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ARE WE RUINED BY THE
GERMANS?
BY
HAROLD COX,
FORMERLY SCHOLAR OF JESUS COLLEGE, CAMBRIDGE.
_Republished from the "Daily Graphic" for the Cobden Club._
[Illustration]
CASSELL and COMPANY, LIMITED:
_LONDON, PARIS & MELBOURNE._
PREFACE.
The greater part of the contents of this little volume appeared
originally in the _Daily Graphic_, in the form of a series of six
articles written in criticism of Mr. Ernest Williams's "Made in
Germany." To these articles Mr. Williams replied in two letters, and to
that reply I made a final rejoinder. In the present reproduction this
sequence has been abandoned. For the convenience of readers, and for the
economy of space, I have anticipated in the text all of Mr. Williams's
objections which appeared to me to have any substance, and, in addition,
I have modified or omitted phrases, in themselves trivial, upon which he
had fastened to build elaborate but unsubstantial retorts. By doing this
I have been able to preserve the continuity of my argument and at the
same time to cut down a somewhat lengthy rejoinder into a brief
concluding chapter. Incidentally a few new points and some further
figures have been added to the articles. This arrangement,
unfortunately, deprives Mr. Williams's reply of most of its original
piquancy; but, in order that my readers may have an opportunity of
seeing what the author of "Made in Germany" was able to say for himself,
his letters are reprinted _verbatim_ in an Appendix. I am indebted to
the proprietors of the _Daily Graphic_ for their courteous permission to
republish the articles, and to the Committee of the Cobden Club for
undertaking the republication. I have only to add that the opinions
expressed throughout are my own, and that the Cobden Club does not
necessarily endorse every one of them.
H. C.
GRAY'S INN,
_December, 1896._
CONTENTS.
CHAP. PAGE
I.--OUR EXPANDING TRADE 1
II.--GERMANY: ONE OF OUR BEST CUSTOMERS 8
III.--PICTURESQUE EXAGGERATIONS 14
IV.--MORE MISREPRESENTATIONS 21
V.--OUR GROWING PROSPERITY 33
VI.--LET WELL ALONE 43
VII.--CONCLUSION 54
APPENDIX 57
ARE WE RUINED BY THE GERMANS?
CHAPTER I.
OUR EXPANDING TRADE.
In a little book recently published, an attempt is made to show that
British trade is being knocked to pieces by German competition, that
already the sun has set on England's commercial supremacy, and that if
we are not careful the few crumbs of trade still left to us will be
snapped up by Germany. This depressing publication, aptly entitled "Made
in Germany," has received the quasi-religious benediction of an
enterprising and esoteric journalist, and the puff direct from a
sportive ex-Prime Minister. Thus sent off it is sure to be widely
circulated, and, being beyond dispute well written, to be also widely
read. Unfortunately--such is the nature of the book--it cannot be so
widely criticised. It consists largely of quoted statistics and
deductions therefrom, and few readers will have the means at hand for
verifying the many figures quoted, while fewer still will have the
patience to compare them with other figures which the author omits to
mention. As a necessary consequence, a large number of persons will
believe that Mr. Williams has proved his case, and some of them will
jump to the conclusion, which is evidently the conclusion to which Mr.
Williams himself leans, that the only way to prevent the commercial
downfall of our country is to reverse the Free Trade policy which we
deliberately adopted fifty years ago.
THE ART OF EXAGGERATION.
That may or may not be a wise thing to do, but at least let us be
certain before taking action, or before taking thought which is
preliminary to action, that we know our facts, and all our facts. The
second point is as important as the first. On hastily reading Mr.
Williams's book for the first time, my impression was that he had only
erred by overlooking facts which told on the other side. On general
grounds, considering the signs of prosperity on every side, it seemed to
me impossible that the condition of our foreign trade could be so bad as
the author of "Made in Germany" paints it. A cursory glance at a few
staple figures convinced me that my general impression was a sound one,
that our trade was not going to the dogs, and that Mr. Williams had only
succeeded in producing so gloomy a picture by fixing his gaze on the
shadows and shutting his eyes to the sunlight. On this supposition I
began a more critical examination of his book, not with a view to
refuting his positive statements, but with a view to showing that in
spite of the ugly facts which he had, on the whole usefully, brought to
light, there were counterbalancing considerations from which we might
draw, at any rate, partial consolation. This I propose to do, but in
addition I shall be able to show that many of Mr. Williams's alleged
ugly facts are not in reality so ugly as he makes them look, and that
what he has done, in his eagerness to prove his case, is to so choose
his figures and so phrase his sentences as to convey in particular
instances an entirely false impression. How this is done will be shown
in detail later on. For the present it is sufficient to state that it is
done, and that some of the most alarmist statements in "Made in Germany"
will not bear critical examination. In a word, the author, in his
polemical zeal, has sinned both sins--he has suggested the false and he
has omitted the true; he has misrepresented, in particular instances,
the facts to which he refers, and he has not referred at all to facts
which refute his general argument.
THE WHOLE TRUTH.
It is with these that I propose first to deal, with the facts which show
that our trade is in a very healthy condition, and that though Germany
is also doing well and hitting us hard in some trades, there is no
reason to believe that her prosperity is, on the whole, injuring us. And
to guard myself, at the outset, against a temptation to which Mr.
Williams has frequently succumbed--the temptation of picking out years
peculiarly favourable to my argument--I propose to take the last ten or
the last fifteen years, for which statistics are available, and to give
wherever possible the figures for each year in the whole period. The
figures that will be here quoted are all taken from official records,
except when otherwise stated.
OUR TOTAL TRADE FOR TEN YEARS.
The first point to attack is the question of the total import and export
trade of the United Kingdom. The figures are contained in the following
table:--
TEN YEARS' TRADE OF THE UNITED KINGDOM
(Exclusive of Bullion and Specie).
In Millions Sterling.
--------------+----+----+----+----+----+----+----+----+----+----
|1886|1887|1888|1889|1890|1891|1892|1893|1894|1895
--------------+----+----+----+----+----+----+----+----+----+----
Total Imports | 350| 362| 388| 428| 421| 435| 423| 405| 408| 417
Total Exports | 269| 281| 299| 316| 328| 309| 292| 277| 274| 286
+----+----+----+----+----+----+----+----+----+----
Excess of | | | | | | | | | |
Imports | | | | | | | | | |
over Exports | 81| 81| 89| 112| 93| 126| 132| 128| 134| 131
--------------+----+----+----+----+----+----+----+----+----+----
These figures may be illustrated as follows:--
[Illustration]
These figures hardly bear out the statement that "commercial dry rot,"
to use one of Mr. Williams's favourite phrases, has already laid hold of
us. In spite of the fall in prices, the money value of our trade, both
import and export, has fully maintained its level. It is true that the
year 1886, with which the diagram starts, was a year of depression, but
the point which I wish to bring out by the diagram is not that 1895 was
a better year than 1886, but that the general course for the whole
period of ten years shows no downward tendency. Later on I shall give a
diagram, covering a period of fifteen years, which brings out the same
point even more clearly. It is important, however, at once to point out
that the mere comparison of the money totals of our trade in different
years is necessarily inconclusive, because no account is taken of
prices. To get a true comparison between any two years, say 1895 and
1890, we ought to calculate what the value of our trade in 1895 would
have been if each separate commodity had been sold at the prices of
1890. Were this done, it would probably be found that 1895, instead of
showing a decline, would show an immense advance. A similar comparison
has been privately worked out in one of the Government offices for the
years 1873 and 1886 with startling results, which I am permitted to
quote. It must be premised that only certain articles are entered in our
returns by quantity as well as by value, and it is therefore only
between these that such a comparison as I have indicated can be made. In
1873, the total declared value of our exports of these articles was 172
millions sterling; in 1886, it was 131 millions, showing an apparent
fall of 41 millions. But if these exports of 1886 had been declared at
the prices of 1873 the total value would have been 215 millions. In this
sense, then, our aggregate trade in these commodities in 1886, instead
of being 41 millions worse than 1873, was 43 millions better. This is
undoubtedly an extreme illustration, for the prices of 1873 were
exceptionally high, and those of 1886 exceptionally low. Nevertheless,
the illustration is most instructive as showing how extremely misleading
it may be to compare values only, without taking account of quantities.
Unfortunately, when we are dealing with the total trade of a country, a
comparison of values is the only comparison possible, for there is no
other common denominator by means of which varied articles--say, steam
ploughs, cotton piece-goods, and patent medicines--can be brought into
our table.
OUR IMPORTS OF GOLD AND SILVER.
To return to our diagram--it may be asked, "How does it happen that
there is such a large and growing excess of imports over exports? Surely
that is a bad sign." On the face of it, why should it be? It only means
that we are, apparently, getting more than we give, and most people do
not in their private relations regard that as a hardship. There are,
however, people to be found who, seeing that we every year buy more
goods than we sell, will jump to the conclusion that we must pay for the
difference in cash. Where we are to get the cash from they do not pause
to think. Hitherto the Welsh hills have resolutely refused to give up
their gold in paying quantities, and as for the silver which we separate
from Cornish lead, it is worth something less than £50,000 a year. The
notion then that we pay for our foreign purchases with our own gold and
silver may be dismissed at once, although a hundred years ago this same
delusion had not a little influence in shaping our commercial policy. As
a matter of fact, instead of sending gold and silver out of the country
to pay for our excess of imports, we almost every year import
considerably more bullion and specie than we export. The actual figures
are given in the following table:--
THE MOVEMENTS OF BULLION AND SPECIE.
In Millions Sterling.
----------------------+----+----+----+----+----+----+----+----+----+----
|1886|1887|1888|1889|1890|1891|1892|1893|1894|1895
----------------------+----+----+----+----+----+----+----+----+----+----
Imports Gold |12·9|10·0|15·8|17·9|23·6|30·3|21·6|24·8|27·6|36·0
" Silver | 7·5| 7·8| 6·2| 9·2|10·4| 9·3|10·7|11·9|11·0|10·7
Exports Gold |13·8| 9·3|14·9|14·5|14·3|24·2|14·8|19·5|15·6|21·4
" Silver | 7·2| 7·8| 7·6|10·7|10·9|13·1|14·1|13·6|12·2|10·4
+----+----+----+----+----+----+----+----+----+----
Total excess or | | | | | | | | | |
deficiency of imports | - | + | - | + | + | + | + | + | + | +
over exports of gold | | | | | | | | | |
and silver together | ·6| ·6| ·5| 2·0| 8·8| 2·3| 2·4| 3·6|10·8|15·0
----------------------+----+----+----+----+----+----+----+----+----+----
EXCESS OF IMPORTS OVER EXPORTS.
The movements of gold and silver then, instead of helping to explain the
excess of imports over exports, only increase the need for explanation.
Happily, the explanation that can be given, though it cannot be
statistical, is fully sufficient. It is fourfold. In the first place the
Custom House returns do not include in the tables of exports the large
export which we every year make of ships built to order for foreign
buyers, so that our exports appear smaller than they really are by at
least five millions a year. Secondly, an allowance must be made for the
profit on our foreign trade. If, in return for every pound's worth of
British goods sent out from our ports, only a pound's worth of foreign
goods came back, our merchants would make a better living by selling
penny toys along the Strand. What the average profit is on our foreign
trade there is no means of knowing, but putting it as low as 10 per
cent. on the double transaction, we at once account for some £30,000,000
sterling in the difference between our exports and imports. The third
item in the explanation is the sum earned by British shipowners for
carrying the greater part of the sea-commerce of the world. This sum has
been estimated at £70,000,000 a year, but that is only a guess, and it
is certainly a high one. Lastly, we have the enormous sum annually due
to this country for interest on the money we have lent abroad. The
amount of this annual payment can again only be guessed at, but it
probably exceeds £100,000,000 a year. Adding then these four items
together, and making every allowance for over-estimates, we not only
account for the whole excess of imports over exports, but have a balance
over, which means that we are still exporting capital to foreign
countries. The capital we export goes out in the form of mining
machinery to South Africa, steel rails to India, coal to South America;
the interest due to us comes home in the form of American wheat,
Argentine beef, Australian wool, Indian tea, South African diamonds.
THE WORLD'S TRIBUTE.
Of what do the Protectionists complain? Would they have us forego the
interest we are owed? Apparently Mr. Williams would, for he says (page
19) that we ought not to spend all our income from foreign investments
"in foreign shops." How else, in the name of the Prophet, are we to
receive all or any part of what is due to us from foreigners, whether it
be due for interest on investments, or for goods carried, or for ships
sold? Does Mr. Williams mean that we are to compel foreign nations to
pay us a couple of hundred millions a year in actual gold and silver,
and then dig a hole in the ground and sit on our hoard like an Indian
cook who has saved money out of the perquisites of his profession? Gold
and silver are useless to us beyond a very few millions every year; if
more bullion were sent the market would reject it. If we are to be paid
at all we must be paid in foreign commodities, and the mechanism of
commerce enables us to select just those commodities which we most want.
This is the whole story of our excess of imports over exports.
Furthermore, that excess would be even greater than it is did we not
every year send fresh millions abroad on loan to our Colonies and
foreign countries, to produce in due course (it is to be hoped)
additional hundreds of thousands in the way of interest.
OUR _ENTREPÔT_ TRADE.
There is one other important point to be dealt with in considering the
movement of our trade as a whole. It is this--that part of the enormous
quantity of goods we import is not consumed by ourselves, but is
re-exported to foreign countries or to our Colonies. For many reasons it
is interesting to distinguish these re-exports from the exports of goods
produced within the United Kingdom. The separate figures for the last
fifteen years are given in the following table:--
OUR _ENTREPÔT_ TRADE AND OUR HOME TRADE.
In Millions Sterling.
--------------+----+---+---+---+---+---+---+---+---+---+---+---+---+---+---
|1881|'82|'83|'84|'85|'86|'87|'88|'89|'90|'91|'92|'93|'94|'95
--------------+----+---+---+---+---+---+---+---+---+---+---+---+---+---+---
Re-exports of | | | | | | | | | | | | | | |
Imported Goods| 63| 65| 66| 63| 58| 56| 59| 64| 67| 65| 62| 65| 59| 58| 60
Exports of | | | | | | | | | | | | | | |
Home Produce | 234|242|240|233|213|213|222|235|249|264|247|227|218|216|226
--------------+----+---+---+---+---+---+---+---+---+---+---+---+---+---+---
Total Exports | 297|307|306|296|271|269|281|299|316|329|309|292|277|274|286
--------------+----+---+---+---+---+---+---+---+---+---+---+---+---+---+---
There is not much to grumble at in these figures. Our _entrepôt_ trade,
which was supposed to be slipping away, seems somewhat to halt in the
process, in spite of the notorious and not entirely unpleasing fact that
our Colonies are now doing a larger direct trade with foreign countries
than ever before. At the same time the figures for the exports of our
own goods are most satisfactory if we take into account the lower range
of prices at which our manufacturers are now working. Altogether there
is nothing in the general figures of our trade to justify the wild
statements that "dry rot" has set in, and that "the industrial glory of
England is departing."