ENGLAND: PRE-WAR PROBLEMS
=452. Relative decline in value and quality of English exports.=—The
questions agitating the minds of English business men and statesmen at
the opening of the twentieth century rose from a consideration of the
immediate past and of the future of English commerce. While the country
had enjoyed a full measure of prosperity in recent years, and had
witnessed a considerable increase in the quantity of its foreign trade,
the quality of this trade awakened forebodings. The increase had been
almost entirely confined to imports. Since 1872 the exports, though
they had increased in bulk, had remained almost stationary in value;
they had kept pace neither with the growth of population in England,
nor with the growth in value of the exports of other countries. In the
twenty years, 1881-1900, foreign countries enlarged their purchases
(imports) by 11 per cent, while England augmented her sales to them
(exports) by only 4 per cent; the British possessions enlarged their
purchases by 17 per cent, while English sales to these dependencies
showed an actual decrease of 1 per cent. The exports of which England
has been most proud, as indicating her superior industrial strength—the
textiles, and iron and steel—had either increased slowly or shown an
actual decline. On the other hand, the exports which had increased in
value were of a kind which the English viewed with disfavor. Many of
them (apparel and slops, preserves, soap, furniture, etc.) were the
product of cheap and unskilled workers and seemed to show a degradation
of English labor. Others of them, potter’s clay and especially coal,
were raw materials which the English would have preferred to use in
their own industry at home.
=453. Growth in exports but decline in relative share of trade.=—The
table of trade of the United Kingdom in the preceding chapter shows
that the period of stagnation in the English export trade ended about
1900, and that there was a marked recovery between that date and 1914,
even after allowance is made, as it should be, for the rise in the
general level of prices, which magnifies the actual growth. Studying
the course of trade during the generation comprised between the dates
1880-1909, the United Kingdom maintained or increased the value of its
sales in all but two of the more important markets of the world; and
the two countries to which British exports have declined, Russia and
Roumania, would not by themselves form very serious exceptions. If,
however, we select for study not the bare figures of export values, but
the figures showing the percentage which British sales to any country
form of that country’s total imports, the result is very different; for
we are then measuring British progress not by the home standard but by
the standard set by commercial competitors.
=454. Illustration by the recent commerce of Japan.=—The distinction is
so important that it deserves illustration by a particular example, and
we may choose for the purpose a country which during the recent period
has furnished a rapidly growing market to the merchants of the world,
namely, Japan.
ANNUAL AVERAGE IMPORTS OF JAPAN IN RECENT DECADES
(_Values in millions of yen_)
==========+=========+=========+=======+===========+==========
| From | | | From |
| United | From | From | other | From all
| Kingdom | Germany | U.S. | countries | countries
----------+---------+---------+-------+-----------+----------
1881-1890 | 19.6 | 3.4 | 4.2 | 19.3 | 46.5
1891-1900 | 46.6 | 14.8 | 22.8 | 87.0 | 171.2
1900-1909 | 84.3 | 36.1 | 65.8 | 199.8 | 386.0
==========+=========+=========+=======+======================
The Japanese monetary unit, the _yen_, has declined considerably in
value in the course of the period, and therefore no exact equivalent
for it can be given; but even allowing for this decline the growth
of British export trade to Japan appears satisfactory if the student
regards merely the figures in the first column. If we apply, however,
the comparative standard, and measure the British exports to Japan
alongside those from other countries, the result is not the same.
PERCENTAGE OF JAPAN’S IMPORTS FROM EACH COUNTRY
==========+=========+==========+=======+===========+==========
| From | | | From |
| United | From | From | other | From all
| Kingdom | Germany | U.S. | countries | countries
----------+---------+----------+-------+-----------+----------
1881-1890 | 42.2 | 7.2 | 8.9 | 41.7 | 100
1891-1900 | 27.3 | 8.6 | 13.3 | 50.8 | 100
1900-1909 | 21.8 | 9.3 | 17.0 | 51.9 | 100
==========+=========+==========+=======+===========+==========
=455. Relative decline of the United Kingdom in the world’s
markets.=—Pursuing the comparative method, illustrated by the last
preceding table, we find that the United Kingdom during the generation
1880-1909 showed an increased share of sales in only three of the minor
markets of the world: Spain, Argentine Republic, Sweden. It almost held
its own in France, Switzerland and Norway; but in most of the important
markets of the world it lost ground seriously.
Even in its trade with the British dependencies the United Kingdom did
not hold its own. Comparing the percentage of British exports to a
dependency with its total imports, we find that the United Kingdom kept
its place in only one of its colonial markets, Mauritius, a purchaser
of relative insignificance, while foreign countries gained ground from
it in British India, Australia, Canada and all the other important
colonial markets.
=456. Significance of the decline, and three possible explanations of
it.=—The relative decline in English exports did not imply that the
country was approaching industrial bankruptcy, but it did mean, if
long continued, the loss of industrial leadership; and the causes of
this decline and remedies proposed to meet it are worthy of careful
attention. The decline in exports may be attributed to one of three
factors: (1) weakness in manufacturing the wares which form the staple
of the export trade; (2) weakness in marketing these wares, when they
have been made; (3) the adverse influence of protective tariffs in
other countries.
=457. (1) Competition in manufactures by low-grade labor.=—Considering
the first of these factors, we find English manufactures menaced by
competition from two different directions: from the East (countries
like India and Japan), and from the West (countries like Germany and
the United States). Eastern competition threatened especially England’s
staple manufacture, cotton. The English laborer was superior in every
point to his Asiatic competitor, but not enough better to earn his
higher wages when employed in the manufacture of coarse goods. England
had built up a serious and growing competition by exporting machinery
and sending out skilled managers and foremen to superintend it. During
the past generation there had been an immense development in the
textile manufactures of India and Japan, and these countries were able
now not only to supply a large proportion of their own demand, but also
to reach out into neutral markets like China.
=458. Competition in manufactures of high-grade labor.=—More serious,
because capable of far greater extension, was the competition which
the Englishman had begun to experience from advanced western peoples.
This confined itself to no one branch of production, but spread
over the whole broad field of manufactures. Americans and Germans
had begun to supply not only the British dependencies but England
herself with manufactured wares, in increasing measure. Some of the
reasons suggested to explain their superiority were as follows: (1)
Elementary education had been developed only recently in England,
and had been hampered by sectarian questions; the average laborer in
Germany and the United States was better equipped for modern methods
of manufacture than was the Englishman. (2) It was asserted that trade
unions had seriously detracted from the productiveness of English
manufactures, by preventing the introduction of improved machinery
and by limiting output. (3) Technical education was even more backward
than general education; improved processes were introduced earlier and
developed further in other countries, for lack of a class of trained
manufacturers in England. (4) Finally, and probably the most important
point of all, English manufactures appeared to suffer from the very
fact that they had been long established. An industry was divided
among many independent firms, each clinging resolutely to the plant,
the processes and the methods which had won for it success in the
past. Foreign countries learned all that the English had to teach, and
applied the lessons in a new field in which they could build up great
manufacturing units, with fresh machinery adapted to production on a
large scale, and with a more flexible and more efficient organization.
It was charged that the directing class in England had lost its
original energy, and did not realize its serious responsibilities. An
English expert who investigated the American cotton industry reported
that there was a great difference in the energy, intelligence, and
adventurousness of the managing class in the two countries, all to the
advantage of the United States.
=459. (2) Alleged weakness of the English mercantile organization.=—In
the preceding paragraph we have suggested various elements of weakness
in English manufactures, which in greater or less degree were bound to
affect the power lying behind the English export trade. We have now to
consider another set of conditions, which are easily confused with the
foregoing, but which are better kept separate. English manufacturers
might be strong, and still they would have but a small export trade
if they were not informed as to the wants of their customers, and
did not study their customers’ tastes in supplying goods. This set
of conditions, which may be termed mercantile, the business of the
merchant rather than of the manufacturer, we may study under two heads:
(_a_) finding out what is wanted; (_b_) selling a suitable ware when it
has been made.
=460. Insufficient knowledge of the needs of foreigners.=—(_a_)
The complaint was general that the scouts of British commerce, the
commercial travelers, were too few in number and that they were ill
prepared, especially in their knowledge of foreign languages. The
English exporter shipped goods which he thought were suitable, without
knowledge or regard of the desires of his customers. A business man who
had had seven years’ experience with trade in the Empire said, “There
is a universal complaint: ‘You English will not make your goods to suit
our markets. You send your samples and tell us to take them or leave
them—you don’t care which. If we ask you to alter things you either
refuse to do it or else you demand prohibitive prices.’” In countries
where English is not spoken (Persia, Sumatra, South America, etc.) the
conditions were still worse. The Merchandise Marks Act, the origin of
the familiar “Made in Germany,” was designed to protect the British
colonist from having foreign-made goods palmed off on him as English,
and thus help the English manufacturer; but it served only to advertise
foreign manufactures, and led the colonists to import goods directly
from foreign countries, instead of taking them through English hands.
=461. Unwillingness to adopt foreign trade customs.=—(_b_) Finally,
when wares suited to sale in any market have been manufactured, they
need to be sold, to maintain trade. English exporters were criticised
for allowing their wares to be driven out of foreign markets by other
wares, no better in themselves but for some reason more attractive to
the customer. Here again the commercial traveler was at fault, but
part of the blame lay on the exporter. Sales must be made in small
lots and on long credit in some countries, if they are to be made at
all; and the English had shown a disinclination to adapt themselves to
such conditions which had enabled others (especially Germans) to take
trade from them. When other things are nearly equal slight differences
in packing and shipping may turn the scale. The English lost trade
in Australia because they sent tacks in paper packages instead of
in cardboard boxes, because they sent cartridges in lots of one
hundred instead of lots of twenty-five. An interesting example of an
opportunity well met occurs in the career of an Englishman who left the
field of manufacture to become a leading statesman—Joseph Chamberlain.
He found that the trade with France in his product, wood-screws, was
small; he introduced the metric system of measurement, put up the
screws in packages of the size usual in France and wrapped in blue
paper familiar to the French customer, and developed a large export
trade. If there had been more men like Chamberlain in manufactures in
England there would have been less need of the protective policy which
he advocated as a remedy for the troubles of English business.
=462. Tendency to remedy these faults.=—There is no doubt that there
was a good basis for these charges against the British manufacturer and
merchant, though some of them doubtless were exaggerated, and it is
impossible to apportion exactly the weight that should be allowed to
any one of them. The crisis of the World War was needed to sweep away
the customs and traditions of a long past. The stimulus of a struggle
for national existence, with the insistent demand for the highest
attainable efficiency, effected reforms reaching deeper and further
than those of a whole previous generation. Even before 1914, however,
many men in responsible positions in English politics and business
recognized the need of mending the pace if England was to keep abreast
of competitors in industry and commerce. Interest in elementary and
technical education quickened; inquiry was directed to the means by
which foreign rivals were getting ahead; the government, associations
and individuals worked together or independently to further efficiency.
A parliamentary committee which in the course of the World War made a
careful study of the prospects of British industry and trade reached
the following conclusions as regards conditions in the previous decade.
England had taken but a small part in the development of some modern
industries, particularly the chemical and electrical; the country had
made comparatively little progress in the iron and steel industry, in
which it was entirely overshadowed by Germany and the United States;
but it had shown wholesome vigor and capacity for growth in some great
manufactures, such as the textiles, ship-building and some branches
of machine-making. British trade abroad was found to suffer from the
competition of foreigners who were found, in some cases at least, to be
following methods of organization and marketing that were distinctly
more efficient than those which the British pursued.
=463. (3) Adverse influence of foreign tariffs; proposals to revise
the English policy of free trade.=—Under conditions of adversity there
is always an inclination to lay the blame, rightly or wrongly, on
others. A considerable party in England asserted that the reasons for
the recent decline were political rather than economic, resulting from
the protective tariffs of other states; and this party asserted that a
change in the tariff policy of England and of the colonies was needed
to rescue British commerce.
There can be no question of the main fact, that protective tariffs
had increased considerably during the last quarter of the century. It
is estimated that the principal English exports were burdened with
duties equivalent to 10 to 30 per cent ad valorem in most states, but
amounting to far more than that in some cases (72 per cent in United
States, 130 per cent in Russia). There can be no question that England
suffered from these restrictions; every commercial state suffers from
them. It is, however, open to grave doubt whether England could help
herself by a change in policy; and the question of what change, if any,
ought to be made, remained unsettled.
=464. Demand for customs duties as a means of defense and
retaliation.=—One group of “tariff reformers” clung to the ideal of
free trade, and favored its maintenance as the policy of the country
in general. It would, however, permit deviations from it in particular
cases. The adherents of this view asserted that England stripped
herself of the armor and the weapons of commercial war when she
adopted complete free trade. She could make no effective protest when
other nations raised tariffs against her, marked perhaps by offensive
discriminations; she must suffer everything because she was forbidden
to retaliate. The adherents of this view laid particular stress on the
practice of “dumping,” as it is called. The manufacturers of protected
nations, themselves, secure from England’s competition, market their
surplus output in England at prices which may not cover the costs, much
less the profits, of production. It is cheaper to do this than to break
prices in the protected market at home; it kills the English industries
and enables foreign manufacturers in the long run to raise prices to
a profitable level in the English market. For retaliation against
protective countries, and for defense against “dumping,” this school
demanded that the English government be armed with the power to impose
heavy duties, to be temporary in character and to be removed as soon as
their immediate object has been accomplished. Such a policy has been
adopted in Canada.
=465. Proposal of an imperial customs union.=—Another school of tariff
reformers, led by Joseph Chamberlain, accepted in general the views
just indicated, but laid particular stress on another possibility in
shaping English commercial policy. It would make the whole great group
of English dependencies not only a political unit but a commercial unit
as well, bound together in an imperial customs union (_Zollverein_), so
that trade would flow from place to place within the Empire instead of
crossing its frontier. It is not possible here to discuss the various
aspects of this proposal, of which some of the most important are
political rather than commercial in character. The attractiveness of
the plan is at once apparent; it promises to assure to England a market
for her manufactures in the colonies, and to the colonies a protected
market for their raw materials in England. The practical weakness of
the plan is, however, equally apparent; no law would be necessary
to secure this result if the various parts of the Empire found it
advantageous to trade with each other, and the mere suggestion that a
law is necessary shows that trade would be cramped and the interests of
individuals hurt by such an arrangement.
=466. Obstacles to a customs union.=—The course of trade has, in
fact, taken lines more and more opposed to the scheme of a customs
union. During the first part of the century, when England was still
protectionist, and when the mother country made the laws for its
dependencies, the plan could be carried out with comparatively little
friction; the colonies were engaged chiefly in the production of raw
materials, and were glad to exchange these for English manufactures.
Since about 1850, however, both the political and the economic
organization of the Empire have changed. The self-governing colonies
have received the right to make their own laws, and have used it to
raise protective tariffs, against England as well as against other
countries. Behind the barriers of the tariff they have developed
a considerable manufacturing industry. They were now unwilling,
therefore, to open wide their markets to English manufacturers; and
showed an increasing tendency to buy what manufactures they did import
from other countries than England. They were unable, on the other
hand, to supply in full the English demand for raw materials; and any
measure designed to restrict supplies of raw materials to some source
inside the British Empire threatened injury to producer and consumer
at home. The self-governing colonies gave evidence of the strength of
their political affection by enacting differential tariffs favoring
the British producer. Canada began the practice in 1894, and later
enlarged the concession until it amounted to a remission of one-third
of the regular customs duty. New Zealand, South Africa and Australia
adopted after 1900 the same principle, making their concessions less
extensive. The differential advantage thus offered the English exporter
must evidently have had an effect on the course of trade. The new
policy was keenly resented in Germany, where it was pictured as an
abuse by England of her political ascendancy to deprive other countries
of the benefit that should go to superior economic efficiency. On the
other hand the policy seems to have been less important than ordinary
economic factors in determining the flow of goods, and certainly had no
decisive influence in changing the customary channels of trade.
=467. Relative progress of England and other countries just before the
World War.=—Just before the outbreak of the World War England appeared
to have made a new start in the efforts to keep her place among
commercial countries. It is interesting to compare the advance that she
had made with the progress of Germany and of the United States.
ABSOLUTE INCREASE IN TRADE OF THE ANNUAL AVERAGE 1910-13
OVER AVERAGE 1895-99.
(Figures in millions of £ sterling, with rough equivalent in $)
=============================+==============+==========+=============
|United Kingdom| Germany |United States
-----------------------------+------+-------+----+-----+-----+-------
Net imports for consumption. | £218 | $1090 |£260|$1300|£188 |$940
Imports of manufactures. | 72 | 360 | 48| 240| 81 | 405
Exports of domestic products.| 230 | 1150 | 244| 1220| 221 |1105
Exports of manufactures. | 177 | 885 | 170| 850| 140 | 700
=============================+======+=======+====+=====+=====+=======
The figures, it should be noted, give not the total commerce of any
country, but the gain which each country had made in the period
in question. The figures do not take account of the difference in
population in the three countries; they treat the three different
countries as units. The reader in studying them cannot fail to be
impressed by the closeness in the struggle for commercial leadership,
and will be better prepared to understand how precarious was the
situation if in one of the countries the view was dominant that
commercial interests were group interests, to be furthered by any
assistance which the state could render, if necessary by the sword.
QUESTIONS AND TOPICS
1. Note the different senses in which the commerce of a country may be
described as “declining.” (1) Other things remaining the same, there
may be an absolute decrease in the quantity and value of both exports
and imports. (2) The decrease may affect only one side of the balance,
while the total figures may remain the same. Why is the decrease
viewed with especial apprehension if it affects exports? (3) Other
things remaining the same, including the quantity of wares, there may
be a decrease in the value of a country’s commerce, due to a change
in the level of prices. (4) The quantity and value of a country’s
commerce may remain the same, and yet be regarded as “declining” if
the population of the country increases; the share of each person in
commerce would be diminishing. (5) Similarly, a country’s commerce
may keep pace with its population, and yet be termed “declining” if
the commerce of other countries increased more rapidly, so that the
given country conducted a diminishing share of the world’s trade.
(6) Previous standards of “decline” have been based on quantity,
measured either in bulk or value, but there may also be a decline in
quality. A scientist might gain more income if he adopted the trade of
an artisan, but he would be thought, nevertheless, to lose in rank.
Endeavor to make clear to yourself the significance of each one of
these various changes, and be prepared to distinguish them as you
study the commercial tendency of different countries. Find examples of
as many of them as you can.
2. Pick from following sections a concrete example to illustrate each
of the three heads suggested in sect. 452.
3. English industry and Eastern competition. [R. S. Gundry, in
Fortnightly Review, 1895, 64: 609-620.]
4. Recent history of elementary education. [Mathew Arnold in Ward,
Reign, 2: 238 ff.; F. E. Smith in Fortnightly Rev., 1912, vol. 97, p.
400 ff.]
5. How trade unionism affects British industries. [E. A. Pratt, Trade
unionism; B. Taylor in North Amer. Review, 1901, 173: 190-207; in
defense of trade unions cf. Edwards in Contemporary Review, 1902, 81:
113-128, and writings of Sidney and Beatrice Webb.]
6. Technical education in England. [Rawson in Contemp. Rev., 1901, 80:
584-598.]
7. Reasons for decline of the English silk trade. [Parker in National
Review, 1895, 26: 212-225.]
8. Relative strength of modern countries in manufactures. [Schoenhof
in Forum, 1901, 31: 89-104 (statistical); Browne in National Review,
1899, 33: 568-580 (espec. U. S.).]
9. Faults of English mercantile organization. [Lambert in Nineteenth
Century, 1898, 44: 940-956; Greenwood in same, 1899, 45: 538-547.]
10. Meaning of “dumping”; effects; means of prevention. [Ashley,
Tariff problem; Marshall, Industry and Trade.]
11. Balfour’s view of the commercial situation. [A. J. Balfour,
Economic notes on insular free trade, N. Y., Longmans, 1903, $.30;
Tariff reform, $.10.]
12. Criticism of Balfour’s proposals. [Quarterly Review, 1903, 198:
613-648.]
13. Chamberlain’s view of the commercial situation. [Chamberlain, The
policy of imperial preference, National Review, 1903-4, 42: 351-370.]
14. Discussion of Chamberlain’s proposals. [Nelson in North Amer.
Review, 1903, 177: 183-191; Goschen in Monthly Review, 1903, 12: July,
38 ff.; Quarterly Review, 1903, 198: 246-278; Edinburgh Review, 1904,
200: 449-476.]
15. The project of an imperial customs union. [Mahan in National
Review, 1902, 39: 390-408; Colquhoun in North Amer. Review, 1903, 177:
172-182; Giffen, in Nineteenth Century, 1902, 51: 693-705; Bastable in
Econ. Journal, 1902, 12: 507-513.]
BIBLIOGRAPHY
I cannot attempt a survey of the vast literature which has sprung
in recent years from the discussion of the proposal to change the
commercial policy of England.
A bibliography of 38 pages compiled under the supervision of A. P.
C. Griffin, Select list of references on the British tariff movement
(Chamberlain’s plan), was published at Washington, 1904. For a
defense of the protective policy the reader may see Ashley, Tariff
problem; for representative statements of the free trade views see
William Smart, The return to protection, London, Macmillan, 1904;
and L. G. C. Money, Elements of the fiscal problem, London, King,
1903. Considerable historical importance attaches to the books by
Gastrell and Williams, which did much to arouse interest in the
great commercial question of the day. Useful surveys are provided in
translations of two foreign works, Carl J. Fuchs, The trade policy of
Great Britain, London, 1905, and Victor Berard, British imperialism
and commercial supremacy, London, 1906.
Reading of a more substantial character is offered in books which
analyze the organization of industry and discuss the merits and
defects of the English. For a survey from the standpoint of theory see
Alfred Marshall, Industry and Trade, London, 1919, which is adapted
only to advanced students, and for more concrete discussions, suited
to topical reading, Arthur Shadwell, **Industrial efficiency, London,
1906, two volumes, reprinted later in one; Sydney J. Chapman, **Work
and wages, 3 vol., 1904-14. Interesting comparisons of methods and
results in England and in the U. S. will be found in Report of the
Moseley Industrial Commission, London, 1903, American engineering
competition, N. Y., 1901, and Causes of decay of a British industry,
(gun-making), by “Artifex” and “Opifex,” London, 1907.
The analysis of commercial statistics in Schooling and Fuchs is
supplemented by later studies to be found in the Journal of the Royal
Statistical Society.