The World in Chains

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But it would be a mistake to suppose that, while war manufactures
prospered, all other 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_, which show that 720
industrial concerns publishing their reports during the first nine
months of 1915, and having a capital of L531,678,701, made profits
amounting to L52,881,300, or under 2-1/4 millions less than in the
previous year (which in the case of almost all the reports was a year
before the war).

Dissecting these figures, we find that not only iron, coal, steel, and
shipping companies report enormous profits, but that increased earnings
were shown by breweries, gas, rubber, oil, and trust companies, and
others. The large exceptions which depressed the total profits were
textile companies (other than those engaged on war contracts), catering,
and cement companies. Shipping leads the van of prosperity owing to
phenomenal freight rates, while iron and steel and shipbuilding, as
direct and established purveyors of armaments, are close behind. As
showing the industrial tendency of the year, one may quote the remarks
of a trust company chairman at a recent meeting. Of 150 home investments
possessed by his company, he remarked that a hundred had since the war
yielded the same as in the year before war, while thirty had paid less
and twenty more.

Into the circle of munition producers have been drawn cycle and motor,
machinery, electrical, and many other branches of manufacture. Of other
industries driven to fever heat by the war may be mentioned woollen and
leather factories. Secondary effects of the war also produced a boom in
several unexpected quarters. For instance, the high wages earned by war
workers, and too generously spent in a vast number of cases, led to a
strong demand for cheap furniture, pianos and many types of household
goods which in normal times are usually out of reach of the purse of
most wage-earners. But one trouble has beset all industries in common--a
shortage of labour, which cannot but grow with every increase to the
numbers of men drafted from the ranks of productive industry into the
army or the munitions works. From all quarters comes the tale of orders,
both from home and from abroad, that cannot be accepted. In the case of
foreign orders that have to be refused, the labour shortage has what one
fears may be lasting consequences. For custom once diverted to America
or elsewhere is not easily regained.

2. _The Manchester Guardian_, March 3, 1916:

MORE GREAT PROFITS

HOLT LINE'S ENORMOUS SURPLUS

The China Mutual Steam Navigation Company (Holt Line) has had a greater
year than ever. It has been supposed that regular liners were getting
little benefit from the boom in freights, but a profit of L591,005, as
against about L294,000 in 1914 and L386,418 in 1913, can only be
explained by a very large participation in special war-time gains. The
dividend and bonus on the ordinary shares make 106 per cent for the
fourth year in succession, and a still larger sum is being kept in hand,
L200,000 being put to the reserve, as against L50,000 for 1914 and
L100,000 for each of two years before that, and the balance forward is
raised from L81,014 to L201,367. Most of the Company's capital, however,
only bears 6 per cent interest. The ordinary shares (which we believe
are held privately) only amount to a little over L83,000.

3. _Pall Mall Gazette_, September 24, 1915:

WAR PROFITS

The other taxes are accepted by the public and traders alike as
inevitable, but special interest is being taken in the excess war
profits tax. That Mr. McKenna is likely to find his estimate of
L30,000,000 largely exceeded is admitted. The _Daily Chronicle_
publishes a table in which the City Editor compares the last profits
announced by some of our greatest undertakings, covering a
considerable portion of the war period in most and some portion of it in
all cases, with the average of the previous three years. It will be seen
that in every instance the war has brought greatly increased prosperity.

Last Average
Profit. Previous Increase.
3 years.
L L L

ARMSTRONG WHITWORTH 802,000 624,000 178,000
(Engineering, Shipb., etc.)

WM. BEARDMORE 219,000 185,000 34,000
(Engineering, Shipb., etc.)

JOHN BROWN 586,000 347,000 239,000
(Engineers, Shipbuilders, etc.)

BEYER PEACOCK 83,000 35,000 48,000
(Locomotive Builders)

BRUNNER MOND 824,000 770,000 54,000
(Alkali Manufacturers)

CAMMELL, LAIRD 238,000 147,000 91,000
(Iron, Steel, and Shipb.)

HAWTHORN LESLIE 202,000 102,000 100,000
(Sh'b. & Marine Engin'ring)

KYNOCH'S 153,000 114,000 39,000
(Explosives)

LAMBERT BROS. 142,000 84,000 58,000
(Coal Exporters, etc.)

POWELL DUFFRYN 422,000 279,000 143,000
(Collieries)

SAMUEL FOX 66,000 39,000 27,000
(Engineers)

SPILLERS & BAKERS 367,000 140,000 227,000
(Millers)

VICKERS, LTD. 1,019,000 809,000 210,000
(Eng. and Shipbuilding)

This table indicates that the Chancellor may expect to receive far more
than the sum he estimated from the war profits tax.

4. _The Manchester Guardian_, Feb. 28, 1916:

COAL PROFITS NEARLY DOUBLED

The tale of colliery war profits is continued by the report of North's
Navigation Collieries (Glamorganshire). The output for 1915 was actually
less by 87,810 tons (1,141,900 tons against 1,229,710), but the profit
was nearly doubled--L130,071 against L65,578. With the L10,496 brought
into the account the directors had their biggest total in recent years
available for distribution. The ordinary shareholders get 10 per cent
and a bonus of 2-1/2 per cent, which is the best payment since the 15
per cent paid for 1907. Advantage is taken of a prosperous year to place
L35,000 to the reserve fund, which has been rather overlooked recently,
only one allocation of L20,000 having been made in four years. It now
stands at L155,000, against L650,000 of share capital. For depreciation,
with regard to which item substantial provision is made each year,
L15,000 is written off. This leaves L10,567 to be carried forward. The
Company has the reputation of being well managed, and its coal
properties are regarded as being very valuable. The recently opened St.
John's pits are being developed satisfactorily, it appears, a further
increase in output being shown.

Despite a decrease in output of nearly 400,000 tons, the Powell Duffryn
Steam Coal Company is enabled to show a profit for 1915 of L438,799, as
compared with L422,204 for 1914 and L364,421 for 1913. The usual 20 per
cent is distributed on the ordinary shares, free of income tax, and last
year's allocation of L50,000 to the reserve fund is repeated. In
addition, the reserve for income tax benefits to the extent of L50,052,
and there remains L120,236 to carry forward. The decrease in output, it
should be noted, is due to the enlistment of the miners, and its
restoration to the normal and probable increase after the war should
balance the decline in profit that may be expected to attend the
decreased demand.

5. The Times, May 19, 1916:

SOAPMAKERS' "RECORD" PROFITS

Presiding yesterday at the annual meeting of Joseph Watson and Sons
(Limited), soapmakers, Leeds, Mr. Joseph Watson said that the company's
profits for the year amounted to L122,000, or L19,000 in excess of any
previous year's profits. Their turnover had largely increased because
they were now supplying soap to France, Belgium, Scandinavia, and a
small amount to Spain and Italy. It was not a question to-day of getting
orders; it was a question of refusing them. They had at the present time
three months' orders on the books.

6. _The New Witness_:

THE SCANDAL OF WAR PROFITS

It is a sinister and deplorable fact--one of the most ironical with
which the continuance of the War has yet confronted us--that there has
grown up in Great Britain a number of firms and businesses to whom a
successful prosecution of the campaign would mean ruin, and who have an
actual vested interest in the indecisive continuance of hostilities.
This is due entirely to the lack of grip and resolution which the
Government have displayed in dealing with the ugly phenomenon of War
Profits. We know, of course, what happens to those profits at present.
Half is taken by the State: half passes to the firms who are getting
"rich quick" out of its necessities. In theory, it is an anomalous
arrangement, indefensible in logic, and opposed to every canon alike of
justice and of taxation. In practice it works out in the way we have
indicated: that certain privileged firms and individuals are amassing
huge fortunes out of the gravest crisis through which the nation has
passed, and which will pinch us all before it is over.

Let us give some examples of the mammoth profits that some of these
concerns are making. There is first of all the famous old English firm
of Levinstein--Messrs. Levinstein of Manchester--to be considered. This
"all-British" concern has not done badly out of the terrible situation
through which we are slowly toiling. While mere vulgar English Tommies
have been dying in the trenches or have returned incapacitated to
England--to find that their country cannot afford them a
pension--Levinsteins have been pocketing several thousands of that
country's cash. Levinsteins' are dye-makers, and in 1914-15 they made a
profit of L80,000 _on a capital of_ L90,000: a profit large enough to
make the mouth of the deceased usurer Kirkwood dry with envy. But, while
our legislature passed laws to restrain the usurer in his exactions, the
"war profiteer" has no restriction placed on him. His workmen can, in
certain cases, be fined or sent to prison if they absent themselves from
work, and hundreds have been proceeded against under the Defence of the
Realm Act. But the profiteer himself is immune! It is childish to say
that the State can recover half of the profit he has wrung from the
country's necessity. What right has he to the other half? In the case of
Levinstein, this L80,000 profit enables the company to pay 14-1/2
years' preference dividend, to distribute a dividend of 30 per cent on
its ordinary shares, and to write off L21,000 for depreciation! It is
merely fatuous to pretend, or to endeavour to pretend, that the
appropriation of half these profits squares matters between the
community and the British firm in question.

As with Levinstein, so with other firms. Messrs. Cammell, Laird & Co.
averaged profits of L146,000 for the three years before the war. Since
last year those profits have risen to L237,000. Those profits, of
course, are subject to war profits taxation. But most manifestly that
taxation is utterly inadequate. So it is in the case of Messrs. W.
Beardmore, whose profits rose from L184,000 (three years' pre-war
average) to L219,000; of the British Westinghouse Co., which rose from
L56,000 to L151,000; and of Beyer Peacock's, which increased from
L57,000 to L109,000.

In all these cases the deduction of 50 per cent by the Government is
entirely inadequate and utterly misleading. It is at once an admission
that the firm in question has no right to amass huge profits out of the
welter and tragedy of the European War, and that the State is content to
stultify itself by surrendering the other half.

Many of these profits have been made by covering rises in raw material
far in excess of the actual increases. Many have been wrung from the
poor and the needy, who are now being enjoined by the Government to eat
less meat. Messrs. Spillers & Baker, of South Wales, increased their
profits from an average of L140,000 (three years' pre-war average) to
L367,000 in 1914-15. We do not blame them. The rise in price was beyond
their control. They could hardly help benefiting. But it is mere madness
for the Government to leave them in possession of these vast accretions
of wealth. Firms that paid 8 per cent before the war, now paying 22-1/2
per cent (such as Messrs. Richard Dickeson & Co., the Army contractors)
are able to pocket tens of thousands that ought to go to strengthen the
resources of the nation. Others, like the Mercantile Steamship Co.,
increase their dividend from 20 per cent to 35 per cent; and some are
able to pay dividends actually larger than the capital of the company
itself!

It is ludicrous for the Government to allow this condition of affairs to
continue. Their course is quite clear. They should limit profits to the
average of three years before the war, and add at the most 5 per cent.
Anything short of this is a betrayal of the national interests to
private firms.

7. _The New Statesman_, March 25, 1916:

An innocent person might think that when a manufacturing company is
faced with an enormous rise in the cost of the principal commodity it
consumes, its profits would be diminished. Some law must be in operation
which has escaped the attention of economists, for so far from this
being the case, what appears to happen is that the profits of
manufacturers rise in a greater degree than the price of the raw
material. Thus, so far from being hit by the enormous rise in the price
of flour, Peek, Frean & Co., the well-known biscuit manufacturers, made
a net profit of L107,478 last year, as compared with L99,578 in 1914,
and L98,607 in 1913. After paying the usual 5 per cent on the L300,000
of preference shares no less than 25 per cent is paid on the L230,000 of
ordinary share capital, which has been issued. This company raised its
money very cheaply from the public, which paid 102 per cent for its 4
per cent debenture stock and par for the 5 per cent preference shares.
The investing public does not benefit by the big dividend on the
ordinary shares. These were never offered to the public, but are
privately held.

Another shipping company, sister to the Court Line, mentioned in these
notes last week, has issued its report. This is the Cressington
Steamship Company, which owns two modern tramp steamers of slightly over
7,000 tons each. The company was very fortunate in that one of these
vessels was delivered in February, 1915, it having been contracted for
at pre-war prices. The profits for the year amounted to L50,015, as
compared with L6,861 in 1914 (when only one vessel was trading). The
dividend for the year is 15 per cent, L7,072 is allocated to
depreciation, L22,000 for special war profits and income-tax, whilst
about L3,000 is being carried forward. The financial position of the
company is such that if its ships were sold at L2 15s. per ton,
shareholders would receive the return of their capital in full. On
present prices, however, they would probably fetch over L15 per ton. The
shares are now quoted at 28s.

The Bengal Iron and Steel Company, whose report has also been issued
during the week, has had an interesting career; it works large iron ore
and coalmining areas in Bengal. At first the company did well, but then
it went in for an unfortunate steel venture and fell into arrears with
its preference dividend. This was overcome, and during the past few
years the company has done well, particularly from its coal business.
The report for the year ended September 30th, 1915, shows a working
profit of L144,913, as compared with L79,200 during the previous year.
This considerable improvement enables the company, after writing off
various old items, to place to a general reserve L20,000, and to declare
a dividend payable quarterly of 24 per cent on the L224,850 of ordinary
shares, which compares with 12 per cent a year ago. By way of a change,
the report states that the trading results would have been even better
had war conditions not prevailed.

EMIL DAVIES.

8. _The New Statesman_, May 27, 1916:

Markets have displayed unwonted cheerfulness during the past week, and
all sorts of peace rumours are in circulation. It is more than likely,
however, that it is the firmness of the market which is responsible for
the rumours, and not _vice versa_. There is a steady stream of orders
from the Midlands and the North, where people are making money, and
these have the effect of putting up prices in several of the markets.
The Brazilian Funding Loan, which was recommended here on the 29th April
at 74, has been noticeably firm, and is now 77-1/4. It still appears to
be the cheapest Government Loan. Brazilian securities are attracting
more attention, and Brazil Traction Common, which a year ago was below
50, now stands at 64. There has been a large business in Castner Kellner
on the working agreement between that chemical company and Brunner, Mond
& Co., the shares having jumped four or five shillings to their present
price of 69s. 6d. Precisely a year ago they were recommended in these
notes at 66s. 10-1/2d. Shipping shares have been exceptionally firm;
Court Lines have risen another few shillings to 34s., the large business
in them being probably due to the fact that they are one of the few
shipping shares which can be obtained. Rubber shares are equally firm.
Nobel's Explosive Company has just issued its report for last year,
showing a profit of L529,738 _after_ providing for excess profits duty.
The dividend is 15 per cent, free of income-tax, or 5 per cent more than
last year. This increase in the dividend came as a surprise to the
market, and the price of the shares (which are a favourite investment in
Glasgow) jumped from 31s. to 38s. 3d.

The profits of the Oceanic Steam Navigation Company (the White Star
Line) for last year have attracted a good deal of attention. They were
stated as being L1,968,285, as compared with L887,548 in 1914 and
L1,121,268 in 1913, which was the Company's record year; but the figure
given for 1915 does not indicate the full profit, for it is arrived at
"after providing for excess profits taxation and contingent
liabilities." Replying to a question asked in the House of Commons by
Mr. W. C. Anderson, Captain Pretyman stated that the Company informed
him that the profit mentioned was before deduction of debenture interest
and depreciation. Captain Pretyman added that the sum divided as
dividend was L487,500, the same amount as in the year 1913 before the
war. Where people are protesting against large war profits it may, at
first sight, appear an adequate answer to point out that a Company is
not paying out more in dividends than it did in the year preceding the
war. As a statement of fact it is perfectly correct, but it has no
bearing upon the amount of profit that has been made, as the following
calculation will show. We now know that the 1915 profit shown in the
accounts is _after_ allowing for excess profits taxation, deferred
repairs, contingent liabilities, debenture interest and depreciation.
Since 1913 the Company has increased its debenture issue, and last year
had to pay in debenture interest L109,536, as compared with L65,211 in
1914. How much has been placed on one side for depreciation before
showing the profits can only be known to very few people, but the amount
the Company must have put on one side for excess profits taxation must
be at least half a million, and possibly a great deal more. The actual
profits for last year were therefore probably in the neighbourhood of
three millions, if not more. As indicated above, out of the L1,968,285
shown as profit, only L487,500 is paid out in dividends, the remainder
going to various reserves. The dividend works out at 65 per cent, but
all goes to the International Mercantile Marine Company, the
much-talked-of American shipping trust associated with the name of the
late J. Pierpont Morgan, which holds all the Ordinary Shares. The trust
was in a bankrupt condition prior to the war, but the present state of
affairs is radically altering its position. It must be annoying to the
American holders that a large slice of the profits of an American-owned
concern has to go to the British Government in the shape of war
taxation.

9. _The New Statesman_, June 24, 1916:

Another firm which has apparently benefited by the war is Ruston,
Proctor & Co., the well-known Lincoln manufacturers of agricultural
implements. A final dividend of 5-1/2 per cent is declared, plus a bonus
of 2 per cent, making 10 per cent for the year, which still allows the
Company to place L45,000 to reserve and to carry over L16,300. This
dividend is 3 per cent more than was paid last year, and is the highest
in the twenty-six years' history of the Company. Shipping shares remain
firm, and it is almost impossible to purchase any of the best shares. As
an illustration of the profits that are being made, the Nitrate
Producers' Steamship Company's accounts for the year ended April 30th
last show a gross profit of L404,022, as compared with L151,905 and
L135,986 in 1914 and 1913 respectively. The dividend is 25 per cent,
free of income tax, L100,000 is placed to reserve, L200,000 to a special
fund for excess profits tax, income tax, etc., L30,000 is added to the
insurance fund, and the carry forward is increased by some L7000. The
Company owned a fleet of ten steamers, which has, however, been reduced
to five by the sinking of one last September by an enemy submarine and
by the sale of four vessels. A new vessel is under construction, and
should be ready for delivery in August. The capital of the Company
consists of L200,000 in Ordinary Shares and L200,000 in 5 per cent
Cumulative Preference Shares.

10. _The New Witness_, June 15, 1916:

WAR PROFITS AND THE GOVERNMENT

It is essential that a determined effort should be made to rouse the
nation to a sense of the gross and scandalous injustice of the huge
profits that are at present being "earned" by certain firms piling up
wealth which is really amazing to contemplate. This is not mere empty
rhetoric; the figures support the description up to the hilt. Let us
take the case of five well-known companies, all engaged in "war work,"
and see to what account they have turned our soldiers' sacrifices:--

FIRMS. PROFITS.

1913 1914 1915

L L L

Cammell, Laird 171,700 235,500 301,500

Curtis & Harvey 48,100 77,800 143,800

Projectile 14,000 40,400 192,700

Webley & Scott 9,500 16,400 61,300

Thornycroft 13,000 107,640 267,333
(6 mos.)

These figures can only be described as staggering--staggering, that is,
to anyone who cherishes a faint, lingering belief that "equality of
sacrifice" is to be a reality and not merely a bitter jest. Look for a
moment at the tale that these profits show! The Projectile Company has
multiplied its 1913 profit _thirteen times over_! Five or six years ago
its affairs were in so parlous a state that 19s. had to be written off
as lost from each 20s. share. Now, as Mr. Charles Duguid reminds us, "it
is paying a first dividend of 50 per cent and is returning to the
shareholders 3s. 6d. out of the 19s. they regarded as lost." The return
on the shares, according to the same financial authority, is 400 per
cent!!!

Look at the case of Thornycrofts. The profits for the first half of 1915
are twenty times as big as the profit for the whole of 1913--an
increase, as Mr. Duguid reminds us, _of 3800 per cent upon the year_, a
year that will spell blank financial ruin, impoverishment and
destitution to the families of thousands and tens of thousands of our
fighting men!

Thornycrofts are by no means peculiarly fortunate; Nobels, for instance,
have managed to earn quite a tidy little profit. Their net profit for
1915 comes out, we learn, at over half a million sterling (L529,800),
exclusive of L213,900 brought forward out of the large profit of the
preceding year, and this makes the total amount available for
distribution as much as L743,700. Even after paying a dividend of 10 per
cent and a bonus of 5 per cent, making 15 per cent, all free of income
tax, the Company has still L424,700 unallocated. In its most prosperous
year, 1913-1914, the net profit of the Nobel Dynamite Trust did not
amount to more than L381,300. We have, we need hardly say, no feeling
against Nobels or Thornycrofts or the Projectile Company. We only want
fair play in this matter. If this aggregation of profits is not stopped
the wealth of England will be in the hands of men who will regard the
triumphant conclusion of the War as spelling ruin to themselves and who
will see in victory only the cessation of profits that in normal times
they have never dared to contemplate.

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