The Return to Protection

CHAPTER XVIII. TESTS OF PROSPERITY.

National Income: Pauperism: Wages: Income-Tax returns: Savings: Banking statistics: Shipping: Import of Raw Material: Leisure: little luxuries. Measured by all these tests, the country is prosperous and progressing.

BEFORE coming to the more drastic proposals now before the country, we may profitably ask how the nation stands as measured by the ordinary canons of prosperity.

According to the famous calculation made by Sir Robert Giffen, the National Income, in 1875, was £1,200,000,000. His revised calculations in 1885 put it at £1,350,000,000. In a paper read by him before the British Association in 1903, it was estimated at £1,750,000,000.1 At the other end of the scale are the figures of Pauperism. In 1862, 47 persons per 1000 were at some time or other in receipt of poor relief in England and Wales. In 1901, there were only 25 persons per 1000. Or, to take a more adequate calculation, while population has increased 18 per cent. in fifteen years, pauperism has decreased by 9 per cent.2

First, as to Wages, the earnings of the great mass of the people. The Board of Trade Blue Book takes five groups of trades—Building, Coal Mining, Engineering, Textiles, and Agriculture—and, going back twenty-five years, finds that wages have risen, since 1878, in the five groups, from a figure indicated by 85.27 (or, in the four groups, excluding Agriculture, from 82.84) to 100 in 1900. Since then, there has been no fall in wages as regards Building and Textiles, and there has been a rise as regards Engineering and Agriculture. The average, however, has been brought down to 97.70 by a fall of some 12½ per cent. in the wages of Coal Mining.

This seems fairly satisfactory, especially when it is remembered how the purchasing power of money has risen: that 69d. to-day buys as much as 100d. did in the average of years about 1873. Or, to use another calculation, 100d. to-day buys as much as 140d. did twenty years ago.3

Comparing this with the progress of Germany, an elaborate calculation in the same Blue Book, p. 275, shows that German and British money wages have risen about equally since 1886. But, in the last twenty years, the purchasing power of money in Germany has risen only 12 per cent. as compared with 40 per cent, in Great Britain. That is to say, taking quinquennial periods, “in the last five years, a German worker has been able to purchase as much food of the kind to which he is accustomed for 100 marks as he could get previously for 112 marks, while the English workman has been able to make 100 shillings go as far in purchasing food as 140 shillings would have gone twenty years before.”4

Take, next, the earnings of the comfortable and wealthy classes. The following is the comparison which emerges from the Income-Tax returns; that is, the incomes which people with over £160 of income5 admitted to the government that they were earning:

1868-9.	Gross Income,	-	£398,794,000
1875-6.	”	-	544,376,000
1894-5.	”	-	657.097.000
1901-2.	”	-	866,993,000

It should be noted that the comparison with the decade 1868-76 is a comparison with years of abnormal prosperity.

Confirmation of this is given by the well-known calculation of what the Chancellor gets for every penny he puts on the Income Tax.6

In 1872-3,	the penny yielded	-	£1,741,088
In 1882-3,	”	-	1,962,871
In 1892-3,	”	-	2,239,856
In 1902-3,	”	-	2,580,000

One must be careful in applying this comparison to the corresponding returns of other nations. It has been asserted that Income-Tax returns in Germany show even better than ours. But Prussia taxes incomes down to £45: thirty per cent. of the population show incomes between £45 and £150: less than five per cent, come under the assessment over £150—which permits us to guess how many come under the £45.7 But, as we do not impose Income Tax till £160 of income is reached, and give degressive abatements on incomes under £700, our Income-Tax returns witness to the prosperity of the comfortable and wealthy class only. As regards those whose income is under £160, the evidence of prosperity is got from the rise of wages.

Next, as to the Savings of the people. In 1882, Sir Robert Giffen calculated these, as a whole, at £200,000,000 per year. In a letter to the Times of 3rd Dec, 1903, he estimated them at £264,000,000.

The Post Office and Savings Banks deposits have grown as under: In 1871, £55 millions; in 1881, £80 millions; in 1891, £114 millions; in 1901, £192 millions; in 1902, £197 millions.

A very improper use of statistics is sometimes made in comparing the amount per head of Savings Bank deposits in protected countries with that in our own. According to this, Denmark appears at the top with £15 11s. 6½d., and Great Britain at the bottom with £4 2s. 5¾d. The fallacy of the comparison may be suspected on noticing that France appears second last on the list, with £4 8s. 8¼d. The reason, of course, is that France limits her deposits to £60, and Great Britain hers to £200, while, in most other countries, there is no limit. Thus the savings of the comfortable and richer classes are compared with those of the working classes.

Such comparisons, too, are of no validity unless account is taken of the other opportunities there are for small investors. In a well-banked country like our own, for instance, it may very well be the case that people, having risen to thrifty habits through the savings banks system, may pass on to invest their money in other things—precisely as, in the life of the individual, the money box is exchanged for the savings bank, the savings bank for the ordinary bank, and the bank deposit for wider investments. Mr. Brabrook, indeed, called savings bank deposits “infantile efforts in thrift.”

Unfortunately, though there are very many ways of investing small savings in this country, the figures are not easily obtainable, particularly over periods of time. It is well known that great numbers of the working classes own their own houses and house property generally, and hold considerable stock in industrial companies.8 Trade Union Funds are all working men’s money.9 Two figures, happily, are available. One is the funds invested in Co-operative Societies. Comparing the returns for the United Kingdom for the years ending December, 1891 and 1901, the increase was from £16½ millions to £40¾ millions. The other is the deposits in Friendly Societies. Here the increase is from £8 millions in 1871 to £14 millions in 1881; to £26 millions in 1891; to £43 millions in 1901.

Banking statistics offer another test of prosperity. The deposits of all the Joint-stock Banks publishing accounts show the following advance: in 1883, £400 millions; in 1888, £470 millions; in 1893, £633 millions; in 1898, £781 millions; in 1903, £834 millions.

The Clearing-House returns—that is the value of cheques, bills, etc., passed through the London Clearing House—have increased as follows: £4¾ milliards in 1871; £6¼ milliards in 1881; £6¾ milliards in 1891; £9½ milliards in 1901; and £10 milliards in 1903. Whatever the precise importance attached to this as evidence, it shows one thing at least—the universal use we make of banks. But, for people to make use of banks, at least shows that they have money enough to open a banking account, and the figures are, of course, generally, a witness to the increase of trade and the position of London as the banking centre of the world.

The state of Shipping is a test of prosperity peculiarly significant as regards this country. The increase in our net tonnage, from 5,690,798 in 1870, to 7,978,538 in 1890, and to 10,054,770 in 1902, speaks for itself, particularly if it is remembered what the “net tonnage,” of a nation, constantly renewing its mercantile fleet, means when translated into “carrying capacity.”10

Another test one might apply. It is notoriously difficult to get any figures of home trade, inasmuch as every man keeps his business secrets to himself: and yet such figures would give us, perhaps, the best test of national prosperity. But we can get at something that lies at the foundation of many of our industries—the import of raw material. We can do nothing with raw material but make it up into finished goods. If these goods are exported, there is a check on one employment of it. But if they are not exported, it shows that the raw material has been used up by the industries of the country, and remains in the shape of goods for consumption at home. If, then, the quantity of raw materials coming into a country increases, it is as good an indication as may be of progress in a great many directions. The following is the increase in quantities of imports from 1886 to 1901:

India-rubber, in cwts.,	194,000 to	466,000
Copper, in tons,	197,000 to	264,000
Timber, in loads,	5,500,000 to	9,200,000
Cotton, in cwts.,	15,300,000 to	16,300,000
Leather, in lbs.,	77,800,000 to	148,300,000

But, beyond these formal and statistical tests, take some not so easily reducible to figures. Where else are the hours of labour so short? Where is there a country that has an almost universal half holiday on Saturdays and a universal whole holiday on Sundays? In what other nation does one find whole populations of cities pouring out for a week or ten days in summer, and spending what must be called lavishly at coast or country? Or take a little thing, and therefore all the more significant. The bicycle is, probably, the most beneficent invention of the last generation as regards the health of the people—men, women, and children. One may go for twenty miles in the populous parts of rural France, and never meet a working man riding a cycle. In what part of Great Britain, outside of the mountainous districts, would this be possible?

Such, then, are some of the material evidences of our prosperity at the present time. Let it be granted that they are no evidence of national character, of virtue, even of happiness. At least they are not evidence of want of character, of viciousness, of unhappiness. The moral life may be difficult above a certain income; below it, it is impossible: considering how far most other countries are below our level of income, there seems no doubt, that we are ahead of almost every nation in the material conditions of the Good Life.

 

11This is the total money income earned by the people of this country, based on the statistics of the Income-Tax Returns, and on calculations for other earnings. As to the method in which the figure was arrived at, see my Distribution of Income, book i., chap. ii.

12Pauperism, it should be noted, does not necessarily go pari passu with Poverty. If one might amend Scripture, the statement “the poor ye have always with you,” might be changed to “the pauper ye have always with you.” There is nothing very optimistic in saying that the time is near at hand when working-man poverty will cease out of the land. But so long as we have drink, thriftlessness, vice, insanity, and friendless old age; so long as there are men who marry, make their wives dependent and incapable of working for themselves, and then desert them; so long there will be pauperism.

13For the course of prices from 1873 till now, see p. 191.

14Board of Trade Blue Book, p. 226.

15Before 1894-5, incomes over £150 were taxed.

16The later yields per penny would be greater but for additional abatements made to the smaller incomes.

17It seems to be the case that about two-thirds of the population of Prussia, the richest state of Germany, have wages under £45.

18The 2000 Building Societies in Great Britain and Ireland have £62 millions of funds.

19The 600 Trade Unions have more than a million and a half members, and nearly £5 millions of funds. The figures here and above are taken from the Presidential Address to Section F of the British Association in 1903 by Mr. Brabrook, Chief Registrar of Friendly Societies.

20Statistical comparisons in regard to Shipping are very complicated, and, therefore, very often misleading. See Appendix for a full treatment of the subject. (Reprinted, by kind permission of the Editor, from an article contributed by me to the Glasgow Herald of 26th November, 1903.)

• 1“When, on Pike’s Peak in Colorado, the thermometer is down to 12° or 13°, and, in the North-west is only a few degrees above freezing point, in New England it will be moderately cool—say 43°; in the Mississippi valley it will be comparatively warm—say 52°; and in Florida it will be at summer heat—75°.”—Lawson, American Industrial Problems, p. 43.
• 2The above figures of Imports and Exports, taken from the Statistical Abstract 1903, do not include Bullion and Specie, of which we imported, in 1902, £21,629,000 of gold (£8 millions from South Africa, £3¼ millions from India, £5 millions from Australia), and £9,764,000 of silver (£8 millions from the United States), and exported £15,409,000 of gold and £10,716,000 of silver. Nor do they include, either as imports, exports, or re-exports, excisable foreign merchandise transhipped under Bond, (£13,683,000). To the imports should be added £5,380,000 of diamonds from the Cape, not declared to the Customs. It may be noted that fish of British take, landed in the United Kingdom, are not included among imports. The value of these in 1901 was £9,000,000.
• 3Without going into the mysteries of banking, it may suffice to say that the reason why payment for foreign goods is not made by cheque is that each country’s banking system does not extend beyond its own shores.
• 4It is strong testimony to the literal “trust” which underlies the credit system that, in the great majority of home transactions, the promise is not put in documentary shape at all; goods are sold on customary terms of credit, and paid on a mere reminder that payment is due. Perhaps there is no better instance of the recognition of a “common interest” and a “general will” among whole peoples than this.
• 5Giffen’s calculation was first made in 1882 (Essays in Finance, Second Series, p. 132), and was revised in 1898 (Royal Statistical Society’s Journal, 1899, p. 11). His method was to take the British gross tonnage earnings at £15 and £5, for steamers and sailers respectively, at the former date, and at £12 and £4 at the latter. The Board of Trade, on the other hand, took the total exports and imports of the principal countries of the world, which are, of course, the same goods valued at points of departure and arrival; accepted the £224,000,000 difference in their value (see p. 41) as representing freights and insurance; halved this sum to represent our share of the carrying tonnage of the world; deducted 9 per cent. for colonial ships, and further deducted £12½ millions for coals and stores purchased abroad, harbour and other dues; and arrived at the figure of £89½ millions.
• 6The importance of Shipping as a British export industry may be realised by remembering that £90,000,000 is just about the value of our cotton and woollen exports combined.
• 7“Unfortunately, there are no official figures with regard to the investments of foreigners in this country, though they are certainly very much smaller in the aggregate than British investments abroad. America is the only foreign country, so far as known, whichh as made important investments in the United Kingdom in recent years,” Board of Trade Blue Book, p. 102. On this whole subject, the admirable article in the Blue Book should be referred to.
• 8Royal Statistical Society’s Journal, March, 1899. Giffen’s calculation, however, includes Pensions, etc., from India and other countries to civil servants living here, of which the Board of Trade says nothing.
• 9At the risk of being tedious, I may repeat here that such boarding expenses involve sending of goods to pay for any balance there may be between countries. All the traveller knows, of course, is that he takes with him, say, circular notes, and, on presenting these, gets money of the country handed over to him. But, suppose that English tourists, in the course of a year, have cashed £100,000 of circular notes in Rome, and that Italian travellers have cashed £50,000 of their circular notes in London, the Italian and English bankers have simply honoured each other’s promises. England is now in debt to Italy to the amount of £100,000, and Italy is in debt to England to the amount of £50,000. The two sets of promises are set against each other, but there remains a sum of value of £50,000 due to Italian bankers. How is this to be paid? If the London bankers send drafts on London, this only gives the Italian bankers a claim on gold in London—promises to pay gold there. Even a Bank of England note is, after all, only a promise to pay gold on presentation of the note at the Bank. Some time or other, unless London is to run deeper and deeper in debt to Italy, the accounts must be squared. But, as has been demonstrated, it is usually more convenient to send Bills of Exchange than gold—that is, to give claims on goods sent to Italy in the ordinary course of business—in which case the real payment of the balance is in goods.
• 10It should be noted, in comparing exports of past years with present figures, that new ships, sold from this country, were not included among our exports before the year 1899, and are properly excluded in comparisons with years before that date.
• 11IT would be rather short-sighted to gauge the importance to us of foreign trade by the fact that it is perhaps only one tenth or one eighth of our total trade. If the United States were to shut herself up inside a prohibitive wall of tariffs, she would still be almost self-sufficient. But we lie between 50 and 60 degrees north latitude; ours is a very small country at best, with a dense population; and we have, besides, sunk much of our capital and specialised much of our labour in industries which depend on other countries for their material and for their market. It seems, too, as if we were destined by nature to be ocean carriers.
• 12Our foreign trade, then, altogether amounts to £877,000,000; made up of £528,000,000 of Imports, and £349,000,000 of Exports (£65,000,000 of these being re-exports). These are values of solid Commodities brought in and taken out over British seas; and—partly as reflex and consequence—of the 32,000,000 gross tons of shipping in the world, we own the half.
• 13Nor yet is the way in which payment is made essentially different. In due time, home goods are paid by a cheque; foreign goods, by a bill of exchange. Indeed, in many cases, when goods are put on board ship, the Bill of Lading is given to a bank here, which does not give it up till cash is paid abroad, the bank meantime giving an advance to the exporter to a large proportion of the value. In either case, the sender gets his payment, in British money, through his own bank, and each transaction ends with a payment. The export of goods, again, from other countries to us takes place in exactly the same way—merchants and manufacturers, there also, sending out goods for a profit, getting paid in their own money, and the transaction ending with the payment.
• 14It takes a little thinking to realise that, in home trade, payments are made by setting debts against debts, and that this is merely another way of saying, “setting goods against goods.” You send me £100 worth of goods, and I, for the moment, am in debt, and send you a record of it in the shape of a promise to pay in three months. On the other hand, I send you £100 worth of goods, and you give me a promise to pay in three months. The promises may be bought and sold and pass into other hands; in any case, they remain in existence as debts for three months. At the end of that time they are brought together and cancel each other. What really has happened, of course, is that the one sending of goods has been put in contra-account against the other. So banking is just a vast complex system of contra-accounting—value of goods represented for the moment by documents put to the debit and credit sides of bankers’ books. Happily, this need not be dwelt on, because, in international trade, the foundation of the contra-account is quite obvious and prominent.
• 15It may be expected, then, that a nation which owns half the world’s shipping, and carries for foreigners as well as for British merchants, will be paid a very large sum for this service. The amount was estimated by Giffen, in 1898, as £90,000,000. An independent calculation, on quite different lines, was put forward by the Board of Trade in 1903, and makes it £89½ millions.
• 16This is the first item which explains our apparent Balance of Imports. Our exports are really £90,000,000 more than the statistical exports shown by the official returns.
• 17The corresponding returns which pay income tax in our country amount to £62½ millions, but this includes only the interest on foreign and colonial securities, coupons, and railways. To this must be added the dividends on miscellaneous industrial undertakings abroad. After all deductions on account of other countries which have lent and invested capital with us, we may accept the Board of Trade conclusion that “£62½ millions is a minimum figure, which is probably largely exceeded.” In 1898, Sir Robert Giffen estimated it at £90 millions, and probably more.
• 18The corresponding returns which pay income tax in our country amount to £62½ millions, but this includes only the interest on foreign and colonial securities, coupons, and railways. To this must be added the dividends on miscellaneous industrial undertakings abroad. After all deductions on account of other countries which have lent and invested capital with us, we may accept the Board of Trade conclusion that “£62½ millions is a minimum figure, which is probably largely exceeded.” In 1898, Sir Robert Giffen estimated it at £90 millions, and probably more.
• 19IV. There is another class of Imports which stands on the same line with the returns from capital invested abroad. It has been happily called “Boarding Expenses”—values sent from one country to another, not to sell or invest, but to consume. This is not a small item. Italy has been credited with £14,000,000, and Switzerland with £8,000,000 spent by sightseers. Americans are said to spend some £20,000,000 a year in foreign travel. How much of such boarding expenses comes to this country, it is impossible to say, but it must be very large. London is the centre of the world, where everybody who can afford it goes once in a lifetime at any rate. Our own Highland hotels get a considerable share. This category includes remittances sent home to families and schools in England by Civil Servants and military men abroad, furlough expenses, and the like; and under it, perhaps, fall professional earnings of Englishmen temporarily abroad, such as the gains of theatrical and concert companies on tour. These all represent imports against which there is no corresponding export. It must, however, be remembered that large sums are sent abroad by us to other countries for similar purposes, and, as Englishmen travel perhaps more than any other nation, the imports on this account may not very greatly overbalance the exports.
• 20(a) The price of old ships sold on the high seas. It is well known that we are continually selling our ships and replacing them with new ones, and these ships do not appear as exports.