Edinburgh Review; or, Critical Journal
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iidc <«^". €z<M3mr^ /?.' <j<';- ■■■5 c.ia fS^^- .^fe'l's -«jC!e% '^ ^ iP ^<r<r m.. ?*»:'j<?" \'&f^i^ '■^^c or. € ^1 2lS _^_ __ fc 0 easiest :j«:<^<:^:' ^ t <: -'^^'' Digitized by the Internet Archive in 2008 with funding from IVIicrosoft Corporation http://www.archive.org/details/edinburghreview182londuoft THE EDINBURGH REVIEW, OR CRITICAL JOURNAL: FOR JULY, 1895 OCTOBER, 1895. TO BE CONTINUED QUARTERLY. JUDEX DAMNATUK CUM NOCENS ABSOLVITUB. PUBLIU3 SYBUS. VOL. CLXXXII. LONGMANS, GREEN, AND CO., LONDON. LEONARD SCOTT PUBLICATION COMPANY, NEW YORK. 1895. 0 THE EDINBURGH REVIEW, JULY, 1895. JVo. CCCLXXUI. Art. I. — 1. Royal Commission on Tirade Depression. Final Report. 188(3. 2. Royal Commission on Gold and Silver. Fitted Report. 1888. 3. Royal Commission on Labour. Final Report. 1888. 4. Royal Commission on Agrindture. Evidence. Vols. I. and IT. 5. Committee on Distress for Want of Employment. 1895. First Report. 'T'he usual talk about depression in agricultare and trade at almost all times, and in almost every country, is surely most characteristic of human nature itself. The dominant note of the complaints is wonder that depression should ever come. We poor mortals expect, as our clear right in the universe, an endless continuance of prosperity, and the cup of our good fortune can never be too full. Hence the keenness of disappointment when prosperity ceases, or appears to cease, and when we mark time, or go back, instead of going on manifestl)^ and beyond all question into a new stage of prosperity. The wailing is on all sides, and even the observer looking on calmly from a quiet retreat, where the stream of life rushes past, is apt to be impressed by the clamour. The truth is that the real cause for wonder should be that times are ever so prosperous as they occa- sionally are, when complaints are unheard, when capitalists are generally making profits and workmen good wages, when consumption and production advance by leaps and bounds. If we consider the multiplicity of the wants of the millions of our race, the immense variety of nations and the immense variety of communities and families within VOL. CLXXXII. NO. CCCLXXIII. B 2 Depression Corrected. J^b^ each nation, the wonderful division of labour by which each family and individual contributes to the sum total of pro- duction an infinitesimal part of a thing to be^ effectually exchanged for all that each individual or family consumes, and that in good times the final result of feeding, clothing, sheltering, and supplying the other varied wants of these millions is accomplished almost without a hitch, or with only the smallest percentage of the industrial mechanism not playing its part, surely it is little short of miraculous that so much can be accomplished by any agency or any device that society can apply. That the mechanism by which this is done should be a spontaneous growth, the result mainly of each individual in the complex organism pursuing his own interest in freedom, is perhaps an addi- tional cause for wonder, though no one can be surprised at all conscious attempts of society to organise itself for so complex a problem or for the much simpler problems of the early industrial Avorld having failed. There is another peculiarity about these complaints — their astonishing exaggeration. One would think, to hear the language sometimes used, that the difference between good and bad times in these days is represented by an almost complete disappearance of profits in the bad times, by an enormous increase of the unemployed, and by a great fall of wages — by an approach to something like revolution on account of the discontent of the masses — whereas, as a matter of fact, good and bad times, to any patient ob- server from the outside, would appear very much alike, both being periods of real prosperity to the great masses of the community, and only varying from each other by a small percentage of the amount annually produced and consumed. In a community of free labour there is probably a small margin of labour, perhaps a half to one per cent., unem- ployed even in the best times, the existence of such a margin being the necessary incident of a free market and of the free transfer of labour from one workshop and one employment to another ; but in the worst times that have been witnessed in this country for half a century this margin has probably never exceeded two to three per cent, of the total industrial army, while the consumption per head of articles of common luxury goes on increasing even in the 1895. Depression Corrected. 3 worst times. But the complaints of depression are always pitched in the key that the total ruin of the country has begun. Since Sir John Sinclair, at the beginning of the century, published in his ' History of the Revenue ' more than two hundred complaints of England having been un- done industrially at different times during the previous two hundred years, the tone has always been the same — the complaint is not of a reduction of the margin of prosperity, of a diminution of j)roduction and consumption by a small percentage, but of absolute and complete ruin. There is yet another peculiarity. Those who complain, although many of them must remember one or more periods of de- pression which have passed away, always speak of the last depression as the worst. History is a vain study for them. They make no comparisons, exaggerate the present evil, and call loudly to the gods for redress. The depression we have now been witnessing for two or three years, and which the authorities agree appears to be beginning to pass away, illustrates these characteristics of human nature. Only the other day even Lord Salisbury spoke of the idle capitalist on the one side and the half- starved labourer on the other, unable to come together owing to discredit, as if the bulk or capital, or all but an infinitesimal percentage, was in fact idle, or as if the musses of the community, again all but a very small percentage, were not in fact employed. The world is also full of the lamentations of bimetallists, whether they declaim sono- rously like Mr. Chaplin, or utter mild jeremiads like Mr. Everett or Mr. Samuel Smith, whose gentle bleatings about disappearance of profits and losses, in agriculture and trade, of sums many times greater than the National Debt, astonish perhaps even the astuter politicians like Mr. Balfour, with whom they are allied. At the beginning of the present parliamentary session, the House of Commons with a half belief assented to Mr. Keir Hardie's appeal for measures to deal with ' millions ' of unemployed, by giving him a Committee on Distress for Want of Employment. The committee promptly reported against his summary remedies, but there has been no similar committee for many years, although they used to be common enough before the present half-century began. The appointment of such a committee emphasises the success which the complaints of industrial depression and of want of employment have at last obtained.* * The appointment of the Royal Commission on Trade Depression in 1885 was perhaps a measure of the same kind, but there were 4 Depression Corrected. J^^V? We may ask, then, first of all, what is the real cause, if any, for all these complaints ? and if, as we shall see, there is no real cause, or at least no cause adecjuate to produce them, what is the explanation of the intensity of the recent and perhaps still existing gloom ? Replying to the first of these questions, we must give as our answer the fact which we have already suggested — that for the most part the complaints are without any founda- tion ; that the country was never, in fact, so prosperous as at the present time, whatever seeds of industrial decay may have been sown ; that at no time in our history have we ever made so much material progress as in the last fifty years, while the progress within the last few years has been at least at the average rate of the fifty ; that, in short, the usual language about industrial depres- sion at the present time is either a blunder, the mistake of those who come as amateurs, like Mr. Keir Hardie, to the study of economic phenomena and who generalise rashly and illogically from a few facts only; or it is worse, the deliberate exaggeration of faddists and others for their own purposes, assisted by the perennial tendency to gloom and exaggeration in these matters which characterises apparently the English race. It is wearisome to repeat the ordinary figures showing national prosperity which we are familiar with in budget speeches and the ' poetry ' of the Statistical Society. But the figures are undeniable and simple, and the only cure for pessimistic exaggeration is to repeat them. The best single figure to take to show the real progress of the country from period to period is that of the gross assessments to the income tax. Incomes above a certain amount only are assessed, except as regards certain descriptions of property where the total annual revenue is assessed ; but for compara- tive purposes this is not material, unless we are to assume that the classes above the income tax limit have been dis- proportionately increasing, which is not the case. The figures may indeed show a less increase than they otherwise would, because the lower limit of the income tax has been gradually raised from lOOZ. to 1601. ; but here also this point is not material, as it would tend to diminish the apparent rate circumstances attending the appointment of this year's committee significant of greater excitement and apprehension. Undoubtedly complaints of depression and want of employment have been more loudly expressed and echoed of late than for many years past. 1895. Depression Corrected. 5 of progress shown, wliile the rate of progress shown, notwith- standing this cause of diminution from the true figure, is simplj astonishing. The only cause of apparent as distin- guished from true increase shown by the figures is in the increased skill with which assessment has been applied by the Inland Revenue ofiicers ; but as against the other causes of variation in the opposite direction this point also is immaterial. The income tax figures are thus almost an absolute test for comparative purposes. They are, moreover, contentious figures, obtained not for statistical and ' viewy ' purposes, but as a hard matter of administration, with a Government department on one side trying to obtain a due amount from the taxpayer, and the taxpayer on the other side interested not to pay more than he justly ought. What the income tax returns show then is, that whereas in Great Britain in 1848 (we leave out Ireland, as there were no figures for Ireland till 1854, but Ireland is not material), the income tax assessments were 250 millions only, or about 13L per head of the population, they amounted in 1893 to no less than 673 millions and nearly 20L per head of the population, and the amount has since increased. The increase has thus been far in excess of the increase of population, although that increase is nearly 80 per cent. Nor is there any qualification to be made of this enormous increase. The purchasing power of the sovereign as regards all the leading articles of production is at least as great as it was fifty years ago. Prices have gone up in the interval, but they have gone back to their former level or to a lower level. In real wealth our progress certainly has been greater, and not less, than those figures of value show. The progress of invention, we must recollect, has been con- tinually bringing new articles and services into existence. Not only can we use the new wealth to purchase more and more of the old staple articles, or as much as we require of them, but a whole world of new articles and services is at our command. We might rest on this one figure alone. But a glance at some others may be serviceable. What has happened to income tax incomes has happened to other incomes. Agri- cultural and other labourers' incomes have increased about 00 per cent, in money. Still more, a transformation has occurred among the labouring classes. Agricultural and other rude labour has itself been largely replaced in the in- dustrial economy by artisan and semi-skilled labour, so that without a rise in the rates for some given kinds of labour. 6 Depression Corrected. July? although ill ahnost every class there has been a rise, there has been an average improvement among the masses, because there are fewer in proportion employed at the very low rates, or in the least remunerative trades.* All this is in a,ccordance with the more general facts of trade. Our ex- ports of British and Irish produce fifty years ago were about 50,000,000L annually. At the present time they average at least 220,000,000^., last year showing a minimum of 21G,O00,000L only. Making a deduction in both cases for the value of raw materials imported contained in the manu- factured articles exported, the increase of employment for English labour and capital at home shown in these figures is as from 30,000,000?. to 160,000,000?., or between five and six times. When people talk of our export trade falling off, a figure like this should be remembered. Still more striking are the shipping figures. Whereas the annual clearances of shipping in the foreign trade fifty years ago were about 4,750,000 tons only, or one-fourth of a ton per head of the population of Great Britain, they are now 40,000,000 tons, or about 1:|- ton for each unit of the population of Great Britain — an increase of eight times in total amount and of nearly five times in amount per head. Similarly the ton- nage of shipping belonging to the United Kingdom was 2,750,000 tons about fifty years ago (mostly sailing tons), and is now 9,000,000 tons, two-thirds being steam tons, so that the increase in effectiveness is about seven times. No doubt there have been some things to weigh on the other side, or perhaps we should have no complaints of depression. Agriculture has been heavily hit — at least, landlords have been — and some land has gone wholly out of cultivation, and much land has gone from arable cultivation to perma- nent pasture. Yarious of our manufacturing industries also complain bitterly of competition, not only in foreign markets, but at home. But generally the growth of our foreign and shipping trades is in accordance with the facts of general growth which the income tax returns exhibit. But the proof of the pudding is in the eating, and the conclusive evidence of advance, not only among those who pay income tax but among the masses of the community, is * See the Eeports of the Labour Commission, passi7n, and Mr. GifFen's evidence before the Labour Commission and the more recent Financial Relations Commission ; also Mr. Giifen's paper on * Kecent Changes in Prices and Incomes/ read before the Statistical Society, December 1888, ' Statistical Society's Journal,' March 1889. 1895. Depression Corrected. 7 shown bj the rapid increase of the consumption of articles of common luxury. The tea retained for home consumption was about 40,000,000 lbs. annually fifty years ago, and ia now 214,000,000 lbs. Tobacco was consumed to the extent of about 22,000,000 lbs. fifty years ago, and the figure now is over 60,000,000 lbs. Sugar consumed fifty years ago was only about 16 lbs. per head of the population of the United Kingdom, now it is more nearly 80 lbs. per head. Both sugar and tea have gained by great remissions of duties, and sugar finally by the total abolition of all duties ; but these remissions of taxation were themselves largely the result of the growing wealth of the community. Our figures do not enable us to go back far enough, but of late years there has been undoubtedly a remarkable increase of the consumption of meat per head in the United King- dom, as stated by the Chancellor of the Exchequer in his last budget speech, although, curiously enough, there is little increase in the consumption of wheat per head, owing, it is believed, to the increased consumption of meat and other articles, which the very prosperity of the masses has enabled them to substitute for bread. To the same order of facts belong the steady decline of pauperism, extension of education, and diminution of crime, on which it would be useless to dwell. Unquestionably, tried b}"- all ordinary tests, the present material condition of the United Kingdom is one of great prosperity, and the advance in fifty years has been of an astonishing kind. In recent years, as we have suggested, the advance has not slackened. To recur to our income tax figures. There was a time, between 1875 and 1885, when the advance was at a much lower rate than in the previous ten years. Between 1865 and 1875 income tax assessments increased about 40 per cent., and in the following ten years they only increased a little over 10 per cent. The real growth in things may not have varied so much, and we believe did not vary so much, between the two periods. Between 1865 and 1875 an inflation of prices, which has since come to an end, was going on, and all values were correspondingly swollen without a corresponding growth in the quantities of things. Since 1875 there has been a fall of prices — an appreciation of gold, as some are pleased to call it — and hence the lower values of the latter period. But, whatever the cause, the income tax assessments have not swollen at a uniform rate from period to period, and about ten years ago the later period had been one of slow progress compared 8 Depression Corrected. July* with the period just before. In the last ten years, again, however, there has been more rapid ^improvement. In 1883 the gross assessments in the United Kingdom were 613,000,000?., and in 1893 they were 712,000,000?.— an in- crease of nearly 100,000,000?., and no less than 16 per cent., in ten years. This is not at all equal to the rate of growth between 1865 and 1875; but, considering that it occurs along with a remarkable decline in land values, that there must have been an increase in other directions more than making up for that decline, and to give a surplus to the good as well, we are justified in saying that the income tax returns prove a most remarkable growth of material prosperity in the country, even in the most recent years. It is the same with figures of consumption of tea, tobacco, and sugar. The so-called depression of the most recent years has not checked the growth of that consumption. The consumption of tea is 214,000,000 lbs. in the United Kingdom now as compared with 194,000,000 lbs, five years ago in the midst of a time of inflation ; of tobacco, 60,000,000 lbs. compared with 54,000,000 lbs. ; and of sugar 80 lbs. per head of the population compared with an average of 74 lbs. five years ago. For ten years the increase is greater still. Within the last two years pauperism has increased a little, by the veriest fraction of a fraction compared with the total population of the country; but judging by ten yearly periods there is a steady decrease in pauperism. There is absolutely nothing to qualify the impression which such figures give. In reality, while people are talking of depression and bad times, the welfare of the people of the country is steadily advancing, and this has been the case recently as well as throughout the long period of fifty years which we have been passing under review. We come, then, to the second question which we proposed to answer — What is the explanation of the intensity of the recent and perhaps still existing gloom ? We may discuss various explanations that are offered, according to the vary- ing ideas of pessimists, in what appears to us the inverse order of their importance, so as to come at last, at the con- clusion of our review, to explanations which will help us to understand the origin of the gloom which, as it is due in our view largely to illusion, must have a psychological explanation. The obvious suggestion coming from a certain class of talkers about soci3,l phenomena, Socialists or semi-Socialists, 1895. Depression Corrected. 9 and the miscellaneous philanthropists who think they can rush the reform of society and cure industrial malaise at a leap, is the rapid growth of a class within, but not of the general community, who are always out of employment or have only casual employment, the classes forming the bottom groups of Mr. Booth's well-known classification of the London population. The general idea of these talkers appears to be that the ' residuum ' in our midst is enormously increasing, notwithstanding the general increase of wealth and rise of wages, and all the other signs of increasing well-being we have just been discussing among the com- munity as a whole. All that need be said of this amiable talk is that it is absolutely without evidence and that it cannot be true. If the residuum were increasing rapidly, pauperism and crime would also be increasing. These are the outcome of a residuum, and were abundant enough in former times when what would now be called the residuum constituted a large portion of the whole community. The idea has its origin in the recent study of social phenomena by well-meaning ladies and gentlemen who do not look at things in proportion, who are struck by the magnitude of the residuum they come in contact with, and who cannot realise, even if they stop to think at all, the conditions of a former society. So far from this being a real explanation of the increased gloom of the present depression as com- pared with any former one, it is an undoubted fact that the residuum can never have been so small in proportion to the whole industrial community as it is at the present time. It is a suggestion from a somewhat opposite quarter that trade unions were never so powerful as now ; that they are paralysing industry by strikes and lockouts and the fear of strikes and lockouts ; that rates of wages are kept up artificially, while capitalists are unable to make a living profit on the work they do; and that, because rates of wages are artificially kept up, thousands go unemployed for whom there would be ample work at a less wage, so that production is curtailed and an opening is made for foreign competitors. We cannot deny that a serious industrial evil is hit by these complaints. The artificiality of union methods is mischievous in many ways. While they paralyse the energy of the entrepreneur, it is most difficult to see where the profit to the workman himself comes in. To the outsider it seems a better thing to a workman to be earning 30s. a week directly, all for himself, than to be earning 33s. and paying over 3s. to union funds for the 10 Depression Corrected. July, support of a percentage of the number in idleness, while at 30s. the capitalist could live, and production would be large and employment full, and at 33s. the capitalist has little or no profit, production is curtailed, and there is not full em- ployment even for the nine-tenths who are nominally at work. This devotion to keeping up rates irrespective of market conditions will have to be reconsidered by unions before long, or unionism itself will break up. But while admitting a serious risk of mischief on this head, we must also point out that unionism is responsible at best for a small part of depression at any time, and its growth of late years has not been specially rapid. Another suggestion is the growth of manufacturing power abroad, especially in eastern countries, and the gradual loss of our manufacturing pre-eminence in different directions. On all sides our position is being assailed. India, Japan, and China are beating us out of the field in textile and other manufactures in their ov^^n and other eastern markets. Other eastern countries with boundless cheap labour, such as Egypt, are threatening to follow suit. Nearer at home we have the cotton manufacture extending more rapidly on the Continent and in the United States than it does in Lancashire, so that Lancashire, while far ahead of any other single district, stands now rsither primus inter pares instead of being first and the rest nowhere, as 1895. Depression Corrected. 11 used to be tlie case. In another field the United States has already gone ahead of us in iron production and will soon be ahead of us in coal^ while the increasing competition of other countries in both coal and iron will soon place those industries in this country in relation to those of the rest of the world in much the same XDOsition that our cotton manufacturing occupies with reference to cotton manufacturing throughout the world. But there is nothing in these facts to explain the special apprehensions of the present depression. As yet there has been nothing in foreign competition to prevent great growth and great prosperity at home, the records of this prosperity, as we have seen, being undeniable. On grounds of theory, we believe, there is nothing in the extension of that competition to give us any real cause for apprehension in the future. The possession of capital and energy ensures us a large pro- duction and consumption at home, whatever other people may do. We cannot be compelled to be idle because other people work and become better producers than they were. The mistake of some amateurs in these discussions always is that they assume production to be a limited quantity, and that the occupation of one man means the idleness of some- body else. But, apart from the view we may take of the great changes in the industrial world which are going on, it is enough for the present to note that nothing actual has occurred to prevent a remarkable developement of manufac- turing power at home. If our capital and labour have been as fully occupied as they ever were or can Avell be, what more can we expect ? Another explanation is to bo found in the continued fall of prices, of which the bimetallists make so much. Accord- ing to Messrs. Chaplin and Everett and Professor Foxwell, the fall of prices since 1873 has been something astonish- ing, and quite accounts for the disarray in the industrial world. The fall, it is said, is never ending, and no capitalist can be sure of the future who undertakes any operation covering a long period of time. A tiresome logomachy has arisen between bimetallists and some monometallists as to whether this fall of prices is properly called an apprecia- tion of gold or not, or is to be ascribed to an appreciation of gold or a multiplication of commodities as the cavise. But admitting for the moment that, however caused or explained, a continuous fall of leading wholesale prices from period to period is probably disastrous to many interests and a hindrance to some enterprise, what we desire 12 Depression Corrected, July, to point our for our present purpose is, that since tlie last time of depression— viz. 1885, 188G, and 18^7— there has been no general movement of prices except of the most ordinary kind, such as is frequently witnessed in the ordinary oscilla- tions of credit and discredit. Take one of the usual records of prices that are commonly quoted — the index number of Mr. Sauerbeck. Between 1873 and 1879 it is evident there was a remarkable fall — from 111 to S3— or something like 25 per cent. This is more than usually happens between the maximum of good credit and the succeeding minimum of bad credit. It helped to account for the gloom of 1879 and the following years, when a great deal was heard of the appreciation of gold. After 1879, with a short interval of improvement, prices slowly dwindled, till in 1886 and 1887 we find the index number at 69 and 68, a decline following on the previous decline of sufficient magnitude and steadi- ness to give some justification for the belief that the fall was never-ending and was due to some unusual and special cause. But in the years which have passed since 1887 there has been no general fall of prices, though there are exceptions for particular articles, mainly agricultural produce, to com- pare with the fall between 1873 and 1879 or between 1879 and 1887. In 1893 the index number of Mr. Sauerbeck still recorded 68 as compared with 68 in 1887, and although there was a further dip in 1894 and the spring of the present year the fall has not been prolonged, and improve- ment in many directions has already set in. There is no general and never-ending fall of prices, therefore, to account for the gloom with which the late depression is regarded. In the present situation as regards prices, in fact, we have only another exemplification of the tendency for complaints in the economic world to be prolonged long after the real occasion for them has passed away. In the beginning of the present century the rational finances were greatly strained ; deficits were avoided with difficulty, even when peace returned ; only with the hardest economy could two ends be made to meet. But half and three-quarters of a century after, when the country has in the interval increased in wealth enormously and millions upon millions of taxation have been remitted, it is not unusual to hear the national finances spoken of as if the strain of the twenties and thirties still continued, and deficits could only be averted by the hardest economy. So in this matter of the fall of prices. Between 1873 and 1886 something unusual happened in prices, corresponding in part to the infiation of thQ 1895. Depression Corrected. 13 previous twenty years, but since 1886 the course of business has been more normal. Yet, although the special causes for discussing' prices as largely accounting for trade depression have passed away, the language which was proper enough between 1879 and 1886 is still maintained. So far from an unusual fall of prices accounting for un- usual slackness of industry at the present moment, we should be inclined to say that, except for the special fall in agricultural prices in the last few years, which is peculiar to agriculture, and which affects only a portion of the in- dustry of this country, the general conditions of prices during the last few years have been most favourable to trade. While there has been no great fall generally to affect the wholesale merchant, retailers and consumers have got the full benefit of the low level of j)rices established finally about 1886, and the general well-being manifest, notwith- standing all the talk of depression, is one of the obvious results. The fall in agricultural prices again, though it involves a redistribution of wealth, injuriously affecting the landowning interests of the country, is beneficial to nine- tenths of the people, including the agricultural labourers. We import so much of our agricultural produce from abroad that the fall of prices, so far, is a pure gain, while as regards that part of the produce raised at home the fall of prices merely involves a transfer from one pocket to another — what the landlord loses some other member of the community gains, so that no real loss, looking at the community as a whole, and admitting to the full the misery caused by any great redistribution of wealth, is involved. The special suffering of agriculture, it may be said, ac- counts very much for the intensity of the gloom. This is another explanation we have to discuss. Here, undoubtedly, every price has fallen, and specially within the last few years ; and the agricultural interest, reduced as it is by its own decline and the relative growth of other interests, is still the largest single interest in the country. But, after all, the number of agricultural sufferers, owing to the large margin of rent upon which the blow of the fall of prices has first fallen, is not large, and the general welfare of the country is not con- cerned. If much land were going out of cultivation alto- gether, or the field of employment for labour generally were so restricted that agricultural labourers, deprived of employ- ment by land going out of cultivation, or by change of cultivation, had no other outlet for their labour, the matter would be serious ; but the universal testimony is that all 14- i)e2J^&ssion Corrected. July, tliroug-li the fall of prices and change of cultivation going on since 1873 the position of the agricultural labourer has been improving and not deteriorating. The voice of agri- cultural sufferers has been heard loudly, and the general feeling of depression has probably been aggravated in this vjiij ; but the real depression of industry generally, whatever it is, cannot have been caused in any way by agricultural losses. Another explanation suggested is perhaps more to the point. This is the severity of the financial crisis with which the present depression began. Few crises certainly have been more dangerous and threatening than that which attended the Baring collapse of 1890. We do not propose to go into the details of that melancholy history ; suffice it to say that in November 1890 this great financial and mercantile establishment was found unable to meet its engagements without assistance. The horror of the dis- covery was appalling to the few who were privileged to know of it before the public disclosure. Nothing less than universal bankruptcy was feared. The bills of the firm in circulation, apart from their other liabilities, were about 16,000,000?., a large part of those very bills npon which the banks in Lombard Street had deposited their cash ' at call ' or ' short notice ' with the discount houses, upon which the latter relied to repay the bankers. The stoppage of the firm would also have involved the destruc- tion of a large part of the machinery by which producers in all parts of the world were able to realise upon their produce by bills on London, and thus provide the means for their purchases in return. An immediate destruction of credit and a prospective restriction of production until a new machinery of credit could be created, if indeed that Avould have been possible for years, were thus threatened on a gigantic scale. Fortunately the Bank of England with the Government behind it came to the rescue ; the shock to credit of the actual stoppage was averted, and no panic arose such as the best informed apprehended even after measures of pre- caution were taken. But although there was no stoppage there was liquidation. A period of uncertainty followed, lasting several years, in which various institutions, par- ticularly the Trust companies which had been largely the creation of the inflated times, crumbled, and in which there were grave and prolonged monetary panics in Aus- tralia, in Argentina, and in the United States, the latter being in part due to the special currency troubles arising 1895. Depression Corrected. 15' from the bimetallic legislation, or would-be bimetallic legis- lation, in favour of silver. There have been many bad times in banking and financial history since credit was so far advanced as to make panics possible ; but the Baring collapse was not only in itself on a larger scale than any owing to the greater developement of credit in these days than at any previous time, but was accompanied by special difficulties abroad, especially in the United States, which would have been of themselves sufficient to create a panic. Hence the gloom of the two or three years which succeeded the Baring collapse, and which continues to the present time, when the actual facts of production and consumption, as we have seen, in no way justify it. The gloom was fully justified when it began, but the actual depression which succeeded must not be spoken of as if the gloomy anticipations, which were themselves not without warrant, had in fact been realised. To sum up. While there is nothing in the realities of things to account for the recent talk of trade depression, the prosperity of the country down to the latest date having continued almost unchecked, there is nothing in any explanation suggested quite accounting for the language indulged in, even in a psychological aspect. Some of the explanations, such as the growth of the residuum, are un- founded in fact, and not explanations at all. Others, like the fall of prices, had some foundation in fact at one time, but they do not explain the recent depression, the talk being a survival from a time when the situation was entirely different. Even an explanation like the magnitude of the Baring collapse partially fails, because, although depression would probably have been unprecedented if the check to business following the Baring collapse had been as great as there was reason to anticipate, yet the check has not, in fact, been so great : the business world has got off much more lightly than there was at one time reason to fear. To some extent, we should add, the excess of complaints arises not only from the prolongation of complaints which at one time had an excuse into a totally different situation, but from the demoralisation produced by the good times which culminated in 1871-3, and of which the tradition yet remains. To a large extent these good times were good times on paper only, the result of an inflation of prices, and far too good to last. The notion, however, was generated by these times that prices were always to go up, or, at least, would recover quickly after each time of discredit, and go back to a high and higher point on the crest of each wave IG Depressiofb Corrected. Jti^'* of credit. Tliis was extremely natural, though it was en- tirely contrary to past experience, Avhich is full of long periods of stationary and falling prices. Still, it leaves its mark on feeUng. The usual talk about depression being so exaggerated and erroneous, we are prepared to believe that the nostrums put forward by the talkers either to remove depression or to produce a prosperity which is assumed to be absent in good as well as bad times are not such as to require serious attention. The ailment being for the most part imaginary, the nostrums are probably in the nature of earthquake pills, as imaginary or little effective as the evils they are designed to cure are themselves imaginary. As we view the in- dustrial world, indeed, the idea of nostrums or remedies for depression of trade and industry which societies may consciously apply, either by legislation or joint action of some kind, is, on the face of it, absurd. Industrially mankind are constantly striving with all their force to make the most of the resources at their command, whether of capital or brains or labour ; to obtain the largest possible return for their exertions. Under the stimulus of the keenest necessity there is incessant diligence to seek new opportuni- ties, to make two blades of grass grow where one grew before, to dispense with one labourer where three can do the work of four. There is force at work to remove moun- tains, if such obstacles are in the way. All that this energy needs is to be let alone, in order to produce such miracles as we have seen in the past. How can remedies which legislatures may apply enhance or stimulate this energy? A tax here or a tax there, or a prohibition or restriction, may divert infinitesimally, by comparison with the grand movement always going on, an infinitesimal fraction of the energy, and the tax or restriction or prohibition, producing evil ;pro tanto because they are diversions of industry, may be taken away ; but clearly legislatures and executives can add nothing to the industrial force itself. The power of invention, the power of direction, the muscular force and skill of the manual worker remain unaffected, or little 1895. Bepression Corrected, 17 affected, by all the positive legislation or direction -which governments and society may knowingly give. Still, the nostrums and remedies now put forward may perhaps deserve a word, seeing that on the surface they command so much attention. Perhaps the least attention may be given to the sugges- tions of Keir Hardie and others to find work for the unem- ployed. There being no margin of unemployed in the sense in which they use the word, industrial depression cannot be removed by setting this margin to work. But, assuming a considerable margin of unemployed to exists there is nothing, unfortunately, in the remedy. The idea is now old as the hills that there is a rough and ready cure for want of employment. The legislators of Queen Elizabeth's time, Locke and other great authorities at a later stage, and amateurs for many generations past, when they first look at the problem of want of employment, have united upon the remedy that the State or local authority must set the unemployed to work. But experience has proved that the first idea in this business is worthless. The problem is really not simple, though it seems so. The produce of the work has to be exchanged as well as made; the State is not an effective supervisor. In short, State or municipal em- ployment is no cure for want of employment, and no cure, consequently, for the trade depression of which the alleged want of employment is a sign. We may go a step further. In a free society relying on individualism, State employ- ment is contrary to the genius of the society, and is a rever- sion to archaic methods of industrial organisation, which individualism has long since supplanted. If it is doubted whether individualism can provide for the unemj)loyed, or produce a condition of things in which the margin of un- employed will be at a minimum, it is quite certain that State measures will not do so. Equally undeserving of attention, though they command a larger share of discussion in respectable quarters, are the fair trade and protectionist schemes which crop up now and again. Baron de Worms attempting to exclude bounty-fed sugar, Colonel Howard Vincent making a similar attempt Avith respect to prison-made goods, agriculturists clinging to protection desirous to exclude foreign barley or bounty- fed butter, or to have foreign meat marked as such, though they dare not call for duties in favour of all home agricultural produce, and colonial federationists calling for a 2 per cent. VOL. CLXXXII. NO. CCCLXXIII. C 18 Dei^tression Corrected. July, differential tax on imports from foreign countries for the benefit of the colonies or other British possessions — are clearl}"- not to be seriously thought of in avquestion of trade depression. Depression would remain after as before the application of such remedies, and all of them of course, as they are interferences with trade, would aggravate the evil. Their mischiefs Avould only be liuiited by their peddling character. That such remedies should receive so much attention is surely a proof of the want of experience in the minds of many who talk most loudly and fluently about trade depression. This class of remedies suggests, by the way, that the whole question of protection as it exists at the present time is misunderstood. Protection is said to prevail throughout the world except in England ; and such remedies as Ave have described are supposed to be a return to protection ; and with protection, we are told, will come back prosperity which we are supposed to have lost. The truth is that the proportion of the industry of the world now carried on under protectionist conditions is infinitesimal. Even in the United States, the leading protectionist country, not 5 per cent, of the labour and capital of the country receives any favour from protection. In countries like our Australian colonies or the Argentine Republic the scope of protection is still naiTower because there are hardly any home industries capable of receiving protection — the protected industries do not exist. Mutatis mutandis much the same may be said of all protectionist countries. There are plenty of countries with high tariffs, but for a variety of reasons there is not so much protection as these tariffs would seem to imply. When it is considered, moreover, how large a part of the foreign trade of the world is carried on by the free trade part of the British empire itself, we can see at once that the popular idea of protection governing and directing the industry of modern societies is altogether untrue. It may be doubted whether even one per cent, of the capital and labour of the modern industrial world, as a whole, is diverted from its proper channels by protection. The talk of our return to protection as a return to the industrial system preponderating in the world is thus in the highest degree absurd. We may meddle with industry in a peddling manner as other countries do, and as Baron de Worms and Colonel Howard Vincent and the like economic authorities recommend us ; but this will not give us a genuine and thorough policy of protection, which is utterly and completely dead, not only 1895. Degression Corrected. 19 in this countrj, but througliout the world, in spite of any quantity of superficial talk and belief to the contrary. 