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BLACKWOOD'S MAGAZINE.

No. MCCCXXXIII. NOVEMBER 1926.

VOL. CCXX.

THE FUTURE OF BRITISH INDUSTRY.

Our

THE last quarterly article in the Board of Trade Journal,' which deals with the twelve months ended 30th June 1926, indicates very clearly the growing importance of our Empire trade. An examination of the total import figures shows that, whereas in 1913 we drew less than one quarter of our imports from the Empire, in 1926 this proportion had increased to over 30 per cent. export figures to the Empire are even more satisfactory. In 1913 they were 37 per cent of our total exports, and in 1926 over 41 per cent. The most noteworthy feature, however, of this latter increase is that, whereas between 1913 and 1925 it only amounted to a little over 1 per cent, last year the increase was more than 3 per cent, a result which is directly due to reciprocal trade brought about by the extension of Imperial Preference in our Budget of 1925.

reason to be gratified with these results, achieved during a period of such profound industrial depression, and they afford both encouragement and ample justification for the consideration of a further extension of preferences in foodstuffs at the present Imperial Economic Conference.

It is a basic argument of Free Traders that exports must pay for imports, and consequently if by a tariff imports are restricted exports must equally be restricted, so that on balance there is no gain from a protective tariff. It is by the reiteration of plausible half-truths such as this that the shibboleths of free trade have been hitherto maintained. The fact is conveniently ignored that many other considerations, such as interest on capital investment, shipping services, and emigration, influence the balance of trade to an important extent. This is more espe

The Government have every cially true in the case of our

VOL. CCXX.-NO. MCCCXXXIII.

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Dominions and Colonies, where markets and their continued prosperity under protective tariffs, brought forward his great scheme of fiscal reform based on Imperial Preference.

British capital has been largely invested and tariffs voluntarily imposed on foreign products with the object of developing Empire trade.

Another plausible half-truth on which Free Traders love to generalise is that as a country we depend, above all, on international trade. In the early days of free trade that may have been true, but to-day it is fundamentally wrong. We are a country that has achieved greatness in the past by our pre-eminent power of production, but when we lose that pre-eminence and begin to rely more upon international trading in the manufactures of other nations, we are on the road leading to extinction. Unfortunately it is on that road we are now beginning to travel, and we are doing so alone, because other producing countries are wisely guarding their home industries by protective tariffs.

There was a time no doubt when the free trade protagonist had a good case. That was before Germany and other countries became serious competitors in nearly all our staple industries, when we could not only find a ready market for all our own products, but could conduct at the same time a world trade in the manufactures of other nations. Then came the time when that far-seeing statesman, Joseph Chamberlain, realising the increasing ability of other nations to compete with us in the world's

Mr Chamberlain's prevision of the conditions which would arise if the country blindly continued to adhere to the fetish of free trade has proved to be so accurate that it is not inappropriate here to quote from one of his great speeches. Addressing an immense gathering of his fellow-townsmen in Birmingham in May 1902, he said :—

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The old ideas of trade, of free competition, are changed ... even the industries and the commerce which we thought to be peculiarly our own are in danger. It is quite impossible that these new methods of competition can be met by a strict adherence to old and antiquated methods, which were perfectly right at the time at which they were developed.... If by adherence to economic pedantry, to old shibboleths, we are to lose the opportunities of closer union which are offered us by our Colonies, if we are to put aside occasions which are now within our grasp, if we do not take every chance in our power to keep British trade in British hands, I am certain that we shall deserve the disaster which will infallibly come upon us."

These words of a great states

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if Joseph Chamberlain had lived of their pre-war value.
to carry out his great concep-
tions, the solidarity of the
British Empire would long ago
have become an accomplished
fact, and even the world war,
with all its disastrous con-
sequences, might have been
avoided. Unfortunately, in the
critical election of 1906-the
last in which Mr Chamberlain
was destined to take part,
the old parrot cry of "dearer
food," in its many variations
unscrupulously employed by his
opponents, triumphed at the
Polls, and with Mr Asquith as
Prime Minister, the country
embarked upon what future
generations will probably re-
gard as the most disastrous
epoch in the whole of her
political history.

It has taken this long period of growing industrial adversity, during which foreign competition in the race for the world's trade has caught us up and passed us, to convince even the most enlightened Free Traders that those two articles of their faith to which I have referred are sadly in need of revision. It is common knowledge to-day that the imports of this country exceed the exports by a very large amount. In the first four months of this year (i.e., before the calamitous Coal Strike) our total import of goods exceeded our total exports by 133 millions, and that this difference is mainly due to a diminishing volume of exports is proved by the fact that our exports to the markets of the world are now only about 80 per cent

Were

it not for interest on British capital invested abroad, payments for shipping and other services, all of which are generally classified as our "invisible exports," the balance of trade, as conceived by Free Traders, would cut a sorry figure. The same may be said of their contention that as a country we depend above all on international trade. There was some plausibility about that assertion so long as British capital invested in foreign countries meant the return of much of that capital and interest in the purchase of British manufactures. Then our international trade and international finance went hand in hand, and British ships which conveyed British goods to foreign countries were able to bring us back food supplies. Those were the days when British manufactures still dominated the markets of the world, when, in fact, no alternative to free trade was required. Unfortunately to-day that happy state of affairs no longer exists. Foreign countries are as ready as ever to employ British capital, but they are not inspired by any sentimental regard for Britain. Consequently, when they find that material, or manufactured goods, which they may require, can now be obtained in cheaper markets than ours, British capital is no longer employed by them in the purchase of British products. This means export of British capital without any balance of trade in the shape

of exported manufactures on which British labour and material have been employed. There would not even be export service for a single British ship to effect a small import balance by bringing back a cargo of foodstuff. All these advantages derived from British capital would go to a competitor country.

Our free trade methods are opposed even to reciprocal treaties, so that in the face of wide international competition the unconditional export of British capital to foreign countries reacts year by year with increasing injury upon our home industries, many of which are themselves in desperate need of more capital for the replacement of obsolete plant and machinery.

Britain may be compared to a well, fed by the springs of industry. In the days of our prosperity these springs were kept so active by our export trade that there was a large and constant overflow of liquid capital available for investment abroad. This was mainly expended in the purchase of British goods, which helped constantly to replenish the springs of industry. Of late years these springs have been running dry, and the overflow of liquid capital has been diminishing in consequence until to-day it has become a mere trickle, and is threatening to cease altogether.

This is not a pictorial exaggeration. In pre-war days our “invisible exports," mainly

the outcome of capital invested abroad, not only made up the difference between our imports and exports of goods, but left a balance on the right side of over 200 millions per annum, which made possible the investment overseas each year of new British capital. Since the war our adverse balance has been growing with alarming rapidity, and our "invisible exports are diminishing. In 1925 our export in goods was nearly 400 millions less than our imports, and when this difference was made up by our "invisible exports," there remained a surplus of only 28 millions available for investment abroad. This is surely an ominous indication of the bankruptcy into which the country is drifting through grinding taxation, industrial depression, and labour troubles, all of which can be attributed, in a large measure, to the economic fallacies of the free trade policy to which we have so blindly adhered.

To record the misfortunes of one's country is never a gratifying task, and it is difficult to do so with restraint when one holds, as we do, the conviction that our misfortunes have been mainly attributable to the country's imperishable faith hitherto in free trade, coupled with the blundering and irresolute methods of one Government after another during the last twenty years. It is pleasanter to record the belief that the worst heresies of free trade are at length being convincingly

exposed, that the country is awakening to the necessity for stronger measures of Imperial Preference and the Safeguarding of Industries, and that we have at last a Government in power which is moving in the right direction, although some of us are inclined to think that it is moving too slowly and leaning too much towards methods of political expediency. That, however, is the failing of all democratic Governments, and the nation, which is sick to death of party politics and politicians, who seem wholly incapable of envisaging industrial realities, has much cause for thankfulness that in these anxious times we have at last in power an honest Conservative Government largely composed of business men.

Unwise legislation of bygone years has created for trade unions privileges beyond those enjoyed by any other section of the community, and it is the latitude afforded by these privileges, far more than sympathy with Labour, which in recent years has attracted to its ranks so many egotistical cranks and agitators. It was the pressure of the extremists within the Socialist ranks and reckless concessions made to Communists which aroused the sober and responsible sections of the community, irrespective of party, to a clear perception of the dangers lurking behind the Socialist Government, and caused the country to turn them out at the last General Election. The Conservatives

were returned with a sweeping majority because the electors had awakened to the fact that a patriotic and trustworthy party in power had become a national necessity, and the Conservative Government was given a free hand to take any action it deemed necessary in order to restore public confidence and to remove industrial unrest.

It is fair to remember that the Government is hampered by the conditions of their damnosa hereditas in trying to carry out the unmistakable mandates which they received from the electorate in the end of 1924. Nevertheless it is undeniable that they have alienated many of those who supported them at the Polls by not at once taking in hand the much-needed revision of the Trade Disputes Act of 1906, and the introduction of further legislation to enable them to deal with Communists and other revolutionary firebrands. The manner in which the Government handled the General Strike in May proved that they could really govern with firmness and courage when constrained by necessity to do so, and that did much to enhance their prestige. On the other hand, their vacillating attitude since then with regard to the Coal Strike has not redounded to their credit. The general view is that they have badly muddled this matter, and that by interfering at all they have increased the difficulties in a dispute which in the end can only be

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