The World in Chains

J >> John Mavrogordato >> The World in Chains

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[Footnote 20: _Matyas Diak_ of Budapest.]

Sec. 6

Trade in Time of Peace

It would not however be correct to infer that the sacrifice of national
welfare to commercial manoeuvres is a condition peculiar to war.
Modern commerce is essentially an art; the art of making people pay more
than they are worth for things which they do not require. And it is with
all the selfishness of the artist that it performs its usual operations.
Among all the unpublished detail of modern life hardly any class of
facts is more disquieting than that of commercial procedure and
achievement. The subject is too large to be reviewed in less than a
volume; and I can do no more here than suggest a few instances that
might be acquired by anyone who devotes his time to not reading the
daily papers.

The distribution and exchange of commodities are necessary to the
existence of the State; so necessary that it might be supposed that
their regulation would be one of the primary functions of government.
Proper systems of distribution and exchange correspond to the digestive
processes of the body, on which depend the proper nutrition of all the
parts and the real prosperity of the State as a whole; yet any
comprehensive plan for their control is still regarded as the most
unattainable dream of Utopia, and they are left to carry on as best they
can in the interstices of private acquisitiveness. National well-being
is not to be measured by mere volume of trade, which is the means and
not the essence of prosperity;[22] and prosperity can certainly never
exist when equitable distribution is hindered by a sort of fatty
degeneration of capitalism. But trade in itself is a necessary aliment
of the State, and its abuses ought not to be beyond remedy.

A few of these abuses are fairly obvious without a full inquiry, and
may be illustrated here because their existence in time of peace may
throw light on the operations of trade in belligerent states, and
indirectly, by suggesting a few of the results of war, may lead us to
some of its motives and occasions. Such abuses may be most easily
identified in opposition to the national rights which they infringe.

FOOTNOTES:

[Footnote 21: So in Germany the fixing of maximum prices for pigs and
potatoes was immediately followed by an almost complete withdrawal from
the market of potatoes and pigs--the German farmers refused to sell
except at their own inflated prices. Cf. quotations from the German
Press in _The New Statesman_ of January 29, 1916.]

[Footnote 22: "Ces choses sont plutot des moyens que l'on emploie pour
travailler a faire prosperer l'Etat qu'ils ne sont l'essence de sa
prosperite."--Rousseau, _Political Writings_, I, 345 (C. E. Vaughan's
edition).]

Sec. 7

Duties of Commerce to the State

The State has a primary right to be fairly served. Prices should not be
arbitrarily raised by any wholesale merchant who happens to be in a
position to do so, or by any cartel of dealers in league for that
purpose. Prices should be regulated by the cost of production, and
should not be an indication of demand; they should rise beyond the cost
of production augmented by a fair profit only when the supply is
insufficient (production not being artificially restrained) to meet some
abnormal demand, and only as a means of checking and regulating the
excessive demand. We find instead that any dealer or group of dealers
will raise their prices almost absent-mindedly as soon as they are in a
position to meet a demand which cannot be postponed. Thus it is that
governments are habitually overcharged in all their contracts and
purchases; because governments have neither the time nor the opportunity
for casual dealings, and because they do not undertake such transactions
at all unless their absolute necessity has already been decided.[23] So
at the beginning of the war English warehouses were full of all sorts of
commodities required by the governments of the Allies; but the urgency
of war prevented any sort of bargaining; and the private merchants took
advantage of the situation to the amount of about two hundred per cent.
At present however I am dealing with trade in time of peace and I must
not flavour the ordinary facts with any consideration of War Office
contracts. It is enough to state the fact that in ordinary times the
private tradesman regards a special demand as an opportunity for raising
prices rather than as the stimulus of supply; a rule which is most
easily detected in the experience of Government departments.

The State, through its individual citizens, has a primary right to
obtain the particular commodity which it happens to prefer, without
restrictions imposed for the benefit of any particular tradesman. We
find instead that the ordinary purchaser no longer has any effective, or
selective, demand. He has to buy what he is given. The informal
organisation of the Trust system, primarily a financial operation,[24]
has involved the whole market in a network of interdependent industries.
The sale of the finished product is controlled and restricted by the
vendors of the raw material. Corn is imported by shipbuilders; ships are
built by iron merchants; iron furnaces are controlled by coal owners,
and coal mines are secured by money-lenders.

The system of the tied house, originally an indigenous corruption of the
liquor trade, is being extended to every industry in the land. We can no
longer buy the bread we like, but have to eat whatever by-product least
interferes with the miller's profits.

The consumer's loss of any power of effective demand would not
necessarily be of national importance, if at least there were any
guarantee that the unique commodity offered by the average trust system
were genuine and of good quality. One of the State's most elementary
rights is that of ensuring to its citizens a pure supply of elementary
commodities. Yet Commerce has taken no steps, even in its own
interests, to suppress the horrid arts of adulteration, in which the
motives of the thief usurp the methods of the poisoner, with results
which may be inferred from the meagre chronicles of the analyst.[25]

Education is the life of the State.[26] It is therefore of the gravest
importance that Commerce should in no circumstances whatever be allowed
to interfere with the education of the future citizens. Yet, before the
war, in spite of the legislation of the last fifty years,[27] no less
than a quarter of a million children of school age were exempted from
school attendance for employment in various occupations.[28] Even apart
from such improper exemptions the "School Age" fixed by law in itself
gives quite insufficient protection. The brain of a girl hardly begins
to wake up, or take any natural interest in the acquisition of general
ideas, before she comes to puberty. But all over London girls of
thirteen or fourteen leave school and are sent by their mothers to earn
half a crown a week matching patterns or sewing on sequins.

More generally, the State is entitled to demand from Commerce that it
should co-operate sincerely with the other elements in the State in
pursuing the real objects of civilisation, inspired by an altruistic
regard for the whole of which it is a part, that is by what is really
"enlightened self-interest"; by what Plato has called Temperance[29] and
Mr. H. G. Wells "a sense of the State."[30] We find instead that the
trader has "day and night held on indignantly" in his disastrous hunt
for markets, destroying by accident or design whatever amenity in the
world does not contribute to his "one aim, one business, one desire."

After all, in our present pre-occupation with the horrors of war, we
must not exaggerate their extent. War at its maddest rivals but cannot,
at present, surpass the mortality caused by tuberculosis, alcoholism and
syphilis, which peaceful Commerce, hand in hand with Christianity,
carries into the remotest parts of the earth. Some reader may have
noticed by this time that I am not a collector of statistics, but gather
my illustrations as I go from any scrap of paper that comes to hand. It
is a lazy trick; but at any rate one escapes the fallacy of
over-elaborated evidence, by calling as witness the man who happens to
be in the street at the moment. So at this point I happen to notice in
the _Manchester Guardian_ an extract from the report of the Resident
Commissioner in the Gilbert and Ellice Islands Protectorate. This is
what it says of the natives:--

The cotton smock for women and the cotton trousers and shirts for
men, which in the mind of the people seem now so indispensable to
professed Christianity, while reducing the endurance of the skin,
render it the more susceptible to the chills which wet clothing
engenders. The result is colds, pneumonia, influenza--eventually
tuberculosis.

We may notice a not unexpected coincidence which the Resident
Commissioner apparently omits to mention. It is that "professed
Christianity," by insisting on the propriety of cotton garments for the
islanders hitherto well clad in a film of coco-nut oil and a "_riri_ or
kilt of finely worked leaves," is conferring a very appreciable benefit
on the Manchester trade in "cotton goods." "Our colonial markets have
steadily grown," says the Encyclopaedia, "and will yearly become of
greater value." ...

On the same day as the issue of the _Manchester Guardian_ just quoted
there appeared in the _Times Literary Supplement_ a review of Canon C.
H. Robinson's _History of Christian Missions_, "a very sound
introduction to a vast and fascinating study." From this I gather that

there are few stories more romantic than the founding of the Uganda
Christian Church in British East Africa. At first progress was very
slow, and ... in 1890 there were scarcely 200 baptized Christians
in the country; yet by 1913 those associated with the Christian
Churches were little short of half a million.

So before Europe has shown many signs of convalescence, Africa is
already virulently infected. And "our markets will yearly become of
greater value."

FOOTNOTES:

[Footnote 23: See, for instance, the Report of the Committee of Public
Accounts (commenting on the extravagance of Admiralty and War
Contracts), summarised in _The Times_ of August 19, 1916.]

[Footnote 24: See Orage, _National Guilds_, p. 170 ff.]

[Footnote 25: Unfortunately I can find no authority for the amusing
report that the annual export of "wine" from Paris is _greater_ than the
annual import.]

[Footnote 26: That is, of course, of the modern or democratic state.
Democracy and education are interdependent.]

[Footnote 27: As a matter of fact, no serious attempt to protect
children was made before the Factory and Workshops Act of 1878.]

[Footnote 28: Since the war there have been the most determined attempts
to destroy all the social legislation so painfully acquired. See G. D.
H. Cole, _Labour in War Time_, pp. 254-274.]

[Footnote 29: _Republic_; 432 A. [Greek: armouia tiui e sophrosune
omiotai, k.t.l.]]

[Footnote 30: See _The Future in America_, and _New Worlds for Old,
passim_.]

Sec. 8

Restricted Sphere of Government corresponding to Restricted Sphere of
Morality

But to return to our sheep, or rather to those who fleece them,--there
is one cardinal proof that trade, in so far as it depends on private
enterprise, is a danger to the State, and is recognised as such. It is
that as soon as war comes, the nation in danger instinctively adopts
whatever measure of Socialism can be introduced during the temporary
inhibition of capitalistic methods. The actual coming of war induces a
brief panic in the marketplace, and during this momentary paralysis of
private acquisitors the State makes a desperate attempt to subdue their
activities to its own needs. By the mere instinct of self-preservation
it clutches at some rudiment of Socialism, and makes a diffident gesture
in the direction of nationalisation--(of the railways, for instance).
But the capitalists of England can point with pride to the fact that
they very soon pulled themselves together. I hope to show in the
following chapter that by the time the war was in full swing they had
made it their own, and had banished every trace of socialism, with the
relics of sanity and truth, to the confines of the Labour press.[31]

But still the danger was for the moment realised, and the attempt was
made, the desperate and unsuccessful attempt to pull and squeeze and
bind the institutions of capitalism into an organised system of
political obligations. It failed because the very abuses and
intemperances of our commercial system are a sign that the sphere of
government has not expanded with the growing complications of the modern
community. Nevertheless the attempt was made: but no corresponding
effort is being made to extend the system of moral obligations in which
we live.

For it is just as the sphere of morality is unduly restricted and fails
to correspond to the needs of humanity, that, on the political plane,
the unduly restricted sphere of government has never been extended to
include all the interrelations of industrial citizenship. Capitalism is
a survival of the penultimate stage of political development, as war is
a survival of the penultimate stage of morality.

The attempts both spasmodic and continuous to extend the sphere of
government, which now begin to affect nearly all serious legislation,
must remain incomplete without an analogous and indeed corollary
expansion of the moral system which will involve the obsolescence of
war.

FOOTNOTES:

[Footnote 31: This seems to apply to all belligerent states. Certainly
very little sanity finds its way into Germany except through the pages
of _Vorwaerts_. It is therefore humiliating to be told that _Vorwaerts_
has a much larger circulation than any socialist paper in England.]

CHAPTER III

Hinc usura uorax auidumque in tempora fenus et concussa fides et
MULTIS UTILE BELLUM.

Lucan, I, 181.

Individuals are constantly trying to decrease supply for their own
advantage.--_Fabian Essays_, 1889, p. 17.

Sec. 1

Trade during the War

Trade during the war seems to have had a remarkably good time. In the
first year of warfare I began to collect a few facts in support of what
then seemed the paradoxical view that war was, in essence if not in
origin, a very profitable capitalistic manoeuvre; a view deduced from
the opinion I had formed _a priori_ of the nature of all modern
warfare.[32] Instead of a few corroborating voices I found testimony
abundant in every paper I picked up, besides the live evidence received
in private letters and conversations. This pamphlet being rather
philosophic than statistical, I have taken the easy course of printing a
selection of these testimonies, crude and undigested, in an appendix--a
cold storage of facts and figures that allows me to repeat with a quiet
conscience that trade is booming. The greater the war, apparently, the
greater the profits. In the words of the _Manchester Guardian_:--

The first full calendar year of war has been a period of
unparalleled industrial activity and, generally speaking,
prosperity in this country. Heavy losses and bad times have been
encountered in a few important industries, but these are balanced
by unprecedented profits made by a large variety of industries,
whether directly or indirectly affected by the war.[33] ... But it
would be a mistake to suppose that, while war manufactures
prospered, all other

FOOTNOTES:

[Footnote 32: See, for instance, my article "A Footnote to the Balkan
War," published in the _Asiatic Review_ for July 1, 1914. This opinion
is there expressed in the following words which I still think
substantially true, though one or two phrases are rhetorically
exaggerated.

"England and the rest of Western Europe have outgrown by about three
hundred years the time in the development of nations when fighting is
natural and even necessary. England, of course, continues to contemplate
war, and to be bluffed by the threat of war in the circumlocutions of
diplomacy. But her national welfare no longer requires war; and, if she
ever undertakes it, it will be at the bidding of merchants and usurers,
who do not represent even the baser instincts of the specifically
national spirit, but are wholly foreign and parasitic. On that occasion
the _Daily Mail_ and the Foreign Office will no doubt assure the British
people that the war in question involves the whole honour and welfare of
the State; and the people will believe it. But it will not be true. For
England is happily not, or not yet, a nation of shopkeepers; and it will
be only the shopkeepers whose welfare is concerned."]

industry languished and decayed. To prove the contrary and show
that only here and there were there heavy losses, we may quote some
figures compiled by the _Economist_....

And so forth.[34]

To this I will add only two typical paragraphs as a text for my
subsequent remarks, as I believe they suggest the general economic
process which enriches the particular industries to which they refer.
The first is taken from _the Sunday Pictorial_, of all papers.[35]

Immense increases in the profits of two shipping companies are, as
a result of the ceaseless rise in freights, disclosed in the
reports of two Newcastle lines published yesterday. The high cost
of freights is largely responsible for the dearness of food, coal,
and other necessities of life. The gross profits of the Cairn Line
of Steamships, Ltd., amounted to L292,108, and the net profits,
after deducting the special war taxation and other items, were
L162,689. A dividend of 10 per cent, with bonus of 4s. per share,
is recommended. This makes a total of 30 per cent, free of income
tax, as against 10 per cent last year, when the total profits
amounted to L97,335. Less than half of this company's capital is
paid up, the total authorised being L600,000; there are also
debentures of about L150,000.

The next quotation is from the _New Statesman_:--[36]

Glasgow is exceedingly prosperous, and iron and steel manufacturers
tell me that the next three or four years, peace or war, must mean
a period of prosperity for them. Government orders now absorb so
large a proportion of output that outside requirements are simply
not being met. Owing to the scarcity of shipping this deficiency is
not being filled by imports from America (the only other possible
source of supply), so that unfilled orders are accumulating. A
waggon manufacturer told me he had sufficient work in sight to keep
him going for five years. It must be remembered that part of the
cost of the war is being met temporarily by depreciation--railway
tracks, rolling stock, locomotives, etc., _to mention only one
industry_,[37] not being replaced as they wear out, or being
maintained to the minimum degree necessary. This means that,
although less obvious than the reconstruction of ruined parts of
Belgium, France, Poland, and Eastern Prussia, repairs and
replacements aggregating many millions sterling in cost will have
to be carried out after the war in countries that have not been
invaded. A peace boom in the iron and steel and shipbuilding trades
appears certain.

Here, before passing on to more general considerations, we may notice
incidentally--it is brought out in the first quotation--that the
taxation of war profits reduces them proportionately but can never annul
or quite overtake them. That is sufficiently obvious; but the fact must
be preliminarily emphasised because it is quite commonly assumed that
the mere imposition of a tax of 50 or 60 or 75 per cent automatically
solves the problem of war profits. As a matter of fact, taxation so far
from solving the problem leaves it essentially unchanged, and really
connives at and recognises the practice. The problem remains, in spite
of taxation, that one section of the nation is enriched by a process
which necessitates the misery and death of other sections. We may
therefore in a broad discussion of the problem leave out of account the
proposed and adopted palliatives of taxation.

Secondly, we may notice--this is brought out in the second
quotation--that profits directly produced by the war are not limited to
the period of the war. This again is really axiomatic, being only
another form of the platitude that it takes longer to construct than to
destroy: but it means that even a short war of sufficient intensity will
ensure a long period of profits, and therefore it noticeably aggravates
the conclusions to which I hope to lead.

A fundamental point is that the profit on freights, excused immediately
by the destruction of shipping,[38] leads indirectly to profits on such
other commodities as food and coal, not only on account of the actual
scarcity resulting, but also because any reason for increasing prices is
made a pretext for increasing profits.

But the scarcity of all general commodities is caused not only
indirectly by the primary scarcity of ships, but also directly by the
same conditions of warfare as those which affect shipping. That is to
say, just as the intensified activity of the nation at war creates a
livelier demand for ships, so it also creates a greater demand for all
the ordinary commodities of living: and just as war by destroying ships
reduces the available supply, so by its general destructiveness it
reduces the supply of other commodities: and just as war by destroying
ships makes extraordinary profits for shipowners, so by destroying
tables and teacups it makes unusual profits for the makers of tables and
teacups. In short, destruction creates demand, and demand gives occasion
for profit.

This is a disquieting statement; because though one might hesitate to
deduce from it that any particular merchant must be in his commercial
capacity a conscious advocate of war for the sake of gain, it certainly
suggests that the body of trade must automatically and by a sort of
instinct of self-preservation be an element in the nation that makes for
war.

That is the kernel of my thesis;[39] and it is certainly a happy
coincidence that the possibility of its truth seems at last to be
dawning on another writer, and one more expert than myself in the
handling of commercial theory. On the very morning after the last few
sentences were written the following paragraph occurred in Mr. Emil
Davies' "City" article in the _New Statesman_:--[40]

It is only as the reports and accounts for 1915 come out that a
correct idea can be formed of the benefit this catastrophic war has
been to the majority of our large industrial concerns. The
following is a list of companies whose reports and accounts have
appeared during the past few days. The difference between the
profits for the two years shown is even greater than appears, for
in practically every case the 1915 profit is stated after allowing
for the excess profits tax, additional depreciation or extra
reserves, most companies now adopting these and other devices to
render less conspicuous their war-time prosperity.

1914 1915
L L
Smithfield and Argentine Meat Co. 25,732 142,055
Waring and Gillow 35,217 100,885
Projectile Co. 30,739 194,136
Lanarkshire Steel 28,144 45,985
Frederick Leyland Steamship 337,188 1,196,683
Sutherland Steamship 94,600 295,200

Waring and Gillow's sudden prosperity is not due to any better
business in the ordinary furniture trade, but to war contracts. The
Projectile Company figures are astonishing even for an armament
company; after applying L47,500 in satisfying the balance of the
prior claims of the Debentures, the Ordinary Shares receive their
first dividend--one of 50 per cent. No sane man would accuse
leaders of these great industrial concerns of doing anything to
bring about an outbreak of war; many of them have, indeed, paid a
heavy price for their prosperity in the shape of the loss of sons
or near relatives; but when all is said and done, the fact that a
war should put many half-bankrupt concerns on their legs, and make
fairly prosperous companies three or four times more prosperous
than before the war, is an influence in an undesirable direction.

FOOTNOTES:

[Footnote 33: Moreover, as I hope to suggest later, even these losses to
a few individual _industries_ do not necessarily imply losses to the
_capital_ involved, which in some cases has been diverted or adapted to
other industries more appropriate to the times. For a review of Trade
profits in 1916 see the _Manchester Guardian_, January 1, 1917.]

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