TOPICS OF THE DAY.

PROTECTION AND EMPLOYMENT.

WAGES AND CURRENCY.

I.

MR. BALDWIN is in a tragic predicament. To prove this, the situation in which he finds himself has only to be described. He has, to begin with, united the Liberal Party and split the Unionist. Next, he has split the Unionists both laterally and horizontally. He has alienated the Free Trade Unionists. Yet he has not gained the whole-hearted sympathy of the Protectionists. He has told the producers of the things which are most .affected by foreign competition that they can have no barrier of duties, and so has failed to give any real satis- faction to the Agriculturists in spite of the subsidies coupled with a minimum wage which have been announced. Yet the landed interests are the backbone of the Unionist Party.

The Dominions are more disappointed than the landed interests. They are to have preferences where they are immaterial, or, at any rate, give no full meal, and nothing where, as in wheat and meat, they would be of vast importance. As guests, friends, blood-rela- tions and allies they do not actually grumble, but they dismiss the pittance of preference for their honey and their candied fruit with " frigid equanimity." Even the unemployed, for whom the attenuated banner of"Protection limited" was raised, are dissatisfied. The trades in which unemployment is most acute, such as shipbuilding and cotton, can get nothing whatever by the restriction of overseas exchanges.

With all these spectres new-raised and gibbering around him, Mr. Baldwin proposes to walk on a dark, cold winter's night through the churchyard ! He is a brave man, and a sincere man, but is his policy at this moment practical politics ?

We know quite well what Mr. Baldwin would answer to this question. He would say he was not trying to please his Party, or the Protectionists, or the Preference men, or the Agriculturist Party; or the Unionist Free Traders, or any section, or group of sections, in the State. His aim was quite different. He was solely trying to solve the dreadful, the oppressive, problem of unemploy- ment. To him nothing else matters, or, at any rate, matters half so much. We honour him. We agree with him. We want to help him. But our sympathy is not going to make us deceive him or fail in our duty of stating the problem as we see it.

Mr. Baldwin is going the wrong way to help the unemployed. Unemployment is a general disease in this country, and it must have a general remedy. To tinker a little here and there will not help, but hinder, the cure. If he chooses protection of home industries from foreign competition as his remedy, he must make that protection universal. It is quite possible that by doing so he might succeed. We, at any rate, should not dream of opposing him as we opposed Mr. Chamberlain, for the times are changed and the circumstances wholly different. He would not make the country richer by throwing obstacles in the way of overseas exchange, but he might, and indeed must, thereby make more people work to get what we want, and require them to work harder, at less con- genial trades. If, then, his object is more work, as it is, he would probably secure that. We write not in irony, but sincerely. He might do more, as Mr. Garvin, with that sense of • economic vision which is his peculium in statesmanship, pointed out in last Sunday's Observer. He might in the end obtain freer trade for the world, i.e., more overseas exchanges, by a system of barter by treaty—" You lower your Tariff and I'll lower mine." But to get more people at work all round, and working harder, i.e., producing more, you must have a General Tariff. To be short, what Mr. Baldwin should have done when he determined to solve unemployment by Protection was to suggest a General Tariff of, say, 12 per cent, ad valorem on the things which at present reach our ports free. He would then be in a position to give a 6 per cent. Prefer- ence to all Dominion products in exchange, where possible, for a further Preference by them. He would also be able to follow out Mr. Garvin's plan and negotiate commercial treaties with Powers that specially want access to our markets, and would, as an equivalent, give us access to theirs. There would be objections to this scheme on certain long-distance views of our trade, and it would, no doubt, hurt us, not only as general carriers, but as the suppliers of neutral markets, but perhaps not very greatly, and it would, no doubt, stimulate the Home Trade. It would, that is, make us work harder, and probably not at the highest rates obtainable. There would be economic waste and loss, but there would be a psychological gain, and also perhaps an increase of thrift, which would compensate for a good deal of the economic loss. But the psycho- logical gain would be the greatest benefit. Every man and every woman works more contentedly, and so better, at high wages than at low. It is no doubt possible to prove that his apparently high wages are really low, yet, as we see in the case of the rural labourer, the man who earns only 35s. a. week, but lives in a house with a garden at 3s. a week, feels depressed beside his urban brother who gets 45s. but pays out 13s. a week in rent and rates.

IV.

But, though Mr. Baldwin would have done much better for himself, his Party, and his country had he chosen a bold, clear-cut system of general Protection instead of a timid. dabble in those strong waters, he would beyond question have done best of all if he had tackled the unemployment problem—the problem he is absolutely right in attacking—by using the instrument which we presented to his notice with the complete approval of so sound a financier and so con- vinced a Free Trader as Mr. McKenna. That instill.- ment was the stopping of deflation and the stabilization of the standard of value and of the amount of the medium of exchange in existence by supplying the currency requisite to carry all the buying and selling, i.e., all exchanges desired by the producers and con- sumers, within those national limits where it is the acknowledged function and duty of the Government. to declare what shall be and shall not be legal tender. Here we reach the crux of the whole problem, or rather the rock on which so many statesmen, traders, economists, theorists and philosophers have suffered shipwreck. He who understands the true, the inner, meaning of legal tender and the medium of exchange can steer the ship past the rock in safety.

Here is the reason why Free Trade has not done as much for mankind as its apologists thought it could and would do. Here is the reason why, as Sir Robert Horne has noticed, a Free Trade country like England has more unemployed than Protectionist France, or super-Protectionist America.

You cannot get the full benefit of Free Trade, or indeed of any trade, unless you arrange that there shall be enough of the, medium of exchange, i.e., money, to meet the needs of the traders. It was in his failure to realize this that Peel's fatal mistake lay. The _Hungry 'Forties followed Free Trade bccause the.plenty. that Peel gave with one hand through Free Trade he took aWay with the other through a contraction of the currency. So men made things that they could not exehange. The bridge of gold was -so narrow that it got blocked. Protection is a great obstacle in the path of exchange, but stringency in the currency is a greater. Protection raises prices, and so far interferes with exchanges and lowers the effective remuneration of labour. A supply of the medium of exchange inadequate to the needs of trade such as we have had of late reduces prices. On the other hand, the provision of an adequate supply of the medium of exchange raises prices, and especially the price of labour. Therefore, though it may make commodities dearer for a time, it gives the working consumer more money with which to buy them. It also stimulates supply so greatly that very soon the product equals or overtakes the demand, and then prices fall.

But how about trade with foreign countries, i.e., the export trade ? It is in the answer to this question that the dangers of stringency arc most clearly seen. The advocates of restricting currency and of credit, i.e., of money in the widest sense, arc inspired by the desire to raise the level of exchange---to look the dollar in the face, as it is called. But the effect of doing this is to make it more difficult to trade with America and also with the European countries in which the exchange is in our favour. If, however, by enlarging instead of contracting the currency we lower the value of the pound sterling in Arnerica, we make it easier for her and for all foreign countries to buy from us. But when foreign countries buy from us they are, of course, not merely buying but exchanging. Therefore, under a system of currency sufficient to our needs, we do not incur that waste from internal trading which Protection often produces, but we get a system of trading which follows the line of least economic resistance. We make ourselves what we can make best at home. For the things which arc best made abroad we make other things to exchange for the products contra-indicated by our climate, or natural resources, or the physical or psychological configurations of our workers.

V.

We do not propose the manufacture of riches. We only propose an increased supply of the rolling stock of commerce. You cannot make absolute wealth out of anything, whether it is gold, or silver, or paper, or leather. You can, however, make a medium of exchange out of any or all of these materials. We accomplish this by declaring certain things legal tender at certain rates, i.e., in certain quantities, or, again, in certain promises to pay inscribed on pieces of paper. These promises to pay have value attached to them, i.e., are in demand either because they can be 'exchanged . in -i he last resort against gold, or because they will always be accepted by those who issue them in payment for debts due to them. Taxes are debts due to a State, and therefore we arc always heavily in debt to the State. The meaning of all this is that the medium of exchange is bound tO be an artificial thing—some- jinn which rests upon an Act of State. It can, of course, be wisely or unwisely used, but per se it is neither good nor bad, and we must not . be afraid of using it well because, like most things in life, it can be used badly. There are two allied cheeks or warnings against expanding currency unduly. One is the ceasing of bona fick unemployment—i.e., of the falling of the num- ber Of persons unemployed below the normal. The other is the absorption of goods. If the people who make goods are all at -work, and are not turning out goods .;which cannot be absorbed,- 'sold,- then -no expansion of the currency can clearly be allowed. No one wants more trucks than are required to carry the goods. We believe firmly that the best way of stopping unemployment, and of using our unrivalled man power and our equally unrivalled plant, is to stop deflating and to give elasticity to the currency till the workless arc absorbed. . If this is done we shall have an almost instant reaction. Yet we shall not have raised obstacles to exchange as Protection does.

VI.

We have dealt with Unionist dangers and difficulties through a snap Dissolution, and we have put on record what we believe to be causes of and remedies for unem- ployment. On the day of Dissolution, .however, what our readers will want most is advice how to vote. When the dilemma before them, as it usually will be, is Protection or a Capital Levy, the Labour Party or the Unionist Party, let them vote without hesitation for the lesser evil, which is Protection. A Liberal Party soon to be led by Mr. Lloyd George is a barren stock, and, as we have said elsewhere, a vote for a Liberal of the left wing may well turn out to be a vote given for a Capital Levy. But let them wherever possible obtain a pledge in favour of adding a Referendum Act to the Statute Book without delay. That will solve the problem of the Second Chamber as well as prevent Protection ever getting a strangle-hold on our trade. Next, we would advise our readers not to take the situation too tragically, and never to forget that their essential object must be to stop unemployment. We make no attempt to prophesy as to the result. If Mr. Baldwin comes back stronger than he is now, let him have a fair field to try his experiment. If he fails, and if the three Parties conic back each with a third of the House, as is not unlikely, the nation will have to find a neutral leader.

J. ST. Lou STRAC1Ux.