Imperial Fiscal Policy

umm on the heels of the Report of the Economic

Conunittee of the Trades Union Congress, which we discussed last week, came the Bankers' Resolution. This resolution marks beyond question an important change in the policy of some representative bankers. It is not that they have changed their fundamental doctrine. Bankers are characteristically Free Traders ; they deal in money ; the more money that conies to them the better, and one man's money is as good as another's. Bankers get much more advantage from freedom in industrial exchanges than from the restriction of those exchanges, and they well know it. In the past the banking businesses of London, including those of the Bill Brokers, could not have been built up unless British ports had been the greatest receiving centres in the world. The point of the resolution is really that new facts have induced several representative bankers to change their tactics.

They still hope for a great extension of the Free Trade area of the world, but they frankly admit that they have been disappointed in the means by which they formerly hoped that this extension could he brought about. Only four years ago—in October, 1026—a large number of European and American bankers and business men issued a manifesto entitled " A Plea for the Removal of Re- strictions upon European Trade." Two of the most pro- minent signatories of that plea, Mr. McKenna and Mr. Beaumont Pease (Chairman of Lloyd's Bank), signed the Protectionist resolution of last week. A remarkable fact ! All who signed the resolution arc converted, for the time being at least, to the policy of turning the British Empire into a Free Trade unit by means of tariffs against the rest of the world

While we retain (they say) the hope of an ultimate extension of the area of Free Trade throughout the world, we believe that the immediate step for securing and extending the market for British goods lies in reciprocal trade agreements between the nations con- st it ut jog the Brit ish Empire. As a condition of securing these agree- ments Great Britain must retain her open market for all Empire products while twine. prepared to impose duties on all imports from all other countries."

It will be seen that the reasoning says ditto to the Report of the Trades Union Congress. Europe was deaf to the Plea of four years ago ; deaf to the exhortation and re- proaches of the Economic Conference at Geneva ; deaf to the appeals of Mr. W. Graham and other Free Trade representatives of the British Government. Where the European tariff walls have not remained as they were they have become even higher.

The bankers, then, who have changed not their doctrine hut their tactics, hold with the Trade Union economists that the short-cut to universal Free Trade is not merely to allow but to help the world to rearrange itself in very large fiscal groups of which the British Empire would be one. Each of these groups would be Protectionist as against the outer world, but each would be in itself an enormous Free Trade area ; and the hope is that ulti- mately bargaining for the reduction of tariffs as between the groups would be much easier than it is now between many scattered countries with no particular economic allegiance.

The tendency in Great Britain to Protectionist opinion —a tendency which has notoriously affected many persons who used to call themselves Free Traders—has become noticeably stronger in recent months. The great organiza- tions of industrial employers led the way and by so doing caused no surprise. Hardly more surprise was caused by the resolutions of numerous Chambers of Commerce. A fortnight ago, however, a " sensation " was caused by the Trade Union Report for it was a new thing for Trade Unionists formally to surrender to the surface logic of their circumstances and to proceed from advocacy of the protection of their labour to advocacy of the Protection of the results of their labour. Finally, the Bankers' Resolution showed how strongly the wind was blowing. All these movements have been aided by the inevitable inclination of people who are conscious of bitter adversity to "try something else." In such a public mood any fiscal policy seems to be better than the one which has been associated with failure.

Those who assume, however, that nearly all men and women will be carried off their feet by this great wind underrate the powers of resistance which will be found in many of the great industrial areas, particularly in the north of England. Mr. Joseph Chamberlain deceived himself into making an insufficient allowance for the popular determination not to accept taxes on foreign food. Again, he was quite unable to define raw materials; which he said should not be taxed. The finished or half- finished product of one industry proved to be the raw material of another.

Sonic of our greatest and most visibly depressed industries cannot be helped by Protection—cotton, coal and shipbuilding. And even if tariffs were admitted as the indispensable cement of the Empire, there are ninny places to which such cement could not be applied. There is India, for instance, whose people form nearly three quarters of the population of the Empire. The fiscal autonomy of India must in any event be respected.

It is inconceivable that she should be coerced. The cotton manufacturers of India, it may be said, ought to agree to let Lancashire cotton goods come into India free in return for the free entry into Great Britain and other parts of the Empire of Indian agricultural products. Should they ! Why should Indian millowners be more altruistic than other men ? The manufacturers of the Dominions have not as yet shown any willingness to modify the Protection of their young and growing industries.

Then there is the ease of the Crown Colonies. Tariffs in those Colonies are entirely for revenue anti without

them the local Treasuries would be beggared. If pro- hibitive tariffs in the Crown Colonies are to be clapped on to foreign goods in order that Imperial goods may COM in free, the rise in the cost of living for the native popula-

tions will, for sonic time at all events, be very serious. That will be so even if we admit that ultimately the prices will be lower than ever. The natives cannot speak for themselves. A change in their cost of living would have to be decreed by the Imperial Government. This would be called " exploitation " and might deserve the name. Moreover, the abandonment of the policy of allowing the foreigner equality of trade opportunities throughout the Empire would create new troubles for us all over the world.

All these difficulties must be faced. The policy which will hold the Empire together without sowing dragon's teeth will be a matter of much slower and more anxious evolution than many people imagine. As we said last week, however, nothing can be compared in importance with an agreed policy which gives continuity and industrial

confidence. Mr. J. H. Thomas has said that the Govern- ment will enter the Imperial Conference without prejudice.

No proposal will be ruled out. The greatest common measure of agreement which can be obtained at the Conference, whether it be Protectionist or otherwise, will be something hardly to be rejected by responsible persons. Free Traders by persuasion though we are, we readily make this admission. The world to-day is so intensely complicated that the incontrovertible argument that imports are paid for by. exports in the long run and that, therefore, the more imports we have the better is subject to the consideration that delays capable of crippling some trades may occur before the " long run " is completed. A vital question for those who as Rationalizers of industry want to be able to predict every phase in an organic evolution has become, "Row long is the long run' going to be ? " In this question lies the force of the new case for Safe- guarding certain industries—a force of which our fathers, happily for them, had not to take any account.

In stun we feel that reasonable people, who do not want to tear any economic passion to tatters, may look without misgiving to the Imperial Conference. All points of view will be represented there and the very fact that agreement was reached—if that should happen—would inspire a moral energy throughout the Empire which would be incomparably more valuable than any immediate advantage or disadvantage, whichever it be, flowing from any particular tariff. Those who feel the validity of such objections as we have raised to an Imperial tariff-wall will dutifully continue to urge those objections. But even a tariff-bound Empire need not by any means be a backward-looking organization if it is handled rightly. It need only be regarded, as the bankers hope, as the embodiment of a Rationalization destined to yield to yet a further concentration—a world in which men would acknowledge that all the difficulties placed in the way of the free exchange of goods had been a hideous mistake.