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Title: Essays in Liberalism - Being the Lectures and Papers Which Were Delivered at the - Liberal Summer School at Oxford, 1922
Author: Various
Language: English
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_Being the Lectures and Papers which were
delivered at the Liberal Summer School
at Oxford, 1922_

Copyright 1922

_Manufactured in Great Britain_


The papers contained in this volume are summaries--in some cases, owing
to the defectiveness of the reports, very much abridged summaries--of a
series of discourses delivered at the Liberal Summer School at Oxford in
the first ten days of August, 1922. In two cases ("The State and
Industry" and "The Machinery of Government") two lectures have been
condensed into a single paper.

The Summer School was not arranged by any of the official organisations
of the Liberal party, nor was any part of its expenses paid out of party
funds. It was the outcome of a spontaneous movement among a number of
men and women who, believing that Liberalism is beyond all other
political creeds dependent upon the free discussion of ideas, came to
the conclusion that it was desirable to create a platform upon which
such discussion could be carried on, in a manner quite different from
what is usual, or indeed practicable, at ordinary official party
gatherings. From the first the movement received cordial support and
encouragement from the leaders of the party, who were more than content
that a movement so essentially Liberal in character should be carried
on quite independently of any official control. The meetings were
inaugurated by an address by Mr. Asquith, and wound up by a valediction
from Lord Grey, while nearly all the recognised leaders of the party
presided at one or more of the meetings, or willingly consented to give
lectures. In short, while wholly unofficial, the meetings drew together
all that is most vital in modern Liberalism.

In some degree the Summer School represented a new departure in
political discussion. Most of the lectures were delivered, not by active
politicians, but by scholars and experts whose distinction has been won
in other fields than practical politics. One or two of the speakers
were, indeed, not even professed Liberals. They were invited to speak
because it was known that on their subjects they would express the true
mind of modern Liberalism. Whatever Lord Robert Cecil, for example, may
call himself, Liberals at any rate recognise that on most subjects he
expresses their convictions.

As a glance at the list of contents will show, the papers cover almost
the whole range of political interest, foreign, domestic, and imperial,
but the greatest emphasis is laid upon the problems of economic and
industrial organisation. Yet, since it is impossible to survey the
universe in ten days, there are large and important themes which remain
unexplored, while many subjects of vital significance are but lightly
touched upon. Perhaps the most notable of these omissions is that of any
treatment of local government, and of the immensely important
subjects--education, public health, housing, and the like--for which
local authorities are primarily held responsible. These subjects are
held over for fuller treatment in later schools; and for that reason two
papers--one on local government and one on education--which were
delivered at Oxford have not been included in the present volume.

It must be obvious, from what has been said above, that these papers
make no pretence to define what may be called an official programme or
policy for the Liberal party. It was with study rather than with
programme-making that the School was concerned, and its aim was the
stimulation of free inquiry rather than the formulation of dogmas. Every
speaker was, and is, responsible for the views expressed in his paper,
though not for the form which the abridged report of it has assumed; and
there are doubtless passages in this book which would not win the assent
of all Liberals, for Liberalism has always encouraged and welcomed
varieties of opinion.

Nevertheless, taken as a whole, these papers do fairly represent the
outlook and temper of modern Liberalism. And the candid reader will not
fail to recognise in them a certain unity of tone and temper, in spite
of the diversity of their authorship and subject-matter. Whether the
subject is foreign politics, or imperial problems, or government, or
industry, the same temper shows itself--a belief in freedom rather than
in regimentation; an earnest desire to substitute law for force; a
belief in persuasion rather than in compulsion as the best mode of
solving difficult problems; an eagerness to establish organised methods
of discussion and co-operation as the best solvent of strife, in
international relations and in industrial affairs quite as much as in
the realm of national politics, to which these methods have long since
been applied.

That is the spirit of modern Liberalism, which gives unity to the
diversity of this little volume. As has often been said, Liberalism is
an attitude of mind rather than a body of definitely formulated
doctrine. It does not claim to know of any formula which will guide us
out of all our troubles, or of any panacea that will cure every social
ill. It recognises that we are surrounded in every field of social and
political life by infinitely difficult problems for which there is no
easy solution. It puts its trust in the honest inquiry and thought of
free men who take their civic responsibilities seriously.


Preface                                                        v

The League of Nations and the
Rehabilitation of Europe          _Rt. Hon. Lord Robert Cecil_ 1

The Balance of Power              _Professor A.F. Pollard_    19

International Disarmament         _Sir Frederick Maurice_     37

Reparations and Inter-Allied Debt _John Maynard Keynes_       51

The Outlook for National Finance  _Sir Josiah Stamp_          59

Free Trade                        _Rt. Hon. J.M. Robertson_   74

India                             _Sir Hamilton Grant_        92

Egypt                             _J.A. Spender_             111

The Machinery of Government       _Ramsay Muir_              120

The State and Industry            _W.T. Layton_              145

The Regulation of Wages           _Professor L.T. Hobhouse_  165

Unemployment                      _H.D. Henderson_           176

The Problem of the Mines          _Arnold D. McNair_         194

The Land Question                 _A.S. Comyns Carr_         212

Agricultural Questions            _Rt. Hon. F.D. Acland_     227



K.C., M.P., Assistant Secretary of State for Foreign Affairs, 1918.
Minister of Blockade, 1916-1918. Representative of Union of South Africa
at Assembly of League of Nations.

Lord Robert Cecil said:--I ought to explain that I am here rather by
accident. The speaker who was to have addressed you was my great
personal friend, Professor Gilbert Murray, and you have greatly suffered
because he is not present. He is prevented by being at Geneva on a
matter connected with the League, and he suggested that I might take his
place. I was very glad to do so, for, let me say quite frankly, I am
ready to advocate the League of Nations before any assembly, certainly
not least an assembly of Liberals. But not only an assembly of
Liberals--I should be ready to advocate it even before an assembly of

Your chairman has said, and said truly, that the League is not a party
question. We welcome, we are anxious for support from every one. We have
seen in another great country the very grave danger that may accrue to
the cause of the League if it unhappily becomes identified with party
politics. We welcome support, yes, I will say even from the Prime
Minister; indeed no one will reject the support of the Prime Minister of
England for any cause. I am bound to admit when I first read the speech
to which reference has already been made, I was a little reminded of the
celebrated letter of Dr. Johnson to Lord Chesterfield. Lord Chesterfield
only began to recognise the value of Johnson's works when Johnson had
already succeeded, and in one of the bitter phrases Dr. Johnson then
used he said, "Is not a patron one who looks with unconcern on a man
struggling for life in the water, and when he has reached ground
incommodes him with help?" That was a passing phase in my mind, and I am
a little ashamed of it, because, after all, we cannot say the League has
reached ground as yet. We need and are grateful for the help of any one
who will genuinely come to its assistance. I hope we may look not only
for words, but for deeds. The League needs all the support it can get in
the very perilous and menacing times which are before us. I was glad to
note that the Government has announced--it is one of the great test
questions--that not only is it in favour of the entry of Germany into
the League, but it would support the election of Germany to the Council
of the League. That is an earnest of what we trust may be a real League
policy from the Government of this country. And yet, though I have
thought it right to emphasise the non-party aspect of this question, I
am conscious, and I am sure all of you are, there are two ways in which
the League is regarded. It is not only that, as your chairman would
say, some people have more faith than others, but there is really a
distinct attitude of mind adopted by some supporters of the League from
that adopted by others.


There is what I may call the empirical view of the League. There are
those of us in this country, and indeed all over the world, who,
profoundly impressed with the horrors of war, hating war from the bottom
of their hearts as an evil thing--a company which must include, as far
as I can see, all Christian men and women--these people, impressed with
the horrors of war, look about for some means of keeping it away, some
safeguard against its renewal. And they say: "We have tried everything
else, we have tried the doctrine of the preparation for war as a great
safeguard of peace; we have tried the doctrine of the Balance of Power;
we have tried the doctrine of making one State or group of States so
powerful that it can enforce its will on the rest of the world. We have
tried all these expedients, and we are driven to the conclusion that
they lead not to peace, but to war. Is there anything else?" And then
they come quite legitimately to the League as their last hope of
preserving the peace of the world. I was talking to a distinguished
Frenchman the other day, and that was his attitude. It is the attitude
of a great many people. In my judgment it is quite sound as far as it
goes. But it is not inspiring. It depends in the last resort merely on
a frank appeal to the terrors of mankind.

Against that view you may set the more fundamental way of approaching
this question. You may say if you are to have peace in the world it is
not enough merely to provide safeguards against war. You must aim at
creating a new international spirit, a new spirit in international
affairs; you must build from the very foundations. That is the positive
as opposed to the negative way of approaching this question. It is not
enough to cast out the war spirit and leave its habitation swept and
garnished. You have to replace the war spirit by a spirit of
international co-operation. And that is the way of regarding this great
movement which some people think can be disposed of by describing it as
idealism--a favourite term of abuse, I learn, now, but which seems to me
not only good politics and good morality, but common sense as well.


These two points of view do represent undoubtedly fundamental
differences of political attitude, and you will find that the two sets
of advocates or supporters of the League whom I have tried to describe,
will inevitably regard with different emphasis the provisions of the
Covenant, and even the achievements of the League. For if you read the
Covenant you will find two sets of provisions in that document. It does
recognise the two schools, as it were, that I have been describing. It
has a set of provisions which deal with the enforcement, the
safeguarding of peace, and a set of provisions which deal with the
building up of international co-operation. You will notice the two sets
of provisions. There are those aiming directly at the settlement of
disputes without war. This is the central part of the League. It is the
first thing before you can hope to do anything else. Before you can
begin to build up your international spirit you must get rid as far as
you can of the actual menace of war; and in that sense this is the
central part of the Covenant. But, in my view, the most enduring and
perhaps the most important part is that set of provisions which cluster
round the group of articles beginning with Article 10 perhaps, certainly
Article 12, and going on to Article 17--the group which says in effect
that before nations submit their disputes to the arbitrament of war they
are bound to try every other means of settling their differences. It
lays down first the principle that every dispute should come to some
kind of arbitration, either by the new Court of International
Justice--one of the great achievements of the League--or discussion
before a specially constituted Arbitration Court, or failing both, then
discussion before the Council of the League; and Articles 15 and 16
provide that until that discussion has taken place, and until adequate
time has been allowed for the public opinion of the world to operate on
the disputants as the result of that examination, no war is to take
place, and if any war takes place the aggressor is to be regarded as
perhaps what may be called an international outlaw.

Before you begin to build you must have freedom from actual war, and
the provisions have been effective. They are not merely theoretic. I am
not sure whether it is generally recognised, even in so instructed an
assembly as this, how successful these provisions have actually been in
practice. Let me give you briefly two illustrations: the dispute between
Sweden and Finland, and the much more urgent case of the dispute between
Serbia and Albania. In the first case you had a dispute about the
possession of certain islands in the Baltic. It was boiling up to be a
serious danger to the peace of the world. It was referred to the League
for discussion. It was before the existence of the International Court.
A special tribunal was constituted. The matter was threshed out with
great elaboration; a decision was come to which, it is interesting to
observe, was a decision against the stronger of the two parties. It was
accepted, not with enthusiasm by the party that lost, but with great
loyalty. It has been adopted, worked out in its details by other organs
of the League, and as far as one can tell, as far as it is safe to
prophesy about anything, it has absolutely closed that dispute, and the
two countries are living in a greater degree of amity than existed
before the dispute became acute.

But the Albanian case is stronger. You had a very striking case: a small
country only just struggling into international existence. Albania had
only just been created before the war as an independent State, and
during the war its independence had in effect vanished. The first thing
that happened was its application for membership of the League. That
was granted, and thereby Albania came into existence really for the
first time as an independent State. Then came its effort to secure the
boundaries to which it was entitled, which had been provisionally
awarded to it before the war. While that dispute was still unsettled,
its neighbour, following some rather disastrous examples given by
greater people in Europe, thought to solve the question by seizing even
more of the land of Albania than it already occupied. Thereupon the
Articles of the Covenant were brought into operation. The Council was
hastily summoned within a few days. It was known that this country was
prepared to advocate before that Council the adoption of the coercive
measures described in Article 16. The Council met, and the aggressive
State immediately recognised that as a member of the League it had no
course open but to comply with its obligations, and that as a prudent
State it dared not face the danger which would be caused to it by the
operation of Article 16. Immediately, before the dispute had actually
been developed, before the Council, the Serbians announced that they
were prepared to withdraw from Albanian territory, and gave orders to
their troops to retire beyond the boundary. Let us recognise that this
decision having been come to, it was carried out with absolute loyalty
and completeness. The troops withdrew. The territory was restored to
Albania without a hitch. No ill-feeling remains behind, and the next
thing we hear is that a commercial treaty is entered into between the
two States, so that they can live in peace and amity together.


I want to emphasise one point about these two cases. It is not so much
that the coercive powers provided in the Covenant were effectively used.
In Sweden and Finland they never came into the question at all, and in
the other case there was merely a suggestion of their operation. What
really brought about a settlement of these two disputes was that the
countries concerned really desired peace, and were really anxious to
comply with their obligations as members of the League of Nations. That
is the essential thing--the League spirit. And if you want to see how
essential it is you have to compare another international incident: the
dispute between Poland and Lithuania, where the League spirit was
conspicuous by its absence. There you had a dispute of the same
character. But ultimately you did secure this: that from the date of the
intervention of the League till the present day--about two years--there
has been no fighting; actual hostilities were put an end to. Though that
is in itself an immensely satisfactory result, and an essential
preliminary for all future international progress, yet one must add that
the dispute still continues, and there is much recrimination and
bitterness between the two countries. The reason why only partial
success has been attained is because one must say Poland has shown a
miserable lack of the true spirit of the League.

Let me turn to the other parts of the Covenant--those which aim
directly at building up international co-operation. I am not sure that
it is always sufficiently realised that that is not only an implicit but
also an explicit object of the Covenant--that it is the main purpose for
which the League exists. International co-operation are the very first
words of the preamble to the Covenant. This is the fundamental idea I
cannot insist on too strongly, because it does really go down to the
very foundations of my whole creed in political matters. International
co-operation, class co-operation, individual co-operation--that is the
essential spirit if we are to solve the difficulties before us. Let me
remind you of the two instances of the action of the League in dealing
with the threat of epidemics to Europe. A conference was called at
Washington to consider what could be done to save Europe from the danger
of epidemics coming from the East. What is interesting is that in that
conference you had present not only members of the League considering
and devising means for the safety of Europe, but you had representatives
of Germany and Russia--a splendid example of the promotion of
international co-operation extending even beyond the limits of the
membership of the League. Admirable work was done. All countries
co-operated quite frankly and willingly under the presidency of a
distinguished Polish scientist.

That is one example of what we mean by international co-operation.
Perhaps an even more striking example was the great work of Dr. Nansen
in liberating the prisoners of war who were in Russia. He was entrusted
with the work on behalf of the League. The prisoners of war belonged to
all nationalities, including our enemies in the late war. He
accomplished his work because he went about it in the true spirit of the
League, merely anxious to promote the welfare of all, leaving aside all
prejudices whether arising from the war or from any other cause. Dr.
Nansen is in my judgment the incarnation of the spirit of the League,
and his work, immensely successful, restored to their homes some 350,000
persons, and he did it for less money than he originally estimated it
would cost.

Do not put me down as a facile optimist in this matter. In the matter of
international co-operation we have a long way to go before we reach our
goal, and we can already see one or two serious failures. I deeply
deplore that last year the League found itself unable, through the
instructions given by the Governments which composed it, to do anything
effective on behalf of the famine in Russia. It was a most deplorable
failure for the League, and still more deplorable for this country. It
was a great opportunity for us to show that we really did mean to be
actuated by a new spirit in international affairs, and that we did
recognise that the welfare of all human beings was part--if you like to
put it so--of our national interests. We failed to make that
recognition. We have been trying feebly and unsuccessfully to repair
that great mistake ever since, and for my part I do not believe there is
any hope of a solution of the Russian difficulty until we absolutely
acknowledge the failure we then made, and begin even at this late hour
to retrace the false step we then took.

I could give other instances of failure, but I do not wish to depress
you, and there are cheering things we may look at. It is a matter of
great relief and congratulation that the policy of mandates really does
appear to be becoming effective, and one of the greatest activities of
the League. Nothing is better than the conception which the mandate
clause embodies, that the old ideas of conquest are to be put aside;
that you are not to allow nations to go out and take chunks of territory
for themselves; that they must hold new territory not for themselves,
but on behalf of and for the benefit of mankind at large. This is at the
bottom of mandates. Since I am speaking on behalf of Professor Murray, I
ought to remind you of the provisions of the Covenant for the protection
of racial linguistic minorities, and minorities in different countries.
It has not yet become an effective part of the machinery of the League,
but I look forward to the time when we shall have established the
doctrine that all racial minorities are entitled to be treated on a
footing absolutely equal with other nationals of the country in which
they live. If that could be established, one of the great difficulties
in the way of international co-operation in the spirit of peace will be


These are the two aspects I wanted to bring before you. If we are to get
down to the root of the matter; if we are to uproot the old jungle
theory of international relations, we must recognise that the chief
danger and difficulty before us is what may be described as excessive
nationalism. We have to recognise in this and other countries that a
mere belief in narrow national interests will never really take you
anywhere. You must recognise that humanity can only exist and prosper as
a whole, and that you cannot separate the nation in which you live, and
say you will work for its prosperity and welfare alone, without
considering that its prosperity and welfare depend on that of others.
And the differences on that point go right through a great deal of the
political thought of the day.

Take the question of reparations. I am not going to discuss in detail
what ought to be done in that difficult and vexed question, but I want
to call your attention to the mistake which was originally made, and
which we have never yet been able to retrieve. The fundamental error of
Versailles was the failure to recognise that even in dealing with a
conquered enemy you can only successfully proceed by co-operation. That
was the mistake--the idea that the victorious Powers could impose their
will without regard to the feelings and desires and national sentiment
of their enemy, even though he was beaten. For the first time in the
history of peace conferences, the vanquished Power was not allowed to
take part in any real discussion of the terms of the treaty. The
attitude adopted was, "These are our terms, take or leave them, but you
will get nothing else." No attempt was made to appreciate, or even
investigate the view put forward by the Germans on that occasion. And
last, but not least, they were most unfortunately excluded from
membership of the League at that time. I felt profoundly indignant with
the Germans and their conduct of the war. I still believe it was due
almost exclusively to the German policy and the policy of their rulers
that the war took place, and that it was reasonable and right to feel
profound indignation, and to desire that international misdeeds of that
character should be adequately punished. But what was wrong was to think
that you could as a matter of practice or of international ethics try to
impose by main force a series of provisions without regard to the
consent or dissent of the country on which you were trying to impose
them. That is part of the heresy that force counts for everything. I
wish some learned person in Oxford or elsewhere would write an essay to
show how little force has been able to achieve in the world. And the
curious and the really remarkable thing is that it was this heresy which
brought Germany herself to grief. It is because of the false and immoral
belief in the all-powerfulness of force that Germany has fallen, and yet
those opposed to Germany, though they conquered her, adopted only too
much of her moral code.

It was because the Allies really adopted the doctrine of the mailed fist
that we are now suffering from the terrible economic difficulties and
dangers which surround us. I venture to insist on that now, because
there are a large number of people who have not abandoned that view.
There are still a number of people who think the real failure that has
been committed is not that we went wrong, as I think, in our
negotiations at Versailles, but that we have not exerted enough force,
and that the remedy for the present situation is more threats of force.
I am sure it won't answer. I want to say that that doctrine is just as
pernicious when applied to France as when applied to Germany. You have
made an agreement. You have signed and ratified a treaty; you are
internationally bound by that treaty. It is no use turning round and
with a new incarnation of the policy of the mailed fist threatening one
of your co-signatories that they are bound to abandon the rights which
you wrongly and foolishly gave to them under that treaty.

I am against a policy based on force as applied to Germany. I am equally
opposed to a policy based on force as applied to France. If we really
understand the creed for which we stand, we must aim at co-operation all
round. If we have made a mistake we must pay for it. If we are really
anxious to bring peace to the world, and particularly to Europe, we must
be prepared for sacrifices. We have got to establish economic peace, and
if we don't establish it in a very short time we shall be faced with
economic ruin. In the strictest, most nationalistic interests of this
country, we have to see that economic war comes to an end. We have got
to make whatever concessions are necessary in order to bring that peace
into being.


That is true not only of the reparation question; it is true of our
whole economic policy. We have been preaching to Europe, and quite
rightly, that the erection of economic barriers between countries is a
treachery to the whole spirit of the League of Nations, and all that it
means, and yet with these words scarcely uttered we turn round and pass
through Parliament a new departure in our economic system which is the
very contradiction of everything we have said in international

The Safeguarding of Industries Act is absolutely opposed to the whole
spirit and purpose which the League of Nations has in view. A reference
was made by your chairman to Lord Grey, and I saw in a very
distinguished organ of the Coalition an attack on his recent speech. We
are told that he ought not at this crisis to be suggesting that the
present Government is not worthy of our confidence, but how can we trust
the present Government? How is it possible to trust them when one finds
at Brussels, at Genoa, at the Hague, and elsewhere they preach the
necessity of the economic unity of Europe, and then go down to the House
of Commons and justify this Act on the strictest, the baldest, the most
unvarnished doctrine of economic particularism for this country? Nor
does it stop there. I told you just now that for me this doctrine on
which the League is based goes right through many other problems than
those of a strictly international character. You will never solve
Indian or Egyptian difficulties by a reliance on force and force alone.
I believe that the deplorable, the scandalous condition to which the
neighbouring island of Ireland has been reduced is largely due to the
failure to recognise that by unrestricted unreasoning, and sometimes
immoral force, you cannot reach the solution of the difficulties of that

And in industry it is the same thing. If you are really to get a
solution of these great problems, depend upon it you will never do it by
strikes and lock-outs. I am an outsider in industrial matters. I am
reproached when I venture to say anything about them with the
observation that I am no business man. I can only hope that in this case
lookers-on may sometimes see most of the game. But to me it is
profoundly depressing when I see whichever section of the industrial
world happens to have the market with it--whether employers or
wage-earners--making it its only concern to down the other party as much
as it can. You will never reach a solution that way. You have to
recognise in industrial as in international affairs that the spirit of
co-operation, the spirit of partnership, is your only hope of salvation.


What is the conclusion of what I have tried to say to you? There are at
the present time two great causes of fighting and hostility. There used
to be three. There was a time when men fought about religious doctrine,
and though I do not defend it, it was perhaps less sordid than some of
our fights to-day. Now the two great causes of fighting are greed and
fear. Generally speaking, I think we may say that greed in international
matters is a less potent cause of hostility than fear. The disease the
world is suffering from is the disease of fear and suspicion. You see it
between man and man, between class and class, and most of all between
nation and nation. People reproach this great country and other great
countries with being unreasonable or unwilling to make concessions. If
you look deeply into it you will find always the same cause. It is not
mere perversity; it is fear and fear alone that makes men unreasonable
and contentious. It is no new thing; it has existed from the foundation
of the world. The Prime Minister the other day said, and said quite
truly, that the provisions of the Covenant, however admirable, were not
in themselves sufficient to secure the peace of the world. He made an
appeal, quite rightly, to the religious forces and organisations to
assist. I agree, but after all something may be done by political
action, and something by international organisation. In modern medicine
doctors are constantly telling us they cannot cure any disease--all they
can do is to give nature a chance. No Covenant will teach men to be
moral or peace-loving, but you can remove, diminish, or modify the
conditions which make for war, and take obstacles out of the way of
peace. We advocate partnership in industry and social life. We advocate
self-government, international co-operation. We recognise that these are
no ends in themselves; they are means to the end; they are the
influences which will facilitate the triumph of the right and impede the
success of the wrong.

But looking deeper into the matter, to the very foundations, we
recognise, all of us, the most devoted adherents of the League, and all
men of goodwill, that in the end we must strive for the brotherhood of
man. We admit we can do comparatively little to help it forward. We
recognise that our efforts, whether by covenant or other means, must
necessarily be imperfect; but we say, and say rightly, that we have been
told that perfect love casteth out fear, and that any step towards that
love, however imperfect, will at any rate mitigate the terrors of



Hon. Litt.D.; Fellow of All Souls' College, Oxford; F.B.A.; Professor of
English History in the University of London; Chairman of the Institute
of Historical Research.

Professor Pollard said:--The usual alternative to the League of Nations,
put forward as a means of averting war by those who desire or profess to
desire permanent peace, but dislike or distrust the League of Nations,
is what they call the Balance of Power. It is a familiar phrase; but the
thing for which the words are supposed to stand, has, if it can save us
from war, so stupendous a virtue that it is worth while inquiring what
it means, if it has any meaning at all. For words are not the same as
things, and the more a phrase is used the less it tends to mean: verbal
currency, like the coinage, gets worn with use until in time it has to
be called in as bad. The time has come to recall the Balance of Power as
a phrase that has completely lost the value it possessed when originally
it was coined.

Recent events have made an examination of the doctrine of the Balance of
Power a matter of some urgency. The Allies who won the war concluded a
pact to preserve the peace, but in that pact they have not yet been able
to include Germany or Russia or the United States, three Powers which
are, potentially at any rate, among the greatest in the world. So, some
fifty years ago, Bismarck, who won three wars in the mid-Victorian age,
set himself to build up a pact of peace. But his Triple Alliance was not
only used to restrain, but abused to repress, the excluded Powers; and
that abuse of a pact of peace drove the excluded Powers, France and
Russia, into each other's arms. There resulted the Balance of Power
which produced the war we have barely survived. And hardly was the great
war fought and won than we saw the wheel beginning to revolve once more.
The excluded Powers, repressed or merely restrained, began to draw
together; others than Turkey might gravitate in the same direction,
while the United States stands in splendid isolation as much aloof as we
were from the Triple Alliance and the Dual Entente a generation ago.
Another Balance of Power loomed on the horizon. "Let us face the facts,"
declared the _Morning Post_ on 22nd April last, "we are back again to
the doctrine of the Balance of Power, whatever the visionaries and the
blind may say." I propose to deal, as faithfully as I can in the time at
my disposal, with the visionaries and the blind--when we have discovered
who they are.

By "visionaries" I suppose the _Morning Post_ means those who believe in
the League of Nations; and by the "blind" I suppose it means them, too,
though usually a distinction is drawn between those who see too much and
those who cannot see at all. Nor need we determine whether those who
believe in the Balance of Power belong rather to the visionaries or to
the blind. A man may be receiving less than his due when he is asked
whether he is a knave or a fool, because the form of the question seems
to preclude the proper answer, which may be "both." Believers in the
Balance of Power are visionaries if they see in it a guarantee of peace,
and blind if they fail to perceive that it naturally and almost
inevitably leads to war. The fundamental antithesis is between the
Balance of Power and the League of Nations.


That antithesis comes out wherever the problem of preserving the peace
of the world is seriously and intelligently discussed. Six years ago,
when he began to turn his attention to this subject, Lord Robert Cecil
wrote and privately circulated a memorandum in which he advocated
something like a League of Nations. To that memorandum an able reply was
drafted by an eminent authority in the Foreign Office, in which it was
contended that out of the discussion "the Balance of Power emerges as
the fundamental factor." That criticism for the time being checked
official leanings towards a League of Nations. But the war went on,
threatening to end in a balance of power, which was anything but welcome
to those who combined a theoretical belief in the Balance of Power with
a practical demand for its complete destruction by an overwhelming
victory for our Allies and ourselves. Meanwhile, before America came
in, President Wilson was declaring that, in order to guarantee the
permanence of such a settlement as would commend itself to the United
States, there must be, not "a Balance of Power but a Community of

Opinion in England was moving in the same direction. The League of
Nations Society (afterwards called "Union") had been formed, and at a
great meeting on 14th May, 1917, speeches advocating some such league as
the best means of preventing future wars were delivered by Lord Bryce,
General Smuts, the Archbishop of Canterbury, Lord Hugh Cecil, and
others. Labour was even more emphatic; and, responding to popular
opinion, the Government, at Christmas, 1917, appointed a small committee
to explore the historical, juridical, and diplomatic bearings of the
suggested solution. A brief survey sufficed to show that attempts to
guarantee the peace of the world resolved themselves into three
categories: (1) a Monopoly of Power, (2) Balance of Power, and (3)
Community of Power. Rome had established the longest peace in history by
subjugating all her rivals and creating a _Pax Romana_ imposed by a
world-wide Empire. That Empire lasted for centuries, and the idea
persisted throughout the middle ages. In modern times Philip II. of
Spain, Louis XIV. of France, Napoleon, and even the Kaiser were
suspected of attempting to revive it; and their efforts provoked the
counter idea, first of a Balance of Power, and then in these latter days
of a Community of Power. The conception of a Monopoly of Power was by
common consent abandoned as impossible and intolerable, after the rise
of nationality, by all except the particular aspirants to the monopoly.
The Balance of Power and the Community of Power--in other words, the
League of Nations--thus became the two rival solutions of the problem of
permanent peace.


The discussion of their respective merits naturally led to an inquiry
into what the alternative policies really meant. But inasmuch as the
Foreign Office committee found itself able to agree in recommending some
form of League of Nations, the idea of the Balance of Power was not
subjected to so close a scrutiny or so searching an analysis as would
certainly have been the case had the committee realised the possibility
that reaction against an imperfect League of Nations might bring once
more to the front the idea of the Balance of Power. The fact was,
however, elicited that the Foreign Office conception of the Balance of
Power is a conception erroneously supposed to have been expressed by
Castlereagh at the time of the Congress of Vienna, and adopted as the
leading principle of nineteenth century British foreign policy.

Castlereagh was not, of course, the author of the phrase or of the
policy. The phrase can be found before the end of the seventeenth
century; and in the eighteenth the policy was always pleaded by
potentates and Powers when on the defensive, and ignored by them when in
pursuit of honour or vital interests. But Castlereagh defined it afresh
after the colossal disturbance of the balance which Napoleon effected;
and he explained it as "a just repartition of force amongst the States
of Europe." They were, so to speak, to be rationed by common agreement.
There were to be five or six Great Powers, whose independence was to be
above suspicion and whose strength was to be restrained by the jealous
watchfulness of one another. If any one State, like France under
Napoleon, grew too powerful, all the rest were to combine to restrain

Now, there is a good deal in common between Castlereagh's idea and that
of the League of Nations. Of course, there are obvious differences.
Castlereagh's Powers were monarchies rather than peoples; they were
limited to Europe; little regard was paid to smaller States, whose
independence sometimes rested on no better foundation than the inability
of the Great Powers to agree about their absorption; and force rather
than law or public opinion was the basis of the scheme. But none of
these differences, important though they were, between Castlereagh's
Balance of Power and the League of Nations is so fundamental as the
difference between two things which are commonly regarded as identical,
viz., Castlereagh's idea of the Balance of Power and the meaning which
has since become attached to the phrase. There are at least two senses
in which it has been used, and the two are wholly incompatible with one
another. The League of Nations in reality resembles Castlereagh's
Balance of Power more closely than does the conventional notion of that
balance; and a verbal identity has concealed a real diversity to the
confusion of all political thought on the subject.

Castlereagh's Balance of Power is what I believe mathematicians call a
multiple balance. It was not like a pair of scales, in which you have
only two weights or forces balanced one against the other. It was rather
like a chandelier, in which you have five or six different weights
co-operating to produce a general stability or equilibrium. In
Castlereagh's scheme it would not much matter if one of the weights were
a little heavier than the others, because there would be four or five of
these others to counterbalance it; and his assumption was that these
other Powers would naturally combine for the purpose of redressing the
balance and preserving the peace. But a simple balance between two
opposing forces is a very different thing. If there are only two, you
have no combination on which you can rely to counteract the increasing
power of either, and the slightest disturbance suffices to upset the
balance. Castlereagh's whole scheme therefore presupposed the continued
and permanent existence of some five or six great Powers always
preserving their independence in foreign policy and war, and
automatically acting as a check upon the might and ambition of any
single State.


Now, it was this condition, essential to the maintenance of
Castlereagh's Balance of Power, which completely broke down during the
course of the nineteenth century. Like most of the vital processes in
history, the change was gradual and unobtrusive, and its significance
escaped the notice of politicians, journalists, and even historians. Men
went on repeating Castlereagh's phrases about the Balance of Power
without perceiving that the circumstances, which alone had given it
reality, had entirely altered. The individual independence and automatic
action of the Great Powers in checking the growing ambitions and
strength of particular States were impaired, if not destroyed, by
separate Alliances, which formed units into groups for the purposes of
war and foreign policy, and broke up the unity of the European system,
just as a similar tendency threatens to break up the League of Nations.
There was a good deal of shifting about in temporary alliances which
there is no need to recount; but the ultimate upshot was the severance
of Europe into the two great groups with which we are all familiar, the
Triple Alliance of Germany, Austria, and Italy on one side, and the
Triple Entente between Russia, France, and Great Britain on the other.
The multiple Balance of Power was thus changed into a simple balance
between two vast aggregations of force, and nothing remained outside to
hold the balance, except the United States, which had apparently
forsworn by the Monroe Doctrine the function of keeping it even.

And yet men continued to speak of the Balance of Power as though there
had been no change, and as though Castlereagh's ideas were as applicable
to the novel situation as they had been to the old! That illustrates
the tyranny of phrases. Cynics have said that language is used to
conceal our thoughts. It is difficult to resist the conclusion that
phrases are used to save us the trouble of thinking. We are always
giving things labels in order to put them away in their appropriate
pigeon-holes, and then we talk about the labels without thinking about
them, and often forgetting (if we ever knew) the things for which they
stand. So we Pelmanised the Balance of Power, and continued to use the
phrase without in the least troubling to ask what it means. When I asked
at the Foreign Office whether diplomatists meant by the Balance of Power
the sort of simple balance between two great alliances like the Triple
Alliance and the Triple Entente, I was told "yes"; and there was some
surprise--since the tradition of Castlereagh is strong in the
service--when I pointed out that that was an entirely different balance
from that of which Castlereagh had approved as a guarantee of peace. You
remember the Cheshire cat in _Alice in Wonderland_--an excellent
text-book for students of politics--and how the cat gradually faded away
leaving only its grin behind it to perplex and puzzle the observer. So
the body and the substance of Castlereagh's Balance of Power passed
away, and still men talk of the grin and look to the phrase to save them
from war. Whether to call them visionaries or the blind, I do not know.


In either case, it is a mischievous hallucination; for the simple
Balance of Power between two great combinations is not only no guarantee
of peace, but the great begetter of fear, of the race for armaments, and
of war. Consider for a moment. If you want a balance, you want to have
it perfect. What is a perfect balance between two opposing weights or
forces? It is one which the addition of a feather-weight to either scale
will at once and completely upset. Now what will that equipoise produce?
The ease with which the balance may be destroyed will produce either on
one side the temptation to upset it, and on the other fear lest it be
upset, or fear on both sides at once. What indeed was it but this even
balance and consequent fear which produced the race for armaments? And
what does the race for armaments result in but in war? If we want war,
we need only aim at a Balance of Power, and it will do the rest. So far
from being a guarantee of peace, the Balance of Power is a sovereign
specific for precipitating war.

Of course, there are arguments for a Balance of Power. Plenty of them,
alas! though they are not often avowed. It produces other things than
war. For one thing, it makes fortunes for munition firms. For another,
it provides careers for those who have a taste for fighting or for
military pomp. Thirdly, in order to maintain armies and navies and
armaments, it keeps up taxation and diverts money from social,
educational, and other reforms which some people want to postpone.
Fourthly, it gratifies those who believe that force is the ultimate
sanction of order, and, by necessitating the maintenance of large forces
for defensive purposes, incidentally provides means for dealing with
domestic discontent. Fifthly, it panders to those who talk of prestige
and think that prestige depends upon the size of a nation's armaments.
For the sake of these things many would be willing to take the risk of
war which the Balance of Power involves. But most of those who use the
phrase are unconscious of these motives, and use it as they use many
another phrase, simply because they know not what it means. For,
assuredly, no sane person who had examined the Balance of Power, as it
existed before the war, could ever advocate it as a means of peace.

Indeed, whenever there has been the prospect of a practical Balance of
Power, its votaries have shown by their action that they knew their
creed was nonsense. The late war, for instance, might have been ended in
1916 on the basis of a Balance of Power. There were a few who believed
that that was the best solution; but they were not our latter-day
believers in the Balance of Power. Their cry was all for a fight to a
finish and a total destruction of the Balance of Power by an
overwhelming victory for the Allies, and their one regret is that a
final blow by Marshal Foch did not destroy the last vestige of a German
army. What is the point of expressing belief in the Balance of Power
when you indignantly repudiate your own doctrine on every occasion on
which you might be able to give it effect? And what is the point of the
present advocacy of the Balance of Power by those who think themselves
neither visionaries nor blind? Do they wish to restore the military
strength of Germany and of Russia and to see an Alliance between them
confronting a Franco-British union, compelled thereby to be militarist
too? Is it really that they wish to be militarists and that the League
of Nations, with its promise of peace, retrenchment, and reform, is to
them a greater evil than the Balance of Power?


There is yet another fatal objection to the Balance of Power due to the
change in circumstances since the days of Castlereagh. He could afford
to think only of Europe, but we have to think of the world; and if our
specific has any value it must be of world-wide application. We cannot
proclaim the virtues of the Balance of Power and then propose to limit
it to the land or to any particular continent. Now, did our believers in
the Balance of Power ever wish to see power balanced anywhere else than
on the continent of Europe? That, if we studied history in any other
language than our own, we should know was the gibe which other peoples
flung at our addiction to the Balance of Power. We wanted, they said, to
see a Balance of Power on the continent of Europe, to see one half of
Europe equally matched against the other, because the more anxiously
Continental States were absorbed in maintaining their Balance of Power,
the keener would be their competition for our favour, and the freer
would be our hands to do what we liked in the rest of the world.

Was that a baseless slander? Let us test it with a question or two. Did
we ever want a Balance of Power at sea? British supremacy, with a
two-to-one or at least a sixteen-to-ten standard was, I fancy, our
minimum requirement. Is British supremacy what we mean by a Balance of
Power? Again, did we ever desire a Balance of Power in Africa, America,
or Asia? We may have talked of it sometimes, but only when we were the
weaker party and feared that another might claim in those continents the
sort of Balance of Power we claimed on the sea. We never spoke of the
Balance of Power in the interests of any nation except ourselves and an
occasional ally. We cannot speak in those terms to-day. If we demand a
Balance of Power on land, we must expect others to claim it at sea; if
we urge it on Europe as a means of peace, we cannot object if others
turn our own argument against us in other quarters of the globe; and
wherever you have a Balance of Power you will have a race for armaments
and the fear of war.

The Balance of Power is, in fact, becoming as obsolete as the Monopoly
of Power enjoyed by the Roman Empire. It is a bankrupt policy which went
into liquidation in 1914, and the high court of public opinion demands a
reconstruction. The principle of that reconstruction was stated by
President Wilson, a great seer whose ultimate fame will survive the
obloquy in which he has been involved by the exigencies of American
party-politics and the short-sightedness of public opinion in Europe. We
want, he said, a Community of Power, and its organ must be the League of
Nations. Nations must begin to co-operate and cease to counteract.

I am not advocating the League of Nations except in the limited way of
attempting to show that the Balance of Power is impossible as an
alternative unless you can re-create the conditions of a century ago,
restore the individual independence of a number of fairly equal Powers,
and guarantee the commonwealth of nations against privy conspiracy and
sedition in the form of separate groups and alliances. But there is one
supreme advantage in a Community of Power, provided it remains a
reality, and that is that it need never be used. Its mere existence
would be sufficient to ensure the peace; for no rebel State would care
to challenge the inevitable defeat and retribution which a Community of
Power could inflict. It has even been urged, and I believe it myself,
that Germany would never have invaded Belgium had she been sure that
Great Britain, and still less had she thought that America, would
intervene. It was the Balance of Power that provoked the war, and it was
the absence of a Community of Power which made it possible.


But no one who thinks that power--whether a Monopoly, a Balance, or even
a Community of Power is the ultimate guardian angel of our peace, has
the root of the matter in him. Men, said Burke, are not governed
primarily by laws, still less by force; and behind all power stands
opinion. To believe in public opinion rather than in might excludes the
believer from the regular forces of militarism and condemns him as a
visionary and blind. For advocates of the Balance of Power bear a
striking resemblance to the Potsdam school; and even so moderate a
German as the late Dr. Rathenau declared in his unregenerate days before
the war that Germans were not in the habit of reckoning with public
opinion. Nevertheless, there is a frontier in the world which for a
century and more has enjoyed a security which all the armaments of
Prussian militarism could not give the German Fatherland; and the
absolute security of that frontier rests not upon a monopoly nor a
community, still less upon a balance of power, but on the opinion held
on both sides of that frontier that all power is irrational and futile
as a guarantee of peace between civilised or Christian people.

Let us look at that frontier for a moment. It is in its way the most
wonderful thing on earth, and it holds a light to lighten the nations
and to guide our feet into the way of peace. It runs, of course, between
the Dominion of Canada and the United States of America across the great
lakes and three thousand miles of prairie; and from the military and
strategic point of view it is probably the worst frontier in the world.
Why then is it secure? Is it because of any monopoly or community or
balance of power? Is it because the United States and the British
Empire are under a common government, or because there is along that
frontier a nicely-balanced distribution of military strength? No, it is
secure, not in spite of the absence of force, but because of the absence
of force; and if you want to destroy the peace of that frontier from end
to end, all you need to do is to send a regiment to protect it, launch a
_Dreadnought_ on those lakes, and establish a balance of power. For
every regiment or warship on one side will produce a regiment or warship
on the other; and then your race for armaments will begin, and the
poison will spread until the whole of America becomes like Europe, an
armed camp of victims to the theory of strategic frontiers and of the
Balance of Power.

Those theories, their application, and their consequences recently cost
the world thirty million casualties and thousands of millions of pounds
within a brief five years, and yet left the frontiers of Europe less
secure than they were before. Three thousand miles of frontier in North
America have in more than a hundred years cost us hardly a life, or a
limb, or a penny. As we put those details side by side we realise
_quantula regitur mundus sapientia_--with how little wisdom do men rule
the world. Yet the truth was told us long ago that he that ruleth his
spirit is better than he that taketh a city, and we might have learnt by
our experience of the peace that the only conquest that really pays is
the conquest of oneself.

The real peace of that North American frontier is due to no conquest of
Americans by Canadians or of Canadians by Americans, but to their
conquest of themselves and of that foolish pride of "heathen folk who
put their trust in reeking tube and iron shard." Let us face the facts,
whatever the visionaries and the blind may say. So be it. The war is a
fact, and so is the desolation it has wrought. But that Anglo-American
frontier is also a fact, and so is that century of peace which happily
followed upon the resolution to depend for the defence of that frontier
on moral restraint instead of on military force. Verily, peace hath her
victories not less renowned than those of war.


We have, indeed, to face the facts, and the facts about the Balance of
Power must dominate our deliberations and determine the fate of our
programmes. There may be no more war for a generation, but there can be
no peace with a Balance of Power. There can be nothing better than an
armed truce; and an armed truce, with super-dreadnoughts costing from
four to eight times what they did before the war, is fatal to any
programme of retrenchment and reform. We are weighted enough in all
conscience with the debt of that war without the burden of preparation
for another; and a Balance of Power involves a progressive increase in
preparations for war.

Unless we can exorcise fear, we are doomed to repeat the sisyphean
cycles of the past and painfully roll our programmes up the hill, only
to see them dashed to the bottom, before we get to the top, by the
catastrophe of war. Fear is fatal to freedom; it is fear which alone
gives militarism its strength, compels nations to spend on armaments
what they fain would devote to social reform, drives them into secret
diplomacy and unnatural alliances, and leads them to deny their just
liberties to subject populations. Fear is the root of reaction as faith
is the parent of progress; and the incarnation of international fear is
the Balance of Power.



Director of Military Operations--Imperial General Staff, 1915-16.

Sir Frederick Maurice said:--This problem of the reduction of armaments
is one of the most urgent of the international and national problems of
the day. It is urgent in its economic aspect, urgent also as regards its
relation to the future peace of the world. The urgency of its economic
aspect was proclaimed two years ago at the Brussels conference of
financiers assembled by the League of Nations. These experts said quite
plainly and definitely that, so far as they could see, the salvation of
Europe from bankruptcy depended upon the immediate diminution of the
crushing burden of expenditure upon arms. That was two years ago. Linked
up with this question is the whole question of the economic
reconstruction of Europe. Linked up with it also is that deep and grave
problem of reparations. It is no longer the case to-day, if it has ever
been the case since the war, which I doubt, that sober opinion in France
considers it necessary for France to have large military forces in order
to protect her from German aggression in the near future. For the past
two years, however, it has been the custom of those who live upon alarms
to produce the German menace. There is a great body of opinion in
France at this moment which feels that unless France is able to put the
pistol to Germany's head, it will never be able to get a penny out of

You have the further connection of the attitude of America to the
problem. America said, officially through Mr. Hoover and unofficially
through a number of her leading financiers, that she was not ready to
come forward and take her share in the economic restoration of Europe so
long as Europe is squandering its resources upon arms. The connection is
quite definitely and explicitly recognised in the Covenant of the League
of Nations. Article 8 begins: "The principles of the League recognise
that the maintenance of peace requires reduction of national armaments
to the lowest point consistent with national safety, and the enforcement
by common action of international obligations." These words were
promulgated in 1919. Personally, I find myself in complete agreement
with what Lord Robert Cecil said this morning, and what Lord Grey said a
few days ago at Newcastle, that one of the prime causes of the war was
Prussian militarism. By that I mean the influence of that tremendous
military machine, which had been built up through years of labour in
Germany, in moulding the public opinion of that country.


Well, how do we stand in regard to that to-day? We stand to-day in the
position that the armaments of Germany, Austria, Hungary, Bulgaria, have
all been compulsorily drastically reduced, but in their place you have a
whole group of new armies. You have armies to-day which did not exist
before the war, in Finland, Esthonia, Poland, Lithuania, and
Czecho-Slovakia, and the sum total is that at this moment there are more
armed men in time of peace in Europe than in 1913. Is there no danger
that this machine will mould the minds of some other peoples, just as
the German machine moulded the minds of the Germans? This is the
position as regards the peace establishments of Europe to-day in their
relation to the future peace of the world. What about the economic
position? I have mentioned that certain Powers have had their forces
drastically reduced, and that has brought with it a drastic reduction of
expenditure, but I have before me the naval, military, and air force
estimates of the eight principal Powers in Europe, leaving out Germany,
Austria, and Bulgaria, whose forces have been compulsorily reduced.

At the economic conference of financiers in Brussels in 1920 it was
mentioned with horror that 20 per cent. of the income of Europe was then
being devoted to arms. I find that to-day 25 per cent. of the total
income of these eight Powers is devoted to arms. I find, further, that
of these eight Powers who have budgeted for a smaller service, only
one--Yugo-Slavia--has managed to balance her budget, and the others have
large deficits which are many times covered by their expenditure on
arms. And this is going on at a time when all these eight nations are
taxed almost up to their limit, when the whole of their industries are
suffering in consequence, and when the danger of bankruptcy, which
horrified the financiers in 1920, is even more imminent.

That being the case, what has been done in the last few years to remedy
this matter, and why is more not being done? As you all know, this
question is in the forefront of the programme of the League of Nations.
And the League began to deal with it at once. Lord Robert Cecil will
agree with me that the framers of the Covenant, of which he is one of
the chief, could not foresee everything, and they did not foresee at the
time the Covenant was framed, that machinery would be required to deal
with this extraordinarily complex question of armaments. They created an
organisation then called a Permanent Military Command, still in
existence, to advise the Council of the League on all military matters.
But when these gentlemen got to work upon such questions as reduction of
armaments, they at once found themselves dealing with matters entirely
beyond their competence, because into this problem enter problems of
high politics and finance, and a thousand other questions of which
soldiers, sailors, and airmen know nothing whatever.


The first step was to remedy an oversight in the machinery, and that was
done at the first meeting of the Assembly. The first meeting of the
Assembly created a temporary mixed commission on armaments, which was
composed of persons of recognised competence in political, social, and
economic matters. It consisted of six members of the old Permanent
Commission, and in addition a number of statesmen, employers, and
representatives of labour. This body started to tackle this grave
question. Before it began the first Assembly of the League had suggested
one line of approach--that there should be an agreement to limit
expenditure; that an attempt should be made to limit armaments by
limiting budgets; and nations were asked to agree that they would not
exceed in the two years following the acceptance of the resolution the
budgeted expenditure on armaments of the current year.

That proposal did not meet with great success. It was turned down by
seven Powers, notably by France and Spain. On the whole, I think France
and Spain and the other Powers had some reason on their side, because it
is not possible to approach this problem solely from the financial
standpoint. You cannot get a financial common denominator and apply it
to armaments. The varying costs of a soldier in Europe and in Japan have
no relation to each other. The cost of a voluntary soldier in Great
Britain has no relation to the cost of a conscript on the Continent.
Therefore, that line of approach, when applied too broadly, is not
fruitful. I think myself it is quite possible that you may be able to
apply financial limitations to the question of material, the
construction of guns and other weapons of war, because the cost of these
things in foreign countries tends much more to a common level. I think
this is a possible line of approach, but to try to make a reduction of
armaments by reducing budgets on a wholesale scale I do not think will
lead us anywhere at all. I may safely say that for the present that line
of approach has been abandoned.

The Temporary Mixed Commission got to work, and in its first year,
frankly, I cannot say it did very much. It concerned itself very largely
with the accumulation of information and the collection of statistics,
bearing rather the same relation to world problems as a Royal Commission
does to our domestic problems. By the time the second Assembly met
practically nothing had been done by the Commission. But other people
had been at work, and our own League of Nations Union had put forward a
proposal--a line of approach, rather, I would say, to this
problem--which I for one think is extremely useful. It began by
inquiring as to what armaments were for, which after all is a useful way
of beginning, and the inquiry came to the conclusion that nations
required them for three purposes--to maintain internal order; as a last
resort for the enforcement of law and order; and to protect overseas
possessions. After these purposes were served there was a large residuum
left. That residuum could only be required for one purpose--to protect
the country in question from foreign aggression. When you had gone thus
far in your reasoning, you had obviously got into the zone where
bargaining becomes possible, because it is obvious that by agreement you
can get the force by which a nation is liable to become reduced. That
line of approach received the general blessing at the second Assembly of
the League of Nations. Things began to move, primarily because the
Dominion of South Africa took a keen interest in this problem of the
reduction of armaments, and South Africa appointed Lord Robert Cecil as
its representative, and instructed him to press the matter on, and he
did. The Assembly definitely instructed this temporary mixed Commission
that by the time the third Assembly met plans should be prepared and
concrete proposals put on paper.


Soon after that came the Washington Conference--a great landmark in the
history of this problem. For reasons I need not go into in detail, the
naval problem is very much easier than the military or air problem. You
have as the nucleus of naval forces something quite definite and
precise--the battleship--and it also happens that that particular unit
is extremely costly, and takes a long time to build, and no man has yet
ever succeeded in concealing the existence of a battleship. There you
had three important points--a large and important unit in the possession
of everybody concerned, very costly, so that by reducing it you make
great reductions in expenditure. There was no possibility of avoiding an
agreement about the construction of battleships, and it is to these
facts mainly that the happy results of the Washington Conference were

But for the furtherance of the problem the point is this. The Washington
Conference definitely established the principle of reduction of
armaments on a great ratio. The ratio for battleships between Great
Britain, the United States, Japan, France, and Italy, was settled as to
5, 5, 3, and 1.75. They all agreed on a definite ratio. All agreed to
scrap a certain number of ships, to bring their tonnage down to a
certain figure, and by doing that relatively they were left in the same
position as before, with this advantage--that they at once obtained an
enormous reduction in expenditure on armaments.

That opened up a new line of approach for the attack on this problem
from the military and air standpoint. And the next development took
place in February this year at the meeting of the Temporary Mixed
Commission on armaments, when the Esher proposals were presented. There
has been a great deal of talk about the Esher proposals, and I am glad
of it, because the one thing wanted in this question is public interest.
The Esher proposals were an endeavour to apply to land armaments this
principle of reduction on a great ratio. And the line taken was this. It
was necessary to find some unit in land armaments which corresponded
with the battleships, and the unit selected by Lord Esher was the
300,000 regular soldiers of the peace armies in France, England, and
Spain. It was selected because it happened to be the number to which the
Austrian army was reduced by treaty, and with that unit he proposed a
ratio for the armies of Europe, which would leave everybody relatively
in much the same position as before, but would obtain an immediate
reduction in numbers of standing armies and a great reduction of

This proposal was subjected to a great deal of criticism, and I am sorry
to say nine-tenths of the criticism appears to emanate from persons who
have never read the proposal at all. It is a proposal which lends itself
to a great deal of criticism, and the most effective criticism which
could have been applied at the time it was presented was that it put the
cart before the horse, and approached the problem from the wrong
direction, for, as Lord Robert Cecil has said here this morning, what
nations require is security. Some of them have clear ideas as to the way
of obtaining it, but they all want it, and before you can expect people
to reduce their armaments, which are, after all, maintained mainly for
the purpose of providing security, you must give them something that
will take the place of armaments.


In June an important development took place in this Temporary
Commission. It was increased by the addition of a number of statesmen,
and, amongst others, of men who ought to have been on it long ago. Lord
Robert Cecil was added, and he at once proceeded to remedy what was a
real difficulty in Lord Esher's proposals. He put forward a plan for
providing security in the form, as the Assembly of the League had asked,
of a definite written proposal--really a brief treaty. The purport of
that treaty is included in the form of resolutions, which are roughly as
follows:--No scheme for the reduction of armaments can be effective
unless it is general; that in the present state of the world no
Government can accept the responsibility for a serious reduction of
armaments unless it is given some other equally satisfactory guarantee
of the safety of its country; such guarantee can only be found in a
general defensive agreement of all the countries concerned, binding them
all to come to the assistance of any one of them if attacked.

A general defensive pact, with a proviso! It is obviously unreasonable
to expect the States of the American continent to be ready to come over
at any moment to help in Europe. It is obviously unreasonable to expect
the States of Europe to bind themselves to come and fight in Asia.
Therefore, there was this proviso added that an obligation to come to
the assistance of the attacked country should be limited to those
countries which belonged to the same quarter of the globe. Thus, you
see, you are getting the obligation of the League into regional
application. Personally my own conviction is that this is the line upon
which many of the functions of the League will develop.

The main point of the situation as it is to-day is that you have got a
committee working out in detail a general pact, which when it is
formulated will be far more complete and satisfactory than the very
general and vague Clause 10 of the Covenant. We have reached the
position when practical proposals are beginning to emerge. What more is
wanted? How can we help on this work? You will have gathered from what I
said that it is my own conviction that with this problem of reduction of
armaments is so closely linked up the problem of economic reconstruction
and reparations that the whole ought to be taken together. I believe one
of the reasons why so little progress has been made is that the economic
problems have been entrusted, with the blessing of our and other
Governments, to perambulating conferences, while the disarmament problem
has been left solely to the League of Nations. I believe if you could
get the whole of these problems considered by one authority--and there
is one obvious authority--progress would be far more rapid.

There is another matter which concerns us as citizens--the attitude of
our own Government to this question. I was delighted to see recently an
announcement made by a Minister in the House of Commons that the
Government was seriously in favour of a reduction of armaments on a
great ratio. I was delighted to read the other day a speech, to which
reference has already been made, by the Prime Minister. We have had a
great many words on this question. The time has come for action, and
quite frankly the action of our Government in the past two years with
regard to this question has been neutral, and not always one of
benevolent neutrality. Our official representatives at Geneva have been
very careful to stress the difficulties, but up to the present I am
unaware that our Government has ever placed its immense resources as
regards information at the disposal of the one Englishman who has been
striving with all his power and knowledge to get a definite solution. I
believe there is going to be a change; I hope so. In any case, the best
thing we can do is to see that it is changed, and that Lord Robert Cecil
is not left to fight a lone battle.


There is something more. There is something wanted from each of us.
Personally, I am convinced myself that this problem is soluble on the
lines by which it is now being approached. I speak to you as a
professional who has given some study to the subject. I am convinced
that on the lines of a general pact as opposed to the particular pact, a
general defensive agreement as opposed to separate alliances, followed
by reduction on a great ratio, the practicability of which has been
proved at Washington, a solution can be reached. Given goodwill--that is
the point. At the last Assembly of the League of Nations a report was
presented by the Commission, of which Lord Robert Cecil was a member,
and it wound up with these words: "Finally, the committee recognises
that a policy of disarmament, to be successful, requires the support of
the population of the world. Limitation of armaments will never be
imposed by Governments on peoples, but it may be imposed by peoples on
Governments." That is absolutely true. How are we going to apply it?
Frankly, myself, I do not see that there is a great deal of value to be
got by demonstrations which demand no more war. I have every sympathy
with their object, but we have got to the stage when we want to get
beyond words to practical resolutions. We want definite concrete
proposals, and you won't get these merely by demonstrations. They are
quite good in their way, but they are not enough. What you want in this
matter is an informed public opinion which sees what is practical and
insists on having it.

I am speaking to you as one who for a great many years believed
absolutely that preparation for war was the means of securing peace. In
1919--when I had a little time to look round, to study the causes of the
war and the events of the war--I changed my opinion. I then came quite
definitely to the conclusion that preparation for war, carried to the
point to which it had been carried in 1914, was a direct cause of war. I
had to find another path, and I found it in 1919. Lord Robert may
possibly remember that in the early days of the Peace Conference I came
to him and made my confession of faith, and I promised to give him what
little help I could. I have tried to keep my promise, and I believe this
vital problem, upon which not only the economic reconstruction of Europe
and the future peace of the world, but also social development at home
depend, can be solved provided you will recognise that the problem is
very complex; that there is fear to be overcome; that you are content
with what is practical from day to day, and accept each practical step
provided it leads forward to the desired goal. I therefore most
earnestly trust that the Liberal party will take this question up, and
translate it into practical politics. For that is what is required.



M.A., C.B.; Fellow of King's College, Cambridge; Editor of _Economic
Journal_ since 1912; principal representative of the Treasury at the
Paris Peace Conference, and Deputy for the Chancellor of the Exchequer
on the Supreme Economic Council, Jan.-June, 1919.

Mr. Keynes said:--I do not complain of Lord Balfour's Note, provided we
assume, as I think we can, that it is our first move, and not our last.
Many people seem to regard it as being really addressed to the United
States. I do not agree. Essentially it is addressed to France. It is a
reply, and a very necessary reply, to the kites which M. Poincaré has
been flying in _The Times_ and elsewhere, suggesting that this country
should sacrifice all its claims of every description in return
for--practically nothing at all, certainly not a permanent solution of
the general problem. The Note brings us back to the facts and to the
proper starting-point for negotiations.

In this question of Reparations the position changes so fast that it may
be worth while for me to remind you just how the question stands at this
moment. There are in existence two inconsistent settlements, both of
which still hold good in law. The first is the assessment of the
Reparation Commission, namely, 132 milliard gold marks. This is a
capital sum. The second is the London Settlement, which is not a capital
sum at all, but a schedule of annual payments calculated according to a
formula; but the capitalised value of these annual payments, worked out
on any reasonable hypothesis, comes to much less than the Reparation
Commission's total, probably to not much more than a half.


But that is not the end of the story. While both the above settlements
remain in force, the temporary régime under which Germany has been
paying is different from, and much less than, either of them. By a
decision of last March Germany was to pay during 1922 £36,000,000 (gold)
in cash, _plus_ deliveries in kind. The value of the latter cannot be
exactly calculated, but, apart from coal, they do not amount to much,
with the result that the 1922 demands are probably between a third and a
quarter of the London Settlement, and less than one-sixth of the
Reparation Commission's original total. It is under the weight of this
reduced burden that Germany has now broken down, and the present crisis
is due to her inability to continue these reduced instalments beyond the
payment of July, 1922. In the long run the payments due during 1922
should be within Germany's capacity. But the insensate policy pursued by
the Allies for the last four years has so completely ruined her
finances, that for the time being she can pay nothing at all; and for a
shorter or longer period it is certain that there is now no alternative
to a moratorium.

What, in these circumstances, does M. Poincaré propose? To judge from
the semi-official forecasts, he is prepared to cancel what are known as
the "C" Bonds, provided Great Britain lets France off the whole of her
debt and forgoes her own claims to Reparation. What are these "C" Bonds?
They are a part of the London Settlement of May, 1921, and, roughly
speaking, they may be said to represent the excess of the Reparation
Commission's assessment over the capitalised value of the London
Schedule of Payments, and a bit more. That is to say, they are pure
water. They mainly represent that part of the Reparation Commission's
total assessment which will not be covered, even though the London
Schedule of Payments is paid in full.

In offering the cancellation of these Bonds, therefore, M. Poincaré is
offering exactly nothing. If Great Britain gave up her own claims to
Reparations, and the "C" Bonds were cancelled to the extent of France's
indebtedness to us, France's claims against Germany would be actually
greater, even on paper, than they are now. For the demands under the
London Settlement would be unabated, and France would be entitled to a
larger proportion of them. The offer is, therefore, derisory. And it
seems to me to be little short of criminal on the part of _The Times_ to
endeavour to trick the people of this country into such a settlement.

Personally, I do not think that at this juncture there is anything
whatever to be done except to grant a moratorium. It is out of the
question that any figure, low enough to do Germany's credit any good
now, could be acceptable to M. Poincaré, in however moderate a mood he
may visit London next week. Apart from which, it is really impossible at
the present moment for any one to say how much Germany will be able to
pay in the long run. Let us content ourselves, therefore, with a
moratorium for the moment, and put off till next year the discussion of
a final settlement, when, with proper preparations beforehand, there
ought to be a grand Conference on the whole connected problem of
inter-Governmental debt, with representatives of the United States
present, and possibly at Washington.


The difficulties in the way of any immediate settlement now are so
obvious that one might wonder why any one should be in favour of the
attempt. The explanation lies in that popular illusion, with which it
now pleases the world to deceive itself--the International Loan. It is
thought that if Germany's liability can now be settled once and for all,
the "bankers" will then lend her a huge sum of money by which she can
anticipate her liabilities and satisfy the requirements of France.

In my opinion the International Loan on a great scale is just as big an
illusion as Reparations on a great scale. It will not happen. It cannot
happen. And it would make a most disastrous disturbance if it did
happen. The idea that the rest of the world is going to lend to
Germany, for her to hand over to France, about 100 per cent. of their
liquid savings--for that is what it amounts to--is utterly preposterous.
And the sooner we get that into our heads the better. I am not quite
clear for what sort of an amount the public imagine that the loan would
be, but I think the sums generally mentioned vary from £250,000,000 up
to £500,000,000. The idea that any Government in the world, or all of
the Governments in the world in combination, let alone bankrupt Germany,
could at the present time raise this amount of new money (that is to
say, for other purposes than the funding or redemption of existing
obligations) from investors in the world's Stock Exchanges is

The highest figure which I have heard mentioned by a reliable authority
is £100,000,000. Personally, I think even this much too high. It could
only be realised if subscriptions from special quarters, as, for
example, German hoards abroad, and German-Americans, were to provide the
greater part of it, which would only be the case if it were part of a
settlement which was of great and obvious advantage to Germany. A loan
to Germany, on Germany's own credit, yielding, say, 8 to 10 per cent.,
would not in my opinion be an investor's proposition in any part of the
world, except on a most trifling scale. I do not mean that a larger
anticipatory loan of a different character--issued, for example, in
Allied countries with the guarantees of the Allied Government, the
proceeds in each such country being handed over to the guaranteeing
Government, so that no new money would pass--might not be possible. But
a loan of this kind is not at present in question.

Yet a loan of from £50,000,000 to £100,000,000--and I repeat that even
this figure is very optimistic except as the result of a settlement of a
kind which engaged the active goodwill of individual Germans with
foreign resources and of foreigners of German origin and
sympathies--would only cover Germany's liabilities under the London
Schedule for four to six months, and the temporarily reduced payments of
last March for little more than a year. And from such a loan, after
meeting Belgian priorities and Army of Occupation costs, there would not
be left any important sum for France.

I see no possibility, therefore, of any final settlement with M.
Poincaré in the immediate future. He has now reached the point of saying
that he is prepared to talk sense in return for an enormous bribe, and
that is some progress. But as no one is in a position to offer him the
bribe, it is not much progress, and as the force of events will compel
him to talk sense sooner or later, even without a bribe, his bargaining
position is not strong. In the meantime he may make trouble. If so, it
can't be helped. But it will do him no good, and may even help to bring
nearer the inevitable day of disillusion. I may add that for France to
agree to a short moratorium is not a great sacrifice since, on account
of the Belgian priority and other items, the amount of cash to which
France will be entitled in the near future, even if the payments fixed
last March were to be paid in full, is quite trifling.


So much for the immediate situation and the politics of the case. If we
look forward a little, I venture to think that there is a clear, simple,
and practical policy for the Liberal Party to adopt and to persist in.
Both M. Poincaré and Mr. Lloyd George have their hands tied by their
past utterances. Mr. Lloyd George's part in the matter of Reparations is
the most discreditable episode in his career. It is not easy for him,
whose hands are not clean in the matter, to give us a clean settlement.
I say this although his present intentions appear to be reasonable. All
the more reason why others should pronounce and persist in a clear and
decided policy. I was disappointed, if I may say so, in what Lord Grey
had to say about this at Newcastle last week. He said many wise things,
but not a word of constructive policy which could get any one an inch
further forward. He seemed to think that all that was necessary was to
talk to the French sympathetically and to put our trust in international
bankers. He puts a faith in an international loan as the means of
solution which I am sure is not justified. We must be much more concrete
than that, and we must be prepared to say unpleasant things as well as
pleasant ones.

The right solution, the solution that we are bound to come to in the
end, is not complicated. We must abandon the claim for pensions and
bring to an end the occupation of the Rhinelands. The Reparation
Commission must be asked to divide their assessment into two parts--the
part that represents pensions and separation allowances and the rest.
And with the abandonment of the former the proportion due to France
would be correspondingly raised. If France would agree to this--which is
in her interest, anyhow--and would terminate the occupation it would be
right for us to forgive her (and our other Allies) all they owe us, and
to accord a priority on all receipts in favour of the devastated areas.
If we could secure a real settlement by these sacrifices, I think we
should make them completely regardless of what the United States may say
or do.

In declaring for this policy in the House of Commons yesterday, Mr.
Asquith has given the Liberal Party a clear lead. I hope that they will
make it a principal plank in their platform. This is a just and
honourable settlement, satisfactory to sentiment and to expediency.
Those who adopt it unequivocally will find that they have with them the
tide and a favouring wind. But no one must suppose that, even with such
a settlement, any important part of Germany's payments can be
anticipated by a loan. Any small loan that can be raised will be
required for Germany herself, to put her on her legs again, and enable
her to make the necessary annual payments.



Assistant Secretary Board of Inland Revenue, 1916-19. Member of Royal
Commission on Income Tax, 1919.

Sir Josiah Stamp said:--In discussing the problem of National Finance we
have to decide which problem we mean, viz., the "short period" or the
"long period," for there are distinctly two issues. I can, perhaps,
illustrate it best by the analogy of the household in which the chief
earner or the head of the family has been stricken down by illness. It
may be that a heavy doctor's bill or surgeon's fee has to be met, and
that this represents a serious burden and involves the strictest economy
for a year or two; that all members of the household forgo some
luxuries, and that there is a cessation of saving and perhaps a "cut"
into some past accumulations. But once these heroic measures have been
taken and the burden lifted, and the chief earner resumes his
occupation, things proceed on the same scale and plan as before. It may
be, however, that the illness or operation permanently impairs his
earning power, and that the changes which have to be made must be more
drastic and permanent. Then perhaps would come an alteration of the
whole ground plan of the life of that family, the removal to a smaller
house with lower standing charges and a changed standard of living. What
I call the "short period" problem involves a view only of the current
year and the immediate future for the purpose of ascertaining whether we
can make ends meet by temporary self-denial. What I term the "long
distance" problem involves an examination of the whole scale upon which
our future outlay is conditioned for us.

The limit of further economies on the lines of the "Geddes' cut" that
can become effective in 1923, would seem to be some 50 or 60 millions,
because every 10 per cent. in economy represents a much more drastic and
difficult task than the preceding, and it cuts more deeply into your
essential national services. On the other side of the account one sees
the probable revenue diminish to an almost similar extent, having regard
to the effect of reductions in the rate of tax and the depression in
trade, with a lower scale of profits, brought about by a lower price
level, entering into the income-tax average. It looks as though 1923 may
just pay its way, but if so, then, like the current year, it will make
no contribution towards the reduction of the debt. So much for the
"short period." Our worst difficulties are really going to be
deep-seated ones.


Now a national budget may consist of two parts, one of which I will call
the "responsive" and the other the "non-responsive" portion. The
responsive portion is the part that may be expected to answer sooner or
later--later perhaps rather than sooner--to alterations in general
conditions, and particularly to price alterations. If there is a very
marked difference in general price level, the salaries--both by the
addition or remission of bonuses and the general alteration in scales
for new entrants--may be expected to alter, at any rate, in the same
direction, and that part of the expense which consists of the purchase
of materials will also be responsive. The second, or non-responsive
part, is the part that has a fixed expression in currency, and does not
alter with changed conditions. This, for the most part, is the capital
and interest for the public debt.

Now the nature and gravity of the "long distance" problem is almost
entirely a question of the proportions which these two sections bear to
each other. If the non-responsive portion is a small percentage of the
total the problem will not be important, but if it is larger, then the
question must be faced seriously. Suppose, for example, that you have
now a total budget of 900 million pounds, and that, in the course of
time, all values are expressed at half the present currency figure.
Imagine that the national income in this instance is 3600 million
pounds. Then the burden, on a first approximation, is 25 per cent. Now,
if the whole budget is responsive, we may find it ultimately at 450
million pounds out of a national income of 1800 million pounds, _i.e._
still 25 per cent. But let the non-responsive portion be 400 million
pounds, then your total budget will be 650 million pounds out of a
national income of about 2000 million pounds, or 33-1/3 per cent., and
every alteration in prices--or what we call "improvement" in the cost of
living--becomes an extraordinarily serious matter as a burden upon new
enterprise in the future.

Let me give you a homely and familiar illustration. During the war the
nation has borrowed something that is equivalent to a pair of boots.
When the time comes for paying back the loan it repays something which
is equivalent to two pairs or, possibly, even to three pairs. If the
total number of boots produced has not altered, you will see what an
increasing "pull" this is upon production. There are, of course, two
ways in which this increasing pull--while a great boon to the person who
is being repaid--must be an increased burden to the individual. Firstly,
if the number of people making boots increases substantially, it may
still be only one pair of boots for the same volume of production, if
the burden is spread over that larger volume. Secondly, even supposing
that the number of individuals is not increased, if the arts of
production have so improved that two pairs can be produced with the same
effort as was formerly necessary for one, then the debt may be repaid by
them without the burden being actually heavier than before.

Now, coming back to the general problem. The two ways in which the
alteration in price level can be prevented from resulting in a heavier
individual burden than existed at the time when the transaction was
begun, are a large increase in the population with no lower average
wealth, or a large increase in wealth with the same population--which
involves a greatly increased dividend from our complex modern social
organism with all its mechanical, financial, and other differentiated
functions. Of course, some of the debt burden is responsive, so far as
the annual charge is concerned, on that part of the floating debt which
is reborrowed continually at rates of interest which follow current
money rates, but, even so, the burden of capital repayment remains. An
opportunity occurs for putting sections of the debt upon a lower annual
charge basis whenever particular loans come to maturity, and there may
be some considerable relief in the annual charge in the course of time
by this method.

What are the prospects of the two methods that I have mentioned coming
to our rescue in this "long distance" problem? It is a problem to which
our present "short distance" contribution is, you will admit, a very
poor one, for we have not so far really made any substantial
contribution from current revenue towards the repayment of the debt.


Historical surveys and parallels are notoriously risky, particularly
where the conditions have no precedent. They ought, however, to be made,
provided that we keep our generalisations from them under careful
control. Now, after the Napoleonic wars we had a national debt somewhat
comparable in magnitude in its relation to the national wealth and
income with the present debt. What happened to that as a burden during
the 100 years just gone by? If it was alleviated, to what was the
alleviation due? I would not burden you with a mass of figures, but I
would just give you one or two selected periods. You can find more
details in my recent book on _Wealth and Taxable Capacity_. We had a
total debt of--

850 million pounds in 1817
841    "      "    "  1842
836    "      "    "  1857
659    "      "    "  1895
800    "      "    "  1903

and before this last war it had been reduced to 707 million pounds. In
1920, of course, it was over 8000 million pounds. Such incidents as the
Crimean and the Boer wars added materially to the debt, but apart
therefrom you will see that there is no tremendous relief by way of
capital repayment to the original debt. Similarly, in a hundred years,
even if we have no big wars, it is quite possible we may have additions
to the national debt from smaller causes. Yet the volume of the debt per
head fell from £50 to £15.7, so you will see that the increasing
population made an enormous difference. The real burden of the debt is
of course felt mainly in its annual charge. I will take this, therefore,
rather than the capital:--

In 1817 the charge was 32 million pounds
"  1842  "    "     "  28    "      "
"  1857  "    "     "  28.8  "      "
In 1895 the charge was 25 million pounds
"  1903  "    "     "  27    "      "
"  1914  "    "     "  24    "      "

Here you will see that the reduction from 32 to 24 was 25 per cent. or a
much greater reduction than the reduction of the _total_ capital debt,
and this, of course, was contributed to by the lower rates of interest
which had been brought about from time to time. When we take the annual
charge per head the fall is much more striking. In the hundred years it
decreased from 37s. to 10s. This, however, was a money reduction, and
the _real_ burden per head can only be judged after we have considered
what the purchasing power of that money was. Now, the charge per head,
reduced to a common basis of purchasing power, fell as follows:--

        Index figure
1817       260
1842       242
1857       191
1895       210
1914       118

In the year 1920 the charge per head was £7.16 and my purchasing power
index figure 629. You will see that the _real_ burden in commodities
moved down much less violently than the _money_ burden, and the relief
was not actually so great as it looks, because prices were far lower in
1914 than they were early in the nineteenth century.

In view of the fact that our debt is approximately ten times that of the
last century, let us ask ourselves the broad question: "Can we look
forward to nothing better than the reduction of our debt by 450
millions in thirty-seven years?"

The nineteenth century was one long contest between two opposing forces.
The increase in the population, together with the power to make wealth,
were together enormously effective in decreasing the burden. Against
them was the ultimate tendency to lower prices, and the former of these
two forces slowly won the day.

I hesitate to say that we can expect anything at all comparable with the
wonderful leap forward in productive power during the early Victorian
era. I hope that in this I may prove to be wrong. Anyway I do not think
that in our lifetime we can expect these islands to double their


If we cannot look forward to any great measure of relief through these
channels, to what then must we look? By far the most important
alternative remedy which has been put to us is that of a Capital Levy;
it has the enormous virtue that it would repay on one level of prices
the debts incurred at that level; in short, it would give back one pair
of boots at once for every pair it has borrowed, instead of waiting and
stretching out over future generations the burden of two pairs. It is so
attractive that one cannot wonder there is a tendency to slur over its
less obvious difficulties.

Advocates of this scheme fall into two camps, whom I would distinguish
broadly as the economist group and the Labour Party, and if you will
examine their advocacy carefully, you will see that they support it by
two different sets of contentions, which are not easily reconciled. The
economists lay stress upon the fact that you not only pay off at a less
onerous cost in real goods, but that it may, considered arithmetically
or actuarially, be "good business" for a payer of high income-tax to
make an outright payment now and have a lighter income-tax in future.
Very much of the economists' case rests indeed upon the argument drawn
from the outright cut and the arithmetical relief. It will be seen that
this case depends upon two assumptions. The first is that the levy in
practice as well as in theory is an outright cut, and the second, that
it is not repeated, or rather that the income-tax is really effectively
reduced. But if you look at the programme of the other supporters of the
Capital Levy you will not find any convincing guarantees of its
non-repetition. I have not seen anywhere any scheme by which we can feel
politically insured against its repetition. You will find plenty of
indication that some intend to have both the levy and a high tax as
well, the new money to be employed for other social purposes. The
arguments based upon arithmetical or actuarial superiority of the levy
for your pocket and for mine may therefore rather go by the board. But I
am not going to discuss either the question of political guarantees or
the possible future socio-financial policy of the Labour Party. I will
merely ask you to consider whether the levy is likely to be in practice
the outright cut that is the basis of the chief and most valid
contention for it. Please understand that I am not attempting to sum up
all the many reasons for and against this proposal, but only to deal
with the particular virtue claimed for it, bearing upon the increasing
burden of the debt as prices decline.

Any taxation scheme dependent upon general capital valuation, where the
amount to be paid is large--say larger than a year's revenue--falls, in
my judgment, into the second or third rate category of taxation
expedients. Whenever we are living in uncertain times, with no
steadiness of outlook, valuation of many classes of wealth is then a
tremendous lottery, and collection--which takes time--may be no less so.

The fair face of the outright and graduated levy would be marred in many
ways. First, there are cases affected by valuation. The valuation of a
fixed rate of interest on good security is easy enough. The valuation of
a field or a house in these days presents more difficulty, but is, of
course, practicable. In practice, however, people do not own these
things outright. They have only an interest in them. This is where the
rub comes. A very large part of the property in this country is held in
life interests, and on reversions or contingencies. It is not a question
of saying that a given property is worth £10,000 and that it forms part
of the fortune of Jones, who pays 40 per cent. duty. The point is that
the £10,000 is split between Jones and Robinson. Jones maybe has a life
interest in it, and Robinson a reversionary interest. You value Jones's
wealth by his prospect of life on a life table, and Robinson has the
balance. But the life table does not indicate the actual likelihood of
Jones's life being fifteen years. It only represents the actuarial
average expectation of all the lives. This may be useful enough for
insurance dependent on the total experience, but it may be a shocking
injustice to the individual in taxation. Only some 10 per cent. of the
Joneses will live for the allotted time, and for the rest your valuation
and your tax will be dead wrong, either too much or too little. Jones
will be coming to you two years after he has paid, or rather his
executors will come to you and say: "We paid a tax based on Jones living
15 years, and he has died; this ought, therefore, to be shifted to


People often say that a Capital Levy merely imagines everybody dying at
the same time. This parallel is wrong in degree when you are considering
the ease of paying duty or of changing the market values by a glut of
shares, and it is still more wrong when you are thinking of ease of
valuation. When a man is dead, he is dead, and in estimating the death
duty you have not to bother about how long he is going to live! But
every time you value a life interest and take a big slice of it for tax
you are probably doing a double injustice. The charge is incorrect for
two taxpayers. On a flat rate of tax this difficulty might be made less,
but the essence of any effective levy is a progressive scale. Moreover,
whether you are right or wrong about Robinson's tax, he has nothing in
hand with which to pay it. He has either to raise a mortgage on his
expectation (on which he pays _annual_ interest) or pay you by
instalments. So far as his burden is concerned, therefore, there is no
outright cut. You will be getting an annual figure over nearly the whole
class of life interests and reversions. It is difficult to see how one
can escape making adjustments year after year for some time in the light
of the ascertained facts, until the expiry of, say, nine or ten years
has reduced the disparities between the estimated valuations and the
facts of life to smaller proportions.

Next come those valuations which depend for their accuracy upon being
the true mid-point of probabilities. A given mine may last for five
years in the view of some experts, or it may go on for fifteen in the
view of others, and you may take a mid-point, say ten, and collect your
tax, but, shortly after, this valuation turns out to be badly wrong,
_though all your valuations in the aggregate are correct_. While the
active procedure of collecting the levy is in progress for a number of
years these assessments will simply shout at you for adjustment. There
are other types of difficulty in assessment which involve annual
adjustment, but you will appreciate most the necessity for care in the
collection. Enthusiastic advocates for the levy meet every hard case put
forward where it is difficult to raise money, such as a private
ownership of an indivisible business, by saying: "But that will be made
in instalments, or the man can raise a mortgage." But the extent to
which this is done robs the levy of all the virtues attaching to
outrightness, for each instalment becomes, as the years roll on,
different in its real content upon a shifting price level, and every
payment of interest on the mortgage--to say nothing of the ultimate
repayment of that mortgage--falls to be met as if reckoned upon the
original currency level. Then those classes of wealth which are not
easily realisable without putting down the market price also require
treatment by instalments, and those who wish to put forward a logical
scheme also add a special charge upon salary-earners for some years--a
pseudo-capitalisation of their earning power.

A really fair and practicable levy would certainly be honeycombed with
annual adjustments and payments for some period of years, and one must
consider how far this would invalidate the economic case of the
"outright cut," and make it no better than a high income-tax; indeed far
worse, for the high income-tax does at least follow closely upon the
annual facts as they change, or is not stereotyped by a valuation made
in obsolete conditions. Imagine three shipowners each with vessels
valued at £200,000, and each called upon to pay 20 per cent., or
£40,000. One owning five small ships might have sold one of them, and
thus paid his bill; the second, with one large ship, might have agreed
to pay £8000 annually (plus interest) for five years; while the third
might have mortgaged his vessel for £40,000, having no other capital at
disposal. At to-day's values each might have been worth, say, £50,000,
but for the tax. The first would actually have ships worth £40,000, so
he would have borne the correct duty of 20 per cent. The second would
have £50,000, bringing in, say, £5000 annually, and would be attempting
to pay £8000 out of it, while the third would be paying £2000 a year out
of his income and still be faced with an 80 per cent. charge on his
fortune! His assessment is computed at one point of time, and liquidated
at another, when its incidence is totally different.

If one cannot have a levy complete at the time of imposition, it clearly
ought not to be launched at a time of rapidly changing prices. But that
is, perhaps, when the economic case for it is strongest.


I do not rule the Capital Levy out as impracticable by any means, but as
a taxation expedient I cannot be enthusiastic about it. It is a
desperate remedy. But if our present temper for "annual" tax relief at
all costs continues, we may _need_ a desperate remedy. Without a levy
what kind of position can you look forward to? Make some assumptions,
not with any virtue in their details, but just in order to determine the
possible prospect. If in fifteen to twenty years reparation payments
have wiped out 1000 millions, debt repayments another 1000, and ordinary
reductions by sinking funds another 1000 millions, you will have the
debt down to 5000 millions, and possibly the lower interest then
effective may bring the annual charge down to some 200 or 225 million
pounds. If the population has reached sixty millions the nominal annual
charge will be reduced from £7 16s. by one-half, but if prices have
dropped further, say half-way, to the pre-war level, the comparable
burden will still be £4 10s. per head.

It is no good talking about "holidays from taxation" and imagining you
can get rid of this thing easily; you won't. We are still in the war
financially. There is the same need of the true national spirit and
heroism as there was then. Thus hard facts may ultimately force us to
some such expedient as the levy, but we should not accept it
light-heartedly, or regard it as an obvious panacea. Perhaps in two or
three years we may tell whether economic conditions are stable enough to
rob it of its worst evils. The question whether the burden of rapidly
relieving debt by this means in an instalment levy over a decade is
actually lighter than the sinking fund method, depends on the relation
of the drop in prices over the short period to the drop over the ensuing
period, with a proper allowance for discount--at the moment an insoluble
problem. I cannot yet with confidence join those who, on purely economic
and non-political grounds, commend the scheme and treat it as "good
business for the income-tax payer."



P.C.; President of National Liberal Federation since 1920; M.P. (L.),
Tyneside Division, Northumberland, 1906-18; Parliamentary Secretary to
Board of Trade, 1911-15.

Mr. Robertson said:--At an early stage of the war Mr. H.G. Wells
published a newspaper article to the effect that while we remained Free
Traders we were determined in future to accord free entry only to the
goods of those States which allowed it to us. The mere state of war, no
doubt, predisposed many to assent to such theses who a few years before
would have remembered that this was but the nominal position of the
average protectionist of the three preceding generations. War being in
itself the negation of Free Trade, the inevitable restrictions and the
war temper alike prepared many to find reasons for continuing a
restrictive policy when the war was over. When, therefore, the Committee
of Lord Balfour of Burleigh published its report, suggesting a variety
of reasons for setting up compromises in a tariffist direction, there
were not wanting professed Free Traders who agreed that the small
tariffs proposed would not do any harm, while others were even anxious
to think that they might do good.

Yet the policy proposed by Lord Balfour's Committee has not been
adopted by the Coalition Government in anything like its entirety. Apart
from the Dyestuffs Act, and such devices as the freeing of home-made
sugar from excise, we have only had the Safeguarding of Industries Bill,
a meticulously conditional measure, providing for the setting up of
particular tariffs in respect of particular industries which may at a
given moment be adjudged by special committees _ad hoc_ to need special
protection from what is loosely called "dumping." And even the findings
of these committees so far have testified above all things to the lack
of any accepted set of principles of a protectionist character. Six
thousand five hundred articles have been catalogued as theoretically
liable to protective treatment, and some dozen have been actually
protected. They have given protection to certain products and refused it
to others; according it to fabric gloves and glass and aluminium goods
and refusing it to dolls' eyes and gold leaf.

Finally, the decision in favour of a tariff on fabric gloves has evoked
such a storm of protest from the textile manufacturers who export the
yarns with which foreign fabric gloves are made, that even the
Coalitionist press has avowed its nervousness. When a professed
protectionist like Lord Derby, actually committed to this protectionist
Act, declares that it will never do to protect one industry at the cost
of injuring a much greater one, those of his party who have any
foresight must begin to be apprehensive even when a House of Commons
majority backs the Government, which, hard driven by its tariffists,
decided to back its Tariff Committee against Lancashire. Protectionists
are not much given to the searching study of statistics, but many of
them have mastered the comparatively simple statistical process of
counting votes.


In a sense, there are new fiscal "circumstances." But I can assure my
young friends that they are just the kind of circumstances which were
foreseen by their seniors in pre-war days as sure to arise when any
attempt was made to apply tariffist principles to British industry. As a
German professor of economics once remarked at a Free Trade Conference,
it is not industries that are protected by tariffs: it is firms. When a
multitude of firms in various industries subscribed to a large Tariff
Reform fund for election-campaign purposes, they commanded a large
Conservative vote; but when for platform tariff propaganda, dealing in
imaginative generalities and eclectic statistics, there are substituted
definite proposals to meddle with specified interests, the real troubles
of the tariffist begin. You might say that they began as soon as he met
the Free Trader in argument; but that difficulty did not arise with his
usual audiences. It is when he undertakes to protect hides and hits
leather, or to protect leather and hits boot-making, or to help shipping
and hits shipbuilding that he becomes acutely conscious of difficulties.
Now he is in the midst of them. The threat of setting up a general
tariff which will hit everybody alike seems so far to create no alarm,
because few traders now believe in it. Still, it would be very unwise to
infer that the project will not be proceeded with. It served as a party
war-cry in Opposition for ten years, and nearly every pre-war
Conservative statesman was committed to it--Earl Balfour and Lord
Lansdowne included. Even misgivings about Lancashire may fail to deter
the tariffist rump.

Some of the people who even yet understand nothing of Free Trade
economics are still found to argue that, if only the duty on imported
gloves is put high enough, sufficient gloves will be made at home to
absorb all the yarns now exported to German glove-makers. They are still
blind, that is to say, to the elementary fact that since Germany
manufactures for a much larger glove-market than the English, the
exclusion of the German gloves means the probable loss to the
yarn-makers of a much larger market than England can possibly offer,
even if we make all our own gloves. In a word, instead of having to
furnish new Free Trade arguments to meet a new situation, we find
ourselves called upon to propound once more the fundamental truths of
Free Trade, which are still so imperfectly assimilated by the nation.

So far as I can gather, the circumstances alleged to constitute a new
problem are these; the need to protect special industries for war
purposes; and the need to make temporary fiscal provision against
industrial fluctuation set up by variations in the international money
exchanges. Obviously, the first of these pleas has already gone by the
board, as regards any comprehensive fiscal action. One of the greatest
of all war industries is the production of food; and during the war some
supposed that after it was over, there could be secured a general
agreement to protect British agriculture to the point at which it could
be relied on to produce at least a war ration on which the nation could
subsist without imports. That dream has already been abandoned by
practical politicians, if any of them ever entertained it. The effective
protection of agriculture on that scale has been dismissed as
impossible; and we rely on foreign imports as before. Whatever may be
said as to the need of subsidising special industries for the production
of certain war material is nothing further to the fiscal purpose,
whether the alleged need be real or not. The production of war material
is a matter of military policy on all fours with the maintenance of
Government dockyards, and does not enter into the fiscal problem
properly so called. But to the special case of dyes, considered as a
"key" or "pivotal" industry, I will return later.

How then stands the argument from the fluctuations of the exchanges? If
that argument be valid further than to prove that _all_ monetary
fluctuations are apt to embarrass industry, why is it not founded on for
the protection of _all_ industries affected by German competition? The
Prime Minister in his highly characteristic speech to the Lancashire
deputation, admitted that the fall of the mark had not had "the effect
which we all anticipated"--that is, which he and his advisers
anticipated--and this in the very act of pretending that the _further_
fall of the mark is a reason for adhering to the course of taxing
fabric gloves. All this is the temporising of men who at last realise
that the case they have been putting forward will bear no further
scrutiny. The idea of systematically regulating an occasional tariff in
terms of the day-to-day fluctuations of the exchanges is wholly
chimerical. A tariff that is on even for one year and may be off the
next is itself as disturbing a factor in industry as any exchange
fluctuations can be.

Nor is there, in the nature of things, any possibility of continuous
advantage in trade to any country through the low valuation of its
currency. The Prime Minister confesses that Germany is _not_ obtaining
any export trade as the result of the fall. Then the whole argument has
been and is a false pretence. The plea that the German manufacturer is
advantaged because his wages bill does not rise as fast as the mark
falls in purchasing power is even in theory but a statement of one side
of a fluctuating case, seeing that when the mark rises in value his
wages bill will not fall as fast as the mark rises, and he is then, in
the terms of the case, at a competitive disadvantage.

But the worst absurdity of all in the tariffist reasoning on this topic
is the assumption that in no other respect than wage-rates is German
industry affected by the fall of the mark. The wiseacres who point
warningly to the exchanges as a reason for firm action on fabric gloves
never ask how a falling currency relates to the process of purchasing
raw materials from abroad. So plainly is the falling mark a bar to such
purchase that there is _prima facie_ no cause to doubt the German
official statement made in June, that foreign goods are actually
underbidding German goods in the German markets, and that the falling
exchange makes it harder and harder for Germany to compete abroad. We
are dealing with a four-square fallacy, the logical implication of which
is that a bankrupt country is the best advantaged for trade, that
Austria is even better placed for competition than Germany, and that
Russia is to-day the best placed of all.


The argument from the exchanges, which is now admitted to be wholly
false in practice, really brings us back to the old tariffist argument
that tariffs are required to protect us against the imports of countries
whose general rate of wages is lower than ours. On the one hand, they
assured us that a tariff was the one means of securing good wages for
the workers in general. On the other, they declared that foreign goods
entered our country to the extent they did because foreign employers in
general sweated their employees. That is to say--seeing that nearly all
our competitors had tariffs--the tariffed countries pay the worst wages;
and we were to raise ours by having tariffs also. But even that pleasing
paralogism did not suffice for the appetite of tariffism in the way of
fallacy. The same propaganda which affirmed the lowness of the rate of
wages paid in tariffist countries affirmed also the _superiority_ of the
rate of wages paid in the United States, whence came much of our
imported goods which the tariffists wished to keep out. In this case,
the evidence for the statement lay in the high wage-rate figures for
three employments in particular--those of engine-drivers, compositors,
and builders' labourers: three industries incapable of protection by

Thus even the percentage of truth was turned to the account of delusion;
for the wages in the protected industries of the States were so far from
being on the scale of the others just mentioned, that they were reported
at times to be absolutely below those paid in the same industries in
Britain. For the rest, _costs of living_ were shown by all the official
statistics to be lower with us than in any of the competing tariffed
countries; and in particular much lower than in the United States. There
were thus established the three facts that wages were higher in the Free
Trade country than in the European tariffed countries; that real wages
here were higher than those of the protected industries in the United
States, and that Protection was thus so far from being a condition of
good wages as to be ostensibly a certain condition of bad. All the same,
high wages in America and low wages on the Continent were alike given as
reasons why we should have a protective tariff.

There stands out, then, the fact that the payment of lower wages by the
protected foreign manufacturer was one of the tariffist arguments of the
pre-war period, when there was no question of unequal currency
exchanges. To-day, the argument from unequal currency exchanges is that
in the country where the currency value is sinking in terms of other
currencies the manufacturer is getting his labour cheaper, seeing that
wages are slow to follow increase in cost of living. Both pleas alike
evade the primary truth that if country A trades with country B at all,
it must receive _some_ goods in payment for its exports, save in a case
in which, for a temporary purpose, it may elect to import gold. But that
fact is vital and must be faced if the issue is to be argued at all.
Unless, then, the defender of the occasional tariff system contends that
that system will rectify trade conditions by keeping out goods which are
made at an artificial advantage, amounting to what is called "unfair
competition," and letting in only the goods not so produced, he is not
facing the true fiscal problem at all. Either he admits that exports and
freight charges and other credit claims must be balanced by imports or
he denies it. If he denies it, the discussion ceases: there is no use in
arguing further. If he admits it, and argues that by his tariff he can
more or less determine _what_ shall be imported, the debate soon narrows
itself to one issue.

The pre-war tariffist argued, when he dealt with the problem, that
tariffs would suffice at will to keep out manufactured goods and let in
only raw material. To that the answer was simple. An unbroken conversion
of the whole yield of exports and freight returns and interest on
foreign investments into imported raw material to be wholly converted
into new products, mainly for export, was something utterly beyond the
possibilities. It would mean a rate of expansion of exports never
attained and not only not attainable but not desirable. On such a
footing, the producing and exporting country would never concretely
taste of its _profit_, which is to be realised, if at all, only in
consumption of imported goods and foods. It is no less plainly
impossible to discriminate by classes between kinds of manufactured
imports on the plea that inequality in the exchanges gives the foreign
competitor an advantage in terms of the relatively lower wage-rate paid
by him while his currency value is falling. Any such advantage, in the
terms of the case, must be held to accrue to all forms of production
alike, and cannot possibly be claimed to accrue in the manufacture of
one thing as compared with another, as fabric gloves in comparison with
gold leaf. In a word, the refusal of protection to gold leaf is an
admission that the argument from inequality of currency exchanges counts
for nothing in the operation of the Safeguarding of Industries Bill. In
the case of any other import, then, the argument falls.


But that is not all. The case of Russia alone has brought home to all
capable of realising an economic truth the fact that the economic
collapse of any large mass of population which had in the past entered
into the totality of international trade is a condition of proportional
impoverishment to all the others concerned. He who sees this as to
Russia cannot conceivably miss seeing it as to Germany; even tariffist
hallucinations about a "losing trade" under German tariffs cannot shut
out the fact that our trade with Russia and the United States was
carried on under still higher hostile tariffs. The unalterable fact
remains that industrial prosperity rises and falls in the measure of the
total mass of goods handled; and men who realise the responsibility of
all Governments for the material wellbeing of their populations can come
to only one conclusion. Trade must be facilitated all round for our own

Once more we come in sight of the truth that the industrial health of
every trading country depends on the industrial health of the rest--a
Free Trade truth that is perceptibly of more vital importance now than
ever before. It is in the exchange of commodities, and the extension of
consumption where that is required on a large scale, that the prosperity
of the industrial nations consists. And to say that, is to say that
until the trade exchanges of the world in general return to something
like the old footing, there cannot be a return of the old degree of
industrial wellbeing. Not that industrial wellbeing is to be secured by
the sole means of industrial re-expansion: the question of the need of
restriction of rate of increase of population is now being more and more
widely recognised as vital. But the present argument is limited to the
fiscal issue; and it must suffice merely to indicate the other as being
of the highest concurrent importance.

Adhering, then, to the fiscal issue, we reach the position that, just as
foreign trade has been a main source of British wealth in the past, and
particularly in the Free Trade era, the wealth consumed in the war is
recoverable only on the same lines. It is not merely that British
shipping--at present so lamentably paralysed and denuded of earning
power--cannot be restored to prosperity without a large resumption of
international exchanges: a large proportion of industrial employment
unalterably depends upon that resumption. And it is wholly impossible to
return to pre-war levels of employment by any plan of penalising


How then does the persistent Free Trader relate to the special case of
the "key industry," of which we heard so much during the war, and hear
so little to-day? I have said that the question of maintaining any given
industry on the score that it is essential for the production of war
material is a matter of military administration, and not properly a
matter of fiscal policy at all. But the plea, we know, has been made the
ground of a fiscal proceeding by the present Government, inasmuch as the
special measure known as the Dyestuffs (Import Regulation) Act of 1920
forbids for ten years the importation of dyestuffs into this country
except under licence of the Board of Trade. Dyestuffs include, by
definition, all the coal-tar dyes, colours, and colouring matter, and
all organic intermediate products used in the manufacture of these--the
last category including a large number of chemicals such as
formaldehyde, formic acid, acetic acid, and methyl alcohol. The
argument is, in sum, that all this protective control is necessary to
keep on foot, on a large scale, an industry which in time of war has
been proved essential for the production of highly important munitions.

What has actually happened under this Act I confess I am unable to tell.
Weeks ago I wrote to the President of the Board of Trade asking if,
without inconvenience, he could favour me with a general account of what
had been done in the matter of issuing licences, and my letter was
promised attention, but up to the moment of delivering this address I
have had no further reply. I can only, then, discuss the proposed policy
on its theoretic merits.[1] The theoretic issues are fairly clear.
Either the licensing power of the Board of Trade has been used to
exclude competitive imports or it has not. If it has been so used, it is
obvious that we have no security whatever for the maintenance of the
industry in question in a state of efficiency. In the terms of the case,
it is enabled to persist in the use of plant and of methods which may be
inferior to those used in the countries whose competition has been
excluded. Then the very object posited as the justification for the Act,
the securing of a thoroughly efficient key industry necessary to the
production of munitions, is not attained by the fiscal device under
notice. If, on the other hand, there has been no barring of imports
under the licence system, the abstention from use of it is an admission
that it was either unnecessary or injurious or was felt to be useless
for its purpose.

[Footnote 1: The promised statistics were soon afterwards sent to Mr.
Robertson by the Board of Trade. They will be found in the _Liberal
Magazine_ for September, 1922, p. 348.--ED.]

And the common-sense verdict on the whole matter is that if continuous
and vigilant research and experiment in the chemistry of dye-making is
held to be essential to the national safety, the proper course is for
the Government to establish and maintain a department or arsenal for
such research and experiment, unhampered by commercial exigencies. Such
an institution may or may not be well managed. But a dividend-earning
company, necessarily concerned first and last with dividend earning, and
at the same time protected against foreign competition in the sale of
its products, cannot be for the purpose in question well managed, being
expressly enabled and encouraged to persist in out-of-date practices.

This being so, the whole argument for protection of key industries goes
by the board. It has been abandoned as to agriculture, surely the most
typical key industry of all; and it has never even been put forward in
regard to shipbuilding, the next in order of importance. For the
building of ships of war the Government has its own dockyards: let it
have its own chemical works, if that be proved to be necessary.
Protection cannot avail. If the Dyestuffs Act is put in operation so as
to exclude the competition of foreign chemicals, it not only keeps our
chemists in ignorance of the developments of the industry abroad: it
raises the prices of dyestuffs against the dye-using industries at home,
and thereby handicaps them dangerously in their never-ending competition
with the foreign industries, German and other, which offer the same
goods in foreign markets.

The really fatal competition is never that of goods produced at low
wages-cost. It is that of superior goods; and if foreign textiles have
the aid of better dyes than are available to our manufacturers our
industry will be wounded incurably. It appears in fact to be the
superior quality of German fabric gloves, and not their cheapness, that
has hitherto defeated the competition of the native product. To protect
inferior production is simply the road to ruin for a British industry.
Delicacy in dyes, in the pre-war days, gave certain French woollen goods
an advantage over ours in our own markets; yet we maintained our vast
superiority in exports by the free use of all the dyes available. Let
protection operate all round, and our foreign markets will be closed to
us by our own political folly. Textiles which are neither well-dyed nor
cheap will be unsaleable against better goods.


It is of a piece with that prodigy of self-contradiction that, when the
Liberal leaders in the House of Commons expose the absurdity of
professing to rectify the German exchanges by keeping out German fabric
gloves, a tariffist leader replies by arguing that the Paris Resolutions
of the first Coalition Government, under Mr. Asquith, conceded the
necessity of protecting home industries against unfair competition. Men
who are normally good debaters seem, when they are fighting for a
tariff, to lose all sense of the nature of argument. As has been
repeatedly and unanswerably shown by my right hon. friend the Chairman,
the Paris Resolutions were expressly framed to guard against a state of
things which has never supervened--a state of things then conceived as
possible after a war without a victory, but wholly excluded by the
actual course of the war. And those Resolutions, all the same, expressly
provided that each consenting State should remain free to act on them
upon the lines of its established fiscal system, Britain being thus left
untrammelled as to its Free Trade policy.

Having regard to the whole history, Free Traders are entitled to say
that the attempt of tariffists to cite the Paris Resolutions in support
of the pitiful policy of taxing imports of German fabric gloves, or the
rest of the ridiculous "litter of mice" that has thus far been yielded
by the Safeguarding of Industries Act, is the crowning proof at once of
the insincerity and ineptitude of tariffism where it has a free hand,
and of the adamantine strength of the Free Trade case. If any further
illustration were needed, it is supplied by the other tariffist
procedure in regard to the promise made five years ago to Canada that
she, with the other Dominions, should have a relative preference in our
markets for her products. In so far as that plan involved an advantage
to our own Dominions over the Allies who, equally with them, bore with
us the heat and burden of the war, it was as impolitic as it was unjust,
and as unflattering as it was impolitic, inasmuch as it assumed that the
Dominions wanted a "tip" as a reward for their splendid comradeship.

As it turns out, the one concession that Canada really wanted was the
removal of the invidious embargo on Canadian store cattle in our ports.
And whereas a promise to that effect was actually given by the tariffist
Coalition during the war, it is only after five years that the promise
is about to be reluctantly fulfilled. It was a promise, be it observed,
of _free importation_, and it is fulfilled only out of very shame. It
may be surmised, indeed, that the point of the possible lifting of the
Canadian embargo was used during the negotiations with Ireland to bring
the Sister State to terms; and that its removal may lead to new trouble
in that direction. But that is another story, with which Free Traders
are not concerned. Their withers are unwrung.


On the total survey, then, the case for Free Trade is not only unshaken,
it is stronger than ever before, were it only because many of the enemy
have visibly lost faith in their own cause. The Coalition, in which
professed Liberals were prepared to sacrifice something of Free Trade to
colleagues who were pledged in the past to destroy it, has quailed
before the insuperable practical difficulties which arise the moment the
scheme of destruction is sought to be framed.

All that has resulted, after four and a half years, is a puerile
tinkering with three or four small industries--a tinkering that is on
the face of it open to suspicion of political corruption. To intelligent
Free Traders there is nothing in it all that can give the faintest
surprise. They knew their ground. The doctrine of Free Trade is
_science_, or it is nothing. It is not a passing cry of faction, or a
survival of prejudice, but the unshakable inference of a hundred years
of economic experience verifying the economic science on which the great
experiment was founded.

On the other hand, let me say, the tactic of tinkering with Free Trade
under a system of special committees who make decisions that only the
House of Commons should ever be able to make, is a "felon blow" at
self-government. It puts national affairs under the control of cliques,
amenable to the pressures of private interests. Millions of men and
women are thus taxable in respect of their living-costs at the caprice
of handfuls of men appointed to do for a shifty Government what it is
afraid to do for itself. It is a vain thing to have secured by statute
that the House of Commons shall be the sole authority in matters of
taxation, if the House of Commons basely delegates its powers to
unrepresentative men. Here, as so often in the past, the Free Trade
issue lies at the heart of sound democratic politics; and if the nation
does not save its liberties in the next election it will pay the price
in corrupted politics no less than in ruined trade.



K.C.S.I., K.C.I.E.; Chief Commissioner, North-West Frontier Province,
India; Deputy Commissioner of various Frontier districts; Secretary to
Frontier Administration; Foreign Secretary, 1914-19; negotiated Peace
Treaty with Afghanistan, 1919.

Sir Hamilton Grant said:--I have been asked to address you on the
subject of India, that vast, heterogeneous continent, with its varied
races, its Babel of languages, its contending creeds. There are many
directions in which one might approach so immense a topic, presenting,
as it does, all manner of problems, historical, ethnological,
linguistic, scientific, political, economic, and strategic. I do not
propose, however, to attempt to give you any general survey of those
questions, or to offer you in tabloid form a resumé of the matters that
concern the government of India. I propose to confine my remarks to two
main questions which appear to be of paramount importance at the present
time, and which, I believe, will be of interest to those here present
to-day, namely, the problems of the North-West Frontier, and the
question of internal political unrest.

Let me deal first with the North-West Frontier. As very few schoolboys
know, we have here a dual boundary--an inner and an outer line. The
inner line is the boundary of the settled districts of the North-West
Frontier Province, the boundary, in fact, of British India proper, and
is known as the Administrative border. The outer line is the boundary
between the Indian Empire and Afghanistan, and is commonly known as the
Durand line, because it was settled by Sir Mortimer Durand and his
mission in 1895 with the old Amir Abdur Rahman. These two lines give us
three tracts to be dealt with--first, the tract inside the inner line,
the settled districts of the North-West Frontier Province, inhabited for
the most part by sturdy and somewhat turbulent Pathans; second, the
tract between the two lines, that welter of mountains where dwell the
hardy brigand hillmen: the tribes of the Black Mountain, of Swat and
Bajur, the Mohmands, the Afridis, the Orakzais, the Wazirs, the Mahsuds,
and a host of others, whose names from time to time become familiar
according as the outrageousness of their misconduct necessitates
military operations; third, the country beyond the outer line, "the
God-granted kingdom of Afghanistan and its dependencies."

Now each of these tracts presents its own peculiar problems, though all
are intimately inter-connected and react one on the other. In the
settled districts we are confronted with the task of maintaining law and
order among a backward but very virile people, prone to violence and
impregnated with strange but binding ideas of honour, for the most part
at variance with the dictates of the Indian Penal Code. For this reason
there exists a special law called the Frontier Crimes Regulation, a most
valuable enactment enabling us to deal with cases through local
Councils of Elders, with the task of providing them with education,
medical relief etc., in accordance with their peculiar needs, and above
all with the task of affording them protection from the raids and forays
of their neighbours from the tribal hills. In the tribal area we are
faced with the task of controlling the wild tribesmen. This control
varies from practically direct administration as in the Lower Swat and
Kurram valleys to the most shadowy political influence, as in the remote
highlands of Upper Swat and the Dir Kohistan, where the foot of white
man has seldom trod. Our general policy, however, with the tribes is to
leave them independent in their internal affairs, so long as they
respect British territory and certain sacrosanct tracts beyond the
border, such as the Khyber road, the Kurram, and the Tochi. The problem
is difficult, because when hardy and well-armed hereditary robbers live
in inaccessible mountains which cannot support the inhabitants,
overlooking fat plains, the temptation to raid is obviously
considerable: and when this inclination to raid is reinforced by
fanatical religion, there must be an ever-present likelihood of trouble.


Few people here in England reading of raids on the North-West Frontier
in India realise the full horror of these outrages. What generally
happens is that in the small hours of the morning, a wretched village is
suddenly assailed by a gang of perhaps 50, perhaps 200, well-armed
raiders, who put out sentries, picket the approaches, and conduct the
operation on the most skilful lines. The houses of the wealthiest men
are attacked and looted; probably several villagers are brutally
murdered--and probably one or two unhappy youths or women are carried
off to be held up to ransom. Sometimes the raid is on a larger scale,
sometimes it is little more than an armed dacoity. But there is nearly
always a tale of death and damage. Not infrequently, however, our
troops, our militia, our frontier constabulary, our armed police, or the
village _chigha_ or hue-and-cry party are successful in repelling and
destroying the raiders. Our officers are untiring in their vigilance,
and not infrequently the district officers and the officers of their
civil forces are out three or four nights a week after raiding gangs.
Statistics in such matters are often misleading and generally dull, but
it may be of interest to state that from the 1st April, 1920, to the
31st March, 1921, when the tribal ebullition consequent on the third
Afghan war had begun to die down, there were in the settled districts of
the North-West Frontier Province 391 raids in which 153 British subjects
were killed and 157 wounded, in which 310 British subjects were
kidnapped and some £20,000 of property looted. These raids are often led
by outlaws from British territory; but each tribe is responsible for
what emanates from or passes through its limits--and when the bill
against a tribe has mounted up beyond the possibility of settlement,
there is nothing for it but punitive military operations. Hence the
large number of military expeditions that have taken place on this
border within the last half century.

Now this brings us to the question so often asked by the advocates of
what is called the Forward policy: "If the tribes give so much trouble,
why not go in and conquer them once and for all and occupy the country
up to the Durand line?" It sounds an attractive solution, and it has
frequently been urged on paper by expert soldiers. But the truth is that
to advance our frontier only means advancing the seat of trouble, and
that the occupation of tribal territory by force is a much more
formidable undertaking than it sounds. We have at this moment before us
a striking proof of the immense difficulty and expense of attempting to
tame and occupy even a comparatively small tract of tribal territory in
the Waziristan operations. Those operations have been going on for two
and a half years. At the start there were ample troops, ample equipment,
and no financial stringency. The operations were conducted, if a layman
may say so, with skill and determination, and our troops fought
gallantly. But what is the upshot? We managed to advance into the heart
of the Mahsud country on a single line, subjected and still subject to
incessant attacks by the enemy; but we are very little nearer effective
occupation than when we started; and now financial stringency has
necessitated a material alteration in the whole programme, and we are
reverting more or less to the methods whereby we have always controlled
the tribes, namely, tribal levies or _khassadars_ belonging to the
tribe itself, frontier militia or other armed civil force, backed by
troops behind.


And for my own part I believe this is the best solution. We must not
expect a millennium on the North-West Frontier. The tribal lion will not
lie down beside the district lamb in our time, and we must deal with the
problem as best we can in accordance with our means, and to this end my
views are briefly as follows:--

(1) We should do everything possible to provide the younger trans-border
tribesmen with all honourable employment for which they are suited:
service in the army, in the frontier civil forces, and in the Indian
police or similar forces overseas, and we should give labour and
contracts as far as possible to tribesmen for public works in their
vicinity. For the problem is largely economic. Unless the lion gets
other food he is bound to cast hungry eyes on the lamb.

(2) We should do all that is possible to establish friendly relations
with the tribal elders through selected and sympathetic political
officers, to give them, by means of subsidies for service, an interest
in controlling the hot-bloods of their tribe, and, where possible, to
give them assistance in education and enlightenment. We must remember
that we have duties to the tribes as well as rights against them.

(3) We should extend the _khassadar_ or levy system; that is, we should
pay for tribal corps to police their own borders, arming themselves and
providing their own ammunition and equipment. In this way we give
honourable employment and secure an effective safeguard against raiders
without pouring more arms into tribal territory.

(4) We must have efficient irregular civil forces, militia, frontier
constabulary, and police, well paid and contented.

(5) We should revert to the old system of a separate frontier force in
the army, specially trained in the work of guarding the marches. Those
who remember the magnificent old Punjab frontier force will agree with
me in deploring its abolition in pursuance of a scheme of army

(6) We should improve communications, telephones, telegraphs, and
lateral M.T. roads.

(7) We should give liberal rewards for the interception and destruction
of raiding gangs, and the rounding up of villages from which raids

(8) We should admit that the Amir of Afghanistani for religious reasons
exercises a paramount influence over our tribes, and we should get him
to use that influence for the maintenance of peace on our common border.
It has been the practise of our statesmen to adopt the attitude that
because the Amir was by treaty precluded from interfering with our
tribes, therefore he must have nothing to do with them. This is a
short-sighted view. We found during the Great War the late Amir's
influence, particularly over the Mahsuds, of the greatest value, when he
agreed to use it on our behalf.

(9) Finally, there is a suggestion afoot that the settled districts of
the North-West Frontier Province should be re-amalgamated with the
Punjab. I have shown, I think, clearly, how inseparable are the problems
of the districts, the tribal area, and of Afghanistan; and any attempt
to place the districts under a separate control could only mean
friction, inefficiency, and disaster. The proposal is, indeed, little
short of administrative lunacy. There is, however, an underlying method
in the madness that has formulated it, namely, the self-interest of a
clever minority, which I need not now dissect. I trust that if this
proposal should go further it will be stoutly resisted.


Let me now turn to Afghanistan. Generally speaking, the story of our
dealings with that country has been a record of stupid, arrogant muddle.
From the days of the first Afghan war, when an ill-fated army was
despatched on its crazy mission to place a puppet king, Shah Shuja, on
the throne of Afghanistan, our statesmen have, with some notable
exceptions, mishandled the Afghan problem. And yet it is simple enough
in itself. For we want very little of Afghanistan, and she does
not really want much of us. All we want from the Amir is
good-neighbourliness; that he should not allow his country to become the
focus of intrigue or aggression against us by Powers hostile to us, and
that he should co-operate with us for the maintenance of peace on our
common border. All he wants of us is some assistance in money and
munitions for the internal and external safeguarding of his realm,
commercial and other facilities, and honourable recognition, for the
Afghan, like the Indian, has a craving for self-respect and the respect
of others.

Now, where our statesmen have failed is in regarding Afghanistan as a
petty little State to be browbeaten and ordered about at our pleasure,
without recognising the very valuable cards that the Amir holds against
us. He sees his hand and appraises it at its value. He knows, in the
first place, that nothing can be more embarrassing to us than the
necessity for another Afghan war, and the despatch of a large force to
the highlands of Kabul, to sit there possibly for years as an army of
occupation, in a desolate country, incapable of affording supplies for
the troops, at enormous cost which could never be recovered, and at the
expense of much health and life, with no clear-cut policy beyond. He
knows, in the second place, that such a war would be the signal for the
rising of practically every tribe along our frontier. The cry of _Jehad_
would go forth, as in the third Afghan war, and we should be confronted
sooner or later with an outburst from the Black Mountain to
Baluchistan--a formidable proposition in these days. He knows, in the
third place, that with Moslem feeling strained as it is to-day on the
subject of Turkey, there would be sympathy for him in India, and among
the Moslem troops of the Indian army. Now these are serious
considerations, but I do not suggest that they are so serious as to make
us tolerate for a moment an offensive or unreasonable attitude on the
part of the Amir. If the necessity should be forced on us, which God
forbid, we should face the position with promptitude and firmness and
hit at once; and apart from an advance into Afghanistan we have a
valuable card in the closing of the passes and the blockade of that

All I suggest is that in negotiating with Afghanistan, we should
remember these things and should not attempt to browbeat a proud and
sensitive ruler, who, however inferior in the ordinary equipment for
regular war, holds such valuable assets on his side. And my own
experience is that the Afghans are not unreasonable. Like every one
else, they will "try it on," but if handled courteously, kindly, with
geniality, and, above all, with complete candour, they will generally
see reason. And remember one thing. In spite of all that has happened,
our mistakes, our bluster, our occasional lapses from complete
disingenuousness, the Afghans still like us. Moreover, their hereditary
mistrust of Russia still inclines them to lean on us. We have lately
concluded a treaty with Afghanistan--not by any means a perfect treaty,
but the best certainly that could be secured in the circumstances, and
we have sent a Minister to Kabul, Lt.-Colonel Humphrys, who was one of
my officers on the frontier. A better man for the post could not, I
believe, be found in the Empire. Unless unduly hampered by a hectoring
diplomacy from Whitehall, he will succeed in establishing that goodwill
and mutual confidence which between Governments is of more value than
all the paper engagements ever signed. One word more of the Afghans.
There is an idea that they are a treacherous and perfidious people.
This, I believe, is wicked slander, so far as the rulers are concerned.
In 1857, during the Indian Mutiny, the Amir Dost Muhammed was true to
his bond, when he might have been a thorn in our side; and during the
Great War the late Amir Halilullah, in the face of appalling
difficulties, maintained the neutrality of his country, as he promised,
and was eventually murdered, a martyr to his own good faith to us.


Let me now turn to our second question: internal political unrest. In
clubs and other places where wise men in arm-chairs lay down the law
about affairs of state, one constantly hears expressions of surprise and
indignation that there should be any unrest in India at all. "We have,"
say the die-hard wiseacres, "governed India jolly well and jolly
honestly, and the Indians ought to be jolly grateful instead of kicking
up all this fuss. If that meddlesome Montagu had not put these wicked
democratic ideas into their heads, and stirred up all this mud, we
should have gone on quite comfortable as before." But if we face the
facts squarely, we shall see that the wonder is not that there has been
so much, but that there has been so comparatively little unrest, and
that India should, on the whole, have waited so patiently for a definite
advance towards self-government.

What are the facts? They are these. Partly by commercial enterprise,
partly by adroit diplomacy, partly by accident, largely by the valour of
our arms, we have obtained dominion over the great continent of India.
We have ruled it for more than a century through the agency of a handful
of Englishmen, alien in creed, colour, and custom from the people whom
they rule--men who do not even make their permanent homes in the land
they administer. Now, however efficient, however honest, however
impartial, however disinterested such a rule may be, it cannot obviously
be really agreeable to the peoples ruled. This is the fundamental
weakness of our position. That our rule on these lines has lasted so
long and has been so successful is due not to the fact alone that it has
been backed by British bayonets, but rather to the fact that it has been
remarkably efficient, honest, just, and disinterested--and, above all,
that we have in the past given and secured goodwill.

Superimposed on this underlying irritant, there have been of late years
a number of other more direct causes of unrest. Education, which we gave
to India and were bound to give, had inevitably bred political
aspiration, and an _intelligensia_ had grown up hungry for political
rights and powers. Simultaneously the voracious demands of a centralised
bureaucracy for reports and returns had left the district officer little
leisure for that close touch with the people which in the past meant
confidence and goodwill. Political restlessness had already for some
years begun to manifest itself in anarchical conspiracies and crimes of
violence, when the Great War began. In India, as elsewhere, the reflex
action of the war was a disturbing element. High prices, stifled trade,
high taxation, nationalist longings and ideas of self-determination and
self-government served to reinforce subterranean agitation.

But throughout the war India not only remained calm and restrained, but
her actual contribution to the war, in men and material, was colossal
and was ungrudgingly given. She had a right to expect in return generous
treatment; but what did she get? She got the Rowlatt Bill. Now, of
course, there was a great deal of wicked, lying nonsense talked by
agitators about the provisions of the Rowlatt Bill, and the people were
grossly misled. But the plain fact remains that when India had emerged
from the trying ordeal of the war, not only with honour untarnished, but
having placed us under a great obligation, our first practical return
was to pass a repressive measure, for fear, forsooth, that if it was not
passed then it might be pigeon-holed and forgotten. India asked for
bread and we gave her a stone--a stupid, blundering act, openly
deprecated at the time by all moderate unofficial opinion in India. What
was the result? The Punjab disturbances and the preventive massacre of
the Jallianwala Bagh. I do not propose to dwell on this deplorable and
sadly mishandled matter, save to say that so far from cowing agitation,
it has left a legacy of hate that it will take years to wipe out; and
that the subsequent action of a number of ill-informed persons in
raising a very large sum of money for the officer responsible for that
massacre has further estranged Indians and emphasised in their eyes the
brand of their subjection.


To India, thus seething with bitterness over the Punjab disturbances,
there was added the Moslem resentment over the fate of Turkey. I was
myself in London and Paris in a humble capacity at the Peace Conference,
and I know that our leading statesmen were fully informed of the Moslem
attitude and the dangers of unsympathetic and dilatory action in this
matter. But an arrogant diplomacy swept all warnings aside and scorned
the Moslem menace as a bogey. What was the result? Troubles in Egypt, in
Mesopotamia, Kurdistan, Afghanistan, and the Khilifat movement in India.
Hindu agitators were not slow to exploit Moslem bitterness, and for the
first time there was a genuine, if very ephemeral, _entente_ between the
two great rival creeds.

It was in this electric atmosphere that Ghandi, emerging from his
ascetic retirement, found himself an unchallenged leader. Short of
stature, frail, with large ears, and a gap in his front teeth, he had
none of the outward appearance of dominance. His appeal lay in the
simplicity of his life and character, for asceticism is still revered in
the East. But his intellectual equipment was mediocre, his political
ideas nebulous and impracticable to a degree, his programme archaic and
visionary; and from the start he was doomed to fail. The _Hijrat_
movement which he advocated brought ruin to thousands of Moslem homes;
his attack on Government educational establishments brought disaster to
many youthful careers; non-co-operation fizzled out. Government servants
would not resign their appointments, lawyers would not cease to
practise, and title-holders, with a few insignificant exceptions, would
not surrender their titles; the "back to the spinning-wheel" call did
not attract, and the continual failure of Ghandi's predictions of the
immediate attainment of complete _Swaraj_ or self-government, which he
was careful never to define, like hope deferred turned the heart sick.

From being a demi-god Ghandi gradually became a bore, and when he was at
last arrested, tragic to relate, there was hardly a tremor of resentment
through the tired political nerves of India. The arrest was indeed a
triumph of wise timing that does credit to the sagacity of the
Government of India. Had the arrest been effected when the name of
Ghandi was at its zenith, there would have been widespread trouble and
bloodshed. As it was, people were only too glad to be rid of a gadfly
that merely goaded them into infructuous bogs.

I apologise for this long excursus on the somewhat threadbare subject of
the causes of unrest in India. But I want those here present to realise
what potent forces have been at work and to believe that the Indian
generally is not the ungrateful, black-hearted seditionist he is painted
by the reactionary press. India is going through an inevitable stage of
political transition, and we must not hastily judge her peoples--for the
most part so gallant, so kindly, so law-abiding, so lovable--by the
passing tantrums of political puberty.


As things stand at present, there is a remarkable lull. It would be
futile to predict whether it will last. It is due in part, as I have
suggested, to general political weariness, in part to the drastic action
taken against the smaller agitating fry, in part to the depletion of the
coffers of the extremists, in part to the fact that the extremists are
quarrelling amongst themselves as to their future programme. Some are
for continuing a boycott of the Councils; others are for capturing all
the seats and dominating the legislature; others are for re-beating the
dead horse of non-co-operation. Meanwhile, with disunion in the
extremist camp, the Councils conduct their business on moderate lines,
and, so far as one can judge, with marked temperance and sanity.

The work of the first Councils has indeed been surprisingly good, and
augurs well for the future. India has not yet, of course, by any means
grasped the full significance of representative government. The party
system is still in embryo, although two somewhat vague and nebulous
parties calling themselves the "Nationalists" and the "Democrats" do
exist. But these parties have no clear-cut programme, and they do not
follow the lead of the Ministers, who are regarded, not as representing
the elected members of the Council, but as newly-appointed additional
members of the official bureaucracy. There will doubtless in time be
gradual sorting of politicians into definite groups, but there are two
unbridgeable gulfs in the Indian social system which must always
militate against the building up of a solid political party system:
first, the gulf between Hindu and Moslem, which still yawns as wide as
ever, and second, the gulf between the Brahman and the "untouchables"
who, by the way, have found their fears that they would be downtrodden
under the new Councils completely baseless.

There are and must be breakers ahead. Some we can see, and there are
doubtless others still bigger which we cannot yet glimpse over the
welter of troubled waters. What we can see is this: first, there is a
danger that unless Government and the Councils together can before the
next elections in 1923-24 take definite steps towards the industrial
development and the self-defence of India, the extremist party are
likely to come in in full force and to create a deadlock in the
administration; second, unless the Councils continue to accept a fiscal
policy in accordance with the general interests of Great Britain and the
Empire, there will be trouble. The fiscal position is obscure, but it is
the crux, for the Councils can indirectly stultify any policy
distasteful to them, and this too may mean a deadlock; third, there is a
danger that the Indianisation of the Services will advance much more
rapidly than was ever contemplated, or than is desirable in the
interests of India for many years to come, for the simple reason that
capable young Englishmen of the right stamp will not, without adequate
guarantees for their future, accept employment in India. Those
guarantees can be given satisfactorily by one authority alone, and that
is by the Indian Legislatures voicing popular opinion. For a complex
administration bristling with technical questions, administrative,
political, and economic, it is essential that India should have for many
years to come the assistance of highly-educated Britons with the
tradition of administration in their blood. The Councils will be wise to
recognise this and make conditions which will secure for them in the
future as in the past the best stamp of adventurous Briton.

Finally, the Montagu-Chelmsford scheme, though a capable and
conscientious endeavour to give gradual effect to a wise and generous
policy, has of necessity its weak points. The system of diarchy--of
allotting certain matters to the bureaucratic authority of the Viceroy
and of the Provincial Governors and other matters to the representatives
of the people--is obviously a stop-gap, which is already moribund. The
attempt to fix definite periods at which further advances towards
self-government can be considered is bound to fail: you cannot give
political concessions by a stop-watch; the advance will either be much
more rapid or much slower than the scheme anticipates. Again, the
present basis of election is absurdly small, but any attempt to broaden
it must tend towards adult suffrage, which in itself would appear
impracticable with a population of over 200 millions.


It is a mistake, however, in politics to look too far ahead. Sufficient
unto the day. For the time being we may be certain of one thing, and
that is that we cannot break the Indian connection and leave India. Both
our interests and our obligations demand that we should remain at the
helm of Indian affairs for many years to come. That being so, let us
accept our part cheerfully and with goodwill as in the past. Let us try
to give India of our best, as we have done heretofore. Let us regive and
regain, above all things, goodwill. Let us not resent the loss of past
privilege, the changes in our individual status, and let us face the
position in a practical and good-humoured spirit. Let us abandon all
talk of holding India by the sword, as we won it by the sword--because
both propositions are fundamentally false. Let us realise that we have
held India by integrity, justice, disinterested efficiency--and, above
all, by goodwill--and let us continue to co-operate with India in India
for India on these same lines.



Editor of the _Westminster Gazette_, 1896 to 1922; Member of the Special
Mission to Egypt, 1919-1920.

Mr. Spender said:--The Egyptian problem resembles the Indian and all
other Eastern problems in that there is no simple explanation or
solution of it. Among the many disagreeable surprises which awaited us
after the war, none was more disagreeable than the discovery in March,
1919, that Egypt was in a state of rebellion. For years previously we
had considered Egypt a model of imperial administration. We had pulled
her out of bankruptcy and given her prosperity. We had provided her with
great public works which had enriched both pasha and fellah. We had
scrupulously refrained from exploiting her in our own interests. No man
ever worked so disinterestedly for a country not his own as Lord Cromer
for Egypt, and if ever a Nationalist movement could have been killed by
kindness, it should have been the Egyptian. Nor were the Egyptian people
ungrateful. I have talked to Egyptian Nationalists of all shades, and
seldom found any who did not handsomely acknowledge what Great Britain
had done for Egypt, but they asked for one thing more, which was that
she should restore them their independence. "We won it from the Turks,"
they said, "and we cannot allow you to take it from us."

This demand was no new thing, but it was brought to a climax by events
during and after the war. When the war broke out, our representative in
Egypt was still only "Agent and Consul-General," and was theoretically
and legally on the same footing with the representative of all other
Powers; when it ended, he was "High Commissioner," governing by martial
law under a system which we called a "protectorate." This to the
Egyptians seemed a definite and disastrous change for the worse.
Throughout the forty years of our occupation we have most carefully
preserved the theory of Egyptian independence. We have occupied and
administered the country, but we have never annexed it or claimed it to
be part of the British Empire. We intervened in 1882 for the purpose of
restoring order, and five years later we offered to withdraw, and were
only prevented from carrying out our intention because the Sultan of
Turkey declined, at the instigation of another Power, to sign the Firman
which gave us the right of re-occupying the country if order should
again be disturbed. In the subsequent years we gave repeated assurances
to Egyptians and to foreign Powers that we had no intention of altering
the status of the country as defined in its theoretical government by
Khedive, Egyptian Ministers, and Egyptian Council or Assembly. And
though it was true that in virtue of the army of occupation we were in
fact supreme, by leaving the forms of their government untouched and
refraining from all steps to legalise our position we reassured the
Egyptians as to our ultimate objects.

In the eyes of the Egyptians the proclamation of the Protectorate and
the conversion of the "Agent and Consul-General" into a "High
Commissioner" armed with the weapons of martial law seriously prejudiced
this situation, and though they acquiesced for the period of the war,
they were determined to have a settlement with us immediately it was
over, and took us very seriously at our word when we promised to review
the whole situation when that time came. The truth about the
"Protectorate" was that we adopted it as a way out of the legal
entanglement which would otherwise have converted the Egyptians into
enemy aliens when their suzerain, the Sultan of Turkey, entered the war
against us, and we did it deliberately as the preferable alternative to
annexing the country. But we have neither explained to the Egyptians nor
made clear to ourselves what exactly we meant by it, and in the absence
of explanations it was interpreted in Egypt as a first step to the
extinction of Egyptian nationality.


Had we acted wisely and expeditiously at the end of the war we might
even then have avoided the trouble that followed. But when Egyptian
ministers asked leave to come to London in December, 1918, we answered
that the time was not opportune for these discussions, and when the
Nationalist leaders proposed to send a delegation, we said that no good
purpose could be served by their coming to Europe. This heightened the
alarm, and the Nationalists retorted by raising their claims from
"complete autonomy" to "complete independence," and started a violent
agitation. The Government retaliated by deporting Zaghlul to Malta,
whereupon the country broke into rebellion. Lord Allenby now came upon
the scene, and, while suppressing the rebellion, released Zaghlul and
gave him and his delegation the permission to go to Europe which had
been refused in January. It was now decided to send out the Milner
Mission, but there was a further delay of seven months before it
started, and during all that time agitation continued.

When the Mission arrived it quickly discovered that there was no
possible "Constitution under the Protectorate" which would satisfy the
Egyptians, and that the sole alternatives were further suppression or
the discovery of some means of settlement which dispensed with the
Protectorate. The Mission unanimously came to the conclusion that though
the first was mechanically possible if the cost and discredit were
faced, the second was not only feasible but far preferable, and that the
right method was a treaty of Alliance between Great Britain and Egypt,
recognising Egypt as a sovereign State, but affording all necessary
guarantees for imperial interests. Working on those lines the Mission
gradually broke down the boycott proclaimed against them, convinced the
Egyptians of their goodwill, induced all parties of Egyptian
Nationalists to come to London, and there negotiated the basis of the
Treaty which was described in the Report. The main points were that
there must be a British force in the country--not an army of occupation,
but a force to guard Imperial communications--that there must be British
liaison officers for law and order and finance, that the control of
foreign policy must remain in the hands of Great Britain, and that the
Soudan settlement of 1898 must remain untouched, but that with these
exceptions the Government of Egypt should be in fact what it had always
been in theory: a Government of Egyptians by Egyptians.

Had the Government accepted this in December, 1920 (instead of in March,
1922), and instructed Lord Milner to go forward and draft a treaty on
this basis, it is extremely probable that a settlement would have been
reached in a few weeks; but Ministers, unhappily, were unable to make up
their minds, and there was a further delay of three months before the
Egyptian Prime Minister, Adli Pasha, was invited to negotiate with the
Foreign Office. By this time the Nationalist parties which the Mission
had succeeded in uniting on a common platform had fallen apart, and the
extremists once more started a violent agitation and upbraided the
moderates for tamely waiting on the British Government, which had
evidently meant to deceive them. The situation had, therefore, changed
again for the worse when Adli came to London in April, 1921, and it was
made worse still by what followed. The negotiations dragged over six
months, and finally broke down for reasons that have never been
explained, but the probability is that Egypt had now got entangled in
Coalition domestic politics, and that the "Die-Hards" claimed to have
their way in Egypt in return for their consent to the Irish settlement.
The door was now banged in the face of all schools of Egyptian
Nationalists, and Lord Allenby was instructed to send to the Sultan the
unhappy letter in which Egypt was peremptorily reminded that she was a
"part of the communications of the British Empire," and many other
things said which were specially calculated to wound Egyptian

The Egyptian Prime Minister resigned, and for the next five months Lord
Allenby endeavoured to govern the country by martial law without an
Egyptian Ministry. Then he came to London with the unanimous support of
British officials in Egypt to tell the Government that the situation was
impossible and a settlement imperative. The Government gave way and
British policy was again reversed, but three opportunities had now been
thrown away, and at the fourth time of asking the difficulties were
greatly increased. The Nationalists were now divided and the Moderates
in danger of being violently attacked if they accepted a moderate
solution. It was found necessary to deport Zaghlul Pasha and to put
several of his chief adherents on trial. Suspicions had been aroused by
the delays and vacillations of the British Government. A settlement by
treaty was now impossible, and Lord Allenby had to give unconditionally
the recognition of sovereignty which the Mission intended to be part of
the treaty, putting the Egyptians under an honourable pledge to respect
British rights and interests. In the circumstances there was nothing
else to do, but it is greatly to be desired that when the constitution
has been completed and the new Assembly convened, an effort should be
made to revert to the method of the treaty which particularly suited the
Egyptian character and would be regarded as a binding obligation by


In regard to the future, there is only one thing to do and that is to
work honestly to its logical conclusion the theory now adopted, that
Egypt is a self-governing independent State. Egyptians must be
encouraged to shoulder the full responsibilities of a self-governing
community. It would be folly to maintain a dual system which enabled an
Egyptian Government to shunt the difficult or disagreeable part of its
task on to a British High Commissioner. Whatever the system of
Government, there is no escape for either party from the most intimate
mutual relations. Geography and circumstances decree them, but there is
no necessary clash between the imperial interests which require us to
guard the highway to the East that runs through Egyptian territory, and
the full exercise of their national rights by Egyptians. Egyptians must
remember that for many years to come the world will hold us responsible
for law and order and solvency in Egypt, and we on our part must
remember that Egyptians have the same pride in their country as other
peoples, and that they will never consent to regard it as merely and
primarily "a communication of the British Empire." In any wise solution
of the question any sudden breach with the past will be avoided, and
Egyptians will of their own free will enlist the aid of British
officials who have proved their devotion to the country by loyal and
skilful service. The hope of the future lies in substituting a free
partnership for a domination of one race by the other, and with a genial
and good-humoured people, such as the Egyptians essentially are, there
should be no difficulty in restoring friendship and burying past
animosities. But there must be a real determination on both sides to
make Egyptian independence a success and no disposition on either to
give merely a reluctant consent to the conditions agreed upon by them
and then to throw the onus of failure on the others.

I deeply regret the schism between the different schools of Nationalists
in Egypt. As we have seen in Ireland, Nationalism is threatened from
within as well as from without, and it is a great misfortune that in
settling the Egyptian problem we missed the moment in 1920 when the
different Nationalist parties were all but united on a common platform.
Extremist leaders have the power of compelling even their friends to
deport them and treat them as enemies, and I assume that Zaghlul put
Lord Allenby under this compulsion, when he decided that his deportation
was necessary. But Zaghlul was one of the few Nationalist leaders who
were of peasant origin, and his followers stand for something that needs
to be strongly represented in the Government if it is not to take its
complexion merely from the towns and the wealthy interests. The fellah
is a very different man from what he was in the days of Ismail, and it
is improbable that he will again submit to oppression as his forefathers
did but it is eminently desirable that there should be in the Government
men whom he would accept as leaders and whom he could trust to speak for

Above all, it is to be hoped that, having conceded the independence of
Egypt, we shall not slip back into governing the country by martial law
with the aid of one party among the Egyptians. That would be merely an
evasion of the difficulty and a postponement of troubles. There are a
good many difficulties yet to be overcome, and the progress of events
will need careful watching by Liberals in and out of the House of
Commons, but if at length we steer a straight course and bring political
good sense to the details of the problem, there is no reason why we
should not satisfy the Egyptians and put Anglo-Egyptian relations on a
good and enduring basis. In dealing with Egypt as with all Eastern
countries, it should constantly be borne in mind that manners,
character, and personality are a chief part of good politics. To a very
large extent the estrangement has been caused by a failure to understand
and respect the feelings of the Egyptian people, and here, as in India,
it is important to understand that the demand of the Eastern man is not
only for self-government, but also for a new status which will enable
him to maintain his self-respect in his dealings with the West.



Professor of Modern History in the University of Manchester, 1913 to

Mr. Ramsay Muir said:--One of the most marked, and one of the most
ominous, features of the political situation to-day is that there is an
almost universal decline of belief in and respect for our system of
government. This undermining of the confidence that a healthy community
ought to feel in its institutions is a perturbing fact which it is the
plain duty of all good Liberals to consider seriously. We need not be
deterred by the old gibe that Liberalism has always cared more about
political machinery than about social reorganisation. The gibe was never
true. But, in any case, no projects of social reorganisation have much
chance of success unless the political machinery by means of which they
have to be carried into effect is working efficiently. Moreover, since
most of the projects of social reform which are being urged upon our
attention involve an enlargement of the activities of the State, it is
obvious that we shall be running the risk of a breakdown unless we make
sure that the machinery of the State is capable of meeting the demands
which are made upon it. We must be satisfied that our engine has
sufficient power before we require it to draw a double load. In truth,
one reason why the engine of government is not working well is that it
has been required to do a great deal more work than it was designed for.
The time has come to consider carefully the character and capacity of
our machinery of government in view of the increased demands which are
certain to be made upon it in the future.

Our national political system may be divided into two parts. On the one
hand, there is the working machine, which goes on, year in, year out,
whether Parliament is sitting or not, and which would still go on quite
well for a time if Parliament never met again. We call it the
Government, and we habitually and rightly hold it responsible for every
aspect of national policy and action, for legislation and finance as
well as for foreign policy and internal administration. On the other
hand, there is what Burke used to call "the control on behalf of the
nation," mainly exercised through Parliament, whose chief function is to
criticise and control the action of Government, and to make the
responsibility of Government to the nation a real and a felt
responsibility. The discontents of to-day apply to both parts of the
system, and I propose to deal with them in turn, first inquiring what is
wrong with the working machine of government and how it can be amended,
and then turning to consider how far the control on behalf of the nation
is working badly, and how it can be made more efficient.

In what I have called the "working machine" of government there are two
distinct elements. First, there is the large, permanent, professional
staff, the Civil Service; secondly, there is the policy-directing body,
the Cabinet. Both of these are the objects of a great deal of
contemporary criticism. On the one hand, we are told that we are
suffering from "bureaucracy," which means that the permanent officials
have too much independent and uncontrolled, or imperfectly controlled,
authority. On the other hand, we are told that we are suffering from
Cabinet dictatorship, or, alternatively, that the Cabinet system is
breaking down and being replaced by the autocracy of the Prime Minister.
There is a good deal of _prima facie_ justification for all these


First, as to bureaucracy. It is manifest that there has been an immense
increase in the number, the functions, and the power of public
officials. This is not merely due to the war. It has been going on for a
long time--ever since, in fact, we began the deliberate process of
national reconstruction in the years following 1832. In itself this
increase has not been a bad thing; on the contrary, it has been the only
possible means of carrying into effect the great series of reforms which
marked the nineteenth century. And may I here underline the fact that we
Liberals, in particular, have no right to criticise the process, since
we have been mainly responsible for it, at any rate in all its early
stages. When our predecessors set up the first Factory Inspectors in
1833, and so rendered possible the creation of a whole code of factory
laws; when they created the first rudimentary Education Office in 1839,
and so set to work the men who have really moulded our national system
of education; when they set up a bureaucratic Poor Law Board in 1841,
which shaped our Poor Law Policy, and a Public Health Board in 1848,
which gradually worked out our system of Public Health--when they did
these things, they were beginning a process which has been carried
further with every decade. If you like, they were laying the foundations
of bureaucracy; but they were also creating the only machinery by which
vast, beneficial and desperately needed measures of social reform could
be carried into effect.

And there is yet another thing for which Liberalism must assume the
responsibility. When Gladstone instituted the Civil Service Commission
in 1853, and the system of appointment by competitive examination in
1870, he freed the Civil Service from the reputation for corruption and
inefficiency which had clung to it; and he ensured that it should
attract, as it has ever since done, much of the best intellect of the
nation. But this very fact inevitably increased the influence of the
Civil Service, and encouraged the expansion of its functions. If you put
a body of very able men in charge of a department of public service, it
is certain that they will magnify their office, take a disproportionate
view of its claims, and incessantly strive to increase its functions and
its staff. This is not only natural, it is healthy--so long as the
process is subjected to efficient criticism and control.

But the plain fact is that the control is inadequate. The vast machine
of government has outgrown the power of the controlling mechanism.

We trust for the control of the immense bureaucratic machine, almost
entirely to the presence, at the head of each department, of a political
minister directly responsible to Parliament. We hold the minister
responsible for everything that happens in his office, and we regard
this ministerial responsibility as one of the keystones of our system.
But when we reflect that the minister is distracted by a multitude of
other calls upon his time, and that he has to deal with officials who
are generally his equals in ability, and always his superiors in special
knowledge; when we realise how impossible it is that a tithe of the
multifarious business of a great department should come before him, and
that the business which does come before him comes with the
recommendations for action of men who know ten times more about it than
he does, it must be obvious that the responsibility of the minister must
be quite unreal, in regard to the normal working of the office. One
thing alone he can do, and it is an important thing, quite big enough to
occupy his attention. He can make sure that the broad policy of the
office, and its big new departures, are in accord with the ideas of the
majority in Parliament, and are co-ordinated, through the Cabinet, with
the policy of the other departments. That, indeed, is the true function
of a minister; and if he tries to make his responsibility real beyond
that, he may easily neglect his main work. Beyond this consideration of
broad policy, I do not hesitate to say that the theory of ministerial
responsibility is not a check upon the growth of bureaucracy, but is
rather the cover under which bureaucracy has grown up. For the position
of the minister enables him, and almost compels him, to use his
influence in Parliament for the purpose of diverting or minimising
parliamentary criticism.


How can this growth of inadequately controlled official power be
checked? Is it not apparent that this can only be done if a clear
distinction is drawn between the sphere of broad policy, in which the
minister both can be and ought to be responsible, and the sphere of
ordinary administrative work for which the minister cannot be genuinely
responsible? If that distinction is accepted, it ought not to be
impossible for Parliament without undermining ministerial or cabinet
responsibility, to devise a means of making its control over the
ordinary working of the departments effective, through a system of
committees or in other ways.

The current complaints of bureaucracy, however, are not directed mainly
against the ineffectiveness of the machinery of control, but against the
way in which public work is conducted by government officials--the
formalism and red-tape by which it is hampered, the absence of
elasticity and enterprise; and the methods of government departments are
often compared, to their disadvantage, with those of business firms. But
the comparison disregards a vital fact. The primary function of a
government department is not creative or productive, but regulative. It
has to see that laws are exactly carried out, and that public funds are
used for the precise purposes for which they were voted; and for this
kind of work a good deal of red-tape is necessary. Moreover, it is
essential that those who are charged with such functions should be above
all suspicion of being influenced by fear or favour or the desire to
make profit; and for this purpose fixed salaries and security of tenure
are essential.

In short, the fundamental principles upon which government departments
are organised are right for the regulative functions which they
primarily exist to perform. But they are altogether wrong for creative
and productive work, which demands the utmost elasticity, adaptability,
and freedom for experiment. And it is just because the ordinary
machinery of government has been used on a large scale for this kind of
work that the outcry against bureaucracy has recently been so vehement.
It is not possible to imagine a worse method of conducting a great
productive enterprise than to put it under the control of an evanescent
minister selected on political grounds, and supported by a body of men
whose work is carried on in accordance with the traditions of the Civil

If we are to avoid a breakdown of our whole system, we must abstain from
placing productive enterprises under the control of the ordinary
machinery of government--Parliament, responsible political ministers,
and civil service staffs. But it does not follow that no productive
concern ought ever to be brought under public ownership and withdrawn
from the sphere of private enterprise. As we shall later note, such
concerns can, if it be necessary, be organised in a way which would
avoid these dangers.


We turn next to the other element in the working machine of government,
the Cabinet, or policy-directing body, which is the very pivot of our
whole system. Two main functions fall to the Cabinet. In the first
place, it has to ensure an effective co-ordination between the various
departments of government; in the second place, it is responsible for
the initiation and guidance of national policy in every sphere, subject
to the watchful but friendly control of Parliament.

Long experience has shown that there are several conditions which must
be fulfilled if a Cabinet is to perform these functions satisfactorily.
In the first place, its members must, among them, be able to speak for
every department of government; failing this, the function of
co-ordination cannot be effectively performed. This principle was
discarded in the later stages of the war, when a small War Cabinet was
instituted, from which most of the ministers were excluded. The result
was confusion and overlapping, and the attempt to remedy these evils by
the creation of a staff of _liaison_ officers under the control of the
Prime Minister had very imperfect success, and in some respects only
added to the confusion. In the second place, the Cabinet must be
coherent and homogeneous, and its members must share the same ideals of
national policy. National business cannot be efficiently transacted if
the members of the Cabinet are under the necessity of constantly arguing
about, and making compromises upon, first principles. That is the
justification for drawing the members of a Cabinet from the leaders of a
single party, who think alike and understand one another's minds.
Whenever this condition has been absent, confusion, vacillation and
contradiction have always marked the conduct of public affairs, and
disastrous results have followed.

In the third place, the procedure of the Cabinet must be intimate,
informal, elastic, and confidential; every member must be able to feel
that he has played his part in all the main decisions of policy, whether
they directly concern his department or not, and that he is personally
responsible for these decisions. Constitutional usage has always
prescribed that it is the duty of a Cabinet Minister to resign if he
differs from his colleagues on any vital matter, whether relating to his
department or not, and this usage is, in truth, the main safeguard for
the preservation of genuine conjoint responsibility, and the main
barrier against irresponsible action by a Prime Minister or a clique.
When the practice of resignation in the sense of giving up office is
replaced by the other kind of resignation--shrugging one's shoulders and
letting things slide--the main virtue of Cabinet government has been
lost. In the fourth place, in order that every minister may fully share
in every important discussion and decision, it is essential that the
Cabinet should be small. Sir Robert Peel, in whose ministry of 1841-6
the system probably reached perfection, laid it down that nine was the
maximum number for efficiency, because not more than about nine men can
sit round a table in full view of one another, all taking a real share
in every discussion. When the membership of a Cabinet largely exceeds
this figure, it is inevitable that the sense of joint and several
responsibility for every decision should be greatly weakened.


I do not think any one will deny that the Cabinet has in a large degree
lost these four features which we have laid down as requisite for full
efficiency. The process has been going on for a long time, but during
the last six years it has been accelerated so greatly that the Cabinet
of to-day is almost unrecognisably different from what it was fifty
years ago. To begin with, it has grown enormously in size, owing to the
increase in the number of departments of government. This growth has
markedly diminished the sense of responsibility for national policy as a
whole felt by the individual members, and the wholesome practice of
resignation has gone out of fashion. It has led to frequent failures in
the co-ordination of the various departments, which are often seen
working at cross purposes. It has brought about a new formality in the
proceedings of the Cabinet, in the establishment of a Cabinet

The lack of an efficient joint Cabinet control has encouraged a very
marked and unhealthy increase in the personal authority of the Prime
Minister and of the clique of more intimate colleagues by whom he is
surrounded; and this is strengthened by the working of the new
Secretariat. All these unhealthy features have been intensified by the
combination of the two strongest parties in Parliament to form a
coalition; for this has deprived the Cabinet of homogeneity and made it
the scene not of the definition of a policy guided by clear principles,
but rather the scene of incessant argument, bargaining, and compromise
on fundamentals. Finally, the responsibility of the Cabinet to
Parliament has been gravely weakened; it acts as the master of
Parliament, not as its agent, and its efficiency suffers from the fact
that its members are able to take their responsibility to Parliament
very lightly.

All these defects in the working of the Cabinet system have been much
more marked since the war than at any earlier time. But the two chief
among them--lessened coherence due to unwieldiness of size, and
diminished responsibility to Parliament--were already becoming apparent
during the generation before the war. On the question of responsibility
to Parliament we shall have something to say later. But it is worth
while to ask whether there is any means whereby the old coherence,
intimacy and community of responsibility can be restored. If it cannot
be restored, the Cabinet system, as we have known it, is doomed. I do
not think that it can be restored unless the size of the Cabinet can be
greatly reduced, without excluding from its deliberations a responsible
spokesman for each department of government.

But this will only be possible if a considerable regrouping of the great
departments can be effected. I do not think that such a regrouping is
impracticable. Indeed, it is for many reasons desirable. If it were
carried out, a Cabinet might consist of the following members, who would
among them be in contact with the whole range of governmental activity.
There would be the Prime Minister; there would be the Chancellor of the
Exchequer, responsible for national finance; there would be the Minister
for Foreign Affairs; there would be a Minister for Imperial Affairs,
speaking for a sub-Cabinet which would include Secretaries for the
Dominions, for India, and for the Crown Colonies and Protectorates;
there would be a Minister of Defence, with a sub-Cabinet including
Ministers of the Navy, the Army, and the Air Force; there would be a
Minister for Justice and Police, performing most of the functions both
of the Home Office and of the Lord Chancellor, who would cease to be a
political officer and be able to devote himself to his judicial
functions; there would be a Minister of Agriculture, Industry, and
Commerce, with a sub-Cabinet representing the Board of Trade, the Board
of Agriculture, the Ministry of Mines, the Ministry of Labour, and
perhaps other departments.

Ministers of Public Health and of Education would complete the list of
active administrative chiefs; but one or two additional members, not
burdened with the charge of a great department might be added, such as
the Lord President of the Council, and one of these might very properly
be a standing representative upon the Council of the League of Nations.
The heads of productive trading departments--the Post Office and the
Public Works Department--should, I suggest, be excluded from the
Cabinet, and their departments should be separately organised in such a
way as not to involve a change of personnel when one party succeeded
another in power. These departments have no direct concern with the
determination of national policy.

On such a scheme we should have a Cabinet of nine or ten members,
representing among them all the departments which are concerned with
regulative or purely governmental work. And I suggest that a
rearrangement of this kind would not only restore efficiency to the
Cabinet, but would lead to very great administrative reforms, better
co-ordination between closely related departments, and in many respects
economy. But valuable as such changes may be, they would not in
themselves be sufficient to restore complete health to our governmental
system. In the last resort this depends upon the organisation of an
efficient and unresting system of criticism and control.


In any modern State the control of the action of Government is largely
wielded by organs not formally recognised by law--by the general
movement of public opinion; by the influence of what is vaguely called
"the city"; by the resolutions of such powerful bodies as trade union
congresses, federations of employers, religious organisations, and
propagandist bodies of many kinds; and, above all, by the Press. No
review of our system would be complete without some discussion of these
extremely powerful and in some cases dangerous influences. We cannot,
however, touch upon them here. We must confine ourselves to the formal,
constitutional machinery of national control over the actions of
Government, that is, to Parliament, as the spokesman of the nation.

An essential part of any full discussion of this subject would be a
treatment of the Second Chamber problem. But that would demand a whole
hour to itself; and I propose to pass it over for the present, and to
ask you to consider the perturbing fact that the House of Commons, which
is the very heart of our system, has largely lost the confidence and
belief which it once commanded.

Why has the House of Commons lost the confidence of the nation? There
are two main reasons, which we must investigate in turn. In the first
place, in spite of the now completely democratic character of the
electorate, the House is felt to be very imperfectly representative of
the national mind. And in the second place, it is believed to perform
very inefficiently its primary function of criticising and controlling
the action of Government.

First of all, why do men vaguely feel that the House of Commons is
unrepresentative? I think there are three main reasons. The first is to
be found in the method of election. Since 1885 the House has been
elected by equal electoral districts, each represented by a single
member. Now, if we suppose that every constituency was contested by two
candidates only, about 45 per cent. of the voters must feel that they
had not voted for anybody who sat at Westminster; while many of the
remaining 55 per cent. must feel that they had been limited to a choice
between two men, neither of whom truly represented them. But if in many
constituencies there are no contests, and in many others there are three
or more candidates, the number of electors who feel that they have not
voted for any member of the House may rise to 60 per cent. or even 70
per cent. of the total.

The psychological effect of this state of things must be profound. And
there is another consideration. The very name of the House of Commons
(Communes, not common people) implies that it represents organised
communities, with a character and personality and tradition of their
own--boroughs or counties. So it did until 1885. Now it largely
represents totally unreal units which exist only for the purpose of the
election. The only possible means of overcoming these defects
of the single member system is some mode of proportional
representation--perhaps qualified by the retention of single members in
those boroughs or counties which are just large enough to be entitled to
one member.

The main objection taken to proportional representation is that it would
probably involve small and composite majorities which would not give
sufficient authority to ministries. But our chief complaint is that the
authority of modern ministries is too great, their power too unchecked.
In the middle of the nineteenth century, when our system worked most
smoothly, parties _were_ composite, and majorities were small--as they
usually ought to be, if the real balance of opinion in the country is to
be reflected. The result was that the control of Parliament over the
Cabinet was far more effective than it is to-day; the Cabinet could not
ride roughshod over the House; and debates really influenced votes, as
they now scarcely ever do. The immense majorities which have been the
rule since 1885 are not healthy. They are the chief cause of the growth
of Cabinet autocracy. And they are due primarily to the working of the
single-member constituency.

The second ground of distrust is the belief that Parliament is unduly
dominated by party; that its members cannot speak and vote freely; that
the Cabinet always gets its way because it is able to hold over members,
_in terrorem_, the threat of a general election, which means a fine of
£1000 a head; and that (what creates more suspicion than anything) the
policy of parties is unduly influenced by the subscribers of large
amounts to secret party funds. I am a profound believer in organised
parties as essential to the working of our system. But I also believe
that there is real substance in these complaints, though they are often
exaggerated. What is the remedy? First, smaller majorities, and a
greater independence of the individual member, which would follow from a
change in the methods of election. And, secondly, publicity of accounts
in regard to party funds. There is no reason why an honest party should
be ashamed of receiving large gifts for the public ends it serves, and
every reason why it should be proud of receiving a multitude of small
gifts. I very strongly hold that in politics, as in industry, the best
safeguard against dishonest dealings, and the surest means of restoring
confidence, is to be found in the policy of "Cards on the table." Is
there any reason why we Liberals should not begin by boldly adopting, in
our own case, this plainly Liberal policy?


There is a third reason for dissatisfaction with the composition of the
House of Commons, which has become more prominent in recent years. It is
that, increasingly, organised interests are making use of the
deficiencies of our electoral system to secure representation for
themselves. If I may take as instances two men whom, in themselves,
everybody would recognise as desirable members of the House, Mr. J.H.
Thomas plainly is, and is bound to think of himself as, a representative
of the railwaymen rather than of the great community of Derby, while Sir
Allan Smith as plainly represents engineering employers rather than
Croydon. There used to be a powerful trade which chose as its motto "Our
trade is our politics." Most of us have regarded that as an unsocial
doctrine, yet the growing representation of interests suggests that it
is being widely adopted.

Indeed, there are some who contend that we ought frankly to accept this
development and universalise it, basing our political organisation upon
what they describe (in a blessed, Mesopotamic phrase) as "functional
representation." The doctrine seems to have, for some minds, a strange
plausibility. But is it not plain that it could not be justly carried
out? Who could define or enumerate the "functions" that are to be
represented? If you limit them to economic functions (as, in practice,
the advocates of this doctrine do), will you provide separate
representation, for example, for the average-adjusters--a mere handful
of men, who nevertheless perform a highly important function? But you
cannot thus limit functions to the economic sphere without distorting
your representation of the national mind and will. If you represent
miners merely as miners, you misrepresent them, for they are also
Baptists or Anglicans, dog-fanciers, or lovers of Shelley,
prize-fighters, or choral singers. The notion that you can represent the
mind of the nation on a basis of functions is the merest moonshine. The
most you can hope for is to get a body of 700 men and women who will
form a sort of microcosm of the more intelligent mind of the nation, and
trust to it to control your Government. Such a body will consist of men
who follow various trades. But the conditions under which they are
chosen ought to be such as to impress upon them the duty of thinking of
the national interest as a whole in the first instance, and of their
trade interests only as they are consistent with that. The fundamental
danger of functional representation is that it reverses this principle,
and impresses upon the representative the view that his trade is his

But it is useless to deplore or condemn a tendency unless you see how it
can be checked. Why has this representation of economic interests become
so strong? Because Parliament is the arena in which important industrial
problems are discussed and settled. It is not a very good body for that
purpose. If we had a National Industrial Council charged, not with the
final decision, but with the most serious and systematic discussion of
such problems, they would be more wisely dealt with. And, what is quite
as important, such a body would offer precisely the kind of sphere
within which the representation of interests as such would be altogether
wholesome and useful; and, once it became the main arena of discussion,
it would satisfy the demand for interest-representation, which is
undermining the character of Parliament. In other words, the true
alternative to functional representation in Parliament is functional
devolution under the supreme authority of Parliament.

But still more important than the dissatisfaction aroused by the
composition of the House is the dissatisfaction which is due to the
belief that its functions are very inefficiently performed. It is
widely believed that, instead of controlling Government, Parliament is
in fact controlled by it. The truth is that the functions imposed upon
Parliament by increased legislative activity and the growth of the
sphere of Government are so vast and multifarious that no part of them
_can_ be adequately performed in the course of sessions of reasonable
length; and if the sessions are not of reasonable length--already they
are too long--we shall be deprived of the services of many types of men
without whom the House would cease to be genuinely representative of the
mind of the nation.

Consider how the three main functions of Parliament are
performed--legislation, finance, and the control of administration. The
discussion of legislation by the whole House has been made to seem
futile by the crack of the party whip, by obstruction, and by the
weapons designed to deal with obstruction--the closure, the guillotine,
the kangaroo. A real amendment has been brought about in this sphere by
the establishment of a system of committees to which legislative
proposals of various kinds are referred, and this is one of the most
hopeful features of recent development. But there is still one important
sphere of legislation in which drastic reform is necessary: the costly
and cumbrous methods of dealing with private bills promoted by
municipalities or by railways and other public companies. It is surely
necessary that the bulk of this work should be devolved upon subordinate

When we pass to finance, the inefficiency of parliamentary control
becomes painfully clear. It is true that a good deal of parliamentary
time is devoted to the discussion of the estimates. But how much of this
time is given to motions to reduce the salary of the Foreign Secretary
by £100 in order to call attention to what is happening in China?
Parliament never, in fact, attempts any searching analysis of the
expenditure in this department or that. It cannot do so, because the
national accounts are presented in a form which makes such discussion
very difficult. The establishment of an Estimates Committee is an
advance. But even an Estimates Committee cannot do such work without the
aid of a whole series of special bodies intimately acquainted with the
working of various departments. In short, the House of Commons has
largely lost control over national expenditure. As for the control of
administration, we have already seen how inadequate that is, and why it
is inadequate.

These deficiencies must be corrected if Parliament is to regain its
prestige, and if our system of government is to attain real efficiency.
For this purpose two things are necessary: in the first place,
substantial changes in the procedure of Parliament; in the second place,
the delegation to subordinate bodies of such powers as can be
appropriately exercised by them without impairing the supreme authority
of Parliament as the mouthpiece of the nation. I cannot here attempt to
discuss these highly important matters in any detail. In regard to
procedure, I can only suggest that the most valuable reform would be the
institution of a series of committees each concerned with a different
department of Government. The function of these committees would be to
investigate and criticise the organisation and normal working of the
departments, not to deal with questions of broad policy; for these ought
to be dealt with in relation to national policy as a whole, and they
must, therefore, be the concern of the minister and of the Cabinet,
subject to the overriding authority of Parliament as a whole. In order
to secure that this distinction is maintained, and in order to avoid the
defects of the French committee system under which independent
_rapporteurs_ disregard and override the authority of the ministers, and
thus gravely undermine their responsibility, it would be necessary not
only that each committee should include a majority of supporters of
Government, but that the chair should be occupied by the minister or his


Nor can I stop to dwell upon the very important subject of the
delegation or devolution of powers by Parliament to subordinate bodies.
I will only say that devolution may be, and I think ought to be, of two
kinds, which we may define as regional and functional. To regional
bodies for large areas (which might either be directly elected or
constituted by indirect election from the local government authorities
within each area) might be allotted much of the legislative power of
Parliament in regard to private Bills, together with general control
over those public functions, such as Education and Public Health, which
are now mainly in the hands of local authorities. Of functional
devolution the most important expression would be the establishment of a
National Industrial Council and of a series of councils or boards for
various industries endowed with quasi-legislative authority; by which I
mean that they should be empowered by statute to draft proposals for
legislation of a defined kind, which would ultimately receive their
validity from Parliament, perhaps without necessarily passing through
the whole of the elaborate process by which ordinary legislation is
enacted. I believe there are many who share my conviction that a
development in this direction represents the healthiest method of
introducing a real element of industrial self-government. But for the
moment we are concerned with it as a means of relieving Parliament from
some very difficult functions which Parliament does not perform
conspicuously well, without qualifying its supreme and final authority.

One final point. If it is true, as I have argued, that the decay of the
prestige and efficiency of Parliament is due to the fact that it is
already overloaded with functions and responsibilities, it must be
obvious that to add to this burden the responsibility for controlling
the conduct of great industries, such as the railways and the mines,
would be to ensure the breakdown of our system of government, already on
the verge of dislocation. In so far as it may be necessary to undertake
on behalf of the community the ownership and conduct of any great
industrial or commercial concern, I submit that it is essential that it
should not be brought under the direct control of a ministerial
department responsible to Parliament. Yet the ultimate responsibility
for the right conduct of any such undertaking (_e.g._ the telephones,
electric supply, or forests) must, when it is assumed by the State, rest
upon Parliament. How is this ultimate responsibility to be met? Surely
in the way in which it is already met in the case of the Ecclesiastical
Commissioners or the Port of London Authority--by setting up, under an
Act of Parliament, an appropriate body in each case, and by leaving to
it a large degree of freedom of action, subject to the terms of the Act
and to the inalienable power of Parliament to alter the Act. In such a
case the Act could define how the authority should be constituted, on
what principles its functions should be performed, and how its profits,
if it made profits, should be distributed. And I suggest that there is
no reason why the Post Office itself should not be dealt with in this

It is only a fleeting and superficial survey which I have been able to
give of the vast and complex themes on which I have touched; and there
is no single one of them with which I have been able to deal fully. My
purpose has been to show that in the political sphere as well as in the
social and economic spheres vast tasks lie before Liberalism, and,
indeed, that our social and economic tasks are not likely to be
efficiently performed unless we give very serious thought to the
political problem. Among the heavy responsibilities which lie upon our
country in the troubled time upon which we are entering, there is none
more heavy than the responsibility which rests upon her as the pioneer
of parliamentary government--the responsibility of finding the means
whereby this system may be made a respected and a trustworthy instrument
for the labours of reconstruction that lie before us.



M.A., C.H., C.B.E.; Editor of the _Economist_, 1922; formerly Member of
Munitions Council, and Director of Economic and Financial Section of the
League of Nations; Director of Welwyn Garden City; Fellow of Gonville
and Caius College, Cambridge, 1910.

Mr. Layton said:--The existing system of private enterprise has been
seriously attacked on many grounds. For my present purpose I shall deal
with four: (1) The critic points to the extreme differences of wealth
and poverty which have emerged from this system of private enterprise;
(2) it has produced and is producing to-day recurrent periods of
depression which result in insecurity and unemployment for the worker;
(3) the critics say the system is producing great aggregations of
capital and monopolies, and that by throwing social power into the hands
of those controlling the capital of the country, it leads to
exploitation of the many by industrial and financial magnates; (4) it
produces a chronic state of internal war which saps industrial activity
and the economic life of the community.

I shall not attempt to minimise the force of these objections; but in
order to get our ideas into correct perspective it should be observed
that the first two of these features are not new phenomena arising out
of our industrial system. You find extreme inequalities of distribution
in practically all forms of society--in the slave state, the feudal
state, in India and in China to-day. Nor is this the first period of
history in which there has been insecurity. If you look at any primitive
community, and note the effect of harvest fluctuations and the
inevitable famine following upon them, you will recognise that the
variations of fortune which affect such communities are more disastrous
in their effect than the trade variations of the modern world.

But after all qualifications have been made these four indictments are
sufficiently serious and must be met, for it is these and similar
considerations which have driven many to desire the complete abolition
of the system. Some wish to abolish private property, and desire a
Communist solution. Others practically attack the system of private
enterprise, and wish to substitute either the community in some form or
another (_e.g._ state socialism), or some corporate form of industry
(_e.g._ guild socialism).


Liberals, on the other hand, reject these solutions, and desire not to
end the present system but to mend it. The grounds for this conclusion
need to be clearly expressed, for after all it is the fundamental point
of doctrine which distinguishes them from the Labour party. In the first
place, there is the fact that Liberals attach a special importance to
the liberty of the individual. The general relation of the individual
to the State is rather outside my subject, but we start from the fact
that the bias of Liberals is towards liberty in every sphere, on the
ground that spiritual and intellectual progress is greatest where
individuality is least restricted by authority or convention. Variety,
originality in thought and action, are the vital virtues for the
Liberal. It is still true that "in this age the mere example of
Nonconformity, the mere refusal to bow the knee to custom, is itself a
service." The Liberal who no longer feels at the bottom of his heart a
sympathy with the rebel who chafes against the institutions of society,
whether religious, political, social or economic, is well on the road to
the other camp. But the dynamic force of Liberty, that great motive
power of progress, though a good servant, may be a bad master; and the
perennial problem of society is to harmonise its aims with those of the
common good.

When we come to the more specific problem of industry, which is our
immediate concern, a glance at history shows that the era of most rapid
economic progress the world has ever seen has been the era of the
greatest freedom of the individual from statutory control in economic
affairs. The features of the last hundred years have been the rapidity
of development in industrial technique, and constant change in the form
of industrial organisation and in the direction of the world's trade.
Could any one suppose that in these respects industry, under the
complete control of the State or of corporations representing large
groups of wage earners and persons engaged in trade, could have
produced a sufficiently elastic system to have permitted that progress
to be made? In reply to this it may be said that though this was true
during the industrial revolution, it does not apply to-day; that our
industries have become organised; that methods of production,
population, and economic conditions generally are stabilised, and that
we can now settle down to a new and standard form of industrial
organisation. But this agreement is based on false premises. The
industrial revolution is far from complete. We are to-day in the full
flood of it. Look at the changes in the last four decades--the evolution
of electricity, the development of motor transport, or the discoveries
in the chemical and metallurgical industries. Consider what lies ahead;
the conquest of the air, the possible evolution of new sources of power,
and a hundred other phases which are opening up in man's conquest of
nature, and you will agree that we are still at the threshold of
industrial revolution.

I may mention here a consideration which applies practically to Great
Britain. We are a great exporting country, living by international
trade, the world's greatest retail shopkeeper whose business is
constantly changing in character and direction. The great structure of
international commerce on which our national life depends is essentially
a sphere in which elasticity is of the utmost importance, and in which
standardised or stereotyped methods of control of production or exchange
would be highly disastrous. Liberal policy, therefore, aims at keeping
the field of private enterprise in business as wide as possible. But in
the general discussion of political or personal liberty in economic
affairs, we have to consider how far and in what way the freedom of
private enterprise needs to be limited or curtailed for the common good.
We must solve that problem. For Liberals there is no inherent sanctity
in the conceptions of private property, or of private enterprise. They
will survive, and we can support them only so long as they appear to
work better in the public interest than any possible alternatives.


My object, then, is to show how a system which embodies a large amount
of private enterprise can be made tolerable and acceptable to modern
ideas of equity. For this purpose we need to consider (1) what have we
done in that direction in the past? (2) what is the setting of the
economic problem to-day, and (3) what is to be our policy for the

Dealing first with wealth and wages, the whole field of social
legislation has a bearing upon them, including particularly education,
elementary and technical, the Factory Acts, and a great mass of
legislation which has affected the earning powers of the worker and the
conditions under which he labours. Just before the war we had come to
the point of fixing a minimum wage in the mines, but an even more
important factor was that we had introduced the Trade Board system,
which had begun to impose a minimum wage in certain trades where wages
were particularly low. But the most important direct attack upon the
unequal distribution of wealth was by taxation in accordance with the
Liberal policy of a graduated and differential income-tax, and still
more important by taxes upon inheritance; for it has long been
recognised that though it may be desirable to allow men to accumulate
great wealth during their lifetime, it by no means follows that they
should be entitled to control the distribution of wealth in the next
generation and launch their children on the world with a great advantage
over their fellows of which they may be quite unworthy. On the question
of insecurity it cannot be said that any serious attack has been made on
the problem of how to diminish fluctuations of trade, but again the
Liberal solution for dealing with that difficulty was to remedy not the
cause but its effects by insurance.

On the question of monopolies and exploitation, though we hear a great
deal of the growth of capitalistic organisation, in fact we find that,
of the three greatest industrial countries in the world, Great Britain
is the least trust-ridden, mainly because of its free trade system. In
the case of enterprises not subject to foreign competition, we had begun
to develop a fairly satisfactory system of control of public utility
services which were of a monopolistic character.

Finally, there had been growing up a complete system of collective
bargaining and conciliation, and though we always heard of it whenever
there was dispute and strife, the ordinary public did not know that this
machinery was working and developing in many great and important
industries a feeling of co-operation or at all events of conciliation
between the two sides. I only mention these points very briefly in
passing in order to show that with the evolution of modern industry we
were already feeling our way, haltingly and far too slowly, it is true,
towards a solution of its most serious defects.

Turning to the present situation, we have to face the fact that Great
Britain is to-day faced with one of the most serious positions in its
economic history. We must make allowances for the readily understood
pessimism of a miners' leader, but it should arrest attention that Mr.
Frank Hodges has recently described the present situation as the coming
of the great famine in England. For nearly two decades before the war
there was occurring a slight fall in the real wages of British
workpeople. Food was becoming dearer, as the world's food supply was not
increasing as fast as the world's industrial population, and the
industrial workers of the world had, therefore, to offer more of their
product to secure the food they needed. Hence the cost of living was
rising faster than wages, except in trades where great technical
advances were being made. There is some reason to fear that the war may
have accentuated this tendency.

For some years the distant countries of the world have had to do without
European manufactured goods. You are all aware of the tendency, for
example, of India, Australia, and Canada to develop their own steel
resources and to create manufacturing industries of all kinds. Moreover,
we have lost part of our hold on the food-producing countries of the
world by the sale of our capital investments in those countries to pay
for the war. These and other considerations all suggest that we may find
it increasingly difficult to maintain our position as one of the main
suppliers of the manufactured goods of the world. In such circumstances
we shall be hard put to it to maintain, far less raise, the pre-war
standard of living.

How then are we to cope with this problem of retaining our economic
position? We can only hope to do it if the present financial
difficulties and obstructions working through the exchanges, by which
international commerce is restricted and constrained, are removed. We
can only do it if and so long as the conception of international
division of labour is maintained. And we can only do it if--granted that
we can induce the world to accept this principle of international
division of labour--we can prove ourselves, by our economic and
productive efficiency, to be the best and cheapest producer of those
classes of goods in which our skilled labour and fixed capital is

Assuming the financial difficulty is overcome, and that the old régime
of international specialisation revives, can we still show to the world
that it is more profitable for them to buy goods and services from us
than from other people? Can we compete with other industrial countries
of the world? The actual output of our labour in most cases is far less
than its potential capacity, partly because of technical conservatism,
and partly for reasons connected with the labour situation. How are we
to mobilise these reserve resources. I have only space to deal with the
second of these problems. In Germany labour is well disciplined, and has
the military virtues of persistence and obedience to orders in the
factory. But we cannot hope to call forth the utmost product of our
labouring population by drill-sergeant methods.

In America this problem is a different one, because the American
employer is often able to take full advantage of his economic position.
For he has a labouring population of mixed nationality, which does not
readily combine, and he can play off one section against the other.
British employers cannot, if they would, deal with British labour on the
principle of Divide and Rule. There is only one method by which we can
hope to call forth this great reserve capacity of British labour, and
that is by securing its confidence. If Free Trade is one of the legs on
which British prosperity rests, the other is goodwill and active
co-operation between the workman and his employer. How is that goodwill
to be gained?

The solution of that problem is only partly in the hands of the
politician; that is one of the reasons why it is extremely difficult to
suggest an industrial policy which is going to hold out the hope of
reaching Utopia in a short time. But it is obviously essential somehow
or another to develop, particularly among employers, the sense of
trusteeship--the sense that a man who controls a large amount of capital
is in fact not merely an individual pursuing his own fortune, but is
taking the very great responsibility of controlling a fragment of the
nation's industrial resources. And we have also to develop a conception
of partnership and joint enterprise between employer and employed.


What policy in the political field can be adopted to further these
objects? Reverting once more to the fourfold division which I made at
the outset, but taking the points in a different order, there is first
the question whether there should be a great extension of State
ownership, management, or control of monopolies and big business. In
spite of the experience of the war, I suggest tentatively that no case
has been made out for any wide or general extension of the field of
State management in industry. This, however, is not a matter of
principle, but of expediency, where each case must be considered on its
merits. Liberals should, indeed, keep an open mind in this connection
and not be afraid to face an enlargement of the field of State
management from time to time. There are, however, two special cases to
be considered: the mines and the railways. As to the mines, the solution
Mr. McNair puts forward is on characteristically Liberal lines, because
it will endeavour to harmonise the safeguarding of the interests of the
State with the maximum freedom to private enterprise and the maximum
scope for variety in methods of management. As to transport, we have
recently passed an Act altering the form of control of British railways.

Personally I think the question whether railways should or should not
be nationalised is very much on the balance. It is obviously one of the
questions where objections to State management are less serious than in
most other cases. On the other hand, we may be able to find methods of
control which may be even better than State management. I do not think
the Act of last year fulfils the conditions which Liberals would have
imposed on the railways, for the principle of guaranteeing to a monopoly
a fixed income practically without any means of securing its efficiency,
is the wrong way to control a public utility service. If we are going to
leave public utilities in the hands of private enterprise, the principle
must be applied that profit should vary in proportion to the services
rendered to the community. In this connection the old gas company
principle developed before the war is an admirable one. Under it the gas
companies were allowed to increase their dividends in proportion as they
lowered their prices to the community. That is a key principle, and some
adaptation of it is required wherever such services are left in private
hands. My own view is that an amended form of railway control should
first be tried, and if that fails we should be prepared for some form of


But if we refuse at present to enlarge the sphere of State management,
we are still faced with the problem of dealing with trusts and
monopolies. In this matter, as in so many other instances, the right
policy has already been worked out. Under the stimulating conditions
which obtained during the war, when old-established methods of thought
had been rudely shaken, progressive ideas had unusually free play; and
you will find in the general economic policy adumbrated during and
immediately after the war much that Liberals are looking for. On this
question of monopolies, we should put into force the recommendation of
the Committee on Trusts of 1919, with one qualification. The policy I
suggest is the policy of the majority, namely, that we should give very
much enlarged powers of inquiry to the Board of Trade, and that a
Tribunal should be set up by which investigations could be made. But I
would go further, and, taking one item from the Minority Report, I would
add that either to this Tribunal or to the Board of Trade department
concerned there should be given in reserve the power in special cases to
regulate prices. I do not think it would be necessary often to use that
power, indeed the mere inquiry and publicity of results would be
sufficient to modify the action of monopolies. But such a power in
reserve, even though price-fixing in ordinary circumstances is usually
mischievous and to be deprecated, would have a very salutary effect.

In the case of public utilities of a standard kind, into which the
element of buying and selling profits does not greatly enter, we should
endeavour to start the experiment of putting representatives of the
workpeople on the boards of directors, but in carefully selected cases,
and not as a general rule. My own view is that if we are ready with the
machinery of investigation, and are prepared to deal in these ways with
public utilities at home where foreign competition is absent, we have
little to fear from trusts.


As regards distribution and wages, in the first place we should adhere
to our traditional policy, developing the system of differential and
graduated taxation, and we should be prepared, if unequal distribution
of wealth continues, to limit further the right of inheritance. This is
not a new Liberal doctrine: it is many decades old. On the question of
wages we have to recognise that unless we can secure an increase in
terms of food and other commodities of the national production the State
cannot radically modify the general standard of living in the country;
or by administrative action raise the level of wages which economic
conditions are imposing on us. But the State can and should enforce a
minimum in certain industries, provided that minimum is reasonably in
harmony with the competitive level of wages. Such action can prevent
workers whose economic position is not a strong one--and this applies
particularly to many women's employment--from being compelled to accept
wages substantially less than the current standard. I therefore welcome
the gradual extension of the Trade Board system, provided it follows the
general principle recommended in the Cave Report--that the community
should use its full powers of compulsion only in regard to the minimum,
and that so far as all other classes of wages are concerned, the State
should encourage collective bargaining. With this proviso, compulsory
enforcement of a minimum could also be extended to the workpeople
covered by Whitley Councils.

As regards all wages above the minimum the Cave Committee recommended
that, provided they are reached by agreement on the Board, and provided
that a sufficiently large proportion of the Board concur, the wage so
determined shall be enforced by civil process, whereas in the cases of
the minimum, the rates would be determined if necessary by arbitration
of the State-appointed members of the Board, and non-payment would be a
penal offence. The Trade Boards now cover three million workers. Two
million are in occupations for which Trade Boards are under
consideration, and there are a further two million under Industrial
Councils or Whitley Councils. If State powers are to be employed in
trades employing seven millions of the eighteen million wage-earners of
the country, the scope of those powers needs to be very carefully


Many Liberals are, however, asking whether this is sufficient and
whether it is not possible for the State to intervene to alter the
distribution of the product of industry in favour of the wage-earner. In
particular, they are wondering whether it is possible to secure the
universal application of some system of profit-sharing. The underlying
principle of profit-sharing is indeed one which we must look to if the
whole-hearted assistance of labour is to be enlisted behind the
productive effort of the country. But the profit we have to consider is
the profit over which the worker has some influence. There is no merit
in inviting him to share in purely commercial profits or losses which
may be due to some one else's speculation or business foresight. It is
futile to imagine you can reverse the functions of labour and capital,
and say that capital should have a fixed wage, and that the employee
should bear all the risks of the industry.

Again, in some cases it is suitable that profits should be considered in
regard to a whole industry, but in others only in regard to a particular
firm or section; and finally the rate of profit suitable to various
trades varies between very wide limits. In short, there can be no
universal rule in this matter which can be enforced by Act of

Nevertheless, we must all desire to proceed along the lines of
associating the pecuniary interests of the worker in the success of the
enterprise, and if any one can suggest a way in which direct assistance
to that end can be given by political action, as distinct from
industrial, he will be doing a great service. I may add that there is an
argument in favour of profit-sharing which is of the utmost importance
and which was recently expressed by a prominent industrialist: who
declared to me that at long last and after much opposition he has come
round to believe in profit-sharing, _because it enables him to show his
men the balance sheet_. The solution adopted last year in the mining
industry contains the sort of elements we wish to see adopted in
principle. The men are given, through their officials, the results of
the industry. They see that they cannot get more than the industry can
pay, and though the present economic conditions are putting the men in a
desperate state to-day, the miners, who were often regarded before the
war as the most pugnacious in the country, are not burning their
employers' houses, but are studying how the economic conditions of the
industry can be improved for the benefit of themselves and their


This brings me to the question of publicity, which is at the root of the
whole problem. We desire the principle of private enterprise to remain.
The one thing that can destroy it is secrecy. We argue that the
self-interest of the investor makes capital flow into those channels
where economic conditions need it most. But how can the investor know
where it should go when the true financial condition of great industrial
companies is a matter of guesswork? Again, we rely upon our bankers to
check excessive industrial fluctuations. How can they do this if they do
not know the facts of production? The public should know what great
combines are doing, but they do not know; and how can we expect the man
in the street to be satisfied when his mind is filled with suspicions
that can be neither confirmed nor removed?

It is of the utmost importance to seek for greater publicity on two
main lines. The illustration of the mines suggests one--production and
wage data. There are only three industries in this country--coal, steel,
and ships--in which production statistics exist. I suggest that in many
of our great staple industries a few simple data with regard to
production should be published promptly, say every three months. The
data I have in mind are the wages bill, the cost of materials, and the
value of the product. It is desirable that this should be done, and I
believe it can be done, for almost every great industry in the country.
These three facts alone will bring the whole wages discussion down to

Then on finance, I suggest that one of the first things a Liberal
Government should do should be to appoint a commission to overhaul the
whole of our Company Law. This is not the occasion to enter in detail
into a highly technical problem. But I would call attention to the
following points: There is no compulsion on any joint-stock company to
publish a balance sheet. It is almost the universal practice to do so;
but as it is not an obligation, the Company Law lays down no rules as to
what published balance sheets must contain. Again, the difference
between private and public companies must be considered; a private
company which employs a great mass of capital and large numbers of
work-people--a concern which may cover a whole town or district--should
in the public interest be subject to the same rules as a public company.
Thirdly, in view of the amalgamation of industry, the linking up of
company with company, there must be reconsideration as regards publicity
in the case of subsidiary companies. Finally, I think we have been wrong
in assuming that a law applicable to a company with a modest little
capital is suitable to regulate the publicity of a great combine
controlling tens of millions of capital. Some attempt should therefore
be made to differentiate between what must be told by the big and by the
little concerns respectively. I am well aware of the myriad difficulties
that this demand for publicity will encounter. But difficulties exist to
be overcome. And they must be overcome, for of this I feel certain: that
if the system of private enterprise dies, it will be because the canker
of secrecy has eaten into its vitals.


I have left very little time for dealing specifically with the question
of industrial relations, though much that I have said has a bearing upon
it. There has been great disappointment with the results of the Whitley
Council movement. Many thought they were going to bring in a new era.
But they have not lived up to these hopes, firstly, because they came
into being at a time of unexampled economic difficulty, and, secondly,
because they were introduced into industries where there was no
tradition of co-operative action--being established mainly in industries
lying between the entirely unorganised and the highly organised trades.
But we must persist in encouraging Whitley Councils, and still more in
the associated objective of encouraging works committees. The basis of
industrial peace is in the individual works. Co-operation cannot be
created by Act of Parliament, but depends upon the development of
opinion among employers and workmen. Starting from Works Councils up
through the Whitley Council, Trade Boards, or National Trade Union
machinery for the negotiation of wages, we arrive at the National
Industrial Council, which is the point at which the Government can most
directly assist the movement towards more cordial relations. The plan of
this Council is ready. It was proposed and developed in 1919, and I
personally do not want to change that plan very much.

But I think it is of the utmost importance that we should embody in our
Liberal programme the institution of a National Industrial Council or
Parliament representing the trade organisations on both sides. Whether
it should represent the consumers, I, personally, am doubtful. It should
be consulted before economic and particularly industrial legislation is
introduced into Parliament. It should be the forum on which we should
get a much better informed discussion of industrial problems than is
possible in Parliament or through any other agency in the country. The
National Council also needs to have specific work to do. I would be
prepared to see transferred to it many of the functions of the Ministry
of Labour, or rather that it should be made obligatory for the Minister
of Labour to consult this Council on such questions as whether it should
hold a compulsory inquiry into an industrial dispute. I would also
throw upon it the duty of advising Parliament exactly how my proposals
as to publicity are to be carried out, and would give it responsibility
for the Ministry of Labour index figures of the cost of living upon
which so many industrial agreements depend. I believe if we could set
out a series of specific functions to give the plan vitality, in
addition to the more nebulous duty of advising the Government on
industrial questions, we should have created an important device for
promoting the mutual confidence of which I have spoken.

The suggestions I have made are perhaps not very new, but they seem to
me to be in the natural line of evolution of Liberal traditions. Above
all, if they are accepted they should be pursued unflinchingly and
persevered with, not as a concession to this or that section which may
happen to be strong at the moment, but as a corporate policy, which aims
at combining the interests of us all in securing increased national
wealth with justice to the component classes of the commonwealth.



Professor of Sociology, London University.

Professor Hobhouse said:--The wages, hours, and general conditions of
industrial workers are of interest to the community from two points of
view. So far as the less skilled and lower paid workers are concerned,
it is to the interest and it is the duty of the community to protect
them from oppression, and to secure that every one of its members, who
is willing and able to contribute honest and industrious work to the
service of others, should be able in return to gain the means of a
decent and civilised life. In this relation the establishment of a
minimum wage is analogous to the restriction of hours or the provision
for safety and health secured by Factory Legislation, and carries
forward the provision for a minimum standard of life. The problem is to
determine upon the minimum and adjust its enforcement to the conditions
of trade in such wise as to avoid industrial dislocation and consequent

With regard to workers of higher skill, who command wages or salaries on
a more generous scale, the interest of the community is of a different
kind. Such workers hardly stand in need of any special protection. They
are well able to take care of themselves, and sometimes through
combination are, in fact, the stronger party in the industrial bargain.
In this region the interest of the community lies in maintaining
industrial peace and securing the maximum of goodwill and co-operation.
The intervention of the community in industrial disputes, however, has
never been very popular with either party in the State. Both sides to a
dispute are inclined to trust to their own strength, and are only ready
to submit to an impartial judgment when convinced that they are
momentarily the weaker. Nor is it easy when we once get above the
minimum to lay down any general principles which a court of arbitration
could apply in grading wages.

For these reasons the movement for compulsory arbitration has never in
this country advanced very far. We have an Industrial Court which can
investigate a dispute, find a solution which commends itself as
reasonable, and publish its finding, but without any power of
enforcement. The movement has for the present stuck there, and is likely
to take a long time to get further. Yet every one recognises the damage
inflicted by industrial disputes, and would admit in the abstract the
desirability of a more rational method of settlement than that of
pitting combination against combination. Such a method may, I would
suggest, grow naturally out of the system which has been devised for the
protection of unskilled and unorganised workers, of which a brief
account may now be given.


Utilising experience gained in Australia, Parliament in 1909 passed an
Act empowering the Board of Trade (now the Ministry of Labour) to
establish a Trade Board in any case where the rate of wages prevailing
in any branch was "exceptionally low as compared with that in other
employments." The Board consisted of a number of persons selected by the
Minister as representatives of employers, an equal number as
representatives of the workers, with a chairman and generally two
colleagues not associated with the trade, and known as the Appointed
Members. These three members hold a kind of casting vote, and can in
general secure a decision if the sides disagree.

No instruction was given in the statute as to the principles on which
the Board should determine wages, but the Board has necessarily in mind
on the one side the requirements of the worker, and on the other the
economic position of the trade. The workers' representatives naturally
emphasise the one aspect and the employers the other, but the appointed
members and the Board as a whole must take account of both. They must
consider what the trade in general can afford to pay and yet continue to
prosper and to give full employment to the workers. They must also
consider the rate at which the worker can pay his way and live a decent,
civilised life. Mere subsistence is not enough. It is a cardinal point
of economic justice that a well-organised society will enable a man to
earn the means of living as a healthy, developed, civilised being by
honest and useful service to the community. I would venture to add that
in a perfectly organised society he would not be able--charitable
provision apart--to make a living by any other method. There is nothing
in these principles to close the avenues to personal initiative or to
deny a career to ability and enterprise. On the contrary, it is a point
of justice that such qualities should have their scope, but not to the
injury of others. For this, I suggest with confidence to a Liberal
audience, is the condition by which all liberty must be defined.[1]

[Footnote 1: I may perhaps be allowed to refer to my _Elements of Social
Justice_, Allen & Unwin, 1921, for the fuller elaboration of these

If we grant that it is the duty of the Boards to aim at a decent
minimum--one which in Mr. Seebohm Rowntree's phrase would secure the
"human needs" of labour--we have still some very difficult points of
principle and of detail to settle. First and foremost, do we mean the
needs of the individual worker or of a family, and if of the latter, how
large a family? It has been generally thought that a man's wages should
suffice for a family on the ground that there ought to be no economic
compulsion--though there should be full legal and social liberty--for
the mother to eke out deficiencies in the father's payment by going out
to work. It has also been thought that a woman is not ordinarily under a
similar obligation to maintain a family, so that her "human needs" would
be met by a wage sufficient to maintain herself as an independent

These views have been attacked as involving a differentiation unfair in
the first instance to women, but in the second instance to men, because
opening a way to undercutting. The remedy proposed is public provision
for children under the industrial age, and for the mother in return for
her work in looking after them. With this subvention, it is conceived,
the rates for men or women might be equalised on the basis of a
sufficiency for the individual alone. This would certainly simplify the
wages question, but at the cost of a serious financial question. I do
not, myself, think that "human needs" can be fully met without the
common provision of certain essentials for children. One such
essential--education, has been long recognised as too costly to be put
upon the wages of the worker. We may find that we shall have to add to
the list if we are to secure to growing children all that the community
would desire for them. On the other hand, the main responsibility for
directing its own life should be left to each family, and this carries
the consequence, that the adult-man's wage should be based not on
personal but on family requirements.


But the supposed injustice to woman is illusory. Trade Boards will not
knowingly fix women's rates at a point at which they can undercut men.
Nor if women are properly represented on them will they fix their rates
at a point at which women will be discarded in favour of male workers.
In industries where both sexes are employed, if the women workers are of
equal value with the men in the eyes of the employer, they will receive
equal pay; if of less value, then, but only then, proportionately less
pay. It is because women have received not proportionately but quite
disproportionately less pay that they have been undercutting men, and
the Trade Boards are--very gradually, I admit--correcting this error.
For well-known historical reasons women have been at an economic
disadvantage, and their work has secured less than its worth as compared
with the work of men. The tendency of any impartial adjustment of wages
is to correct this disadvantage, because any such system will attempt to
secure equality of opportunity for employment for all the classes with
which it is dealing. But it is admitted that there is a "lag" in women's
wages which has been but partially made good.

If the standard wage must provide for a family, what must be the size of
the family? Discussion on the subject generally assumes a "statistical"
family of man and wife and three children under age. This is criticised
on the ground that it does not meet the human needs of larger families
and is in excess for smaller ones. The reply to this is that a general
rate can only meet general needs. Calculation easily shows that the
minimum suited for three children is by no means extravagant if there
should be but two children or only one, while it gives the bachelor or
newly married couple some small chance of getting a little beforehand
with the world. On the other hand, it is impossible to cater on general
principles for the larger needs of individuals. The standard wage gives
an approximation to what is needed for the ordinary family, and the
balance must be made good by other provision, whether public or private
I will not here discuss. I conclude that for adult men the minimum is
reasonably fixed at a figure which would meet the "human needs" of a
family of five, and that for women it should be determined by the value
of their services relatively to that of men.[1]

[Footnote 1: I am assuming that this value is sufficient to cover the
needs of the independent woman worker. If not, these needs must also be
taken into account. As a fact both considerations are present to the
minds of the Trade Boards. A Board would not willingly fix a wage which
would either (_a_) diminish the opportunity of women to obtain
employment, or (_b_) enable them to undercut men, or (_c_) fail to
provide for them if living alone.]

How far have Trade Boards actually succeeded in fixing such a minimum?
Mr. Seebohm Rowntree has put forward two sets of figures based on
pre-war prices, and, of course, requiring adjustment for the changes
that have subsequently taken place. One of these figures was designed
for a subsistence wage, the other for a "human needs" wage. The latter
was a figure which Mr. Rowntree himself did not expect to see reached in
the near future. I have compared these figures with the actual minima
for unskilled workers fixed by the Boards during 1920 and 1921, and I
find that the rates fixed are intermediate between the two. The
subsistence rate is passed, but the higher rate not attained, except for
some classes of skilled workers. The Boards have in general proceeded
with moderation, but the more serious forms of underpayment have been
suppressed so far as inspection has been adequately enforced. The ratio
of the female to the male minimum averages 57.2 per cent., which may
seem unduly low, but it must be remembered that in the case of women's
wages a much greater leeway had to be made good, and there can be little
doubt that the increases secured for female workers considerably
exceeded those obtained for men.


Criticism of Trade Boards has fastened on their power to determine
higher rates of wages for skilled workers, one of the additional powers
that they secured under the Act of 1918. There are many who agree that a
bare minimum should be fixed by a statutory authority with legal powers,
but think that this should be the beginning and end of law's
interference. As to this, it must be said, first, that the wide margin
between a subsistence wage and a human needs wage, brought out by Mr.
Rowntree's calculations, shows that there can be no question at present
of a single minimum. To give the "human needs" figure legislative
sanction would at present be Utopian. Very few Trade Boards ventured so
far even when trade was booming. The Boards move in the region between
bare subsistence and "human needs," as trade conditions allow, and can
secure a better figure for some classes of their clients when they
cannot secure it for all. They therefore need all the elasticity which
the present law gives them.

On the other hand, it is contended with some force by the Cave Committee
that it is improper for appointed members to decide questions of
relatively high wages for skilled men or for the law to enforce such
wages by criminal proceedings, and the Committee accordingly propose to
differentiate between higher and lower minima both as regards the method
of determination and of enforcement. I have not time here to discuss the
details of their proposal, but I wish to say a word on the retention--if
in some altered shape--of the powers given by the Act of 1918. The Trade
Board system has been remarkable for the development of understanding
and co-operation between representatives of employers and workers.
Particularly in the work of the administrative committees, matters of
detail which might easily excite controversy and passion are habitually
handled with coolness and good sense in the common interest of the
trade. A number of the employers have not merely acquiesced in the
system, but have become its convinced supporters, and this attitude
would be more common if certain irritating causes of friction were
removed. The employer who desires to treat his workers well and maintain
good conditions is relieved from the competition of rivals who care
little for these things, and what he is chiefly concerned about is
simplicity of rules and rigid universality of enforcement. It is this
section of employers who have prevented the crippling of the Boards in a
time of general reaction. It is blindness to refuse to see in such
co-operation a possible basis of industrial peace, and those were right
who in 1918 saw in the mechanism of the Boards the possibility, not
merely of preventing industrial oppression and securing a minimum living
wage, but of advancing to a general regulation of industrial relations.
At that time it was thought that the whole of industry might be divided
between Trade Boards and Whitley Councils, the former for the less, the
latter for the more organised trades. In the result the Whitley Councils
have proved to be hampered if not paralysed by the lack of an
independent element and of compulsory powers.


The Trade Board holds the field as the best machinery for the
determination of industrial conditions. It is better than unfettered
competition, which leaves the weak at the mercy of the strong. It is
better than the contest of armed forces, in which the battle is decided
with no reference to equity, to permanent economic conditions, or to the
general good, by the main strength of one combination or the other in
the circumstances of the moment. It is better than a universal
State-determined wages-law which would take no account of fluctuating
industrial conditions, and better than official determinations which are
exposed to political influences and are apt to ignore the technicalities
which only the practical worker or employer understands. It is better
than arbitration, which acts intermittently and incalculably from
outside, and makes no call on the continuous co-operation of the trade

My hope is that as the true value of the Trade Board comes to be better
understood, its powers, far from being jealously curtailed, or confined
to the suppression of the worst form of underpayment, will be extended
to skilled employments, and organised industries, and be used not merely
to fulfil the duty of the community to its humblest members, but to
serve its still wider interest in the development of peaceful industrial



M.A.; Fellow of Clare College, Cambridge; Lecturer in Economics;
Secretary to the Cotton Control Board from 1917-1919.

Mr. Henderson said:--From one point of view the existence of an
unemployment problem is an enigma and a paradox. In a world, where even
before the war the standard of living that prevailed among the mass of
the people was only what it was, even in those countries which we termed
wealthy, it seems at first sight an utterly astonishing anomaly that at
frequent intervals large numbers of competent and industrious
work-people should find no work to do. The irony of the situation cannot
be more tersely expressed than in the words, which a man is supposed to
have uttered as he watched a procession of unemployed men: "No work to
do. Set them to rebuild their own houses."

But, if we reflect just a shade more deeply, nothing should surprise us
less than unemployment. We have more reason for surprise that it is
usually upon so small a scale. The economic system under which we live
in the modern world is very peculiar and only our familiarity with it
keeps us from perceiving how peculiar it is. In one sense it is highly
organised; in another sense it is not organised at all. There is an
elaborate differentiation of functions--the "division of labour," to
give it its time-honoured name, under which innumerable men and women
perform each small specialised tasks, which fit into one another with
the complexity of a jig-saw puzzle, to form an integral whole. Some men
dig coal from the depths of the earth, others move that coal over land
by rail and over the seas in ships, others are working in factories, at
home and abroad, which consume that coal, or in shipyards which build
the ships; and it is obvious, not to multiply examples further, that the
numbers of men engaged on those various tasks must somehow be adjusted,
_in due proportions_ to one another. It is no use, for instance,
building more ships than are required to carry the stuff there is to

Adjustment, co-ordination, must somehow be secured. Well, how is it
secured? Who is it that ordains that, say, a million men shall work in
the coal-mines, and 600,000 on the railways, and 200,000 in the
shipyards, and so on? Who apportions the nation's labour power between
the innumerable different occupations, so as to secure that there are
not too many and not too few engaged in any one of them relatively to
the others? Is it the Prime Minister, or the Cabinet, or Parliament, or
the Civil Service? Is it the Trade Union Congress, or the Federation of
British Industries, or does any one suppose that it is some hidden cabal
of big business interests? No, there is no co-ordinator. There is no
human brain or organisation responsible for fitting together this vast
jig-saw puzzle; and, that being so, I say that what should really excite
our wonder is the fact that that puzzle should somehow get fitted
together, usually with so few gaps left unfilled and with so few pieces
left unplaced.

It would, indeed, be a miracle, if it were not for the fact that those
old economic laws, whose impersonal forces of supply and demand, whose
existence some people nowadays are inclined to dispute, or to regard as
being in extremely bad taste, really do work in a manner after all. They
are our co-ordinators, the only ones we have; and they do their work
with much friction and waste, only by correcting a maladjustment after
it has taken place, by slow and often cruel devices, of which one of the
most cruel is, precisely, unemployment and all the misery it entails.


I do not propose to deal with such branches of the problem of
unemployment as casual labour or seasonal fluctuations. I confine myself
to what we all, I suppose, feel to be the really big problem, to
unemployment which is not special to particular industries or districts,
but which is common to them all, to a general depression of almost every
form of business and industrial activity. General trade depressions are
no new phenomenon, though the present depression is, of course, far
worse than any we have experienced in modern times. They used to occur
so regularly that long before the war people had come to speak of
cyclical fluctuations, or to use a phrase which is now common, the trade
cycle. That is a useful phrase, and a useful conception. It is well that
we should realise, when we speak of those normal pre-war conditions, to
which we hope some day to revert, that in a sense trade conditions never
were normal; that, at any particular moment you care to take, we were
either in full tide of a trade boom, with employment active and prices
rising, and order books congested; or else right on the crest of the
boom, when prices were no longer rising generally, though they had not
yet commenced to fall, when employment was still good, but when new
orders were no longer coming in; or else in the early stages of a
depression, with prices falling, and every one trying to unload stocks
and failing to do so, and works beginning to close down; or else right
in the trough of the depression where we are to-day; that we were at one
or other of the innumerable stages of the trade cycle, without any
prospect of remaining there for very long, but always, as it were, in
motion, going round and round and round.

What are the root causes which bring every period of active trade to an
inevitable end? There are two which are almost invariably present
towards the end of every boom. First, the general level of prices and
wages has usually become too high; it is straining against the limits of
the available supplies of currency and credit, and, unless inflation is
to be permitted, a restriction of credit is inevitable which will bring
on a trade depression. In those circumstances, a reduction of the
general level of prices and wages is an essential condition of a trade
revival. A reduction of prices _and wages_. That point has a
significance to which I will return.

The second cause is the distorted balance which grows up in every boom
between different branches of industrial activity. When trade is good,
we invariably build ships, produce machinery, erect factories, make
every variety of what are termed "constructional goods" upon a scale
which is altogether disproportionate to the scale upon which we are
making "consumable goods" like food and clothes. And that condition of
things could not possibly endure for very long. If it were to continue
indefinitely, it would lead in the end to our having, say, half a dozen
ships for every ton of wheat or cotton which there was to carry. You
have there a maladjustment, which must be corrected somehow; and the
longer the readjustment is postponed, the bigger the readjustment that
will ultimately be inevitable. Now that means, first on the negative
side, that, when you are confronted with a trade depression, it is
hopeless to try to cure it by looking for some device by which you can
give a general stimulus to all forms of industry. Devices of that nature
may be very useful in the later stages of a trade depression, when the
necessary readjustments both of the price-level and of the relative
outputs of different classes of commodities have already been effected,
and when trade remains depressed only because people have not yet
plucked up the necessary confidence to start things going again. But in
the early stages of a depression, an indiscriminating stimulus to
industry in general will serve only to perpetuate the maladjustments
which are the root of the trouble. It will only put off the evil day,
and make it worse when it comes. The problem is not one of getting
everybody back to work on their former jobs. It is one of getting them
set to work on the _right_ jobs; and that is a far more difficult

On the positive side, what this really comes to is, that if you wish to
prevent depressions occurring you must prevent booms taking the form
they do. You must prevent prices rising so much, and so many
constructional goods being made during the period of active trade; and I
am not going to pretend that that is an easy thing to do. It's all very
well to say that the bankers, through their control of the credit
system, might endeavour to guide industry and keep it from straying out
of the proper channels. But the bankers would have to know much more
than they do about these matters, and, furthermore, the problem is not
merely a national one--it is a world-wide problem. It would be of little
use to prevent an excess of ships being built here, if that only meant
that still more ships were built, say, in the United States.

I do not say that even now the banks might not do something which would
help; still less do I wish to convey the impression that mankind must
always remain passive and submissive, impotent to control these forces
which so vitally affect his welfare. But I say that for any serious
attempt to master this problem, the necessary detailed knowledge has
still to be acquired, and the rudiments of organisation have still to be
built up; and the problem is not one at this stage for policies and
programmes. What you can do by means of policies and programmes lies, at
present, in the sphere of international politics. In that sphere,
though you cannot achieve all, you might achieve much. To reduce the
problem to its pre-war dimensions would be no small result; and that
represents a big enough objective, for the time being, for the
concentration of our hardest thinking and united efforts. But into that
sphere I am not going to enter. I pass to the problem of unemployment


The fundamental difficulty of the problem of relieving unemployment is a
very old one. It turns upon what used to be called, ninety years ago,
"the principle of less eligibility," the principle that the position of
the man who is unemployed and receiving support from the community
should be made upon the whole less eligible, less attractive than that
of the man who is working and living upon the wages that he earns. That
is a principle which has been exposed to much criticism and denunciation
in these modern days. We are told that it is the false and antiquated
doctrine of a hard-hearted and coarse-minded age, which thought that
unemployment was usually a man's own fault, which saw a malingerer in
every recipient of relief, which was obsessed by the bad psychology of
pains and penalties and looked instinctively for a deterrent as the cure
for every complex evil.

But, however that may be, this principle of less eligibility is one
which you cannot ignore. It is not merely or mainly a matter of the
effect on the character of the workmen who receive relief. The danger
that adequate relief will demoralise the recipient has, I agree, been
grossly exaggerated in the past. Prolonged unemployment is always in
itself demoralising. But, given that a man is unemployed, it will not
demoralise him more that he should receive adequate relief rather than
inadequate relief or no relief at all. On the contrary, on balance, it
will, I believe, demoralise him less. For nothing so unfits a man for
work as that he should go half-starved, or lack the means to maintain
the elementary decencies of life.

But there are other considerations which you have to take into account.
If you get a situation such that the man who loses his job becomes
thereby much better-off than the man who remains at work, I do not say
that the former man will necessarily be demoralised, but I do say that
the latter man will become disgruntled. I do not want to put that
consideration too high. At the present time there are many such
anomalies; in a great many occupations, the wages that the men at work
are receiving amount to much less than the money they would obtain if
they lost their jobs and were labelled unemployed. But they have stuck
to their jobs, they are carrying on, with a patience and good humour
that are beyond all praise. Yes, but that state of affairs is so
anomalous, so contrary to our elementary sense of fairness that, as a
permanent proposition it would prove intolerable. We cannot go on for
ever with a system under which in many trades men receive much more when
they are unemployed than when they are at work. On the other hand, the
attempt to avoid such anomalies leads us, so long as we have a uniform
scale of relief, against an alternative which is equally intolerable.
Wages vary greatly from trade to trade; and, if the scale of relief is
not to exceed the wages paid in _any_ occupation it must be very low
indeed. That is the root dilemma of the problem of unemployment
relief--how if your scale of relief is not to be too high for equity and
prudence it is not to be too low for humanity and decency. We have not,
as some people imagine, done anything in recent years to escape from it,
we have merely exchanged one horn of the dilemma for the other.

In any satisfactory system the scale of relief must vary from occupation
to occupation, in accordance with the normal standard of wages ruling in
each case. But it is very difficult, in fact I think it would always be
impracticable to do that under any system of relief, administered by the
State, either the Central Government or the local authorities. It must
be done on an industrial basis; each industry settling its own scale,
finding its own money, and managing its own scheme. That is an idea
which has received much ventilation in the last few years. But the
really telling arguments in favour of it do not seem to me to have
received sufficient stress.

Foremost among them I place the consideration I have just indicated:
that in this way, and in this way alone, it becomes possible for
work-people who receive high wages when they are at work, and where
habits of expenditure and standards of family living are built up on
that basis, to receive when unemployed, adequate relief without that
leading to anomalies which in the long run would prove intolerable. But
there are many other arguments.


About five years ago I had the opportunity of witnessing at very close
quarters the working of an unemployment scheme on an industrial basis.
The great Lancashire cotton industry was faced during the war with a
very serious unemployment problem, owing to the difficulty of
transporting sufficient cotton from America. It met that situation with
a scheme of unemployment relief, devised and administered by one of
those war Control Boards, which in this case was essentially a
representative joint committee of employers and employed. The money was
raised, every penny of it, from the employers in the industry itself;
the Cotton Control Board laid down certain rules and regulations as to
the scale of benefits, and the conditions entitling a worker to receive
it; and the task of applying those rules and paying the money out was
entrusted to the trade unions.

Well, I was in a good position to watch that experiment. I do not think
I am a particularly credulous person, or one prone to indulge in easy
enthusiasms, and I certainly don't believe in painting a fairy picture
in glowing colours by way of being encouraging. But I say deliberately
that there has never been an unemployment scheme in this country or in
any other country which has worked with so little abuse, with so few
anomalies, with so little demoralisation to any one, and at the same
time which has met so adequately the needs of a formidable situation, or
given such general satisfaction all round as that Cotton Control Board

I cannot describe as fully as I should like to do the various features
which made that scheme attractive, and made it a success. I will take
just one by way of illustration. It is technically possible in the
cotton trade to work the mills with relays of workers, so that if a mill
has 100 work-people, and can only employ 80 work-people each week, the
whole 100 can work each for four weeks out of the five, and "play off,"
as it is called, in regular sequence for the fifth week. And that was
what was done for a long time. It was called the "rota" system; and the
"rota" week of "playing off" became a very popular institution. Under
that system, benefits which would have been far from princely as the
sole source of income week after week--they never amounted to more than
30/- for a man and 18/- for a woman--assumed a much more liberal aspect.
For they came only as the occasional variants of full wages; and they
were accompanied not by the depressing circumstances of long-continued
unemployment, but by what is psychologically an entirely different and
positively exhilarating thing, a full week's holiday. That meant that
the available resources--and one of the difficulties of any scheme of
unemployment relief is that the resources available are always
limited--did much more to prevent misery and distress, and went much
further towards fulfilling all the objects of an unemployment scheme
than would have been possible otherwise.

That system was possible in the cotton trade; in other trades it might
be impossible for technical reasons, or, where possible, it might in
certain circumstances be highly undesirable. The point I wish to stress
is that under an industrial scheme you have an immense flexibility, you
can adapt all the details to the special conditions of the particular
industry, and by that means you can secure results immeasurably superior
to anything that is possible under a universal State system. Moreover,
if certain features of the scheme should prove in practice
unsatisfactory, they can be altered with comparatively little
difficulty. You don't need to be so desperately afraid of the
possibility of making a mistake as you must when it is a case of a great
national scheme, which can only be altered by Act of Parliament.


I do not underrate the difficulty of applying this principle of
industrial relief over the whole field of industry. There is the great
difficulty of defining an industry, or drawing the lines of demarcation
between one trade and another. I have not time to elaborate those
difficulties, but I consider that they constitute an insuperable
obstacle to anything in the nature of an Act of Parliament, which would
impose forcibly upon each industry the obligation to work out an
unemployment scheme. The initiative must come from within the industry;
the organisations of employers and employed must get together and work
out their own scheme, on their own responsibility and with a free hand.
And, if it happens in this way--one industry taking the lead and others
following--these difficulties of demarcation become comparatively
unimportant. You can let an industry define itself more or less as it
likes, and it does not matter much if its distinctions are somewhat
arbitrary. It is not a fatal drawback if some firms and work-people are
left outside who would like to be brought in. And if there are two
industries which overlap one another, each of which is contemplating a
scheme of the kind, it is a comparatively simple matter for the
responsible bodies in the two industries to agree with one another as to
the lines of demarcation between them, as was actually done during the
war by the Cotton Control Board and the Wool Control Board, with
practically no difficulty whatever. But for such agreements to work
smoothly it is essential that the industries concerned should be anxious
to make their schemes a success; and that is another reason why you
cannot impose this policy by _force majeure_ upon a reluctant trade. It
is in the field of industry that the real move must be made.

But I think that Parliament and the Government might come in to the
picture. In the first place, the ordinary national system of
unemployment relief, which must in any case continue, might be so framed
as to encourage rather than to discourage the institution of industrial
schemes. Under the Insurance Act of 1920 "contracting out" was provided
for, but it was penalised, while at the present moment it is prohibited
altogether. I say that it should rather be encouraged, that everything
should be done, in fact, to suggest that not a legal but a moral
obligation lies upon each industry to do its best to work out a
satisfactory unemployment scheme. And, when an industry has done that, I
think the State should come in again. I think that the representative
joint committee, formed to administer such a scheme, might well be
endowed by statute with a formal status, and certain clearly-defined
powers--such as the Cotton Control Board possessed during the war--of
enforcing its decisions.

But--and, of course, there is a "but"--we cannot expect very much from
this in the near future. We must wait for better trade conditions before
we begin; and, as I have already indicated, the prospects of really good
trade in the next few years are none too well assured. For a long time
to come, it is clear, we must rely upon the ordinary State machinery for
the provision of unemployment relief; and, of course, the machinery of
the State will always be required to cover a large part of the ground.
The liability which an industry assumes must necessarily be strictly
limited in point of time; and there are many occupations in which it
will probably always prove impracticable for the occupation to assume
even a temporary liability. For the meantime, at any rate, we must rely
mainly upon the State machinery. Is it possible to improve upon the
present working of this machinery? I think it is. By the State machinery
I mean not merely the Central Government, but the local authorities and
the local Boards of Guardians.


At present what is the situation? Most unemployed work-people are
entitled to receive certain payments from the Employment Exchanges under
a so-called Insurance scheme, which is administered on a national basis;
some weeks they are entitled to receive those payments, other weeks they
are not; but in any case those payments afford relief which is
admittedly inadequate, and they are supplemented--and very materially
supplemented--by sums varying from one locality to another, but within
each locality on a uniform scale, which are paid by the Boards of
Guardians in the form of outdoor relief. Now that situation is highly
unsatisfactory. The system of outdoor relief and the machinery of the
Guardians are not adapted for work of this kind. They are designed to
meet the problem of individual cases of distress, not necessarily
arising from unemployment, but in any event individual cases to be dealt
with, each on its own merits, after detailed inquiry into the special
circumstances of the case. That is the function which the Guardians are
fitted to perform, and it is a most important function, which will still
have to be discharged by the Guardians, or by similar local bodies,
whatever the national system of unemployment relief may be. But for
dealing with unemployment wholesale, for paying relief in accordance
with a fixed scale and without regard to individual circumstances--for
that work the Guardians are a most inappropriate body. They possess no
qualification for it which the Central Government does not possess,
while they have some special and serious disqualifications.

In any case, it is preposterous that you should have two agencies, each
relieving the same people in the same wholesale way, the Employment
Exchanges with their scale, asking whether a man is unemployed, and how
many children he has to support, and paying him so much, and the
Guardians with their scale, asking only the same questions and paying
him so much more. It would obviously be simpler, more economical, and
more satisfactory in every way, if one or other of those agencies paid
the man the whole sum. And I have no hesitation in saying that that
agency should be the Central Government. Perhaps the strongest argument
in favour of that course is that, when relief is given locally, the
money must be raised by one of the worst taxes in the whole of our
fiscal system, local rates, which are tantamount to a tax, in many
districts exceeding 100 per cent., upon erection of houses and buildings
generally. It is foolish to imagine that any useful end is served by
keeping down taxes at the expense of rates.

Serious as is the problem of national finance, the fiscal resources of
the Central Government are still far more elastic and less objectionable
than those which the local authorities possess. I suggest, accordingly,
as a policy for the immediate future, the raising of the scale of
national relief to a more adequate level, coupled with the abolition of
what I have termed wholesale outdoor relief in the localities. What it
is right to pay on a uniform scale should be paid entirely by the
Central Government, and local outdoor relief should be restricted to its
proper function of the alleviation of cases of exceptional distress
after special inquiries into the individual circumstances of each case.

One final word to prevent misconception. I have said that our present
system of relief is unsatisfactory, and I have indicated certain
respects in which I think it could be improved. But I am far from
complaining that relief is being granted throughout the country as a
whole upon too generous a scale. Anomalies there are which, if they
continued indefinitely, would prove intolerable. But we have been
passing through an unparalleled emergency. Unemployment in the last two
years has been far more widespread and intense than it has ever been
before in modern times, and never was it less true that the men out of
work have mainly themselves to blame. But it has meant far less
distress, far less destruction of human vitality, and I will add far
less demoralisation of human character than many of the bad years we had
before the war. That is due to the system of doles, the national and
local doles; and in the circumstances I prefer that system with all its
anomalies to the alternative of a substantially lower scale of relief.
We are still in the midst of that emergency; and if we are faced, as I
think for this decade we must expect to be faced, with that dilemma
which I indicated earlier, I should prefer, and I hope that every
Liberal will prefer, to err by putting the scale of relief somewhat too
high for prudence and equity rather than obviously too low for humanity
and decency.



M.A., LL.M., C.B.E.; Fellow of Gonville and Caius College, Cambridge;
Secretary of Coal Conservation Committee, 1916-1918; Secretary of
Advisory Board of Coal Controller, 1917-1919; Secretary of Coal Industry
Commission, 1919 (Sankey Commission).

Mr. McNair said:--Need I labour the point that there _is_ a problem of
the Mines? Can any one, looking back on the last ten years, when time
after time a crisis in the mining industry has threatened the internal
peace and equilibrium of the State, deny that there is something
seriously wrong with the present constitution of what our chairman has
described as this great pivotal industry? What is it that is wrong? If I
may take a historical parallel, will you please contrast the political
situation and aspirations of the working-class population at the close
of the Napoleonic wars with their industrial situation and aspirations
now. Politically they were a hundred years ago unenfranchised; more or
less constant political ferment prevailed until the Reform Bill, and
later, extensions of the franchise applied the Liberal solution of
putting it within the power of the people, if they wished it, to take an
effective share in the control of political affairs.

Industrially, their situation to-day is not unlike their political
situation a hundred years ago. Such influence as they have got is
exerted almost entirely outside the constitution of industry, and very
often in opposition to it. Their trade unions, workers' committees,
councils of action, triple alliances, and so forth, are not part of the
regular industrial machine, and too often are found athwart its path.
They are members of an industry with substantially no constitutional
control over it, just as a hundred years ago they were members of a
State whose destinies they had no constitutional power to direct.

This does not mean that a hundred years ago every working man wanted the
political vote, nor that now he wants to sit on a committee and control
his industry. It meant that a substantial number of the more enlightened
and ambitious did--a large enough number to be a source of permanent
discontent until they got it. The same is true to-day in the case of
many industries. Many men in all classes of society are content to do
their job, take their money, go home and work in their gardens, or
course dogs or fly pigeons. They are very good citizens. Many others,
equally good citizens, take a more mental and active interest in their
job, and want to have some share in the direction of it. This class is
increasing and should not be discouraged. They constitute our problem.
The Liberal solution of a gradually extended franchise has cured the
political ferment. Political controversy is still acute, and long may it
remain so, as it is the sign of a healthy political society. But the
ugly, ominous, revolutionary features of a hundred years ago in the
sphere of politics have substantially gone or been transferred to the
industrial sphere.


The same solution must be applied to that sphere. This does not mean
transferring the machinery of votes and elections to industry. It means
finding channels in industry whereby every person may exercise his
legitimate aspiration, if he should feel one, of being more than a mere
routine worker while still perhaps doing routine work, and of
contributing in an effective manner his ideas, thoughts, suggestions,
experience, to the direction and improvement of the industry. We have
satisfied the desire for self-expression as citizens, and we have now to
find some means of satisfying a similar desire for self-expression as
workers in industry. That is all very vague. Does it mean
co-partnership, profit-sharing, co-operative societies, joint
committees, national wages boards, guild socialism, nationalisation? It
may mean any or all of these things--one in one industry, one in
another, or several different forms in the same industry--whatever
experiment may prove to be best suited to each industry. But it must
mean opportunity of experiment, and experiment by all concerned. It must
mean greater recognition by employers of their trusteeship on behalf of
their work-people as well as their shareholders; greater recognition of
the public as opposed to the purely proprietary view of industry; and
recognition that the man who contributes his manual skill and labour
and risks his life and limb is as much a part of the industry as a man
who contributes skill in finance, management, or salesmanship, or the
man who risks his capital.

Coming to the mines, that is, the coal mining industry (with a few
incidental mines such as stratified ironstone, fireclay, etc., which
need not complicate our argument), the first step to the solution of the
problem of the mines, _i.e._ the collieries, the mining industry, is the
solution of the problem of the minerals. This distinction is not at
first sight obvious to all, but it is fundamental. The ownership and
leasing of the coal is one thing, the business or industry of mining it
is quite another. State ownership of the former does not involve State
ownership of the latter. That is elementary and fundamental. It lies at
the root of what is to follow.

Will you picture to yourself a section of the coal-mining industry in
the common form of the pictures one sees of an Atlantic liner cut neatly
in two so as to expose to view what is taking place on each deck. On top
you have the landowner, under the surface of whose land coal, whether
suspected or not, has been discovered. He may decide to mine the coal
himself, but more frequently--indeed, usually--he grants to some persons
or company a lease to mine that coal on payment of what is called a
royalty of so much for every ton extracted. Thereupon he is called the
mineral-owner or royalty-owner, and the persons or company who actually
engage in the business or industry of coal mining and pay him the
royalties we shall call the colliery-owners. Do not be misled by the
confusing term "coal-owners." Very frequently the colliery-owners are
called the "coal-owners," and their associations "coal-owners'
associations." That is quite a misnomer. The real _coal_-owner is the
landowner, the royalty-owner, though it may well happen that the two
functions of owning the minerals and mining them may be combined in the
same person. Below the colliery-owners we find the managerial staff;
below them what may be called the non-commissioned officers of the mine,
such as firemen or deputies, who have most important duties as to
safety, and below them the miners as a whole, that is, both the actual
coal-getters or hewers or colliers and all the other grades of labour
who are essential to this the primary operation.


Coming back to the royalty-owner, you will see his functions are not
very onerous. He signs receipts for his royalties and occasionally
negotiates the terms of a lease. But as regards the coal-mining
industry, he "toils not, neither does he spin." I do not say that
reproachfully, for he (and his number has been estimated at 4000) is
doubtless a good husband, a kind father, a busy man, and a good citizen.
But as regards this industry he performs no essential function beyond
allowing the colliery-owners to mine his coal.

What is the total amount annually paid in coal royalties? We can arrive
at an approximate estimate in this way: Average output of coal for five
years before the war, roughly, 270,000,000 tons; average royalty, 51/2d.
per ton, which means, after deducting coal for colliery consumption and
the mineral rights duty paid to the State by the royalty-owner, roughly
£5,500,000 per annum paid in coal royalties. Regarding this as an
annuity, the capital value is 70 millions sterling if we allow a
purchaser 8 per cent. on his money (12.5 years' purchase), or 551/2
millions sterling if we allow him 10 per cent. (10 years' purchase). For
all practical purposes the annuity may be regarded as perpetual.

Now the State must acquire these royalties. That is the only practicable
solution, and a condition precedent to any modification in the structure
of the coal-mining industry so long as the participants in that industry
continue unwilling or unable to agree upon those modifications
themselves. _Why and how?_ (1) First and foremost because until then the
State is not master in its own house, and cannot make those experiments
in modifying conditions in the industry which I believe to be essential
to bring it into a healthy condition instead of being a standing menace
to the equilibrium of the State--as it was before the war, and during
the war, and has been since the war; (2) the technical difficulties and
obstacles resulting from the ownership of the minerals being in the
hands of several thousand private landowners and preventing the economic
working of coal are enormous. You will find abundant evidence of this
second statement in the testimony given by Sir Richard Redmayne and the
late Mr. James Gemmell and others before the Sankey Commission in 1919.

How is the State to acquire them? Not piece-meal, but once and for all
in one final settlement, by an Act of Parliament providing adequate
compensation in the form of State securities. The assessment of the
compensation is largely a technical problem, and there is nothing
insuperable about it. It is being done every day for the purpose of
death duties, transfer on sale, etc. Supposing, for the sake of
argument, 551/2 millions sterling is the total capital value of the
royalties, an ingenious method which has been recommended is to set
aside that sum not in cash but in bonds and appoint a tribunal to divide
it equitably amongst all the mineral-owners. That is called "throwing
the bun to the bears." The State then knows its total commitments, is
not involved in interminable arbitrations, and can get on with what lies
ahead at once, leaving the claimants to fight out the compensation
amongst themselves. This does not mean that the State will have to find
551/2 millions sterling in cash. It means this, in the words of Sir
Richard Redmayne: "The State would in effect say to each owner of a
mineral tract: The value of your property to a purchaser is in present
money £x, and you are required to lend to the State the amount of this
purchase price at, say, 5 per cent. per annum, in exchange for which you
will receive bonds bearing interest at that rate in perpetuity, which
bonds you can sell whenever you like."

The minerals or royalties being acquired by the State, what then? For
the first time the State would be placed in a strategic position for
the control and development of this great national asset. Having
acquired the minerals and issued bonds to compensate the former owners,
the State enters into the receipt of the royalty payments, and these
payments will be kept alive. We must now decide between at least two
courses: (_a_) Is the State to do nothing more and merely wait for
existing leases to expire and fall in, and then attach any new
conditions it may consider necessary upon receiving applications for
renewals? Or (_b_) is the State to be empowered by Parliament to
determine the existing leases at any time and so accelerate the time
when it can attach new conditions, make certain re-grouping of mines,
etc.? My answer is that the latter course (_b_) must be adopted. The
same Act of Parliament which vests the coal and the royalties in the
State, or another Act passed at the same time, should give the State
power to determine the then existing leases if and when it chooses,
subject to just compensation for disturbance in the event of the
existing lessees refusing to take a fresh lease.

Why is course (_b_) recommended? (i) Most leases are granted for terms
varying from thirty to sixty years. They are falling in year by year,
but we cannot afford to wait until they have all fallen in if we are
effectively to deal with a pressing problem. (ii) The second objection
to merely waiting is that some colliery-owners (not many) might make up
their minds not to apply for a renewal of their leases, and might
consequently be tempted to neglect the necessary development and
maintenance work, over-concentrating on output, and thus allowing the
colliery to get into a backward state from which it would cost much time
and money to recover it--a state of affairs which could and would be
provided against in future leases, but which the framers of existing
leases may not have visualised. I do not suggest that upon the
acquisition by the State of the minerals all the existing leases should
automatically determine. But the State should have power to determine
them on payment of compensation for disturbance.


At the same time a National Mining Board consisting of representatives
of all the interested elements, colliery-owners, managerial and
technical staffs, miners, and other grades of workers, and coal
consumers would be formed (the Mines Department already has a National
Advisory Committee); the mining engineering element must be strongly
represented, and provision must be made for first-class technical advice
being always available. It would then be the business of the National
Mining Board to work out its policy and decide upon the broad principles
which it wishes to weave into the existing structure of the coal-mining
industry by means of its power of granting leases. The following
principles will readily occur to most people, and are supported by
evidence which is, in my humble judgment, convincing, given before the
various commissions and committees which have inquired into this
industry during recent years.

Firstly, More Amalgamation or Unification of Collieries. At present
there are about 3000 pits owned by about 1500 companies or individuals,
and producing an aggregate output of about 250 million tons per annum.
Already there have been many large amalgamations. (i) Many fortunately
situated small pits making a good profit will be found, but on the whole
small collieries are economically unsound. In many cases at present the
units are too small, having regard to the class of work being done, to
the cost of up-to-date machinery and upkeep and to the variableness of
the trade. Broadly I believe it to be true that the larger collieries
are as a general rule more efficient than the smaller ones. (ii) In
respect of co-operation in pumping, larger units would frequently make
for efficiency and reduced cost; Sir Richard Redmayne, speaking of South
Staffordshire before the Sankey Commission, said that we had already
lost a large part of that coalfield through disagreement between
neighbouring owners as to pumping. (iii) The advantages of larger units
in facilitating the advantageous buying of timber, ponies, rails,
machinery and the vast amount of other materials required in a colliery
will be obvious to most business men.

I do not propose to chop up the coalfields into mathematical sections
and compulsorily unify the collieries in those sections. I am merely
laying down the broad principle that to get the best out of our national
asset the National Mining Board must bring about through its power of
granting leases the formation of larger working units than at present
usually exist. The geological and other conditions in the different
coalfields vary enormously, and these form a very relevant factor in
deciding upon the ideal unit of size. It is conceivable that in certain
districts all the colliery-owners in the district, with the aid of the
National Mining Board, would form a statutory company on the lines of
the District Coal Board, described in the Report made by Sir Arthur
Duckham as a member of the Sankey Commission. One advantage accruing
from unification (to which recent events have given more prominence) is
that it mitigates the tendency for the wages of the district to be just
those which the worst situated and the worst managed colliery can pay
and yet keep going, and no more. This tendency seems to be recognised
and mitigated in the Agreement of June, 1921, on which the mines are now
being worked. Secondly, Provision for Progressive Joint Control, that
is, for enabling all the persons engaged in the mining industry either
in money, in brains, or in manual labour, or a combination of those
interests, gradually to exercise an effective voice in the direction of
their industry.

Some of the arguments for this principle appear to me to be (i) that, as
indicated in my opening remarks, a sufficiently large number of the
manual or mainly manual workers in the industry ardently desire a
progressively effective share in the control of the industry; (ii) that
this desire is natural and legitimate, having regard to the great
increase in the education of the workers and the improvement in their
status as citizens, and that so far from being repressed it should be
encouraged; (iii) that it is the natural development of the system of
Conciliation Boards and (occasionally) Pit Committees which has
prevailed in the industry for many years, though more highly developed
in some parts of the country than others. So far, these organs have been
mainly used for purposes of consultation and negotiation; the time has
come when with a more representative personnel, while not usurping the
functions of a mine manager or, on a larger scale, the managing
director, they must be developed so as to exercise some effective share
in controlling the industry. (iv) While working conditions are not so
dangerous and unpleasant as the public are sometimes asked to believe,
the workers in this industry are exposed to an unusually high risk of
injury and loss of life, and thus have a very direct interest in
devising and adopting measures for increased safety. These measures
nearly always mean expenditure, and thus an increased cost of working,
and so long as their adoption (except in so far as made compulsory by
the Mines Department) rests solely with bodies on which capital alone is
represented and labour not at all, there will be fruitful cause for
suspicion and discontent. The miners are apt to argue that dividends and
safety precautions are mutually antipathetic, and will continue to do so
as long as they have no part or lot in the reconciliation of these
competing obligations. The question is not whether this argument of the
miners is well-founded or not: the point is that their suspicion is
natural, and any excuse for it should be removed. (v) The exceptionally
large items which wages form in the total cost of coal production
indicates the important contribution made by the miners to the welfare
of the industry and justifies some share in the direction of that

Upon the basis of typical pre-war years, the value of the labour put
into the coal mining industry is 70 per cent. of the capital employed,
and 70 per cent. of the annual saleable value of the coal, and yet this
large labour interest has no share in the management of the industry.


Thirdly, More Financial Publicity. Secrecy as to profits, which always
suggests that they are as large as to make one ashamed of them, has been
the bane of the coal-mining industry. For nearly half a century wages
have borne some relation to _selling prices_, and there have been
quarterly audits of typical selected mines in each district by joint
auditors appointed by the owners and the miners. But over _profits_ a
curtain was drawn, except in so far as the compulsory filing at Somerset
House by public companies of a document called a Statement in the form
of a balance sheet, enabled the curious to draw not very accurate
conclusions. It is not easy for the plain man to read a balance sheet or
estimate profits, especially when shares are being subdivided, or when
bonus shares are being issued, or large sums carried to reserve. The
result has been continual and natural suspicion on the part of the
miners, who doubtless imagined the colliery-owners' profits to be much
larger than they were. The miners knew that whenever they asked for an
increase in their wages they were liable to be told that such an
increase would turn a moderate profit into a substantial loss, but the
amount of the profit they had to take on trust. Selling prices, yes, but
profits, no.

The war and coal control partly killed that, and it must not return. By
the settlement of June, 1921, for the first time the miners have
established the principle of the adjustment of their wages in accordance
with the proceeds of the industry "as ascertained by returns to be made
by the owners, checked by a joint test audit of the owners' books
carried out by independent accountants appointed by each side." That is
an important step, but does not go anything like far enough.

At least two good results would accrue if colliery-owners conducted
their business more in public: (i) a great deal of the suspicion and
mistrust of the miners would be removed, and they would realise why and
when their wages must undergo fluctuations, and the value of the many
other factors besides wages which went to make up the pit-head cost of
coal; (ii) publicity coupled with _costing returns_ would make it
possible to draw comparative conclusions as to the cost of production in
different mines and districts, which would be a fruitful source of
experiment and improvement. Publicity does not involve publication of
lists of customers, British or foreign.


How far will the lessees to whom the National Mining Board will grant
leases to work the coal be the same persons and companies as the present
lessees? In this matter it is desirable to maintain the maximum amount
of flexibility and variety. I do not think we have yet discovered the
ideal unit, the ideal organisation for the development of our principal
national asset. So much do our coalfields differ in geological
formation, in tradition, in the subdivision and classification of
labour, in outlet for trade, that it is unlikely that any single unit or
organisation will be the ideal one for every coalfield. So we must
resist any attempt, especially an early attempt, at stereotyping or
standardising the type of lessee. By trial and error we shall learn

All the following types of lessee seem likely, sooner or later, to
demand the attention of the National Mining Board. (I shall not touch on
the question of distribution, inland and export. That is another and
quite separate question):--

(i) _The Present Lessees._--I see no reason to doubt that in the vast
majority of cases the present lessees would be prepared to continue to
operate their mines, paying royalties to the State instead of to the
present royalty-owner. Where the unit is sufficiently large and the
management efficient, the National Mining Board would probably grant a
fresh lease, incorporating such conditions as to unification, joint
control, and publicity as they might consider necessary. If the present
lessees do not want the lease, there are others who will.

(ii) _Larger Groups._--In a great many cases, however, the Board would
decline to grant separate leases in respect of each of a number of small
collieries, and would indicate that they were only prepared to receive
applications for leases by groups of persons or companies prepared to
amalgamate themselves into a corporation representing an output of x
tons _per annum_. This figure would vary in each coalfield. In South
Staffordshire, in particular, divided ownership has had most prejudicial
effects in the matter of pumping.

(iii) _District Coal Boards._--Sir Arthur Duckham's scheme of statutory
companies known as District Coal Boards requires consideration. Without
necessarily adopting his districts or his uniformity of type throughout
the country, there are many areas where it might be found that voluntary
amalgamation was impracticable, and that the desired result could only
be attained by an Act of Parliament providing for the compulsory
amalgamation of persons and companies working a specified area and the
issue of shares in the new corporation in exchange for the previous

(iv) _Public Authorities._--I should very much like to see, sooner or
later, in some area, a lessee in the form of an organisation which,
though not national--not the State--should be at any rate
public--something on the lines of the Port of London Authority.

It may well be that in one or more of our coalfields a public authority
of this type, though with larger labour representation upon it and with
a large measure of joint control from top to bottom, would be a
suitable lessee of the minerals in that area. The important point is
that public management need not mean bureaucratic State-management with
the disadvantages popularly associated with it.

(v) I have mentioned several types of possible lessees, but it will be
noticed that there is nothing in these suggestions which would prevent
the National Mining Board from making the experiment of working a few
mines themselves.

To sum up. There _is_ a problem of the Mines. No sensible person should
be deceived by the quiescence of the last twelve abnormal months.
Without using extravagant language, the coal-mining industry is a
volcano liable at any moment to erupt and involve the whole community in
loss and suffering. Therefore, as a body of citizens, we are under a
duty to seek a solution which can be effected between the occurrence of
the recurring crises. As a body of Liberal citizens we shall naturally
seek a Liberal solution, and the foregoing suggestions (for which no
originality is claimed) are inspired by the Liberal point of view. They
apply to the industrial sphere principles which have been tried and
proved in the political sphere, both in the central and the local
government. Apart from State acquisition of the minerals, about which
there can surely be no question, these suggestions merely develop
tendencies and organisations already existing within the industry. They
involve no leap in the dark, such as has been attributed by some to
nationalisation of the whole industry, and they provide for great
flexibility and experimentation. The fact that the official spokesmen of
neither miners nor colliery-owners may like them need not deter us. They
have had numerous opportunities of settling the problem amongst
themselves, but the "die-hards" in both camps have always prevented it.
It is time that the general public outside the industry took the matter
in hand and propounded a solution likely to be acceptable to the vast
body of sensible and central feeling within the industry.



Member of Acquisition of Land Committee, 1918.

Mr. Comyns Carr said:--The Land Question I believe to be the most
important subject in purely domestic politics to-day, as it was in 1914.
At that date we were embarking, under the especial leadership of one who
has now deserted us, upon a comprehensive campaign dealing with that
question in all its aspects. The present Government has filled a large
portion of the Statute Book with legislation bearing on the land; it is
not the quantity we have to complain of, but the quality. In 1914 we had
already achieved one signal victory in carrying against the House of
Lords the Land Clauses of the Budget of 1909-10, and although many of us
were never satisfied with the form which those clauses took, they were
valuable both as a step in the direction of land taxation and for the
machinery of valuation which they established. Mr. Lloyd George in his
present alliance with the Tories has sunk so low as not only to repeal
those clauses, but actually to refund to the landlords every penny which
they have paid in taxation under them.

The campaign which was inaugurated in 1913 did not deal with the
question of taxation only, and for my part, although I am an enthusiast
on this branch of the subject, I have never thought that other aspects
should be neglected. We put forward proposals for dealing with leases
both in town and country. The present Government has carried and
repealed again a series of statutes dealing with agriculture. Their
original policy was to offer to the farmer guaranteed prices for his
produce, if necessary at the expense of the tax-payer, and to the
labourer guaranteed wages, to be fixed and enforced by Wages Boards.
Before this policy was fully in operation it was repealed. The farmer
got some cash compensation for his losses; the labourer has got nothing
but voluntary Conciliation Boards, with no power to do more than pass
pious resolutions. There has, however, survived this welter of
contradictory legislation, a series of clauses which do confer upon the
tenant farmer a substantial part of the rights in his dealings with his
landlord for which we were agitating in 1914. The town lease-holder, on
the other hand, has got nothing, and it is one of the first duties of
the Liberal Party to provide him with security against the confiscation
of his improvements and goodwill, to give him reasonable security of
tenure, and to put an end once for all to the pestilent system of
building leases which extends all over London and to about half the
other towns of England. The evils of this system are especially to be
found in those older parts of our great cities where the original leases
are drawing to a close. In such cases a kind of blight appears to settle
on whole neighbourhoods, and no improvements can be carried out by
either party because the landlord cannot obtain possession, and the
tenant has not, and is unable to obtain, a sufficient length of term to
make it worth his while to risk his capital upon them.


The branch of the land question to which the Government called the
greatest attention in their election promises was Housing. On this
subject the Government have placed many pages of legislation on the
Statute Book. One can only wish that the houses occupied as much space.
They began by informing us, probably accurately, that up to the time of
the Armistice there was an accumulated shortage of 500,000 houses; in
pre-war days new working-class houses were required, and to a certain
extent provided, although the shortage had then already begun, to an
average number of 90,000 a year. According to the official figures in
July last, 123,000 houses had been completed by Local Authorities and
Public Utility Societies; 37,000 by private builders with Government
subsidies; 36,000 were under construction, and as the Government have
now limited the total scheme (thereby causing the resignation of Dr.
Addison, its sponsor) there remain 17,000 to be built. This is the
record of four years, so clearly the Government have not even succeeded
in keeping pace with the normal annual demand, and the shortage has not
been attacked, but actually accentuated.

The cause of the failure was mainly financial. Without attacking the
roots of the evil in our land and rating system, and without attempting
to control the output and supply of materials and building in the way in
which munitions were controlled during the war, the Government brought
forward gigantic schemes to be financed from the supposedly bottomless
purse of the tax-payer. At the same time the demand for building
materials and labour in every direction was at its maximum, and
unfortunately both employers and employed in the building and allied
industries took the fullest advantage of the position to force up prices
without regard to the unfortunate people who wanted houses. The Trade
Unions concerned seem to have overlooked the fact that if wages were
raised and output reduced houses would become so dear that their
fellow-workmen who needed them could not attempt to pay the rents
required, and the tax-payer would revolt against the burdens imposed
upon him; thus the golden era for their own trade was bound to come to a
rapid end, and, so far from employment being increased and prolonged,
unemployment on a large scale was bound to result. With the Anti-Waste
panic and the Geddes Axe, social reform was cut first, and, in their
hurry to stop the provision of homes for heroes, the Government is
indulging in such false economies as leaving derelict land acquired and
laid out at enormous cost, even covering over excavations already made,
and paying out to members of the building trade large sums in
unemployment benefit, while the demand for the houses on which they
might be employed is left wholly unsatisfied.


The Acquisition and Valuation of Land for the purpose of public
improvements is a branch of the question to which a great deal of
attention was drawn during and immediately after the war. The Government
appointed a Committee, of which the present Solicitor-General was
chairman, and which, in spite of a marked scarcity of advanced land
reformers amongst its members, produced a series of remarkably unanimous
and far-reaching recommendations. These recommendations dealt with four
main topics:--

(_a_) Improvements in the machinery by which powers may be obtained by
public and private bodies for the acquisition of land for improvements
of a public character;

(_b_) Valuation of land which it is proposed to acquire;

(_c_) Fair adjustment as between these bodies and the owners of other
land, both of claims by owners for damage done by the undertaking to
other lands, and of claims by the promoting bodies for increased value
given by their undertaking to other lands; and

(_d_) The application of these principles to the special subject of

The Government in the Acquisition of Land Act, 1919, has adopted a great
part of the Committee's recommendations under the second head, and this
Act has undoubtedly effected an enormous improvement in the prices paid
by public bodies for land which they require, although, most
unfortunately, the same immunity from the extortion of the land-owner
and the land speculator has not been extended to private bodies such as
railway companies who need land for the improvement of public services.
Moreover, it has not attempted to bring the purchase price of land into
any relation with its taxing valuation.

The whole of the rest of the Committee's recommendations dealing with
the other three points which I have mentioned, the Government has wholly
ignored. Powers for public development can still only be obtained by the
slow, costly and antiquated processes in vogue before the war; private
owners of lands adjoining works of a public character are still in a
position to put into their own pockets large increases in value due to
public improvements to which they have contributed nothing, and which
they may even have impeded; the development of minerals is still
hampered by the veto of unreasonable owners, by the necessity of leaving
unnecessary barriers between different properties, and by other
obstacles which were dealt with in detail in the Committee's report. An
illustration of the importance of this aspect of the question was put
before the Committee and has been emphasised by recent events. It was
stated on behalf of the railway companies that they were prepared with
schemes for the extension of their systems in various parts of the
country, which would not only provide temporary employment for a large
number of men on construction, and permanent employment to a smaller
number on the working of the lines, but would also open up new
residential and industrial districts, but that it was impossible for
them to find the necessary funds unless they could have some guarantee
that at least any loss upon the cost of construction would be charged
upon the increased value of land in the new districts which would be
created by the railway extensions. Remarkable instances were given of
the way in which the value of land had been multiplied many-fold by the
promotion of new railways, which, nevertheless, had never succeeded in
paying a dividend to their shareholders, and the capital cost of which
had been practically lost.

On the other hand, the Committee were assured that, given a charge on
the increased value of land likely to be created, there would be no
difficulty in obtaining the necessary funds without Government
assistance. When the pressure of the unemployment problem became acute,
and not before--and then it was, of course, too late--the Government
turned their attention to this problem, and have guaranteed the interest
upon new capital to be expended on a few of these railway extensions,
but instead of charging the guarantee upon the increased value of land,
they have charged it upon the pocket of the tax-payer. The most striking
instance is that of the tube railway from Charing Cross to Golders
Green, now being extended under Government guarantee to Edgware. Those
who provided the original capital have never received any return upon
their money, yet millions have been put into the pockets of the owners
of what was undeveloped land now served by the line, and now that the
extension is being carried out with the tax-payers' guarantee, the
land-owners will again reap the benefit untaxed.

The development of the natural resources of our country was one of the
promises held out by Mr. Lloyd George to the electors in 1918. Schemes
were ready, and are still in the official pigeon-holes, for the
production of electricity on a very large scale both from water power
and from coal, which would not only provide employment, but cheapen the
cost of production in all our industries. France, Italy, and other
countries are at this moment carrying out similar schemes whereby they
will relieve themselves to a large extent from dependence on British
coal. But here, four years of Coalition Government have left us
practically where we were. In France, although in many respects her
social system seems to me less enlightened than our own, the power of
the land-owner to obstruct enterprise and development is by no means so
great. Land Reform in this country is a necessary preliminary to the
fulfilment of Mr. Lloyd George's promises. Development at the public
expense without such reforms will result chiefly in further burdens upon
the tax-payer and further enrichment of the landowner.


This brings me to the last, and in my opinion the most important branch
of the Land Question, that relating to the reform of our system of
rating and taxation. I am myself an ardent supporter of the policy which
I think has been rather unfortunately named the Taxation of Land
Values. The vital point about this policy is not so much that we should
tax land values, as that we should leave off taxing buildings and other
improvements of land. The policy would be better described as the Relief
of Improvements from Taxation. Its economic merits seem to me so obvious
as hardly to require examination. It is only because the present system
has been in force for over 300 years that it can find any supporters. If
any one were to propose as a useful means of encouraging the steel trade
or the boot trade, or as a desirable method of taxation, that a tax of,
say, 50 per cent. should be imposed upon the value of every ton of steel
or every pair of boots turned out in our factories, he would be rightly
and universally denounced as a lunatic. Yet this is the system which
ever since the days of Queen Elizabeth has been in force with regard to
the building trade and all other industries which result in the
production of improvements upon land.

As long as land remains unused it pays no rates or taxes, whatever its
immediate potential value. But the moment it is brought into use, as
soon as a house, a factory, or a railway is built upon it, or it is
drained or planted--rates and taxes, which in these days often exceed 50
per cent. of its improved value, have to be paid, without regard even to
the question whether its use is successful in yielding profits or not.
Familiarity with this system, instead of breeding the contempt which it
deserves, has bred a kind of passive acquiescence which is exceedingly
difficult to shake. Even such a champion of our land system as the Duke
of Bedford years ago in his book, _The Story of a Great Agricultural
Estate_, perceived the absurdity, although he was apparently blind to
the remedy and to the application of it to some of his estates which are
not agricultural. He converted an ordinary arable field into a fruit
garden, and discovered that his rates were promptly trebled by reason of
his expenditure. Striking, but, nevertheless, everyday examples may be
found if we see how the system works out in urban districts. If a new
factory is built, rates and taxes are immediately levied on the full
annual value of the building, which is a direct charge upon production,
and has to be paid before a single person can be employed in the
factory. It therefore not only restricts the possibilities of
employment, but has to be added to the price at which the goods can be


Or take the illustration of a slum area. Each tumble-down tenement is
rated and taxed on the assessment based upon its annual rental value. In
many places in the central parts of towns the total of these assessments
is less than the sum for which the whole site could be sold as a
building area, nevertheless if all the tenements fall or are pulled down
the site may remain vacant for years and no rates or taxes are paid. But
if substantial and decent buildings are erected on the site, immediately
the assessment is raised to their full annual value. The individual or
public body that has cleared away the slum and erected something decent
in its place is thus immediately punished for doing so, with the result
that such a thing is seldom done except at the public expense. The
remedy for all these absurdities is quite a simple one. No one disputes
that the sums necessary for municipal and imperial taxation have got to
be provided. The question is, in so far as they are to be raised from
lands and buildings, how can they be assessed most fairly and with the
least injury to trade and commerce? They should be assessed upon the
value of land which is not due to any effort of the owner or occupier;
they should not be assessed upon nor increased because of any buildings
which he may have erected or any improvements which he may have carried

This question was closely investigated by the Land Enquiry Committee
appointed by Mr. Lloyd George in 1913. They were unanimous in condemning
the existing system and in regarding the one which I have just described
as the ideal. They were, however, met by great difficulties in its
immediate practical application, because, owing to the long prevalence
of the wrong system, an immediate and total change would bring about
rather startling alterations in the value of existing properties. The
Committee closely considered these objections, and a number of
alternative methods of bringing the change into operation gradually and
without these drastic changes in value were put forward. The one which
immediately suggested itself as the simplest, and from many points of
view the most desirable, was to leave the rates and taxes of existing
properties on their present basis, to impose them at their present rate
on the annual value of all unoccupied land, but to exempt from rates and
taxes all future buildings and improvements of every kind.

To illustrate the way in which this would work, let us revert to the
case of a block of slum property. As long as it remained in its present
condition the existing valuation based upon the annual rent obtainable
for it would apply, but any parts of it which now are or may hereafter
become unoccupied, would, instead of escaping as they do now from all
rates and taxes, contribute on the basis of the value of their sites,
which would be assessed at an annual rent for the purpose of comparison
with the existing valuations, at least until the capital values of the
whole rating area could be ascertained. If any improvements were carried
out the assessments would not be raised on that account, as they would
be under present conditions, and if a whole area were pulled down,
replanned and rebuilt, the assessment instead of being based, as it
would be to-day, on the annual value of the reconstructed property,
would be based upon the site value alone. Gradually in this way site
value would become the prevalent basis of assessment. "It is obvious,"
as the Committee said in 1913, "that unrating of future improvements is
from the economic point of view of far more importance than the unrating
of existing improvements; if we want to encourage new buildings and new
improvements, what is really important is to ensure that new
improvements (not old ones) shall be exempt from the burden of rates."
The Committee were, however, compelled to reject this suggestion at that
time on the ground that "it would cause an unfair differentiation
between the man who had already put up buildings or improvements, and
the man who put up buildings or improvements after the passing of the
Act." But as between buildings and improvements which existed before the
war and those which come into existence under post-war conditions no
such unfairness could operate, because the increase in the cost of
building even to-day is greater than the benefit which would accrue from
the unrating of improvements. The present is therefore the unique
opportunity for bringing into force this much-needed reform in the most
effective way, free from the difficulties which had to be met in 1913.
If it had been carried out immediately after the Armistice it would, in
my opinion, have done more than anything else to solve the housing
problem, and even now it is not too late. In fact, in view of the
present unemployment it would be most opportune. Incidentally it would
soon render unnecessary the renewal of the Rent Restriction Act. I
understand that something on these lines has been introduced in New York
to meet a similar problem.


The Committee of 1913 were obliged to turn their attention to other
suggestions. They proposed:

(_a_) That all future increases in the expenditure of each Local
Authority which had to be met out of rates should be met by a rate upon
site values instead of upon the existing assessments; and

(_b_) That existing expenditure should be met to a small extent
compulsorily, and to a larger extent at the option of the Local
Authority, in the same manner.

There is no reason why these proposals should not be brought into force
simultaneously with that relating to new buildings and improvements.
They made these proposals conditional upon a substantial increase in the
grants in aid to Local Authorities, especially in necessitous areas,
from the Imperial Exchequer; and they suggested, although they did not
definitely recommend, that a part at least of this increased grant might
be raised by means of an additional tax upon site values. This, I think,
should certainly be done, and such a tax might be wholly or partially
substituted for the present Land Tax and Income-Tax Schedule A, which
are assessed on the wrong basis.

These proposals would, of course, involve the revival and revision of
the National Land Valuation established by the Finance Act, 1909-10,
which should be made the basis of all taxation and rating relating to
real property. This would be both a reform and an economy, because there
are at present several overlapping systems of valuation by Central and
Local Authorities, none of which are really satisfactory even on the
present unsatisfactory basis of assessment. The existence of such a
valuation frequently revised and kept up to date, and independent of
local influences, would be invaluable not only for purposes of rating
and taxation, but also in arriving at a fair price for the acquisition
of land for public purposes, and for the levying of special charges upon
the increased value due to particular public improvements, such as
railway extensions, with which I have already dealt.

I am not one of those who claim for these reforms that they would cure
all the evils from which the community is at present suffering, but I do
believe that there is no other and no better way of removing the
unfairness and the restrictions of our present methods of rating and
taxation or of setting free and stimulating the energies of our people
in the development of the resources of our country.



P.C.; M.P. (L.) North-West Cornwall; Financial Secretary, War Office,
1908-10; Under-Secretary of State for Foreign Affairs, 1911-15;
Financial Secretary to Treasury, Feb.-June, 1915; Secretary to the Board
of Agriculture, 1915-16; a Forestry Commissioner. Chairman of the
Agricultural Organisation Society.

Mr. Acland said:--I begin by laying down in a didactic form five points
which one would like to see firmly established in our rural life: (i)
intensive production; (ii) plenty of employment at good wages; (iii)
easy access to land, and a good chance of rising upon the land; (iv)
real independence in rural life; (v) co-operative association for many

Intensive production is most important. It is so easy to say the farmer
_can_ get more out of the land, and the farmer _should_ get more out of
the land, that we are tempted to continue and say that the farmer _must
be made_ to get more out of the land. But it isn't so easy. It has been
tried and failed, and when any subject in our British political life has
been brought up to the boiling-point, and yet nothing effective has been
done, it is extremely difficult to bring it to the boil a second time.

It is worth while tracing out what has actually happened. The
Government's Agriculture Act of 1921 contained four great
principles:--(i) that we must have more food produced in this country
(_a_) as an insurance against risk of war, (_b_) so as to meet our
post-war conditions as a debtor nation by importing less of our food
supplies; (ii) that as the most productive farming is arable farming,
and as by maintaining a proper proportion of arable we can on emergency
make ourselves independent for our food supplies for an indefinite time,
farmers should be guaranteed against loss on their arable rotations;
(iii) that if farmers are to be required to produce more they must have
clear legal rights to farm their land in the most productive way, a
greater compensation for disturbance; (iv) that as the first three
principles give security to the nation and to the farmer, it is
desirable also to give security to the worker by permanently continuing
the war-time system of Agricultural Wages Boards.

These principles were duly embodied in the Bill as it left the House of

(i) The Ministry of Agriculture, acting through the County Agricultural
Committees, was given powers to insist on a certain standard of arable
cultivation, as well as in minor matters, such as control of weeds and
of rabbits;

(ii) The difference between the ascertained market price and the
estimated cost of production on his wheat and oat acreage was guaranteed
to the farmer, the guarantee not to be altered except after four years'

(iii) The landlord had to forfeit a year's rent if a tenant was
disturbed except for bad farming, or four years' rent if the disturbance
was capricious;

(iv) The existing Wages Board system was continued.


The gradual destruction of this policy began in the House of Lords. They
allowed themselves to be swept away by the popular cry against
Government interference with industry, and cut out the power of control
of cultivation. The Prime Minister had said that this was an absolutely
essential part of the Bill, and of the Government's policy, but the
Government quietly and characteristically accepted the Lords' amendment
and the Bill was passed.

Then troubles began. Other industries began to ask why the Government
satisfied agriculture and not them, and as the Government could not
plead their control of agriculture in justification, no real reply was
possible. Also the cold fit came on as regards national expenditure. The
Bill for the corn subsidies threatened to be very high. Though Europe
was starving, it could not buy, so cheap American grain flooded our
markets; but cost of production here was still at its peak, and, for
oats especially, the amount to be paid to the farmer threatened to be
large. It was realised that it might cost 25-30 millions to implement
the guarantees for the first year, and perhaps 10-12 millions a year
later. In short, the guarantees had to go. Instead of four years' notice
of any change, a Bill to repeal the great Act was introduced five months
after it had been passed. And it was unfortunately part of the bargain
with the farmers who received for the single season perhaps six or
eight millions less than they might have been entitled to under the Act,
that the Wages Boards should be abolished--and they were. There remained
of the original structure only the depreciation of the value of all
agricultural landowners' property by about one-twentieth, owing to the
extra compensation for disturbance.

Every one felt that they had been had, and they had been. The industry
which had lately been talked up and made much of was dumped into the
dustbin. The farmers had lost their guarantees on the strength of which,
in many cases, they had bought their farms dear or planned their
rotations. The labourers, who particularly needed the protection of
Wages Boards during a time of fall in cost of living and unemployment,
had lost all legal protection. The landlords, willing enough to give
what was asked of them if any national purpose was to be served, found
that their loss brought no corresponding national gain. Agriculture
retired as far as it could from any contact with perfidious Governments,
to lick its wounds.

That is not a good basis upon which to build intensive cultivation or
any other active policy. There being now no legal or patriotic call to
intensive production, we are driven back to ask, "Does intensive
production pay?" and the broad answer is that at a time of low prices it
does not. There is no doubt that slowly and steadily education will
gradually improve farming, and that farmers will learn to find out what
parts of their business pay best and to concentrate upon them. There is
also no doubt that even at low prices there is plenty of scope for
better farming, and that better manuring, particularly of grass land,
will pay. But the farmer is faced with an economic principle--the law of
diminishing returns. It may be stated thus: beyond a certain point which
rises and falls directly with the value of the product, extra doses of
labour and manure do not give a corresponding return. It is this
principle which accounts for what we see everywhere--that farmers are
tending to economise as much as they can on their labour and to let
arable land go back to grass.

And if this is clear to farmers who are thinking of intensive arable
farming, still more is it true in comparing arable with grass. If you
take the same sort of quantity of arable and grass farms, farmed by men
of the same skill and diligence, over a range of seasons under low world
prices for farm produce, you will, I believe, find something like this:
grass land needs half the capital and one-third of the labour of arable;
it produces three-quarters the receipts with half the payments, and
yields double the profit per acre and four times the profit on capital.
The moral of all this is clear. Unless the nation is willing to go back
to protection for agriculture, which I am glad to believe in the general
interest unthinkable, and unless it is willing to guarantee the farmer
against loss from that method of agriculture which means most production
and most employment, we must let the farmer set the tune and farm in the
way it best suits him to farm. We must try, in fact, not to talk too
much nonsense about intensive production as the cure for agricultural
depression. It is useful to remember that all countries overseas which
combine high wages with agricultural prosperity have a very low output
per acre judged by our standards.


It follows directly from what I have just said that a time of high costs
and low prices like the present, like the time of lower costs but still
lower prices of the late '80's and early '90's, is not a favourable time
for expecting employment to be brisk or wages high. And reasons other
than those which we have yet considered make the farmer feel his labour
to be specially burdensome at present. He finds that the prices he gets
on the average are one and one-third times what they were before the
war: what he has to buy costing from one and a half to one and
two-thirds what it cost before the war; and he is expected in very many
counties in England and Wales to pay his workers about double what he
paid before the war. This is a strong point for him. But the labourers'
position is just as strong. "I was not sufficiently well paid before the
war. If this is to be recognised in any way at all, I must at the
present cost of living (185) have double my pre-war wages." It is
certainly beyond all question that 30/- a week, which is the present
wage over a large part of England, is not, even with only 3/- a week
rent for house and garden, enough to keep a man and his wife and family
in a state of real efficiency. Yet I know from personal experience that
this fact is not properly recognised in practice. If one tries to pay
more one is regarded as a very rich man, and an extremely stupid one--an
idea erroneous as to one's wealth and possibly exaggerated as to one's

How have the two conflicting views of farmer and labourer been
reconciled in practice. I can only say that so far as my own knowledge
extends--bearing in mind that the farmer has not the business man's
habit of cheerfully setting off a bad year against a good (for the
business man knows that trade must improve some time, and then he will
make profits, while the farmer has no certainty that things will
improve)--things might well have been worse. There has been a good deal
of mutual consideration and desire to make the best of difficult
circumstances. I have, however, little doubt that it would have been
better had the Wages Boards, which had controlled the rise in wages
during the rise in the cost of living, regulated the fall in wages
during its fall--relaxing control perhaps later when things became more

The reason why I think that things might have been worse is that the
District Wages Committee left a good legacy to the voluntary
Conciliation Committees which followed them--the men serving on the
latter were those who under the Wages Board system had learned to
negotiate with and to know and respect the workers--generally some of
the best farmers in their districts--and they genuinely tried not to let
the workers down with too much of a bump; on the other hand, they knew
that the only value their recommendations could have was that they
should be voluntarily observed, and therefore they took care not to
recommend rates higher than those which the least favourably situated
farmers in the district could manage to pay--which meant rates lower
than many might have been willing to give. This means that any general
rate agreed to voluntarily will be rather on the low side. But I would
rather have a rate which is generally observed, even if it is rather
low, than that every farmer should be a law unto himself. If there is no
recognised standard, and one man with impunity pays a lower rate than
his neighbours, other rates also tend to come down, and then the process
begins over again.

Looking to the future, the only thing that I can say with any certainty
about the wages question is that it needs very careful watching. Let us
be sure first of our principle, that the first charge on land, as on any
other industry, should be a reasonable standard of living for the
workers. Then let us be sure of the fact that there is over a very large
part of England and Wales no certain prospect of an improvement in the
condition of the labourer compared with conditions ten years ago. The
dangers to be feared are that in the present lamentable weakness of the
men's unions large sections of farmers may break away from the
recommendations of their leaders; and that if depression continues and
war savings become depleted farmers will tend to push wages down in
self-preservation. These things must be watched. If the general
condition of agriculture improves without a corresponding improvement in
the workers' condition, or if conditions get worse and the brunt of the
burden is transferred to the labourer, we ought to be prepared to
advocate a return to the old Wages Boards or the adoption of a Trade
Board system. It must, I think, be a cardinal point of our Liberal faith
that though it is better to leave industrial questions to be adjusted as
much as possible by the parties concerned in the industry, the State
must be ready to step in in any case in which the workers have not
developed the power by their own combination to secure reasonable
conditions and prospects. It is to the prospects that I now turn.


I mean by this that there should be as many chances as possible for men
and women who have an inclination for country pursuits to take up
cultivation of the soil; the freest opportunity for experiment in making
a living out of the land; and good chances for those who have started on
the land ladder to rise to the top of it.

The three things which stand in the way are:--

(i) The cost of building and equipment;

(ii) The practice under which the cultivator provides all the movable

(iii) The handicap on free use of land imposed upon its owners by the
compensation clauses of the Agriculture Act.

These obstacles do real harm, in the first place, because a very large
proportion of farms in this country are the wrong size: too large for a
man to work with his hands, and too much for him to work with his head,
as Sir Thomas Middleton has well said. Figures show quite conclusively
that whether you take production per acre or production per man, the
farm of from 100 to 150 acres is economically the worst-sized unit.
Probably more than half of our farms lie between 70 and 100 acres. We
should get far more out of the land if all were either below 80--so that
a man and his family could manage them--or above 180, so that there
would be a chance of applying to production the most scientific methods
and up-to-date machinery.

But movement, either towards breaking up existing holdings or throwing
them together, will be extremely slow. The one process means building
new houses and buildings, which is prohibitive in price; and the other,
also fresh building and the abandonment of hearths and homes, which is
prohibited both by price and by sentiment. Any change in either
direction is almost prohibitive to the new poor landowner class, because
if one makes any change, except when a tenant dies or moves of his own
accord, one forfeits a year's rent.

I have not yet mentioned the difficulty about capital. Under our British
method, if a man wants a farm he must have capital--about £10 per arable
acre and about £5 for grass. This is a great bar to freedom of
experiment and the greatest bar on the way up the agricultural ladder.
There ought to be free access to our farms by town brains, which can
often strike out new and profitable lines if given a chance. It is not
good for agriculture, and it does not promote that sympathy and contact
and interchange which should exist between town and country, that a
start in farming should need a heavy supply of capital. If our
landlords were better off they might well try some of the continental
systems, under which the landlord provides not only the farm and
buildings, but the stock and equipment, and receives in addition to a
fair rent for the land half the profits of the farm. But it is vain to
hope for this under present conditions, and, for good or ill, the newly
rich does not buy land. He knows too much, and he can get what he wants
without it. He may lease a house, he does take shooting, but he won't
buy an estate.

When thinking of the importance of freedom of experiment and of a ladder
with no missing rungs, I have my mind on the possibility of the owner of
one estate of from 5,000 to 10,000 acres throwing all the farms and many
of the fields together and making his best tenants fellow-directors with
him of a joint enterprise, one doing the buying and selling, one looking
after the power and the tractors and implements, one planning the
agricultural processes, one directing the labour and so on. This gives a
prospect of the greatest production and the greatest profit, and it
gives a really good labourer a chance which at present he has not got.
At present, unless he leaves the land, in nine cases out of ten once a
labourer always a labourer. My vision would give him a chance to become,
first, foreman, then assistant manager, manager, director, and
managing-director. It ought to be tried--but how one's tenants would
loathe it, and quite natural too! At present if things go wrong, if it's
not the fault of the Government or the weather, it's the farmer's own
fault. On my joint-stock estate every director and manager would feel
that all his colleagues were letting him down and destroying his
profits. It is hard to make people accept at all readily, in practice,
the teaching that they are their brothers' keeper.

The scheme could hardly be started with men accustomed to the present
methods, and the cost of obtaining vacant possession of land would make
it difficult to try with new men. I am sure, however, that something of
the sort is a good and hopeful idea, and the best way of making the
ladder complete. And I am emboldened to think that something of the sort
will be tried gradually in some places, when I see the number of
landlords' sons who are in this and other universities taking the best
courses they can get in the science and economics of agriculture. They
know this is the only way to retain a remnant of the old acres. It is
quite new since the war--and a most hopeful sign.


I need not urge the importance in our villages of real independence of
life. It was the absence of independence combined with long working
hours and little occupation for the hours of leisure, which, more than
low wages, caused the pre-war exodus from the country. Should the
prospects of industry improve, but agriculture remain depressed, there
will be another exodus from the country-side of the best of the young
men who have come back to it after the war. It is of first-class
importance, both from the national and from the agricultural point of
view, that they should stay, for there was a real danger before the war
that agriculture might become a residual industry, carried on mainly by
them, too lethargic in mind and body to do anything else.

In a preface which he wrote to Volume I of the Land Report, as chairman
of Lloyd George's Land Inquiry Committee (it seems a long time ago now
that Lloyd George was a keen land reformer), my father sketched out the
idea of setting up commissions to report parish by parish in each
county, in the same way that commissions have reported on the parochial
charities. They would record how the land was distributed, whether the
influence of the landowners told for freedom or against it, whether
there was a chance for the labourer to get on to the land and to mount
the ladder. Whether there was an efficient village institute, whether
there were enough allotments conveniently situated, whether the
cottagers were allowed to keep pigs and poultry, and what the health and
housing were like.

It is a good idea, and should be borne in mind. I confess I do not know
enough to know whether it is now as desirable as it seemed to be before
the war. I would fain hope not, but I am not sure. I believe that there
is a good deal more real independent life in the villages now than there
was ten years ago. There are, I think, now fewer villages like some in
North Yorkshire before the war, in which the only chance for a Liberal
candidate to have a meeting was to have it in the open-air, after dark
on a night with no moon, and even then he needed a big voice--for his
immediate audience was apt to be two dogs and a pig. Now, it seems to me
that people like having political meetings going on, but do not bother
to listen to any of them.

As to the present, there has been lately, within my knowledge, a great
building of village institutes. There has been a tremendous development
of football. Village industries, under the wise encouragement of the
Development Commission, are reviving. Motor buses make access to town
amusements much easier, and cinemas come out into the village. There is
revived interest and very keen competition in the allotment and cottage
garden shows. Thus it is, at any rate, down our way--but no one can know
more than his own bit of country. On these and similar matters we ought
to think and watch and meet together to report and discuss. We need more
Maurice Hewletts and Mrs. Sturge Grettons to tell us how things really
are, for nothing is so difficult to visualise as what is going on slowly
in one's own parish.


I come lastly to co-operation. You will think me biased when I speak of
its possibilities. I am. I have been for eighteen years on the governing
body of the Agricultural Organisation Society, and happen now to be its
chairman, and am therefore closely in touch with the work of organising
co-operative effort. One sees fairly clearly how difficult it is to make
any class of English agriculturists combine for any mutual purpose, how
worth while it is, and what almost unexpected opportunities of useful
work still exist. Thanks largely to untiring work by Sir Leslie
Scott--who gave up the chairmanship of the society on his recent
appointment as Solicitor-General--the country is now fairly covered by
societies for purchasing requirements co-operatively--principally
fertilisers, feeding-stuffs, and seeds. There are also affiliated to the
movement I have mentioned, many useful co-operative auction marts,
slaughter-house societies, bacon factories, wool societies, egg and
poultry societies, and fruit and garden produce societies (but not
nearly enough), besides a thousand or so societies of allotment holders
which, thanks largely to our friend, George Nicholls, set all the others
an example in keenness and loyalty to their parent body.

The _ideal_ is that where a society exists the main raw materials of the
industry shall be bought wholesale instead of retail, and the main
products of the industry sold retail instead of wholesale; that thereby
middlemen's and other profits shall be reduced to a reasonable figure,
and that the consumer shall get the most efficient possible service with
regard to his supplies. It is also the ideal that farmers and others
shall learn more comradeship and brotherhood; that the big and small men
alike shall become one community bound together for many common
purposes, and that thus the cultivators of the soil shall lose that
isolation and selfishness which is a reproach against them. The ideal
is, however, not always realised. The farmer likes to have a
co-operative society to keep down other people's prices, but, having
helped to form a society, he does not see why he should be loyal to it
if a trader offers him anything a shilling a ton cheaper. A good
committee is formed, but the members think they hold their offices
mainly in order to get first cut for themselves at some good bargain the
society has made, and they start with the delusion that they are good
men of business. Things, therefore, get into the hands of the manager,
and it is astonishing how much more quickly a bad manager can lose money
than a good one can make it. And if in these and other ways it is uphill
work with farmers' societies, the work is still more uphill with
small-holders. It is the breath of their nostrils to bargain
individually, and if a society is started they will only send their
stuff to be sold when they and every one else have a glut, ungraded and
badly packed--and then they grumble at getting a low price.

But all co-operative work is abundantly worth while. And the field of
co-operation is not limited to the purchase of supplies or the sale of
produce. It ought to cover the use of tractors and threshing sets and
the installation and distribution of power. And if agriculture gets a
chance of settling down to a moderate amount of stability and
prosperity, it would not be beyond the bounds of hope that part, at any
rate, of the profits of co-operative enterprise should be used to
develop the amenities of the common life of the community--to provide
prizes for the sports and the flower show--the capital to start an
industry for the winter evenings, and even seats for the old people
round the village green.

Times are not propitious for increasing the productivity of our land,
excepting by the slow processes of education--which work particularly
slowly in agriculture. Nor are they immediately propitious for raising
the workers' standard of life, though we should never leave go of this
as an essential. But many of us can, if we will, help a good man to
start on the land, or help a man who has made good on the land to do
better. Many of us can help to develop real independence of life in the
villages and, through co-operation, those kindly virtues of friendliness
and helpfulness to others and willingness to work for common ends which
are sometimes not so common as they might be. And those who _can_ do any
of these things _should_, without waiting for legislation--for the
legislator is a bruised reed.

[Transcriber's Notes:
The following apparent printer's errors have been corrected for this
electronic edition:

misconduct necessitates military operations;
was "operations:"

and if he tries to make his responsibility real
was "responsiblity"

things slide--the main virtue of Cabinet
was "virture"

are two which are almost invariably present towards
was "invarably"]

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