Labour, finance, and the war; being the results of inquiries, arranged by the Section of economic science and statistics of the British association for the advancement of science, during the years 1915 and 1916

Front matter

mss i r

LABOUR, FINANCE,

AND

Preface

This book is the result of organised co-operative effort. The work of last year, published under the title of Credit, Industry, and the War, was so well received that it was determined to proceed with another volume. Three committees of investigation were estab¬ lished, and the British Association most generously furnished funds to continue the work.

The investigations which have been completed should prove helpful to those who will be responsible for our economic reconstruc¬ tion when peace is restored. The financial position and its possi¬ bilities have been examined and explained by experts, and Labour difficulties, both those which have caused anxiety for years past and those brought into existence by war conditions, have been discussed with those in practical touch with them. Thus it is hoped that the recommendations here put forward may not only arouse interest but lead to some definite results. -

The fear undoubtedly exists in industrial circles that peace abroad may bring us face to face with serious troubles at home. If Capital and Labour should enter upon a period of strife the seriousness of the consequences can hardly be exaggerated. Thus an attempt has been made to construct a forecast of the commercial future. This forecast is the result of many discussions with repre¬ sentatives of varied interests, and it is printed in the hope that it may stimulate others to give thought to the subject. The know¬ ledge and experience of business men may lead them to modify or develop some of the points advanced. But if it induce leaders in the commercial world to make a definite effort to look ahead with a view to discussing their conclusions with all other interested parties, a great thing will have been achieved. One is convinced that unless the leaders on both sides of industry take up a more statesmanlike attitude there is more than the possibility of a disas¬ trous struggle. Common sense, frankness, and a disposition to give and take are required from both sides. If these be practised, and our trade organisation be developed on the lines suggested in the following pages, there would be little need to feel anxious as to our industrial and commercial future.

The chapter on replacement of men by women contains many

iii

IV

PREFACE surprises, and deserves careful attention. A comparatively small number of women have replaced men, but the introduction of new methods, especially new machinery, and improvements in works organisation, together with the cheerful response of all to the call to make great efforts, have resulted in enormously increasing the production not only of munitions, but of all kinds of war equipment. Nor has the national effort stopped there, as can clearly be seen by referring to the figures of our export trade. In a word, the nation has bestirred itself in every sphere. When peace comes this awaken¬ ing must be made even more thorough. The comparatively sleepy days of the Victorian Age are at an end: the call is to effort, and still more of it. Two years ago no one realised what the nation could accomplish; to-day all the world is aware that the British Empire cannot be lightly challenged either by sea, by land, in the air, or in the workshop.

As President of the Section, and Editor of this volume, I have to thank all those who have so disinterestedly contributed to the work. Professor Scott has been Chairman of two committees, and every¬ thing that he has touched has responded to the master-hand. In the chapter on the effects of the war on credit, currency, and finance his influence and thought are continuously in evidence. Mr. J. E. Allen, the Secretary of this Committee, most ably supported his Chairman: the result speaks for itself. That these two officials were able to obtain the co-operation of so many busy men — bankers, financiers, and economists- — is a proof that both practical and theoretical men realise the value of the work undertaken in this investigation.

The work on the replacement of men by women was carried through by local committees, working under considerable difficulties. The results were co-ordinated by the Secretary — Mr. James Cunnison — under the guidance of Professor Scott. On the whole the local investigations were most thoroughly carried out. Special thanks are due to Miss Mellor and Miss Ashley, Messrs. H. E. R. and J. E. Highton, and Mr. Halliday.

The committee over which I had the honour to preside included well-known representatives of both Capital and Labour, as well as Economists. It was very striking to find not only how all realised the seriousness of the interests at stake, but that the points on which they were in agreement were infinitely more important than those on which there was some difference of opinion. All agreed as to thP

PREFACE

V need for supplying more information when industrial decisions have to be made, all regretted that in the past a want of frankness has so frequently been the cause of failure to find a solution. The attitude of all, supplemented by that of other representative men interviewed during the course of the inquiry, strengthens the hope that we may be on the threshold of a new era. If only the attitude taken up under the stress of war be maintained for a few years a peaceful revolution will result, and we shall wonder why we did not take the obvious steps sooner. My special thanks are due to Mr. Howard Heaton for help in incorporating suggestions in the final revision of the chapter.

The chapter on Land Settlement, for which we are indebted to Mr. Christopher Turnor, teems with wit and worth. His readiness to place his knowledge and experience before the Association merits a very special word of thanks.

When the forces necessitated by the war are disbanded the country will have a unique opportunity for tackling the subject of land settlement. One landowner, at all events, has realised his responsibility, and it is to be hoped that the example set by the Duke of Sutherland will be widely followed. The Government appears to be aware of the need for action, but the Bill now before Parliament requires developing if a really satisfactory scheme is to result.

It cannot be too strongly impressed upon the nation that our countryside has been lamentably neglected. This has frequently been proclaimed, but never before has there been such a possibility for successfully coping with the repopulation of our rural districts. Thousands of men will at the moment of demobilisation be willing to enter upon the new career, and this moment must not be allowed to pass without the offer being made. Such an opportunity is not likely to recur during this generation. There will be a demand for healthy living conditions, and though it may require much courage and more cash to comply with it, the findings of our Currency Committee and the optimism of the Chancellor of the Exchequer as to the effects of the war on the national wealth show that if the nation has the will, the means exist for carrying that will into effect.

A. W. KIRKALDY.

The University,

Birmingham.

15 th August, 1916.

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Contents

CHAP. PAGE

Preface ........ iii

I. Some Thoughts on Reconstruction after the War

Chapter I

We have been at war for two years, and the war has been waged more strenuously than any that human history records. It used to be said that a great European war, under modern conditions, could not last more than six months; but this prediction, like so many other preconceptions, has been falsified by a world calamity that to the great mass of mankind was entirely unforeseen.

In every sphere, this great war has worked, and will yet work, great changes; but in the economic sphere the effects that can already be noted far exceed those in any other.

Up to the present, “ the man in the street ” will tell you that the war has cost over £2,000,000,000. In mentioning that sum, he probably thinks of sacks of sovereigns, a printing press feverishly turning out Treasury notes, and the various devices with which he is familiar for making currency or credit. But it would probably sound strange to him to hear that the number of sovereigns in the country is, if anything, greater than when the war commenced, and that currency generally has been enormously increased during the past twenty-four months, for it is not currency that has been consumed. The same “ man in the street,” especially if he live in a munitions district, will discover that there is money in plenty in circulation; that the people all look well-to-do, and are living as they seldom or never have before; and he may conclude that war is, after all, not such a bad thing: at any rate, it brings prosperity.

What is the truth ? When we say that the war has cost £2,000,000,000, we mean that we have consumed that amount of commodities and services; that we have diverted capital and labour into new channels of production, but that these channels.

unlike those connected with a good scheme of irrigation- — which may make the wilderness to blossom like the rose — have emptied themselves in the desert, and the runnels are now dry and worth¬ less. To put it plainly, the warring Powers have, some entirely, others more or less partially, turned their attention from profit¬ able production — the output of wealth, the exchange or use of which will produce new wealth — to the production of instruments of destruction. When these instruments are utilised, they not only consume themselves and leave practically nothing remaining, but they carry out a work of destruction which entails the loss of other accumulations or possibilities of wealth. Nor is the consumption of the instruments and munitions of war the sole or chief material loss to the combatants. The men handling those weapons have to be trained and transported to the field of action, fed during the period of their service, tended when sick or wounded, and clothed and housed in some sort. All these operations consume a quantity of food, clothing, and other materials of various descrip¬ tions, and there is absolutely nothing tangible to show for this expenditure.

To take our own case, 5,000,000 men trained to industry, helping to carry on the business and trade of this country, would consume almost as much food and clothing, and other materials, as the men in the field and on the sea; but as a return for that consump¬ tion, there is more than corresponding production of useful com¬ modities, machines, ships, and railway stock which, in turn, assist in the work of developing the natural resources of the world, or of directly taking part in the work of further production. Thus the position is that for two years we have been consuming our wealth, and to that extent must remain the poorer and be short of many of the goods and services we used to consider necessaries of life, until we have, by renewed efforts, and a return to the industries and commerce of peace, taken measures to restore those useful things which have been consumed.

When the war ends, it will be incumbent on us all to redouble our activities; increase the productivity of mill, factory, and field: for so long as there is a deficiency in excess of what we were accustomed to, so long must some of us, and especially the poorer members of the community, feel the pinch occasioned by this devastating war.

But it may be asked: How are we to increase our productivity? The war, in spite of the suffering and loss occasioned, has not been all loss. As a nation — nay, as an Empire— we have found our¬ selves; but this thought, if developed, would lead us into spheres foreign to the work of this Section. We have taken measures which must result in improving the physique of our race. Of the many thousands of men who have been trained to arms and sub¬ mitted to discipline, the great majority happily will return when peace is made. The self-sacrifice practised by these men will act as a leaven among our population — it has already done so. We shall emerge from this war a better disciplined, a more serious people — better equipped mentally and physically to cope with new conditions. We have learned what hitherto had only been suspected or at most known to a few, that we have not produced anything like our industrial maximum.

An insidious element of friction threatening to develop into class war has been sapping our energies. There have been faults on both sides, but daylight is being thrown over the situation, and the waste and loss of this friction has been laid bare. If we do not take to heart this great experience and alter our ways for the better, then we deserve to go down as a nation; but I am persuaded that the lesson is being learned, that the picture now visible of industrial waste and loss- — a loss that falls most hardly on the masses of the people, will not pass before our eyes unheeded.

Not only was there loss through friction between employer and employed, but in many industries we were continuing to use outof-date tools and methods long after they should have been dis¬ carded. A long era of prosperity had not, indeed, caused decadence, but was threatening to do so. The war has shaken us up and shown us the realities of life, making the mistakes of the material side with which we have to do here plain and unmistakable.

To beat the national enemy, we had to re-equip our workshops, and the new equipment will be available, to a great extent, for future work. Moreover, we have been taught by a bitter lesson that up-to-date equipment is as necessary, if we are to maintain our position as an industrial and commercial nation, as it was to enable us to maintain our international position.

Friction between employers and workpeople led to restrictions on output, indifference led to utilising old tools and methods: both meant decrease of productivity. The necessary increase can readily be obtained by remodelling our system in these respects. How this can be carried out so far as reorganisation of the industrial forces of this country is concerned, will be developed later; and is dealt with in greater detail in the report presented by a committee of investigation, which has been working for this Association.

Attempted Forecast of Our Industrial Future. — I want to attempt now to make a forecast of what may be expected in the commercial and industrial spheres when we sheathe the sword. Germany has overrun some important manufacturing districts. Belgium, North-Western France, and Poland have not only been occupied by the enemy, but machinery and industrial equipment have, in many cases, been removed to Germany. It is reported that railway tracks have been torn up, in order that their materials might be used for military purposes elsewhere. The busy industrial areas mentioned have undoubtedly suffered very considerably, and will require to reconstruct and re-equip towns and factories, and to reorganise the labour force. To set commerce and industry at work again on anything like the previous scale must be a work of some time. On the other hand, in spite of every effort, Germany has found it impossible to interfere with the industries of the United Kingdom by either force or intrigue; nor have the Entente Powers as yet invaded Germany. Indeed, for the pur¬ pose of this forecast, it is wise to assume that German industrial equipment will not be affected detrimentally by the war. Even though we should invade Germany with a view to inflicting not only defeat, but punishment, our purpose will not include industrial destruction. We shall undoubtedly do our utmost to punish those, whatever their rank, who have been responsible for the many crimes committed against humanity during the past two years. But this does not necessitate the ruthless destruction of mill, factory, or mine. We can quite adequately punish Germany without putting ourselves on a par with her in methods of destruc¬ tion and brutality. The military caste must be summarily punished, and the entire nation must be made to realise the senti¬ ments of horror that their delight in the sinking of the Lusitania, the executions of Miss Cavell and Captain Fryatt, have aroused throughout the world. Every instance of insensate brutality must be atoned for by the guilty parties, and the nation, as a whole, must be taught such a lesson as shall make a repetition of those savage methods impossible. We feel our ability to carry through this salutary work; but when this is effected, and when once again the world begins to get into its normal stride, so far as one can foresee, England and Germany will for some time be the only two European nations prepared to take any considerable part in international trade.

Meantime, during the period of the war, two countries— the United States of America and Japan— have enjoyed new and unlooked-for trading advantages. So far as competition from the United States is concerned, it is probable that we need not feel unnecessarily pessimistic. The South American States are at the beginning of a period of development which may well prove to be rapid. The possibilities opened up by the Panama Canal route, even though the present canal should prove a failure, will not be resigned before another attempt is made to pierce the isthmus; that a cutting will eventually be made is, in my opinion, beyond question. American developments then may be expected to take place principally on the American Continent, in the Pacific, and in the Far East. In these regions, there is ample room for both British and American enterprise.

Nor will Japan, for some time to come, at any rate, compete with our staple manufactures. The development made by Japan during the war would seem to indicate that it is Germany and not Great Britain that will have to bear the brunt of Japanese com¬ petition. Small goods and fancy articles which came freely into our markets from Germany and Austria before the war are now being made in Japan. Our merchants being unable to get sup¬ plies of these goods, sent samples to Japan with the most satis¬ factory results as to price, finish, and quality, thus we have been able to extend our business relations with our Ally at the expense of our enemy. Moreover, although there is no certain information on the subject, it is more than possible that when normal trading is resumed, it will be found that Japan has been extending her business in these and other classes of goods into other markets hitherto the preserve of the Central Powers.

Hence, it is of special interest to attempt to forecast to what extent and with what prospects England and Germany will be in competition in international trade after the war. This will depend, for the most part, on two sets of factors: (1) the internal industrial conditions of each country; and (2) commercial factors. So far as the former are concerned, there is much that this country should realise and take to heart.

The United Kingdom, in spite of the war and its heavy drain on our resources, has been enjoying an exceptional time of seeming prosperity. A large section of the workpeople have been earning high wages, whilst some employers have been earning handsome profits. High prices, high wages, high profits have been the order of the day: the return of peace will very considerably modify the last two of these, and how will those affected face the change ? To understand how the parties will answer this question, certain agreements must be remembered. Foremost among these is the State guarantee that certain Trade Union restrictions and Govern¬ ment regulations which have been in abeyance for the period of the war shall be re-imposed when peace is restored. If we were reverting to pre-war conditions, there would be much to be said for this; but one hopes that both parties realise fully that con¬ ditions have radically changed, and that, in consequence, both employers and workpeople must be prepared to meet the new situation in a new spirit. Why were these agreements and regula¬ tions set aside ? Because it was known that they hampered out¬ put, and our military success depended upon our producing the greatest possible amount of munitions of war. Our commercial success will now equally depend on getting the utmost possible pro¬ duction out of our industrial equipment. Are we, then, going to restore these obstacles just at the most critical moment ?

With the return to more normal times, the national necessity for war stores and munitions will cease, and our industrial forces will have to rely on the home and foreign markets for employment. Foreign competition will almost certainly be greatly intensified. There may be, at first, a great demand for manufactured goods of all kinds as a consequence of decreased supplies during the war, but all the principal trading nations will strain every nerve to get the greatest possible share of orders. If under such circumstances we indulge in an internal struggle between capital and labour, instead of bending our whole energies to retain and extend our hold on markets, we shall lose an opportunity which is not likely to return. And yet there is a widespread expectation among employers and workpeople that the European War will be succeeded by serious industrial strife.

So far as the commercial factors are concerned, we have almost everything in our favour. We have not outraged the sentiments of humanity by employing inhuman methods in waging war. We have retained our position as the headquarters of the Money Market. We have our shipping resources and equipment practically intact. Our merchants and exporters are keen and ready to carry on their business with even greater energy than before the war. We have arrears to make up, but have the will and, with harmony at home, the ability to carry on a more extended trade. Our capital has not been seriously affected, and there are no signs that it will be — our financial establishments and banks are prepared to do their share.

Turning to Germany, there is a most interesting condition of affairs to study. If beaten in the war, Germany will be a poor country; the economic position will be deplorable, but hardly irreparable. Every section of the community has already felt to some degree the effects of the war. When peace comes, there will be a determined attempt to regain the old position. A disciplined people, acting under a Government that will be compelled by circumstances to foster every possible means for repairing the broken machine of trade and for restoring the national wealth, will, without any doubt, be prepared to make heavy sacrifices to regain what has been lost. The Government will offer advantages in the shape of low railway rates and canal facilities, and, as far as possible, bounties on export business and on shipping, to encourage and to extend foreign trade. Manufacturers and merchants will cut down profits, and workpeople will be carefully taught that only by increased productivity and by a period of low wages can that which has been lost be regained. One foresees a remarkable attempt by a united and determined people to make good, in as short a period as possible, the waste and loss occasioned by the war and the blockade. German goods for export will be cheap, and the low price will be still further emphasised by the depreciation of the Mark. For so long as the Mark is at a dis¬ count, there will be a pyo tcinto advantage to export trade, and, although the Mark may eventually regain its par value, a few months or even weeks will have an appreciable influence on re-opening foreign business.

Thus a comparison of English and German possibilities in foreign trade on the resumption of peace shows that there are certain advantages on both sides. The German advantages are solid and appreciable, but if England is seething with industrial friction, the advantages she possesses will be neutralised and her failure a certainty.

This leads us to consider whether a policy can be devised which will remove causes of friction and assure to our industries a new era of prosperity.

The Need for National Organisation. — It is, at first sight, curious, but still very natural, that Press and public should from time to time be obsessed with one idea. As the war developed, there has been a growing tendency to demand organisation in every sphere of national life. The striking successes scored by Germany have been universally and probably rightly ascribed to thoroughness of organisation and complete preparedness before provoking the conflict. As a consequence, a comparison has been made between English and German military policy, greatly to the detriment of the former. And not content with this, further com¬ parisons have been made, with the result that if one believed all that was printed in the newspapers or accepted what passes in private conversation, we should be led to believe that rule of thumb has been the leading British characteristic. It has been forgotten that Germany has for many decades prided herself on her Army, even as England has relied on her Navy. One has been a great military power, the other equally great at sea. The test of war has proved that Germany was a very difficult country to oppose by land, but that in naval matters England is supreme. The economist, however, has to go further and investigate into those matters which are connected with his science — viz., the pro¬ duction, the distribution, and the consumption of wealth. Can it be said that the want of organisation and other faults of our military system are typical of what has been going on in the industrial and commercial sphere ? I for one cannot bring myself to accept the truth of this. Had our Economic interests been carried on under so-called War Office principles, we could not have built up the great position we occupy as world traders. What, then, are the facts ? To answer this question, one should remember the leading facts connected with our industrial development. This brings out some points which the superficial observer inevitably misses. For upwards of a century our industries have been gradually developing, and the progress has, on the whole, been along new and healthy lines — each decade has seen some advance more or less great.

German attention to industry and commerce is much more recent. She was able to benefit by our experience, nor was she slow in doing so. To take a simple illustration. A manufacturing firm of fifty years’ standing has developed a system, and has equipped factory and workshop as occasion demanded. A rival seeing the possibility of competing successfully in the same busi¬ ness, organises a new company, raises the necessary capital, and is able to commence operations with plant, machinery, and equip¬ ment of all kinds absolutely up to date, and even with some new improvements. Under these circumstances, provided that the management be good and that there be a demand for the goods produced, the new firm has, on the manufacturing side, considerable advantages. The older firm, however, is not devoid of advantages. It has a certain connection, a goodwill, and, with able manage¬ ment, these will enable it to compete with the new-comer; whilst the managers will have time to consider how to put the manu¬ facturing side of their business on a par with that of the rival firm. The position in a simple instance like this is fairly easy to under¬ stand. In the case of a nation with its many and varied interests, it takes a very much longer time for the situation to develop. The agitation for Tariff Reform and Colonial Preferences is a proof that several years before the war broke out some Englishmen were awake to the fact that a new condition had come into existence; and that if we were to preserve our advantageous position, we must take careful stock of newly-arisen factors in world-trade.

For Germany was not the only, nor, perhaps, the most serious, of these factors. The United States of America from the time of the Civil War had bent her energies to the work of internal development. Having concentrated on this for nearly forty years, she began to expand a world policy, both political and commercial. Japan, too, emerged with unexpected suddenness into the arena. Thus, as the nineteenth century drew to a close, the economic interests of England required careful and earnest attention. I he fiscal controversy undoubtedly had the great and important effect of waking English traders out of the lotus-eating condition into which they were in danger of sinking. All our principal, and many of our less important, industries were carefully reviewed, with results that can be realised by a study of the annual statistics published by the Board of Trade. There was, however, a very subtle policy being pursued which required very minute knowledge and wide experience to grasp. It was our proud boast that we left trade free and untrammelled, that we believed in the health¬ giving effects of open competition. It needed the stern lesson of the war to make known how this generous policy could be utilised to our detriment by a rival commercial nation. The facts as to the exploiting of the mineral resources of the Empire, as to how the dye and colour industry and various bye-proeluct industries, have been developed, so that certain vital trades almost passed under foreign control, came to light only just in time.