FINANCE.
THE financial aspects of our question are striking and
significant. Britain herself is the greatest money-lending
nation of the world: her colonies and dependencies, with their
vast undeveloped resources, are among the greatest borrowers.
The public debts of the Australasian colonies amount to nearly
£200,000,000, and private investments for the development of
mines, for the wool producing and meat raising industries and so
on, amount, I have been told by Australian business men, to even
more. It is probably a moderate estimate to say that Australasia
borrows £400,000,000, all of which is raised in London, to which
the interest steadily flows back.
In his 'Problems of Greater Britain' Sir Charles Dilke says:
'British capital to the extent of £350,000,000 sterling has been
sunk in Indian enterprises, on official or quasi-official
guarantee; and a further vast amount of British capital is
employed by purely private British enterprise in industry.'
Canada's public borrowings amount to about £50,000,000, and
allowing an equal sum for private {272} investments, she perhaps
draws £100,000,000 of working capital from English sources.
Nothing has been said about South Africa, the West Indies, and
the minor divisions of the Empire, but even the rough estimates
already given prove that the aggregate of money loaned from
Britain, and borrowed by other parts of the Empire, reaches
enormous figures, and certainly exceeds £1,000,000,000 sterling.
For investor and borrower the benefit is mutual. The investor
has the advantage of placing his money where it will be employed
in making the most of vast natural resources, under a settled
government, and in the energetic and responsible hands of men of
our own race. This advantage is emphasized by the experience of
British capitalists in countries like Argentina, where
government is unstable, or Turkey, where it is inefficient. It
is emphasized by the contrast between the financial position of
Egypt, when dominated by British influence and protected by
British power, and the same country when free to follow its own
methods of administration and compelled to find its own defence.
It is shown by the difference between the rates at which
Australia or Canada borrow money, and those paid by many foreign
states.
The colonial borrower has the advantage of getting the money he
requires at the cheapest rate possible. The last Canadian loan
was floated at 3 per cent, and the Australian colonies are
borrowing at 3 1/2. Lord {273} Dufferin has said that British
capital is ventured in India 'on the assumption that English
capital and English justice would remain dominant in India.' In
like manner the rate at which colonial loans are issued is
unquestionably determined in part by the fact that the
industrial position and military security of the colonies is
guaranteed by the imperial power. Independent, exposed to face
the risks of war unaided, and compelled to bear the whole burden
of defending their coasts and commerce, the credit of the
colonies could not be what it is to-day.
On the other hand, since cheap capital means cheap production,
the money lent on easy terms to the colonies returns far more to
the mother-country than the interest which has hitherto been so
regularly paid. It secures for Britain what she most requires,
cheap food and cheap raw material--wheat, beef and mutton, wool,
cotton and minerals. For a great consuming country the free
movement of the wheels of industry in the areas of production is
all-important. Even the cheap insurance which comes from assured
safety in the transport of goods between producer and consumer
is no slight element in the prosperity of both.
In view of these considerations there is clearly ground for
saying that a close political union between the greatest
money-lending centre of the world and countries which have the
widest range of undeveloped resources, between the greatest
consuming country and those mainly productive, will be of the
greatest advantage to both.
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I have often, to audiences in the colonies, put the financial
relation in the following way: 'You borrow from Britain in
public debts many hundred millions of pounds. When, as
merchants, ship-owners, or house-holders, you borrow money in a
private capacity, on your goods, your ships, or your houses, the
lender requires that as a guarantee your property must be
insured, and for this insurance you must yourself pay. Now when
British people lend you money, on your state credit, they
themselves provide the insurance of the whole strength of the
British army and navy--an insurance which it is admitted secures
the cheapest money in the world. But not only does Britain lend
you the money for the development of your resources, and provide
the insurance which enables you to have it at a cheap rate, but
under her Free trade system she then in addition throws herself
into the open market for every pound of wool or ounce of gold or
tin that you produce. She asks no preference in colonial
markets. Any conditions which would be more favourable for a
borrowing country I cannot find it possible to conceive.'
A further point seems worthy of consideration.
While the colonies, under the national production, borrow money
cheaply on the public credit, the United Kingdom borrows more
cheaply still. Low as is the rate of interest paid on the
National Debt, for many purposes of investment it is deemed the
most satisfactory, because the most secure, of all.
One of the advantages which Canada has reaped {275} from
internal confederation has been the greatly decreased rate of
interest which she pays for her borrowings. A high financial
authority has estimated that the Australasian colonies would
gain, from a consolidated federal stock, an advantage equal to a
diminution of more that £20,000,000 on the general indebtedness.
Facts such as these have naturally led the advocates of national
unity to suggest a further step and to urge that a financial
federation of the public debts of the Empire, guaranteed by the
strength and resources of the nation at large, would reduce the
cost of public money for the colonies and dependencies to at
least the level of interest paid on the National Debt. It has
been pointed out with force and reason that the saving which
might thus be effected under a guarantee of Imperial unity would
of itself be sufficient to enable the colonies to contribute a
large sum to the national defence without any addition to the
burdens which they now bear, while sensibly relieving the
taxpayer of the United Kingdom. The fixing of a reasonable limit
to thus borrowing on national credit for each portion of the
Empire would, of course, present a difficulty, but it is one
which has, on a small scale, been grappled with in the provinces
of the Canadian confederation, and does not seem to be
altogether insuperable. The federally guaranteed debt would
certainly be held almost exclusively within the Empire itself,
and the general desire for its complete security might fairly be
expected to act as a strong national bond. {276} Enormous as is
the amount which the mother-country has already staked in the
colonies and dependencies, it seems certain that under
favourable conditions capital will more and more seek these
areas of peaceful industrial development rather than take the
risks of internal revolutions in South America or military
convulsions in Europe. With closer union this tendency, in
itself essentially healthy, would increase. With separation, it
would be deeply affected by two considerations: first, the
weakened guarantee of safety to the individual colony: and
second, the new burden which would be laid upon the separating
colony in undertaking single-handed the whole task of defence,
and the whole diplomatic, consular and other organization
incident to national independence. Inevitably expenses would go
up while credit went down. I am satisfied that people either in
England or abroad who for colonial relations thoughtlessly
borrow the simile of the ripe fruit dropping easily from the
parent tree, have formed little conception of the violent
financial wrench involved in the separation of even one great
colony, or of the strength of the financial bond which, every
day increasing in strength, is binding more closely together
with ties of common interest the mother-land and her greatest
offshoots.
A very important financial issue has lately been raised by the
proposition to permit the investment of British Trust Funds in
colonial securities. The proposal has for some time been
steadily urged upon the English Government by the Agents General
who {277} officially represent the Australian colonies, and by
the High Commissioner for Canada, and it is generally believed
that the negociations had proceeded so far that at one time Her
Majesty's Government had consented to initiate the Legislation
necessary for the purpose. Though the discussion is now in
abeyance, it will no doubt come up at a later time for decision.
If favourable, that decision would confer a considerable
financial advantage upon the colonies. Of the sufficiency of the
guarantee furnished in such investments careful and responsible
financiers entertain no reasonable doubt. It is obvious,
however, that any determination to concede this privilege to
trustees implies a belief that the colonies will remain a part
of the Empire. It is equally obvious that any tendency in an
opposite direction on the part of any great colony would be
fatal to the proposition. At present such investment can only be
made in certain home securities, or in Indian, and a very
limited number of colonial securities which are under direct
Imperial guarantee. There would be as valid reason for extending
them to French, Italian or Russian securities as to those of
colonies which might soon become independent nations. It will be
scarcely possible to avoid the consideration of ultimate
inter-imperial relations should this subject come up for final
decision in Parliament. Under a settled system of Imperial unity
colonial securities, even without Legislation, would naturally
rank with the best in the Empire.
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