[Footnote 1: Not to be confused for a moment with the very different form of freemasonry which prevails in this country.]
The die has been cast, and even those who most regret Turkey's action cannot shut their eyes to the fact that it inevitably raises the whole question of Constantinople and the Dardanelles. If Germany should emerge victorious, Turkey is likely to fall under a more or less veiled German protectorate. In the event of the victory of the Allies, Turkey may continue to exist as an Asiatic power, but there is little doubt that she will be eliminated from Europe. The only real question is, Who is to replace her? Bulgaria will, it is to be hoped, recover Adrianople and the Enos-Midia line, of which she was so cruelly robbed last year. The fact that the Turks on their re-entry systematically wiped out the entire Bulgarian population of northern Thrace does not weaken, but enormously strengthens, the case for its restoration. But to offer Constantinople to Bulgaria would be a fatal gift. She has absolutely no historic claim to the great city of the Caesars (Tsarigrad, as it is rightly known to every Slav); nor is there even any considerable Bulgarian population which could rally round the new government. The administrative task is obviously far beyond the powers of a small peasant state, most of whose present leaders were born under a foreign yoke. Nor is Greece a serious candidate for the vacant post. The Greeks, of course, unlike the Bulgarians, have a definite claim, based on the traditions of the Byzantine Empire, and there is a large Greek population in the city—at present close upon 350,000, though their numbers are likely to be materially reduced before this war is over. But in their case also Constantinople would be a fatal gift. The resources even of the enlarged Hellenic kingdom would inevitably prove unequal to the task. Moreover, it must not be forgotten that a Greek occupation would be opposed on many grounds by the entire commercial community of every other nation in Europe.
In some ways the ideal arrangement would be that Roumania should assume the administration of the city, as trustee for a reconstituted Balkan League, with proper guarantees for the commercial rights of all the Powers. But it is to be feared that such a solution would please nobody, perhaps not even Roumania herself. A league of the five Balkan kings, with Roumania asprimus inter pares, is the dream of a remote future, and until it can be realised, Constantinople cannot assume its natural position as capital of the Balkan peninsula.
§14.Russia and Constantinople.—In short, as matters stand to-day, there is only one power which can replace the Turks as master of Constantinople, and that power is Russia. The Russians could not of course incorporate the city in their empire for reasons of geography; and this fundamental fact destroys at a blow the numerous objections which might have told against the occupation, if Constantinople had been contiguous to the Russian dominions. It would obviously be necessary to establish a special autonomous administration under a Russian governor. It is by no means impossible that Russia would be satisfied with the expulsion of the Turks and the internationalisation of Constantinople as a free port under a Christian prince or a commission of the Powers. But, though admirable in theory, such a solution would give rise to endless complications and disputes. Unless the Western Powers can trust Russia sufficiently to leave her in full possession, they must make up their minds to bolstering up the impossible Turk for a further period of years. Such a surrender to the unreasoning and ignorant prejudices of a previous generation would be a sure prelude to the collapse of our alliance with Russia, which it is the vital interest of all British patriots to uphold at all costs. Happily, "the fear of Russia," as of a strange and unknown colossus, is dying out, vague fancies inevitably yielding to the hard logic of facts. The Disraeli policy in the Near East must give place once and for all to the broader conceptions of Gladstone, tempered by the cautious statesmanship of Salisbury. The greatest of the Christian Powers must be allowed to replace the cross upon the dome of Saint Sofia. The religious appeal of such a change is clear enough, nor need there be any anxiety on economic grounds. There is nothing to prevent Constantinople from becoming a free port under the Russian flag, and filling a similar place to that which the free port of Trieste would occupy under the flag of United Italy. Indeed it may be confidently assumed that the change would give an extraordinary impetus to trade in the whole eastern Mediterranean. The recent history of Batum and Baku is a faint indication of what might be expected.
The fate of the Dardanelles cannot be separated from that of the capital; both must be in the same hands. At the same time a reasonable compensation for their cession to Russia would be the dismantlement of their forts. In any case, whatever their fate may be, it is clear that an end must be put to the galling restrictions upon Russia's Black Sea fleet. The essential point to bear in mind is that if the war goes well with the Allies, and if Russia expresses a definite desire to occupy Constantinople and the straits, resistance on our part would be alike difficult, pointless, and undesirable. Those who oppose have no arguments, so long as the special international needs and conditions of the city are properly recognised and guaranteed. With true Oriental fatalism, the Turk has always regarded his ultimate disappearance from Europe as a certainty; the superstition which led the inhabitants of Stamboul to prefer burial across the straits in Asia has its parallel in the alarm aroused in the bazaars by the Young Turks' decision to exterminate the pariah dogs which have for centuries supplied the place of scavengers in the streets of the capital. To-day the prophecy which made their removal the prelude to the departure of their masters seems on the point of fulfillment, and all who believe in the retributive justice of history will re-echo Mr. Asquith's hope that the fall of Ottoman rule will remove "the blight which for generations has withered some of the fairest regions of the world."
§15.Asiatic Turkey.—What then will be the subsequent fate of the Turks if they are once driven "bag and baggage" across the straits. The Sultan will doubtless transfer his capital to Brussa, or even to Konieh. But can the Khalifate survive such a loss of prestige on the part of the Ottoman dynasty? It would be altogether premature to discuss in anything approaching detail the vast issues of the fate of Turkey's Asiatic dominions, but it is necessary to indicate that even after settling the fate of the straits we shall still be confronted by issues of appalling magnitude. It is the conjunction of the spiritual and temporal power in a single person which has given the Khalifate its importance, and its expulsion from the Golden Horn would transform its whole political status. Above all, it is necessary to reckon with the Arab nationalist movement which is already a reality and a factor of permanent importance. Here, too, the principle of nationality must be applied, though in a very different sense, for national feeling is of course at a much earlier stage of development among the Arabs than in Central Europe. Hitherto they have accepted the Khalifate of the House of Othman, though without enthusiasm; but recent events are likely to bring to a head the resentment with which they view the spectacle of the Khalif as the helpless tool of a clique which in no way represents Islam. Will they repudiate him and restore the Khalifate to some more authentic descendant of the Prophet? Is there to be an independent Arab power? Will it be practicable to create a central authority amid the virtual anarchy of so vast and primitive a country? Or will Britain, as the chief Mahommedan power, be obliged to assume a loose protectorate over Arabia and Mesopotamia? If so, will she share this with the French in Syria, and will Lebanon be able to preserve its autonomy? Only the course of events can provide an answer to such questions; only one fixed point emerges from the surrounding uncertainty—the firm pledge of the British Government that the Holy Places of Islam shall be respected.
Even this does not exhaust the possibilities of the immediate future. Is Palestine to become a Jewish land? In recent years there has been a steady emigration of Moslem and Christian and an equally marked Jewish immigration, and among other factors in the movement the potentialities of Jewish nationalism in the United States deserve especial notice. America is full of nationalities which, while accepting with enthusiasm their new American citizenship, none the less look to some centre in the Old World as the source and inspiration of their national culture and traditions. The most typical instance is the feeling of the American Jew for Palestine, which may well become a focus for hisdéclassékinsmen in other parts of the world. The Jews quite realise that they can have no exclusive claim to the possession of such a religious centre as Jerusalem, and it is clear that whatever happens to the Holy Land as a whole, the city itself must be subject to an impartial administration, which would be neither Jewish, Catholic, Orthodox, Protestant nor Moslem in any exclusive sense, but would secure free play to the religious and educational aspirations of them all. Herzl himself, the founder of modern Zionism, dreamt of Jerusalem as the shrine of all religions and never looked forward to the day when it would be a purely Jewish city.
Lastly, what is to be the fate of Asia Minor? There can be no question that the Russians must be allowed to occupy and retain the whole of Turkish Armenia. They will thus be conferring a benefit upon humanity and ending one of the most grinding and barbarous tyrannies that the modern world has ever seen; the progress made by the Armenians under Russian rule during the past twenty years is a happy augury for the future of this race when once united in common allegiance to the Tsar, under a wise system of local autonomy. But will the Ottoman Empire be able to survive when shorn of its European possessions, of its Armenian and Arab populations? Will not Italy demand her share of the spoils, and side by side with the French in Syria, assume in friendly rivalry the protectorate of Cilicia from a point east of Adalia as far as the gulf of Alexandretta? Will it be possible to arrest the process of disintegration even at this stage? Will not Greece attempt to annex Smyrna and at least a portion of its hinterland, or has she not at least as good a title as any other competitor? Here, again, it would be absurd to attempt any answer for the present, but we must at least be prepared for the possibility of a transformation as rapid and as overwhelming in Asiatic Turkey as that which freed the Balkans from the Turkish nightmare two short years ago. In Asia, as in Europe, the war is the prelude to a new era, and Britain is faced with the alternative of weakly abandoning her Imperial mission or assuming still greater responsibilities. "The Turkish Empire has committed suicide, and dug with its own hand its grave," and to Britain will fall more fully than ever before the leadership of the Mahommedan world. The loyalty and devotion of the Moslem community in India can best be repaid by the most scrupulous and sympathetic attention to the interests of Islam throughout the world.
§16.Russia and Poland.—It is no mere accident that Germany, Austria-Hungary, and Turkey should be ranged on the same side in the great European struggle; for they represent, each in its own way, those false conceptions of nationality which have so long envenomed the public life of Europe, and which, for want of better words, have been described as Germanisation, Magyarisation, and Turkification. It would, however, be flagrantly untrue to suggest that those three States enjoyed a monopoly of racial intolerance; for the ideas on nationality which dominated official Russia under the old absolutist régime and which so rapidly regained the upper hand under Stolypin and the triumphant bureaucracy, struck at the very root of tolerance and political liberty. But recent years have revealed a subtle change of attitude. The policy of Russification had not been abandoned; indeed in Finland and the Ukraine it survived in its most odious form. But it was none the less possible to detect a growing note of interrogation even among the bureaucracy, and still more an increasing movement of impatient protest on the part of thinking Russians. Without in any way ignoring what has happened in Persia, we have every right to point to the essential fact that Russia has of her own accord raised the question of nationality and thus set in motion vast forces which are already shaking Europe to its foundations. In proclaiming as one of her foremost aims the restoration of Polish Unity, Russia did not, it is true, commit herself to any concrete project of autonomy. But whether her action represents genuine feeling on the part of the Tsar and his advisers, as M. Gabriel Hanotaux so positively asserts, or whether it was originally a mere manoeuvre to prevent the Polish question being raised against her, it is at least certain that Russia has entered upon a new path from which it will be very difficult if not impossible to recede. The Russian Poles, under the leadership of M. Dmowski, have rallied loyally round the Tsar; and there are many signs that the long-deferred Russo-Polishrapprochementis at length on the point of fulfillment. Here economic interests play their part, for in recent years the district between Warsaw and Lodz has become one of the chief industrial centres of the Russian Empire, and its annexation to Austria or to Prussia would place a tariff wall between it and the South Russian markets upon which it chiefly depends. The Poles of Galicia, having enjoyed the utmost liberty under Austrian rule, have naturally been almost immune from the discontent so noticeable among their kinsmen in Russia and Prussia, and have indeed for a generation past formed the backbone of all parliamentary majorities in the Austrian Reichsrat. But even among them the first faint signs of Russophil feeling have been noticeable in the last two years. This is partially due to the encouragement given by the Austrian Government to the Ruthenes in Galicia, but also to the disintegrating effect of universal suffrage upon the Polish political parties, the growth of democratic tendencies at the expense of the Austrophil nobility, and the consequent increased influence of the Poles of Warsaw. Though the Polish parties in Galicia issued declarations of loyalty to Austria at the beginning of the war, and though theirfranc-tireursare fighting in the Austrian ranks, there is a growing perception of the fact that the only serious prospect of attaining Polish Unity lies in a Russian victory. Austria, they argue, might, if successful, unite the Russian and Austrian sections (at the expense of the former's economic future!), but never the Prussian; and Prussia, out of loyalty to her ally, could at best addRussianPoland to her own territory: Russia alone can hope, in the event of a victory, to unite all three fragments in a single whole. However profoundly they may differ on points of detail, all Poles agree that the first essential is the attainment of that unity without which they may at any moment become, as now, the battleground of three great Empires, and which provides the key with which they themselves can unlock the portals of their future destiny. Should their dream be fulfilled, the valley of the Vistula, restored to geographical unity, may soon play an important part in the political and economic life of Europe.
Russia, then, is faced by one of the greatest choices in history. An opportunity will present itself after this war, for solving her own racial question which has in the past presented scarcely less grave embarrassment than the parallel problem of Austria-Hungary, and which, if left unsolved, may at no distant date endanger the unity and welfare of the Empire. The grant of Polish autonomy, the restoration of the Finnish constitution, the recognition of the special position of the Ukraine or Ruthene language and cultural traditions, the relaxation of linguistic restrictions among the lesser races of the Empire, and the adoption of a humaner attitude towards the Jews of the Pale—these are steps which follow logically from the proclamation of the Grand Duke Nicholas, and indeed from the alliance with the Western Powers. Incidentally much will depend upon the attitude adopted by the Russian Government towards its new Catholic subjects. Its relations with the Vatican will require to be placed upon an entirely new footing, and due respect must be accorded to the Uniate Catholic Church of the four million Ruthenes of Galicia. In this respect the Concordat signed a few weeks before the outbreak of war between Serbia and the Vatican should form a very valuable precedent for the whole future relations of the Catholic and Orthodox Churches, relations which are likely to assume increasing importance in the not too far distant future. And here it is worth while to emphasise, for the benefit of those who still regard Russia with misgiving or dislike, the indisputable fact that it is just the most democratic and enlightened of the smaller Slavonic States, and the most intellectual and enlightened politicians and thinkers in those States, who have always looked with the greatest confidence and enthusiasm to Russia, and who to-day are most unanimous in welcoming her as the herald of a new era of humanity and progress.
§17.General Aims.—It would lead us much too far afield to consider the possible effects of the war upon colonial development and upon the political and commercial development of the Far East. Here again, the central fact to remember is that we may, indeed, that we must, defeat Germany or perish in the attempt, but that a nation of 65 million inhabitants cannot be effaced or permanently reduced to impotence. After the war the two nations will have to live peaceably side by side once more, and repair so far as possible the wreckage to which this gigantic struggle has reduced their political, social, and commercial intercourse. Any peace settlement will be good only so far as it avoids placing obstacles in the path of so difficult an achievement. It will be the first duty of our statesmen to watch over the alliance between Russia and the Western Powers, sealed as it is by the fiery ordeal of war, and to neutralise the occult influences which are even now working to undermine it, to the advantage of interests which are anything but British. But it will also be their duty to create a situation which, while safeguarding the Empire's vital interests, shall not render improved relations with the central European Powers impossible from the very outset. It is one thing to abandon our allies and friends, it is quite another thing to perpetuate a feud which, though converted by circumstances into a struggle between two unanimous nations, was in the first instance the work of mischievous if powerful minorities.
The final settlement will inevitably bring many disappointments and errors in its train. We can best guard against such a result by preparing ourselves for all eventualities and giving the most careful consideration to each of the many problems at issue. Our obvious aim must be a settlement which shows some reasonable prospect of permanence, and this can best be achieved if we respect so far as possible the wishes of the populations concerned. The principle of Nationality is not a talisman which will open all gates, for in some parts of Europe the different races are so inextricably intermingled as to defy all efforts to create ethnographic boundaries. This does not, however, affect the central fact that Nationality is the best salve for existing wounds, and that its application will enormously reduce the infected area. But if the peoples are to make their wishes felt there must be a regeneration of diplomatic methods throughout Europe. Attempts will be made to revive the pernicious principles of the Congress of Vienna, by which a few autocrats and aristocrats carved out the fate of millions according to their dynastic appetites or fancies, and thus tied a whole series of unnecessary knots for subsequent wars to sever. A healthy and informed public opinion—especially in the West—must watch over the doings of those who represent it at the fateful Congress, according loyal support to their declared policy, but promptly checking the reactionary tendencies which are certain to reveal themselves. It is still unhappily possible for the arrogant impatience of a single ruler or the persistent intrigue and misrepresentation of an ambassador to embroil the European situation. Unless the nations in council can devise some practical checks upon irresponsible meddling, the flower of their manhood will have massacred each other in vain. The antecedents of Sir Edward Grey, and more especially his attitude during the crisis which led to war, justify us in the hope that his entire influence will be employed in the right direction when the decisive moment arrives, and that he will insist upon such crucial questions as the reduction of armaments, the substitution of "citizen" for "conscript" armies, the control of armament firms and their occult influence, the effective extension of arbitration and the elimination of impossible time-limits, being discussed in all seriousness, and not merely dismissed with a few ironic platitudes and expressions of hypocritical goodwill. We must not be unduly discouraged if some of these ideals prove impossible of realisation, for it would be childish to suppose that when the great war is over the nations will at once convert their swords into ploughshares and proclaim for the first time in history the sway of Right over Might. But it is obvious that in a world which has long ceased to be merely European, the European Powers cannot long continue with impunity such internecine strife, and that unless some real shape and substance can be given to the Concert of Europe—so long and so justly a byword among all thinking men—our continent (and with it these islands) will inevitably forfeit the leadership which has hitherto been theirs and surrender the direction of the world's affairs into the hands of the extra-European powers. It will be remembered that Sir Edward Grey, in a last despairing effort to preserve peace,[1] broached the idea of "some more definite rapprochement between the Powers," and though admittedly "hitherto too Utopian to form the subject of definite proposals," it may be hoped that the enormous difficulty of the task will not deter him from pleading before the future Congress the outraged cause of international goodwill.
[Footnote 1: White Paper, No. 101.]
"And the economic ravages of war are also much greater with civilised nations than with barbarians. A war nowadays may have stern, fearful consequences, especially through the destruction of the ingenious credit system."—TREITSCHKE.
"Those who have fallen have consecrated deaths. They have taken their part in the making of a new Europe, a new world. I can see signs of its coming in the glare of the battlefield. The people will gain more by this struggle in all lands than they comprehend at the present moment…. A great flood of luxury and of sloth which had submerged the land is receding, and a new Britain is appearing. We can see for the first time the fundamental things that matter in life and that have been obscured from our vision by the tropical growth of prosperity."—MR.D. LLOYD GEORGE.
It is obvious that a great war must profoundly disturb every side of the national life of the peoples taking part in it, and that these disturbances must react upon neutral States. The exact character and extent of these changes, however, are by no means easy to understand, and the present chapter does not pretend to offer an exhaustive treatment of them. It is impossible to appreciate the full significance of the immediate social and economic reactions of the war, whilst an attempt to state the ultimate effects of the war leads us along the slippery paths of prophecy. Nevertheless, we are not likely to grasp the importance of the various phenomena which have followed so closely upon the heels of the declaration of war, nor to adapt ourselves to the new situation which will arise out of the war, unless we give our attention to the things which are happening around us.
Unfortunately we can gain little guidance from the past. The South African War inevitably disturbed the normal course of our industrial life, but it involved us in conflict with a nation of relatively little general economic importance; and so, costly and prolonged though it was, it bears no comparison in its magnitude and in the character of its main issues to the present war in Europe. The Crimean War of sixty years ago, though waged between four European nations—Great Britain, France, Turkey, and Russia—cost Great Britain much less in money than the Boer War; the issues so far as this country was concerned were not so momentous; and industry and commerce, though important, were not then nearly so highly developed and complicated as they are now. The Napoleonic wars, though comparable to the present war in fundamental importance, lasted for a generation, which the war of to-day can hardly do; the effects of the wars with Napoleon were complicated by the Industrial Revolution; the industrial system and the commercial fabric erected on it were then only in process of formation and the power of the people was small.
These differences enable us to see the new factors which have come into play during the past century. The present war is being fought under conditions which were non-existent during the struggle with Napoleon—conditions which on the one hand add to the waste and loss and misery of war, but on the other give rise to the hope that many of its evil consequences may be averted. Firstly, industry and commerce are world-wide; the remotest countries are bound together by economic ties; invisible cords link the Belgian iron worker with the London docker and the Clyde shipwright, the Californian fruit grower with the Malay tin miner and the German dye worker. The economic effects of modern warfare, therefore, reverberate throughout the whole world, and widespread dislocation ensues. In the next place, the gigantic scale on which war between great powers is conducted, though it tends to shorten the duration of wars, increases the intensity of the shock to human society.
But besides these new material conditions, modern warfare is carried on under the eyes of more enlightened peoples than in the past. The struggle which is now being pursued is the first great war watched by a conscious or at any rate partly conscious democracy. It is the first modern war waged (except in our own case) by national armies constituting practically the entire fit male population. The masses of the people have in most civilised countries some measure of political power. And though to the elector diplomacy and the conduct of foreign affairs are a closed book, war once declared is war by the people; and their voice must be heard in matters connected with it and arising out of it. Then, further, in the past the aftermath of war was in many ways as horrible as war itself, whilst the period during war witnessed an enormous amount of privation and suffering among non-combatants almost as ghastly as that of the battlefield. This was due not so much to inaction resulting from callousness as to unwise action and ignorance. During the past century political science and economic inquiry have made vast strides, and consequently the injurious social effects of warfare may be minimised, though not averted; and a considerable body of public opinion, far more enlightened than during any previous European war, is almost certain to exercise some pressure in the direction of wise and far-reaching action both during the war and after it is ended. These considerations must be borne in mind in discussing both the present position and possible future developments.
It is clear that four great European Powers and some smaller ones cannot engage in war without shaking the fabric of European civilisation to its foundations. The tramp of fifteen million armed men is the greatest social and economic fact of the present day, and indeed of the present generation. These millions of combatants have to be clothed, fed, armed, transported, and tended in health and in sickness; they are non-producers for the time, consuming in large quantities the staple commodities of life, and calling in addition for all the paraphernalia of war; sooner or later, they will desire to return to the plough and the mine, the factory and the railroad. These two facts alone are of tremendous importance. But besides this, the activity of those who stay at home is called into play in a thousand different ways, and economic and social life leave their well-trodden paths in answer to the imperious call of national necessity. Social institutions of all kinds are inevitably led into new fields of thought and action, and States are driven to untried experiments in communal activity. The usual channels of thought dry up, the flood of new ideas and of old ideas throbbing with a new life rushes on unconfined, here in the shallows, there in the deeps, presently to overflow into the old channels, cleansing their beds and giving them a new direction, and linking up in fruitful union but remotely connected streams. When fighting ceases and there comes the calm of peace, society will tend to revert to its normal functions, based on peace; but the society of yesterday can never return. Social life cannot be the same as it was before, not merely because those activities called forth by the war may persist in some form, but because of the growth of new ideas under the stimulus of the war. The struggle will almost certainly set in progress trains of thought not only connected with questions of war and peace, but with the wider questions of human destiny.
Coming to a closer view of the question, we must distinguish between the immediate effects of the war which are already in evidence and the ultimate effects which will but begin to unfold themselves after the return of peace. Some of the latter results will grow out of the immediate effects; others will be more directly due to the events following on the conclusion of the war. It will also be advisable to distinguish between the economic reactions of the war, and the broader social consequences. At such an early stage it would be presumptuous and tempting Providence to attempt to forecast the future in any detail or to try to trace the play and interplay of the various forces going towards the making of the future. This chapter will be concerned with broad tentative generalisations on quite simple lines.
One of the things which struck the intelligent working man during the early days of the war was the rapidity with which the State acted in the face of the crisis. In next to no time large measures of State control and action were put successfully into operation and those who had advocated co-operative action in the past with but indifferent success were amazed at the swiftness with which the nation can act in the hour of need. The drastic action of the State cannot be better illustrated than by the steps which were taken to meet the sudden commercial deadlock which the war precipitated. A discussion of these financial measures will at the same time enable us to understand how, through credit, war strikes at the industry and trade of the modern world.
The Austrian ultimatum to Servia was followed by the paralysis of the world's international system of finance. Before the end of July many important stock exchanges were closed, and by the 31st the London Stock Exchange for the first time in its history was also compelled to close. The remittance market collapsed and with it the fabric of international trade. Widespread bankruptcy and ruin seemed imminent; so serious did the state of affairs become that moratoria were declared not only in several European countries but in parts of America, and in many continental countries specie payments were suspended. In a word, the possibility of war had thrown the delicately poised credit system of the commercial world out of gear; the declaration of war had brought it to a standstill. Into an explanation of its working it is not possible to enter; it is sufficient for our immediate purpose to realise that the foreign exchange machinery by which the supply of commodities from other countries becomes practicable on a large scale was for a time altogether unworkable. London as the financial centre of the world has immense sums owing to it and in its turn owes large sums. The ultimate effect of the collapse of credit, which depends on confidence, was that London could neither receive nor make payment. The big finance houses, who had "accepted" bills of exchange and rendered themselves liable to meet the payments for the things they represented, on the understanding that the means to pay them were to be promptly despatched, found that these means were not forthcoming; their own resources were far from sufficient to meet these payments. Utter ruin stared them in the face. At home also a run on the banks seemed probable, which would have meant ruin to large numbers of people. In this grave crisis the State acted with commendable promptness. The bank holiday was extended; State notes for 10s. and £1 were issued; a moratorium was declared, legalising the postponement of the due payment of debts, with certain exceptions; the Bank of England under a guarantee from the Government that the latter would meet the loss, began discounting, or buying for cash, approved bills of exchange accepted before war was declared, many of which are hardly likely to be met by the people liable for payment. These steps were taken swiftly and boldly and allayed the panic. But more was needed; such measures were not in themselves sufficient to put the machinery of foreign exchange into operation again and the suspension of this method of settling international indebtedness was having serious effects. To carry on international trade, and to supply ourselves with the produce on which the very existence of the community depends, without the machinery, is a thousand times more difficult than to conduct our home trade by means of direct barter. Without going into technical details, it may be said that the purchase of bills by the Bank of England, whilst relieving the last holder from loss, did not extinguish the liability of persons whose names had appeared on the bills as acceptors, endorsers and drawers. This was true of traders and commercial people not only in this country but also in other parts of the world. In the face of these liabilities, in most cases unexpected, it was hardly likely that they would increase their liabilities under new bills. Consequently the remittances coming to London shrank to next to nothing. As bills of exchange—or their equivalent—are the means by which both importers and exporters get paid for their goods, the difficulty of getting paid naturally began to have a serious effect on trade. As the figures of foreign trade during August show, cargoes were being held up. It was clear, therefore, that if this country were to continue to receive supplies of corn and meat, of cotton and wool, of hides and timber, something further must be done. The question the Government had to decide was what steps could be taken to safeguard the food of the people, and to avoid a crushing volume of unemployment through the lack of the raw materials of industry. The produce was there; what was needed was to start the flow of the particular kind of currency—"credit money"—which would expedite exchange. The course taken by the State was to advance money to the large bill bankers or "accepting houses" in London to allow of the due payment of the enormous number of bills falling due in the three months succeeding the outbreak of war. The audacity of the step will be understood when it is realised that probably something like £300,000,000 of bills fall due over a period of three months.[1] The necessary money was lent without security, the Government promising not to demand repayment until twelve months after the end of the war. A proportion of this advance will be in the nature of a loss, though how much it is quite impossible to say. By this measure, in the event of the bills not being met by those who have promised to pay them—the acceptors—the liability which would ordinarily have fallen upon the drawers and endorsers through whose hands the bills had passed has been removed. The State has advanced to the commercial community a huge sum of money, risking the total loss of some part of it, in order to set in motion the machinery of international exchange. Further steps, however, were taken. The general moratorium expired on November 4. Useful as it had been, it still left many traders in financial difficulties because of the impossibility of collecting debts owing to them in enemy and other countries. The Government, therefore, appointed a committee representing the Treasury, the Bank of England, the Joint Stock Banks, and the Association of Chambers of Commerce of the United Kingdom to authorise advances in approved cases to British traders carrying on an export business in respect of debts outstanding in foreign countries and colonies, including unpaid foreign and colonial accepted bills which cannot be collected for the time being. It is safe to say that no Government ever took such gigantic measures to meet a great crisis.[2] The Prime Minister, speaking at the Guildhall on November 9, 1914, summarised as follows the effects of the steps taken: "The foreign exchanges are working in the case of most countries quite satisfactorily, and the gold reserves at the Bank of England, which were 40 millions on July 22, and which had fallen on August 7 to 27 millions, now stand at the unprecedented figure of 69-1/2 millions. The central gold reserve of the country after three months of the war amounts to £80,000,000, almost exactly twice the amount at which it stood at the beginning of the crisis. The bank rate, which rose, as you know, to 10 per cent, has now come down to 5, a figure, I think, not in excess of that at which it stood this time last year. Food prices have been kept at a fairly normal level, and though trade has been curtailed in some directions, unemployment has been rather below than above the average."
[Footnote 1: Mr. J.M. Keynes (Economic Journal,Sept. 1914) estimates the aggregate value of outstanding bills in London at £350,000,000.]
[Footnote 2: In addition to these various financial measures, the State has lent Belgium £10,000,000 and the Union of South Africa £7,000,000, whilst it has also guaranteed £5,000,000 of the new Egyptian cotton loan.]
But this is by no means the only example of State action. The Government has established temporarily a State-aided system of marine insurance, by undertaking 80 per cent of the war risk, in order to encourage overseas trade. It has given substantial aid to the joint-stock banks "for the sole purpose that they might be fit to aid in every way possible the country's trade and finance."[1] It made arrangements for the direct purchase of forage and vegetables, etc., from farmers.[2] It took over the control of the railways. When, owing to panic, there was a rush for the purchase of food-stuffs, which was used to force up prices unduly, the Government intervened to prevent exorbitant charges. Particularly interesting is the action of the State regarding sugar, two-thirds of our supply of which comes from Germany and Austria. In the days immediately following the declaration of war wholesale prices were trebled. The Government, therefore, decided to take upon itself the task of ensuring an adequate supply of sugar, and a Royal Commission was appointed. The leading refiners were approached and an arrangement was made with the whole body of refiners that they should stand aside from the market for raw sugars, leaving it free for the operations of the Government. The Royal Commission pledged the refiners to buy their sugar from the Commission,i.e.from the State; sugar was to be offered to them at a fixed price, and the refiners were to sell the refined product to the dealers also at a fixed price sufficient to yield the refiners a fair profit on manufacture. As a result of the corner, a big rise in the price of sugar, which is not only an important domestic commodity but the raw material of several industries, was averted. This merits the description given of it inThe Nation—"a really dashing experiment in State Socialism." [3] On the other hand, it has done nothing to increase the world's supply of sugar, but has merely commandeered a part of the existing stock. The aid of the State has been invoked in other directions. Already the Government has assisted experimental cultivation of beet in this country. The suggestion has been made that the State should build two beet-sugar factories, which would cost about £200,000 each; in this way it is suggested that our home supply of sugar would in the future be assured, and that agriculture would benefit considerably.[4]
[Footnote 1:Round Table, Sept. 1914, p. 705.]
[Footnote 2: This was done through the Board of Agriculture for the War Office. On the other hand, in the purchase of clothing, boots, blankets, etc., the War Office approached the producers directly instead of through the Board of Trade.]
[Footnote 3: It was reported in the Press on October 8, 1914, that the Home Secretary had purchased 900,000 tons of sugar at about £20 per ton, the transaction involving an outlay of about £18,000,000.]
[Footnote 4: See an article by Mr. Robertson Scott inThe NineteenthCentury, October 1914.]
Sir Charles Macara has put forward a scheme of State aid for the cotton industry. Owing to the war, a third of the total cotton crop (usually taken by the continental countries) was thrown on the market. Prices naturally fell, and there was a danger that the cotton planters might not be able to pay the debts they had contracted to enable them to grow their crops, in which case there would be a likelihood of the land being used for other saleable commodities, and the efforts which have been made in the past to increase the cotton crop would be nullified. In the meantime, the surplus cotton on the market created an uncertainty regarding prices, and buying came to a standstill, with the result that the position of the industry as a whole became very critical. The suggestion of Sir Charles Macara is that the Governments of this country and the United States, acting in conjunction, should take the temporarily unsaleable surplus of raw cotton off the market and store it for use in years when the crop is short. In other words, it is proposed to establish a permanent national cotton reserve. It is estimated that the cost of the scheme would mean an outlay of sixty to seventy millions sterling. If the plan were put into operation, however, it is claimed that it would restore confidence, prevent the wholesale stoppage of mills, and at the same time establish a cotton reserve to counteract the fluctuations of crops in the future.[1] These matters need but to be stated as examples of the remarkable adaptability of the State and the possibility of drastic action under the pressure of imperative needs.[2]
[Footnote 1: It should be pointed out that the serious condition of the cotton industry is not due to the war. The overstocking of the Eastern and Indian markets during the trade boom of 1913, together with the financial crisis in India last year, has reduced the demand for cotton goods. The war has merely emphasised a depression which had already fallen on the industry. Sir Charles Macara's scheme, whilst it may be desirable on other grounds, cannot compensate for the shrinkage in the demand for Lancashire products. The Government, it is interesting to note, have commissioned certain firms in Alexandria "to buy cotton extensively from small proprietors at a reasonable rate, on Government account, to be stored until the arrival of more prosperous times." (Press Association Telegram,Daily Press,Nov. 2, 1914).]
[Footnote 2: The voluntary gifts of different parts of the Empire should not be overlooked. Besides these other steps have been taken. The Australian Government, for example, in order to induce farmers to extend the area of cultivation, has guaranteed "a fixed minimum price of 4s." for all wheat grown on the newly cultivated land. (Reuter's Correspondent,Daily Press, Oct. 27, 1914).]
The course of events has shown the temporary collapse of economic individualism in the face of the European crisis. The economic system, which works during times of peace, could not meet successfully the crushing effects of a European war. It lacked not only adequate resources but the necessary power of corporate action and co-ordination. Immediate State action seemed to be the only way to avert disaster. In a month, Britain came nearer than ever before to being a co-operative commonwealth. It has been realised that industry and commerce are not primarily intended as a field for exploitation and profit, but are essential national services in as true a sense as the army and navy. The complexity of the modern economic world and the large individual gains which have been made in it have obscured the fact that the economic structure exists to serve the needs of the community. It was recognised by the Government, at any rate to some extent, that the success of our armies in the field would be nullified if, in the economic sphere, the production of commodities and services were seriously diminished and if their interchange were hampered in a large degree. People have felt that the spinner, the miner, the weaver, the machinist, are all by following their occupations performing a valuable service to the community. How far this attitude of mind will persist after the war, when normal conditions in industry and commerce gradually return, remains to be seen.
1.Foreign Trade.—The effects of the war on industry and commerce will be complicated and far reaching. The British and German Empires together transact about two-fifths of the international trade of the world, the British Empire doing over a quarter and Germany almost exactly an eighth. Between them they own over half the merchant shipping of the world. A war in which they are both engaged, therefore, must have serious consequences not only to these countries themselves but to the countries with whom they carry on business relations, and through them, in a lesser degree, to all other commercial countries. But this is not all: France has a foreign trade amounting to £615,000,000 a year; Belgium's is valued at £326,000,000, Russia's at £275,000,000, and Austria-Hungary's at £256,000,000. Besides a gigantic foreign trade there is a domestic trade, which is on a larger scale than the external trade of these countries. Let us consider in more detail the case of Germany. Half her foreign trade is transacted with the nations now engaged in the great war. The trade of Britain, Russia, and France with the German Empire is now at a standstill, except possibly for a very small amount transacted via neutral countries; her trade with Austria-Hungary must seriously decline. Moreover, her imports from neutral countries and her exports to them have dwindled very considerably, and must remain small as long as British naval supremacy continues. More than one half of Germany's total imports are raw materials for manufactures, about two-thirds of her exports being manufactured goods. Assuming that she continues o conduct foreign trade through Norway and Sweden, Denmark, Holland, Switzerland, and Austria-Hungary, the volume will be small, and even if her whole trade with neutral countries could be maintained she would still be without the trade of her enemies. For example, in 1913 this country sold goods to the value of £40,000,000 to Germany and purchased from her goods to the value of £80,000,000.[1]
[Footnote 1: The following list indicates some of the chief articles of trade between the two countries:
German Imports into the United | British Exports to Germany, 1912 Kingdom, 1912. | | £ million. | £ million. Sugar 6·2 | Cottons and yarn 8·3 Cottons and yarn 5·9 | Woollens and yarn 6·6 Iron and steel and | Coal, coke, etc. 4·4 manufactures 5·7 | Herrings 2·4 Woollens and yarn 2·6 | Ironwork 2·1 Machinery 2·4 | Machinery 2·1 Glass and Manufactures 1·1 |
It is not true, as Dr. R.G. Usher says, that Germany is "literally self-sufficing" (Pan Germanism, p. 65).]
In Great Britain, economic activity has been developed on the assumption of continued peace. In Germany, however, though there were those who would "base all economic policy on an imaginary permanent peace,"[1] the Government has had in view the possibility of war. "Every conscientious Government," writes von Bülow, "seeks to avoid [war] so long as the honour and vital interests of the nation permit of so doing. But every State department should be organised as if war were going to break out tomorrow. This applies to economic policy as well."[2] It is with this idea in mind that the German Government has striven to maintain the importance of agriculture. "Economic policy must foster peaceful development; but it must keep in view the possibility of war, and, for this reason above all, must be agrarian in the best sense of the word."[3] It is held that in the event of war the home market in Germany would be an important factor in maintaining intact the fabric of industry. "The home market," we are told, "is … of very great importance. It would be called upon to replace the foreign market if in time of war our national frontiers should be wholly or partly closed. But in the home market agriculture is by far the most important customer of industry; only if agriculture is able to buy, if it earns enough itself to enable others to earn too, will it be able, in critical times, to consume a part of the products which cannot be disposed of abroad. The old proverb, "If the peasant has money then every one else has too," is literally true, as soon as industry is forced, to a greater extent than is necessary in times of peace, to find its customers at home."[4] "As in time of war industry is dependent on the buying power of agriculture, the productive power of agriculture is a vital question for the nation."[5]
[Footnote 1:Imperial Germany, by Prince Bernhard von Bülow, p. 221.]
[Footnote 2:Ibid.p. 220. See also Bernhardi,Germany and the NextWar, pp. 157-159 and 260et seq.]
[Footnote 3:Imperial Germany, pp. 220-221.]
[Footnote 4:Imperial Germany, p. 219.]
[Footnote 5:Ibid. p. 221.]
The importance of agriculture in Germany is undoubtedly great; it may be, as Bülow says, that "the value of its produce is equal to that of the produce of industry, or even surpasses it."[1] But if the demand for it were to shrink because the industrial population lost their work through a shortage of raw materials or in any other way, agriculture would also suffer. The population at present engaged in agriculture will in times of peace buy up to the practical limits of its purchasing power, and is hardly likely, especially in the early stages of a war, to "consume a part of the products which cannot be disposed of abroad," except in so far as they buy German goods (the production of which the declaration of the war may have seriously impeded), instead of commodities produced abroad. But it is questionable whether they will be able to maintain their aggregate purchasing power. Prince Bülow ignores the fact that production for the home market will be hampered by the possible non-arrival of foreign raw materials in war time; yet Germany imported raw cotton to the value of over £29,000,000 in 1913. Her foreign purchases of hides and skins amounted to over £22,500,000 and of wool to £10,000,000. With even a partial suspension of imports of these and similar commodities, industries dependent on foreign products must be severely hit; unemployment must increase and the purchasing power of the urban workers diminish. The agricultural community must suffer also, and in all likelihood will not be able to take their normal share of goods off the market. It is true, of course, that Germany buys large quantities of food-stuffs from abroad, and that home produce will be required to take their place; but they cannot be grown immediately; in the interval, industrial disorganisation must result, and before agriculture can begin to profit by the lack of foreign supplies the harm will have been done. Moreover, agriculture must be impeded, as, owing to the size of the German Empire, the transport of troops must seriously interfere with the conveyance of goods to the larger centres of population. It would seem, therefore, that the policy of developing German agriculture at the same time that her dependence on foreign commerce is increasing is not an effective reply to the British Navy. The position in Germany then is that she must for the present be satisfied with a much smaller amount of imported food-stuffs and of the raw materials of industry; and that in any case, even if the industrial machine could be kept at work, there will be practically no outlet for goods abroad. Commercially isolated, she must, therefore, suffer an industrial and commercial collapse. On the other hand, the total volume of unemployment, which would have been enormous during the first weeks of the war, has of course been considerably reduced by the withdrawal of great masses of men to join the colours, and by the stimulus which the war has given to industries supplying the needs of the German armies. Then also Rotterdam, through which Germany does a great deal of its trade, remains open, whilst a fraction of her foreign trade is being carried on through Denmark, Scandinavia, and Switzerland. Nevertheless, the amount of economic distress within a very few weeks after the outbreak of war, especially in the large towns, was considerable even on the showing of German newspapers.[2] The amount of distress was increased and intensified by steadily rising prices. As the rise has taken place not only in commodities of which there is a shortage, but in others such as sugar, it may be concluded that it is due largely to the inflation of the currency, owing to the adoption of the fatally easy expedient of issuing large masses of paper money.
[Footnote 1:Ibid. p. 217.]
[Footnote 2: "Let us imagine," says Bernhardi, "the endless misery which a protracted stoppage or definite destruction of our oversea trade would bring upon the whole nation, and in particular on the masses of the industrial classes who live on our export trade"(Germany and the Next War,p. 232).
According toThe Times(Sept. 18, 1914) the German nautical newspaperHansaon Sept. 12 admitted that England had captured many millions of marks worth of German shipping, and that "the cessation of business will cost our shipowners many millions more." "It will hold up the development of our shipping trade for years." TheNeue Freie Presseof Vienna on Sept. 11 admitted that the activity of the exporters in Germany had been crippled. According toThe Times(Oct. 7), the German Socialist paperVorwaerts, stated that "the state of want has reached an alarming extent, even though we are now only at the beginning of the catastrophe which has befallen the people of Europe." "Masses of unemployment grow every month."]
Austria-Hungary, which is not an advanced industrial country, will not suffer quite so keenly, though even here the German newspapers admit that trade has come almost to a standstill.[1] In the western theatre of war the fighting has centred largely round the Franco-Belgian Coalfield, on or near which stand on both sides of the frontier many industrial towns. Lille, Nancy, Epinal, Belfort, Reims, Amiens, and Valenciennes on one side, and Liège and Charleroi on the other, are all of economic importance. Even apart from the actual destruction due to the war which in some of these towns has been serious, the mere presence of the contending armies will have a more or less paralysing effect on industrial and commercial life in both France and Belgium.[2] The position in Belgium, however, is much more serious than in France. It may best be described in the words of Professor Sarolea, written after a visit of five weeks to his native country. "Other belligerent nations may suffer from unemployment. In Belgium alone there has been created a whole nation of unemployed. In other countries trade and industry are dislocated. In Belgium they have come to a complete standstill. Out of a population of eight millions, seven millions are under the heel of the invader. Railwaymen are starving, for railways have ceased to work. Office clerks are starving, for banks and offices are closed. Public officials are starving, for no salaries can be paid…. Journalists and printers are starving, for newspapers and books have ceased to appear. Mill hands and coal miners and ironworkers are starving, for mills and coal mines and iron works are closed."[3] Bad as this is, the condition of affairs is somewhat relieved so far as France and Belgium are concerned by the fact that the seas are open to them, but even then we must add these areas to Germany and Austria-Hungary as regions where industry and trade are at the best severely hampered, regions all of which are important factors in the markets of Europe, and whose commercial paralysis will re-echo through the whole commercial world.
[Footnote 1: "The shortage of raw materials, notably cotton, wool, jute, and petroleum, is greatly restricting production in many branches of manufacture in Austria-Hungary. According to official estimates, the supplies of some of the most necessary raw products are barely sufficient for two more months. Factories are closing down, and the number of unemployed is steadily increasing" (Reuter's telegram from Venice, Oct. 21, 1914).]
[Footnote 2: For example, the probable number of French factories in a position to produce sugar in 1914-15, will be 82 or 83 as against 206 during the year 1913-14(Times, Nov. 3, 1914).]
[Footnote 3: Letter to the Press dated Sept. 12, 1914. Mr. J.H. Whitehouse, M.P., who visited Belgium says, "The whole life of the nation has been arrested."]
The most fortunately situated combatants in Europe are Russia and Great Britain. The former, covering half the area of Europe, has almost limitless resources, and is much more easily capable of being self-supporting than any of the other Great Powers engaged in the war. This country still has the seas open to it.[1] The State subsidy to marine insurance has encouraged overseas trade, and the re-establishment of the remittance market has removed an obstacle to the flow of exports and imports. Still, it is true that the financial world cannot recover all at once. "It is like a man whose nervous system has been shattered by a great shock. Tonics and stimulants may save him from complete collapse, but real recovery is a matter of months and even years."[2] Further, the work hitherto done and the services performed for Germany and Austria are now no longer called for; our allies in the west of Europe are suffering acutely from the immediate economic effects of the war and the large destruction of capital; our neutral customers have not escaped scot-free. It would seem, therefore, that in spite of the British command of the seas, production must necessarily be seriously curtailed and that, therefore, the volume of unemployment must be very considerable. On the other hand, though production in France, Belgium and Russia may diminish in many directions, what goods they do produce for export will find no market in Germany and Austria-Hungary and a proportion of them will find their way to this country. Such commodities will not only be valuable as food and raw material for industry, but will set up a flow of British goods in payment for them. Further, the production of commodities needed for the prosecution of the war, will increase the volume of employment. Goods of all kinds are required not only for the British armies but for the Allies generally. The manner and extent to which these factors have influenced unemployment will be considered presently.
[Footnote 1: According to an Admiralty statement, corrected up to Sept. 23, 1914, 12 British ships had been sunk by German cruisers, 8 had been sunk by mines, whilst a few fishing boats had been destroyed. British ships detained and captured by Germany numbered 86, with a total tonnage of 229,000. On the other hand, 387 German vessels had been detained or captured, the total tonnage being 1,140,000. According toThe Times(Oct. 9, 1914), up to date 1.6 per cent of the tonnage registered in the United Kingdom had been lost. The figures for Germany and Austria were 18 and 13 per cent respectively. The Committee which prepared the State War Insurance Scheme estimated that the loss during the first six months of the war might be about 10 per cent of all British steamers employed in foreign trade.]
[Footnote 2:Round Table, Sept. 1914, p. 704.]
Now the demand for the goods hitherto supplied by Germany to her foreign customers, though abated, will still continue. As we have seen, she cannot for the present supply them. By whom will she be superseded?[1] The Government of this country early in the war took steps to co-operate with British traders in an attempt to obtain some share of this trade, and the United States also strove to make the fullest use of the opportunity. In this country goods previously imported from Germany will, if still needed, either be bought from the next cheapest importer or produced at home. Commodities which we have in the past produced for German consumption are not now required from us. If they continue to be made, it must be for other countries. In other words, whether the volume of British foreign trade remains the same or not, a proportion of it will be diverted into new channels during the progress of the war. In a less degree, the trade of other states will be deflected from its accustomed channels. Beyond this, special influences will be felt in the case of certain new countries, as for example Canada. "Canada's annual balance of trade is probably about £60,000,000 against her: £30,000,000 being the excess of her trade imports over her trade exports and the remaining £30,000,000 representing her annual payment on money borrowed. She has balanced her account hitherto by borrowing very large sums of money. Now she will be unable to do that any longer. Nor will she at present, at any rate, obtain the immigrants on which she is counting to enable her to pay her interest. She cannot redeem the balance due by the export of gold. The burden would be too great in any case, and moreover she has suspended specie payments. A part of the balance due may be covered by the higher value of her exports, such as wheat. The remainder she can only meet either by increasing her exports or by reducing her imports. The latter she has already begun to do."[2] This new readjustment may be accompanied by great economic loss; in any case the dislocation will be harmful for the time, not only to the new countries, but to the countries with whom they trade. It is clear that foreign trade generally will during the war gradually be readjusted to the new conditions of the times. To what extent the various streams of the world's trade will be directed into new channels it is impossible to say; the readjustment will be partly temporary, and partly permanent.[3] This redistribution of production, if it leads to production under less favourable conditions than before, will tend to raise prices, and thereby probably diminish the power to buy other commodities. If it leads to the substitution of a well organised and well paid industry by an industry of a less skilled kind, there will be in effect a net lowering of wages. The widespread effects of the war on industry and commerce must, therefore, have a profound effect on the whole of the economic world.
[Footnote 1: Towards the end of August, the tin-plate and steel-sheet trade in this country which had suffered badly on the outbreak of war revived, and "several mills were reopened, owing to the obtaining of orders which formerly went to Germany" (Board of Trade Labour Gazette, Sept. 1914, p. 330).]
[Footnote 2:Round Table, Sept. 1914, pp. 708-9.]
[Footnote 3: This, of course, does not mean that Great Britain will "capture" German trade and increase its foreign commerce by the amount of its value.]
2.Unemployment and Short Time.—We are now able to understand how the war has affected the individual workman. As we have seen, the panic caused by the outbreak of war and the collapse of the remittance market meant in many industries the holding up of production and the stoppage of the workman's wages. If it had not been possible to restart the machinery of exchange, starvation would have walked through the land, and the industries dependent on foreign raw material would have closed down altogether. As it was, the inevitable dislocation increased the amount of unemployment.[1] Whereas the trade union percentage[2] of unemployment amongst their members was only 2.8 at the end of July, it had reached 7.1 by the end of August. This figure, however, is considerably below the percentage of unemployed during many periods of trade depression; the average for the whole of 1908 was 7.8 and for 1909, 7.7, whilst during the month of March 1912 it rose to 11.3 as a result of the coal strike.
[Footnote 1: Note that unemployment prior to the war was showing a tendency to increase.]
[Footnote 2: It should be observed that these figures relate only to about a million trade unionists, no non-unionists being included. Further, they ignore short time.]
The volume of unemployment during August varied considerably from trade to trade. In the cotton industry, which, however, appeared to be in for a bad time anyhow, 17.7 per cent of the trade union members were returned as unemployed during August 1914, whilst in coal mining the percentage was 1.3. As compared with the previous month of July, there was a general decline in all industries except shipbuilding, which benefited by increased activity on Government work. The contraction in the volume of employment was specially marked in the case of tin-plate works and in the textile, furnishing and woodworking, and pottery trades. Again, in the trades where the Government scheme of compulsory unemployment insurance applies, the volume of unemployment at the end of July was 3.6 per cent, but at the end of August it had reached 6.2 per cent or double the volume recorded in August 1913.[1] Beyond this, there was during the month of August, an enormous amount of short time; in several industries for which particulars are available, thousands of workpeople were working half-time or less.[2] The rise which took place in the price of certain food-stuffs especially during the first part of August intensified the evil by reducing "real" wages.
[Footnote 1: The gradual increase during the month may be observed from the weekly returns:—Aug. 7, 4.0 per cent; Aug. 14, 5.1 per cent; Aug. 21, 5.8 per cent; Aug. 28, 6.2 per cent.]
[Footnote 2: The Board of Trade receives monthly reports from employers and others in different industries. These returns, though they do not cover the whole of the industries, are sufficiently reliable to indicate the widespread character of short time. During August 1914, in slate quarries and china clay works, "there was a good deal of short time and some unemployment in consequence of the war"; in tin-plate and sheet-steel works, "short time was very general. In some cases discharges were obviated by the sharing of work at the mills remaining open. The decrease in employment is to be attributed to the effects of the war, and in particular to the general restriction of the European market"; some branches of the engineering trade, particularly agricultural and textile machinery, and the motor car and cycle trades, were "disorganised by the war; many discharges took place and a large amount of short time was worked." In the miscellaneous metal trades, except in the manufacture of articles required for military and naval purposes, "much short time was reported." In the cotton industry, "the trade as a whole was working less than three days a week, and large numbers of workpeople were entirely unemployed." In the woollen trade, "about 60 per cent of the workpeople covered by the returns received were on short time, including over 20 per cent who were working half-time or less." The returns showed a decrease of "21.5 per cent in the amount of wages paid compared with a month ago." In the worsted industry, "about 65 per cent of the workpeople covered by the returns were working short time during the month, including over 30 per cent who were working only half time or less." The returns showed a decrease "of 26.5 per cent in the amount of wages paid compared with a month ago." In the linen trade "short time was reported generally." In the hosiery industry, "short time was reported by firms employing over 40 per cent of the operatives covered by the returns." In the silk trade "a great deal of short time was worked in all the districts." In the levers and curtains branches of the lace industry "the majority of the operatives … were only working half time, and large numbers were altogether unemployed." In the carpet trade "short time was general, most districts working only half the usual hours." In the furnishing trades "short time was worked in almost every district." "Short time was very generally reported" in printing. In the glass trades "short time was reported in several districts." In the potteries "most of the firms" were running short time (see theBoard of Trade Labour Gazette, Sept. 1914).]
During the month of September, however, employment revived.[1] Besides Government work in shipbuilding yards, certain branches of the woollen industry were working at full pressure on the production of blankets and cloth for uniforms; the leather and boot and shoe industries on some sides received an impetus from the large orders placed for army boots; hosiery and knitted goods were required in large quantities. Speaking generally, industries whose products were required for the army and navy were strained to the extent of their resources. But each industry supplies a large variety of goods of many different grades, and machinery and works equipment cannot always be easily converted to the production of other classes of commodities; so that even in the woollen and boot trades, for example, the whole industries were not uniformly busy. The many industries, however, to which the war brought no orders, enjoyed but a slight recovery, and in some cases none at all. As the month of September proceeded, the newspapers triumphantly referred to the fall in the percentage of unemployment. The truth is that the decline was by no means general or uniform, but was brought about, not so much by the gradual revival of normal activity, but by the rush of Government orders. For instance, the cotton industry remained in the trough of a deep depression, and the furniture and piano making trades profited little. Further, no account was taken of the prevalence of short time, though over a large field it was widespread especially amongst women. What the real position of the labour market was after we had been at war two months, cannot be precisely determined, but it was certainly more serious than the Board of Trade percentage would seem to indicate.[2]
[Footnote 1: The percentage of unemployment at the beginning of October in the trades compulsorily insured against unemployment was 5.1, as compared with 6.3 at the beginning of the previous month.]
[Footnote 2: "Certain confidential statistical enquiries on a large scale are said to support the inference to be drawn from the figures published by the Board of Trade, that at least 10 per cent of the fifteen million wage-earners in the United Kingdom are not at work at all, whilst quite as large a proportion are on short time. But out of more than a million men whose services the employers have thus temporarily dispensed with, some nine hundred thousand are being clothed, or are going to be clothed, in khaki, and given Government pay. Thus the actual unemployment among men is, except in (certain) black patches, only sporadic and scarcely more than we are accustomed to. Very different is the situation of the women wage-earners. Of these apparently half a million are now unemployed, and twice as many are working only short time. Though the industrial situation is considerably better than would have been predicted for the end of the second month of a world war, it was, in fact, worse than it has been at any time during the past quarter of a century"(New Statesman,Oct. 3, 1914).]
The month of October saw a further recovery and a more normal state of affairs. The percentage of unemployment in insured trades continued to decline;[1] but whilst the number of men on the Labour Exchange registers fell (from 28,664 on October 2 to 24,690 on October 30), the number of women registered remained almost stationary. At the end of three months from the beginning of the war the condition of men's employment was about normal; but women were suffering from excessive unemployment, whilst short time was still common in many industries in which women are largely employed.
[Footnote 1: The percentages are as follows: Oct. 2, 5.11; Oct. 9, 4.80;Oct. 16, 4.46; Oct. 23, 4.29; Oct. 30, 4.16.]
The large volume of unemployment, which it had been anticipated would accompany a great war, was avoided, partly because of prompt State action in maintaining the fabric of commerce and finance, and therefore the supply of raw materials, and partly because of the large demand for commodities for the Army and Navy—a war demand vastly in excess of that in any previous war. In other words, State intervention and the Navy have placed Great Britain in a much superior economic position to that of her adversaries.
3.Trade Unions, Co-operative Societies and Distress.—Before the outbreak of the war there were signs that the wave of industrial activity which reached a high point in 1913 was receding, and that unemployment was beginning to increase; but the trade unions did not anticipate that the ordinary ebb and flow of trade was to be disturbed by a great war. Within a very short time after the declaration of war, the trade unions experienced a heavy drain on their funds in respect of unemployment benefit. It is, of course, obvious that the accumulated funds of trade unions were never intended as a subsidy to the community during a time of war, which is what, in point of fact, they became. It is true that the unions made efforts to conserve their resources in various ways, not least by advising their younger members without dependants to join the army; it is true also that most of them profited under Section 106 of the National Insurance Act by the State refund of one-sixth of their payments to their unemployed members; but these measures—and others—were inadequate to maintain the unions in a sound financial condition, and many unions trembled on the verge of bankruptcy.[1] Such a condition of affairs was viewed with apprehension not only by the trade union movement, but by the State, with the result that at the beginning of October the Government subsidy of one-sixth was under certain conditions increased.[2] But even with this assistance, many unions will undoubtedly experience considerable difficulty in avoiding financial disaster. Speaking generally, the trade union movement as a whole will emerge from the war in straitened circumstances. Some unions may have collapsed, and amongst others the movement in favour of amalgamation may have received an impetus owing to financial embarrassments.