THE MYSTERIES AND PARADOXES OF WORLD COMMERCE. N OT one nation,
nor one group of nations, but the whole world is commercially in stays." We want to move, but our power has vanished. We want to trade, but we cannot use the mechanism of exchange. We want to produce cheaply, but often we cannot produce at all. We want to be prosperous, but we are poor, nay bankrupt. What is worse, we not only do not know how to get out of our trouble, but cannot even tell what is the true cause of the trouble. How, then, can we find the remedy ? The diagnosis of the disease is, indeed, so imperfect that we dare not try a medicine or a treatment, much less a remedial operation. Let, us try to think out as coolly as we can where we are, how we got there, and then see if an understanding of these points may suggest the way out. We make no profession of possessing the key of the situation, but, at any rate, no harm can be done, and possibly some good, by a stocktaking such as we propose.
The first thing to remember is that the old explanation of our poverty and commercial impotence will not stand investigation. According to this view, we are poor and economically unhappy because we spent so much in the war, i.e., destroyed so much property of all kinds and dissipated so much capital. The analogy of the private individual is used to show that we must expect to he poor. If a man engages in a very expensive law suit and has to sell out his investments in order to carry it on, and, though he wins his cause, only just saves himself from bank- ruptcy, he has to endure many years of poverty before he can replace his capital and get back to his old position. That analogy sounds well enough, but in fact it is almost wholly fallacious. This country, and indeed the world in general, has not been impoverished by the war at all in the way that the ordinary man is impoverished. We, and most of the other countries of the world, are in essentials as rich as we were before 1914. It is true that by loans and taxation we have altered the distribution of property in a manner which, if it had been done in a different way, would have been called revolutionary, but that does not mean a diminution of total wealth. All the shares in companies which yield a fixed rate of interest, like railway debentures and preference stock, are, as are also pre-war Consols, only worth to sell half their old price. On the other hand, there are some seven thousand millions of new National Debt from which some twenty-five millions or so of people are drawing dividends, great and small. Certainly there is no diminution of wealth here. In the same way there are no great industries that have been destroyed by the war—our coal-pits, our cotton trade, our shipbuilding yards, and all our industries from iron furnaces to woollen mills are there ready to be worked. As regards popula- tion, it is true that we have possibly lost the services of a million men through deaths and wounds that totally incapacitate, but this, looked at from the economic side, is not a loss which takes very long to repair. Suppose we had two or three very unhealthy years, added to an abnormally high emigration rate, we might easily lose a good many more men without anyone noticing it. Once more no serious diminution of physical wealth has been caused by the war here. We have not even got a demora- lized population. Take it altogether, the war was a stimulus, and there are more people at this moment ready and eager, if they can see how, to make a profit and increase the wealth of the world than there were ever before.
What is true of Britain is, of course, still more true of America, for America is suffering even more intensely than we are from commercial depression and unemployment. It is also true of Europe as a whole. If we rule out Russia, which, owing to internal political conditions, is in a state of social and political disintegration and cursed by plague and famine, there is no marked destruction of wealth or of the means of production. No doubt a considerable proportion of land in Belgium was physically devastated by the war, and a large area, though smaller in proportion to the size of the country, of France was ruined, though, happily, not permanently, by the war. The same condi- tions exist in Italy. No doubt also there was a great deal of damage done in the Near East and in Northern Central Europe, and indeed wherever the Germans or Turks pene- trated. Again, in all these countries there was a large loss of population. But the war was paid for year by year and as we went along, and it is absurd to say we are now poor because we are having to make good the waste. The trouble is that we are not making good anything. We are making nothing, or at any rate nothing like as much as we could or would or should.
The factories stand throughout the world without any adequate trade products not because they are making other things, not because the men are doing something else as they were in the war, and not because men are on strike, or are too fastidious or too weary to work, but as a rule because there is no sale for the goods which are made in them. Men, of course, desire these things just as much as they did before the war, but something paralyses them and takes from them the courage to ask for what they want so ardently. We fail to produce not because we have not the power to manufacture, but because we cannot trade, cannot buy or sell. Again, it is not, as some people have sup- posed, merely inflation that is making us poor. Inflation has no doubt greatly helped the process of taking away wealth from one set of people and giving it to another set, but it has not diminished the total wealth of the world. As Sidonia slid in the passage we have so often quoted, but must be allowed to quote once more, " We have not diminishel the stocks of gold and silver in the world because we have taken to using paper as money." No, the trouble is not a material or a physical one. Commercially speaking :- "Lord Chatham, with his sword drawn, Is waiting for Sir Richard Strachan. Sir Richard, longing to be at 'em, Is waiting for the Earl of Chatham."
Sellers are longing to sell and buyers to buy, but, alas ! they cannot get together. There is something lurking behind or in front of or beside them which forbids action, though what may be its name or its nature they cannot tell. They know nothing except that they cannot trade with the other man, and the other man cannot trade with them. When they call in the dark- ness to each other to do business, the reply comes back : " How can I do business with you unless you first do business with me ? " And so the world rocks and strains and groans uneasily on the rock on which it has struck, but there is no forward movement. The high water that it was hoped would raise her has come and gone, and still the vessel is fast, and still the wretched crew and merchant passengers with all their rich bales in the hold are praying for some record spring-tide which will be enough to lift her.
To put the matter in a more concrete form, though we admit it is not a very helpful form, the machine has some- how or other broken down, but unhappily our economic physicians cannot tell us how that breakdown took place, and, further, cannot tell how to treat the machine now it is broken down. They can only say wisely and hopelessly that it is probably some quite small screw or pin somewhere which has got loose, and which is now obstructing instead of helping the transmission of power. Again, there may be something wrong with the fuel which ought to be but is not producing sufficient energy. Finally, though things look all right, it might be that something got bent or twisted in the course of the late collision, and that the engine, though the repair shop said everything was now in order, is not truly aligned. So the talk goes on, but over it all is the one deadly and menacing fact that the wheels won't go round, or, when they do, won't bite.
Wealth is exchange. Therefore exchange is our economic object. All, then, that we have got to do is to get busy with bartering. But will no one teach us how to begin ? " Speak, oh, some one, the word that will reconcile buying and selling." Let us envisage the actual situation. A, B, C, and D go over to Genoa to do business. When they get back to their hotel in the evening they ask each other over coffee and cigars.how things have gone, and each has the same tale to tell : " They were quite keen to buy, but there was always some provision : I cannot let you book the order unless you can arrange to buy from me, or to buy from somebody who owes me money and cannot pay it unless he gets an order.' " The would-be seller very naturally replied : " Oh ! that's not my business. You have got to pay me in cash, but I cannot promise you how I shall lay out that cash. As a matter of fact, it is wanted to pay production costs and taxes in England, and if I spent it here on some- thing that might prove quite unsaleable in London, there would be a deuce of a row in our offices when I got home." Therefore, for these and similar reasons everybody reports : " Nothing doing." Curiously enough, the Italian opposite numbers of A, B, C, and D are probably over in England making similar propositions and getting similar answers. Surely it is worth somebody's while—and if it is worth their while, why don't they do it ?—to bring these gentlemen together into some sort of clearing-house which would conduct the barter of chops against tomato-sauce, oranges against worsted, and pig-iron against ladies' underwear, and only demand cash for the total difference—often a comparatively trivial sum. Plenty of such clearing-houses for trade, with a central and parent commercial clearing- house, ought, one would think, to get rid very easily of exchange difficulties. The clearing-house paper, based on gold, would have a stable backing, and people would always know exactly what it was worth. As to credits, it is quite easy to see that what we venture to call the guardian angels of commerce ought to be increased in number and more quickly mobilized. Again, the mechanism of loans ought to be popularized as much as possible and on easy terms. An example of what we mean is to be found in the Morris Banks which were described in our columns of September 24th by " J. B. G." The world is not ruined by money-lenders, but very much helped. We want more usury, not less—provided, of course, that the usurer is a decent man or not forced to behave like a fiend because he is subjected to idiotic persecution. As to the way in which a loan may set business going, the present writer may be pardoned for telling a personal anecdote which seems to him, at any rate, illuminating. The scene is a Nile gunboat some twenty-five years ago. When Phylac was reached came the proper moment to give a present to Houssein, the very efficient Egyptian who had acted as steward, valet, and housemaid, But in a land where there are no shops one is very apt te have no change, and the traveller found himself without the wherewithal to tip. He made application to an English officer on board. Could he cash a cheque ? No. unfortunately he could not. He had not a halfpenny of change. Otherwise he would have been delighted, of course, to lend the money. The steward would not under- stand a cheque, and thus all concerned appeared to be faced with an insoluble problem. " But," said the traveller to his friend, " what will you do yourself when you want some petty cash for tipping people in Assouan ? " " Oh, I shall borrow from Houssein." " But if you can borrow from Houssein for yourself, you can borrow for me. Borrow a sovereign in silver dollars from him. I will give you a cheque for £1, and then I can make my present to Houssein." Though it was paradoxical, no flaw could be found in the arrangement. Accordingly Houssein came to the saloon and gave his officer five silver dollar pieces on loan. The officer crossed to where the traveller was sitting smoking, and handed him the silver. The traveller then went across to the cabins where Houssein had returned to his task of making beds, and he was solemnly donated with his own money. He salaamed, showed real gratitude, and every- body was satisfied. Houssein knew that the officer would return him the sovereign he had borrowed. The officer knew that the traveller's cheque was all right, and the traveller had the feeling that he had purchased freedom from the thought that he had behaved shabbily. This principle of borrowing from people in order to pay them is, in truth, a perfectly sound one, and is, in the last resort, what happens under a well-developed system of commercial credit. We do not say that it wholly solves the great world problem, but we have a kind of instinctive feeling that if it was properly thought out it might give a hint which, combined with the clearing-house scheme, would be helpful.
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