THE INDIAN SILVER QUESTION.
Since the preceding chapters were written a great and most momentous step
has been taken by the Indian Government. On the 26th of June, 1893, the
Finance Minister in India announced that a gold standard was to be
established, and that the mints were to be closed to the free coinage of
silver. This measure, which so profoundly affects the prospects of the
producers and manufacturers of India, I am compelled to notice. To do so,
however, in an exhaustive manner would be quite beyond the scope of this
book, and I shall confine my remarks as much as possible to the points of
the subject which bear upon the welfare of those who produce or
manufacture anything in India. The reports[61] and papers enumerated at
the foot of the page supply me with a large amount of information and
opinion, but I must warn those interested in the subject that a complete
view of the whole situation, as far as India is concerned, cannot be
obtained from them. For some, and in my opinion the most important, points
connected with the question, have either not been alluded to at all, or
quite inadequately investigated. These defects I hope in some degree to
be able to supply from my long experience of the effects of the
expenditure of capital in developing the resources of India--and I say in
some degree, because I feel sure that a much fuller investigation is
required before all the far-reaching effects of this momentous measure can
be adequately weighed. I trust, however, that, even in the short space I
am devoting to the subject, I shall be able sufficiently to elucidate
those points which dominate the situation, and a consideration of which
will show that if the Government succeeds in forcing up the gold value of
the rupee in the manner proposed, the prosperity of the people, the
popularity of our rule, and the state of our trade in the East will be
most seriously prejudiced. And now let me begin at the beginning, so that
the uninformed reader may have a clear view of the whole subject as far as
India is concerned.
The origin of the movement in India with reference to the introduction of
a gold standard and forcing up the gold value of the rupee is shortly, and
I believe very accurately, stated by Sir Frank Forbes Adam in his evidence
given before the Currency Committee; and on November 26th, 1892, he told
the Committee that "Though there is undoubtedly dissatisfaction existing
among a certain number of those carrying on foreign trade, really the
origin of the movement and its true force proceed from the servants of
Government." Of this, I think, there can be no doubt whatever; and it is
important to remember that this movement did not originate with the
people, or planters, or merchants, or manufacturers, or from any section
of the producers and traders of India. The servants of the Government had
a great and legitimate grievance, because they found that, though rupee
prices in India were not to be complained of, they experienced a grievous
loss on their home remittances, and it was their persistent agitation
which created and maintained the true force of the movement. The
agitation they thus originated was joined in by some of the merchants of
India, though to what extent does not appear, and I can only say generally
that the merchants who did join the movement were small in number. Bombay
and Karachi were clearly against any interference with the currency; and
from the expression of disappointment which fell from the Hon. Mr.
Mackay--President of the Currency Association, Calcutta--with reference to
the small number of his supporters, I am led to the conclusion that, with
the exception of a certain proportion of Calcutta merchants, occasional
individuals in other parts of India, and the servants of the State, all
India was, and is, dead against the monetary policy of the Government. Of
the twenty-two witnesses examined before the Currency Committee, thirteen
were against the Government measure, six in favour of it (four of the
latter being Government servants), two doubtful, and one presumably
against the measure.
The main features of the measure I take from the statement of the Finance
Minister, who, on the 26th of June, 1893, announced the introduction of a
Bill "with the object of altering the Indian monetary standard from silver
to gold," and who in his next sentence declared that "It is not intended
to do more at present than stop the free coinage of silver at the Indian
mints, and as a provisional arrangement to provide for the issue of rupees
at these mints in exchange for gold at the ratio of 1s. 4d. per
rupee."[62] In a subsequent part of his speech Sir David Barbour states
"that an arrangement for the receipt of gold at the mints at a ratio of
1s. 4d. per rupee will be made by executive order, and so will the
arrangements for the receipt of sovereigns in payment of sums due to
Government at the rate of fifteen rupees a sovereign." The current rate
of exchange then, and still existing, is about 1s. 3d., and the
Government thus proposed, by creating an artificial scarcity of rupees, to
force up the gold value of the rupee by one rupee per sovereign. Let us
now glance at the cash effects of the measure on the finances of the
Government and the prosperity of the people; and in doing so I shall, to
aid the comprehension of the English reader who knows nothing of lakhs, or
crores, or Rs. x, state the figure in pounds sterling, treating the rupee
at its old value of 2s. To do this will not materially affect my
statements, for, though some articles have risen in price, others have
fallen, and, on the average, the rupee (excepting as regards labourers'
wages, which have much risen in many parts of India in recent years) goes
nearly as far in India as it ever did, a fact which is fully corroborated
by several very competent witnesses examined by the Currency Committee,
though one witness maintained that silver prices in India had risen.[63]
It may be interesting to note in this connection that the purchasing price
of silver in China has remained unchanged for many years past, and that
for the last thirty years there has been little change in the purchasing
power of the rupee in Ceylon. Both these statements I make on the
authority of witnesses examined before the Currency Committee.
What then would be the cash effect (1) on the finances, and (2) on the
people, were the Government successful in forcing up the gold value of the
rupee by one rupee a sovereign? The saving that the Government would
effect in remitting money to England to pay home charges would amount to
about £1,570,000,[64] but as the amount is liable to loss by exchange we
must make a deduction, and, in round numbers, the sum that the Government
would save is about a million and a half sterling. Now as to the people of
India. What the Government gains, i.e., a rupee a sovereign, the seller
of produce must lose, as exporters could afford to give them just so much
less than they now do. Now, taking the exports of India at one hundred
millions,[65] the currency measure of the Government would cause a loss to
producers of 7 per cent., which is equivalent to a tax on the exported
productions of India of seven millions. The result of course is, that to
get little more than one million and a half into the Treasury, the
Government proposes to take seven millions out of the pockets of the
people. Now I have no wish to pose as what is commonly called an expert,
and I naturally shrink from any idea of criticising that long chain of
financial luminaries which, beginning at the Council Chamber at Calcutta,
stretches through the rooms of the Currency Committee which recently sat
in London, right up to that Cabinet over which the greatest of financial
luminaries presides, but I trust I may be allowed to go as far as to say
that the arrangement made by Mr. Gladstone's Government which is the body
ultimately responsible--does not seem to be of a very alluring character,
as it entails on India, viewed as a whole, a loss of £5,500,000. And this
cheering result has apparently been viewed with such satisfaction by the
financial experts, that it is to be regarded as merely a small instalment
of the blessings they have in store for the happy toilers whose destinies
they have been empowered to influence. For if the policy of taking five
and a half millions sterling out of the pockets of the people in order to
put about one million and a half into the financial till is a good one,
the extension of the process, up to certain limits, must be equally so.
For such an extension the Indian Finance Minister is evidently prepared,
as one may see by looking again at the sentence I have quoted from the
speech, in which he declares that "it is not intended to do more _at
present_ (the italics are mine) than aim at a rate of 1s. 4d." This,
coupled with statements subsequently made, and by what the Currency
Committee has suggested as to a farther increase if it should seem
necessary, shows that the Government evidently contemplates a rise to 1s.
6d.; and indeed this must obviously be the case, as the anticipated gain
from a rise to 1s. 4d., when put against the probable loss on opium, and
the allowances to be made to Government servants to compensate them for
the loss they sustain on home remittances, would go far to swallow up the
gain to the State from a 1s. 4d. rate. Supposing, then, that the
Government should be able to carry out its project of a 1s. 6d. rate,
the blessings previously showered on the producers will be trebled; so, of
course, will be the gain to the Exchequer; and the account will then in
round figures stand thus:--gain to the Exchequer on home remittances,
£4,500,000; loss to the producers, £21,000,000; or, in other words, the
levy of an export tax of 21 per cent. on all the productions of India,[66]
and a total annual loss to India considered as a whole of £16,500,000
sterling. This seems pretty well for a beginning, but it is really a very
small part of the results that may with certainty be anticipated from the
measure, which, as Sir David Barbour says, will have far-reaching effects.
Of this, as we shall see, there can be no doubt whatever. Of the direct
loss we can form a rough calculation; the indirect losses are indeed
incalculable. But let me proceed.
We have seen that, at the least, the Government proposes to impose, and
will impose if it can force up the exchange, an export tax (or what is
practically an export tax) of 7 per cent., which is to be ultimately
raised to 21 per cent. And we have now to follow out the effects of this
on the producers, the people generally, and the financial prospects of the
State.
The producers in India of articles for foreign export either, as the
planters generally do, send their produce for sale to London, or, as the
main body of producers do, sell them to merchants who export the goods.
Both these classes of producers are of course much benefited by a low rate
of exchange--the former when they sell in gold and remit money to India to
pay for the up-keep of their estates, and the latter when they find that
the merchant can afford to pay more rupees than they could when exchange
was higher. If then, to put the case in a more precise way, the Government
succeeds in forcing up the gold value of the rupee, and the merchant is
thereby compelled to turn his sovereign into 15 rupees instead of 16
rupees, it is obvious that to make the same profit as before he must give
the seller of produce one rupee less. Now let me take the business with
which, as a planter, I am most familiar. I have roughly estimated the
total value of the coffee annually produced in Mysore at £870,000, and if,
for the sake of even numbers, we knock off £70,000, a 7 per cent. export
duty on this will amount to £56,000, and if the Government could raise, as
it proposes, the rupee to 1s. 6d., £168,000 a year would be the price
that the measure would entail on a portion of the inhabitants of the
native state of Mysore on this single article of export. But this direct
cash loss is far from being all; and if the reader will turn back to the
Introductory Chapter, and to that on Coffee Planting in Coorg, he will
there find an explanation of the extraordinary effect produced by the
introduction of capital into the rural districts of India, and of the
remarkable effects it produces on the prosperity of the people, the
development of the agricultural resources of the country, and the finances
of the Government. But, for the convenience of the reader, I may briefly
repeat here what I have pointed out in greater detail in the chapters
alluded to.
From the estimate given of the profits of well-managed European
plantations which have been formed on the best land (_vide_ chapters on
Coffee Planting in Coorg, and in Mysore), it is evident that, though these
would be greatly injured by the exchange being forced up, they could still
make fair profits; and, indeed, it is conceivable that, from the losses
that the Government measure would entail, they might ultimately be in as
good a position as they are now; for there are large amounts of poor lands
which, if the Government policy is pursued, would be thrown out of
cultivation, either partially or entirely, and the diminished production
and demand for labour would, of course, be of great advantage to the
estates which survived. And what would largely accelerate the decrease of
cultivation would be the fact that if the exchange is forced up all
confidence in the Government will naturally be shaken. For how can
producers have any confidence in a Government which, instead of levying on
the country as a whole the increased taxes it requires, seeks to attain
its financial ends by manipulating the currency in such a way as to reduce
to the producers the prices of the commodities they grow for export? And
if the gold value of silver is to be forced up to 1s. 4d., and with the
declared possibility of its being forced up to 1s. 6d., what is more
likely than that the Government may persevere with this disastrous policy
whenever it again finds itself in financial straits? And is it not evident
that the present financial policy of the Government, and the possibility
of its being further pursued, must give that shock to confidence which
will at once repel capital and injure credit? And is it not equally
evident that if the gold value of the rupee can be forced up in the manner
proposed, the first effect of this will be shown in a large decline in the
demand for labour? Now, as pointed out in the chapters previously alluded
to, the results of an increased employment of labour are quite different
from what they would be in England, where an increase of employment given
to labourers merely means an increase of comfort amongst the working
classes, and of the profits of the shopkeepers with whom they deal. For in
India, the introduction of capital to be spent in labour in the rural
districts means a social revolution, as large numbers of the labourers set
up as cultivators the moment they have saved enough capital to do so. In
some cases they give up working for Europeans, in others they combine
agriculture with occasional months of work on the plantations, or other
sources of employment; the whole lower classes of the people are thus
elevated, and this tells at once on the finances, enabling (1) rents to be
more easily paid, and (2) because the finances improve as more land is
brought under cultivation. Now, not only would a large diminution of
employment take place in connection with coffee-planting were exchange
forced up, but the same cause would act on the growers of pepper,
cardamoms, and other products, and the prosperity of the province would be
thrown back, and the same kind of result would obviously occur in any part
of India which grows articles for export.
But there is yet another result from this truly far-reaching measure, as
Sir David Barbour justly calls it, which to my mind is the most important
of all--the bearing of it on famines; for we all know that the population
is rapidly increasing, and that of all apprehensions which haunt the minds
of those responsible for the safety of India, those as regard famines are
by far the greatest. And here I must ask the reader to turn back to my
Introductory Chapter, and consider the facts relating to famines--facts
which show how constantly the fear of famine lies before the Indian
administrator, both from a financial and humane point of view. I ask him
carefully to survey these facts, and then consider what effect the forcing
up of the gold value of the rupee is likely to have on famine-producing
causes. And is it not evident that the effect of the measure in
diminishing the demand for labour must be enormous; that if less money is
spent on labour, less will be spent in improving and developing the
agricultural resources of India, in digging wells and other
famine-preventing works; and that if the labourers fail to find the amount
of employment they can now readily obtain, the greater will be the
financial burden thrown on the hands of the State in times of famine and
scarcity? And must it not be equally evident to anyone possessed of the
humblest form of human reason that the Government had far better exhaust
every taxational resource before embarking on a course which, if the
anticipations of Government are realized as to silver, will be ruinous to
the country, and which, at a vast direct and indirect cost to the people,
will only, as I have shown, afford a comparatively speaking trifling
financial relief to the State? But it is time now to pass to other points
connected with the measure. And first of all let us glance at the evident
political results that must arise from it.
From what has been previously said, it is evident that the Government has
arrayed against itself every class in India excepting its own civilian and
military servants, and to these we have only to add, not another class,
but only a small proportion of the mercantile class. With the exception of
some just complaints they had to make as regards charges[67] that had been
unjustly thrust on the Indian Exchequer, and which I myself made in the
"Times" and elsewhere long before the Congress was even thought of, the
agitators of the Congress had no serious grounds to go upon. But who can
say that now? Up till lately there was no cause for discontent. India has
never been more prosperous, and has never shown greater, or nearly as
great signs of progress, as she has within the last twenty years. Not only
has the demand for labour been abundant, but in many instances it has
exceeded the supply. The rates of wages had largely increased, and were
producing, as I have previously shown, an accelerated quickening of
attention to the development of the resources of the soil. All that the
country wanted was to be let alone, and if the financial conditions
required increased taxation, no agitator could have successfully
complained of this, seeing that it could only have been imposed on account
of that cheapening of silver which has been one of the great causes
(railways were the other) of the increased prosperity which all classes
have enjoyed in recent years. But, if the Government measure raises the
gold value of the rupee, the agitator will be able to point out that, at
an enormous cost to the producers of India, the Government has only
obtained a most trifling financial relief, and be able to complain with
justice that the Government has lessened the profits of the agriculturist
and diminished the employment for labour. What an admirable advantage has
the monetary measure of the Government conferred on the popularity of
British Rule in India!
I have alluded to the losses that the measure must inflict on the planters
of Southern India, and my remarks on that head apply equally to the
tea-planters of India; but the latter have, besides, a special grievance
which they share in common with the tea-planters of Ceylon, and this
grievance is also shared in by the coffee-planters, though, as far as I
can see, hardly to the same extent. This well-founded grievance lies in
the fact that if no international agreement (and there seems no
probability whatever of such an agreement ever being come to within any
time to be even guessed at) is come to between the silver-using countries
in the East, the tea-planters of India and Ceylon will be brought into
unequal competition with their rivals in China, and the coffee-planters of
India and Ceylon will in like manner be unfairly weighted in their
competition with the coffee producers of Brazil. With reference to the
tea-planters of India and Ceylon the case is very clear, and it is
perfectly obvious that if in India you have silver artificially raised in
value relatively to gold, and that in China silver remains unprotected,
the Chinese will be able to accept a smaller gold value for their tea than
the Indian producers, and the difference in the exchange may be such that
China may regain her former position in the tea market, and that Indian
teas may be partially driven from the field; and if we add to that that
the Indian tea-planter will, in consequence of exchange being forced up,
have fewer rupees to pay his coolies than he has now, it is evident that
the result of the Government measure will be most serious to this
industry. The evidence (Currency Committee) that relates to Ceylon is very
decisive on this point, and the witnesses examined with reference to tea
expressed extremely depressed views as to the ruinous results that must
arise if the monetary policy of the Indian Government can be carried into
effect. From the correspondence that has passed between the Government of
India and the Secretary of State for the Colonies, it would seem that
India has no objection to Ceylon establishing its own mint for the coinage
of silver (the silver coins at present in use in Ceylon are rupees) and
the island would then be in the same position as other silver-using
countries. But if Ceylon starts its own mint, and is thus able to prevent
the evils of the artificial scarcity of silver to be created in India with
the view of forcing up the gold value of the rupee, then it is plain that
Ceylon tea-planters would retain their present advantages, which arise
from a low rate of exchange, and thus be able to carry on their business
on far more advantageous conditions than their Indian rivals.
To estimate the effect on the Indian coffee-planters with reference to the
effect of the monetary policy of the Government in placing the Indian at a
disadvantage as regards his competition with the Brazilian planter would
be difficult, and I am not in a position to form a decisive opinion on the
subject; but I may mention that the manager of the London and Brazilian
Bank informed the Currency Committee that the production of coffee in
Brazil has largely increased, and will still further largely increase,
owing to the greater facilities of communication, and also the direct
influence of a low rate of exchange. The last-mentioned fact gives, I may
observe, one more instance of the direct effect of a low rate of exchange
in stimulating production, and so swelling the volume of exports. If,
then, the Brazilians are to retain, and we are to lose, the benefits of
the cheapness of silver relatively to gold, it is evident that the
coffee-planters of India must be handicapped in their competition with
those of Brazil; but I do not hazard a decisive opinion as to the exact
weight of the competition, as I am uncertain as to how far our quality of
coffee comes into competition[68] with the quality produced in Brazil.
I must now at least allude to the effects of the measure on the trade,
manufactures, and railways of India. I regret that I am unable to go more
fully at present into a consideration of the effects on them of this
ill-starred measure, but all that the general reader requires to know is,
to use the words of Sir Frank Adam (one of the most important witnesses
examined by the Currency Committee), that if the Government succeeds in
forcing up the gold value of the rupee, China would be able to undersell
India in tea and rice; the Bombay manufacturers would receive fewer rupees
for their wares, and, as in the case of opium, the advantage would go to
the Chinese and Japanese; the railways would have little to carry from the
interior if the rupee prices went down. Finally, I may observe that the
gold industry of India would be largely injured, and that, especially,
mines struggling towards a successful issue would be seriously hampered if
the gold value of the rupee were forced up.
Brief though my survey of this great subject may be, I trust I have said
enough to expose the harmonious rottenness of the monetary policy of the
Government, and by this I mean a rottenness so complete that it is
impossible to find a single redeeming feature in the measure that has been
adopted. It is rotten economically, it is rotten financially, and it is,
if possible, still more rotten from a political point of view. Those who
have knowledge enough to understand the bearing and ultimate evil effects
of the measure are angrily arrayed against the Government now, and when
the ryots and labouring classes of all kinds experience the fall in prices
and dearth of employment that will assuredly follow if the Government
should be able to force up the gold value of the rupee, and are able to
trace this to the action of their rulers, widespread and serious will be
the abiding discontent which will take possession of the people.
I cannot conclude this short notice of a great subject without commenting
on what, at first sight, seems the remarkable fact, that the Government in
India, as represented by the Viceroy, and those merchants who are
represented by Mr. Mackay, President of the Currency Association, have
admitted that a low exchange has been a stimulus to the progress of India,
and that producers have gained by it. It is true that the Viceroy declared
in his speech in Council of June 26th, 1893, that "to leave matters as
they were meant for the country as a whole a fatal and stunting
arrestation [_sic_, probably a misprint for arrestment] of its
development."[69] But the cat escapes later on in the speech when a hope
is expressed that one of the effects of the measure will be "that capital
will flow more freely into the country without the adventitious stimulus
which we have hitherto been unable to refuse." The Viceroy thus admits,
what everyone knows, that a low exchange has acted as a stimulus to the
progress of India, and in doing so has given away the whole case for the
Government. But no one has ever denied the admission in question except
Mr. Mackay; and his absolute denial, when questioned on the subject, that
the producers of India would be affected by the measure, was subsequently
eaten up by himself in cross-examination towards the close of his evidence
given before the Currency Committee. But it is of course the rule, to
which there are few exceptions, that those who are engaged in the
unfortunate business of bolstering up an indefensible case, invariably let
out something which is absolutely destructive to the cause they are
advocating; and we find another instance of this at p. 191, Appendix I. of
the "Report of the Currency Committee." And if Mr. Mackay has given away
the whole case in London, one of his followers equally did so in Calcutta
when a deputation, headed by Mr. Mackay, was received by the Viceroy. And
on this occasion Mr. W. O. Bell Irving, as representing over 3,300 square
miles of land in Lower Bengal, stated that he "was not prepared to contend
that in certain respects the ryots and zemindars have not benefited from
the depreciation of the rupee." We thus see that both the Government, as
represented by the Viceroy, and the most active supporters of the present
monetary policy, have admitted that the measure would have injurious
effects on the producers of India--in other words, on those on whom the
financial stability of the empire entirely rests.
And the producers of India have as little reason to be satisfied with the
action of the Currency Committee which was presided over by Lord Herschell
as they have with the Government in our Eastern Empire. A glance at the
first page of the Report, and at the professions of the witnesses
examined, will show that this is the case. The Committee was requested by
Mr. Gladstone's Government to form, _inter alia_, "a just estimate of the
effect of a varying, and possibly much lower exchange, upon the commerce
and people of India." Now, the people of India almost entirely live either
directly (and I think about ninety per cent. do so directly) or indirectly
on the land; and yet, though in England there are to be found persons who,
like myself, are Indian landowners, and who, from having lived amongst the
people in the rural districts, are well able to testify to the effects of
the measure on the welfare of the people, not a single Indian landed
proprietor was called before the Committee. If a Parliamentary Committee
were called upon here to consider any proposed measure that would widely
effect the people of England as a whole, and the landed classes in
particular, would it not be scandalously unjust if not a single landed
proprietor, or any person directly or indirectly connected with land, were
requested to give evidence before it? But notwithstanding that a certain
proportion of the witnesses were Indian officials, and that the
examination of representatives of the classes chiefly concerned (the
producers) was carefully left out, the weight of the evidence was entirely
against the monetary policy of the Government. And yet the committee
supported the Indian Government. So that this measure has been passed
after a partial investigation, during which the most important points that
ought to have been minutely examined were never even touched upon, and
even then in the teeth of the majority of the witnesses examined, and
whose opinions, from their character and position, were of great value.
Were it not that the Committee was composed of English gentlemen, who
would not wittingly do anything but examine into matters to the best of
their ability, it would really seem, after a careful survey of the whole
situation, as if this Committee was a mere sham got up as a shield to
protect a foregone conclusion.
There can be little doubt that the Indian Government and the Currency
Committee were acting under the idea that (1) India had been pushed into a
financial corner, and (2) in fear of the result of the probable repeal of
the Sherman Act in the United States; and so, urged on by a panic-stricken
feeling to rush somewhere, the Government began in haste to burn the whole
house down in order to roast its financial pig. As to the first point, the
state of the finances in India no doubt requires all the care and economy
that can be exercised; but to imagine, as many people seem to do, that it
has exhausted its taxational resources, is ridiculous. The salt tax,
taking the price all over India, is lower than it was fifteen years ago,
and this could be raised without hardship to the people. Import duties
might be imposed to the amount of several millions. Then, considerable
charges now defrayed from current revenues might be passed to capital
account, as they would be in England. And if the worst came to the worst
an export duty of three per cent. might be imposed, for though is would
not be good policy to do so, it would still be better than the seven per
cent. export duty the Government would practically levy were exchange
forced up to 1s. 4d., and obviously very much better than the twenty-one
per cent. export tax which the Government evidently look forward to, for,
as we have seen, it is aiming at a 1s. 6d. rate. A large saving, too,
might be effected by going back to the old system of having a local
European force in India. Let anyone consider these points, and weigh the
remarkable and interesting statement quoted from Sir William Hunter, and
he will at once see that the condition of India generally is full of hope
(or at least was so till the monetary policy was announced), and that its
taxational resources are by no means exhausted. It should also be
considered that as the Government has not only spent large sums in recent
years in defensive works and public buildings, and at the same time paid
off debt to the amount of twenty-three millions, it would be perfectly
justified in borrowing, if it were necessary, in order to meet temporary
difficulties.
Now let me turn to what is the dominant cause of the monetary policy of
the Government--the dread that if the Sherman Act were repealed exchange
might sink even as low as a shilling per rupee.[70] What if it did? Let us
examine the consequences of that to India considered as a whole. The
apprehension in question was proclaimed in the Viceroy's speech of June,
26th, 1893, and in considering the consequences of a 1s. rate of
exchange, he pointed out that this would entail an increase of Rs. x
7,748,000 in the remittances required to be made for the home charges of
the Government, being, curiously enough, almost the exact sum which the
people of India would lose on their exports were exchange forced up to
1s. 4d. by the monetary policy of the Government. But as the producers
of India would gain largely by the 1s. rate of exchange, the total
account would stand thus:--loss to the Government say, for the sake of
round figures, seven millions; gain to the producers, twenty-one millions;
total gain to India, considered as a whole, fourteen millions. So that if
the very worst anticipations of the Government were realized India would
be a large gainer by the fall to a 1s. rate of exchange, and the
finances could be squared by increased taxation, which, if levied
considerably on imports, would be distinctly a popular measure. And, in
any case, the agitators could have no ground to go upon, as I have shown,
as the increased taxation could be amply justified.
One word more. I cannot refrain from calling attention to the remarkable
circumstance that Mr. Gladstone's Government has in a single year adopted
two measures which are highly objectionable from political, economical,
and financial points of view--the Home Rule Bill for Ireland and the
Currency Measure for India; and that both were forced on by arbitrary and
tyrannical action. For just as the Home Rule Bill was forced through the
House of Commons with inadequate examination and discussion, so was the
Currency Measure forced through, not only without adequate investigation,
but in the teeth of the majority of those whose opinions were laid before
the Viceroy, and in the teeth of the majority of the witnesses examined
before the Currency Committee. But arbitrary and tyrannical action seems
to be the order of the day with the Gladstonian Government; and it is
worthy of notice in this connection that it forced an Opium Commission on
India merely to buy a few votes in the House of Commons, and, with the
grossest injustice, provided that India should pay for a part of the cost.
The outcry raised has, indeed, brought about a reduction of the charge
that was to have been made, but, from a statement made in the "Times," I
observe that the Government has clung to the travelling expenses of the
members of the Commission, which are to be charged to India, and probably
with the view of proving that extreme meanness is not one of the national
failings.
As the English reader might imagine that the Indian Government was solely
responsible for this measure being passed into law, I may point out that
the decision of the Cabinet was required and obtained in connection with
the Currency Measure. From such a Government the producers of India, while
they have everything to fear, can have nothing to hope. Our sole hope
depends upon its being turned out, and replaced by an Unionist
administration which will either annul the suicidal policy that has been
adopted, or at least suspend its action till a full and searching
investigation has been made into all the immediate and all the
consequential results that must arise from the measure in question, should
the Government be able to force up the gold value of the rupee. If the
facts adduced in this chapter are substantially correct, the verdict
cannot be doubtful, for these facts prove that the Government proposes to
levy what is practically a heavy export tax on the products of India, and
in a form, too, most injurious to its best interests, and ultimately to
the finances of the State. And I say in a form most injurious, because the
Gladstonian Government (for the Cabinet is distinctly responsible for the
policy proposed to be carried into execution) has practically adopted a
policy of protection, not for the benefit of the productions and
industries of India, but for the protection and encouragement of the
productions and industries of those silver-using countries which now
compete with India. Of all the grotesquely ludicrous policies that have
ever been adopted by perverted human reason this surely is by far the most
absurd. By one and the same measure to stamp down the progress of India
and promote the progress of other silver-using countries; to diminish the
traffic on Indian railways, and correspondingly increase the traffic in
such countries; to diminish the volume of India's trade and increase that
of other Eastern countries; to raise a comparatively small sum for the
Indian Exchequer at a vast cost to the producers of India; to diminish the
amount of capital that would otherwise flow into the hands of the people,
and to, at the same time, sacrifice all its consequential effects; to
diminish employment for labour and increase the causes that aggravate
famines and scarcities; to ultimately diminish the financial resources of
our Indian Empire; to create a serious cause of dispeace (a useful Scotch
word) between us and the people we govern;--such are some of the effects
that must be produced should the Government be successful in carrying out
that monetary policy which it has forced on India in the most arbitrary
and tyrannical manner. Can we wonder then that Sir David Barbour, the
Indian Finance Minister, said that the measure would have "far-reaching
effects, and ought not to be attempted unless under the pressure of
necessity?" No such necessity, as I have completely shown, has arisen. Out
of its own mouth, then, does the Government stand condemned.
In this connection it may be interesting to quote the opinion of the great
Duke of Wellington, who, speaking in the House of Lords in 1833 (July 5),
said, "My lords, I wish the noble lords opposite had taken the advice of
Sir John Malcolm upon the subject of forming an independent body in
London, representing the interests and carrying on the concerns of India.
My lords, it is persons of this description who interpose an efficient
check upon the Government." Unfortunately for India there is no such
body, and the final decision on this great question has rested with a
Cabinet composed of men who know nothing of Indian interests, and who,
indeed, have no time to attend to them, seeing that their thoughts require
to be almost exclusively devoted to a consideration of those
vote-catching, parochial politics with the aid of which alone the
Government can hope to maintain its balance on the political tight-rope.
I may observe, in conclusion, that, as regards the effects of the
depreciation of silver on a silver-using country, we have, in the case of
Mexico, circumstances exactly parallel to those in India, and in the
"Times" of October 21st, 1893, a most interesting analysis is given of the
report of our consul at Mexico--Mr. Lionel Carden--as regards the effects
on that country of a further serious depreciation of silver. Mr. Carden
sums up his conclusions on the hypothesis that the present value of the
dollar, which is 3s. 1d., falls to 2s. 6d., and proceeds then to
examine into the effects of such a fall on the country considered as a
whole. He estimates the losses to the Government and the railways which
would arise from the sums they have to pay in gold, and then puts against
them the advantages that the fall in silver would confer on miners,
agriculturists, and manufacturers. His final conclusions are as follows:
"In striking a balance between the advantages and disadvantages arising to
different interests in Mexico from a depreciation of silver, it must be
borne in mind that the losses which would be sustained by the Government
and the railway companies are essentially limited in their amount, whereas
the benefits that would accrue to certain of the productive industries are
susceptible of indefinite extension. Moreover, an increase in the
productiveness of the country would make itself felt at once in an
increase of the revenue of the Government, as well as of the railways.
The only conclusion, then, at which it is possible to arrive is that a low
price of silver, if permanent, would not only not be prejudicial to Mexico
as a whole, but would conduce to its ultimate benefit by the stimulus it
would afford to the development of its immense agricultural resources."
Yes. The losses from the payments that have to be made in gold are a
comparatively speaking fixed quantity, while the gain to the people from
cheap silver will yield wide-spreading consequential benefits far beyond
the reach of calculation. This, too, is the case as regards India; we
require for it a Government which can appreciate, and act up to, this view
of the situation.
FOOTNOTES:
[61] "Minutes of Evidence taken before the Committee appointed to inquire
into the Indian Currency, 1893." "Report of Committee appointed to inquire
into the Indian Currency, 1893." "Indian Currency Correspondence between
the Government of India and the Secretary of State, 1893." "Abstract of
the Proceedings of the Council of the Governor-General of India, the
Viceregal Lodge, Simla, Monday, June 26th, 1893."
[62] I may mention that formerly anyone could take bullion or ornaments in
silver to the mints and change them for rupees.
[63] It is very difficult to form an accurate opinion on this point.
Returns seem at first sight very conclusive, but you require a knowledge
of facts which the returns do not disclose. For instance, in the
Government return quoted in the "Economist" of September 30th, 1893, it
would appear that, compared with 1873, there had been an enormous rise in
the price of ragi--a millet which is the staple food of the people of
Mysore. In the table, the prices of 1873 being taken as equal to 100, the
rise from 1876 to 1880 is 209, from 1881 to 1885 the ratio falls to 103,
and remains at that till 1890. Then, in 1891, it rises to 138, and in 1892
to 177. From this return the writer in the "Economist" concludes that the
purchasing power of the rupee is now about 30 per cent. lower than it was
in 1873. But to my mind the rupee price of ragi, judging by the returns
and omitting periods of famine and scarcity, has probably only risen 3 per
cent. The high price of the 1876-80 period was caused by the great famine,
and the price in 1891 is to be accounted for by the partial failure of the
ragi crop in that year--the country being on the brink of a famine--and
this circumstance of course affected prices in the year following.
[64] The amount that the Government would save is about 1,570,000 Rs. x.
[65] The reader will see that, for the sake of making even figures, I have
taken the value of the exports at upwards of eleven millions less than
they really are. The return of the trade of British India for 1891-92 is
as follows:
Rs. x
Private imports 81,310,119
Private exports 111,179,196
Government imports 2,844,926
Government exports 281,082
-----------
Total trade Rs. x 195,615,323
The above figures show that--
The export trade is Rs. x 111,179,196
The import trade is Rs. x 84,155,045
-----------
Net excess exports of total trade Rs. x 27,305,233
[66] I observe that one of the witnesses calculates the export tax thus
proposed to be levied by forcing up the exchange to 1s. 6d. at 20 per
cent., but I have obtained my figures from a highly competent authority,
and I have no doubt they are substantially correct. I may add that the
"Times" correspondent, telegraphing from Calcutta on October 23rd, says,
"Exports cannot be profitably financed. The currency legislation alone is
equivalent to 20 per cent. tax upon them."
[67] As a set-off against the charges complained of, it should be
remembered--a point which I did not take into account when formerly
writing on the subject--that England bears the cost of the naval
protection of India.
[68] I have since ascertained, on good authority, that, though the coffee
of Brazil has not as yet come into competition with Indian coffee (as
people used to the latter do not care for the former, and would not use it
unless there was a very great difference in the value), the coffee from
Costa Rica, Columbia, Guatemala, and Mexico (all silver-using countries)
does so to a very considerable extent.
[69] It might be imagined from this statement that a low rate of exchange
had been already setting back, or at least arresting, the hand of
progress, and I therefore quote the following passage from p. 40 of the,
"Report of the Currency Committee."
"The following facts relating to the recent progress of India are taken
from a paper read by Sir W. Hunter (one of the greatest existing
authorities on the subject) at the Society of Arts, on the 16th of
February, 1892.
"Between 1881 and 1891 the whole number of the Army had been raised from
170,000 to 220,000, and the number of British soldiers in it from 60,000
to 71,000, or, including reserves, volunteers, etc., to very much more.
Many large and costly defensive works had been constructed, both on the
north-west frontier and on the coast. In recent years almost all the
public buildings have been reconstructed on a large scale.
"Railways, both military and commercial, have been greatly extended.
Notwithstanding these extraordinary expenses, there were, during the
twenty-five years which followed 1862, fourteen years of surplus and
eleven years of deficit, yielding a net surplus of Rs. x 4,000,000. In
1889 the public debt of India, exclusive of capital invested in railways,
showed a reduction since the mutiny period of Rs. x 26,000,000. The rate
at which India can borrow has been reduced from 4 or 5 per cent. to a
little over 3 per cent. The revenue of India, exclusive of railways and
municipal funds, has grown between 1856-57 and 1886-87 from Rs. x
33,378,000 to Rs. x 62,859,000, and in 1891 it had increased to Rs. x
64,000,000, or, including railway and migration receipts, to Rs. x
85,750,000; and this increase is due to the growth of old revenue rather
than to new taxation. Further, whilst the rent or land tax paid by the
people has increased by one-third, the produce of their fields has more
than doubled, in consequence partly of higher prices and partly of
increase in cultivation. Further, in 1891 there were nearly 18,000 miles
of railway open, carrying 121,000,000 of passengers and 26,000,000 tons of
goods, and adding a benefit to the people of India calculated as far back
as 1886 at Rs. x 60,000,000. Further, the Indian exports and imports at
sea, which in 1858 were about Rs. x 40,000,000, amounted in 1891 to about
Rs. x 200,000,000, and the produce thus exported has increased in quality
and variety no less than in amount."
What evidences of "a fatal and stunting arrestation of development"!
[70] This extraordinary assumption must evidently have been founded on
another, if possible still more wonderful; namely that the American
Government was composed of individuals so short-sighted that they would
fail to take the precautions which men of ordinary common sense would be
sure to adopt with the view of preventing, as far as possible, a sudden
fall in the value of silver. But the American Government, as we know,
naturally diminished its purchases of silver, and as no one supposes
(except perhaps the Indian Government) that it can be so silly as at once
to lose money and create a gratuitous disturbance by suddenly flooding the
market with the silver accumulated, we see that, since the repeal of the
Sherman Act, the price of silver, so far from having gone down, as
anticipated by the Viceroy, has even slightly gone up.