Economic Programmes After the War

IT must be difficult for those who have lived in the United States since the beginning of the war to realize how mightily the waves of passion and indignation have beaten against the minds and hearts of the peoples of Great Britain and Ireland, or how many sand-built edifices have been swept away by this unprecedented hurricane. But unless I can convey to you this impression at the very outset, what I have to write about the probabilities of the future will seem to you disappointingly wanting in dogmatic precision. It is now mid-November. For more than two years this desperate conflict has continued, and the losses have been so frightful that the ideas, even of statesmen and professors hitherto distinguished for consistency, have suffered derangement. The few who refused to budge from their old moorings have been held up to obloquy or ridicule by the nocturnal scribes of Fleet Street; and in Parliament, principles (unsupported since the Coalition by party) have almost faded away.

In fact, there is now such a political and economic chaos as has not been seen since the introduction of representative democracy in 1832. There was something a little like it in 1846, when Sir Robert Feel, the leader of the Protectionist party, suddenly announced his conversion to free trade in corn. There was something like it again in 1867, when Disraeli, the leader of the Anti-Reform party, introduced a democratic suffrage. Yet another period of political confusion began in 1886, when Mr. Gladstone split British Liberalism by suddenly abandoning coercion and embracing the policy of Home Rule for Ireland. Liberalism, let us remind ourselves, is not to be confused with democracy. Gladstone’s definition of it as ‘trust in the People’ is, with all deference to that great man, mere electioneering claptrap. A democracy may be illiberal; an oligarchy may be liberal. A liberal is certainly not a person who allows his opinions to be swayed, or his principles decided, by the majority. He may be, probably is, ready to recognize the majority’s right to decide; but it is his right to say that the majority is wrong, and (if he is a man of public spirit) to endeavor to bring it round.

British liberalism — I spell it with a small l in order to disconnect it from the official Liberalism of the Liberal Caucus — rests upon the doctrine of individual liberty, which again may be described under three main heads — free service, free speech, and free trade. All these existed before the war. Under the stress and strain of this great war all three have in a greater or less degree disappeared, though the same Liberal Prime Minister has remained in office.

I am concerned here only with the third form of liberty — the right of the individual to trade freely with any other individual in any other part of the world. With this right we associate the doctrine of free trade in the narrow and technical sense. That doctrine is sometimes described as the doctrine of free imports. But, in fact, the exigencies of the revenue have never permitted free imports. What we mean by free trade is, not the absence of a tariff, but the absence from our tariff of any protective duties. Before the war our tariff’ was a tariff for revenue. It was laid mainly upon articles like tea, sugar, and tobacco, which are not produced in this country. And where duties were laid upon articles like beer, which are produced in this country, an excise duty roughly corresponding with the customs duty was imposed.

In 1904 Mr. Chamberlain started a protectionist movement, and for the first time since the middle of the nineteenth century free trade was seriously challenged. The protectionists however were decisively defeated, and, thanks mainly to free trade, the Liberal party succeeded in winning three general elections, with the result that the Unionist party had already reconsidered the fiscal question, and was practically ready before the war to put its tariff reformers on the shelf.

But the outbreak of war suspended at a blow our trade with Germany and Austria, and afterwards also with Turkey and Bulgaria. Moreover, owing to the closing of the Baltic and Black seas, the bulk of our ordinary trade with Russia has likewise ceased. In addition to this, under restrictions and prohibitions of the Board of Trade, almost every branch of commerce has lost its old freedom of movement. And finally, a year ago, Mr. McKenna in his budget imposed several highly protective duties for the purpose, he said, of reducing the consumption of luxuries. I do not inquire how far all these regulations of trade were unavoidable. I merely emphasize the fact that British trade is no longer free; and although many of us would like to remove now a great number of the restrictions which (in our view) have been erroneously imposed, no serious person supposes that anything like absolute freedom of trade can be restored so long as the war lasts,

But what will happen when the war ends? That is the question of questions, upon the answer to which the economic future of the British Empire and of the whole world depends. During the fiscal controversy Mr. Asquith once said there were only two systems — free trade and protection: ‘All the rest was fudge.’ He meant, of course, that the real fight was between consumers, on the one hand, who wanted cheapness and plenty, and producers on the other, each of whom wants the article he grows or manufactures to be dear in the home market. In most countries the producers, being better organized, usually contrive to defeat the consumers; and the richest producers get a tariff specially favorable to their own commodities. The chief reason why free trade has been established and maintained in the United Kingdom is that to many of our manufacturers the foreign customer is more important than the home buyer. Thus, the Lancashire cotton trade exports about three quarters. of its total output. The supreme interest of our cotton manufactures is cheapness of production. If food, timber, machinery, raw cotton, and so forth, were taxed, the cost of production would of necessity rise, and exports would necessarily fall. An increased price in the home market would not compensate for a great reduction in exports. Thus it comes about that in England and Scotland many manufacturers are free traders. Moreover, a vast multitude of people are associated with the transport trades; and if a shipper or a ship-owner is a protectionist, it is a proof that he is either ignorant of his own interests, or strangely unselfish.

During the last two years many manufacturers, merchants, and ship-owners have made huge war profits (out of the National Debt), which profits will not last after the war. They have also incurred heavy taxation, which will last long after the war. Obviously, when the war ends there will be a conflict between interest and passion. The other day a simple and ingenuous rubber-trader announced that he would have no dealings with Germans: that is, he would not buy anything from Germany, but would sell her as much as he could!

The old protectionist party has been galvanized into new life, and is endeavoring to represent, protection as a form of patriotism. For this purpose it has invented various battle-cries. The first was, ’Capture German trade.’ The second was, ‘Protect key industries.’ The latest policy is a protectionist tariff, which is to be given a patriotic appearance by the setting up of walls of varying heights: a high and almost prohibitive one against the goods and products of Germany, Austria, Bulgaria, and Turkey; a lower one against neutral goods; a lower one still for our allies — France, Russia, Italy, Japan, Roumania, Servia, Montenegro, and Portugal; finally, the lowest one of all for British colonies and possessions. As a matter of fact the driving force behind this scheme is protection pure and simple. That much came out clearly in a resolution unanimously passed not long ago by the glass-manufacturers, who demanded a tariff of from thirty to fifty per cent on foreign goods — Belgian glass being their most severe competitor in the home market.

Over against these advocates of an elaborate post-war tariff stand the free traders, led by Sir Hugh Bell and others, in battle-array. Between these two hosts of stalwarts an official party of compromise exists, or seems to exist. It attaches itself to the Paris Resolutions. They are so nebulous that they may be interpreted to mean anything or nothing. It is generally supposed that they represent the mutual concessions of office-holders, made to one another by free traders and protectionists who are serving together in the Coalition government. That the Paris Resolutions were intended to strike at neutrals has been emphatically denied by the Prime Minister himself in his speech at the Guildhall on November 9. He denounced as a ‘childish fiction’ the suggestion that it is the intention of the Allies to erect an impenetrable stone wall against neutral trade. That, he said, would mean economic suicide. After the war self-interest would impel us to establish and maintain the best economic and financial relations with the neutral powers. This appeal by Mr. Asquith to self-interest as the key to trade-policy after the war is significant of a cooling down of sentiment — a process which will become more and more rapid as the war nears its end.

Thus, one effect of prohibiting direct trade with Germany and Austria after the war would be that an important and profitable part of London’s financial business would be parceled out between Copenhagen, Amsterdam, and Zurich. Again, the imposition of a moderate tariff on French silks, wines, hats, cheese, vegetables, fruit, and butter would cause consternation in Paris, Lyons, and Brittany. The reflection that a higher tariff was imposed on American motor-cars or German electrical machinery would be no consolation to the sufferers.

To my mind the complications introduced into the philosophy of tariff reform by the war will make the framing of a practical policy more difficult than ever, both for the pure protectionists and for the Imperialistic preferentialists. I admit that at the moment free traders seem to be in evil plight. But then so are the tariff reformers. They are quite as angry with Mr. Bonar Law as the free traders are with Mr. Asquith. The régime of governmental regulations is a form of protection exasperating to all business men. Many of our leading Socialists are thoroughly disgusted with bureaucracy. It is quite possible that in the reaction and rebound after the war laissez-faire may again become popular. Whatever happens, one may be certain that in the scramble for employment during demobilization it will go hard with any government which proposes to close up important avenues of trade.