land, and a good chance +of rising upon the land; (iv) real independence in +rural life; (v) co-operative association for many +purposes.</p> + +<p>Intensive production is most important. It is +so easy to say the farmer <em>can</em> get more out of the +land, and the farmer <em>should</em> get more out of the +land, that we are tempted to continue and say that +the farmer <em>must be made</em> to get more out of the land. +But it isn’t so easy. It has been tried and failed, +and when any subject in our British political life +has been brought up to the boiling-point, and yet +nothing effective has been done, it is extremely +difficult to bring it to the boil a second time.</p> + +<p>It is worth while tracing out what has actually +happened. The Government’s Agriculture Act +of 1921 contained four great principles:—(i) that +<a name="Page_228" id="Page_228"></a><span class="pagenum" title="228"></span>we must have more food produced in this country +(<em>a</em>) as an insurance against risk of war, (<em>b</em>) so as to +meet our post-war conditions as a debtor nation +by importing less of our food supplies; (ii) that +as the most productive farming is arable farming, +and as by maintaining a proper proportion of +arable we can on emergency make ourselves independent +for our food supplies for an indefinite +time, farmers should be guaranteed against loss +on their arable rotations; (iii) that if farmers are +to be required to produce more they must have +clear legal rights to farm their land in the most +productive way, a greater compensation for disturbance; +(iv) that as the first three principles +give security to the nation and to the farmer, it is +desirable also to give security to the worker by +permanently continuing the war-time system of +Agricultural Wages Boards.</p> + +<p>These principles were duly embodied in the Bill +as it left the House of Commons:—</p> + +<p>(i) The Ministry of Agriculture, acting through +the County Agricultural Committees, was given +powers to insist on a certain standard of arable +cultivation, as well as in minor matters, such as +control of weeds and of rabbits;</p> + +<p>(ii) The difference between the ascertained market +price and the estimated cost of production on his +wheat and oat acreage was guaranteed to the +farmer, the guarantee not to be altered except after +four years’ notice;</p> + +<p>(iii) The landlord had to forfeit a year’s rent if +a tenant was disturbed except for bad farming, or +four years’ rent if the disturbance was capricious;</p> + +<p><a name="Page_229" id="Page_229"></a><span class="pagenum" title="229"></span>(iv) The existing Wages Board system was +continued.</p> + + +<h3>The Destruction of a Policy</h3> + +<p>The gradual destruction of this policy began in +the House of Lords. They allowed themselves to +be swept away by the popular cry against Government +interference with industry, and cut out the +power of control of cultivation. The Prime Minister +had said that this was an absolutely essential part +of the Bill, and of the Government’s policy, but the +Government quietly and characteristically accepted +the Lords’ amendment and the Bill was passed.</p> + +<p>Then troubles began. Other industries began +to ask why the Government satisfied agriculture and +not them, and as the Government could not plead +their control of agriculture in justification, no +real reply was possible. Also the cold fit came on +as regards national expenditure. The Bill for the +corn subsidies threatened to be very high. Though +Europe was starving, it could not buy, so cheap +American grain flooded our markets; but cost of +production here was still at its peak, and, for oats +especially, the amount to be paid to the farmer +threatened to be large. It was realised that it +might cost 25-30 millions to implement the guarantees +for the first year, and perhaps 10-12 millions +a year later. In short, the guarantees had to go. +Instead of four years’ notice of any change, a Bill +to repeal the great Act was introduced five months +after it had been passed. And it was unfortunately +part of the bargain with the farmers who received +<a name="Page_230" id="Page_230"></a><span class="pagenum" title="230"></span>for the single season perhaps six or eight millions +less than they might have been entitled to under +the Act, that the Wages Boards should be abolished—and +they were. There remained of the original +structure only the depreciation of the value of all +agricultural landowners’ property by about one-twentieth, +owing to the extra compensation for +disturbance.</p> + +<p>Every one felt that they had been had, and they +had been. The industry which had lately been +talked up and made much of was dumped into +the dustbin. The farmers had lost their guarantees +on the strength of which, in many cases, they had +bought their farms dear or planned their rotations. +The labourers, who particularly needed the protection +of Wages Boards during a time of fall in cost of +living and unemployment, had lost all legal protection. +The landlords, willing enough to give what +was asked of them if any national purpose was to +be served, found that their loss brought no corresponding +national gain. Agriculture retired as far +as it could from any contact with perfidious Governments, +to lick its wounds.</p> + +<p>That is not a good basis upon which to build +intensive cultivation or any other active policy. +There being now no legal or patriotic call to intensive +production, we are driven back to ask, “Does +intensive production pay?” and the broad answer +is that at a time of low prices it does not. There is +no doubt that slowly and steadily education will +gradually improve farming, and that farmers will +learn to find out what parts of their business pay +best and to concentrate upon them. There is also +<a name="Page_231" id="Page_231"></a><span class="pagenum" title="231"></span>no doubt that even at low prices there is plenty of +scope for better farming, and that better manuring, +particularly of grass land, will pay. But the +farmer is faced with an economic principle—the +law of diminishing returns. It may be stated thus: +beyond a certain point which rises and falls directly +with the value of the product, extra doses of labour +and manure do not give a corresponding return. +It is this principle which accounts for what we see +everywhere—that farmers are tending to economise +as much as they can on their labour and to let +arable land go back to grass.</p> + +<p>And if this is clear to farmers who are thinking +of intensive arable farming, still more is it true in +comparing arable with grass. If you take the same +sort of quantity of arable and grass farms, farmed +by men of the same skill and diligence, over a +range of seasons under low world prices for farm +produce, you will, I believe, find something like +this: grass land needs half the capital and one-third +of the labour of arable; it produces three-quarters +the receipts with half the payments, and +yields double the profit per acre and four times +the profit on capital. The moral of all this is clear. +Unless the nation is willing to go back to protection +for agriculture, which I am glad to believe in the +general interest unthinkable, and unless it is willing +to guarantee the farmer against loss from that +method of agriculture which means most production +and most employment, we must let the farmer set +the tune and farm in the way it best suits him to +farm. We must try, in fact, not to talk too much +nonsense about intensive production as the cure +<a name="Page_232" id="Page_232"></a><span class="pagenum" title="232"></span>for agricultural depression. It is useful to remember +that all countries overseas which combine high +wages with agricultural prosperity have a very low +output per acre judged by our standards.</p> + + +<h3>Employment and Wages</h3> + +<p>It follows directly from what I have just said +that a time of high costs and low prices like the +present, like the time of lower costs but still lower +prices of the late ’80’s and early ’90’s, is not a +favourable time for expecting employment to be +brisk or wages high. And reasons other than those +which we have yet considered make the farmer +feel his labour to be specially burdensome at present. +He finds that the prices he gets on the average are +one and one-third times what they were before the +war: what he has to buy costing from one and a +half to one and two-thirds what it cost before the +war; and he is expected in very many counties in +England and Wales to pay his workers about +double what he paid before the war. This is a strong +point for him. But the labourers’ position is just +as strong. “I was not sufficiently well paid before +the war. If this is to be recognised in any way at +all, I must at the present cost of living (185) have +double my pre-war wages.” It is certainly beyond +all question that 30/- a week, which is the present +wage over a large part of England, is not, even +with only 3/- a week rent for house and garden, +enough to keep a man and his wife and family in a +state of real efficiency. Yet I know from personal +experience that this fact is not properly recognised +<a name="Page_233" id="Page_233"></a><span class="pagenum" title="233"></span>in practice. If one tries to pay more one is regarded +as a very rich man, and an extremely stupid one—an +idea erroneous as to one’s wealth and possibly +exaggerated as to one’s mentality.</p> + +<p>How have the two conflicting views of farmer +and labourer been reconciled in practice. I can +only say that so far as my own knowledge extends—bearing +in mind that the farmer has not the +business man’s habit of cheerfully setting off a bad +year against a good (for the business man knows +that trade must improve some time, and then he +will make profits, while the farmer has no certainty +that things will improve)—things might well have +been worse. There has been a good deal of mutual +consideration and desire to make the best of difficult +circumstances. I have, however, little doubt that +it would have been better had the Wages Boards, +which had controlled the rise in wages during the +rise in the cost of living, regulated the fall in wages +during its fall—relaxing control perhaps later +when things became more stable.</p> + +<p>The reason why I think that things might have +been worse is that the District Wages Committee +left a good legacy to the voluntary Conciliation +Committees which followed them—the men serving +on the latter were those who under the Wages +Board system had learned to negotiate with and +to know and respect the workers—generally some +of the best farmers in their districts—and they +genuinely tried not to let the workers down with +too much of a bump; on the other hand, they +knew that the only value their recommendations +could have was that they should be voluntarily +<a name="Page_234" id="Page_234"></a><span class="pagenum" title="234"></span>observed, and therefore they took care not to +recommend rates higher than those which the least +favourably situated farmers in the district could +manage to pay—which meant rates lower than +many might have been willing to give. This +means that any general rate agreed to voluntarily +will be rather on the low side. But I would rather +have a rate which is generally observed, even if it +is rather low, than that every farmer should be a +law unto himself. If there is no recognised standard, +and one man with impunity pays a lower rate than +his neighbours, other rates also tend to come down, +and then the process begins over again.</p> + +<p>Looking to the future, the only thing that I can +say with any certainty about the wages question +is that it needs very careful watching. Let us be +sure first of our principle, that the first charge on +land, as on any other industry, should be a reasonable +standard of living for the workers. Then let us +be sure of the fact that there is over a very large +part of England and Wales no certain prospect of +an improvement in the condition of the labourer compared +with conditions ten years ago. The dangers +to be feared are that in the present lamentable weakness +of the men’s unions large sections of farmers +may break away from the recommendations of +their leaders; and that if depression continues and +war savings become depleted farmers will tend to +push wages down in self-preservation. These +things must be watched. If the general condition +of agriculture improves without a corresponding +improvement in the workers’ condition, or if conditions +get worse and the brunt of the burden +<a name="Page_235" id="Page_235"></a><span class="pagenum" title="235"></span>is transferred to the labourer, we ought to be +prepared to advocate a return to the old Wages +Boards or the adoption of a Trade Board system. +It must, I think, be a cardinal point of our Liberal +faith that though it is better to leave industrial +questions to be adjusted as much as possible by +the parties concerned in the industry, the State +must be ready to step in in any case in which the +workers have not developed the power by their own +combination to secure reasonable conditions and +prospects. It is to the prospects that I now turn.</p> + + +<h3>Access to the Land</h3> + +<p>I mean by this that there should be as many +chances as possible for men and women who have +an inclination for country pursuits to take up +cultivation of the soil; the freest opportunity for +experiment in making a living out of the land; and +good chances for those who have started on the land +ladder to rise to the top of it.</p> + +<p>The three things which stand in the way are:—</p> + +<p>(i) The cost of building and equipment;</p> + +<p>(ii) The practice under which the cultivator +provides all the movable capital;</p> + +<p>(iii) The handicap on free use of land imposed +upon its owners by the compensation clauses of the +Agriculture Act.</p> + +<p>These obstacles do real harm, in the first place, +because a very large proportion of farms in this +country are the wrong size: too large for a man to +work with his hands, and too much for him to +work with his head, as Sir Thomas Middleton has +<a name="Page_236" id="Page_236"></a><span class="pagenum" title="236"></span>well said. Figures show quite conclusively that +whether you take production per acre or production +per man, the farm of from 100 to 150 acres is +economically the worst-sized unit. Probably more +than half of our farms lie between 70 and 100 acres. +We should get far more out of the land if all were +either below 80—so that a man and his family +could manage them—or above 180, so that there +would be a chance of applying to production the +most scientific methods and up-to-date machinery.</p> + +<p>But movement, either towards breaking up +existing holdings or throwing them together, will +be extremely slow. The one process means building +new houses and buildings, which is prohibitive in +price; and the other, also fresh building and the +abandonment of hearths and homes, which is prohibited +both by price and by sentiment. Any +change in either direction is almost prohibitive +to the new poor landowner class, because if one +makes any change, except when a tenant dies or +moves of his own accord, one forfeits a year’s rent.</p> + +<p>I have not yet mentioned the difficulty about +capital. Under our British method, if a man wants +a farm he must have capital—about £10 per arable +acre and about £5 for grass. This is a great bar to +freedom of experiment and the greatest bar on the +way up the agricultural ladder. There ought to +be free access to our farms by town brains, which +can often strike out new and profitable lines if +given a chance. It is not good for agriculture, and +it does not promote that sympathy and contact +and interchange which should exist between town +and country, that a start in farming should need +<a name="Page_237" id="Page_237"></a><span class="pagenum" title="237"></span>a heavy supply of capital. If our landlords were +better off they might well try some of the continental +systems, under which the landlord provides not +only the farm and buildings, but the stock and +equipment, and receives in addition to a fair rent +for the land half the profits of the farm. But it is +vain to hope for this under present conditions, and, +for good or ill, the newly rich does not buy land. +He knows too much, and he can get what he wants +without it. He may lease a house, he does take +shooting, but he won’t buy an estate.</p> + +<p>When thinking of the importance of freedom of +experiment and of a ladder with no missing rungs, +I have my mind on the possibility of the owner of +one estate of from 5,000 to 10,000 acres throwing all +the farms and many of the fields together and +making his best tenants fellow-directors with him +of a joint enterprise, one doing the buying and +selling, one looking after the power and the tractors +and implements, one planning the agricultural +processes, one directing the labour and so on. This +gives a prospect of the greatest production and the +greatest profit, and it gives a really good labourer +a chance which at present he has not got. At +present, unless he leaves the land, in nine cases +out of ten once a labourer always a labourer. My +vision would give him a chance to become, first, +foreman, then assistant manager, manager, director, +and managing-director. It ought to be tried—but +how one’s tenants would loathe it, and quite natural +too! At present if things go wrong, if it’s not the +fault of the Government or the weather, it’s the +farmer’s own fault. On my joint-stock estate +<a name="Page_238" id="Page_238"></a><span class="pagenum" title="238"></span>every director and manager would feel that all his +colleagues were letting him down and destroying +his profits. It is hard to make people accept at all +readily, in practice, the teaching that they are their +brothers’ keeper.</p> + +<p>The scheme could hardly be started with men +accustomed to the present methods, and the cost +of obtaining vacant possession of land would make +it difficult to try with new men. I am sure, however, +that something of the sort is a good and hopeful +idea, and the best way of making the ladder complete. +And I am emboldened to think that something +of the sort will be tried gradually in some +places, when I see the number of landlords’ sons +who are in this and other universities taking the +best courses they can get in the science and economics +of agriculture. They know this is the only way to +retain a remnant of the old acres. It is quite new +since the war—and a most hopeful sign.</p> + + +<h3>Independence</h3> + +<p>I need not urge the importance in our villages of +real independence of life. It was the absence of +independence combined with long working hours +and little occupation for the hours of leisure, which, +more than low wages, caused the pre-war exodus +from the country. Should the prospects of industry +improve, but agriculture remain depressed, there +will be another exodus from the country-side of +the best of the young men who have come back to +it after the war. It is of first-class importance, +both from the national and from the agricultural +<a name="Page_239" id="Page_239"></a><span class="pagenum" title="239"></span>point of view, that they should stay, for there was +a real danger before the war that agriculture might +become a residual industry, carried on mainly by +them, too lethargic in mind and body to do anything +else.</p> + +<p>In a preface which he wrote to Volume I of the +Land Report, as chairman of Lloyd George’s Land +Inquiry Committee (it seems a long time ago now +that Lloyd George was a keen land reformer), my +father sketched out the idea of setting up commissions +to report parish by parish in each county, +in the same way that commissions have reported +on the parochial charities. They would record +how the land was distributed, whether the influence +of the landowners told for freedom or against it, +whether there was a chance for the labourer to get +on to the land and to mount the ladder. Whether +there was an efficient village institute, whether +there were enough allotments conveniently situated, +whether the cottagers were allowed to keep pigs +and poultry, and what the health and housing +were like.</p> + +<p>It is a good idea, and should be borne in mind. +I confess I do not know enough to know whether +it is now as desirable as it seemed to be before the +war. I would fain hope not, but I am not sure. +I believe that there is a good deal more real independent +life in the villages now than there was ten +years ago. There are, I think, now fewer villages +like some in North Yorkshire before the war, in +which the only chance for a Liberal candidate to have +a meeting was to have it in the open-air, after dark +on a night with no moon, and even then he needed +<a name="Page_240" id="Page_240"></a><span class="pagenum" title="240"></span>a big voice—for his immediate audience was apt +to be two dogs and a pig. Now, it seems to me that +people like having political meetings going on, but +do not bother to listen to any of them.</p> + +<p>As to the present, there has been lately, within +my knowledge, a great building of village institutes. +There has been a tremendous development of +football. Village industries, under the wise encouragement +of the Development Commission, +are reviving. Motor buses make access to town +amusements much easier, and cinemas come out +into the village. There is revived interest and +very keen competition in the allotment and cottage +garden shows. Thus it is, at any rate, down our +way—but no one can know more than his own +bit of country. On these and similar matters we +ought to think and watch and meet together to +report and discuss. We need more Maurice Hewletts +and Mrs. Sturge Grettons to tell us how things +really are, for nothing is so difficult to visualise as +what is going on slowly in one’s own parish.</p> + + +<h3>Co-operation</h3> + +<p>I come lastly to co-operation. You will think +me biased when I speak of its possibilities. I am. +I have been for eighteen years on the governing +body of the Agricultural Organisation Society, and +happen now to be its chairman, and am therefore +closely in touch with the work of organising +co-operative effort. One sees fairly clearly how +difficult it is to make any class of English agriculturists +combine for any mutual purpose, how worth +<a name="Page_241" id="Page_241"></a><span class="pagenum" title="241"></span>while it is, and what almost unexpected opportunities +of useful work still exist. Thanks largely +to untiring work by Sir Leslie Scott—who gave +up the chairmanship of the society on his recent +appointment as Solicitor-General—the country is +now fairly covered by societies for purchasing +requirements co-operatively—principally fertilisers, +feeding-stuffs, and seeds. There are also affiliated +to the movement I have mentioned, many useful +co-operative auction marts, slaughter-house +societies, bacon factories, wool societies, egg and +poultry societies, and fruit and garden produce +societies (but not nearly enough), besides a thousand +or so societies of allotment holders which, thanks +largely to our friend, George Nicholls, set all the +others an example in keenness and loyalty to their +parent body.</p> + +<p>The <em>ideal</em> is that where a society exists the main +raw materials of the industry shall be bought +wholesale instead of retail, and the main products +of the industry sold retail instead of wholesale; +that thereby middlemen’s and other profits shall +be reduced to a reasonable figure, and that the +consumer shall get the most efficient possible +service with regard to his supplies. It is also the +ideal that farmers and others shall learn more +comradeship and brotherhood; that the big and +small men alike shall become one community +bound together for many common purposes, and +that thus the cultivators of the soil shall lose that +isolation and selfishness which is a reproach against +them. The ideal is, however, not always realised. +The farmer likes to have a co-operative society to +<a name="Page_242" id="Page_242"></a><span class="pagenum" title="242"></span>keep down other people’s prices, but, having helped +to form a society, he does not see why he should be +loyal to it if a trader offers him anything a shilling +a ton cheaper. A good committee is formed, but +the members think they hold their offices mainly +in order to get first cut for themselves at some +good bargain the society has made, and they start +with the delusion that they are good men of business. +Things, therefore, get into the hands of the manager, +and it is astonishing how much more quickly a +bad manager can lose money than a good one can +make it. And if in these and other ways it is uphill +work with farmers’ societies, the work is still more +uphill with small-holders. It is the breath of their +nostrils to bargain individually, and if a society is +started they will only send their stuff to be sold +when they and every one else have a glut, ungraded +and badly packed—and then they grumble at +getting a low price.</p> + +<p>But all co-operative work is abundantly worth +while. And the field of co-operation is not limited +to the purchase of supplies or the sale of produce. +It ought to cover the use of tractors and threshing +sets and the installation and distribution of power. +And if agriculture gets a chance of settling down +to a moderate amount of stability and prosperity, +it would not be beyond the bounds of hope that +part, at any rate, of the profits of co-operative +enterprise should be used to develop the amenities +of the common life of the community—to provide +prizes for the sports and the flower show—the capital +to start an industry for the winter evenings, and even +seats for the old people round the village green.</p> + +<p><a name="Page_243" id="Page_243"></a><span class="pagenum" title="243"></span>Times are not propitious for increasing the +productivity of our land, excepting by the slow +processes of education—which work particularly +slowly in agriculture. Nor are they immediately +propitious for raising the workers’ standard of life, +though we should never leave go of this as an +essential. But many of us can, if we will, help a +good man to start on the land, or help a man who +has made good on the land to do better. Many of +us can help to develop real independence of life in +the villages and, through co-operation, those kindly +virtues of friendliness and helpfulness to others +and willingness to work for common ends which +are sometimes not so common as they might be. +And those who <em>can</em> do any of these things <em>should</em>, +without waiting for legislation—for the legislator +is a bruised reed.</p> + +<hr style="width: 65%;" /> +<p class="center" style="font-size: smaller;">Transcriber’s Note: The following apparent misprints have been +corrected for this electronic edition:</p> +<table cellpadding="2" border="1" frame="box" rules="none" style="font-size: smaller;" summary="List of misprints and their corrections"> +<tr><td style="text-align: right;"><a href="#typo_1">misconduct necessitates military operations;</a> +</td><td> <em>as printed</em> </td><td>operations:</td></tr> +<tr><td style="text-align: right;"><a href="#typo_2">if he tries to make his responsibility real</a> +</td><td> <em>as printed</em> </td><td>responsiblity</td></tr> +<tr><td style="text-align: right;"><a href="#typo_3">the main virtue of Cabinet</a> +</td><td> <em>as printed</em> </td><td>virture</td></tr> +<tr><td style="text-align: right;"><a href="#typo_4">which are almost invariably present towards</a> +</td><td> <em>as printed</em> </td><td>invarably</td></tr> +</table> + + + + + + + + +<pre> + + + + + +End of the Project Gutenberg EBook of Essays in Liberalism, by Various + +*** END OF THIS PROJECT GUTENBERG EBOOK ESSAYS IN LIBERALISM *** + +***** This file should be named 17294-h.htm or 17294-h.zip ***** +This and all associated files of various formats will be found in: + https://www.gutenberg.org/1/7/2/9/17294/ + +Produced by Melissa Er-Raqabi, Jonathan Niehof, Ted Garvin +and the Online Distributed Proofreading Team at +https://www.pgdp.net + + +Updated editions will replace the previous one--the old editions +will be renamed. + +Creating the works from public domain print editions means that no +one owns a United States copyright in these works, so the Foundation +(and you!) can copy and distribute it in the United States without +permission and without paying copyright royalties. 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You may copy it, give it away or +re-use it under the terms of the Project Gutenberg License included +with this eBook or online at www.gutenberg.org + + +Title: Essays in Liberalism + Being the Lectures and Papers Which Were Delivered at the + Liberal Summer School at Oxford, 1922 + +Author: Various + +Release Date: December 12, 2005 [EBook #17294] + +Language: English + +Character set encoding: ASCII + +*** START OF THIS PROJECT GUTENBERG EBOOK ESSAYS IN LIBERALISM *** + + + + +Produced by Melissa Er-Raqabi, Jonathan Niehof, Ted Garvin +and the Online Distributed Proofreading Team at +https://www.pgdp.net + + + + + +ESSAYS +IN +LIBERALISM + +_Being the Lectures and Papers which were +delivered at the Liberal Summer School +at Oxford, 1922_ + + +LONDON: 48 PALL MALL +W. COLLINS SONS & CO. LTD. +GLASGOW MELBOURNE AUCKLAND +Copyright 1922 + + +_Manufactured in Great Britain_ + + + + +PREFACE + + +The papers contained in this volume are summaries--in some cases, owing +to the defectiveness of the reports, very much abridged summaries--of a +series of discourses delivered at the Liberal Summer School at Oxford in +the first ten days of August, 1922. In two cases ("The State and +Industry" and "The Machinery of Government") two lectures have been +condensed into a single paper. + +The Summer School was not arranged by any of the official organisations +of the Liberal party, nor was any part of its expenses paid out of party +funds. It was the outcome of a spontaneous movement among a number of +men and women who, believing that Liberalism is beyond all other +political creeds dependent upon the free discussion of ideas, came to +the conclusion that it was desirable to create a platform upon which +such discussion could be carried on, in a manner quite different from +what is usual, or indeed practicable, at ordinary official party +gatherings. From the first the movement received cordial support and +encouragement from the leaders of the party, who were more than content +that a movement so essentially Liberal in character should be carried +on quite independently of any official control. The meetings were +inaugurated by an address by Mr. Asquith, and wound up by a valediction +from Lord Grey, while nearly all the recognised leaders of the party +presided at one or more of the meetings, or willingly consented to give +lectures. In short, while wholly unofficial, the meetings drew together +all that is most vital in modern Liberalism. + +In some degree the Summer School represented a new departure in +political discussion. Most of the lectures were delivered, not by active +politicians, but by scholars and experts whose distinction has been won +in other fields than practical politics. One or two of the speakers +were, indeed, not even professed Liberals. They were invited to speak +because it was known that on their subjects they would express the true +mind of modern Liberalism. Whatever Lord Robert Cecil, for example, may +call himself, Liberals at any rate recognise that on most subjects he +expresses their convictions. + +As a glance at the list of contents will show, the papers cover almost +the whole range of political interest, foreign, domestic, and imperial, +but the greatest emphasis is laid upon the problems of economic and +industrial organisation. Yet, since it is impossible to survey the +universe in ten days, there are large and important themes which remain +unexplored, while many subjects of vital significance are but lightly +touched upon. Perhaps the most notable of these omissions is that of any +treatment of local government, and of the immensely important +subjects--education, public health, housing, and the like--for which +local authorities are primarily held responsible. These subjects are +held over for fuller treatment in later schools; and for that reason two +papers--one on local government and one on education--which were +delivered at Oxford have not been included in the present volume. + +It must be obvious, from what has been said above, that these papers +make no pretence to define what may be called an official programme or +policy for the Liberal party. It was with study rather than with +programme-making that the School was concerned, and its aim was the +stimulation of free inquiry rather than the formulation of dogmas. Every +speaker was, and is, responsible for the views expressed in his paper, +though not for the form which the abridged report of it has assumed; and +there are doubtless passages in this book which would not win the assent +of all Liberals, for Liberalism has always encouraged and welcomed +varieties of opinion. + +Nevertheless, taken as a whole, these papers do fairly represent the +outlook and temper of modern Liberalism. And the candid reader will not +fail to recognise in them a certain unity of tone and temper, in spite +of the diversity of their authorship and subject-matter. Whether the +subject is foreign politics, or imperial problems, or government, or +industry, the same temper shows itself--a belief in freedom rather than +in regimentation; an earnest desire to substitute law for force; a +belief in persuasion rather than in compulsion as the best mode of +solving difficult problems; an eagerness to establish organised methods +of discussion and co-operation as the best solvent of strife, in +international relations and in industrial affairs quite as much as in +the realm of national politics, to which these methods have long since +been applied. + +That is the spirit of modern Liberalism, which gives unity to the +diversity of this little volume. As has often been said, Liberalism is +an attitude of mind rather than a body of definitely formulated +doctrine. It does not claim to know of any formula which will guide us +out of all our troubles, or of any panacea that will cure every social +ill. It recognises that we are surrounded in every field of social and +political life by infinitely difficult problems for which there is no +easy solution. It puts its trust in the honest inquiry and thought of +free men who take their civic responsibilities seriously. + + + + +CONTENTS + + PAGE +Preface v + +The League of Nations and the +Rehabilitation of Europe _Rt. Hon. Lord Robert Cecil_ 1 + +The Balance of Power _Professor A.F. Pollard_ 19 + +International Disarmament _Sir Frederick Maurice_ 37 + +Reparations and Inter-Allied Debt _John Maynard Keynes_ 51 + +The Outlook for National Finance _Sir Josiah Stamp_ 59 + +Free Trade _Rt. Hon. J.M. Robertson_ 74 + +India _Sir Hamilton Grant_ 92 + +Egypt _J.A. Spender_ 111 + +The Machinery of Government _Ramsay Muir_ 120 + +The State and Industry _W.T. Layton_ 145 + +The Regulation of Wages _Professor L.T. Hobhouse_ 165 + +Unemployment _H.D. Henderson_ 176 + +The Problem of the Mines _Arnold D. McNair_ 194 + +The Land Question _A.S. Comyns Carr_ 212 + +Agricultural Questions _Rt. Hon. F.D. Acland_ 227 + + + + +THE LEAGUE OF NATIONS AND THE REHABILITATION OF EUROPE + +BY THE RT. HON. LORD ROBERT CECIL + +K.C., M.P., Assistant Secretary of State for Foreign Affairs, 1918. +Minister of Blockade, 1916-1918. Representative of Union of South Africa +at Assembly of League of Nations. + + +Lord Robert Cecil said:--I ought to explain that I am here rather by +accident. The speaker who was to have addressed you was my great +personal friend, Professor Gilbert Murray, and you have greatly suffered +because he is not present. He is prevented by being at Geneva on a +matter connected with the League, and he suggested that I might take his +place. I was very glad to do so, for, let me say quite frankly, I am +ready to advocate the League of Nations before any assembly, certainly +not least an assembly of Liberals. But not only an assembly of +Liberals--I should be ready to advocate it even before an assembly of +"Die-Hards." + +Your chairman has said, and said truly, that the League is not a party +question. We welcome, we are anxious for support from every one. We have +seen in another great country the very grave danger that may accrue to +the cause of the League if it unhappily becomes identified with party +politics. We welcome support, yes, I will say even from the Prime +Minister; indeed no one will reject the support of the Prime Minister of +England for any cause. I am bound to admit when I first read the speech +to which reference has already been made, I was a little reminded of the +celebrated letter of Dr. Johnson to Lord Chesterfield. Lord Chesterfield +only began to recognise the value of Johnson's works when Johnson had +already succeeded, and in one of the bitter phrases Dr. Johnson then +used he said, "Is not a patron one who looks with unconcern on a man +struggling for life in the water, and when he has reached ground +incommodes him with help?" That was a passing phase in my mind, and I am +a little ashamed of it, because, after all, we cannot say the League has +reached ground as yet. We need and are grateful for the help of any one +who will genuinely come to its assistance. I hope we may look not only +for words, but for deeds. The League needs all the support it can get in +the very perilous and menacing times which are before us. I was glad to +note that the Government has announced--it is one of the great test +questions--that not only is it in favour of the entry of Germany into +the League, but it would support the election of Germany to the Council +of the League. That is an earnest of what we trust may be a real League +policy from the Government of this country. And yet, though I have +thought it right to emphasise the non-party aspect of this question, I +am conscious, and I am sure all of you are, there are two ways in which +the League is regarded. It is not only that, as your chairman would +say, some people have more faith than others, but there is really a +distinct attitude of mind adopted by some supporters of the League from +that adopted by others. + + +THE TWO VIEWS OF THE LEAGUE + +There is what I may call the empirical view of the League. There are +those of us in this country, and indeed all over the world, who, +profoundly impressed with the horrors of war, hating war from the bottom +of their hearts as an evil thing--a company which must include, as far +as I can see, all Christian men and women--these people, impressed with +the horrors of war, look about for some means of keeping it away, some +safeguard against its renewal. And they say: "We have tried everything +else, we have tried the doctrine of the preparation for war as a great +safeguard of peace; we have tried the doctrine of the Balance of Power; +we have tried the doctrine of making one State or group of States so +powerful that it can enforce its will on the rest of the world. We have +tried all these expedients, and we are driven to the conclusion that +they lead not to peace, but to war. Is there anything else?" And then +they come quite legitimately to the League as their last hope of +preserving the peace of the world. I was talking to a distinguished +Frenchman the other day, and that was his attitude. It is the attitude +of a great many people. In my judgment it is quite sound as far as it +goes. But it is not inspiring. It depends in the last resort merely on +a frank appeal to the terrors of mankind. + +Against that view you may set the more fundamental way of approaching +this question. You may say if you are to have peace in the world it is +not enough merely to provide safeguards against war. You must aim at +creating a new international spirit, a new spirit in international +affairs; you must build from the very foundations. That is the positive +as opposed to the negative way of approaching this question. It is not +enough to cast out the war spirit and leave its habitation swept and +garnished. You have to replace the war spirit by a spirit of +international co-operation. And that is the way of regarding this great +movement which some people think can be disposed of by describing it as +idealism--a favourite term of abuse, I learn, now, but which seems to me +not only good politics and good morality, but common sense as well. + + +THE NEGATIVE AND THE POSITIVE + +These two points of view do represent undoubtedly fundamental +differences of political attitude, and you will find that the two sets +of advocates or supporters of the League whom I have tried to describe, +will inevitably regard with different emphasis the provisions of the +Covenant, and even the achievements of the League. For if you read the +Covenant you will find two sets of provisions in that document. It does +recognise the two schools, as it were, that I have been describing. It +has a set of provisions which deal with the enforcement, the +safeguarding of peace, and a set of provisions which deal with the +building up of international co-operation. You will notice the two sets +of provisions. There are those aiming directly at the settlement of +disputes without war. This is the central part of the League. It is the +first thing before you can hope to do anything else. Before you can +begin to build up your international spirit you must get rid as far as +you can of the actual menace of war; and in that sense this is the +central part of the Covenant. But, in my view, the most enduring and +perhaps the most important part is that set of provisions which cluster +round the group of articles beginning with Article 10 perhaps, certainly +Article 12, and going on to Article 17--the group which says in effect +that before nations submit their disputes to the arbitrament of war they +are bound to try every other means of settling their differences. It +lays down first the principle that every dispute should come to some +kind of arbitration, either by the new Court of International +Justice--one of the great achievements of the League--or discussion +before a specially constituted Arbitration Court, or failing both, then +discussion before the Council of the League; and Articles 15 and 16 +provide that until that discussion has taken place, and until adequate +time has been allowed for the public opinion of the world to operate on +the disputants as the result of that examination, no war is to take +place, and if any war takes place the aggressor is to be regarded as +perhaps what may be called an international outlaw. + +Before you begin to build you must have freedom from actual war, and +the provisions have been effective. They are not merely theoretic. I am +not sure whether it is generally recognised, even in so instructed an +assembly as this, how successful these provisions have actually been in +practice. Let me give you briefly two illustrations: the dispute between +Sweden and Finland, and the much more urgent case of the dispute between +Serbia and Albania. In the first case you had a dispute about the +possession of certain islands in the Baltic. It was boiling up to be a +serious danger to the peace of the world. It was referred to the League +for discussion. It was before the existence of the International Court. +A special tribunal was constituted. The matter was threshed out with +great elaboration; a decision was come to which, it is interesting to +observe, was a decision against the stronger of the two parties. It was +accepted, not with enthusiasm by the party that lost, but with great +loyalty. It has been adopted, worked out in its details by other organs +of the League, and as far as one can tell, as far as it is safe to +prophesy about anything, it has absolutely closed that dispute, and the +two countries are living in a greater degree of amity than existed +before the dispute became acute. + +But the Albanian case is stronger. You had a very striking case: a small +country only just struggling into international existence. Albania had +only just been created before the war as an independent State, and +during the war its independence had in effect vanished. The first thing +that happened was its application for membership of the League. That +was granted, and thereby Albania came into existence really for the +first time as an independent State. Then came its effort to secure the +boundaries to which it was entitled, which had been provisionally +awarded to it before the war. While that dispute was still unsettled, +its neighbour, following some rather disastrous examples given by +greater people in Europe, thought to solve the question by seizing even +more of the land of Albania than it already occupied. Thereupon the +Articles of the Covenant were brought into operation. The Council was +hastily summoned within a few days. It was known that this country was +prepared to advocate before that Council the adoption of the coercive +measures described in Article 16. The Council met, and the aggressive +State immediately recognised that as a member of the League it had no +course open but to comply with its obligations, and that as a prudent +State it dared not face the danger which would be caused to it by the +operation of Article 16. Immediately, before the dispute had actually +been developed, before the Council, the Serbians announced that they +were prepared to withdraw from Albanian territory, and gave orders to +their troops to retire beyond the boundary. Let us recognise that this +decision having been come to, it was carried out with absolute loyalty +and completeness. The troops withdrew. The territory was restored to +Albania without a hitch. No ill-feeling remains behind, and the next +thing we hear is that a commercial treaty is entered into between the +two States, so that they can live in peace and amity together. + + +THE SPIRIT OF THE LEAGUE + +I want to emphasise one point about these two cases. It is not so much +that the coercive powers provided in the Covenant were effectively used. +In Sweden and Finland they never came into the question at all, and in +the other case there was merely a suggestion of their operation. What +really brought about a settlement of these two disputes was that the +countries concerned really desired peace, and were really anxious to +comply with their obligations as members of the League of Nations. That +is the essential thing--the League spirit. And if you want to see how +essential it is you have to compare another international incident: the +dispute between Poland and Lithuania, where the League spirit was +conspicuous by its absence. There you had a dispute of the same +character. But ultimately you did secure this: that from the date of the +intervention of the League till the present day--about two years--there +has been no fighting; actual hostilities were put an end to. Though that +is in itself an immensely satisfactory result, and an essential +preliminary for all future international progress, yet one must add that +the dispute still continues, and there is much recrimination and +bitterness between the two countries. The reason why only partial +success has been attained is because one must say Poland has shown a +miserable lack of the true spirit of the League. + +Let me turn to the other parts of the Covenant--those which aim +directly at building up international co-operation. I am not sure that +it is always sufficiently realised that that is not only an implicit but +also an explicit object of the Covenant--that it is the main purpose for +which the League exists. International co-operation are the very first +words of the preamble to the Covenant. This is the fundamental idea I +cannot insist on too strongly, because it does really go down to the +very foundations of my whole creed in political matters. International +co-operation, class co-operation, individual co-operation--that is the +essential spirit if we are to solve the difficulties before us. Let me +remind you of the two instances of the action of the League in dealing +with the threat of epidemics to Europe. A conference was called at +Washington to consider what could be done to save Europe from the danger +of epidemics coming from the East. What is interesting is that in that +conference you had present not only members of the League considering +and devising means for the safety of Europe, but you had representatives +of Germany and Russia--a splendid example of the promotion of +international co-operation extending even beyond the limits of the +membership of the League. Admirable work was done. All countries +co-operated quite frankly and willingly under the presidency of a +distinguished Polish scientist. + +That is one example of what we mean by international co-operation. +Perhaps an even more striking example was the great work of Dr. Nansen +in liberating the prisoners of war who were in Russia. He was entrusted +with the work on behalf of the League. The prisoners of war belonged to +all nationalities, including our enemies in the late war. He +accomplished his work because he went about it in the true spirit of the +League, merely anxious to promote the welfare of all, leaving aside all +prejudices whether arising from the war or from any other cause. Dr. +Nansen is in my judgment the incarnation of the spirit of the League, +and his work, immensely successful, restored to their homes some 350,000 +persons, and he did it for less money than he originally estimated it +would cost. + +Do not put me down as a facile optimist in this matter. In the matter of +international co-operation we have a long way to go before we reach our +goal, and we can already see one or two serious failures. I deeply +deplore that last year the League found itself unable, through the +instructions given by the Governments which composed it, to do anything +effective on behalf of the famine in Russia. It was a most deplorable +failure for the League, and still more deplorable for this country. It +was a great opportunity for us to show that we really did mean to be +actuated by a new spirit in international affairs, and that we did +recognise that the welfare of all human beings was part--if you like to +put it so--of our national interests. We failed to make that +recognition. We have been trying feebly and unsuccessfully to repair +that great mistake ever since, and for my part I do not believe there is +any hope of a solution of the Russian difficulty until we absolutely +acknowledge the failure we then made, and begin even at this late hour +to retrace the false step we then took. + +I could give other instances of failure, but I do not wish to depress +you, and there are cheering things we may look at. It is a matter of +great relief and congratulation that the policy of mandates really does +appear to be becoming effective, and one of the greatest activities of +the League. Nothing is better than the conception which the mandate +clause embodies, that the old ideas of conquest are to be put aside; +that you are not to allow nations to go out and take chunks of territory +for themselves; that they must hold new territory not for themselves, +but on behalf of and for the benefit of mankind at large. This is at the +bottom of mandates. Since I am speaking on behalf of Professor Murray, I +ought to remind you of the provisions of the Covenant for the protection +of racial linguistic minorities, and minorities in different countries. +It has not yet become an effective part of the machinery of the League, +but I look forward to the time when we shall have established the +doctrine that all racial minorities are entitled to be treated on a +footing absolutely equal with other nationals of the country in which +they live. If that could be established, one of the great difficulties +in the way of international co-operation in the spirit of peace will be +removed. + + +THE MISTAKE OF VERSAILLES + +These are the two aspects I wanted to bring before you. If we are to get +down to the root of the matter; if we are to uproot the old jungle +theory of international relations, we must recognise that the chief +danger and difficulty before us is what may be described as excessive +nationalism. We have to recognise in this and other countries that a +mere belief in narrow national interests will never really take you +anywhere. You must recognise that humanity can only exist and prosper as +a whole, and that you cannot separate the nation in which you live, and +say you will work for its prosperity and welfare alone, without +considering that its prosperity and welfare depend on that of others. +And the differences on that point go right through a great deal of the +political thought of the day. + +Take the question of reparations. I am not going to discuss in detail +what ought to be done in that difficult and vexed question, but I want +to call your attention to the mistake which was originally made, and +which we have never yet been able to retrieve. The fundamental error of +Versailles was the failure to recognise that even in dealing with a +conquered enemy you can only successfully proceed by co-operation. That +was the mistake--the idea that the victorious Powers could impose their +will without regard to the feelings and desires and national sentiment +of their enemy, even though he was beaten. For the first time in the +history of peace conferences, the vanquished Power was not allowed to +take part in any real discussion of the terms of the treaty. The +attitude adopted was, "These are our terms, take or leave them, but you +will get nothing else." No attempt was made to appreciate, or even +investigate the view put forward by the Germans on that occasion. And +last, but not least, they were most unfortunately excluded from +membership of the League at that time. I felt profoundly indignant with +the Germans and their conduct of the war. I still believe it was due +almost exclusively to the German policy and the policy of their rulers +that the war took place, and that it was reasonable and right to feel +profound indignation, and to desire that international misdeeds of that +character should be adequately punished. But what was wrong was to think +that you could as a matter of practice or of international ethics try to +impose by main force a series of provisions without regard to the +consent or dissent of the country on which you were trying to impose +them. That is part of the heresy that force counts for everything. I +wish some learned person in Oxford or elsewhere would write an essay to +show how little force has been able to achieve in the world. And the +curious and the really remarkable thing is that it was this heresy which +brought Germany herself to grief. It is because of the false and immoral +belief in the all-powerfulness of force that Germany has fallen, and yet +those opposed to Germany, though they conquered her, adopted only too +much of her moral code. + +It was because the Allies really adopted the doctrine of the mailed fist +that we are now suffering from the terrible economic difficulties and +dangers which surround us. I venture to insist on that now, because +there are a large number of people who have not abandoned that view. +There are still a number of people who think the real failure that has +been committed is not that we went wrong, as I think, in our +negotiations at Versailles, but that we have not exerted enough force, +and that the remedy for the present situation is more threats of force. +I am sure it won't answer. I want to say that that doctrine is just as +pernicious when applied to France as when applied to Germany. You have +made an agreement. You have signed and ratified a treaty; you are +internationally bound by that treaty. It is no use turning round and +with a new incarnation of the policy of the mailed fist threatening one +of your co-signatories that they are bound to abandon the rights which +you wrongly and foolishly gave to them under that treaty. + +I am against a policy based on force as applied to Germany. I am equally +opposed to a policy based on force as applied to France. If we really +understand the creed for which we stand, we must aim at co-operation all +round. If we have made a mistake we must pay for it. If we are really +anxious to bring peace to the world, and particularly to Europe, we must +be prepared for sacrifices. We have got to establish economic peace, and +if we don't establish it in a very short time we shall be faced with +economic ruin. In the strictest, most nationalistic interests of this +country, we have to see that economic war comes to an end. We have got +to make whatever concessions are necessary in order to bring that peace +into being. + + +ECONOMIC PEACE + +That is true not only of the reparation question; it is true of our +whole economic policy. We have been preaching to Europe, and quite +rightly, that the erection of economic barriers between countries is a +treachery to the whole spirit of the League of Nations, and all that it +means, and yet with these words scarcely uttered we turn round and pass +through Parliament a new departure in our economic system which is the +very contradiction of everything we have said in international +conference. + +The Safeguarding of Industries Act is absolutely opposed to the whole +spirit and purpose which the League of Nations has in view. A reference +was made by your chairman to Lord Grey, and I saw in a very +distinguished organ of the Coalition an attack on his recent speech. We +are told that he ought not at this crisis to be suggesting that the +present Government is not worthy of our confidence, but how can we trust +the present Government? How is it possible to trust them when one finds +at Brussels, at Genoa, at the Hague, and elsewhere they preach the +necessity of the economic unity of Europe, and then go down to the House +of Commons and justify this Act on the strictest, the baldest, the most +unvarnished doctrine of economic particularism for this country? Nor +does it stop there. I told you just now that for me this doctrine on +which the League is based goes right through many other problems than +those of a strictly international character. You will never solve +Indian or Egyptian difficulties by a reliance on force and force alone. +I believe that the deplorable, the scandalous condition to which the +neighbouring island of Ireland has been reduced is largely due to the +failure to recognise that by unrestricted unreasoning, and sometimes +immoral force, you cannot reach the solution of the difficulties of that +country. + +And in industry it is the same thing. If you are really to get a +solution of these great problems, depend upon it you will never do it by +strikes and lock-outs. I am an outsider in industrial matters. I am +reproached when I venture to say anything about them with the +observation that I am no business man. I can only hope that in this case +lookers-on may sometimes see most of the game. But to me it is +profoundly depressing when I see whichever section of the industrial +world happens to have the market with it--whether employers or +wage-earners--making it its only concern to down the other party as much +as it can. You will never reach a solution that way. You have to +recognise in industrial as in international affairs that the spirit of +co-operation, the spirit of partnership, is your only hope of salvation. + + +THE TWO CAUSES OF UNREST + +What is the conclusion of what I have tried to say to you? There are at +the present time two great causes of fighting and hostility. There used +to be three. There was a time when men fought about religious doctrine, +and though I do not defend it, it was perhaps less sordid than some of +our fights to-day. Now the two great causes of fighting are greed and +fear. Generally speaking, I think we may say that greed in international +matters is a less potent cause of hostility than fear. The disease the +world is suffering from is the disease of fear and suspicion. You see it +between man and man, between class and class, and most of all between +nation and nation. People reproach this great country and other great +countries with being unreasonable or unwilling to make concessions. If +you look deeply into it you will find always the same cause. It is not +mere perversity; it is fear and fear alone that makes men unreasonable +and contentious. It is no new thing; it has existed from the foundation +of the world. The Prime Minister the other day said, and said quite +truly, that the provisions of the Covenant, however admirable, were not +in themselves sufficient to secure the peace of the world. He made an +appeal, quite rightly, to the religious forces and organisations to +assist. I agree, but after all something may be done by political +action, and something by international organisation. In modern medicine +doctors are constantly telling us they cannot cure any disease--all they +can do is to give nature a chance. No Covenant will teach men to be +moral or peace-loving, but you can remove, diminish, or modify the +conditions which make for war, and take obstacles out of the way of +peace. We advocate partnership in industry and social life. We advocate +self-government, international co-operation. We recognise that these are +no ends in themselves; they are means to the end; they are the +influences which will facilitate the triumph of the right and impede the +success of the wrong. + +But looking deeper into the matter, to the very foundations, we +recognise, all of us, the most devoted adherents of the League, and all +men of goodwill, that in the end we must strive for the brotherhood of +man. We admit we can do comparatively little to help it forward. We +recognise that our efforts, whether by covenant or other means, must +necessarily be imperfect; but we say, and say rightly, that we have been +told that perfect love casteth out fear, and that any step towards that +love, however imperfect, will at any rate mitigate the terrors of +mankind. + + + + +THE BALANCE OF POWER + +BY PROFESSOR A.F. POLLARD + +Hon. Litt.D.; Fellow of All Souls' College, Oxford; F.B.A.; Professor of +English History in the University of London; Chairman of the Institute +of Historical Research. + + +Professor Pollard said:--The usual alternative to the League of Nations, +put forward as a means of averting war by those who desire or profess to +desire permanent peace, but dislike or distrust the League of Nations, +is what they call the Balance of Power. It is a familiar phrase; but the +thing for which the words are supposed to stand, has, if it can save us +from war, so stupendous a virtue that it is worth while inquiring what +it means, if it has any meaning at all. For words are not the same as +things, and the more a phrase is used the less it tends to mean: verbal +currency, like the coinage, gets worn with use until in time it has to +be called in as bad. The time has come to recall the Balance of Power as +a phrase that has completely lost the value it possessed when originally +it was coined. + +Recent events have made an examination of the doctrine of the Balance of +Power a matter of some urgency. The Allies who won the war concluded a +pact to preserve the peace, but in that pact they have not yet been able +to include Germany or Russia or the United States, three Powers which +are, potentially at any rate, among the greatest in the world. So, some +fifty years ago, Bismarck, who won three wars in the mid-Victorian age, +set himself to build up a pact of peace. But his Triple Alliance was not +only used to restrain, but abused to repress, the excluded Powers; and +that abuse of a pact of peace drove the excluded Powers, France and +Russia, into each other's arms. There resulted the Balance of Power +which produced the war we have barely survived. And hardly was the great +war fought and won than we saw the wheel beginning to revolve once more. +The excluded Powers, repressed or merely restrained, began to draw +together; others than Turkey might gravitate in the same direction, +while the United States stands in splendid isolation as much aloof as we +were from the Triple Alliance and the Dual Entente a generation ago. +Another Balance of Power loomed on the horizon. "Let us face the facts," +declared the _Morning Post_ on 22nd April last, "we are back again to +the doctrine of the Balance of Power, whatever the visionaries and the +blind may say." I propose to deal, as faithfully as I can in the time at +my disposal, with the visionaries and the blind--when we have discovered +who they are. + +By "visionaries" I suppose the _Morning Post_ means those who believe in +the League of Nations; and by the "blind" I suppose it means them, too, +though usually a distinction is drawn between those who see too much and +those who cannot see at all. Nor need we determine whether those who +believe in the Balance of Power belong rather to the visionaries or to +the blind. A man may be receiving less than his due when he is asked +whether he is a knave or a fool, because the form of the question seems +to preclude the proper answer, which may be "both." Believers in the +Balance of Power are visionaries if they see in it a guarantee of peace, +and blind if they fail to perceive that it naturally and almost +inevitably leads to war. The fundamental antithesis is between the +Balance of Power and the League of Nations. + + +BALANCE OR LEAGUE? + +That antithesis comes out wherever the problem of preserving the peace +of the world is seriously and intelligently discussed. Six years ago, +when he began to turn his attention to this subject, Lord Robert Cecil +wrote and privately circulated a memorandum in which he advocated +something like a League of Nations. To that memorandum an able reply was +drafted by an eminent authority in the Foreign Office, in which it was +contended that out of the discussion "the Balance of Power emerges as +the fundamental factor." That criticism for the time being checked +official leanings towards a League of Nations. But the war went on, +threatening to end in a balance of power, which was anything but welcome +to those who combined a theoretical belief in the Balance of Power with +a practical demand for its complete destruction by an overwhelming +victory for our Allies and ourselves. Meanwhile, before America came +in, President Wilson was declaring that, in order to guarantee the +permanence of such a settlement as would commend itself to the United +States, there must be, not "a Balance of Power but a Community of +Power." + +Opinion in England was moving in the same direction. The League of +Nations Society (afterwards called "Union") had been formed, and at a +great meeting on 14th May, 1917, speeches advocating some such league as +the best means of preventing future wars were delivered by Lord Bryce, +General Smuts, the Archbishop of Canterbury, Lord Hugh Cecil, and +others. Labour was even more emphatic; and, responding to popular +opinion, the Government, at Christmas, 1917, appointed a small committee +to explore the historical, juridical, and diplomatic bearings of the +suggested solution. A brief survey sufficed to show that attempts to +guarantee the peace of the world resolved themselves into three +categories: (1) a Monopoly of Power, (2) Balance of Power, and (3) +Community of Power. Rome had established the longest peace in history by +subjugating all her rivals and creating a _Pax Romana_ imposed by a +world-wide Empire. That Empire lasted for centuries, and the idea +persisted throughout the middle ages. In modern times Philip II. of +Spain, Louis XIV. of France, Napoleon, and even the Kaiser were +suspected of attempting to revive it; and their efforts provoked the +counter idea, first of a Balance of Power, and then in these latter days +of a Community of Power. The conception of a Monopoly of Power was by +common consent abandoned as impossible and intolerable, after the rise +of nationality, by all except the particular aspirants to the monopoly. +The Balance of Power and the Community of Power--in other words, the +League of Nations--thus became the two rival solutions of the problem of +permanent peace. + + +THE THEORY OF BALANCE + +The discussion of their respective merits naturally led to an inquiry +into what the alternative policies really meant. But inasmuch as the +Foreign Office committee found itself able to agree in recommending some +form of League of Nations, the idea of the Balance of Power was not +subjected to so close a scrutiny or so searching an analysis as would +certainly have been the case had the committee realised the possibility +that reaction against an imperfect League of Nations might bring once +more to the front the idea of the Balance of Power. The fact was, +however, elicited that the Foreign Office conception of the Balance of +Power is a conception erroneously supposed to have been expressed by +Castlereagh at the time of the Congress of Vienna, and adopted as the +leading principle of nineteenth century British foreign policy. + +Castlereagh was not, of course, the author of the phrase or of the +policy. The phrase can be found before the end of the seventeenth +century; and in the eighteenth the policy was always pleaded by +potentates and Powers when on the defensive, and ignored by them when in +pursuit of honour or vital interests. But Castlereagh defined it afresh +after the colossal disturbance of the balance which Napoleon effected; +and he explained it as "a just repartition of force amongst the States +of Europe." They were, so to speak, to be rationed by common agreement. +There were to be five or six Great Powers, whose independence was to be +above suspicion and whose strength was to be restrained by the jealous +watchfulness of one another. If any one State, like France under +Napoleon, grew too powerful, all the rest were to combine to restrain +it. + +Now, there is a good deal in common between Castlereagh's idea and that +of the League of Nations. Of course, there are obvious differences. +Castlereagh's Powers were monarchies rather than peoples; they were +limited to Europe; little regard was paid to smaller States, whose +independence sometimes rested on no better foundation than the inability +of the Great Powers to agree about their absorption; and force rather +than law or public opinion was the basis of the scheme. But none of +these differences, important though they were, between Castlereagh's +Balance of Power and the League of Nations is so fundamental as the +difference between two things which are commonly regarded as identical, +viz., Castlereagh's idea of the Balance of Power and the meaning which +has since become attached to the phrase. There are at least two senses +in which it has been used, and the two are wholly incompatible with one +another. The League of Nations in reality resembles Castlereagh's +Balance of Power more closely than does the conventional notion of that +balance; and a verbal identity has concealed a real diversity to the +confusion of all political thought on the subject. + +Castlereagh's Balance of Power is what I believe mathematicians call a +multiple balance. It was not like a pair of scales, in which you have +only two weights or forces balanced one against the other. It was rather +like a chandelier, in which you have five or six different weights +co-operating to produce a general stability or equilibrium. In +Castlereagh's scheme it would not much matter if one of the weights were +a little heavier than the others, because there would be four or five of +these others to counterbalance it; and his assumption was that these +other Powers would naturally combine for the purpose of redressing the +balance and preserving the peace. But a simple balance between two +opposing forces is a very different thing. If there are only two, you +have no combination on which you can rely to counteract the increasing +power of either, and the slightest disturbance suffices to upset the +balance. Castlereagh's whole scheme therefore presupposed the continued +and permanent existence of some five or six great Powers always +preserving their independence in foreign policy and war, and +automatically acting as a check upon the might and ambition of any +single State. + + +THE CHANGE SINCE CASTLEREAGH + +Now, it was this condition, essential to the maintenance of +Castlereagh's Balance of Power, which completely broke down during the +course of the nineteenth century. Like most of the vital processes in +history, the change was gradual and unobtrusive, and its significance +escaped the notice of politicians, journalists, and even historians. Men +went on repeating Castlereagh's phrases about the Balance of Power +without perceiving that the circumstances, which alone had given it +reality, had entirely altered. The individual independence and automatic +action of the Great Powers in checking the growing ambitions and +strength of particular States were impaired, if not destroyed, by +separate Alliances, which formed units into groups for the purposes of +war and foreign policy, and broke up the unity of the European system, +just as a similar tendency threatens to break up the League of Nations. +There was a good deal of shifting about in temporary alliances which +there is no need to recount; but the ultimate upshot was the severance +of Europe into the two great groups with which we are all familiar, the +Triple Alliance of Germany, Austria, and Italy on one side, and the +Triple Entente between Russia, France, and Great Britain on the other. +The multiple Balance of Power was thus changed into a simple balance +between two vast aggregations of force, and nothing remained outside to +hold the balance, except the United States, which had apparently +forsworn by the Monroe Doctrine the function of keeping it even. + +And yet men continued to speak of the Balance of Power as though there +had been no change, and as though Castlereagh's ideas were as applicable +to the novel situation as they had been to the old! That illustrates +the tyranny of phrases. Cynics have said that language is used to +conceal our thoughts. It is difficult to resist the conclusion that +phrases are used to save us the trouble of thinking. We are always +giving things labels in order to put them away in their appropriate +pigeon-holes, and then we talk about the labels without thinking about +them, and often forgetting (if we ever knew) the things for which they +stand. So we Pelmanised the Balance of Power, and continued to use the +phrase without in the least troubling to ask what it means. When I asked +at the Foreign Office whether diplomatists meant by the Balance of Power +the sort of simple balance between two great alliances like the Triple +Alliance and the Triple Entente, I was told "yes"; and there was some +surprise--since the tradition of Castlereagh is strong in the +service--when I pointed out that that was an entirely different balance +from that of which Castlereagh had approved as a guarantee of peace. You +remember the Cheshire cat in _Alice in Wonderland_--an excellent +text-book for students of politics--and how the cat gradually faded away +leaving only its grin behind it to perplex and puzzle the observer. So +the body and the substance of Castlereagh's Balance of Power passed +away, and still men talk of the grin and look to the phrase to save them +from war. Whether to call them visionaries or the blind, I do not know. + + +MISCHIEVOUS HALLUCINATION + +In either case, it is a mischievous hallucination; for the simple +Balance of Power between two great combinations is not only no guarantee +of peace, but the great begetter of fear, of the race for armaments, and +of war. Consider for a moment. If you want a balance, you want to have +it perfect. What is a perfect balance between two opposing weights or +forces? It is one which the addition of a feather-weight to either scale +will at once and completely upset. Now what will that equipoise produce? +The ease with which the balance may be destroyed will produce either on +one side the temptation to upset it, and on the other fear lest it be +upset, or fear on both sides at once. What indeed was it but this even +balance and consequent fear which produced the race for armaments? And +what does the race for armaments result in but in war? If we want war, +we need only aim at a Balance of Power, and it will do the rest. So far +from being a guarantee of peace, the Balance of Power is a sovereign +specific for precipitating war. + +Of course, there are arguments for a Balance of Power. Plenty of them, +alas! though they are not often avowed. It produces other things than +war. For one thing, it makes fortunes for munition firms. For another, +it provides careers for those who have a taste for fighting or for +military pomp. Thirdly, in order to maintain armies and navies and +armaments, it keeps up taxation and diverts money from social, +educational, and other reforms which some people want to postpone. +Fourthly, it gratifies those who believe that force is the ultimate +sanction of order, and, by necessitating the maintenance of large forces +for defensive purposes, incidentally provides means for dealing with +domestic discontent. Fifthly, it panders to those who talk of prestige +and think that prestige depends upon the size of a nation's armaments. +For the sake of these things many would be willing to take the risk of +war which the Balance of Power involves. But most of those who use the +phrase are unconscious of these motives, and use it as they use many +another phrase, simply because they know not what it means. For, +assuredly, no sane person who had examined the Balance of Power, as it +existed before the war, could ever advocate it as a means of peace. + +Indeed, whenever there has been the prospect of a practical Balance of +Power, its votaries have shown by their action that they knew their +creed was nonsense. The late war, for instance, might have been ended in +1916 on the basis of a Balance of Power. There were a few who believed +that that was the best solution; but they were not our latter-day +believers in the Balance of Power. Their cry was all for a fight to a +finish and a total destruction of the Balance of Power by an +overwhelming victory for the Allies, and their one regret is that a +final blow by Marshal Foch did not destroy the last vestige of a German +army. What is the point of expressing belief in the Balance of Power +when you indignantly repudiate your own doctrine on every occasion on +which you might be able to give it effect? And what is the point of the +present advocacy of the Balance of Power by those who think themselves +neither visionaries nor blind? Do they wish to restore the military +strength of Germany and of Russia and to see an Alliance between them +confronting a Franco-British union, compelled thereby to be militarist +too? Is it really that they wish to be militarists and that the League +of Nations, with its promise of peace, retrenchment, and reform, is to +them a greater evil than the Balance of Power? + + +WHERE THE LINE IS DRAWN + +There is yet another fatal objection to the Balance of Power due to the +change in circumstances since the days of Castlereagh. He could afford +to think only of Europe, but we have to think of the world; and if our +specific has any value it must be of world-wide application. We cannot +proclaim the virtues of the Balance of Power and then propose to limit +it to the land or to any particular continent. Now, did our believers in +the Balance of Power ever wish to see power balanced anywhere else than +on the continent of Europe? That, if we studied history in any other +language than our own, we should know was the gibe which other peoples +flung at our addiction to the Balance of Power. We wanted, they said, to +see a Balance of Power on the continent of Europe, to see one half of +Europe equally matched against the other, because the more anxiously +Continental States were absorbed in maintaining their Balance of Power, +the keener would be their competition for our favour, and the freer +would be our hands to do what we liked in the rest of the world. + +Was that a baseless slander? Let us test it with a question or two. Did +we ever want a Balance of Power at sea? British supremacy, with a +two-to-one or at least a sixteen-to-ten standard was, I fancy, our +minimum requirement. Is British supremacy what we mean by a Balance of +Power? Again, did we ever desire a Balance of Power in Africa, America, +or Asia? We may have talked of it sometimes, but only when we were the +weaker party and feared that another might claim in those continents the +sort of Balance of Power we claimed on the sea. We never spoke of the +Balance of Power in the interests of any nation except ourselves and an +occasional ally. We cannot speak in those terms to-day. If we demand a +Balance of Power on land, we must expect others to claim it at sea; if +we urge it on Europe as a means of peace, we cannot object if others +turn our own argument against us in other quarters of the globe; and +wherever you have a Balance of Power you will have a race for armaments +and the fear of war. + +The Balance of Power is, in fact, becoming as obsolete as the Monopoly +of Power enjoyed by the Roman Empire. It is a bankrupt policy which went +into liquidation in 1914, and the high court of public opinion demands a +reconstruction. The principle of that reconstruction was stated by +President Wilson, a great seer whose ultimate fame will survive the +obloquy in which he has been involved by the exigencies of American +party-politics and the short-sightedness of public opinion in Europe. We +want, he said, a Community of Power, and its organ must be the League of +Nations. Nations must begin to co-operate and cease to counteract. + +I am not advocating the League of Nations except in the limited way of +attempting to show that the Balance of Power is impossible as an +alternative unless you can re-create the conditions of a century ago, +restore the individual independence of a number of fairly equal Powers, +and guarantee the commonwealth of nations against privy conspiracy and +sedition in the form of separate groups and alliances. But there is one +supreme advantage in a Community of Power, provided it remains a +reality, and that is that it need never be used. Its mere existence +would be sufficient to ensure the peace; for no rebel State would care +to challenge the inevitable defeat and retribution which a Community of +Power could inflict. It has even been urged, and I believe it myself, +that Germany would never have invaded Belgium had she been sure that +Great Britain, and still less had she thought that America, would +intervene. It was the Balance of Power that provoked the war, and it was +the absence of a Community of Power which made it possible. + + +BASIS OF SECURITY + +But no one who thinks that power--whether a Monopoly, a Balance, or even +a Community of Power is the ultimate guardian angel of our peace, has +the root of the matter in him. Men, said Burke, are not governed +primarily by laws, still less by force; and behind all power stands +opinion. To believe in public opinion rather than in might excludes the +believer from the regular forces of militarism and condemns him as a +visionary and blind. For advocates of the Balance of Power bear a +striking resemblance to the Potsdam school; and even so moderate a +German as the late Dr. Rathenau declared in his unregenerate days before +the war that Germans were not in the habit of reckoning with public +opinion. Nevertheless, there is a frontier in the world which for a +century and more has enjoyed a security which all the armaments of +Prussian militarism could not give the German Fatherland; and the +absolute security of that frontier rests not upon a monopoly nor a +community, still less upon a balance of power, but on the opinion held +on both sides of that frontier that all power is irrational and futile +as a guarantee of peace between civilised or Christian people. + +Let us look at that frontier for a moment. It is in its way the most +wonderful thing on earth, and it holds a light to lighten the nations +and to guide our feet into the way of peace. It runs, of course, between +the Dominion of Canada and the United States of America across the great +lakes and three thousand miles of prairie; and from the military and +strategic point of view it is probably the worst frontier in the world. +Why then is it secure? Is it because of any monopoly or community or +balance of power? Is it because the United States and the British +Empire are under a common government, or because there is along that +frontier a nicely-balanced distribution of military strength? No, it is +secure, not in spite of the absence of force, but because of the absence +of force; and if you want to destroy the peace of that frontier from end +to end, all you need to do is to send a regiment to protect it, launch a +_Dreadnought_ on those lakes, and establish a balance of power. For +every regiment or warship on one side will produce a regiment or warship +on the other; and then your race for armaments will begin, and the +poison will spread until the whole of America becomes like Europe, an +armed camp of victims to the theory of strategic frontiers and of the +Balance of Power. + +Those theories, their application, and their consequences recently cost +the world thirty million casualties and thousands of millions of pounds +within a brief five years, and yet left the frontiers of Europe less +secure than they were before. Three thousand miles of frontier in North +America have in more than a hundred years cost us hardly a life, or a +limb, or a penny. As we put those details side by side we realise +_quantula regitur mundus sapientia_--with how little wisdom do men rule +the world. Yet the truth was told us long ago that he that ruleth his +spirit is better than he that taketh a city, and we might have learnt by +our experience of the peace that the only conquest that really pays is +the conquest of oneself. + +The real peace of that North American frontier is due to no conquest of +Americans by Canadians or of Canadians by Americans, but to their +conquest of themselves and of that foolish pride of "heathen folk who +put their trust in reeking tube and iron shard." Let us face the facts, +whatever the visionaries and the blind may say. So be it. The war is a +fact, and so is the desolation it has wrought. But that Anglo-American +frontier is also a fact, and so is that century of peace which happily +followed upon the resolution to depend for the defence of that frontier +on moral restraint instead of on military force. Verily, peace hath her +victories not less renowned than those of war. + + +THE ALTERNATIVE + +We have, indeed, to face the facts, and the facts about the Balance of +Power must dominate our deliberations and determine the fate of our +programmes. There may be no more war for a generation, but there can be +no peace with a Balance of Power. There can be nothing better than an +armed truce; and an armed truce, with super-dreadnoughts costing from +four to eight times what they did before the war, is fatal to any +programme of retrenchment and reform. We are weighted enough in all +conscience with the debt of that war without the burden of preparation +for another; and a Balance of Power involves a progressive increase in +preparations for war. + +Unless we can exorcise fear, we are doomed to repeat the sisyphean +cycles of the past and painfully roll our programmes up the hill, only +to see them dashed to the bottom, before we get to the top, by the +catastrophe of war. Fear is fatal to freedom; it is fear which alone +gives militarism its strength, compels nations to spend on armaments +what they fain would devote to social reform, drives them into secret +diplomacy and unnatural alliances, and leads them to deny their just +liberties to subject populations. Fear is the root of reaction as faith +is the parent of progress; and the incarnation of international fear is +the Balance of Power. + + + + +INTERNATIONAL DISARMAMENT + +BY MAJOR-GENERAL SIR FREDERICK MAURICE, K.C.M.G., C.B. + +Director of Military Operations--Imperial General Staff, 1915-16. + + +Sir Frederick Maurice said:--This problem of the reduction of armaments +is one of the most urgent of the international and national problems of +the day. It is urgent in its economic aspect, urgent also as regards its +relation to the future peace of the world. The urgency of its economic +aspect was proclaimed two years ago at the Brussels conference of +financiers assembled by the League of Nations. These experts said quite +plainly and definitely that, so far as they could see, the salvation of +Europe from bankruptcy depended upon the immediate diminution of the +crushing burden of expenditure upon arms. That was two years ago. Linked +up with this question is the whole question of the economic +reconstruction of Europe. Linked up with it also is that deep and grave +problem of reparations. It is no longer the case to-day, if it has ever +been the case since the war, which I doubt, that sober opinion in France +considers it necessary for France to have large military forces in order +to protect her from German aggression in the near future. For the past +two years, however, it has been the custom of those who live upon alarms +to produce the German menace. There is a great body of opinion in +France at this moment which feels that unless France is able to put the +pistol to Germany's head, it will never be able to get a penny out of +Germany. + +You have the further connection of the attitude of America to the +problem. America said, officially through Mr. Hoover and unofficially +through a number of her leading financiers, that she was not ready to +come forward and take her share in the economic restoration of Europe so +long as Europe is squandering its resources upon arms. The connection is +quite definitely and explicitly recognised in the Covenant of the League +of Nations. Article 8 begins: "The principles of the League recognise +that the maintenance of peace requires reduction of national armaments +to the lowest point consistent with national safety, and the enforcement +by common action of international obligations." These words were +promulgated in 1919. Personally, I find myself in complete agreement +with what Lord Robert Cecil said this morning, and what Lord Grey said a +few days ago at Newcastle, that one of the prime causes of the war was +Prussian militarism. By that I mean the influence of that tremendous +military machine, which had been built up through years of labour in +Germany, in moulding the public opinion of that country. + + +A GROUP OF NEW ARMIES + +Well, how do we stand in regard to that to-day? We stand to-day in the +position that the armaments of Germany, Austria, Hungary, Bulgaria, have +all been compulsorily drastically reduced, but in their place you have a +whole group of new armies. You have armies to-day which did not exist +before the war, in Finland, Esthonia, Poland, Lithuania, and +Czecho-Slovakia, and the sum total is that at this moment there are more +armed men in time of peace in Europe than in 1913. Is there no danger +that this machine will mould the minds of some other peoples, just as +the German machine moulded the minds of the Germans? This is the +position as regards the peace establishments of Europe to-day in their +relation to the future peace of the world. What about the economic +position? I have mentioned that certain Powers have had their forces +drastically reduced, and that has brought with it a drastic reduction of +expenditure, but I have before me the naval, military, and air force +estimates of the eight principal Powers in Europe, leaving out Germany, +Austria, and Bulgaria, whose forces have been compulsorily reduced. + +At the economic conference of financiers in Brussels in 1920 it was +mentioned with horror that 20 per cent. of the income of Europe was then +being devoted to arms. I find that to-day 25 per cent. of the total +income of these eight Powers is devoted to arms. I find, further, that +of these eight Powers who have budgeted for a smaller service, only +one--Yugo-Slavia--has managed to balance her budget, and the others have +large deficits which are many times covered by their expenditure on +arms. And this is going on at a time when all these eight nations are +taxed almost up to their limit, when the whole of their industries are +suffering in consequence, and when the danger of bankruptcy, which +horrified the financiers in 1920, is even more imminent. + +That being the case, what has been done in the last few years to remedy +this matter, and why is more not being done? As you all know, this +question is in the forefront of the programme of the League of Nations. +And the League began to deal with it at once. Lord Robert Cecil will +agree with me that the framers of the Covenant, of which he is one of +the chief, could not foresee everything, and they did not foresee at the +time the Covenant was framed, that machinery would be required to deal +with this extraordinarily complex question of armaments. They created an +organisation then called a Permanent Military Command, still in +existence, to advise the Council of the League on all military matters. +But when these gentlemen got to work upon such questions as reduction of +armaments, they at once found themselves dealing with matters entirely +beyond their competence, because into this problem enter problems of +high politics and finance, and a thousand other questions of which +soldiers, sailors, and airmen know nothing whatever. + + +THE LEAGUE'S COMMISSION + +The first step was to remedy an oversight in the machinery, and that was +done at the first meeting of the Assembly. The first meeting of the +Assembly created a temporary mixed commission on armaments, which was +composed of persons of recognised competence in political, social, and +economic matters. It consisted of six members of the old Permanent +Commission, and in addition a number of statesmen, employers, and +representatives of labour. This body started to tackle this grave +question. Before it began the first Assembly of the League had suggested +one line of approach--that there should be an agreement to limit +expenditure; that an attempt should be made to limit armaments by +limiting budgets; and nations were asked to agree that they would not +exceed in the two years following the acceptance of the resolution the +budgeted expenditure on armaments of the current year. + +That proposal did not meet with great success. It was turned down by +seven Powers, notably by France and Spain. On the whole, I think France +and Spain and the other Powers had some reason on their side, because it +is not possible to approach this problem solely from the financial +standpoint. You cannot get a financial common denominator and apply it +to armaments. The varying costs of a soldier in Europe and in Japan have +no relation to each other. The cost of a voluntary soldier in Great +Britain has no relation to the cost of a conscript on the Continent. +Therefore, that line of approach, when applied too broadly, is not +fruitful. I think myself it is quite possible that you may be able to +apply financial limitations to the question of material, the +construction of guns and other weapons of war, because the cost of these +things in foreign countries tends much more to a common level. I think +this is a possible line of approach, but to try to make a reduction of +armaments by reducing budgets on a wholesale scale I do not think will +lead us anywhere at all. I may safely say that for the present that line +of approach has been abandoned. + +The Temporary Mixed Commission got to work, and in its first year, +frankly, I cannot say it did very much. It concerned itself very largely +with the accumulation of information and the collection of statistics, +bearing rather the same relation to world problems as a Royal Commission +does to our domestic problems. By the time the second Assembly met +practically nothing had been done by the Commission. But other people +had been at work, and our own League of Nations Union had put forward a +proposal--a line of approach, rather, I would say, to this +problem--which I for one think is extremely useful. It began by +inquiring as to what armaments were for, which after all is a useful way +of beginning, and the inquiry came to the conclusion that nations +required them for three purposes--to maintain internal order; as a last +resort for the enforcement of law and order; and to protect overseas +possessions. After these purposes were served there was a large residuum +left. That residuum could only be required for one purpose--to protect +the country in question from foreign aggression. When you had gone thus +far in your reasoning, you had obviously got into the zone where +bargaining becomes possible, because it is obvious that by agreement you +can get the force by which a nation is liable to become reduced. That +line of approach received the general blessing at the second Assembly of +the League of Nations. Things began to move, primarily because the +Dominion of South Africa took a keen interest in this problem of the +reduction of armaments, and South Africa appointed Lord Robert Cecil as +its representative, and instructed him to press the matter on, and he +did. The Assembly definitely instructed this temporary mixed Commission +that by the time the third Assembly met plans should be prepared and +concrete proposals put on paper. + + +WASHINGTON + +Soon after that came the Washington Conference--a great landmark in the +history of this problem. For reasons I need not go into in detail, the +naval problem is very much easier than the military or air problem. You +have as the nucleus of naval forces something quite definite and +precise--the battleship--and it also happens that that particular unit +is extremely costly, and takes a long time to build, and no man has yet +ever succeeded in concealing the existence of a battleship. There you +had three important points--a large and important unit in the possession +of everybody concerned, very costly, so that by reducing it you make +great reductions in expenditure. There was no possibility of avoiding an +agreement about the construction of battleships, and it is to these +facts mainly that the happy results of the Washington Conference were +due. + +But for the furtherance of the problem the point is this. The Washington +Conference definitely established the principle of reduction of +armaments on a great ratio. The ratio for battleships between Great +Britain, the United States, Japan, France, and Italy, was settled as to +5, 5, 3, and 1.75. They all agreed on a definite ratio. All agreed to +scrap a certain number of ships, to bring their tonnage down to a +certain figure, and by doing that relatively they were left in the same +position as before, with this advantage--that they at once obtained an +enormous reduction in expenditure on armaments. + +That opened up a new line of approach for the attack on this problem +from the military and air standpoint. And the next development took +place in February this year at the meeting of the Temporary Mixed +Commission on armaments, when the Esher proposals were presented. There +has been a great deal of talk about the Esher proposals, and I am glad +of it, because the one thing wanted in this question is public interest. +The Esher proposals were an endeavour to apply to land armaments this +principle of reduction on a great ratio. And the line taken was this. It +was necessary to find some unit in land armaments which corresponded +with the battleships, and the unit selected by Lord Esher was the +300,000 regular soldiers of the peace armies in France, England, and +Spain. It was selected because it happened to be the number to which the +Austrian army was reduced by treaty, and with that unit he proposed a +ratio for the armies of Europe, which would leave everybody relatively +in much the same position as before, but would obtain an immediate +reduction in numbers of standing armies and a great reduction of +expenditure. + +This proposal was subjected to a great deal of criticism, and I am sorry +to say nine-tenths of the criticism appears to emanate from persons who +have never read the proposal at all. It is a proposal which lends itself +to a great deal of criticism, and the most effective criticism which +could have been applied at the time it was presented was that it put the +cart before the horse, and approached the problem from the wrong +direction, for, as Lord Robert Cecil has said here this morning, what +nations require is security. Some of them have clear ideas as to the way +of obtaining it, but they all want it, and before you can expect people +to reduce their armaments, which are, after all, maintained mainly for +the purpose of providing security, you must give them something that +will take the place of armaments. + + +A GENERAL DEFENSIVE PACT + +In June an important development took place in this Temporary +Commission. It was increased by the addition of a number of statesmen, +and, amongst others, of men who ought to have been on it long ago. Lord +Robert Cecil was added, and he at once proceeded to remedy what was a +real difficulty in Lord Esher's proposals. He put forward a plan for +providing security in the form, as the Assembly of the League had asked, +of a definite written proposal--really a brief treaty. The purport of +that treaty is included in the form of resolutions, which are roughly as +follows:--No scheme for the reduction of armaments can be effective +unless it is general; that in the present state of the world no +Government can accept the responsibility for a serious reduction of +armaments unless it is given some other equally satisfactory guarantee +of the safety of its country; such guarantee can only be found in a +general defensive agreement of all the countries concerned, binding them +all to come to the assistance of any one of them if attacked. + +A general defensive pact, with a proviso! It is obviously unreasonable +to expect the States of the American continent to be ready to come over +at any moment to help in Europe. It is obviously unreasonable to expect +the States of Europe to bind themselves to come and fight in Asia. +Therefore, there was this proviso added that an obligation to come to +the assistance of the attacked country should be limited to those +countries which belonged to the same quarter of the globe. Thus, you +see, you are getting the obligation of the League into regional +application. Personally my own conviction is that this is the line upon +which many of the functions of the League will develop. + +The main point of the situation as it is to-day is that you have got a +committee working out in detail a general pact, which when it is +formulated will be far more complete and satisfactory than the very +general and vague Clause 10 of the Covenant. We have reached the +position when practical proposals are beginning to emerge. What more is +wanted? How can we help on this work? You will have gathered from what I +said that it is my own conviction that with this problem of reduction of +armaments is so closely linked up the problem of economic reconstruction +and reparations that the whole ought to be taken together. I believe one +of the reasons why so little progress has been made is that the economic +problems have been entrusted, with the blessing of our and other +Governments, to perambulating conferences, while the disarmament problem +has been left solely to the League of Nations. I believe if you could +get the whole of these problems considered by one authority--and there +is one obvious authority--progress would be far more rapid. + +There is another matter which concerns us as citizens--the attitude of +our own Government to this question. I was delighted to see recently an +announcement made by a Minister in the House of Commons that the +Government was seriously in favour of a reduction of armaments on a +great ratio. I was delighted to read the other day a speech, to which +reference has already been made, by the Prime Minister. We have had a +great many words on this question. The time has come for action, and +quite frankly the action of our Government in the past two years with +regard to this question has been neutral, and not always one of +benevolent neutrality. Our official representatives at Geneva have been +very careful to stress the difficulties, but up to the present I am +unaware that our Government has ever placed its immense resources as +regards information at the disposal of the one Englishman who has been +striving with all his power and knowledge to get a definite solution. I +believe there is going to be a change; I hope so. In any case, the best +thing we can do is to see that it is changed, and that Lord Robert Cecil +is not left to fight a lone battle. + + +THE APPEAL TO PUBLIC OPINION + +There is something more. There is something wanted from each of us. +Personally, I am convinced myself that this problem is soluble on the +lines by which it is now being approached. I speak to you as a +professional who has given some study to the subject. I am convinced +that on the lines of a general pact as opposed to the particular pact, a +general defensive agreement as opposed to separate alliances, followed +by reduction on a great ratio, the practicability of which has been +proved at Washington, a solution can be reached. Given goodwill--that is +the point. At the last Assembly of the League of Nations a report was +presented by the Commission, of which Lord Robert Cecil was a member, +and it wound up with these words: "Finally, the committee recognises +that a policy of disarmament, to be successful, requires the support of +the population of the world. Limitation of armaments will never be +imposed by Governments on peoples, but it may be imposed by peoples on +Governments." That is absolutely true. How are we going to apply it? +Frankly, myself, I do not see that there is a great deal of value to be +got by demonstrations which demand no more war. I have every sympathy +with their object, but we have got to the stage when we want to get +beyond words to practical resolutions. We want definite concrete +proposals, and you won't get these merely by demonstrations. They are +quite good in their way, but they are not enough. What you want in this +matter is an informed public opinion which sees what is practical and +insists on having it. + +I am speaking to you as one who for a great many years believed +absolutely that preparation for war was the means of securing peace. In +1919--when I had a little time to look round, to study the causes of the +war and the events of the war--I changed my opinion. I then came quite +definitely to the conclusion that preparation for war, carried to the +point to which it had been carried in 1914, was a direct cause of war. I +had to find another path, and I found it in 1919. Lord Robert may +possibly remember that in the early days of the Peace Conference I came +to him and made my confession of faith, and I promised to give him what +little help I could. I have tried to keep my promise, and I believe this +vital problem, upon which not only the economic reconstruction of Europe +and the future peace of the world, but also social development at home +depend, can be solved provided you will recognise that the problem is +very complex; that there is fear to be overcome; that you are content +with what is practical from day to day, and accept each practical step +provided it leads forward to the desired goal. I therefore most +earnestly trust that the Liberal party will take this question up, and +translate it into practical politics. For that is what is required. + + + + +REPARATIONS AND INTER-ALLIED DEBT + +BY JOHN MAYNARD KEYNES + +M.A., C.B.; Fellow of King's College, Cambridge; Editor of _Economic +Journal_ since 1912; principal representative of the Treasury at the +Paris Peace Conference, and Deputy for the Chancellor of the Exchequer +on the Supreme Economic Council, Jan.-June, 1919. + + +Mr. Keynes said:--I do not complain of Lord Balfour's Note, provided we +assume, as I think we can, that it is our first move, and not our last. +Many people seem to regard it as being really addressed to the United +States. I do not agree. Essentially it is addressed to France. It is a +reply, and a very necessary reply, to the kites which M. Poincare has +been flying in _The Times_ and elsewhere, suggesting that this country +should sacrifice all its claims of every description in return +for--practically nothing at all, certainly not a permanent solution of +the general problem. The Note brings us back to the facts and to the +proper starting-point for negotiations. + +In this question of Reparations the position changes so fast that it may +be worth while for me to remind you just how the question stands at this +moment. There are in existence two inconsistent settlements, both of +which still hold good in law. The first is the assessment of the +Reparation Commission, namely, 132 milliard gold marks. This is a +capital sum. The second is the London Settlement, which is not a capital +sum at all, but a schedule of annual payments calculated according to a +formula; but the capitalised value of these annual payments, worked out +on any reasonable hypothesis, comes to much less than the Reparation +Commission's total, probably to not much more than a half. + + +THE BREAKDOWN OF GERMANY + +But that is not the end of the story. While both the above settlements +remain in force, the temporary regime under which Germany has been +paying is different from, and much less than, either of them. By a +decision of last March Germany was to pay during 1922 L36,000,000 (gold) +in cash, _plus_ deliveries in kind. The value of the latter cannot be +exactly calculated, but, apart from coal, they do not amount to much, +with the result that the 1922 demands are probably between a third and a +quarter of the London Settlement, and less than one-sixth of the +Reparation Commission's original total. It is under the weight of this +reduced burden that Germany has now broken down, and the present crisis +is due to her inability to continue these reduced instalments beyond the +payment of July, 1922. In the long run the payments due during 1922 +should be within Germany's capacity. But the insensate policy pursued by +the Allies for the last four years has so completely ruined her +finances, that for the time being she can pay nothing at all; and for a +shorter or longer period it is certain that there is now no alternative +to a moratorium. + +What, in these circumstances, does M. Poincare propose? To judge from +the semi-official forecasts, he is prepared to cancel what are known as +the "C" Bonds, provided Great Britain lets France off the whole of her +debt and forgoes her own claims to Reparation. What are these "C" Bonds? +They are a part of the London Settlement of May, 1921, and, roughly +speaking, they may be said to represent the excess of the Reparation +Commission's assessment over the capitalised value of the London +Schedule of Payments, and a bit more. That is to say, they are pure +water. They mainly represent that part of the Reparation Commission's +total assessment which will not be covered, even though the London +Schedule of Payments is paid in full. + +In offering the cancellation of these Bonds, therefore, M. Poincare is +offering exactly nothing. If Great Britain gave up her own claims to +Reparations, and the "C" Bonds were cancelled to the extent of France's +indebtedness to us, France's claims against Germany would be actually +greater, even on paper, than they are now. For the demands under the +London Settlement would be unabated, and France would be entitled to a +larger proportion of them. The offer is, therefore, derisory. And it +seems to me to be little short of criminal on the part of _The Times_ to +endeavour to trick the people of this country into such a settlement. + +Personally, I do not think that at this juncture there is anything +whatever to be done except to grant a moratorium. It is out of the +question that any figure, low enough to do Germany's credit any good +now, could be acceptable to M. Poincare, in however moderate a mood he +may visit London next week. Apart from which, it is really impossible at +the present moment for any one to say how much Germany will be able to +pay in the long run. Let us content ourselves, therefore, with a +moratorium for the moment, and put off till next year the discussion of +a final settlement, when, with proper preparations beforehand, there +ought to be a grand Conference on the whole connected problem of +inter-Governmental debt, with representatives of the United States +present, and possibly at Washington. + + +THE ILLUSION OF A LOAN + +The difficulties in the way of any immediate settlement now are so +obvious that one might wonder why any one should be in favour of the +attempt. The explanation lies in that popular illusion, with which it +now pleases the world to deceive itself--the International Loan. It is +thought that if Germany's liability can now be settled once and for all, +the "bankers" will then lend her a huge sum of money by which she can +anticipate her liabilities and satisfy the requirements of France. + +In my opinion the International Loan on a great scale is just as big an +illusion as Reparations on a great scale. It will not happen. It cannot +happen. And it would make a most disastrous disturbance if it did +happen. The idea that the rest of the world is going to lend to +Germany, for her to hand over to France, about 100 per cent. of their +liquid savings--for that is what it amounts to--is utterly preposterous. +And the sooner we get that into our heads the better. I am not quite +clear for what sort of an amount the public imagine that the loan would +be, but I think the sums generally mentioned vary from L250,000,000 up +to L500,000,000. The idea that any Government in the world, or all of +the Governments in the world in combination, let alone bankrupt Germany, +could at the present time raise this amount of new money (that is to +say, for other purposes than the funding or redemption of existing +obligations) from investors in the world's Stock Exchanges is +ridiculous. + +The highest figure which I have heard mentioned by a reliable authority +is L100,000,000. Personally, I think even this much too high. It could +only be realised if subscriptions from special quarters, as, for +example, German hoards abroad, and German-Americans, were to provide the +greater part of it, which would only be the case if it were part of a +settlement which was of great and obvious advantage to Germany. A loan +to Germany, on Germany's own credit, yielding, say, 8 to 10 per cent., +would not in my opinion be an investor's proposition in any part of the +world, except on a most trifling scale. I do not mean that a larger +anticipatory loan of a different character--issued, for example, in +Allied countries with the guarantees of the Allied Government, the +proceeds in each such country being handed over to the guaranteeing +Government, so that no new money would pass--might not be possible. But +a loan of this kind is not at present in question. + +Yet a loan of from L50,000,000 to L100,000,000--and I repeat that even +this figure is very optimistic except as the result of a settlement of a +kind which engaged the active goodwill of individual Germans with +foreign resources and of foreigners of German origin and +sympathies--would only cover Germany's liabilities under the London +Schedule for four to six months, and the temporarily reduced payments of +last March for little more than a year. And from such a loan, after +meeting Belgian priorities and Army of Occupation costs, there would not +be left any important sum for France. + +I see no possibility, therefore, of any final settlement with M. +Poincare in the immediate future. He has now reached the point of saying +that he is prepared to talk sense in return for an enormous bribe, and +that is some progress. But as no one is in a position to offer him the +bribe, it is not much progress, and as the force of events will compel +him to talk sense sooner or later, even without a bribe, his bargaining +position is not strong. In the meantime he may make trouble. If so, it +can't be helped. But it will do him no good, and may even help to bring +nearer the inevitable day of disillusion. I may add that for France to +agree to a short moratorium is not a great sacrifice since, on account +of the Belgian priority and other items, the amount of cash to which +France will be entitled in the near future, even if the payments fixed +last March were to be paid in full, is quite trifling. + + +A POLICY FOR THE LIBERAL PARTY + +So much for the immediate situation and the politics of the case. If we +look forward a little, I venture to think that there is a clear, simple, +and practical policy for the Liberal Party to adopt and to persist in. +Both M. Poincare and Mr. Lloyd George have their hands tied by their +past utterances. Mr. Lloyd George's part in the matter of Reparations is +the most discreditable episode in his career. It is not easy for him, +whose hands are not clean in the matter, to give us a clean settlement. +I say this although his present intentions appear to be reasonable. All +the more reason why others should pronounce and persist in a clear and +decided policy. I was disappointed, if I may say so, in what Lord Grey +had to say about this at Newcastle last week. He said many wise things, +but not a word of constructive policy which could get any one an inch +further forward. He seemed to think that all that was necessary was to +talk to the French sympathetically and to put our trust in international +bankers. He puts a faith in an international loan as the means of +solution which I am sure is not justified. We must be much more concrete +than that, and we must be prepared to say unpleasant things as well as +pleasant ones. + +The right solution, the solution that we are bound to come to in the +end, is not complicated. We must abandon the claim for pensions and +bring to an end the occupation of the Rhinelands. The Reparation +Commission must be asked to divide their assessment into two parts--the +part that represents pensions and separation allowances and the rest. +And with the abandonment of the former the proportion due to France +would be correspondingly raised. If France would agree to this--which is +in her interest, anyhow--and would terminate the occupation it would be +right for us to forgive her (and our other Allies) all they owe us, and +to accord a priority on all receipts in favour of the devastated areas. +If we could secure a real settlement by these sacrifices, I think we +should make them completely regardless of what the United States may say +or do. + +In declaring for this policy in the House of Commons yesterday, Mr. +Asquith has given the Liberal Party a clear lead. I hope that they will +make it a principal plank in their platform. This is a just and +honourable settlement, satisfactory to sentiment and to expediency. +Those who adopt it unequivocally will find that they have with them the +tide and a favouring wind. But no one must suppose that, even with such +a settlement, any important part of Germany's payments can be +anticipated by a loan. Any small loan that can be raised will be +required for Germany herself, to put her on her legs again, and enable +her to make the necessary annual payments. + + + + +THE OUTLOOK FOR NATIONAL FINANCE + +BY SIR JOSIAH STAMP, K.B.E., D.SC. + +Assistant Secretary Board of Inland Revenue, 1916-19. Member of Royal +Commission on Income Tax, 1919. + + +Sir Josiah Stamp said:--In discussing the problem of National Finance we +have to decide which problem we mean, viz., the "short period" or the +"long period," for there are distinctly two issues. I can, perhaps, +illustrate it best by the analogy of the household in which the chief +earner or the head of the family has been stricken down by illness. It +may be that a heavy doctor's bill or surgeon's fee has to be met, and +that this represents a serious burden and involves the strictest economy +for a year or two; that all members of the household forgo some +luxuries, and that there is a cessation of saving and perhaps a "cut" +into some past accumulations. But once these heroic measures have been +taken and the burden lifted, and the chief earner resumes his +occupation, things proceed on the same scale and plan as before. It may +be, however, that the illness or operation permanently impairs his +earning power, and that the changes which have to be made must be more +drastic and permanent. Then perhaps would come an alteration of the +whole ground plan of the life of that family, the removal to a smaller +house with lower standing charges and a changed standard of living. What +I call the "short period" problem involves a view only of the current +year and the immediate future for the purpose of ascertaining whether we +can make ends meet by temporary self-denial. What I term the "long +distance" problem involves an examination of the whole scale upon which +our future outlay is conditioned for us. + +The limit of further economies on the lines of the "Geddes' cut" that +can become effective in 1923, would seem to be some 50 or 60 millions, +because every 10 per cent. in economy represents a much more drastic and +difficult task than the preceding, and it cuts more deeply into your +essential national services. On the other side of the account one sees +the probable revenue diminish to an almost similar extent, having regard +to the effect of reductions in the rate of tax and the depression in +trade, with a lower scale of profits, brought about by a lower price +level, entering into the income-tax average. It looks as though 1923 may +just pay its way, but if so, then, like the current year, it will make +no contribution towards the reduction of the debt. So much for the +"short period." Our worst difficulties are really going to be +deep-seated ones. + + +THE TWO PARTS OF A BUDGET + +Now a national budget may consist of two parts, one of which I will call +the "responsive" and the other the "non-responsive" portion. The +responsive portion is the part that may be expected to answer sooner or +later--later perhaps rather than sooner--to alterations in general +conditions, and particularly to price alterations. If there is a very +marked difference in general price level, the salaries--both by the +addition or remission of bonuses and the general alteration in scales +for new entrants--may be expected to alter, at any rate, in the same +direction, and that part of the expense which consists of the purchase +of materials will also be responsive. The second, or non-responsive +part, is the part that has a fixed expression in currency, and does not +alter with changed conditions. This, for the most part, is the capital +and interest for the public debt. + +Now the nature and gravity of the "long distance" problem is almost +entirely a question of the proportions which these two sections bear to +each other. If the non-responsive portion is a small percentage of the +total the problem will not be important, but if it is larger, then the +question must be faced seriously. Suppose, for example, that you have +now a total budget of 900 million pounds, and that, in the course of +time, all values are expressed at half the present currency figure. +Imagine that the national income in this instance is 3600 million +pounds. Then the burden, on a first approximation, is 25 per cent. Now, +if the whole budget is responsive, we may find it ultimately at 450 +million pounds out of a national income of 1800 million pounds, _i.e._ +still 25 per cent. But let the non-responsive portion be 400 million +pounds, then your total budget will be 650 million pounds out of a +national income of about 2000 million pounds, or 33-1/3 per cent., and +every alteration in prices--or what we call "improvement" in the cost of +living--becomes an extraordinarily serious matter as a burden upon new +enterprise in the future. + +Let me give you a homely and familiar illustration. During the war the +nation has borrowed something that is equivalent to a pair of boots. +When the time comes for paying back the loan it repays something which +is equivalent to two pairs or, possibly, even to three pairs. If the +total number of boots produced has not altered, you will see what an +increasing "pull" this is upon production. There are, of course, two +ways in which this increasing pull--while a great boon to the person who +is being repaid--must be an increased burden to the individual. Firstly, +if the number of people making boots increases substantially, it may +still be only one pair of boots for the same volume of production, if +the burden is spread over that larger volume. Secondly, even supposing +that the number of individuals is not increased, if the arts of +production have so improved that two pairs can be produced with the same +effort as was formerly necessary for one, then the debt may be repaid by +them without the burden being actually heavier than before. + +Now, coming back to the general problem. The two ways in which the +alteration in price level can be prevented from resulting in a heavier +individual burden than existed at the time when the transaction was +begun, are a large increase in the population with no lower average +wealth, or a large increase in wealth with the same population--which +involves a greatly increased dividend from our complex modern social +organism with all its mechanical, financial, and other differentiated +functions. Of course, some of the debt burden is responsive, so far as +the annual charge is concerned, on that part of the floating debt which +is reborrowed continually at rates of interest which follow current +money rates, but, even so, the burden of capital repayment remains. An +opportunity occurs for putting sections of the debt upon a lower annual +charge basis whenever particular loans come to maturity, and there may +be some considerable relief in the annual charge in the course of time +by this method. + +What are the prospects of the two methods that I have mentioned coming +to our rescue in this "long distance" problem? It is a problem to which +our present "short distance" contribution is, you will admit, a very +poor one, for we have not so far really made any substantial +contribution from current revenue towards the repayment of the debt. + + +A CENTURY OF THE NATIONAL DEBT + +Historical surveys and parallels are notoriously risky, particularly +where the conditions have no precedent. They ought, however, to be made, +provided that we keep our generalisations from them under careful +control. Now, after the Napoleonic wars we had a national debt somewhat +comparable in magnitude in its relation to the national wealth and +income with the present debt. What happened to that as a burden during +the 100 years just gone by? If it was alleviated, to what was the +alleviation due? I would not burden you with a mass of figures, but I +would just give you one or two selected periods. You can find more +details in my recent book on _Wealth and Taxable Capacity_. We had a +total debt of-- + +850 million pounds in 1817 +841 " " " 1842 +836 " " " 1857 +659 " " " 1895 +800 " " " 1903 + +and before this last war it had been reduced to 707 million pounds. In +1920, of course, it was over 8000 million pounds. Such incidents as the +Crimean and the Boer wars added materially to the debt, but apart +therefrom you will see that there is no tremendous relief by way of +capital repayment to the original debt. Similarly, in a hundred years, +even if we have no big wars, it is quite possible we may have additions +to the national debt from smaller causes. Yet the volume of the debt per +head fell from L50 to L15.7, so you will see that the increasing +population made an enormous difference. The real burden of the debt is +of course felt mainly in its annual charge. I will take this, therefore, +rather than the capital:-- + +In 1817 the charge was 32 million pounds +" 1842 " " " 28 " " +" 1857 " " " 28.8 " " +In 1895 the charge was 25 million pounds +" 1903 " " " 27 " " +" 1914 " " " 24 " " + +Here you will see that the reduction from 32 to 24 was 25 per cent. or a +much greater reduction than the reduction of the _total_ capital debt, +and this, of course, was contributed to by the lower rates of interest +which had been brought about from time to time. When we take the annual +charge per head the fall is much more striking. In the hundred years it +decreased from 37s. to 10s. This, however, was a money reduction, and +the _real_ burden per head can only be judged after we have considered +what the purchasing power of that money was. Now, the charge per head, +reduced to a common basis of purchasing power, fell as follows:-- + + Index figure +1817 260 +1842 242 +1857 191 +1895 210 +1914 118 + +In the year 1920 the charge per head was L7.16 and my purchasing power +index figure 629. You will see that the _real_ burden in commodities +moved down much less violently than the _money_ burden, and the relief +was not actually so great as it looks, because prices were far lower in +1914 than they were early in the nineteenth century. + +In view of the fact that our debt is approximately ten times that of the +last century, let us ask ourselves the broad question: "Can we look +forward to nothing better than the reduction of our debt by 450 +millions in thirty-seven years?" + +The nineteenth century was one long contest between two opposing forces. +The increase in the population, together with the power to make wealth, +were together enormously effective in decreasing the burden. Against +them was the ultimate tendency to lower prices, and the former of these +two forces slowly won the day. + +I hesitate to say that we can expect anything at all comparable with the +wonderful leap forward in productive power during the early Victorian +era. I hope that in this I may prove to be wrong. Anyway I do not think +that in our lifetime we can expect these islands to double their +population. + + +THE CAPITAL LEVY + +If we cannot look forward to any great measure of relief through these +channels, to what then must we look? By far the most important +alternative remedy which has been put to us is that of a Capital Levy; +it has the enormous virtue that it would repay on one level of prices +the debts incurred at that level; in short, it would give back one pair +of boots at once for every pair it has borrowed, instead of waiting and +stretching out over future generations the burden of two pairs. It is so +attractive that one cannot wonder there is a tendency to slur over its +less obvious difficulties. + +Advocates of this scheme fall into two camps, whom I would distinguish +broadly as the economist group and the Labour Party, and if you will +examine their advocacy carefully, you will see that they support it by +two different sets of contentions, which are not easily reconciled. The +economists lay stress upon the fact that you not only pay off at a less +onerous cost in real goods, but that it may, considered arithmetically +or actuarially, be "good business" for a payer of high income-tax to +make an outright payment now and have a lighter income-tax in future. +Very much of the economists' case rests indeed upon the argument drawn +from the outright cut and the arithmetical relief. It will be seen that +this case depends upon two assumptions. The first is that the levy in +practice as well as in theory is an outright cut, and the second, that +it is not repeated, or rather that the income-tax is really effectively +reduced. But if you look at the programme of the other supporters of the +Capital Levy you will not find any convincing guarantees of its +non-repetition. I have not seen anywhere any scheme by which we can feel +politically insured against its repetition. You will find plenty of +indication that some intend to have both the levy and a high tax as +well, the new money to be employed for other social purposes. The +arguments based upon arithmetical or actuarial superiority of the levy +for your pocket and for mine may therefore rather go by the board. But I +am not going to discuss either the question of political guarantees or +the possible future socio-financial policy of the Labour Party. I will +merely ask you to consider whether the levy is likely to be in practice +the outright cut that is the basis of the chief and most valid +contention for it. Please understand that I am not attempting to sum up +all the many reasons for and against this proposal, but only to deal +with the particular virtue claimed for it, bearing upon the increasing +burden of the debt as prices decline. + +Any taxation scheme dependent upon general capital valuation, where the +amount to be paid is large--say larger than a year's revenue--falls, in +my judgment, into the second or third rate category of taxation +expedients. Whenever we are living in uncertain times, with no +steadiness of outlook, valuation of many classes of wealth is then a +tremendous lottery, and collection--which takes time--may be no less so. + +The fair face of the outright and graduated levy would be marred in many +ways. First, there are cases affected by valuation. The valuation of a +fixed rate of interest on good security is easy enough. The valuation of +a field or a house in these days presents more difficulty, but is, of +course, practicable. In practice, however, people do not own these +things outright. They have only an interest in them. This is where the +rub comes. A very large part of the property in this country is held in +life interests, and on reversions or contingencies. It is not a question +of saying that a given property is worth L10,000 and that it forms part +of the fortune of Jones, who pays 40 per cent. duty. The point is that +the L10,000 is split between Jones and Robinson. Jones maybe has a life +interest in it, and Robinson a reversionary interest. You value Jones's +wealth by his prospect of life on a life table, and Robinson has the +balance. But the life table does not indicate the actual likelihood of +Jones's life being fifteen years. It only represents the actuarial +average expectation of all the lives. This may be useful enough for +insurance dependent on the total experience, but it may be a shocking +injustice to the individual in taxation. Only some 10 per cent. of the +Joneses will live for the allotted time, and for the rest your valuation +and your tax will be dead wrong, either too much or too little. Jones +will be coming to you two years after he has paid, or rather his +executors will come to you and say: "We paid a tax based on Jones living +15 years, and he has died; this ought, therefore, to be shifted to +Robinson." + + +DIFFICULTIES OF VALUATION + +People often say that a Capital Levy merely imagines everybody dying at +the same time. This parallel is wrong in degree when you are considering +the ease of paying duty or of changing the market values by a glut of +shares, and it is still more wrong when you are thinking of ease of +valuation. When a man is dead, he is dead, and in estimating the death +duty you have not to bother about how long he is going to live! But +every time you value a life interest and take a big slice of it for tax +you are probably doing a double injustice. The charge is incorrect for +two taxpayers. On a flat rate of tax this difficulty might be made less, +but the essence of any effective levy is a progressive scale. Moreover, +whether you are right or wrong about Robinson's tax, he has nothing in +hand with which to pay it. He has either to raise a mortgage on his +expectation (on which he pays _annual_ interest) or pay you by +instalments. So far as his burden is concerned, therefore, there is no +outright cut. You will be getting an annual figure over nearly the whole +class of life interests and reversions. It is difficult to see how one +can escape making adjustments year after year for some time in the light +of the ascertained facts, until the expiry of, say, nine or ten years +has reduced the disparities between the estimated valuations and the +facts of life to smaller proportions. + +Next come those valuations which depend for their accuracy upon being +the true mid-point of probabilities. A given mine may last for five +years in the view of some experts, or it may go on for fifteen in the +view of others, and you may take a mid-point, say ten, and collect your +tax, but, shortly after, this valuation turns out to be badly wrong, +_though all your valuations in the aggregate are correct_. While the +active procedure of collecting the levy is in progress for a number of +years these assessments will simply shout at you for adjustment. There +are other types of difficulty in assessment which involve annual +adjustment, but you will appreciate most the necessity for care in the +collection. Enthusiastic advocates for the levy meet every hard case put +forward where it is difficult to raise money, such as a private +ownership of an indivisible business, by saying: "But that will be made +in instalments, or the man can raise a mortgage." But the extent to +which this is done robs the levy of all the virtues attaching to +outrightness, for each instalment becomes, as the years roll on, +different in its real content upon a shifting price level, and every +payment of interest on the mortgage--to say nothing of the ultimate +repayment of that mortgage--falls to be met as if reckoned upon the +original currency level. Then those classes of wealth which are not +easily realisable without putting down the market price also require +treatment by instalments, and those who wish to put forward a logical +scheme also add a special charge upon salary-earners for some years--a +pseudo-capitalisation of their earning power. + +A really fair and practicable levy would certainly be honeycombed with +annual adjustments and payments for some period of years, and one must +consider how far this would invalidate the economic case of the +"outright cut," and make it no better than a high income-tax; indeed far +worse, for the high income-tax does at least follow closely upon the +annual facts as they change, or is not stereotyped by a valuation made +in obsolete conditions. Imagine three shipowners each with vessels +valued at L200,000, and each called upon to pay 20 per cent., or +L40,000. One owning five small ships might have sold one of them, and +thus paid his bill; the second, with one large ship, might have agreed +to pay L8000 annually (plus interest) for five years; while the third +might have mortgaged his vessel for L40,000, having no other capital at +disposal. At to-day's values each might have been worth, say, L50,000, +but for the tax. The first would actually have ships worth L40,000, so +he would have borne the correct duty of 20 per cent. The second would +have L50,000, bringing in, say, L5000 annually, and would be attempting +to pay L8000 out of it, while the third would be paying L2000 a year out +of his income and still be faced with an 80 per cent. charge on his +fortune! His assessment is computed at one point of time, and liquidated +at another, when its incidence is totally different. + +If one cannot have a levy complete at the time of imposition, it clearly +ought not to be launched at a time of rapidly changing prices. But that +is, perhaps, when the economic case for it is strongest. + + +A DESPERATE REMEDY + +I do not rule the Capital Levy out as impracticable by any means, but as +a taxation expedient I cannot be enthusiastic about it. It is a +desperate remedy. But if our present temper for "annual" tax relief at +all costs continues, we may _need_ a desperate remedy. Without a levy +what kind of position can you look forward to? Make some assumptions, +not with any virtue in their details, but just in order to determine the +possible prospect. If in fifteen to twenty years reparation payments +have wiped out 1000 millions, debt repayments another 1000, and ordinary +reductions by sinking funds another 1000 millions, you will have the +debt down to 5000 millions, and possibly the lower interest then +effective may bring the annual charge down to some 200 or 225 million +pounds. If the population has reached sixty millions the nominal annual +charge will be reduced from L7 16s. by one-half, but if prices have +dropped further, say half-way, to the pre-war level, the comparable +burden will still be L4 10s. per head. + +It is no good talking about "holidays from taxation" and imagining you +can get rid of this thing easily; you won't. We are still in the war +financially. There is the same need of the true national spirit and +heroism as there was then. Thus hard facts may ultimately force us to +some such expedient as the levy, but we should not accept it +light-heartedly, or regard it as an obvious panacea. Perhaps in two or +three years we may tell whether economic conditions are stable enough to +rob it of its worst evils. The question whether the burden of rapidly +relieving debt by this means in an instalment levy over a decade is +actually lighter than the sinking fund method, depends on the relation +of the drop in prices over the short period to the drop over the ensuing +period, with a proper allowance for discount--at the moment an insoluble +problem. I cannot yet with confidence join those who, on purely economic +and non-political grounds, commend the scheme and treat it as "good +business for the income-tax payer." + + + + +FREE TRADE + +BY RT. HON. J.M. ROBERTSON + +P.C.; President of National Liberal Federation since 1920; M.P. (L.), +Tyneside Division, Northumberland, 1906-18; Parliamentary Secretary to +Board of Trade, 1911-15. + + +Mr. Robertson said:--At an early stage of the war Mr. H.G. Wells +published a newspaper article to the effect that while we remained Free +Traders we were determined in future to accord free entry only to the +goods of those States which allowed it to us. The mere state of war, no +doubt, predisposed many to assent to such theses who a few years before +would have remembered that this was but the nominal position of the +average protectionist of the three preceding generations. War being in +itself the negation of Free Trade, the inevitable restrictions and the +war temper alike prepared many to find reasons for continuing a +restrictive policy when the war was over. When, therefore, the Committee +of Lord Balfour of Burleigh published its report, suggesting a variety +of reasons for setting up compromises in a tariffist direction, there +were not wanting professed Free Traders who agreed that the small +tariffs proposed would not do any harm, while others were even anxious +to think that they might do good. + +Yet the policy proposed by Lord Balfour's Committee has not been +adopted by the Coalition Government in anything like its entirety. Apart +from the Dyestuffs Act, and such devices as the freeing of home-made +sugar from excise, we have only had the Safeguarding of Industries Bill, +a meticulously conditional measure, providing for the setting up of +particular tariffs in respect of particular industries which may at a +given moment be adjudged by special committees _ad hoc_ to need special +protection from what is loosely called "dumping." And even the findings +of these committees so far have testified above all things to the lack +of any accepted set of principles of a protectionist character. Six +thousand five hundred articles have been catalogued as theoretically +liable to protective treatment, and some dozen have been actually +protected. They have given protection to certain products and refused it +to others; according it to fabric gloves and glass and aluminium goods +and refusing it to dolls' eyes and gold leaf. + +Finally, the decision in favour of a tariff on fabric gloves has evoked +such a storm of protest from the textile manufacturers who export the +yarns with which foreign fabric gloves are made, that even the +Coalitionist press has avowed its nervousness. When a professed +protectionist like Lord Derby, actually committed to this protectionist +Act, declares that it will never do to protect one industry at the cost +of injuring a much greater one, those of his party who have any +foresight must begin to be apprehensive even when a House of Commons +majority backs the Government, which, hard driven by its tariffists, +decided to back its Tariff Committee against Lancashire. Protectionists +are not much given to the searching study of statistics, but many of +them have mastered the comparatively simple statistical process of +counting votes. + + +THE "NEW CIRCUMSTANCES" CRY + +In a sense, there are new fiscal "circumstances." But I can assure my +young friends that they are just the kind of circumstances which were +foreseen by their seniors in pre-war days as sure to arise when any +attempt was made to apply tariffist principles to British industry. As a +German professor of economics once remarked at a Free Trade Conference, +it is not industries that are protected by tariffs: it is firms. When a +multitude of firms in various industries subscribed to a large Tariff +Reform fund for election-campaign purposes, they commanded a large +Conservative vote; but when for platform tariff propaganda, dealing in +imaginative generalities and eclectic statistics, there are substituted +definite proposals to meddle with specified interests, the real troubles +of the tariffist begin. You might say that they began as soon as he met +the Free Trader in argument; but that difficulty did not arise with his +usual audiences. It is when he undertakes to protect hides and hits +leather, or to protect leather and hits boot-making, or to help shipping +and hits shipbuilding that he becomes acutely conscious of difficulties. +Now he is in the midst of them. The threat of setting up a general +tariff which will hit everybody alike seems so far to create no alarm, +because few traders now believe in it. Still, it would be very unwise to +infer that the project will not be proceeded with. It served as a party +war-cry in Opposition for ten years, and nearly every pre-war +Conservative statesman was committed to it--Earl Balfour and Lord +Lansdowne included. Even misgivings about Lancashire may fail to deter +the tariffist rump. + +Some of the people who even yet understand nothing of Free Trade +economics are still found to argue that, if only the duty on imported +gloves is put high enough, sufficient gloves will be made at home to +absorb all the yarns now exported to German glove-makers. They are still +blind, that is to say, to the elementary fact that since Germany +manufactures for a much larger glove-market than the English, the +exclusion of the German gloves means the probable loss to the +yarn-makers of a much larger market than England can possibly offer, +even if we make all our own gloves. In a word, instead of having to +furnish new Free Trade arguments to meet a new situation, we find +ourselves called upon to propound once more the fundamental truths of +Free Trade, which are still so imperfectly assimilated by the nation. + +So far as I can gather, the circumstances alleged to constitute a new +problem are these; the need to protect special industries for war +purposes; and the need to make temporary fiscal provision against +industrial fluctuation set up by variations in the international money +exchanges. Obviously, the first of these pleas has already gone by the +board, as regards any comprehensive fiscal action. One of the greatest +of all war industries is the production of food; and during the war some +supposed that after it was over, there could be secured a general +agreement to protect British agriculture to the point at which it could +be relied on to produce at least a war ration on which the nation could +subsist without imports. That dream has already been abandoned by +practical politicians, if any of them ever entertained it. The effective +protection of agriculture on that scale has been dismissed as +impossible; and we rely on foreign imports as before. Whatever may be +said as to the need of subsidising special industries for the production +of certain war material is nothing further to the fiscal purpose, +whether the alleged need be real or not. The production of war material +is a matter of military policy on all fours with the maintenance of +Government dockyards, and does not enter into the fiscal problem +properly so called. But to the special case of dyes, considered as a +"key" or "pivotal" industry, I will return later. + +How then stands the argument from the fluctuations of the exchanges? If +that argument be valid further than to prove that _all_ monetary +fluctuations are apt to embarrass industry, why is it not founded on for +the protection of _all_ industries affected by German competition? The +Prime Minister in his highly characteristic speech to the Lancashire +deputation, admitted that the fall of the mark had not had "the effect +which we all anticipated"--that is, which he and his advisers +anticipated--and this in the very act of pretending that the _further_ +fall of the mark is a reason for adhering to the course of taxing +fabric gloves. All this is the temporising of men who at last realise +that the case they have been putting forward will bear no further +scrutiny. The idea of systematically regulating an occasional tariff in +terms of the day-to-day fluctuations of the exchanges is wholly +chimerical. A tariff that is on even for one year and may be off the +next is itself as disturbing a factor in industry as any exchange +fluctuations can be. + +Nor is there, in the nature of things, any possibility of continuous +advantage in trade to any country through the low valuation of its +currency. The Prime Minister confesses that Germany is _not_ obtaining +any export trade as the result of the fall. Then the whole argument has +been and is a false pretence. The plea that the German manufacturer is +advantaged because his wages bill does not rise as fast as the mark +falls in purchasing power is even in theory but a statement of one side +of a fluctuating case, seeing that when the mark rises in value his +wages bill will not fall as fast as the mark rises, and he is then, in +the terms of the case, at a competitive disadvantage. + +But the worst absurdity of all in the tariffist reasoning on this topic +is the assumption that in no other respect than wage-rates is German +industry affected by the fall of the mark. The wiseacres who point +warningly to the exchanges as a reason for firm action on fabric gloves +never ask how a falling currency relates to the process of purchasing +raw materials from abroad. So plainly is the falling mark a bar to such +purchase that there is _prima facie_ no cause to doubt the German +official statement made in June, that foreign goods are actually +underbidding German goods in the German markets, and that the falling +exchange makes it harder and harder for Germany to compete abroad. We +are dealing with a four-square fallacy, the logical implication of which +is that a bankrupt country is the best advantaged for trade, that +Austria is even better placed for competition than Germany, and that +Russia is to-day the best placed of all. + + +TARIFFS AND WAGES + +The argument from the exchanges, which is now admitted to be wholly +false in practice, really brings us back to the old tariffist argument +that tariffs are required to protect us against the imports of countries +whose general rate of wages is lower than ours. On the one hand, they +assured us that a tariff was the one means of securing good wages for +the workers in general. On the other, they declared that foreign goods +entered our country to the extent they did because foreign employers in +general sweated their employees. That is to say--seeing that nearly all +our competitors had tariffs--the tariffed countries pay the worst wages; +and we were to raise ours by having tariffs also. But even that pleasing +paralogism did not suffice for the appetite of tariffism in the way of +fallacy. The same propaganda which affirmed the lowness of the rate of +wages paid in tariffist countries affirmed also the _superiority_ of the +rate of wages paid in the United States, whence came much of our +imported goods which the tariffists wished to keep out. In this case, +the evidence for the statement lay in the high wage-rate figures for +three employments in particular--those of engine-drivers, compositors, +and builders' labourers: three industries incapable of protection by +tariffs. + +Thus even the percentage of truth was turned to the account of delusion; +for the wages in the protected industries of the States were so far from +being on the scale of the others just mentioned, that they were reported +at times to be absolutely below those paid in the same industries in +Britain. For the rest, _costs of living_ were shown by all the official +statistics to be lower with us than in any of the competing tariffed +countries; and in particular much lower than in the United States. There +were thus established the three facts that wages were higher in the Free +Trade country than in the European tariffed countries; that real wages +here were higher than those of the protected industries in the United +States, and that Protection was thus so far from being a condition of +good wages as to be ostensibly a certain condition of bad. All the same, +high wages in America and low wages on the Continent were alike given as +reasons why we should have a protective tariff. + +There stands out, then, the fact that the payment of lower wages by the +protected foreign manufacturer was one of the tariffist arguments of the +pre-war period, when there was no question of unequal currency +exchanges. To-day, the argument from unequal currency exchanges is that +in the country where the currency value is sinking in terms of other +currencies the manufacturer is getting his labour cheaper, seeing that +wages are slow to follow increase in cost of living. Both pleas alike +evade the primary truth that if country A trades with country B at all, +it must receive _some_ goods in payment for its exports, save in a case +in which, for a temporary purpose, it may elect to import gold. But that +fact is vital and must be faced if the issue is to be argued at all. +Unless, then, the defender of the occasional tariff system contends that +that system will rectify trade conditions by keeping out goods which are +made at an artificial advantage, amounting to what is called "unfair +competition," and letting in only the goods not so produced, he is not +facing the true fiscal problem at all. Either he admits that exports and +freight charges and other credit claims must be balanced by imports or +he denies it. If he denies it, the discussion ceases: there is no use in +arguing further. If he admits it, and argues that by his tariff he can +more or less determine _what_ shall be imported, the debate soon narrows +itself to one issue. + +The pre-war tariffist argued, when he dealt with the problem, that +tariffs would suffice at will to keep out manufactured goods and let in +only raw material. To that the answer was simple. An unbroken conversion +of the whole yield of exports and freight returns and interest on +foreign investments into imported raw material to be wholly converted +into new products, mainly for export, was something utterly beyond the +possibilities. It would mean a rate of expansion of exports never +attained and not only not attainable but not desirable. On such a +footing, the producing and exporting country would never concretely +taste of its _profit_, which is to be realised, if at all, only in +consumption of imported goods and foods. It is no less plainly +impossible to discriminate by classes between kinds of manufactured +imports on the plea that inequality in the exchanges gives the foreign +competitor an advantage in terms of the relatively lower wage-rate paid +by him while his currency value is falling. Any such advantage, in the +terms of the case, must be held to accrue to all forms of production +alike, and cannot possibly be claimed to accrue in the manufacture of +one thing as compared with another, as fabric gloves in comparison with +gold leaf. In a word, the refusal of protection to gold leaf is an +admission that the argument from inequality of currency exchanges counts +for nothing in the operation of the Safeguarding of Industries Bill. In +the case of any other import, then, the argument falls. + + +MEMBERS ONE OF ANOTHER + +But that is not all. The case of Russia alone has brought home to all +capable of realising an economic truth the fact that the economic +collapse of any large mass of population which had in the past entered +into the totality of international trade is a condition of proportional +impoverishment to all the others concerned. He who sees this as to +Russia cannot conceivably miss seeing it as to Germany; even tariffist +hallucinations about a "losing trade" under German tariffs cannot shut +out the fact that our trade with Russia and the United States was +carried on under still higher hostile tariffs. The unalterable fact +remains that industrial prosperity rises and falls in the measure of the +total mass of goods handled; and men who realise the responsibility of +all Governments for the material wellbeing of their populations can come +to only one conclusion. Trade must be facilitated all round for our own +sake. + +Once more we come in sight of the truth that the industrial health of +every trading country depends on the industrial health of the rest--a +Free Trade truth that is perceptibly of more vital importance now than +ever before. It is in the exchange of commodities, and the extension of +consumption where that is required on a large scale, that the prosperity +of the industrial nations consists. And to say that, is to say that +until the trade exchanges of the world in general return to something +like the old footing, there cannot be a return of the old degree of +industrial wellbeing. Not that industrial wellbeing is to be secured by +the sole means of industrial re-expansion: the question of the need of +restriction of rate of increase of population is now being more and more +widely recognised as vital. But the present argument is limited to the +fiscal issue; and it must suffice merely to indicate the other as being +of the highest concurrent importance. + +Adhering, then, to the fiscal issue, we reach the position that, just as +foreign trade has been a main source of British wealth in the past, and +particularly in the Free Trade era, the wealth consumed in the war is +recoverable only on the same lines. It is not merely that British +shipping--at present so lamentably paralysed and denuded of earning +power--cannot be restored to prosperity without a large resumption of +international exchanges: a large proportion of industrial employment +unalterably depends upon that resumption. And it is wholly impossible to +return to pre-war levels of employment by any plan of penalising +imports. + + +THE DYESTUFFS ACT + +How then does the persistent Free Trader relate to the special case of +the "key industry," of which we heard so much during the war, and hear +so little to-day? I have said that the question of maintaining any given +industry on the score that it is essential for the production of war +material is a matter of military administration, and not properly a +matter of fiscal policy at all. But the plea, we know, has been made the +ground of a fiscal proceeding by the present Government, inasmuch as the +special measure known as the Dyestuffs (Import Regulation) Act of 1920 +forbids for ten years the importation of dyestuffs into this country +except under licence of the Board of Trade. Dyestuffs include, by +definition, all the coal-tar dyes, colours, and colouring matter, and +all organic intermediate products used in the manufacture of these--the +last category including a large number of chemicals such as +formaldehyde, formic acid, acetic acid, and methyl alcohol. The +argument is, in sum, that all this protective control is necessary to +keep on foot, on a large scale, an industry which in time of war has +been proved essential for the production of highly important munitions. + +What has actually happened under this Act I confess I am unable to tell. +Weeks ago I wrote to the President of the Board of Trade asking if, +without inconvenience, he could favour me with a general account of what +had been done in the matter of issuing licences, and my letter was +promised attention, but up to the moment of delivering this address I +have had no further reply. I can only, then, discuss the proposed policy +on its theoretic merits.[1] The theoretic issues are fairly clear. +Either the licensing power of the Board of Trade has been used to +exclude competitive imports or it has not. If it has been so used, it is +obvious that we have no security whatever for the maintenance of the +industry in question in a state of efficiency. In the terms of the case, +it is enabled to persist in the use of plant and of methods which may be +inferior to those used in the countries whose competition has been +excluded. Then the very object posited as the justification for the Act, +the securing of a thoroughly efficient key industry necessary to the +production of munitions, is not attained by the fiscal device under +notice. If, on the other hand, there has been no barring of imports +under the licence system, the abstention from use of it is an admission +that it was either unnecessary or injurious or was felt to be useless +for its purpose. + +[Footnote 1: The promised statistics were soon afterwards sent to Mr. +Robertson by the Board of Trade. They will be found in the _Liberal +Magazine_ for September, 1922, p. 348.--ED.] + +And the common-sense verdict on the whole matter is that if continuous +and vigilant research and experiment in the chemistry of dye-making is +held to be essential to the national safety, the proper course is for +the Government to establish and maintain a department or arsenal for +such research and experiment, unhampered by commercial exigencies. Such +an institution may or may not be well managed. But a dividend-earning +company, necessarily concerned first and last with dividend earning, and +at the same time protected against foreign competition in the sale of +its products, cannot be for the purpose in question well managed, being +expressly enabled and encouraged to persist in out-of-date practices. + +This being so, the whole argument for protection of key industries goes +by the board. It has been abandoned as to agriculture, surely the most +typical key industry of all; and it has never even been put forward in +regard to shipbuilding, the next in order of importance. For the +building of ships of war the Government has its own dockyards: let it +have its own chemical works, if that be proved to be necessary. +Protection cannot avail. If the Dyestuffs Act is put in operation so as +to exclude the competition of foreign chemicals, it not only keeps our +chemists in ignorance of the developments of the industry abroad: it +raises the prices of dyestuffs against the dye-using industries at home, +and thereby handicaps them dangerously in their never-ending competition +with the foreign industries, German and other, which offer the same +goods in foreign markets. + +The really fatal competition is never that of goods produced at low +wages-cost. It is that of superior goods; and if foreign textiles have +the aid of better dyes than are available to our manufacturers our +industry will be wounded incurably. It appears in fact to be the +superior quality of German fabric gloves, and not their cheapness, that +has hitherto defeated the competition of the native product. To protect +inferior production is simply the road to ruin for a British industry. +Delicacy in dyes, in the pre-war days, gave certain French woollen goods +an advantage over ours in our own markets; yet we maintained our vast +superiority in exports by the free use of all the dyes available. Let +protection operate all round, and our foreign markets will be closed to +us by our own political folly. Textiles which are neither well-dyed nor +cheap will be unsaleable against better goods. + + +THE PARIS RESOLUTIONS + +It is of a piece with that prodigy of self-contradiction that, when the +Liberal leaders in the House of Commons expose the absurdity of +professing to rectify the German exchanges by keeping out German fabric +gloves, a tariffist leader replies by arguing that the Paris Resolutions +of the first Coalition Government, under Mr. Asquith, conceded the +necessity of protecting home industries against unfair competition. Men +who are normally good debaters seem, when they are fighting for a +tariff, to lose all sense of the nature of argument. As has been +repeatedly and unanswerably shown by my right hon. friend the Chairman, +the Paris Resolutions were expressly framed to guard against a state of +things which has never supervened--a state of things then conceived as +possible after a war without a victory, but wholly excluded by the +actual course of the war. And those Resolutions, all the same, expressly +provided that each consenting State should remain free to act on them +upon the lines of its established fiscal system, Britain being thus left +untrammelled as to its Free Trade policy. + +Having regard to the whole history, Free Traders are entitled to say +that the attempt of tariffists to cite the Paris Resolutions in support +of the pitiful policy of taxing imports of German fabric gloves, or the +rest of the ridiculous "litter of mice" that has thus far been yielded +by the Safeguarding of Industries Act, is the crowning proof at once of +the insincerity and ineptitude of tariffism where it has a free hand, +and of the adamantine strength of the Free Trade case. If any further +illustration were needed, it is supplied by the other tariffist +procedure in regard to the promise made five years ago to Canada that +she, with the other Dominions, should have a relative preference in our +markets for her products. In so far as that plan involved an advantage +to our own Dominions over the Allies who, equally with them, bore with +us the heat and burden of the war, it was as impolitic as it was unjust, +and as unflattering as it was impolitic, inasmuch as it assumed that the +Dominions wanted a "tip" as a reward for their splendid comradeship. + +As it turns out, the one concession that Canada really wanted was the +removal of the invidious embargo on Canadian store cattle in our ports. +And whereas a promise to that effect was actually given by the tariffist +Coalition during the war, it is only after five years that the promise +is about to be reluctantly fulfilled. It was a promise, be it observed, +of _free importation_, and it is fulfilled only out of very shame. It +may be surmised, indeed, that the point of the possible lifting of the +Canadian embargo was used during the negotiations with Ireland to bring +the Sister State to terms; and that its removal may lead to new trouble +in that direction. But that is another story, with which Free Traders +are not concerned. Their withers are unwrung. + + +SCIENCE AND EXPERIENCE + +On the total survey, then, the case for Free Trade is not only unshaken, +it is stronger than ever before, were it only because many of the enemy +have visibly lost faith in their own cause. The Coalition, in which +professed Liberals were prepared to sacrifice something of Free Trade to +colleagues who were pledged in the past to destroy it, has quailed +before the insuperable practical difficulties which arise the moment the +scheme of destruction is sought to be framed. + +All that has resulted, after four and a half years, is a puerile +tinkering with three or four small industries--a tinkering that is on +the face of it open to suspicion of political corruption. To intelligent +Free Traders there is nothing in it all that can give the faintest +surprise. They knew their ground. The doctrine of Free Trade is +_science_, or it is nothing. It is not a passing cry of faction, or a +survival of prejudice, but the unshakable inference of a hundred years +of economic experience verifying the economic science on which the great +experiment was founded. + +On the other hand, let me say, the tactic of tinkering with Free Trade +under a system of special committees who make decisions that only the +House of Commons should ever be able to make, is a "felon blow" at +self-government. It puts national affairs under the control of cliques, +amenable to the pressures of private interests. Millions of men and +women are thus taxable in respect of their living-costs at the caprice +of handfuls of men appointed to do for a shifty Government what it is +afraid to do for itself. It is a vain thing to have secured by statute +that the House of Commons shall be the sole authority in matters of +taxation, if the House of Commons basely delegates its powers to +unrepresentative men. Here, as so often in the past, the Free Trade +issue lies at the heart of sound democratic politics; and if the nation +does not save its liberties in the next election it will pay the price +in corrupted politics no less than in ruined trade. + + + + +INDIA + +BY SIR HAMILTON GRANT + +K.C.S.I., K.C.I.E.; Chief Commissioner, North-West Frontier Province, +India; Deputy Commissioner of various Frontier districts; Secretary to +Frontier Administration; Foreign Secretary, 1914-19; negotiated Peace +Treaty with Afghanistan, 1919. + + +Sir Hamilton Grant said:--I have been asked to address you on the +subject of India, that vast, heterogeneous continent, with its varied +races, its Babel of languages, its contending creeds. There are many +directions in which one might approach so immense a topic, presenting, +as it does, all manner of problems, historical, ethnological, +linguistic, scientific, political, economic, and strategic. I do not +propose, however, to attempt to give you any general survey of those +questions, or to offer you in tabloid form a resume of the matters that +concern the government of India. I propose to confine my remarks to two +main questions which appear to be of paramount importance at the present +time, and which, I believe, will be of interest to those here present +to-day, namely, the problems of the North-West Frontier, and the +question of internal political unrest. + +Let me deal first with the North-West Frontier. As very few schoolboys +know, we have here a dual boundary--an inner and an outer line. The +inner line is the boundary of the settled districts of the North-West +Frontier Province, the boundary, in fact, of British India proper, and +is known as the Administrative border. The outer line is the boundary +between the Indian Empire and Afghanistan, and is commonly known as the +Durand line, because it was settled by Sir Mortimer Durand and his +mission in 1895 with the old Amir Abdur Rahman. These two lines give us +three tracts to be dealt with--first, the tract inside the inner line, +the settled districts of the North-West Frontier Province, inhabited for +the most part by sturdy and somewhat turbulent Pathans; second, the +tract between the two lines, that welter of mountains where dwell the +hardy brigand hillmen: the tribes of the Black Mountain, of Swat and +Bajur, the Mohmands, the Afridis, the Orakzais, the Wazirs, the Mahsuds, +and a host of others, whose names from time to time become familiar +according as the outrageousness of their misconduct necessitates +military operations; third, the country beyond the outer line, "the +God-granted kingdom of Afghanistan and its dependencies." + +Now each of these tracts presents its own peculiar problems, though all +are intimately inter-connected and react one on the other. In the +settled districts we are confronted with the task of maintaining law and +order among a backward but very virile people, prone to violence and +impregnated with strange but binding ideas of honour, for the most part +at variance with the dictates of the Indian Penal Code. For this reason +there exists a special law called the Frontier Crimes Regulation, a most +valuable enactment enabling us to deal with cases through local +Councils of Elders, with the task of providing them with education, +medical relief etc., in accordance with their peculiar needs, and above +all with the task of affording them protection from the raids and forays +of their neighbours from the tribal hills. In the tribal area we are +faced with the task of controlling the wild tribesmen. This control +varies from practically direct administration as in the Lower Swat and +Kurram valleys to the most shadowy political influence, as in the remote +highlands of Upper Swat and the Dir Kohistan, where the foot of white +man has seldom trod. Our general policy, however, with the tribes is to +leave them independent in their internal affairs, so long as they +respect British territory and certain sacrosanct tracts beyond the +border, such as the Khyber road, the Kurram, and the Tochi. The problem +is difficult, because when hardy and well-armed hereditary robbers live +in inaccessible mountains which cannot support the inhabitants, +overlooking fat plains, the temptation to raid is obviously +considerable: and when this inclination to raid is reinforced by +fanatical religion, there must be an ever-present likelihood of trouble. + + +FRONTIER RAIDS + +Few people here in England reading of raids on the North-West Frontier +in India realise the full horror of these outrages. What generally +happens is that in the small hours of the morning, a wretched village is +suddenly assailed by a gang of perhaps 50, perhaps 200, well-armed +raiders, who put out sentries, picket the approaches, and conduct the +operation on the most skilful lines. The houses of the wealthiest men +are attacked and looted; probably several villagers are brutally +murdered--and probably one or two unhappy youths or women are carried +off to be held up to ransom. Sometimes the raid is on a larger scale, +sometimes it is little more than an armed dacoity. But there is nearly +always a tale of death and damage. Not infrequently, however, our +troops, our militia, our frontier constabulary, our armed police, or the +village _chigha_ or hue-and-cry party are successful in repelling and +destroying the raiders. Our officers are untiring in their vigilance, +and not infrequently the district officers and the officers of their +civil forces are out three or four nights a week after raiding gangs. +Statistics in such matters are often misleading and generally dull, but +it may be of interest to state that from the 1st April, 1920, to the +31st March, 1921, when the tribal ebullition consequent on the third +Afghan war had begun to die down, there were in the settled districts of +the North-West Frontier Province 391 raids in which 153 British subjects +were killed and 157 wounded, in which 310 British subjects were +kidnapped and some L20,000 of property looted. These raids are often led +by outlaws from British territory; but each tribe is responsible for +what emanates from or passes through its limits--and when the bill +against a tribe has mounted up beyond the possibility of settlement, +there is nothing for it but punitive military operations. Hence the +large number of military expeditions that have taken place on this +border within the last half century. + +Now this brings us to the question so often asked by the advocates of +what is called the Forward policy: "If the tribes give so much trouble, +why not go in and conquer them once and for all and occupy the country +up to the Durand line?" It sounds an attractive solution, and it has +frequently been urged on paper by expert soldiers. But the truth is that +to advance our frontier only means advancing the seat of trouble, and +that the occupation of tribal territory by force is a much more +formidable undertaking than it sounds. We have at this moment before us +a striking proof of the immense difficulty and expense of attempting to +tame and occupy even a comparatively small tract of tribal territory in +the Waziristan operations. Those operations have been going on for two +and a half years. At the start there were ample troops, ample equipment, +and no financial stringency. The operations were conducted, if a layman +may say so, with skill and determination, and our troops fought +gallantly. But what is the upshot? We managed to advance into the heart +of the Mahsud country on a single line, subjected and still subject to +incessant attacks by the enemy; but we are very little nearer effective +occupation than when we started; and now financial stringency has +necessitated a material alteration in the whole programme, and we are +reverting more or less to the methods whereby we have always controlled +the tribes, namely, tribal levies or _khassadars_ belonging to the +tribe itself, frontier militia or other armed civil force, backed by +troops behind. + + +FRONTIER POLICY + +And for my own part I believe this is the best solution. We must not +expect a millennium on the North-West Frontier. The tribal lion will not +lie down beside the district lamb in our time, and we must deal with the +problem as best we can in accordance with our means, and to this end my +views are briefly as follows:-- + +(1) We should do everything possible to provide the younger trans-border +tribesmen with all honourable employment for which they are suited: +service in the army, in the frontier civil forces, and in the Indian +police or similar forces overseas, and we should give labour and +contracts as far as possible to tribesmen for public works in their +vicinity. For the problem is largely economic. Unless the lion gets +other food he is bound to cast hungry eyes on the lamb. + +(2) We should do all that is possible to establish friendly relations +with the tribal elders through selected and sympathetic political +officers, to give them, by means of subsidies for service, an interest +in controlling the hot-bloods of their tribe, and, where possible, to +give them assistance in education and enlightenment. We must remember +that we have duties to the tribes as well as rights against them. + +(3) We should extend the _khassadar_ or levy system; that is, we should +pay for tribal corps to police their own borders, arming themselves and +providing their own ammunition and equipment. In this way we give +honourable employment and secure an effective safeguard against raiders +without pouring more arms into tribal territory. + +(4) We must have efficient irregular civil forces, militia, frontier +constabulary, and police, well paid and contented. + +(5) We should revert to the old system of a separate frontier force in +the army, specially trained in the work of guarding the marches. Those +who remember the magnificent old Punjab frontier force will agree with +me in deploring its abolition in pursuance of a scheme of army +reorganisation. + +(6) We should improve communications, telephones, telegraphs, and +lateral M.T. roads. + +(7) We should give liberal rewards for the interception and destruction +of raiding gangs, and the rounding up of villages from which raids +emanate. + +(8) We should admit that the Amir of Afghanistani for religious reasons +exercises a paramount influence over our tribes, and we should get him +to use that influence for the maintenance of peace on our common border. +It has been the practise of our statesmen to adopt the attitude that +because the Amir was by treaty precluded from interfering with our +tribes, therefore he must have nothing to do with them. This is a +short-sighted view. We found during the Great War the late Amir's +influence, particularly over the Mahsuds, of the greatest value, when he +agreed to use it on our behalf. + +(9) Finally, there is a suggestion afoot that the settled districts of +the North-West Frontier Province should be re-amalgamated with the +Punjab. I have shown, I think, clearly, how inseparable are the problems +of the districts, the tribal area, and of Afghanistan; and any attempt +to place the districts under a separate control could only mean +friction, inefficiency, and disaster. The proposal is, indeed, little +short of administrative lunacy. There is, however, an underlying method +in the madness that has formulated it, namely, the self-interest of a +clever minority, which I need not now dissect. I trust that if this +proposal should go further it will be stoutly resisted. + + +AFGHANISTAN + +Let me now turn to Afghanistan. Generally speaking, the story of our +dealings with that country has been a record of stupid, arrogant muddle. +From the days of the first Afghan war, when an ill-fated army was +despatched on its crazy mission to place a puppet king, Shah Shuja, on +the throne of Afghanistan, our statesmen have, with some notable +exceptions, mishandled the Afghan problem. And yet it is simple enough +in itself. For we want very little of Afghanistan, and she does +not really want much of us. All we want from the Amir is +good-neighbourliness; that he should not allow his country to become the +focus of intrigue or aggression against us by Powers hostile to us, and +that he should co-operate with us for the maintenance of peace on our +common border. All he wants of us is some assistance in money and +munitions for the internal and external safeguarding of his realm, +commercial and other facilities, and honourable recognition, for the +Afghan, like the Indian, has a craving for self-respect and the respect +of others. + +Now, where our statesmen have failed is in regarding Afghanistan as a +petty little State to be browbeaten and ordered about at our pleasure, +without recognising the very valuable cards that the Amir holds against +us. He sees his hand and appraises it at its value. He knows, in the +first place, that nothing can be more embarrassing to us than the +necessity for another Afghan war, and the despatch of a large force to +the highlands of Kabul, to sit there possibly for years as an army of +occupation, in a desolate country, incapable of affording supplies for +the troops, at enormous cost which could never be recovered, and at the +expense of much health and life, with no clear-cut policy beyond. He +knows, in the second place, that such a war would be the signal for the +rising of practically every tribe along our frontier. The cry of _Jehad_ +would go forth, as in the third Afghan war, and we should be confronted +sooner or later with an outburst from the Black Mountain to +Baluchistan--a formidable proposition in these days. He knows, in the +third place, that with Moslem feeling strained as it is to-day on the +subject of Turkey, there would be sympathy for him in India, and among +the Moslem troops of the Indian army. Now these are serious +considerations, but I do not suggest that they are so serious as to make +us tolerate for a moment an offensive or unreasonable attitude on the +part of the Amir. If the necessity should be forced on us, which God +forbid, we should face the position with promptitude and firmness and +hit at once; and apart from an advance into Afghanistan we have a +valuable card in the closing of the passes and the blockade of that +country. + +All I suggest is that in negotiating with Afghanistan, we should +remember these things and should not attempt to browbeat a proud and +sensitive ruler, who, however inferior in the ordinary equipment for +regular war, holds such valuable assets on his side. And my own +experience is that the Afghans are not unreasonable. Like every one +else, they will "try it on," but if handled courteously, kindly, with +geniality, and, above all, with complete candour, they will generally +see reason. And remember one thing. In spite of all that has happened, +our mistakes, our bluster, our occasional lapses from complete +disingenuousness, the Afghans still like us. Moreover, their hereditary +mistrust of Russia still inclines them to lean on us. We have lately +concluded a treaty with Afghanistan--not by any means a perfect treaty, +but the best certainly that could be secured in the circumstances, and +we have sent a Minister to Kabul, Lt.-Colonel Humphrys, who was one of +my officers on the frontier. A better man for the post could not, I +believe, be found in the Empire. Unless unduly hampered by a hectoring +diplomacy from Whitehall, he will succeed in establishing that goodwill +and mutual confidence which between Governments is of more value than +all the paper engagements ever signed. One word more of the Afghans. +There is an idea that they are a treacherous and perfidious people. +This, I believe, is wicked slander, so far as the rulers are concerned. +In 1857, during the Indian Mutiny, the Amir Dost Muhammed was true to +his bond, when he might have been a thorn in our side; and during the +Great War the late Amir Halilullah, in the face of appalling +difficulties, maintained the neutrality of his country, as he promised, +and was eventually murdered, a martyr to his own good faith to us. + + +INTERNAL UNREST + +Let me now turn to our second question: internal political unrest. In +clubs and other places where wise men in arm-chairs lay down the law +about affairs of state, one constantly hears expressions of surprise and +indignation that there should be any unrest in India at all. "We have," +say the die-hard wiseacres, "governed India jolly well and jolly +honestly, and the Indians ought to be jolly grateful instead of kicking +up all this fuss. If that meddlesome Montagu had not put these wicked +democratic ideas into their heads, and stirred up all this mud, we +should have gone on quite comfortable as before." But if we face the +facts squarely, we shall see that the wonder is not that there has been +so much, but that there has been so comparatively little unrest, and +that India should, on the whole, have waited so patiently for a definite +advance towards self-government. + +What are the facts? They are these. Partly by commercial enterprise, +partly by adroit diplomacy, partly by accident, largely by the valour of +our arms, we have obtained dominion over the great continent of India. +We have ruled it for more than a century through the agency of a handful +of Englishmen, alien in creed, colour, and custom from the people whom +they rule--men who do not even make their permanent homes in the land +they administer. Now, however efficient, however honest, however +impartial, however disinterested such a rule may be, it cannot obviously +be really agreeable to the peoples ruled. This is the fundamental +weakness of our position. That our rule on these lines has lasted so +long and has been so successful is due not to the fact alone that it has +been backed by British bayonets, but rather to the fact that it has been +remarkably efficient, honest, just, and disinterested--and, above all, +that we have in the past given and secured goodwill. + +Superimposed on this underlying irritant, there have been of late years +a number of other more direct causes of unrest. Education, which we gave +to India and were bound to give, had inevitably bred political +aspiration, and an _intelligensia_ had grown up hungry for political +rights and powers. Simultaneously the voracious demands of a centralised +bureaucracy for reports and returns had left the district officer little +leisure for that close touch with the people which in the past meant +confidence and goodwill. Political restlessness had already for some +years begun to manifest itself in anarchical conspiracies and crimes of +violence, when the Great War began. In India, as elsewhere, the reflex +action of the war was a disturbing element. High prices, stifled trade, +high taxation, nationalist longings and ideas of self-determination and +self-government served to reinforce subterranean agitation. + +But throughout the war India not only remained calm and restrained, but +her actual contribution to the war, in men and material, was colossal +and was ungrudgingly given. She had a right to expect in return generous +treatment; but what did she get? She got the Rowlatt Bill. Now, of +course, there was a great deal of wicked, lying nonsense talked by +agitators about the provisions of the Rowlatt Bill, and the people were +grossly misled. But the plain fact remains that when India had emerged +from the trying ordeal of the war, not only with honour untarnished, but +having placed us under a great obligation, our first practical return +was to pass a repressive measure, for fear, forsooth, that if it was not +passed then it might be pigeon-holed and forgotten. India asked for +bread and we gave her a stone--a stupid, blundering act, openly +deprecated at the time by all moderate unofficial opinion in India. What +was the result? The Punjab disturbances and the preventive massacre of +the Jallianwala Bagh. I do not propose to dwell on this deplorable and +sadly mishandled matter, save to say that so far from cowing agitation, +it has left a legacy of hate that it will take years to wipe out; and +that the subsequent action of a number of ill-informed persons in +raising a very large sum of money for the officer responsible for that +massacre has further estranged Indians and emphasised in their eyes the +brand of their subjection. + + +THE RISE OF GHANDI + +To India, thus seething with bitterness over the Punjab disturbances, +there was added the Moslem resentment over the fate of Turkey. I was +myself in London and Paris in a humble capacity at the Peace Conference, +and I know that our leading statesmen were fully informed of the Moslem +attitude and the dangers of unsympathetic and dilatory action in this +matter. But an arrogant diplomacy swept all warnings aside and scorned +the Moslem menace as a bogey. What was the result? Troubles in Egypt, in +Mesopotamia, Kurdistan, Afghanistan, and the Khilifat movement in India. +Hindu agitators were not slow to exploit Moslem bitterness, and for the +first time there was a genuine, if very ephemeral, _entente_ between the +two great rival creeds. + +It was in this electric atmosphere that Ghandi, emerging from his +ascetic retirement, found himself an unchallenged leader. Short of +stature, frail, with large ears, and a gap in his front teeth, he had +none of the outward appearance of dominance. His appeal lay in the +simplicity of his life and character, for asceticism is still revered in +the East. But his intellectual equipment was mediocre, his political +ideas nebulous and impracticable to a degree, his programme archaic and +visionary; and from the start he was doomed to fail. The _Hijrat_ +movement which he advocated brought ruin to thousands of Moslem homes; +his attack on Government educational establishments brought disaster to +many youthful careers; non-co-operation fizzled out. Government servants +would not resign their appointments, lawyers would not cease to +practise, and title-holders, with a few insignificant exceptions, would +not surrender their titles; the "back to the spinning-wheel" call did +not attract, and the continual failure of Ghandi's predictions of the +immediate attainment of complete _Swaraj_ or self-government, which he +was careful never to define, like hope deferred turned the heart sick. + +From being a demi-god Ghandi gradually became a bore, and when he was at +last arrested, tragic to relate, there was hardly a tremor of resentment +through the tired political nerves of India. The arrest was indeed a +triumph of wise timing that does credit to the sagacity of the +Government of India. Had the arrest been effected when the name of +Ghandi was at its zenith, there would have been widespread trouble and +bloodshed. As it was, people were only too glad to be rid of a gadfly +that merely goaded them into infructuous bogs. + +I apologise for this long excursus on the somewhat threadbare subject of +the causes of unrest in India. But I want those here present to realise +what potent forces have been at work and to believe that the Indian +generally is not the ungrateful, black-hearted seditionist he is painted +by the reactionary press. India is going through an inevitable stage of +political transition, and we must not hastily judge her peoples--for the +most part so gallant, so kindly, so law-abiding, so lovable--by the +passing tantrums of political puberty. + + +THE PRESENT SITUATION + +As things stand at present, there is a remarkable lull. It would be +futile to predict whether it will last. It is due in part, as I have +suggested, to general political weariness, in part to the drastic action +taken against the smaller agitating fry, in part to the depletion of the +coffers of the extremists, in part to the fact that the extremists are +quarrelling amongst themselves as to their future programme. Some are +for continuing a boycott of the Councils; others are for capturing all +the seats and dominating the legislature; others are for re-beating the +dead horse of non-co-operation. Meanwhile, with disunion in the +extremist camp, the Councils conduct their business on moderate lines, +and, so far as one can judge, with marked temperance and sanity. + +The work of the first Councils has indeed been surprisingly good, and +augurs well for the future. India has not yet, of course, by any means +grasped the full significance of representative government. The party +system is still in embryo, although two somewhat vague and nebulous +parties calling themselves the "Nationalists" and the "Democrats" do +exist. But these parties have no clear-cut programme, and they do not +follow the lead of the Ministers, who are regarded, not as representing +the elected members of the Council, but as newly-appointed additional +members of the official bureaucracy. There will doubtless in time be +gradual sorting of politicians into definite groups, but there are two +unbridgeable gulfs in the Indian social system which must always +militate against the building up of a solid political party system: +first, the gulf between Hindu and Moslem, which still yawns as wide as +ever, and second, the gulf between the Brahman and the "untouchables" +who, by the way, have found their fears that they would be downtrodden +under the new Councils completely baseless. + +There are and must be breakers ahead. Some we can see, and there are +doubtless others still bigger which we cannot yet glimpse over the +welter of troubled waters. What we can see is this: first, there is a +danger that unless Government and the Councils together can before the +next elections in 1923-24 take definite steps towards the industrial +development and the self-defence of India, the extremist party are +likely to come in in full force and to create a deadlock in the +administration; second, unless the Councils continue to accept a fiscal +policy in accordance with the general interests of Great Britain and the +Empire, there will be trouble. The fiscal position is obscure, but it is +the crux, for the Councils can indirectly stultify any policy +distasteful to them, and this too may mean a deadlock; third, there is a +danger that the Indianisation of the Services will advance much more +rapidly than was ever contemplated, or than is desirable in the +interests of India for many years to come, for the simple reason that +capable young Englishmen of the right stamp will not, without adequate +guarantees for their future, accept employment in India. Those +guarantees can be given satisfactorily by one authority alone, and that +is by the Indian Legislatures voicing popular opinion. For a complex +administration bristling with technical questions, administrative, +political, and economic, it is essential that India should have for many +years to come the assistance of highly-educated Britons with the +tradition of administration in their blood. The Councils will be wise to +recognise this and make conditions which will secure for them in the +future as in the past the best stamp of adventurous Briton. + +Finally, the Montagu-Chelmsford scheme, though a capable and +conscientious endeavour to give gradual effect to a wise and generous +policy, has of necessity its weak points. The system of diarchy--of +allotting certain matters to the bureaucratic authority of the Viceroy +and of the Provincial Governors and other matters to the representatives +of the people--is obviously a stop-gap, which is already moribund. The +attempt to fix definite periods at which further advances towards +self-government can be considered is bound to fail: you cannot give +political concessions by a stop-watch; the advance will either be much +more rapid or much slower than the scheme anticipates. Again, the +present basis of election is absurdly small, but any attempt to broaden +it must tend towards adult suffrage, which in itself would appear +impracticable with a population of over 200 millions. + + +OUR DUTY TO INDIA + +It is a mistake, however, in politics to look too far ahead. Sufficient +unto the day. For the time being we may be certain of one thing, and +that is that we cannot break the Indian connection and leave India. Both +our interests and our obligations demand that we should remain at the +helm of Indian affairs for many years to come. That being so, let us +accept our part cheerfully and with goodwill as in the past. Let us try +to give India of our best, as we have done heretofore. Let us regive and +regain, above all things, goodwill. Let us not resent the loss of past +privilege, the changes in our individual status, and let us face the +position in a practical and good-humoured spirit. Let us abandon all +talk of holding India by the sword, as we won it by the sword--because +both propositions are fundamentally false. Let us realise that we have +held India by integrity, justice, disinterested efficiency--and, above +all, by goodwill--and let us continue to co-operate with India in India +for India on these same lines. + + + + +EGYPT + +BY J.A. SPENDER + +Editor of the _Westminster Gazette_, 1896 to 1922; Member of the Special +Mission to Egypt, 1919-1920. + + +Mr. Spender said:--The Egyptian problem resembles the Indian and all +other Eastern problems in that there is no simple explanation or +solution of it. Among the many disagreeable surprises which awaited us +after the war, none was more disagreeable than the discovery in March, +1919, that Egypt was in a state of rebellion. For years previously we +had considered Egypt a model of imperial administration. We had pulled +her out of bankruptcy and given her prosperity. We had provided her with +great public works which had enriched both pasha and fellah. We had +scrupulously refrained from exploiting her in our own interests. No man +ever worked so disinterestedly for a country not his own as Lord Cromer +for Egypt, and if ever a Nationalist movement could have been killed by +kindness, it should have been the Egyptian. Nor were the Egyptian people +ungrateful. I have talked to Egyptian Nationalists of all shades, and +seldom found any who did not handsomely acknowledge what Great Britain +had done for Egypt, but they asked for one thing more, which was that +she should restore them their independence. "We won it from the Turks," +they said, "and we cannot allow you to take it from us." + +This demand was no new thing, but it was brought to a climax by events +during and after the war. When the war broke out, our representative in +Egypt was still only "Agent and Consul-General," and was theoretically +and legally on the same footing with the representative of all other +Powers; when it ended, he was "High Commissioner," governing by martial +law under a system which we called a "protectorate." This to the +Egyptians seemed a definite and disastrous change for the worse. +Throughout the forty years of our occupation we have most carefully +preserved the theory of Egyptian independence. We have occupied and +administered the country, but we have never annexed it or claimed it to +be part of the British Empire. We intervened in 1882 for the purpose of +restoring order, and five years later we offered to withdraw, and were +only prevented from carrying out our intention because the Sultan of +Turkey declined, at the instigation of another Power, to sign the Firman +which gave us the right of re-occupying the country if order should +again be disturbed. In the subsequent years we gave repeated assurances +to Egyptians and to foreign Powers that we had no intention of altering +the status of the country as defined in its theoretical government by +Khedive, Egyptian Ministers, and Egyptian Council or Assembly. And +though it was true that in virtue of the army of occupation we were in +fact supreme, by leaving the forms of their government untouched and +refraining from all steps to legalise our position we reassured the +Egyptians as to our ultimate objects. + +In the eyes of the Egyptians the proclamation of the Protectorate and +the conversion of the "Agent and Consul-General" into a "High +Commissioner" armed with the weapons of martial law seriously prejudiced +this situation, and though they acquiesced for the period of the war, +they were determined to have a settlement with us immediately it was +over, and took us very seriously at our word when we promised to review +the whole situation when that time came. The truth about the +"Protectorate" was that we adopted it as a way out of the legal +entanglement which would otherwise have converted the Egyptians into +enemy aliens when their suzerain, the Sultan of Turkey, entered the war +against us, and we did it deliberately as the preferable alternative to +annexing the country. But we have neither explained to the Egyptians nor +made clear to ourselves what exactly we meant by it, and in the absence +of explanations it was interpreted in Egypt as a first step to the +extinction of Egyptian nationality. + + +AFTER-WAR MISTAKES + +Had we acted wisely and expeditiously at the end of the war we might +even then have avoided the trouble that followed. But when Egyptian +ministers asked leave to come to London in December, 1918, we answered +that the time was not opportune for these discussions, and when the +Nationalist leaders proposed to send a delegation, we said that no good +purpose could be served by their coming to Europe. This heightened the +alarm, and the Nationalists retorted by raising their claims from +"complete autonomy" to "complete independence," and started a violent +agitation. The Government retaliated by deporting Zaghlul to Malta, +whereupon the country broke into rebellion. Lord Allenby now came upon +the scene, and, while suppressing the rebellion, released Zaghlul and +gave him and his delegation the permission to go to Europe which had +been refused in January. It was now decided to send out the Milner +Mission, but there was a further delay of seven months before it +started, and during all that time agitation continued. + +When the Mission arrived it quickly discovered that there was no +possible "Constitution under the Protectorate" which would satisfy the +Egyptians, and that the sole alternatives were further suppression or +the discovery of some means of settlement which dispensed with the +Protectorate. The Mission unanimously came to the conclusion that though +the first was mechanically possible if the cost and discredit were +faced, the second was not only feasible but far preferable, and that the +right method was a treaty of Alliance between Great Britain and Egypt, +recognising Egypt as a sovereign State, but affording all necessary +guarantees for imperial interests. Working on those lines the Mission +gradually broke down the boycott proclaimed against them, convinced the +Egyptians of their goodwill, induced all parties of Egyptian +Nationalists to come to London, and there negotiated the basis of the +Treaty which was described in the Report. The main points were that +there must be a British force in the country--not an army of occupation, +but a force to guard Imperial communications--that there must be British +liaison officers for law and order and finance, that the control of +foreign policy must remain in the hands of Great Britain, and that the +Soudan settlement of 1898 must remain untouched, but that with these +exceptions the Government of Egypt should be in fact what it had always +been in theory: a Government of Egyptians by Egyptians. + +Had the Government accepted this in December, 1920 (instead of in March, +1922), and instructed Lord Milner to go forward and draft a treaty on +this basis, it is extremely probable that a settlement would have been +reached in a few weeks; but Ministers, unhappily, were unable to make up +their minds, and there was a further delay of three months before the +Egyptian Prime Minister, Adli Pasha, was invited to negotiate with the +Foreign Office. By this time the Nationalist parties which the Mission +had succeeded in uniting on a common platform had fallen apart, and the +extremists once more started a violent agitation and upbraided the +moderates for tamely waiting on the British Government, which had +evidently meant to deceive them. The situation had, therefore, changed +again for the worse when Adli came to London in April, 1921, and it was +made worse still by what followed. The negotiations dragged over six +months, and finally broke down for reasons that have never been +explained, but the probability is that Egypt had now got entangled in +Coalition domestic politics, and that the "Die-Hards" claimed to have +their way in Egypt in return for their consent to the Irish settlement. +The door was now banged in the face of all schools of Egyptian +Nationalists, and Lord Allenby was instructed to send to the Sultan the +unhappy letter in which Egypt was peremptorily reminded that she was a +"part of the communications of the British Empire," and many other +things said which were specially calculated to wound Egyptian +susceptibilities. + +The Egyptian Prime Minister resigned, and for the next five months Lord +Allenby endeavoured to govern the country by martial law without an +Egyptian Ministry. Then he came to London with the unanimous support of +British officials in Egypt to tell the Government that the situation was +impossible and a settlement imperative. The Government gave way and +British policy was again reversed, but three opportunities had now been +thrown away, and at the fourth time of asking the difficulties were +greatly increased. The Nationalists were now divided and the Moderates +in danger of being violently attacked if they accepted a moderate +solution. It was found necessary to deport Zaghlul Pasha and to put +several of his chief adherents on trial. Suspicions had been aroused by +the delays and vacillations of the British Government. A settlement by +treaty was now impossible, and Lord Allenby had to give unconditionally +the recognition of sovereignty which the Mission intended to be part of +the treaty, putting the Egyptians under an honourable pledge to respect +British rights and interests. In the circumstances there was nothing +else to do, but it is greatly to be desired that when the constitution +has been completed and the new Assembly convened, an effort should be +made to revert to the method of the treaty which particularly suited the +Egyptian character and would be regarded as a binding obligation by +Egyptians. + + +THE HOPE OF THE FUTURE + +In regard to the future, there is only one thing to do and that is to +work honestly to its logical conclusion the theory now adopted, that +Egypt is a self-governing independent State. Egyptians must be +encouraged to shoulder the full responsibilities of a self-governing +community. It would be folly to maintain a dual system which enabled an +Egyptian Government to shunt the difficult or disagreeable part of its +task on to a British High Commissioner. Whatever the system of +Government, there is no escape for either party from the most intimate +mutual relations. Geography and circumstances decree them, but there is +no necessary clash between the imperial interests which require us to +guard the highway to the East that runs through Egyptian territory, and +the full exercise of their national rights by Egyptians. Egyptians must +remember that for many years to come the world will hold us responsible +for law and order and solvency in Egypt, and we on our part must +remember that Egyptians have the same pride in their country as other +peoples, and that they will never consent to regard it as merely and +primarily "a communication of the British Empire." In any wise solution +of the question any sudden breach with the past will be avoided, and +Egyptians will of their own free will enlist the aid of British +officials who have proved their devotion to the country by loyal and +skilful service. The hope of the future lies in substituting a free +partnership for a domination of one race by the other, and with a genial +and good-humoured people, such as the Egyptians essentially are, there +should be no difficulty in restoring friendship and burying past +animosities. But there must be a real determination on both sides to +make Egyptian independence a success and no disposition on either to +give merely a reluctant consent to the conditions agreed upon by them +and then to throw the onus of failure on the others. + +I deeply regret the schism between the different schools of Nationalists +in Egypt. As we have seen in Ireland, Nationalism is threatened from +within as well as from without, and it is a great misfortune that in +settling the Egyptian problem we missed the moment in 1920 when the +different Nationalist parties were all but united on a common platform. +Extremist leaders have the power of compelling even their friends to +deport them and treat them as enemies, and I assume that Zaghlul put +Lord Allenby under this compulsion, when he decided that his deportation +was necessary. But Zaghlul was one of the few Nationalist leaders who +were of peasant origin, and his followers stand for something that needs +to be strongly represented in the Government if it is not to take its +complexion merely from the towns and the wealthy interests. The fellah +is a very different man from what he was in the days of Ismail, and it +is improbable that he will again submit to oppression as his forefathers +did but it is eminently desirable that there should be in the Government +men whom he would accept as leaders and whom he could trust to speak for +him. + +Above all, it is to be hoped that, having conceded the independence of +Egypt, we shall not slip back into governing the country by martial law +with the aid of one party among the Egyptians. That would be merely an +evasion of the difficulty and a postponement of troubles. There are a +good many difficulties yet to be overcome, and the progress of events +will need careful watching by Liberals in and out of the House of +Commons, but if at length we steer a straight course and bring political +good sense to the details of the problem, there is no reason why we +should not satisfy the Egyptians and put Anglo-Egyptian relations on a +good and enduring basis. In dealing with Egypt as with all Eastern +countries, it should constantly be borne in mind that manners, +character, and personality are a chief part of good politics. To a very +large extent the estrangement has been caused by a failure to understand +and respect the feelings of the Egyptian people, and here, as in India, +it is important to understand that the demand of the Eastern man is not +only for self-government, but also for a new status which will enable +him to maintain his self-respect in his dealings with the West. + + + + +THE MACHINERY OF GOVERNMENT + +BY RAMSAY MUIR + +Professor of Modern History in the University of Manchester, 1913 to +1921. + + +Mr. Ramsay Muir said:--One of the most marked, and one of the most +ominous, features of the political situation to-day is that there is an +almost universal decline of belief in and respect for our system of +government. This undermining of the confidence that a healthy community +ought to feel in its institutions is a perturbing fact which it is the +plain duty of all good Liberals to consider seriously. We need not be +deterred by the old gibe that Liberalism has always cared more about +political machinery than about social reorganisation. The gibe was never +true. But, in any case, no projects of social reorganisation have much +chance of success unless the political machinery by means of which they +have to be carried into effect is working efficiently. Moreover, since +most of the projects of social reform which are being urged upon our +attention involve an enlargement of the activities of the State, it is +obvious that we shall be running the risk of a breakdown unless we make +sure that the machinery of the State is capable of meeting the demands +which are made upon it. We must be satisfied that our engine has +sufficient power before we require it to draw a double load. In truth, +one reason why the engine of government is not working well is that it +has been required to do a great deal more work than it was designed for. +The time has come to consider carefully the character and capacity of +our machinery of government in view of the increased demands which are +certain to be made upon it in the future. + +Our national political system may be divided into two parts. On the one +hand, there is the working machine, which goes on, year in, year out, +whether Parliament is sitting or not, and which would still go on quite +well for a time if Parliament never met again. We call it the +Government, and we habitually and rightly hold it responsible for every +aspect of national policy and action, for legislation and finance as +well as for foreign policy and internal administration. On the other +hand, there is what Burke used to call "the control on behalf of the +nation," mainly exercised through Parliament, whose chief function is to +criticise and control the action of Government, and to make the +responsibility of Government to the nation a real and a felt +responsibility. The discontents of to-day apply to both parts of the +system, and I propose to deal with them in turn, first inquiring what is +wrong with the working machine of government and how it can be amended, +and then turning to consider how far the control on behalf of the nation +is working badly, and how it can be made more efficient. + +In what I have called the "working machine" of government there are two +distinct elements. First, there is the large, permanent, professional +staff, the Civil Service; secondly, there is the policy-directing body, +the Cabinet. Both of these are the objects of a great deal of +contemporary criticism. On the one hand, we are told that we are +suffering from "bureaucracy," which means that the permanent officials +have too much independent and uncontrolled, or imperfectly controlled, +authority. On the other hand, we are told that we are suffering from +Cabinet dictatorship, or, alternatively, that the Cabinet system is +breaking down and being replaced by the autocracy of the Prime Minister. +There is a good deal of _prima facie_ justification for all these +complaints. + + +THE GROWTH OF THE CIVIL SERVICE + +First, as to bureaucracy. It is manifest that there has been an immense +increase in the number, the functions, and the power of public +officials. This is not merely due to the war. It has been going on for a +long time--ever since, in fact, we began the deliberate process of +national reconstruction in the years following 1832. In itself this +increase has not been a bad thing; on the contrary, it has been the only +possible means of carrying into effect the great series of reforms which +marked the nineteenth century. And may I here underline the fact that we +Liberals, in particular, have no right to criticise the process, since +we have been mainly responsible for it, at any rate in all its early +stages. When our predecessors set up the first Factory Inspectors in +1833, and so rendered possible the creation of a whole code of factory +laws; when they created the first rudimentary Education Office in 1839, +and so set to work the men who have really moulded our national system +of education; when they set up a bureaucratic Poor Law Board in 1841, +which shaped our Poor Law Policy, and a Public Health Board in 1848, +which gradually worked out our system of Public Health--when they did +these things, they were beginning a process which has been carried +further with every decade. If you like, they were laying the foundations +of bureaucracy; but they were also creating the only machinery by which +vast, beneficial and desperately needed measures of social reform could +be carried into effect. + +And there is yet another thing for which Liberalism must assume the +responsibility. When Gladstone instituted the Civil Service Commission +in 1853, and the system of appointment by competitive examination in +1870, he freed the Civil Service from the reputation for corruption and +inefficiency which had clung to it; and he ensured that it should +attract, as it has ever since done, much of the best intellect of the +nation. But this very fact inevitably increased the influence of the +Civil Service, and encouraged the expansion of its functions. If you put +a body of very able men in charge of a department of public service, it +is certain that they will magnify their office, take a disproportionate +view of its claims, and incessantly strive to increase its functions and +its staff. This is not only natural, it is healthy--so long as the +process is subjected to efficient criticism and control. + +But the plain fact is that the control is inadequate. The vast machine +of government has outgrown the power of the controlling mechanism. + +We trust for the control of the immense bureaucratic machine, almost +entirely to the presence, at the head of each department, of a political +minister directly responsible to Parliament. We hold the minister +responsible for everything that happens in his office, and we regard +this ministerial responsibility as one of the keystones of our system. +But when we reflect that the minister is distracted by a multitude of +other calls upon his time, and that he has to deal with officials who +are generally his equals in ability, and always his superiors in special +knowledge; when we realise how impossible it is that a tithe of the +multifarious business of a great department should come before him, and +that the business which does come before him comes with the +recommendations for action of men who know ten times more about it than +he does, it must be obvious that the responsibility of the minister must +be quite unreal, in regard to the normal working of the office. One +thing alone he can do, and it is an important thing, quite big enough to +occupy his attention. He can make sure that the broad policy of the +office, and its big new departures, are in accord with the ideas of the +majority in Parliament, and are co-ordinated, through the Cabinet, with +the policy of the other departments. That, indeed, is the true function +of a minister; and if he tries to make his responsibility real beyond +that, he may easily neglect his main work. Beyond this consideration of +broad policy, I do not hesitate to say that the theory of ministerial +responsibility is not a check upon the growth of bureaucracy, but is +rather the cover under which bureaucracy has grown up. For the position +of the minister enables him, and almost compels him, to use his +influence in Parliament for the purpose of diverting or minimising +parliamentary criticism. + + +A CHECK UPON BUREAUCRACY + +How can this growth of inadequately controlled official power be +checked? Is it not apparent that this can only be done if a clear +distinction is drawn between the sphere of broad policy, in which the +minister both can be and ought to be responsible, and the sphere of +ordinary administrative work for which the minister cannot be genuinely +responsible? If that distinction is accepted, it ought not to be +impossible for Parliament without undermining ministerial or cabinet +responsibility, to devise a means of making its control over the +ordinary working of the departments effective, through a system of +committees or in other ways. + +The current complaints of bureaucracy, however, are not directed mainly +against the ineffectiveness of the machinery of control, but against the +way in which public work is conducted by government officials--the +formalism and red-tape by which it is hampered, the absence of +elasticity and enterprise; and the methods of government departments are +often compared, to their disadvantage, with those of business firms. But +the comparison disregards a vital fact. The primary function of a +government department is not creative or productive, but regulative. It +has to see that laws are exactly carried out, and that public funds are +used for the precise purposes for which they were voted; and for this +kind of work a good deal of red-tape is necessary. Moreover, it is +essential that those who are charged with such functions should be above +all suspicion of being influenced by fear or favour or the desire to +make profit; and for this purpose fixed salaries and security of tenure +are essential. + +In short, the fundamental principles upon which government departments +are organised are right for the regulative functions which they +primarily exist to perform. But they are altogether wrong for creative +and productive work, which demands the utmost elasticity, adaptability, +and freedom for experiment. And it is just because the ordinary +machinery of government has been used on a large scale for this kind of +work that the outcry against bureaucracy has recently been so vehement. +It is not possible to imagine a worse method of conducting a great +productive enterprise than to put it under the control of an evanescent +minister selected on political grounds, and supported by a body of men +whose work is carried on in accordance with the traditions of the Civil +Service. + +If we are to avoid a breakdown of our whole system, we must abstain from +placing productive enterprises under the control of the ordinary +machinery of government--Parliament, responsible political ministers, +and civil service staffs. But it does not follow that no productive +concern ought ever to be brought under public ownership and withdrawn +from the sphere of private enterprise. As we shall later note, such +concerns can, if it be necessary, be organised in a way which would +avoid these dangers. + + +THE CABINET + +We turn next to the other element in the working machine of government, +the Cabinet, or policy-directing body, which is the very pivot of our +whole system. Two main functions fall to the Cabinet. In the first +place, it has to ensure an effective co-ordination between the various +departments of government; in the second place, it is responsible for +the initiation and guidance of national policy in every sphere, subject +to the watchful but friendly control of Parliament. + +Long experience has shown that there are several conditions which must +be fulfilled if a Cabinet is to perform these functions satisfactorily. +In the first place, its members must, among them, be able to speak for +every department of government; failing this, the function of +co-ordination cannot be effectively performed. This principle was +discarded in the later stages of the war, when a small War Cabinet was +instituted, from which most of the ministers were excluded. The result +was confusion and overlapping, and the attempt to remedy these evils by +the creation of a staff of _liaison_ officers under the control of the +Prime Minister had very imperfect success, and in some respects only +added to the confusion. In the second place, the Cabinet must be +coherent and homogeneous, and its members must share the same ideals of +national policy. National business cannot be efficiently transacted if +the members of the Cabinet are under the necessity of constantly arguing +about, and making compromises upon, first principles. That is the +justification for drawing the members of a Cabinet from the leaders of a +single party, who think alike and understand one another's minds. +Whenever this condition has been absent, confusion, vacillation and +contradiction have always marked the conduct of public affairs, and +disastrous results have followed. + +In the third place, the procedure of the Cabinet must be intimate, +informal, elastic, and confidential; every member must be able to feel +that he has played his part in all the main decisions of policy, whether +they directly concern his department or not, and that he is personally +responsible for these decisions. Constitutional usage has always +prescribed that it is the duty of a Cabinet Minister to resign if he +differs from his colleagues on any vital matter, whether relating to his +department or not, and this usage is, in truth, the main safeguard for +the preservation of genuine conjoint responsibility, and the main +barrier against irresponsible action by a Prime Minister or a clique. +When the practice of resignation in the sense of giving up office is +replaced by the other kind of resignation--shrugging one's shoulders and +letting things slide--the main virtue of Cabinet government has been +lost. In the fourth place, in order that every minister may fully share +in every important discussion and decision, it is essential that the +Cabinet should be small. Sir Robert Peel, in whose ministry of 1841-6 +the system probably reached perfection, laid it down that nine was the +maximum number for efficiency, because not more than about nine men can +sit round a table in full view of one another, all taking a real share +in every discussion. When the membership of a Cabinet largely exceeds +this figure, it is inevitable that the sense of joint and several +responsibility for every decision should be greatly weakened. + + +MODERN CHANGES IN THE CABINET + +I do not think any one will deny that the Cabinet has in a large degree +lost these four features which we have laid down as requisite for full +efficiency. The process has been going on for a long time, but during +the last six years it has been accelerated so greatly that the Cabinet +of to-day is almost unrecognisably different from what it was fifty +years ago. To begin with, it has grown enormously in size, owing to the +increase in the number of departments of government. This growth has +markedly diminished the sense of responsibility for national policy as a +whole felt by the individual members, and the wholesome practice of +resignation has gone out of fashion. It has led to frequent failures in +the co-ordination of the various departments, which are often seen +working at cross purposes. It has brought about a new formality in the +proceedings of the Cabinet, in the establishment of a Cabinet +Secretariat. + +The lack of an efficient joint Cabinet control has encouraged a very +marked and unhealthy increase in the personal authority of the Prime +Minister and of the clique of more intimate colleagues by whom he is +surrounded; and this is strengthened by the working of the new +Secretariat. All these unhealthy features have been intensified by the +combination of the two strongest parties in Parliament to form a +coalition; for this has deprived the Cabinet of homogeneity and made it +the scene not of the definition of a policy guided by clear principles, +but rather the scene of incessant argument, bargaining, and compromise +on fundamentals. Finally, the responsibility of the Cabinet to +Parliament has been gravely weakened; it acts as the master of +Parliament, not as its agent, and its efficiency suffers from the fact +that its members are able to take their responsibility to Parliament +very lightly. + +All these defects in the working of the Cabinet system have been much +more marked since the war than at any earlier time. But the two chief +among them--lessened coherence due to unwieldiness of size, and +diminished responsibility to Parliament--were already becoming apparent +during the generation before the war. On the question of responsibility +to Parliament we shall have something to say later. But it is worth +while to ask whether there is any means whereby the old coherence, +intimacy and community of responsibility can be restored. If it cannot +be restored, the Cabinet system, as we have known it, is doomed. I do +not think that it can be restored unless the size of the Cabinet can be +greatly reduced, without excluding from its deliberations a responsible +spokesman for each department of government. + +But this will only be possible if a considerable regrouping of the great +departments can be effected. I do not think that such a regrouping is +impracticable. Indeed, it is for many reasons desirable. If it were +carried out, a Cabinet might consist of the following members, who would +among them be in contact with the whole range of governmental activity. +There would be the Prime Minister; there would be the Chancellor of the +Exchequer, responsible for national finance; there would be the Minister +for Foreign Affairs; there would be a Minister for Imperial Affairs, +speaking for a sub-Cabinet which would include Secretaries for the +Dominions, for India, and for the Crown Colonies and Protectorates; +there would be a Minister of Defence, with a sub-Cabinet including +Ministers of the Navy, the Army, and the Air Force; there would be a +Minister for Justice and Police, performing most of the functions both +of the Home Office and of the Lord Chancellor, who would cease to be a +political officer and be able to devote himself to his judicial +functions; there would be a Minister of Agriculture, Industry, and +Commerce, with a sub-Cabinet representing the Board of Trade, the Board +of Agriculture, the Ministry of Mines, the Ministry of Labour, and +perhaps other departments. + +Ministers of Public Health and of Education would complete the list of +active administrative chiefs; but one or two additional members, not +burdened with the charge of a great department might be added, such as +the Lord President of the Council, and one of these might very properly +be a standing representative upon the Council of the League of Nations. +The heads of productive trading departments--the Post Office and the +Public Works Department--should, I suggest, be excluded from the +Cabinet, and their departments should be separately organised in such a +way as not to involve a change of personnel when one party succeeded +another in power. These departments have no direct concern with the +determination of national policy. + +On such a scheme we should have a Cabinet of nine or ten members, +representing among them all the departments which are concerned with +regulative or purely governmental work. And I suggest that a +rearrangement of this kind would not only restore efficiency to the +Cabinet, but would lead to very great administrative reforms, better +co-ordination between closely related departments, and in many respects +economy. But valuable as such changes may be, they would not in +themselves be sufficient to restore complete health to our governmental +system. In the last resort this depends upon the organisation of an +efficient and unresting system of criticism and control. + + +THE HOUSE OF COMMONS + +In any modern State the control of the action of Government is largely +wielded by organs not formally recognised by law--by the general +movement of public opinion; by the influence of what is vaguely called +"the city"; by the resolutions of such powerful bodies as trade union +congresses, federations of employers, religious organisations, and +propagandist bodies of many kinds; and, above all, by the Press. No +review of our system would be complete without some discussion of these +extremely powerful and in some cases dangerous influences. We cannot, +however, touch upon them here. We must confine ourselves to the formal, +constitutional machinery of national control over the actions of +Government, that is, to Parliament, as the spokesman of the nation. + +An essential part of any full discussion of this subject would be a +treatment of the Second Chamber problem. But that would demand a whole +hour to itself; and I propose to pass it over for the present, and to +ask you to consider the perturbing fact that the House of Commons, which +is the very heart of our system, has largely lost the confidence and +belief which it once commanded. + +Why has the House of Commons lost the confidence of the nation? There +are two main reasons, which we must investigate in turn. In the first +place, in spite of the now completely democratic character of the +electorate, the House is felt to be very imperfectly representative of +the national mind. And in the second place, it is believed to perform +very inefficiently its primary function of criticising and controlling +the action of Government. + +First of all, why do men vaguely feel that the House of Commons is +unrepresentative? I think there are three main reasons. The first is to +be found in the method of election. Since 1885 the House has been +elected by equal electoral districts, each represented by a single +member. Now, if we suppose that every constituency was contested by two +candidates only, about 45 per cent. of the voters must feel that they +had not voted for anybody who sat at Westminster; while many of the +remaining 55 per cent. must feel that they had been limited to a choice +between two men, neither of whom truly represented them. But if in many +constituencies there are no contests, and in many others there are three +or more candidates, the number of electors who feel that they have not +voted for any member of the House may rise to 60 per cent. or even 70 +per cent. of the total. + +The psychological effect of this state of things must be profound. And +there is another consideration. The very name of the House of Commons +(Communes, not common people) implies that it represents organised +communities, with a character and personality and tradition of their +own--boroughs or counties. So it did until 1885. Now it largely +represents totally unreal units which exist only for the purpose of the +election. The only possible means of overcoming these defects +of the single member system is some mode of proportional +representation--perhaps qualified by the retention of single members in +those boroughs or counties which are just large enough to be entitled to +one member. + +The main objection taken to proportional representation is that it would +probably involve small and composite majorities which would not give +sufficient authority to ministries. But our chief complaint is that the +authority of modern ministries is too great, their power too unchecked. +In the middle of the nineteenth century, when our system worked most +smoothly, parties _were_ composite, and majorities were small--as they +usually ought to be, if the real balance of opinion in the country is to +be reflected. The result was that the control of Parliament over the +Cabinet was far more effective than it is to-day; the Cabinet could not +ride roughshod over the House; and debates really influenced votes, as +they now scarcely ever do. The immense majorities which have been the +rule since 1885 are not healthy. They are the chief cause of the growth +of Cabinet autocracy. And they are due primarily to the working of the +single-member constituency. + +The second ground of distrust is the belief that Parliament is unduly +dominated by party; that its members cannot speak and vote freely; that +the Cabinet always gets its way because it is able to hold over members, +_in terrorem_, the threat of a general election, which means a fine of +L1000 a head; and that (what creates more suspicion than anything) the +policy of parties is unduly influenced by the subscribers of large +amounts to secret party funds. I am a profound believer in organised +parties as essential to the working of our system. But I also believe +that there is real substance in these complaints, though they are often +exaggerated. What is the remedy? First, smaller majorities, and a +greater independence of the individual member, which would follow from a +change in the methods of election. And, secondly, publicity of accounts +in regard to party funds. There is no reason why an honest party should +be ashamed of receiving large gifts for the public ends it serves, and +every reason why it should be proud of receiving a multitude of small +gifts. I very strongly hold that in politics, as in industry, the best +safeguard against dishonest dealings, and the surest means of restoring +confidence, is to be found in the policy of "Cards on the table." Is +there any reason why we Liberals should not begin by boldly adopting, in +our own case, this plainly Liberal policy? + + +REPRESENTATION OF "INTERESTS" + +There is a third reason for dissatisfaction with the composition of the +House of Commons, which has become more prominent in recent years. It is +that, increasingly, organised interests are making use of the +deficiencies of our electoral system to secure representation for +themselves. If I may take as instances two men whom, in themselves, +everybody would recognise as desirable members of the House, Mr. J.H. +Thomas plainly is, and is bound to think of himself as, a representative +of the railwaymen rather than of the great community of Derby, while Sir +Allan Smith as plainly represents engineering employers rather than +Croydon. There used to be a powerful trade which chose as its motto "Our +trade is our politics." Most of us have regarded that as an unsocial +doctrine, yet the growing representation of interests suggests that it +is being widely adopted. + +Indeed, there are some who contend that we ought frankly to accept this +development and universalise it, basing our political organisation upon +what they describe (in a blessed, Mesopotamic phrase) as "functional +representation." The doctrine seems to have, for some minds, a strange +plausibility. But is it not plain that it could not be justly carried +out? Who could define or enumerate the "functions" that are to be +represented? If you limit them to economic functions (as, in practice, +the advocates of this doctrine do), will you provide separate +representation, for example, for the average-adjusters--a mere handful +of men, who nevertheless perform a highly important function? But you +cannot thus limit functions to the economic sphere without distorting +your representation of the national mind and will. If you represent +miners merely as miners, you misrepresent them, for they are also +Baptists or Anglicans, dog-fanciers, or lovers of Shelley, +prize-fighters, or choral singers. The notion that you can represent the +mind of the nation on a basis of functions is the merest moonshine. The +most you can hope for is to get a body of 700 men and women who will +form a sort of microcosm of the more intelligent mind of the nation, and +trust to it to control your Government. Such a body will consist of men +who follow various trades. But the conditions under which they are +chosen ought to be such as to impress upon them the duty of thinking of +the national interest as a whole in the first instance, and of their +trade interests only as they are consistent with that. The fundamental +danger of functional representation is that it reverses this principle, +and impresses upon the representative the view that his trade is his +politics. + +But it is useless to deplore or condemn a tendency unless you see how it +can be checked. Why has this representation of economic interests become +so strong? Because Parliament is the arena in which important industrial +problems are discussed and settled. It is not a very good body for that +purpose. If we had a National Industrial Council charged, not with the +final decision, but with the most serious and systematic discussion of +such problems, they would be more wisely dealt with. And, what is quite +as important, such a body would offer precisely the kind of sphere +within which the representation of interests as such would be altogether +wholesome and useful; and, once it became the main arena of discussion, +it would satisfy the demand for interest-representation, which is +undermining the character of Parliament. In other words, the true +alternative to functional representation in Parliament is functional +devolution under the supreme authority of Parliament. + +But still more important than the dissatisfaction aroused by the +composition of the House is the dissatisfaction which is due to the +belief that its functions are very inefficiently performed. It is +widely believed that, instead of controlling Government, Parliament is +in fact controlled by it. The truth is that the functions imposed upon +Parliament by increased legislative activity and the growth of the +sphere of Government are so vast and multifarious that no part of them +_can_ be adequately performed in the course of sessions of reasonable +length; and if the sessions are not of reasonable length--already they +are too long--we shall be deprived of the services of many types of men +without whom the House would cease to be genuinely representative of the +mind of the nation. + +Consider how the three main functions of Parliament are +performed--legislation, finance, and the control of administration. The +discussion of legislation by the whole House has been made to seem +futile by the crack of the party whip, by obstruction, and by the +weapons designed to deal with obstruction--the closure, the guillotine, +the kangaroo. A real amendment has been brought about in this sphere by +the establishment of a system of committees to which legislative +proposals of various kinds are referred, and this is one of the most +hopeful features of recent development. But there is still one important +sphere of legislation in which drastic reform is necessary: the costly +and cumbrous methods of dealing with private bills promoted by +municipalities or by railways and other public companies. It is surely +necessary that the bulk of this work should be devolved upon subordinate +bodies. + +When we pass to finance, the inefficiency of parliamentary control +becomes painfully clear. It is true that a good deal of parliamentary +time is devoted to the discussion of the estimates. But how much of this +time is given to motions to reduce the salary of the Foreign Secretary +by L100 in order to call attention to what is happening in China? +Parliament never, in fact, attempts any searching analysis of the +expenditure in this department or that. It cannot do so, because the +national accounts are presented in a form which makes such discussion +very difficult. The establishment of an Estimates Committee is an +advance. But even an Estimates Committee cannot do such work without the +aid of a whole series of special bodies intimately acquainted with the +working of various departments. In short, the House of Commons has +largely lost control over national expenditure. As for the control of +administration, we have already seen how inadequate that is, and why it +is inadequate. + +These deficiencies must be corrected if Parliament is to regain its +prestige, and if our system of government is to attain real efficiency. +For this purpose two things are necessary: in the first place, +substantial changes in the procedure of Parliament; in the second place, +the delegation to subordinate bodies of such powers as can be +appropriately exercised by them without impairing the supreme authority +of Parliament as the mouthpiece of the nation. I cannot here attempt to +discuss these highly important matters in any detail. In regard to +procedure, I can only suggest that the most valuable reform would be the +institution of a series of committees each concerned with a different +department of Government. The function of these committees would be to +investigate and criticise the organisation and normal working of the +departments, not to deal with questions of broad policy; for these ought +to be dealt with in relation to national policy as a whole, and they +must, therefore, be the concern of the minister and of the Cabinet, +subject to the overriding authority of Parliament as a whole. In order +to secure that this distinction is maintained, and in order to avoid the +defects of the French committee system under which independent +_rapporteurs_ disregard and override the authority of the ministers, and +thus gravely undermine their responsibility, it would be necessary not +only that each committee should include a majority of supporters of +Government, but that the chair should be occupied by the minister or his +deputy. + + +DEVOLUTION + +Nor can I stop to dwell upon the very important subject of the +delegation or devolution of powers by Parliament to subordinate bodies. +I will only say that devolution may be, and I think ought to be, of two +kinds, which we may define as regional and functional. To regional +bodies for large areas (which might either be directly elected or +constituted by indirect election from the local government authorities +within each area) might be allotted much of the legislative power of +Parliament in regard to private Bills, together with general control +over those public functions, such as Education and Public Health, which +are now mainly in the hands of local authorities. Of functional +devolution the most important expression would be the establishment of a +National Industrial Council and of a series of councils or boards for +various industries endowed with quasi-legislative authority; by which I +mean that they should be empowered by statute to draft proposals for +legislation of a defined kind, which would ultimately receive their +validity from Parliament, perhaps without necessarily passing through +the whole of the elaborate process by which ordinary legislation is +enacted. I believe there are many who share my conviction that a +development in this direction represents the healthiest method of +introducing a real element of industrial self-government. But for the +moment we are concerned with it as a means of relieving Parliament from +some very difficult functions which Parliament does not perform +conspicuously well, without qualifying its supreme and final authority. + +One final point. If it is true, as I have argued, that the decay of the +prestige and efficiency of Parliament is due to the fact that it is +already overloaded with functions and responsibilities, it must be +obvious that to add to this burden the responsibility for controlling +the conduct of great industries, such as the railways and the mines, +would be to ensure the breakdown of our system of government, already on +the verge of dislocation. In so far as it may be necessary to undertake +on behalf of the community the ownership and conduct of any great +industrial or commercial concern, I submit that it is essential that it +should not be brought under the direct control of a ministerial +department responsible to Parliament. Yet the ultimate responsibility +for the right conduct of any such undertaking (_e.g._ the telephones, +electric supply, or forests) must, when it is assumed by the State, rest +upon Parliament. How is this ultimate responsibility to be met? Surely +in the way in which it is already met in the case of the Ecclesiastical +Commissioners or the Port of London Authority--by setting up, under an +Act of Parliament, an appropriate body in each case, and by leaving to +it a large degree of freedom of action, subject to the terms of the Act +and to the inalienable power of Parliament to alter the Act. In such a +case the Act could define how the authority should be constituted, on +what principles its functions should be performed, and how its profits, +if it made profits, should be distributed. And I suggest that there is +no reason why the Post Office itself should not be dealt with in this +way. + +It is only a fleeting and superficial survey which I have been able to +give of the vast and complex themes on which I have touched; and there +is no single one of them with which I have been able to deal fully. My +purpose has been to show that in the political sphere as well as in the +social and economic spheres vast tasks lie before Liberalism, and, +indeed, that our social and economic tasks are not likely to be +efficiently performed unless we give very serious thought to the +political problem. Among the heavy responsibilities which lie upon our +country in the troubled time upon which we are entering, there is none +more heavy than the responsibility which rests upon her as the pioneer +of parliamentary government--the responsibility of finding the means +whereby this system may be made a respected and a trustworthy instrument +for the labours of reconstruction that lie before us. + + + + +THE STATE AND INDUSTRY + +BY W.T. LAYTON + +M.A., C.H., C.B.E.; Editor of the _Economist_, 1922; formerly Member of +Munitions Council, and Director of Economic and Financial Section of the +League of Nations; Director of Welwyn Garden City; Fellow of Gonville +and Caius College, Cambridge, 1910. + + +Mr. Layton said:--The existing system of private enterprise has been +seriously attacked on many grounds. For my present purpose I shall deal +with four: (1) The critic points to the extreme differences of wealth +and poverty which have emerged from this system of private enterprise; +(2) it has produced and is producing to-day recurrent periods of +depression which result in insecurity and unemployment for the worker; +(3) the critics say the system is producing great aggregations of +capital and monopolies, and that by throwing social power into the hands +of those controlling the capital of the country, it leads to +exploitation of the many by industrial and financial magnates; (4) it +produces a chronic state of internal war which saps industrial activity +and the economic life of the community. + +I shall not attempt to minimise the force of these objections; but in +order to get our ideas into correct perspective it should be observed +that the first two of these features are not new phenomena arising out +of our industrial system. You find extreme inequalities of distribution +in practically all forms of society--in the slave state, the feudal +state, in India and in China to-day. Nor is this the first period of +history in which there has been insecurity. If you look at any primitive +community, and note the effect of harvest fluctuations and the +inevitable famine following upon them, you will recognise that the +variations of fortune which affect such communities are more disastrous +in their effect than the trade variations of the modern world. + +But after all qualifications have been made these four indictments are +sufficiently serious and must be met, for it is these and similar +considerations which have driven many to desire the complete abolition +of the system. Some wish to abolish private property, and desire a +Communist solution. Others practically attack the system of private +enterprise, and wish to substitute either the community in some form or +another (_e.g._ state socialism), or some corporate form of industry +(_e.g._ guild socialism). + + +THE LIBERAL BIAS + +Liberals, on the other hand, reject these solutions, and desire not to +end the present system but to mend it. The grounds for this conclusion +need to be clearly expressed, for after all it is the fundamental point +of doctrine which distinguishes them from the Labour party. In the first +place, there is the fact that Liberals attach a special importance to +the liberty of the individual. The general relation of the individual +to the State is rather outside my subject, but we start from the fact +that the bias of Liberals is towards liberty in every sphere, on the +ground that spiritual and intellectual progress is greatest where +individuality is least restricted by authority or convention. Variety, +originality in thought and action, are the vital virtues for the +Liberal. It is still true that "in this age the mere example of +Nonconformity, the mere refusal to bow the knee to custom, is itself a +service." The Liberal who no longer feels at the bottom of his heart a +sympathy with the rebel who chafes against the institutions of society, +whether religious, political, social or economic, is well on the road to +the other camp. But the dynamic force of Liberty, that great motive +power of progress, though a good servant, may be a bad master; and the +perennial problem of society is to harmonise its aims with those of the +common good. + +When we come to the more specific problem of industry, which is our +immediate concern, a glance at history shows that the era of most rapid +economic progress the world has ever seen has been the era of the +greatest freedom of the individual from statutory control in economic +affairs. The features of the last hundred years have been the rapidity +of development in industrial technique, and constant change in the form +of industrial organisation and in the direction of the world's trade. +Could any one suppose that in these respects industry, under the +complete control of the State or of corporations representing large +groups of wage earners and persons engaged in trade, could have +produced a sufficiently elastic system to have permitted that progress +to be made? In reply to this it may be said that though this was true +during the industrial revolution, it does not apply to-day; that our +industries have become organised; that methods of production, +population, and economic conditions generally are stabilised, and that +we can now settle down to a new and standard form of industrial +organisation. But this agreement is based on false premises. The +industrial revolution is far from complete. We are to-day in the full +flood of it. Look at the changes in the last four decades--the evolution +of electricity, the development of motor transport, or the discoveries +in the chemical and metallurgical industries. Consider what lies ahead; +the conquest of the air, the possible evolution of new sources of power, +and a hundred other phases which are opening up in man's conquest of +nature, and you will agree that we are still at the threshold of +industrial revolution. + +I may mention here a consideration which applies practically to Great +Britain. We are a great exporting country, living by international +trade, the world's greatest retail shopkeeper whose business is +constantly changing in character and direction. The great structure of +international commerce on which our national life depends is essentially +a sphere in which elasticity is of the utmost importance, and in which +standardised or stereotyped methods of control of production or exchange +would be highly disastrous. Liberal policy, therefore, aims at keeping +the field of private enterprise in business as wide as possible. But in +the general discussion of political or personal liberty in economic +affairs, we have to consider how far and in what way the freedom of +private enterprise needs to be limited or curtailed for the common good. +We must solve that problem. For Liberals there is no inherent sanctity +in the conceptions of private property, or of private enterprise. They +will survive, and we can support them only so long as they appear to +work better in the public interest than any possible alternatives. + + +RETROSPECT AND PROSPECT + +My object, then, is to show how a system which embodies a large amount +of private enterprise can be made tolerable and acceptable to modern +ideas of equity. For this purpose we need to consider (1) what have we +done in that direction in the past? (2) what is the setting of the +economic problem to-day, and (3) what is to be our policy for the +future? + +Dealing first with wealth and wages, the whole field of social +legislation has a bearing upon them, including particularly education, +elementary and technical, the Factory Acts, and a great mass of +legislation which has affected the earning powers of the worker and the +conditions under which he labours. Just before the war we had come to +the point of fixing a minimum wage in the mines, but an even more +important factor was that we had introduced the Trade Board system, +which had begun to impose a minimum wage in certain trades where wages +were particularly low. But the most important direct attack upon the +unequal distribution of wealth was by taxation in accordance with the +Liberal policy of a graduated and differential income-tax, and still +more important by taxes upon inheritance; for it has long been +recognised that though it may be desirable to allow men to accumulate +great wealth during their lifetime, it by no means follows that they +should be entitled to control the distribution of wealth in the next +generation and launch their children on the world with a great advantage +over their fellows of which they may be quite unworthy. On the question +of insecurity it cannot be said that any serious attack has been made on +the problem of how to diminish fluctuations of trade, but again the +Liberal solution for dealing with that difficulty was to remedy not the +cause but its effects by insurance. + +On the question of monopolies and exploitation, though we hear a great +deal of the growth of capitalistic organisation, in fact we find that, +of the three greatest industrial countries in the world, Great Britain +is the least trust-ridden, mainly because of its free trade system. In +the case of enterprises not subject to foreign competition, we had begun +to develop a fairly satisfactory system of control of public utility +services which were of a monopolistic character. + +Finally, there had been growing up a complete system of collective +bargaining and conciliation, and though we always heard of it whenever +there was dispute and strife, the ordinary public did not know that this +machinery was working and developing in many great and important +industries a feeling of co-operation or at all events of conciliation +between the two sides. I only mention these points very briefly in +passing in order to show that with the evolution of modern industry we +were already feeling our way, haltingly and far too slowly, it is true, +towards a solution of its most serious defects. + +Turning to the present situation, we have to face the fact that Great +Britain is to-day faced with one of the most serious positions in its +economic history. We must make allowances for the readily understood +pessimism of a miners' leader, but it should arrest attention that Mr. +Frank Hodges has recently described the present situation as the coming +of the great famine in England. For nearly two decades before the war +there was occurring a slight fall in the real wages of British +workpeople. Food was becoming dearer, as the world's food supply was not +increasing as fast as the world's industrial population, and the +industrial workers of the world had, therefore, to offer more of their +product to secure the food they needed. Hence the cost of living was +rising faster than wages, except in trades where great technical +advances were being made. There is some reason to fear that the war may +have accentuated this tendency. + +For some years the distant countries of the world have had to do without +European manufactured goods. You are all aware of the tendency, for +example, of India, Australia, and Canada to develop their own steel +resources and to create manufacturing industries of all kinds. Moreover, +we have lost part of our hold on the food-producing countries of the +world by the sale of our capital investments in those countries to pay +for the war. These and other considerations all suggest that we may find +it increasingly difficult to maintain our position as one of the main +suppliers of the manufactured goods of the world. In such circumstances +we shall be hard put to it to maintain, far less raise, the pre-war +standard of living. + +How then are we to cope with this problem of retaining our economic +position? We can only hope to do it if the present financial +difficulties and obstructions working through the exchanges, by which +international commerce is restricted and constrained, are removed. We +can only do it if and so long as the conception of international +division of labour is maintained. And we can only do it if--granted that +we can induce the world to accept this principle of international +division of labour--we can prove ourselves, by our economic and +productive efficiency, to be the best and cheapest producer of those +classes of goods in which our skilled labour and fixed capital is +invested. + +Assuming the financial difficulty is overcome, and that the old regime +of international specialisation revives, can we still show to the world +that it is more profitable for them to buy goods and services from us +than from other people? Can we compete with other industrial countries +of the world? The actual output of our labour in most cases is far less +than its potential capacity, partly because of technical conservatism, +and partly for reasons connected with the labour situation. How are we +to mobilise these reserve resources. I have only space to deal with the +second of these problems. In Germany labour is well disciplined, and has +the military virtues of persistence and obedience to orders in the +factory. But we cannot hope to call forth the utmost product of our +labouring population by drill-sergeant methods. + +In America this problem is a different one, because the American +employer is often able to take full advantage of his economic position. +For he has a labouring population of mixed nationality, which does not +readily combine, and he can play off one section against the other. +British employers cannot, if they would, deal with British labour on the +principle of Divide and Rule. There is only one method by which we can +hope to call forth this great reserve capacity of British labour, and +that is by securing its confidence. If Free Trade is one of the legs on +which British prosperity rests, the other is goodwill and active +co-operation between the workman and his employer. How is that goodwill +to be gained? + +The solution of that problem is only partly in the hands of the +politician; that is one of the reasons why it is extremely difficult to +suggest an industrial policy which is going to hold out the hope of +reaching Utopia in a short time. But it is obviously essential somehow +or another to develop, particularly among employers, the sense of +trusteeship--the sense that a man who controls a large amount of capital +is in fact not merely an individual pursuing his own fortune, but is +taking the very great responsibility of controlling a fragment of the +nation's industrial resources. And we have also to develop a conception +of partnership and joint enterprise between employer and employed. + + +STATE OWNERSHIP: FOR AND AGAINST + +What policy in the political field can be adopted to further these +objects? Reverting once more to the fourfold division which I made at +the outset, but taking the points in a different order, there is first +the question whether there should be a great extension of State +ownership, management, or control of monopolies and big business. In +spite of the experience of the war, I suggest tentatively that no case +has been made out for any wide or general extension of the field of +State management in industry. This, however, is not a matter of +principle, but of expediency, where each case must be considered on its +merits. Liberals should, indeed, keep an open mind in this connection +and not be afraid to face an enlargement of the field of State +management from time to time. There are, however, two special cases to +be considered: the mines and the railways. As to the mines, the solution +Mr. McNair puts forward is on characteristically Liberal lines, because +it will endeavour to harmonise the safeguarding of the interests of the +State with the maximum freedom to private enterprise and the maximum +scope for variety in methods of management. As to transport, we have +recently passed an Act altering the form of control of British railways. + +Personally I think the question whether railways should or should not +be nationalised is very much on the balance. It is obviously one of the +questions where objections to State management are less serious than in +most other cases. On the other hand, we may be able to find methods of +control which may be even better than State management. I do not think +the Act of last year fulfils the conditions which Liberals would have +imposed on the railways, for the principle of guaranteeing to a monopoly +a fixed income practically without any means of securing its efficiency, +is the wrong way to control a public utility service. If we are going to +leave public utilities in the hands of private enterprise, the principle +must be applied that profit should vary in proportion to the services +rendered to the community. In this connection the old gas company +principle developed before the war is an admirable one. Under it the gas +companies were allowed to increase their dividends in proportion as they +lowered their prices to the community. That is a key principle, and some +adaptation of it is required wherever such services are left in private +hands. My own view is that an amended form of railway control should +first be tried, and if that fails we should be prepared for some form of +nationalisation. + + +TRUSTS AND MONOPOLIES + +But if we refuse at present to enlarge the sphere of State management, +we are still faced with the problem of dealing with trusts and +monopolies. In this matter, as in so many other instances, the right +policy has already been worked out. Under the stimulating conditions +which obtained during the war, when old-established methods of thought +had been rudely shaken, progressive ideas had unusually free play; and +you will find in the general economic policy adumbrated during and +immediately after the war much that Liberals are looking for. On this +question of monopolies, we should put into force the recommendation of +the Committee on Trusts of 1919, with one qualification. The policy I +suggest is the policy of the majority, namely, that we should give very +much enlarged powers of inquiry to the Board of Trade, and that a +Tribunal should be set up by which investigations could be made. But I +would go further, and, taking one item from the Minority Report, I would +add that either to this Tribunal or to the Board of Trade department +concerned there should be given in reserve the power in special cases to +regulate prices. I do not think it would be necessary often to use that +power, indeed the mere inquiry and publicity of results would be +sufficient to modify the action of monopolies. But such a power in +reserve, even though price-fixing in ordinary circumstances is usually +mischievous and to be deprecated, would have a very salutary effect. + +In the case of public utilities of a standard kind, into which the +element of buying and selling profits does not greatly enter, we should +endeavour to start the experiment of putting representatives of the +workpeople on the boards of directors, but in carefully selected cases, +and not as a general rule. My own view is that if we are ready with the +machinery of investigation, and are prepared to deal in these ways with +public utilities at home where foreign competition is absent, we have +little to fear from trusts. + + +DISTRIBUTION + +As regards distribution and wages, in the first place we should adhere +to our traditional policy, developing the system of differential and +graduated taxation, and we should be prepared, if unequal distribution +of wealth continues, to limit further the right of inheritance. This is +not a new Liberal doctrine: it is many decades old. On the question of +wages we have to recognise that unless we can secure an increase in +terms of food and other commodities of the national production the State +cannot radically modify the general standard of living in the country; +or by administrative action raise the level of wages which economic +conditions are imposing on us. But the State can and should enforce a +minimum in certain industries, provided that minimum is reasonably in +harmony with the competitive level of wages. Such action can prevent +workers whose economic position is not a strong one--and this applies +particularly to many women's employment--from being compelled to accept +wages substantially less than the current standard. I therefore welcome +the gradual extension of the Trade Board system, provided it follows the +general principle recommended in the Cave Report--that the community +should use its full powers of compulsion only in regard to the minimum, +and that so far as all other classes of wages are concerned, the State +should encourage collective bargaining. With this proviso, compulsory +enforcement of a minimum could also be extended to the workpeople +covered by Whitley Councils. + +As regards all wages above the minimum the Cave Committee recommended +that, provided they are reached by agreement on the Board, and provided +that a sufficiently large proportion of the Board concur, the wage so +determined shall be enforced by civil process, whereas in the cases of +the minimum, the rates would be determined if necessary by arbitration +of the State-appointed members of the Board, and non-payment would be a +penal offence. The Trade Boards now cover three million workers. Two +million are in occupations for which Trade Boards are under +consideration, and there are a further two million under Industrial +Councils or Whitley Councils. If State powers are to be employed in +trades employing seven millions of the eighteen million wage-earners of +the country, the scope of those powers needs to be very carefully +defined. + + +THE CASE FOR PROFIT-SHARING + +Many Liberals are, however, asking whether this is sufficient and +whether it is not possible for the State to intervene to alter the +distribution of the product of industry in favour of the wage-earner. In +particular, they are wondering whether it is possible to secure the +universal application of some system of profit-sharing. The underlying +principle of profit-sharing is indeed one which we must look to if the +whole-hearted assistance of labour is to be enlisted behind the +productive effort of the country. But the profit we have to consider is +the profit over which the worker has some influence. There is no merit +in inviting him to share in purely commercial profits or losses which +may be due to some one else's speculation or business foresight. It is +futile to imagine you can reverse the functions of labour and capital, +and say that capital should have a fixed wage, and that the employee +should bear all the risks of the industry. + +Again, in some cases it is suitable that profits should be considered in +regard to a whole industry, but in others only in regard to a particular +firm or section; and finally the rate of profit suitable to various +trades varies between very wide limits. In short, there can be no +universal rule in this matter which can be enforced by Act of +Parliament. + +Nevertheless, we must all desire to proceed along the lines of +associating the pecuniary interests of the worker in the success of the +enterprise, and if any one can suggest a way in which direct assistance +to that end can be given by political action, as distinct from +industrial, he will be doing a great service. I may add that there is an +argument in favour of profit-sharing which is of the utmost importance +and which was recently expressed by a prominent industrialist: who +declared to me that at long last and after much opposition he has come +round to believe in profit-sharing, _because it enables him to show his +men the balance sheet_. The solution adopted last year in the mining +industry contains the sort of elements we wish to see adopted in +principle. The men are given, through their officials, the results of +the industry. They see that they cannot get more than the industry can +pay, and though the present economic conditions are putting the men in a +desperate state to-day, the miners, who were often regarded before the +war as the most pugnacious in the country, are not burning their +employers' houses, but are studying how the economic conditions of the +industry can be improved for the benefit of themselves and their +employers. + + +INDUSTRIAL PUBLICITY + +This brings me to the question of publicity, which is at the root of the +whole problem. We desire the principle of private enterprise to remain. +The one thing that can destroy it is secrecy. We argue that the +self-interest of the investor makes capital flow into those channels +where economic conditions need it most. But how can the investor know +where it should go when the true financial condition of great industrial +companies is a matter of guesswork? Again, we rely upon our bankers to +check excessive industrial fluctuations. How can they do this if they do +not know the facts of production? The public should know what great +combines are doing, but they do not know; and how can we expect the man +in the street to be satisfied when his mind is filled with suspicions +that can be neither confirmed nor removed? + +It is of the utmost importance to seek for greater publicity on two +main lines. The illustration of the mines suggests one--production and +wage data. There are only three industries in this country--coal, steel, +and ships--in which production statistics exist. I suggest that in many +of our great staple industries a few simple data with regard to +production should be published promptly, say every three months. The +data I have in mind are the wages bill, the cost of materials, and the +value of the product. It is desirable that this should be done, and I +believe it can be done, for almost every great industry in the country. +These three facts alone will bring the whole wages discussion down to +earth. + +Then on finance, I suggest that one of the first things a Liberal +Government should do should be to appoint a commission to overhaul the +whole of our Company Law. This is not the occasion to enter in detail +into a highly technical problem. But I would call attention to the +following points: There is no compulsion on any joint-stock company to +publish a balance sheet. It is almost the universal practice to do so; +but as it is not an obligation, the Company Law lays down no rules as to +what published balance sheets must contain. Again, the difference +between private and public companies must be considered; a private +company which employs a great mass of capital and large numbers of +work-people--a concern which may cover a whole town or district--should +in the public interest be subject to the same rules as a public company. +Thirdly, in view of the amalgamation of industry, the linking up of +company with company, there must be reconsideration as regards publicity +in the case of subsidiary companies. Finally, I think we have been wrong +in assuming that a law applicable to a company with a modest little +capital is suitable to regulate the publicity of a great combine +controlling tens of millions of capital. Some attempt should therefore +be made to differentiate between what must be told by the big and by the +little concerns respectively. I am well aware of the myriad difficulties +that this demand for publicity will encounter. But difficulties exist to +be overcome. And they must be overcome, for of this I feel certain: that +if the system of private enterprise dies, it will be because the canker +of secrecy has eaten into its vitals. + + +A NATIONAL INDUSTRIAL COUNCIL + +I have left very little time for dealing specifically with the question +of industrial relations, though much that I have said has a bearing upon +it. There has been great disappointment with the results of the Whitley +Council movement. Many thought they were going to bring in a new era. +But they have not lived up to these hopes, firstly, because they came +into being at a time of unexampled economic difficulty, and, secondly, +because they were introduced into industries where there was no +tradition of co-operative action--being established mainly in industries +lying between the entirely unorganised and the highly organised trades. +But we must persist in encouraging Whitley Councils, and still more in +the associated objective of encouraging works committees. The basis of +industrial peace is in the individual works. Co-operation cannot be +created by Act of Parliament, but depends upon the development of +opinion among employers and workmen. Starting from Works Councils up +through the Whitley Council, Trade Boards, or National Trade Union +machinery for the negotiation of wages, we arrive at the National +Industrial Council, which is the point at which the Government can most +directly assist the movement towards more cordial relations. The plan of +this Council is ready. It was proposed and developed in 1919, and I +personally do not want to change that plan very much. + +But I think it is of the utmost importance that we should embody in our +Liberal programme the institution of a National Industrial Council or +Parliament representing the trade organisations on both sides. Whether +it should represent the consumers, I, personally, am doubtful. It should +be consulted before economic and particularly industrial legislation is +introduced into Parliament. It should be the forum on which we should +get a much better informed discussion of industrial problems than is +possible in Parliament or through any other agency in the country. The +National Council also needs to have specific work to do. I would be +prepared to see transferred to it many of the functions of the Ministry +of Labour, or rather that it should be made obligatory for the Minister +of Labour to consult this Council on such questions as whether it should +hold a compulsory inquiry into an industrial dispute. I would also +throw upon it the duty of advising Parliament exactly how my proposals +as to publicity are to be carried out, and would give it responsibility +for the Ministry of Labour index figures of the cost of living upon +which so many industrial agreements depend. I believe if we could set +out a series of specific functions to give the plan vitality, in +addition to the more nebulous duty of advising the Government on +industrial questions, we should have created an important device for +promoting the mutual confidence of which I have spoken. + +The suggestions I have made are perhaps not very new, but they seem to +me to be in the natural line of evolution of Liberal traditions. Above +all, if they are accepted they should be pursued unflinchingly and +persevered with, not as a concession to this or that section which may +happen to be strong at the moment, but as a corporate policy, which aims +at combining the interests of us all in securing increased national +wealth with justice to the component classes of the commonwealth. + + + + +THE REGULATION OF WAGES + +BY PROFESSOR L.T. HOBHOUSE + +Professor of Sociology, London University. + + +Professor Hobhouse said:--The wages, hours, and general conditions of +industrial workers are of interest to the community from two points of +view. So far as the less skilled and lower paid workers are concerned, +it is to the interest and it is the duty of the community to protect +them from oppression, and to secure that every one of its members, who +is willing and able to contribute honest and industrious work to the +service of others, should be able in return to gain the means of a +decent and civilised life. In this relation the establishment of a +minimum wage is analogous to the restriction of hours or the provision +for safety and health secured by Factory Legislation, and carries +forward the provision for a minimum standard of life. The problem is to +determine upon the minimum and adjust its enforcement to the conditions +of trade in such wise as to avoid industrial dislocation and consequent +unemployment. + +With regard to workers of higher skill, who command wages or salaries on +a more generous scale, the interest of the community is of a different +kind. Such workers hardly stand in need of any special protection. They +are well able to take care of themselves, and sometimes through +combination are, in fact, the stronger party in the industrial bargain. +In this region the interest of the community lies in maintaining +industrial peace and securing the maximum of goodwill and co-operation. +The intervention of the community in industrial disputes, however, has +never been very popular with either party in the State. Both sides to a +dispute are inclined to trust to their own strength, and are only ready +to submit to an impartial judgment when convinced that they are +momentarily the weaker. Nor is it easy when we once get above the +minimum to lay down any general principles which a court of arbitration +could apply in grading wages. + +For these reasons the movement for compulsory arbitration has never in +this country advanced very far. We have an Industrial Court which can +investigate a dispute, find a solution which commends itself as +reasonable, and publish its finding, but without any power of +enforcement. The movement has for the present stuck there, and is likely +to take a long time to get further. Yet every one recognises the damage +inflicted by industrial disputes, and would admit in the abstract the +desirability of a more rational method of settlement than that of +pitting combination against combination. Such a method may, I would +suggest, grow naturally out of the system which has been devised for the +protection of unskilled and unorganised workers, of which a brief +account may now be given. + + +THE ESTABLISHMENT OF TRADE BOARDS + +Utilising experience gained in Australia, Parliament in 1909 passed an +Act empowering the Board of Trade (now the Ministry of Labour) to +establish a Trade Board in any case where the rate of wages prevailing +in any branch was "exceptionally low as compared with that in other +employments." The Board consisted of a number of persons selected by the +Minister as representatives of employers, an equal number as +representatives of the workers, with a chairman and generally two +colleagues not associated with the trade, and known as the Appointed +Members. These three members hold a kind of casting vote, and can in +general secure a decision if the sides disagree. + +No instruction was given in the statute as to the principles on which +the Board should determine wages, but the Board has necessarily in mind +on the one side the requirements of the worker, and on the other the +economic position of the trade. The workers' representatives naturally +emphasise the one aspect and the employers the other, but the appointed +members and the Board as a whole must take account of both. They must +consider what the trade in general can afford to pay and yet continue to +prosper and to give full employment to the workers. They must also +consider the rate at which the worker can pay his way and live a decent, +civilised life. Mere subsistence is not enough. It is a cardinal point +of economic justice that a well-organised society will enable a man to +earn the means of living as a healthy, developed, civilised being by +honest and useful service to the community. I would venture to add that +in a perfectly organised society he would not be able--charitable +provision apart--to make a living by any other method. There is nothing +in these principles to close the avenues to personal initiative or to +deny a career to ability and enterprise. On the contrary, it is a point +of justice that such qualities should have their scope, but not to the +injury of others. For this, I suggest with confidence to a Liberal +audience, is the condition by which all liberty must be defined.[1] + +[Footnote 1: I may perhaps be allowed to refer to my _Elements of Social +Justice_, Allen & Unwin, 1921, for the fuller elaboration of these +principles.] + +If we grant that it is the duty of the Boards to aim at a decent +minimum--one which in Mr. Seebohm Rowntree's phrase would secure the +"human needs" of labour--we have still some very difficult points of +principle and of detail to settle. First and foremost, do we mean the +needs of the individual worker or of a family, and if of the latter, how +large a family? It has been generally thought that a man's wages should +suffice for a family on the ground that there ought to be no economic +compulsion--though there should be full legal and social liberty--for +the mother to eke out deficiencies in the father's payment by going out +to work. It has also been thought that a woman is not ordinarily under a +similar obligation to maintain a family, so that her "human needs" would +be met by a wage sufficient to maintain herself as an independent +individual. + +These views have been attacked as involving a differentiation unfair in +the first instance to women, but in the second instance to men, because +opening a way to undercutting. The remedy proposed is public provision +for children under the industrial age, and for the mother in return for +her work in looking after them. With this subvention, it is conceived, +the rates for men or women might be equalised on the basis of a +sufficiency for the individual alone. This would certainly simplify the +wages question, but at the cost of a serious financial question. I do +not, myself, think that "human needs" can be fully met without the +common provision of certain essentials for children. One such +essential--education, has been long recognised as too costly to be put +upon the wages of the worker. We may find that we shall have to add to +the list if we are to secure to growing children all that the community +would desire for them. On the other hand, the main responsibility for +directing its own life should be left to each family, and this carries +the consequence, that the adult-man's wage should be based not on +personal but on family requirements. + + +WOMEN'S WAGES + +But the supposed injustice to woman is illusory. Trade Boards will not +knowingly fix women's rates at a point at which they can undercut men. +Nor if women are properly represented on them will they fix their rates +at a point at which women will be discarded in favour of male workers. +In industries where both sexes are employed, if the women workers are of +equal value with the men in the eyes of the employer, they will receive +equal pay; if of less value, then, but only then, proportionately less +pay. It is because women have received not proportionately but quite +disproportionately less pay that they have been undercutting men, and +the Trade Boards are--very gradually, I admit--correcting this error. +For well-known historical reasons women have been at an economic +disadvantage, and their work has secured less than its worth as compared +with the work of men. The tendency of any impartial adjustment of wages +is to correct this disadvantage, because any such system will attempt to +secure equality of opportunity for employment for all the classes with +which it is dealing. But it is admitted that there is a "lag" in women's +wages which has been but partially made good. + +If the standard wage must provide for a family, what must be the size of +the family? Discussion on the subject generally assumes a "statistical" +family of man and wife and three children under age. This is criticised +on the ground that it does not meet the human needs of larger families +and is in excess for smaller ones. The reply to this is that a general +rate can only meet general needs. Calculation easily shows that the +minimum suited for three children is by no means extravagant if there +should be but two children or only one, while it gives the bachelor or +newly married couple some small chance of getting a little beforehand +with the world. On the other hand, it is impossible to cater on general +principles for the larger needs of individuals. The standard wage gives +an approximation to what is needed for the ordinary family, and the +balance must be made good by other provision, whether public or private +I will not here discuss. I conclude that for adult men the minimum is +reasonably fixed at a figure which would meet the "human needs" of a +family of five, and that for women it should be determined by the value +of their services relatively to that of men.[1] + +[Footnote 1: I am assuming that this value is sufficient to cover the +needs of the independent woman worker. If not, these needs must also be +taken into account. As a fact both considerations are present to the +minds of the Trade Boards. A Board would not willingly fix a wage which +would either (_a_) diminish the opportunity of women to obtain +employment, or (_b_) enable them to undercut men, or (_c_) fail to +provide for them if living alone.] + +How far have Trade Boards actually succeeded in fixing such a minimum? +Mr. Seebohm Rowntree has put forward two sets of figures based on +pre-war prices, and, of course, requiring adjustment for the changes +that have subsequently taken place. One of these figures was designed +for a subsistence wage, the other for a "human needs" wage. The latter +was a figure which Mr. Rowntree himself did not expect to see reached in +the near future. I have compared these figures with the actual minima +for unskilled workers fixed by the Boards during 1920 and 1921, and I +find that the rates fixed are intermediate between the two. The +subsistence rate is passed, but the higher rate not attained, except for +some classes of skilled workers. The Boards have in general proceeded +with moderation, but the more serious forms of underpayment have been +suppressed so far as inspection has been adequately enforced. The ratio +of the female to the male minimum averages 57.2 per cent., which may +seem unduly low, but it must be remembered that in the case of women's +wages a much greater leeway had to be made good, and there can be little +doubt that the increases secured for female workers considerably +exceeded those obtained for men. + + +THE QUESTION OF A SINGLE MINIMUM + +Criticism of Trade Boards has fastened on their power to determine +higher rates of wages for skilled workers, one of the additional powers +that they secured under the Act of 1918. There are many who agree that a +bare minimum should be fixed by a statutory authority with legal powers, +but think that this should be the beginning and end of law's +interference. As to this, it must be said, first, that the wide margin +between a subsistence wage and a human needs wage, brought out by Mr. +Rowntree's calculations, shows that there can be no question at present +of a single minimum. To give the "human needs" figure legislative +sanction would at present be Utopian. Very few Trade Boards ventured so +far even when trade was booming. The Boards move in the region between +bare subsistence and "human needs," as trade conditions allow, and can +secure a better figure for some classes of their clients when they +cannot secure it for all. They therefore need all the elasticity which +the present law gives them. + +On the other hand, it is contended with some force by the Cave Committee +that it is improper for appointed members to decide questions of +relatively high wages for skilled men or for the law to enforce such +wages by criminal proceedings, and the Committee accordingly propose to +differentiate between higher and lower minima both as regards the method +of determination and of enforcement. I have not time here to discuss the +details of their proposal, but I wish to say a word on the retention--if +in some altered shape--of the powers given by the Act of 1918. The Trade +Board system has been remarkable for the development of understanding +and co-operation between representatives of employers and workers. +Particularly in the work of the administrative committees, matters of +detail which might easily excite controversy and passion are habitually +handled with coolness and good sense in the common interest of the +trade. A number of the employers have not merely acquiesced in the +system, but have become its convinced supporters, and this attitude +would be more common if certain irritating causes of friction were +removed. The employer who desires to treat his workers well and maintain +good conditions is relieved from the competition of rivals who care +little for these things, and what he is chiefly concerned about is +simplicity of rules and rigid universality of enforcement. It is this +section of employers who have prevented the crippling of the Boards in a +time of general reaction. It is blindness to refuse to see in such +co-operation a possible basis of industrial peace, and those were right +who in 1918 saw in the mechanism of the Boards the possibility, not +merely of preventing industrial oppression and securing a minimum living +wage, but of advancing to a general regulation of industrial relations. +At that time it was thought that the whole of industry might be divided +between Trade Boards and Whitley Councils, the former for the less, the +latter for the more organised trades. In the result the Whitley Councils +have proved to be hampered if not paralysed by the lack of an +independent element and of compulsory powers. + + +TRADE BOARDS HOLDING THE FIELD + +The Trade Board holds the field as the best machinery for the +determination of industrial conditions. It is better than unfettered +competition, which leaves the weak at the mercy of the strong. It is +better than the contest of armed forces, in which the battle is decided +with no reference to equity, to permanent economic conditions, or to the +general good, by the main strength of one combination or the other in +the circumstances of the moment. It is better than a universal +State-determined wages-law which would take no account of fluctuating +industrial conditions, and better than official determinations which are +exposed to political influences and are apt to ignore the technicalities +which only the practical worker or employer understands. It is better +than arbitration, which acts intermittently and incalculably from +outside, and makes no call on the continuous co-operation of the trade +itself. + +My hope is that as the true value of the Trade Board comes to be better +understood, its powers, far from being jealously curtailed, or confined +to the suppression of the worst form of underpayment, will be extended +to skilled employments, and organised industries, and be used not merely +to fulfil the duty of the community to its humblest members, but to +serve its still wider interest in the development of peaceful industrial +co-operation. + + + + +UNEMPLOYMENT + +BY H.D. HENDERSON + +M.A.; Fellow of Clare College, Cambridge; Lecturer in Economics; +Secretary to the Cotton Control Board from 1917-1919. + + +Mr. Henderson said:--From one point of view the existence of an +unemployment problem is an enigma and a paradox. In a world, where even +before the war the standard of living that prevailed among the mass of +the people was only what it was, even in those countries which we termed +wealthy, it seems at first sight an utterly astonishing anomaly that at +frequent intervals large numbers of competent and industrious +work-people should find no work to do. The irony of the situation cannot +be more tersely expressed than in the words, which a man is supposed to +have uttered as he watched a procession of unemployed men: "No work to +do. Set them to rebuild their own houses." + +But, if we reflect just a shade more deeply, nothing should surprise us +less than unemployment. We have more reason for surprise that it is +usually upon so small a scale. The economic system under which we live +in the modern world is very peculiar and only our familiarity with it +keeps us from perceiving how peculiar it is. In one sense it is highly +organised; in another sense it is not organised at all. There is an +elaborate differentiation of functions--the "division of labour," to +give it its time-honoured name, under which innumerable men and women +perform each small specialised tasks, which fit into one another with +the complexity of a jig-saw puzzle, to form an integral whole. Some men +dig coal from the depths of the earth, others move that coal over land +by rail and over the seas in ships, others are working in factories, at +home and abroad, which consume that coal, or in shipyards which build +the ships; and it is obvious, not to multiply examples further, that the +numbers of men engaged on those various tasks must somehow be adjusted, +_in due proportions_ to one another. It is no use, for instance, +building more ships than are required to carry the stuff there is to +carry. + +Adjustment, co-ordination, must somehow be secured. Well, how is it +secured? Who is it that ordains that, say, a million men shall work in +the coal-mines, and 600,000 on the railways, and 200,000 in the +shipyards, and so on? Who apportions the nation's labour power between +the innumerable different occupations, so as to secure that there are +not too many and not too few engaged in any one of them relatively to +the others? Is it the Prime Minister, or the Cabinet, or Parliament, or +the Civil Service? Is it the Trade Union Congress, or the Federation of +British Industries, or does any one suppose that it is some hidden cabal +of big business interests? No, there is no co-ordinator. There is no +human brain or organisation responsible for fitting together this vast +jig-saw puzzle; and, that being so, I say that what should really excite +our wonder is the fact that that puzzle should somehow get fitted +together, usually with so few gaps left unfilled and with so few pieces +left unplaced. + +It would, indeed, be a miracle, if it were not for the fact that those +old economic laws, whose impersonal forces of supply and demand, whose +existence some people nowadays are inclined to dispute, or to regard as +being in extremely bad taste, really do work in a manner after all. They +are our co-ordinators, the only ones we have; and they do their work +with much friction and waste, only by correcting a maladjustment after +it has taken place, by slow and often cruel devices, of which one of the +most cruel is, precisely, unemployment and all the misery it entails. + + +THE CAUSES OF TRADE DEPRESSIONS + +I do not propose to deal with such branches of the problem of +unemployment as casual labour or seasonal fluctuations. I confine myself +to what we all, I suppose, feel to be the really big problem, to +unemployment which is not special to particular industries or districts, +but which is common to them all, to a general depression of almost every +form of business and industrial activity. General trade depressions are +no new phenomenon, though the present depression is, of course, far +worse than any we have experienced in modern times. They used to occur +so regularly that long before the war people had come to speak of +cyclical fluctuations, or to use a phrase which is now common, the trade +cycle. That is a useful phrase, and a useful conception. It is well that +we should realise, when we speak of those normal pre-war conditions, to +which we hope some day to revert, that in a sense trade conditions never +were normal; that, at any particular moment you care to take, we were +either in full tide of a trade boom, with employment active and prices +rising, and order books congested; or else right on the crest of the +boom, when prices were no longer rising generally, though they had not +yet commenced to fall, when employment was still good, but when new +orders were no longer coming in; or else in the early stages of a +depression, with prices falling, and every one trying to unload stocks +and failing to do so, and works beginning to close down; or else right +in the trough of the depression where we are to-day; that we were at one +or other of the innumerable stages of the trade cycle, without any +prospect of remaining there for very long, but always, as it were, in +motion, going round and round and round. + +What are the root causes which bring every period of active trade to an +inevitable end? There are two which are almost invariably present +towards the end of every boom. First, the general level of prices and +wages has usually become too high; it is straining against the limits of +the available supplies of currency and credit, and, unless inflation is +to be permitted, a restriction of credit is inevitable which will bring +on a trade depression. In those circumstances, a reduction of the +general level of prices and wages is an essential condition of a trade +revival. A reduction of prices _and wages_. That point has a +significance to which I will return. + +The second cause is the distorted balance which grows up in every boom +between different branches of industrial activity. When trade is good, +we invariably build ships, produce machinery, erect factories, make +every variety of what are termed "constructional goods" upon a scale +which is altogether disproportionate to the scale upon which we are +making "consumable goods" like food and clothes. And that condition of +things could not possibly endure for very long. If it were to continue +indefinitely, it would lead in the end to our having, say, half a dozen +ships for every ton of wheat or cotton which there was to carry. You +have there a maladjustment, which must be corrected somehow; and the +longer the readjustment is postponed, the bigger the readjustment that +will ultimately be inevitable. Now that means, first on the negative +side, that, when you are confronted with a trade depression, it is +hopeless to try to cure it by looking for some device by which you can +give a general stimulus to all forms of industry. Devices of that nature +may be very useful in the later stages of a trade depression, when the +necessary readjustments both of the price-level and of the relative +outputs of different classes of commodities have already been effected, +and when trade remains depressed only because people have not yet +plucked up the necessary confidence to start things going again. But in +the early stages of a depression, an indiscriminating stimulus to +industry in general will serve only to perpetuate the maladjustments +which are the root of the trouble. It will only put off the evil day, +and make it worse when it comes. The problem is not one of getting +everybody back to work on their former jobs. It is one of getting them +set to work on the _right_ jobs; and that is a far more difficult +matter. + +On the positive side, what this really comes to is, that if you wish to +prevent depressions occurring you must prevent booms taking the form +they do. You must prevent prices rising so much, and so many +constructional goods being made during the period of active trade; and I +am not going to pretend that that is an easy thing to do. It's all very +well to say that the bankers, through their control of the credit +system, might endeavour to guide industry and keep it from straying out +of the proper channels. But the bankers would have to know much more +than they do about these matters, and, furthermore, the problem is not +merely a national one--it is a world-wide problem. It would be of little +use to prevent an excess of ships being built here, if that only meant +that still more ships were built, say, in the United States. + +I do not say that even now the banks might not do something which would +help; still less do I wish to convey the impression that mankind must +always remain passive and submissive, impotent to control these forces +which so vitally affect his welfare. But I say that for any serious +attempt to master this problem, the necessary detailed knowledge has +still to be acquired, and the rudiments of organisation have still to be +built up; and the problem is not one at this stage for policies and +programmes. What you can do by means of policies and programmes lies, at +present, in the sphere of international politics. In that sphere, +though you cannot achieve all, you might achieve much. To reduce the +problem to its pre-war dimensions would be no small result; and that +represents a big enough objective, for the time being, for the +concentration of our hardest thinking and united efforts. But into that +sphere I am not going to enter. I pass to the problem of unemployment +relief. + + +THE SCALE OF RELIEF + +The fundamental difficulty of the problem of relieving unemployment is a +very old one. It turns upon what used to be called, ninety years ago, +"the principle of less eligibility," the principle that the position of +the man who is unemployed and receiving support from the community +should be made upon the whole less eligible, less attractive than that +of the man who is working and living upon the wages that he earns. That +is a principle which has been exposed to much criticism and denunciation +in these modern days. We are told that it is the false and antiquated +doctrine of a hard-hearted and coarse-minded age, which thought that +unemployment was usually a man's own fault, which saw a malingerer in +every recipient of relief, which was obsessed by the bad psychology of +pains and penalties and looked instinctively for a deterrent as the cure +for every complex evil. + +But, however that may be, this principle of less eligibility is one +which you cannot ignore. It is not merely or mainly a matter of the +effect on the character of the workmen who receive relief. The danger +that adequate relief will demoralise the recipient has, I agree, been +grossly exaggerated in the past. Prolonged unemployment is always in +itself demoralising. But, given that a man is unemployed, it will not +demoralise him more that he should receive adequate relief rather than +inadequate relief or no relief at all. On the contrary, on balance, it +will, I believe, demoralise him less. For nothing so unfits a man for +work as that he should go half-starved, or lack the means to maintain +the elementary decencies of life. + +But there are other considerations which you have to take into account. +If you get a situation such that the man who loses his job becomes +thereby much better-off than the man who remains at work, I do not say +that the former man will necessarily be demoralised, but I do say that +the latter man will become disgruntled. I do not want to put that +consideration too high. At the present time there are many such +anomalies; in a great many occupations, the wages that the men at work +are receiving amount to much less than the money they would obtain if +they lost their jobs and were labelled unemployed. But they have stuck +to their jobs, they are carrying on, with a patience and good humour +that are beyond all praise. Yes, but that state of affairs is so +anomalous, so contrary to our elementary sense of fairness that, as a +permanent proposition it would prove intolerable. We cannot go on for +ever with a system under which in many trades men receive much more when +they are unemployed than when they are at work. On the other hand, the +attempt to avoid such anomalies leads us, so long as we have a uniform +scale of relief, against an alternative which is equally intolerable. +Wages vary greatly from trade to trade; and, if the scale of relief is +not to exceed the wages paid in _any_ occupation it must be very low +indeed. That is the root dilemma of the problem of unemployment +relief--how if your scale of relief is not to be too high for equity and +prudence it is not to be too low for humanity and decency. We have not, +as some people imagine, done anything in recent years to escape from it, +we have merely exchanged one horn of the dilemma for the other. + +In any satisfactory system the scale of relief must vary from occupation +to occupation, in accordance with the normal standard of wages ruling in +each case. But it is very difficult, in fact I think it would always be +impracticable to do that under any system of relief, administered by the +State, either the Central Government or the local authorities. It must +be done on an industrial basis; each industry settling its own scale, +finding its own money, and managing its own scheme. That is an idea +which has received much ventilation in the last few years. But the +really telling arguments in favour of it do not seem to me to have +received sufficient stress. + +Foremost among them I place the consideration I have just indicated: +that in this way, and in this way alone, it becomes possible for +work-people who receive high wages when they are at work, and where +habits of expenditure and standards of family living are built up on +that basis, to receive when unemployed, adequate relief without that +leading to anomalies which in the long run would prove intolerable. But +there are many other arguments. + + +A MODEL SCHEME FROM LANCASHIRE + +About five years ago I had the opportunity of witnessing at very close +quarters the working of an unemployment scheme on an industrial basis. +The great Lancashire cotton industry was faced during the war with a +very serious unemployment problem, owing to the difficulty of +transporting sufficient cotton from America. It met that situation with +a scheme of unemployment relief, devised and administered by one of +those war Control Boards, which in this case was essentially a +representative joint committee of employers and employed. The money was +raised, every penny of it, from the employers in the industry itself; +the Cotton Control Board laid down certain rules and regulations as to +the scale of benefits, and the conditions entitling a worker to receive +it; and the task of applying those rules and paying the money out was +entrusted to the trade unions. + +Well, I was in a good position to watch that experiment. I do not think +I am a particularly credulous person, or one prone to indulge in easy +enthusiasms, and I certainly don't believe in painting a fairy picture +in glowing colours by way of being encouraging. But I say deliberately +that there has never been an unemployment scheme in this country or in +any other country which has worked with so little abuse, with so few +anomalies, with so little demoralisation to any one, and at the same +time which has met so adequately the needs of a formidable situation, or +given such general satisfaction all round as that Cotton Control Board +scheme. + +I cannot describe as fully as I should like to do the various features +which made that scheme attractive, and made it a success. I will take +just one by way of illustration. It is technically possible in the +cotton trade to work the mills with relays of workers, so that if a mill +has 100 work-people, and can only employ 80 work-people each week, the +whole 100 can work each for four weeks out of the five, and "play off," +as it is called, in regular sequence for the fifth week. And that was +what was done for a long time. It was called the "rota" system; and the +"rota" week of "playing off" became a very popular institution. Under +that system, benefits which would have been far from princely as the +sole source of income week after week--they never amounted to more than +30/- for a man and 18/- for a woman--assumed a much more liberal aspect. +For they came only as the occasional variants of full wages; and they +were accompanied not by the depressing circumstances of long-continued +unemployment, but by what is psychologically an entirely different and +positively exhilarating thing, a full week's holiday. That meant that +the available resources--and one of the difficulties of any scheme of +unemployment relief is that the resources available are always +limited--did much more to prevent misery and distress, and went much +further towards fulfilling all the objects of an unemployment scheme +than would have been possible otherwise. + +That system was possible in the cotton trade; in other trades it might +be impossible for technical reasons, or, where possible, it might in +certain circumstances be highly undesirable. The point I wish to stress +is that under an industrial scheme you have an immense flexibility, you +can adapt all the details to the special conditions of the particular +industry, and by that means you can secure results immeasurably superior +to anything that is possible under a universal State system. Moreover, +if certain features of the scheme should prove in practice +unsatisfactory, they can be altered with comparatively little +difficulty. You don't need to be so desperately afraid of the +possibility of making a mistake as you must when it is a case of a great +national scheme, which can only be altered by Act of Parliament. + + +THE MORAL OBLIGATION OF INDUSTRIES + +I do not underrate the difficulty of applying this principle of +industrial relief over the whole field of industry. There is the great +difficulty of defining an industry, or drawing the lines of demarcation +between one trade and another. I have not time to elaborate those +difficulties, but I consider that they constitute an insuperable +obstacle to anything in the nature of an Act of Parliament, which would +impose forcibly upon each industry the obligation to work out an +unemployment scheme. The initiative must come from within the industry; +the organisations of employers and employed must get together and work +out their own scheme, on their own responsibility and with a free hand. +And, if it happens in this way--one industry taking the lead and others +following--these difficulties of demarcation become comparatively +unimportant. You can let an industry define itself more or less as it +likes, and it does not matter much if its distinctions are somewhat +arbitrary. It is not a fatal drawback if some firms and work-people are +left outside who would like to be brought in. And if there are two +industries which overlap one another, each of which is contemplating a +scheme of the kind, it is a comparatively simple matter for the +responsible bodies in the two industries to agree with one another as to +the lines of demarcation between them, as was actually done during the +war by the Cotton Control Board and the Wool Control Board, with +practically no difficulty whatever. But for such agreements to work +smoothly it is essential that the industries concerned should be anxious +to make their schemes a success; and that is another reason why you +cannot impose this policy by _force majeure_ upon a reluctant trade. It +is in the field of industry that the real move must be made. + +But I think that Parliament and the Government might come in to the +picture. In the first place, the ordinary national system of +unemployment relief, which must in any case continue, might be so framed +as to encourage rather than to discourage the institution of industrial +schemes. Under the Insurance Act of 1920 "contracting out" was provided +for, but it was penalised, while at the present moment it is prohibited +altogether. I say that it should rather be encouraged, that everything +should be done, in fact, to suggest that not a legal but a moral +obligation lies upon each industry to do its best to work out a +satisfactory unemployment scheme. And, when an industry has done that, I +think the State should come in again. I think that the representative +joint committee, formed to administer such a scheme, might well be +endowed by statute with a formal status, and certain clearly-defined +powers--such as the Cotton Control Board possessed during the war--of +enforcing its decisions. + +But--and, of course, there is a "but"--we cannot expect very much from +this in the near future. We must wait for better trade conditions before +we begin; and, as I have already indicated, the prospects of really good +trade in the next few years are none too well assured. For a long time +to come, it is clear, we must rely upon the ordinary State machinery for +the provision of unemployment relief; and, of course, the machinery of +the State will always be required to cover a large part of the ground. +The liability which an industry assumes must necessarily be strictly +limited in point of time; and there are many occupations in which it +will probably always prove impracticable for the occupation to assume +even a temporary liability. For the meantime, at any rate, we must rely +mainly upon the State machinery. Is it possible to improve upon the +present working of this machinery? I think it is. By the State machinery +I mean not merely the Central Government, but the local authorities and +the local Boards of Guardians. + + +THE PRESENT MACHINERY OF RELIEF + +At present what is the situation? Most unemployed work-people are +entitled to receive certain payments from the Employment Exchanges under +a so-called Insurance scheme, which is administered on a national basis; +some weeks they are entitled to receive those payments, other weeks they +are not; but in any case those payments afford relief which is +admittedly inadequate, and they are supplemented--and very materially +supplemented--by sums varying from one locality to another, but within +each locality on a uniform scale, which are paid by the Boards of +Guardians in the form of outdoor relief. Now that situation is highly +unsatisfactory. The system of outdoor relief and the machinery of the +Guardians are not adapted for work of this kind. They are designed to +meet the problem of individual cases of distress, not necessarily +arising from unemployment, but in any event individual cases to be dealt +with, each on its own merits, after detailed inquiry into the special +circumstances of the case. That is the function which the Guardians are +fitted to perform, and it is a most important function, which will still +have to be discharged by the Guardians, or by similar local bodies, +whatever the national system of unemployment relief may be. But for +dealing with unemployment wholesale, for paying relief in accordance +with a fixed scale and without regard to individual circumstances--for +that work the Guardians are a most inappropriate body. They possess no +qualification for it which the Central Government does not possess, +while they have some special and serious disqualifications. + +In any case, it is preposterous that you should have two agencies, each +relieving the same people in the same wholesale way, the Employment +Exchanges with their scale, asking whether a man is unemployed, and how +many children he has to support, and paying him so much, and the +Guardians with their scale, asking only the same questions and paying +him so much more. It would obviously be simpler, more economical, and +more satisfactory in every way, if one or other of those agencies paid +the man the whole sum. And I have no hesitation in saying that that +agency should be the Central Government. Perhaps the strongest argument +in favour of that course is that, when relief is given locally, the +money must be raised by one of the worst taxes in the whole of our +fiscal system, local rates, which are tantamount to a tax, in many +districts exceeding 100 per cent., upon erection of houses and buildings +generally. It is foolish to imagine that any useful end is served by +keeping down taxes at the expense of rates. + +Serious as is the problem of national finance, the fiscal resources of +the Central Government are still far more elastic and less objectionable +than those which the local authorities possess. I suggest, accordingly, +as a policy for the immediate future, the raising of the scale of +national relief to a more adequate level, coupled with the abolition of +what I have termed wholesale outdoor relief in the localities. What it +is right to pay on a uniform scale should be paid entirely by the +Central Government, and local outdoor relief should be restricted to its +proper function of the alleviation of cases of exceptional distress +after special inquiries into the individual circumstances of each case. + +One final word to prevent misconception. I have said that our present +system of relief is unsatisfactory, and I have indicated certain +respects in which I think it could be improved. But I am far from +complaining that relief is being granted throughout the country as a +whole upon too generous a scale. Anomalies there are which, if they +continued indefinitely, would prove intolerable. But we have been +passing through an unparalleled emergency. Unemployment in the last two +years has been far more widespread and intense than it has ever been +before in modern times, and never was it less true that the men out of +work have mainly themselves to blame. But it has meant far less +distress, far less destruction of human vitality, and I will add far +less demoralisation of human character than many of the bad years we had +before the war. That is due to the system of doles, the national and +local doles; and in the circumstances I prefer that system with all its +anomalies to the alternative of a substantially lower scale of relief. +We are still in the midst of that emergency; and if we are faced, as I +think for this decade we must expect to be faced, with that dilemma +which I indicated earlier, I should prefer, and I hope that every +Liberal will prefer, to err by putting the scale of relief somewhat too +high for prudence and equity rather than obviously too low for humanity +and decency. + + + + +THE PROBLEM OF THE MINES + +BY ARNOLD D. MCNAIR + +M.A., LL.M., C.B.E.; Fellow of Gonville and Caius College, Cambridge; +Secretary of Coal Conservation Committee, 1916-1918; Secretary of +Advisory Board of Coal Controller, 1917-1919; Secretary of Coal Industry +Commission, 1919 (Sankey Commission). + + +Mr. McNair said:--Need I labour the point that there _is_ a problem of +the Mines? Can any one, looking back on the last ten years, when time +after time a crisis in the mining industry has threatened the internal +peace and equilibrium of the State, deny that there is something +seriously wrong with the present constitution of what our chairman has +described as this great pivotal industry? What is it that is wrong? If I +may take a historical parallel, will you please contrast the political +situation and aspirations of the working-class population at the close +of the Napoleonic wars with their industrial situation and aspirations +now. Politically they were a hundred years ago unenfranchised; more or +less constant political ferment prevailed until the Reform Bill, and +later, extensions of the franchise applied the Liberal solution of +putting it within the power of the people, if they wished it, to take an +effective share in the control of political affairs. + +Industrially, their situation to-day is not unlike their political +situation a hundred years ago. Such influence as they have got is +exerted almost entirely outside the constitution of industry, and very +often in opposition to it. Their trade unions, workers' committees, +councils of action, triple alliances, and so forth, are not part of the +regular industrial machine, and too often are found athwart its path. +They are members of an industry with substantially no constitutional +control over it, just as a hundred years ago they were members of a +State whose destinies they had no constitutional power to direct. + +This does not mean that a hundred years ago every working man wanted the +political vote, nor that now he wants to sit on a committee and control +his industry. It meant that a substantial number of the more enlightened +and ambitious did--a large enough number to be a source of permanent +discontent until they got it. The same is true to-day in the case of +many industries. Many men in all classes of society are content to do +their job, take their money, go home and work in their gardens, or +course dogs or fly pigeons. They are very good citizens. Many others, +equally good citizens, take a more mental and active interest in their +job, and want to have some share in the direction of it. This class is +increasing and should not be discouraged. They constitute our problem. +The Liberal solution of a gradually extended franchise has cured the +political ferment. Political controversy is still acute, and long may it +remain so, as it is the sign of a healthy political society. But the +ugly, ominous, revolutionary features of a hundred years ago in the +sphere of politics have substantially gone or been transferred to the +industrial sphere. + + +THE LIBERALISATION OF INDUSTRY + +The same solution must be applied to that sphere. This does not mean +transferring the machinery of votes and elections to industry. It means +finding channels in industry whereby every person may exercise his +legitimate aspiration, if he should feel one, of being more than a mere +routine worker while still perhaps doing routine work, and of +contributing in an effective manner his ideas, thoughts, suggestions, +experience, to the direction and improvement of the industry. We have +satisfied the desire for self-expression as citizens, and we have now to +find some means of satisfying a similar desire for self-expression as +workers in industry. That is all very vague. Does it mean +co-partnership, profit-sharing, co-operative societies, joint +committees, national wages boards, guild socialism, nationalisation? It +may mean any or all of these things--one in one industry, one in +another, or several different forms in the same industry--whatever +experiment may prove to be best suited to each industry. But it must +mean opportunity of experiment, and experiment by all concerned. It must +mean greater recognition by employers of their trusteeship on behalf of +their work-people as well as their shareholders; greater recognition of +the public as opposed to the purely proprietary view of industry; and +recognition that the man who contributes his manual skill and labour +and risks his life and limb is as much a part of the industry as a man +who contributes skill in finance, management, or salesmanship, or the +man who risks his capital. + +Coming to the mines, that is, the coal mining industry (with a few +incidental mines such as stratified ironstone, fireclay, etc., which +need not complicate our argument), the first step to the solution of the +problem of the mines, _i.e._ the collieries, the mining industry, is the +solution of the problem of the minerals. This distinction is not at +first sight obvious to all, but it is fundamental. The ownership and +leasing of the coal is one thing, the business or industry of mining it +is quite another. State ownership of the former does not involve State +ownership of the latter. That is elementary and fundamental. It lies at +the root of what is to follow. + +Will you picture to yourself a section of the coal-mining industry in +the common form of the pictures one sees of an Atlantic liner cut neatly +in two so as to expose to view what is taking place on each deck. On top +you have the landowner, under the surface of whose land coal, whether +suspected or not, has been discovered. He may decide to mine the coal +himself, but more frequently--indeed, usually--he grants to some persons +or company a lease to mine that coal on payment of what is called a +royalty of so much for every ton extracted. Thereupon he is called the +mineral-owner or royalty-owner, and the persons or company who actually +engage in the business or industry of coal mining and pay him the +royalties we shall call the colliery-owners. Do not be misled by the +confusing term "coal-owners." Very frequently the colliery-owners are +called the "coal-owners," and their associations "coal-owners' +associations." That is quite a misnomer. The real _coal_-owner is the +landowner, the royalty-owner, though it may well happen that the two +functions of owning the minerals and mining them may be combined in the +same person. Below the colliery-owners we find the managerial staff; +below them what may be called the non-commissioned officers of the mine, +such as firemen or deputies, who have most important duties as to +safety, and below them the miners as a whole, that is, both the actual +coal-getters or hewers or colliers and all the other grades of labour +who are essential to this the primary operation. + + +THE QUESTION OF ROYALTIES + +Coming back to the royalty-owner, you will see his functions are not +very onerous. He signs receipts for his royalties and occasionally +negotiates the terms of a lease. But as regards the coal-mining +industry, he "toils not, neither does he spin." I do not say that +reproachfully, for he (and his number has been estimated at 4000) is +doubtless a good husband, a kind father, a busy man, and a good citizen. +But as regards this industry he performs no essential function beyond +allowing the colliery-owners to mine his coal. + +What is the total amount annually paid in coal royalties? We can arrive +at an approximate estimate in this way: Average output of coal for five +years before the war, roughly, 270,000,000 tons; average royalty, 51/2d. +per ton, which means, after deducting coal for colliery consumption and +the mineral rights duty paid to the State by the royalty-owner, roughly +L5,500,000 per annum paid in coal royalties. Regarding this as an +annuity, the capital value is 70 millions sterling if we allow a +purchaser 8 per cent. on his money (12.5 years' purchase), or 551/2 +millions sterling if we allow him 10 per cent. (10 years' purchase). For +all practical purposes the annuity may be regarded as perpetual. + +Now the State must acquire these royalties. That is the only practicable +solution, and a condition precedent to any modification in the structure +of the coal-mining industry so long as the participants in that industry +continue unwilling or unable to agree upon those modifications +themselves. _Why and how?_ (1) First and foremost because until then the +State is not master in its own house, and cannot make those experiments +in modifying conditions in the industry which I believe to be essential +to bring it into a healthy condition instead of being a standing menace +to the equilibrium of the State--as it was before the war, and during +the war, and has been since the war; (2) the technical difficulties and +obstacles resulting from the ownership of the minerals being in the +hands of several thousand private landowners and preventing the economic +working of coal are enormous. You will find abundant evidence of this +second statement in the testimony given by Sir Richard Redmayne and the +late Mr. James Gemmell and others before the Sankey Commission in 1919. + +How is the State to acquire them? Not piece-meal, but once and for all +in one final settlement, by an Act of Parliament providing adequate +compensation in the form of State securities. The assessment of the +compensation is largely a technical problem, and there is nothing +insuperable about it. It is being done every day for the purpose of +death duties, transfer on sale, etc. Supposing, for the sake of +argument, 551/2 millions sterling is the total capital value of the +royalties, an ingenious method which has been recommended is to set +aside that sum not in cash but in bonds and appoint a tribunal to divide +it equitably amongst all the mineral-owners. That is called "throwing +the bun to the bears." The State then knows its total commitments, is +not involved in interminable arbitrations, and can get on with what lies +ahead at once, leaving the claimants to fight out the compensation +amongst themselves. This does not mean that the State will have to find +551/2 millions sterling in cash. It means this, in the words of Sir +Richard Redmayne: "The State would in effect say to each owner of a +mineral tract: The value of your property to a purchaser is in present +money Lx, and you are required to lend to the State the amount of this +purchase price at, say, 5 per cent. per annum, in exchange for which you +will receive bonds bearing interest at that rate in perpetuity, which +bonds you can sell whenever you like." + +The minerals or royalties being acquired by the State, what then? For +the first time the State would be placed in a strategic position for +the control and development of this great national asset. Having +acquired the minerals and issued bonds to compensate the former owners, +the State enters into the receipt of the royalty payments, and these +payments will be kept alive. We must now decide between at least two +courses: (_a_) Is the State to do nothing more and merely wait for +existing leases to expire and fall in, and then attach any new +conditions it may consider necessary upon receiving applications for +renewals? Or (_b_) is the State to be empowered by Parliament to +determine the existing leases at any time and so accelerate the time +when it can attach new conditions, make certain re-grouping of mines, +etc.? My answer is that the latter course (_b_) must be adopted. The +same Act of Parliament which vests the coal and the royalties in the +State, or another Act passed at the same time, should give the State +power to determine the then existing leases if and when it chooses, +subject to just compensation for disturbance in the event of the +existing lessees refusing to take a fresh lease. + +Why is course (_b_) recommended? (i) Most leases are granted for terms +varying from thirty to sixty years. They are falling in year by year, +but we cannot afford to wait until they have all fallen in if we are +effectively to deal with a pressing problem. (ii) The second objection +to merely waiting is that some colliery-owners (not many) might make up +their minds not to apply for a renewal of their leases, and might +consequently be tempted to neglect the necessary development and +maintenance work, over-concentrating on output, and thus allowing the +colliery to get into a backward state from which it would cost much time +and money to recover it--a state of affairs which could and would be +provided against in future leases, but which the framers of existing +leases may not have visualised. I do not suggest that upon the +acquisition by the State of the minerals all the existing leases should +automatically determine. But the State should have power to determine +them on payment of compensation for disturbance. + + +A NATIONAL MINING BOARD + +At the same time a National Mining Board consisting of representatives +of all the interested elements, colliery-owners, managerial and +technical staffs, miners, and other grades of workers, and coal +consumers would be formed (the Mines Department already has a National +Advisory Committee); the mining engineering element must be strongly +represented, and provision must be made for first-class technical advice +being always available. It would then be the business of the National +Mining Board to work out its policy and decide upon the broad principles +which it wishes to weave into the existing structure of the coal-mining +industry by means of its power of granting leases. The following +principles will readily occur to most people, and are supported by +evidence which is, in my humble judgment, convincing, given before the +various commissions and committees which have inquired into this +industry during recent years. + +Firstly, More Amalgamation or Unification of Collieries. At present +there are about 3000 pits owned by about 1500 companies or individuals, +and producing an aggregate output of about 250 million tons per annum. +Already there have been many large amalgamations. (i) Many fortunately +situated small pits making a good profit will be found, but on the whole +small collieries are economically unsound. In many cases at present the +units are too small, having regard to the class of work being done, to +the cost of up-to-date machinery and upkeep and to the variableness of +the trade. Broadly I believe it to be true that the larger collieries +are as a general rule more efficient than the smaller ones. (ii) In +respect of co-operation in pumping, larger units would frequently make +for efficiency and reduced cost; Sir Richard Redmayne, speaking of South +Staffordshire before the Sankey Commission, said that we had already +lost a large part of that coalfield through disagreement between +neighbouring owners as to pumping. (iii) The advantages of larger units +in facilitating the advantageous buying of timber, ponies, rails, +machinery and the vast amount of other materials required in a colliery +will be obvious to most business men. + +I do not propose to chop up the coalfields into mathematical sections +and compulsorily unify the collieries in those sections. I am merely +laying down the broad principle that to get the best out of our national +asset the National Mining Board must bring about through its power of +granting leases the formation of larger working units than at present +usually exist. The geological and other conditions in the different +coalfields vary enormously, and these form a very relevant factor in +deciding upon the ideal unit of size. It is conceivable that in certain +districts all the colliery-owners in the district, with the aid of the +National Mining Board, would form a statutory company on the lines of +the District Coal Board, described in the Report made by Sir Arthur +Duckham as a member of the Sankey Commission. One advantage accruing +from unification (to which recent events have given more prominence) is +that it mitigates the tendency for the wages of the district to be just +those which the worst situated and the worst managed colliery can pay +and yet keep going, and no more. This tendency seems to be recognised +and mitigated in the Agreement of June, 1921, on which the mines are now +being worked. Secondly, Provision for Progressive Joint Control, that +is, for enabling all the persons engaged in the mining industry either +in money, in brains, or in manual labour, or a combination of those +interests, gradually to exercise an effective voice in the direction of +their industry. + +Some of the arguments for this principle appear to me to be (i) that, as +indicated in my opening remarks, a sufficiently large number of the +manual or mainly manual workers in the industry ardently desire a +progressively effective share in the control of the industry; (ii) that +this desire is natural and legitimate, having regard to the great +increase in the education of the workers and the improvement in their +status as citizens, and that so far from being repressed it should be +encouraged; (iii) that it is the natural development of the system of +Conciliation Boards and (occasionally) Pit Committees which has +prevailed in the industry for many years, though more highly developed +in some parts of the country than others. So far, these organs have been +mainly used for purposes of consultation and negotiation; the time has +come when with a more representative personnel, while not usurping the +functions of a mine manager or, on a larger scale, the managing +director, they must be developed so as to exercise some effective share +in controlling the industry. (iv) While working conditions are not so +dangerous and unpleasant as the public are sometimes asked to believe, +the workers in this industry are exposed to an unusually high risk of +injury and loss of life, and thus have a very direct interest in +devising and adopting measures for increased safety. These measures +nearly always mean expenditure, and thus an increased cost of working, +and so long as their adoption (except in so far as made compulsory by +the Mines Department) rests solely with bodies on which capital alone is +represented and labour not at all, there will be fruitful cause for +suspicion and discontent. The miners are apt to argue that dividends and +safety precautions are mutually antipathetic, and will continue to do so +as long as they have no part or lot in the reconciliation of these +competing obligations. The question is not whether this argument of the +miners is well-founded or not: the point is that their suspicion is +natural, and any excuse for it should be removed. (v) The exceptionally +large items which wages form in the total cost of coal production +indicates the important contribution made by the miners to the welfare +of the industry and justifies some share in the direction of that +industry. + +Upon the basis of typical pre-war years, the value of the labour put +into the coal mining industry is 70 per cent. of the capital employed, +and 70 per cent. of the annual saleable value of the coal, and yet this +large labour interest has no share in the management of the industry. + + +THE MYSTERY AS TO PROFITS + +Thirdly, More Financial Publicity. Secrecy as to profits, which always +suggests that they are as large as to make one ashamed of them, has been +the bane of the coal-mining industry. For nearly half a century wages +have borne some relation to _selling prices_, and there have been +quarterly audits of typical selected mines in each district by joint +auditors appointed by the owners and the miners. But over _profits_ a +curtain was drawn, except in so far as the compulsory filing at Somerset +House by public companies of a document called a Statement in the form +of a balance sheet, enabled the curious to draw not very accurate +conclusions. It is not easy for the plain man to read a balance sheet or +estimate profits, especially when shares are being subdivided, or when +bonus shares are being issued, or large sums carried to reserve. The +result has been continual and natural suspicion on the part of the +miners, who doubtless imagined the colliery-owners' profits to be much +larger than they were. The miners knew that whenever they asked for an +increase in their wages they were liable to be told that such an +increase would turn a moderate profit into a substantial loss, but the +amount of the profit they had to take on trust. Selling prices, yes, but +profits, no. + +The war and coal control partly killed that, and it must not return. By +the settlement of June, 1921, for the first time the miners have +established the principle of the adjustment of their wages in accordance +with the proceeds of the industry "as ascertained by returns to be made +by the owners, checked by a joint test audit of the owners' books +carried out by independent accountants appointed by each side." That is +an important step, but does not go anything like far enough. + +At least two good results would accrue if colliery-owners conducted +their business more in public: (i) a great deal of the suspicion and +mistrust of the miners would be removed, and they would realise why and +when their wages must undergo fluctuations, and the value of the many +other factors besides wages which went to make up the pit-head cost of +coal; (ii) publicity coupled with _costing returns_ would make it +possible to draw comparative conclusions as to the cost of production in +different mines and districts, which would be a fruitful source of +experiment and improvement. Publicity does not involve publication of +lists of customers, British or foreign. + + +THE LESSEES OF THE FUTURE + +How far will the lessees to whom the National Mining Board will grant +leases to work the coal be the same persons and companies as the present +lessees? In this matter it is desirable to maintain the maximum amount +of flexibility and variety. I do not think we have yet discovered the +ideal unit, the ideal organisation for the development of our principal +national asset. So much do our coalfields differ in geological +formation, in tradition, in the subdivision and classification of +labour, in outlet for trade, that it is unlikely that any single unit or +organisation will be the ideal one for every coalfield. So we must +resist any attempt, especially an early attempt, at stereotyping or +standardising the type of lessee. By trial and error we shall learn +much. + +All the following types of lessee seem likely, sooner or later, to +demand the attention of the National Mining Board. (I shall not touch on +the question of distribution, inland and export. That is another and +quite separate question):-- + +(i) _The Present Lessees._--I see no reason to doubt that in the vast +majority of cases the present lessees would be prepared to continue to +operate their mines, paying royalties to the State instead of to the +present royalty-owner. Where the unit is sufficiently large and the +management efficient, the National Mining Board would probably grant a +fresh lease, incorporating such conditions as to unification, joint +control, and publicity as they might consider necessary. If the present +lessees do not want the lease, there are others who will. + +(ii) _Larger Groups._--In a great many cases, however, the Board would +decline to grant separate leases in respect of each of a number of small +collieries, and would indicate that they were only prepared to receive +applications for leases by groups of persons or companies prepared to +amalgamate themselves into a corporation representing an output of x +tons _per annum_. This figure would vary in each coalfield. In South +Staffordshire, in particular, divided ownership has had most prejudicial +effects in the matter of pumping. + +(iii) _District Coal Boards._--Sir Arthur Duckham's scheme of statutory +companies known as District Coal Boards requires consideration. Without +necessarily adopting his districts or his uniformity of type throughout +the country, there are many areas where it might be found that voluntary +amalgamation was impracticable, and that the desired result could only +be attained by an Act of Parliament providing for the compulsory +amalgamation of persons and companies working a specified area and the +issue of shares in the new corporation in exchange for the previous +holdings. + +(iv) _Public Authorities._--I should very much like to see, sooner or +later, in some area, a lessee in the form of an organisation which, +though not national--not the State--should be at any rate +public--something on the lines of the Port of London Authority. + +It may well be that in one or more of our coalfields a public authority +of this type, though with larger labour representation upon it and with +a large measure of joint control from top to bottom, would be a +suitable lessee of the minerals in that area. The important point is +that public management need not mean bureaucratic State-management with +the disadvantages popularly associated with it. + +(v) I have mentioned several types of possible lessees, but it will be +noticed that there is nothing in these suggestions which would prevent +the National Mining Board from making the experiment of working a few +mines themselves. + +To sum up. There _is_ a problem of the Mines. No sensible person should +be deceived by the quiescence of the last twelve abnormal months. +Without using extravagant language, the coal-mining industry is a +volcano liable at any moment to erupt and involve the whole community in +loss and suffering. Therefore, as a body of citizens, we are under a +duty to seek a solution which can be effected between the occurrence of +the recurring crises. As a body of Liberal citizens we shall naturally +seek a Liberal solution, and the foregoing suggestions (for which no +originality is claimed) are inspired by the Liberal point of view. They +apply to the industrial sphere principles which have been tried and +proved in the political sphere, both in the central and the local +government. Apart from State acquisition of the minerals, about which +there can surely be no question, these suggestions merely develop +tendencies and organisations already existing within the industry. They +involve no leap in the dark, such as has been attributed by some to +nationalisation of the whole industry, and they provide for great +flexibility and experimentation. The fact that the official spokesmen of +neither miners nor colliery-owners may like them need not deter us. They +have had numerous opportunities of settling the problem amongst +themselves, but the "die-hards" in both camps have always prevented it. +It is time that the general public outside the industry took the matter +in hand and propounded a solution likely to be acceptable to the vast +body of sensible and central feeling within the industry. + + + + +THE LAND QUESTION + +BY A.S. COMYNS CARR + +Member of Acquisition of Land Committee, 1918. + + +Mr. Comyns Carr said:--The Land Question I believe to be the most +important subject in purely domestic politics to-day, as it was in 1914. +At that date we were embarking, under the especial leadership of one who +has now deserted us, upon a comprehensive campaign dealing with that +question in all its aspects. The present Government has filled a large +portion of the Statute Book with legislation bearing on the land; it is +not the quantity we have to complain of, but the quality. In 1914 we had +already achieved one signal victory in carrying against the House of +Lords the Land Clauses of the Budget of 1909-10, and although many of us +were never satisfied with the form which those clauses took, they were +valuable both as a step in the direction of land taxation and for the +machinery of valuation which they established. Mr. Lloyd George in his +present alliance with the Tories has sunk so low as not only to repeal +those clauses, but actually to refund to the landlords every penny which +they have paid in taxation under them. + +The campaign which was inaugurated in 1913 did not deal with the +question of taxation only, and for my part, although I am an enthusiast +on this branch of the subject, I have never thought that other aspects +should be neglected. We put forward proposals for dealing with leases +both in town and country. The present Government has carried and +repealed again a series of statutes dealing with agriculture. Their +original policy was to offer to the farmer guaranteed prices for his +produce, if necessary at the expense of the tax-payer, and to the +labourer guaranteed wages, to be fixed and enforced by Wages Boards. +Before this policy was fully in operation it was repealed. The farmer +got some cash compensation for his losses; the labourer has got nothing +but voluntary Conciliation Boards, with no power to do more than pass +pious resolutions. There has, however, survived this welter of +contradictory legislation, a series of clauses which do confer upon the +tenant farmer a substantial part of the rights in his dealings with his +landlord for which we were agitating in 1914. The town lease-holder, on +the other hand, has got nothing, and it is one of the first duties of +the Liberal Party to provide him with security against the confiscation +of his improvements and goodwill, to give him reasonable security of +tenure, and to put an end once for all to the pestilent system of +building leases which extends all over London and to about half the +other towns of England. The evils of this system are especially to be +found in those older parts of our great cities where the original leases +are drawing to a close. In such cases a kind of blight appears to settle +on whole neighbourhoods, and no improvements can be carried out by +either party because the landlord cannot obtain possession, and the +tenant has not, and is unable to obtain, a sufficient length of term to +make it worth his while to risk his capital upon them. + + +HOUSING + +The branch of the land question to which the Government called the +greatest attention in their election promises was Housing. On this +subject the Government have placed many pages of legislation on the +Statute Book. One can only wish that the houses occupied as much space. +They began by informing us, probably accurately, that up to the time of +the Armistice there was an accumulated shortage of 500,000 houses; in +pre-war days new working-class houses were required, and to a certain +extent provided, although the shortage had then already begun, to an +average number of 90,000 a year. According to the official figures in +July last, 123,000 houses had been completed by Local Authorities and +Public Utility Societies; 37,000 by private builders with Government +subsidies; 36,000 were under construction, and as the Government have +now limited the total scheme (thereby causing the resignation of Dr. +Addison, its sponsor) there remain 17,000 to be built. This is the +record of four years, so clearly the Government have not even succeeded +in keeping pace with the normal annual demand, and the shortage has not +been attacked, but actually accentuated. + +The cause of the failure was mainly financial. Without attacking the +roots of the evil in our land and rating system, and without attempting +to control the output and supply of materials and building in the way in +which munitions were controlled during the war, the Government brought +forward gigantic schemes to be financed from the supposedly bottomless +purse of the tax-payer. At the same time the demand for building +materials and labour in every direction was at its maximum, and +unfortunately both employers and employed in the building and allied +industries took the fullest advantage of the position to force up prices +without regard to the unfortunate people who wanted houses. The Trade +Unions concerned seem to have overlooked the fact that if wages were +raised and output reduced houses would become so dear that their +fellow-workmen who needed them could not attempt to pay the rents +required, and the tax-payer would revolt against the burdens imposed +upon him; thus the golden era for their own trade was bound to come to a +rapid end, and, so far from employment being increased and prolonged, +unemployment on a large scale was bound to result. With the Anti-Waste +panic and the Geddes Axe, social reform was cut first, and, in their +hurry to stop the provision of homes for heroes, the Government is +indulging in such false economies as leaving derelict land acquired and +laid out at enormous cost, even covering over excavations already made, +and paying out to members of the building trade large sums in +unemployment benefit, while the demand for the houses on which they +might be employed is left wholly unsatisfied. + + +LAND FOR PUBLIC PURPOSES + +The Acquisition and Valuation of Land for the purpose of public +improvements is a branch of the question to which a great deal of +attention was drawn during and immediately after the war. The Government +appointed a Committee, of which the present Solicitor-General was +chairman, and which, in spite of a marked scarcity of advanced land +reformers amongst its members, produced a series of remarkably unanimous +and far-reaching recommendations. These recommendations dealt with four +main topics:-- + +(_a_) Improvements in the machinery by which powers may be obtained by +public and private bodies for the acquisition of land for improvements +of a public character; + +(_b_) Valuation of land which it is proposed to acquire; + +(_c_) Fair adjustment as between these bodies and the owners of other +land, both of claims by owners for damage done by the undertaking to +other lands, and of claims by the promoting bodies for increased value +given by their undertaking to other lands; and + +(_d_) The application of these principles to the special subject of +mining. + +The Government in the Acquisition of Land Act, 1919, has adopted a great +part of the Committee's recommendations under the second head, and this +Act has undoubtedly effected an enormous improvement in the prices paid +by public bodies for land which they require, although, most +unfortunately, the same immunity from the extortion of the land-owner +and the land speculator has not been extended to private bodies such as +railway companies who need land for the improvement of public services. +Moreover, it has not attempted to bring the purchase price of land into +any relation with its taxing valuation. + +The whole of the rest of the Committee's recommendations dealing with +the other three points which I have mentioned, the Government has wholly +ignored. Powers for public development can still only be obtained by the +slow, costly and antiquated processes in vogue before the war; private +owners of lands adjoining works of a public character are still in a +position to put into their own pockets large increases in value due to +public improvements to which they have contributed nothing, and which +they may even have impeded; the development of minerals is still +hampered by the veto of unreasonable owners, by the necessity of leaving +unnecessary barriers between different properties, and by other +obstacles which were dealt with in detail in the Committee's report. An +illustration of the importance of this aspect of the question was put +before the Committee and has been emphasised by recent events. It was +stated on behalf of the railway companies that they were prepared with +schemes for the extension of their systems in various parts of the +country, which would not only provide temporary employment for a large +number of men on construction, and permanent employment to a smaller +number on the working of the lines, but would also open up new +residential and industrial districts, but that it was impossible for +them to find the necessary funds unless they could have some guarantee +that at least any loss upon the cost of construction would be charged +upon the increased value of land in the new districts which would be +created by the railway extensions. Remarkable instances were given of +the way in which the value of land had been multiplied many-fold by the +promotion of new railways, which, nevertheless, had never succeeded in +paying a dividend to their shareholders, and the capital cost of which +had been practically lost. + +On the other hand, the Committee were assured that, given a charge on +the increased value of land likely to be created, there would be no +difficulty in obtaining the necessary funds without Government +assistance. When the pressure of the unemployment problem became acute, +and not before--and then it was, of course, too late--the Government +turned their attention to this problem, and have guaranteed the interest +upon new capital to be expended on a few of these railway extensions, +but instead of charging the guarantee upon the increased value of land, +they have charged it upon the pocket of the tax-payer. The most striking +instance is that of the tube railway from Charing Cross to Golders +Green, now being extended under Government guarantee to Edgware. Those +who provided the original capital have never received any return upon +their money, yet millions have been put into the pockets of the owners +of what was undeveloped land now served by the line, and now that the +extension is being carried out with the tax-payers' guarantee, the +land-owners will again reap the benefit untaxed. + +The development of the natural resources of our country was one of the +promises held out by Mr. Lloyd George to the electors in 1918. Schemes +were ready, and are still in the official pigeon-holes, for the +production of electricity on a very large scale both from water power +and from coal, which would not only provide employment, but cheapen the +cost of production in all our industries. France, Italy, and other +countries are at this moment carrying out similar schemes whereby they +will relieve themselves to a large extent from dependence on British +coal. But here, four years of Coalition Government have left us +practically where we were. In France, although in many respects her +social system seems to me less enlightened than our own, the power of +the land-owner to obstruct enterprise and development is by no means so +great. Land Reform in this country is a necessary preliminary to the +fulfilment of Mr. Lloyd George's promises. Development at the public +expense without such reforms will result chiefly in further burdens upon +the tax-payer and further enrichment of the landowner. + + +RATING RELIEF FOR IMPROVEMENTS + +This brings me to the last, and in my opinion the most important branch +of the Land Question, that relating to the reform of our system of +rating and taxation. I am myself an ardent supporter of the policy which +I think has been rather unfortunately named the Taxation of Land +Values. The vital point about this policy is not so much that we should +tax land values, as that we should leave off taxing buildings and other +improvements of land. The policy would be better described as the Relief +of Improvements from Taxation. Its economic merits seem to me so obvious +as hardly to require examination. It is only because the present system +has been in force for over 300 years that it can find any supporters. If +any one were to propose as a useful means of encouraging the steel trade +or the boot trade, or as a desirable method of taxation, that a tax of, +say, 50 per cent. should be imposed upon the value of every ton of steel +or every pair of boots turned out in our factories, he would be rightly +and universally denounced as a lunatic. Yet this is the system which +ever since the days of Queen Elizabeth has been in force with regard to +the building trade and all other industries which result in the +production of improvements upon land. + +As long as land remains unused it pays no rates or taxes, whatever its +immediate potential value. But the moment it is brought into use, as +soon as a house, a factory, or a railway is built upon it, or it is +drained or planted--rates and taxes, which in these days often exceed 50 +per cent. of its improved value, have to be paid, without regard even to +the question whether its use is successful in yielding profits or not. +Familiarity with this system, instead of breeding the contempt which it +deserves, has bred a kind of passive acquiescence which is exceedingly +difficult to shake. Even such a champion of our land system as the Duke +of Bedford years ago in his book, _The Story of a Great Agricultural +Estate_, perceived the absurdity, although he was apparently blind to +the remedy and to the application of it to some of his estates which are +not agricultural. He converted an ordinary arable field into a fruit +garden, and discovered that his rates were promptly trebled by reason of +his expenditure. Striking, but, nevertheless, everyday examples may be +found if we see how the system works out in urban districts. If a new +factory is built, rates and taxes are immediately levied on the full +annual value of the building, which is a direct charge upon production, +and has to be paid before a single person can be employed in the +factory. It therefore not only restricts the possibilities of +employment, but has to be added to the price at which the goods can be +sold. + + +THE LESSON OF THE SLUMS + +Or take the illustration of a slum area. Each tumble-down tenement is +rated and taxed on the assessment based upon its annual rental value. In +many places in the central parts of towns the total of these assessments +is less than the sum for which the whole site could be sold as a +building area, nevertheless if all the tenements fall or are pulled down +the site may remain vacant for years and no rates or taxes are paid. But +if substantial and decent buildings are erected on the site, immediately +the assessment is raised to their full annual value. The individual or +public body that has cleared away the slum and erected something decent +in its place is thus immediately punished for doing so, with the result +that such a thing is seldom done except at the public expense. The +remedy for all these absurdities is quite a simple one. No one disputes +that the sums necessary for municipal and imperial taxation have got to +be provided. The question is, in so far as they are to be raised from +lands and buildings, how can they be assessed most fairly and with the +least injury to trade and commerce? They should be assessed upon the +value of land which is not due to any effort of the owner or occupier; +they should not be assessed upon nor increased because of any buildings +which he may have erected or any improvements which he may have carried +out. + +This question was closely investigated by the Land Enquiry Committee +appointed by Mr. Lloyd George in 1913. They were unanimous in condemning +the existing system and in regarding the one which I have just described +as the ideal. They were, however, met by great difficulties in its +immediate practical application, because, owing to the long prevalence +of the wrong system, an immediate and total change would bring about +rather startling alterations in the value of existing properties. The +Committee closely considered these objections, and a number of +alternative methods of bringing the change into operation gradually and +without these drastic changes in value were put forward. The one which +immediately suggested itself as the simplest, and from many points of +view the most desirable, was to leave the rates and taxes of existing +properties on their present basis, to impose them at their present rate +on the annual value of all unoccupied land, but to exempt from rates and +taxes all future buildings and improvements of every kind. + +To illustrate the way in which this would work, let us revert to the +case of a block of slum property. As long as it remained in its present +condition the existing valuation based upon the annual rent obtainable +for it would apply, but any parts of it which now are or may hereafter +become unoccupied, would, instead of escaping as they do now from all +rates and taxes, contribute on the basis of the value of their sites, +which would be assessed at an annual rent for the purpose of comparison +with the existing valuations, at least until the capital values of the +whole rating area could be ascertained. If any improvements were carried +out the assessments would not be raised on that account, as they would +be under present conditions, and if a whole area were pulled down, +replanned and rebuilt, the assessment instead of being based, as it +would be to-day, on the annual value of the reconstructed property, +would be based upon the site value alone. Gradually in this way site +value would become the prevalent basis of assessment. "It is obvious," +as the Committee said in 1913, "that unrating of future improvements is +from the economic point of view of far more importance than the unrating +of existing improvements; if we want to encourage new buildings and new +improvements, what is really important is to ensure that new +improvements (not old ones) shall be exempt from the burden of rates." +The Committee were, however, compelled to reject this suggestion at that +time on the ground that "it would cause an unfair differentiation +between the man who had already put up buildings or improvements, and +the man who put up buildings or improvements after the passing of the +Act." But as between buildings and improvements which existed before the +war and those which come into existence under post-war conditions no +such unfairness could operate, because the increase in the cost of +building even to-day is greater than the benefit which would accrue from +the unrating of improvements. The present is therefore the unique +opportunity for bringing into force this much-needed reform in the most +effective way, free from the difficulties which had to be met in 1913. +If it had been carried out immediately after the Armistice it would, in +my opinion, have done more than anything else to solve the housing +problem, and even now it is not too late. In fact, in view of the +present unemployment it would be most opportune. Incidentally it would +soon render unnecessary the renewal of the Rent Restriction Act. I +understand that something on these lines has been introduced in New York +to meet a similar problem. + + +A RATE AND A TAX UPON SITE VALUES + +The Committee of 1913 were obliged to turn their attention to other +suggestions. They proposed: + +(_a_) That all future increases in the expenditure of each Local +Authority which had to be met out of rates should be met by a rate upon +site values instead of upon the existing assessments; and + +(_b_) That existing expenditure should be met to a small extent +compulsorily, and to a larger extent at the option of the Local +Authority, in the same manner. + +There is no reason why these proposals should not be brought into force +simultaneously with that relating to new buildings and improvements. +They made these proposals conditional upon a substantial increase in the +grants in aid to Local Authorities, especially in necessitous areas, +from the Imperial Exchequer; and they suggested, although they did not +definitely recommend, that a part at least of this increased grant might +be raised by means of an additional tax upon site values. This, I think, +should certainly be done, and such a tax might be wholly or partially +substituted for the present Land Tax and Income-Tax Schedule A, which +are assessed on the wrong basis. + +These proposals would, of course, involve the revival and revision of +the National Land Valuation established by the Finance Act, 1909-10, +which should be made the basis of all taxation and rating relating to +real property. This would be both a reform and an economy, because there +are at present several overlapping systems of valuation by Central and +Local Authorities, none of which are really satisfactory even on the +present unsatisfactory basis of assessment. The existence of such a +valuation frequently revised and kept up to date, and independent of +local influences, would be invaluable not only for purposes of rating +and taxation, but also in arriving at a fair price for the acquisition +of land for public purposes, and for the levying of special charges upon +the increased value due to particular public improvements, such as +railway extensions, with which I have already dealt. + +I am not one of those who claim for these reforms that they would cure +all the evils from which the community is at present suffering, but I do +believe that there is no other and no better way of removing the +unfairness and the restrictions of our present methods of rating and +taxation or of setting free and stimulating the energies of our people +in the development of the resources of our country. + + + + +AGRICULTURAL QUESTIONS + +BY RT. HON. F.D. ACLAND + +P.C.; M.P. (L.) North-West Cornwall; Financial Secretary, War Office, +1908-10; Under-Secretary of State for Foreign Affairs, 1911-15; +Financial Secretary to Treasury, Feb.-June, 1915; Secretary to the Board +of Agriculture, 1915-16; a Forestry Commissioner. Chairman of the +Agricultural Organisation Society. + + +Mr. Acland said:--I begin by laying down in a didactic form five points +which one would like to see firmly established in our rural life: (i) +intensive production; (ii) plenty of employment at good wages; (iii) +easy access to land, and a good chance of rising upon the land; (iv) +real independence in rural life; (v) co-operative association for many +purposes. + +Intensive production is most important. It is so easy to say the farmer +_can_ get more out of the land, and the farmer _should_ get more out of +the land, that we are tempted to continue and say that the farmer _must +be made_ to get more out of the land. But it isn't so easy. It has been +tried and failed, and when any subject in our British political life has +been brought up to the boiling-point, and yet nothing effective has been +done, it is extremely difficult to bring it to the boil a second time. + +It is worth while tracing out what has actually happened. The +Government's Agriculture Act of 1921 contained four great +principles:--(i) that we must have more food produced in this country +(_a_) as an insurance against risk of war, (_b_) so as to meet our +post-war conditions as a debtor nation by importing less of our food +supplies; (ii) that as the most productive farming is arable farming, +and as by maintaining a proper proportion of arable we can on emergency +make ourselves independent for our food supplies for an indefinite time, +farmers should be guaranteed against loss on their arable rotations; +(iii) that if farmers are to be required to produce more they must have +clear legal rights to farm their land in the most productive way, a +greater compensation for disturbance; (iv) that as the first three +principles give security to the nation and to the farmer, it is +desirable also to give security to the worker by permanently continuing +the war-time system of Agricultural Wages Boards. + +These principles were duly embodied in the Bill as it left the House of +Commons:-- + +(i) The Ministry of Agriculture, acting through the County Agricultural +Committees, was given powers to insist on a certain standard of arable +cultivation, as well as in minor matters, such as control of weeds and +of rabbits; + +(ii) The difference between the ascertained market price and the +estimated cost of production on his wheat and oat acreage was guaranteed +to the farmer, the guarantee not to be altered except after four years' +notice; + +(iii) The landlord had to forfeit a year's rent if a tenant was +disturbed except for bad farming, or four years' rent if the disturbance +was capricious; + +(iv) The existing Wages Board system was continued. + + +THE DESTRUCTION OF A POLICY + +The gradual destruction of this policy began in the House of Lords. They +allowed themselves to be swept away by the popular cry against +Government interference with industry, and cut out the power of control +of cultivation. The Prime Minister had said that this was an absolutely +essential part of the Bill, and of the Government's policy, but the +Government quietly and characteristically accepted the Lords' amendment +and the Bill was passed. + +Then troubles began. Other industries began to ask why the Government +satisfied agriculture and not them, and as the Government could not +plead their control of agriculture in justification, no real reply was +possible. Also the cold fit came on as regards national expenditure. The +Bill for the corn subsidies threatened to be very high. Though Europe +was starving, it could not buy, so cheap American grain flooded our +markets; but cost of production here was still at its peak, and, for +oats especially, the amount to be paid to the farmer threatened to be +large. It was realised that it might cost 25-30 millions to implement +the guarantees for the first year, and perhaps 10-12 millions a year +later. In short, the guarantees had to go. Instead of four years' notice +of any change, a Bill to repeal the great Act was introduced five months +after it had been passed. And it was unfortunately part of the bargain +with the farmers who received for the single season perhaps six or +eight millions less than they might have been entitled to under the Act, +that the Wages Boards should be abolished--and they were. There remained +of the original structure only the depreciation of the value of all +agricultural landowners' property by about one-twentieth, owing to the +extra compensation for disturbance. + +Every one felt that they had been had, and they had been. The industry +which had lately been talked up and made much of was dumped into the +dustbin. The farmers had lost their guarantees on the strength of which, +in many cases, they had bought their farms dear or planned their +rotations. The labourers, who particularly needed the protection of +Wages Boards during a time of fall in cost of living and unemployment, +had lost all legal protection. The landlords, willing enough to give +what was asked of them if any national purpose was to be served, found +that their loss brought no corresponding national gain. Agriculture +retired as far as it could from any contact with perfidious Governments, +to lick its wounds. + +That is not a good basis upon which to build intensive cultivation or +any other active policy. There being now no legal or patriotic call to +intensive production, we are driven back to ask, "Does intensive +production pay?" and the broad answer is that at a time of low prices it +does not. There is no doubt that slowly and steadily education will +gradually improve farming, and that farmers will learn to find out what +parts of their business pay best and to concentrate upon them. There is +also no doubt that even at low prices there is plenty of scope for +better farming, and that better manuring, particularly of grass land, +will pay. But the farmer is faced with an economic principle--the law of +diminishing returns. It may be stated thus: beyond a certain point which +rises and falls directly with the value of the product, extra doses of +labour and manure do not give a corresponding return. It is this +principle which accounts for what we see everywhere--that farmers are +tending to economise as much as they can on their labour and to let +arable land go back to grass. + +And if this is clear to farmers who are thinking of intensive arable +farming, still more is it true in comparing arable with grass. If you +take the same sort of quantity of arable and grass farms, farmed by men +of the same skill and diligence, over a range of seasons under low world +prices for farm produce, you will, I believe, find something like this: +grass land needs half the capital and one-third of the labour of arable; +it produces three-quarters the receipts with half the payments, and +yields double the profit per acre and four times the profit on capital. +The moral of all this is clear. Unless the nation is willing to go back +to protection for agriculture, which I am glad to believe in the general +interest unthinkable, and unless it is willing to guarantee the farmer +against loss from that method of agriculture which means most production +and most employment, we must let the farmer set the tune and farm in the +way it best suits him to farm. We must try, in fact, not to talk too +much nonsense about intensive production as the cure for agricultural +depression. It is useful to remember that all countries overseas which +combine high wages with agricultural prosperity have a very low output +per acre judged by our standards. + + +EMPLOYMENT AND WAGES + +It follows directly from what I have just said that a time of high costs +and low prices like the present, like the time of lower costs but still +lower prices of the late '80's and early '90's, is not a favourable time +for expecting employment to be brisk or wages high. And reasons other +than those which we have yet considered make the farmer feel his labour +to be specially burdensome at present. He finds that the prices he gets +on the average are one and one-third times what they were before the +war: what he has to buy costing from one and a half to one and +two-thirds what it cost before the war; and he is expected in very many +counties in England and Wales to pay his workers about double what he +paid before the war. This is a strong point for him. But the labourers' +position is just as strong. "I was not sufficiently well paid before the +war. If this is to be recognised in any way at all, I must at the +present cost of living (185) have double my pre-war wages." It is +certainly beyond all question that 30/- a week, which is the present +wage over a large part of England, is not, even with only 3/- a week +rent for house and garden, enough to keep a man and his wife and family +in a state of real efficiency. Yet I know from personal experience that +this fact is not properly recognised in practice. If one tries to pay +more one is regarded as a very rich man, and an extremely stupid one--an +idea erroneous as to one's wealth and possibly exaggerated as to one's +mentality. + +How have the two conflicting views of farmer and labourer been +reconciled in practice. I can only say that so far as my own knowledge +extends--bearing in mind that the farmer has not the business man's +habit of cheerfully setting off a bad year against a good (for the +business man knows that trade must improve some time, and then he will +make profits, while the farmer has no certainty that things will +improve)--things might well have been worse. There has been a good deal +of mutual consideration and desire to make the best of difficult +circumstances. I have, however, little doubt that it would have been +better had the Wages Boards, which had controlled the rise in wages +during the rise in the cost of living, regulated the fall in wages +during its fall--relaxing control perhaps later when things became more +stable. + +The reason why I think that things might have been worse is that the +District Wages Committee left a good legacy to the voluntary +Conciliation Committees which followed them--the men serving on the +latter were those who under the Wages Board system had learned to +negotiate with and to know and respect the workers--generally some of +the best farmers in their districts--and they genuinely tried not to let +the workers down with too much of a bump; on the other hand, they knew +that the only value their recommendations could have was that they +should be voluntarily observed, and therefore they took care not to +recommend rates higher than those which the least favourably situated +farmers in the district could manage to pay--which meant rates lower +than many might have been willing to give. This means that any general +rate agreed to voluntarily will be rather on the low side. But I would +rather have a rate which is generally observed, even if it is rather +low, than that every farmer should be a law unto himself. If there is no +recognised standard, and one man with impunity pays a lower rate than +his neighbours, other rates also tend to come down, and then the process +begins over again. + +Looking to the future, the only thing that I can say with any certainty +about the wages question is that it needs very careful watching. Let us +be sure first of our principle, that the first charge on land, as on any +other industry, should be a reasonable standard of living for the +workers. Then let us be sure of the fact that there is over a very large +part of England and Wales no certain prospect of an improvement in the +condition of the labourer compared with conditions ten years ago. The +dangers to be feared are that in the present lamentable weakness of the +men's unions large sections of farmers may break away from the +recommendations of their leaders; and that if depression continues and +war savings become depleted farmers will tend to push wages down in +self-preservation. These things must be watched. If the general +condition of agriculture improves without a corresponding improvement in +the workers' condition, or if conditions get worse and the brunt of the +burden is transferred to the labourer, we ought to be prepared to +advocate a return to the old Wages Boards or the adoption of a Trade +Board system. It must, I think, be a cardinal point of our Liberal faith +that though it is better to leave industrial questions to be adjusted as +much as possible by the parties concerned in the industry, the State +must be ready to step in in any case in which the workers have not +developed the power by their own combination to secure reasonable +conditions and prospects. It is to the prospects that I now turn. + + +ACCESS TO THE LAND + +I mean by this that there should be as many chances as possible for men +and women who have an inclination for country pursuits to take up +cultivation of the soil; the freest opportunity for experiment in making +a living out of the land; and good chances for those who have started on +the land ladder to rise to the top of it. + +The three things which stand in the way are:-- + +(i) The cost of building and equipment; + +(ii) The practice under which the cultivator provides all the movable +capital; + +(iii) The handicap on free use of land imposed upon its owners by the +compensation clauses of the Agriculture Act. + +These obstacles do real harm, in the first place, because a very large +proportion of farms in this country are the wrong size: too large for a +man to work with his hands, and too much for him to work with his head, +as Sir Thomas Middleton has well said. Figures show quite conclusively +that whether you take production per acre or production per man, the +farm of from 100 to 150 acres is economically the worst-sized unit. +Probably more than half of our farms lie between 70 and 100 acres. We +should get far more out of the land if all were either below 80--so that +a man and his family could manage them--or above 180, so that there +would be a chance of applying to production the most scientific methods +and up-to-date machinery. + +But movement, either towards breaking up existing holdings or throwing +them together, will be extremely slow. The one process means building +new houses and buildings, which is prohibitive in price; and the other, +also fresh building and the abandonment of hearths and homes, which is +prohibited both by price and by sentiment. Any change in either +direction is almost prohibitive to the new poor landowner class, because +if one makes any change, except when a tenant dies or moves of his own +accord, one forfeits a year's rent. + +I have not yet mentioned the difficulty about capital. Under our British +method, if a man wants a farm he must have capital--about L10 per arable +acre and about L5 for grass. This is a great bar to freedom of +experiment and the greatest bar on the way up the agricultural ladder. +There ought to be free access to our farms by town brains, which can +often strike out new and profitable lines if given a chance. It is not +good for agriculture, and it does not promote that sympathy and contact +and interchange which should exist between town and country, that a +start in farming should need a heavy supply of capital. If our +landlords were better off they might well try some of the continental +systems, under which the landlord provides not only the farm and +buildings, but the stock and equipment, and receives in addition to a +fair rent for the land half the profits of the farm. But it is vain to +hope for this under present conditions, and, for good or ill, the newly +rich does not buy land. He knows too much, and he can get what he wants +without it. He may lease a house, he does take shooting, but he won't +buy an estate. + +When thinking of the importance of freedom of experiment and of a ladder +with no missing rungs, I have my mind on the possibility of the owner of +one estate of from 5,000 to 10,000 acres throwing all the farms and many +of the fields together and making his best tenants fellow-directors with +him of a joint enterprise, one doing the buying and selling, one looking +after the power and the tractors and implements, one planning the +agricultural processes, one directing the labour and so on. This gives a +prospect of the greatest production and the greatest profit, and it +gives a really good labourer a chance which at present he has not got. +At present, unless he leaves the land, in nine cases out of ten once a +labourer always a labourer. My vision would give him a chance to become, +first, foreman, then assistant manager, manager, director, and +managing-director. It ought to be tried--but how one's tenants would +loathe it, and quite natural too! At present if things go wrong, if it's +not the fault of the Government or the weather, it's the farmer's own +fault. On my joint-stock estate every director and manager would feel +that all his colleagues were letting him down and destroying his +profits. It is hard to make people accept at all readily, in practice, +the teaching that they are their brothers' keeper. + +The scheme could hardly be started with men accustomed to the present +methods, and the cost of obtaining vacant possession of land would make +it difficult to try with new men. I am sure, however, that something of +the sort is a good and hopeful idea, and the best way of making the +ladder complete. And I am emboldened to think that something of the sort +will be tried gradually in some places, when I see the number of +landlords' sons who are in this and other universities taking the best +courses they can get in the science and economics of agriculture. They +know this is the only way to retain a remnant of the old acres. It is +quite new since the war--and a most hopeful sign. + + +INDEPENDENCE + +I need not urge the importance in our villages of real independence of +life. It was the absence of independence combined with long working +hours and little occupation for the hours of leisure, which, more than +low wages, caused the pre-war exodus from the country. Should the +prospects of industry improve, but agriculture remain depressed, there +will be another exodus from the country-side of the best of the young +men who have come back to it after the war. It is of first-class +importance, both from the national and from the agricultural point of +view, that they should stay, for there was a real danger before the war +that agriculture might become a residual industry, carried on mainly by +them, too lethargic in mind and body to do anything else. + +In a preface which he wrote to Volume I of the Land Report, as chairman +of Lloyd George's Land Inquiry Committee (it seems a long time ago now +that Lloyd George was a keen land reformer), my father sketched out the +idea of setting up commissions to report parish by parish in each +county, in the same way that commissions have reported on the parochial +charities. They would record how the land was distributed, whether the +influence of the landowners told for freedom or against it, whether +there was a chance for the labourer to get on to the land and to mount +the ladder. Whether there was an efficient village institute, whether +there were enough allotments conveniently situated, whether the +cottagers were allowed to keep pigs and poultry, and what the health and +housing were like. + +It is a good idea, and should be borne in mind. I confess I do not know +enough to know whether it is now as desirable as it seemed to be before +the war. I would fain hope not, but I am not sure. I believe that there +is a good deal more real independent life in the villages now than there +was ten years ago. There are, I think, now fewer villages like some in +North Yorkshire before the war, in which the only chance for a Liberal +candidate to have a meeting was to have it in the open-air, after dark +on a night with no moon, and even then he needed a big voice--for his +immediate audience was apt to be two dogs and a pig. Now, it seems to me +that people like having political meetings going on, but do not bother +to listen to any of them. + +As to the present, there has been lately, within my knowledge, a great +building of village institutes. There has been a tremendous development +of football. Village industries, under the wise encouragement of the +Development Commission, are reviving. Motor buses make access to town +amusements much easier, and cinemas come out into the village. There is +revived interest and very keen competition in the allotment and cottage +garden shows. Thus it is, at any rate, down our way--but no one can know +more than his own bit of country. On these and similar matters we ought +to think and watch and meet together to report and discuss. We need more +Maurice Hewletts and Mrs. Sturge Grettons to tell us how things really +are, for nothing is so difficult to visualise as what is going on slowly +in one's own parish. + + +CO-OPERATION + +I come lastly to co-operation. You will think me biased when I speak of +its possibilities. I am. I have been for eighteen years on the governing +body of the Agricultural Organisation Society, and happen now to be its +chairman, and am therefore closely in touch with the work of organising +co-operative effort. One sees fairly clearly how difficult it is to make +any class of English agriculturists combine for any mutual purpose, how +worth while it is, and what almost unexpected opportunities of useful +work still exist. Thanks largely to untiring work by Sir Leslie +Scott--who gave up the chairmanship of the society on his recent +appointment as Solicitor-General--the country is now fairly covered by +societies for purchasing requirements co-operatively--principally +fertilisers, feeding-stuffs, and seeds. There are also affiliated to the +movement I have mentioned, many useful co-operative auction marts, +slaughter-house societies, bacon factories, wool societies, egg and +poultry societies, and fruit and garden produce societies (but not +nearly enough), besides a thousand or so societies of allotment holders +which, thanks largely to our friend, George Nicholls, set all the others +an example in keenness and loyalty to their parent body. + +The _ideal_ is that where a society exists the main raw materials of the +industry shall be bought wholesale instead of retail, and the main +products of the industry sold retail instead of wholesale; that thereby +middlemen's and other profits shall be reduced to a reasonable figure, +and that the consumer shall get the most efficient possible service with +regard to his supplies. It is also the ideal that farmers and others +shall learn more comradeship and brotherhood; that the big and small men +alike shall become one community bound together for many common +purposes, and that thus the cultivators of the soil shall lose that +isolation and selfishness which is a reproach against them. The ideal +is, however, not always realised. The farmer likes to have a +co-operative society to keep down other people's prices, but, having +helped to form a society, he does not see why he should be loyal to it +if a trader offers him anything a shilling a ton cheaper. A good +committee is formed, but the members think they hold their offices +mainly in order to get first cut for themselves at some good bargain the +society has made, and they start with the delusion that they are good +men of business. Things, therefore, get into the hands of the manager, +and it is astonishing how much more quickly a bad manager can lose money +than a good one can make it. And if in these and other ways it is uphill +work with farmers' societies, the work is still more uphill with +small-holders. It is the breath of their nostrils to bargain +individually, and if a society is started they will only send their +stuff to be sold when they and every one else have a glut, ungraded and +badly packed--and then they grumble at getting a low price. + +But all co-operative work is abundantly worth while. And the field of +co-operation is not limited to the purchase of supplies or the sale of +produce. It ought to cover the use of tractors and threshing sets and +the installation and distribution of power. And if agriculture gets a +chance of settling down to a moderate amount of stability and +prosperity, it would not be beyond the bounds of hope that part, at any +rate, of the profits of co-operative enterprise should be used to +develop the amenities of the common life of the community--to provide +prizes for the sports and the flower show--the capital to start an +industry for the winter evenings, and even seats for the old people +round the village green. + +Times are not propitious for increasing the productivity of our land, +excepting by the slow processes of education--which work particularly +slowly in agriculture. Nor are they immediately propitious for raising +the workers' standard of life, though we should never leave go of this +as an essential. But many of us can, if we will, help a good man to +start on the land, or help a man who has made good on the land to do +better. Many of us can help to develop real independence of life in the +villages and, through co-operation, those kindly virtues of friendliness +and helpfulness to others and willingness to work for common ends which +are sometimes not so common as they might be. And those who _can_ do any +of these things _should_, without waiting for legislation--for the +legislator is a bruised reed. + +[Transcriber's Notes: +The following apparent printer's errors have been corrected for this +electronic edition: + +misconduct necessitates military operations; +was "operations:" + +and if he tries to make his responsibility real +was "responsiblity" + +things slide--the main virtue of Cabinet +was "virture" + +are two which are almost invariably present towards +was "invarably"] + + + + + + +End of the Project Gutenberg EBook of Essays in Liberalism, by Various + +*** END OF THIS PROJECT GUTENBERG EBOOK ESSAYS IN LIBERALISM *** + +***** This file should be named 17294.txt or 17294.zip ***** +This and all associated files of various formats will be found in: + https://www.gutenberg.org/1/7/2/9/17294/ + +Produced by Melissa Er-Raqabi, Jonathan Niehof, Ted Garvin +and the Online Distributed Proofreading Team at +https://www.pgdp.net + + +Updated editions will replace the previous one--the old editions +will be renamed. + +Creating the works from public domain print editions means that no +one owns a United States copyright in these works, so the Foundation +(and you!) can copy and distribute it in the United States without +permission and without paying copyright royalties. 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