OUR NATIONAL PROSPERITY.
THE gures of our foreign trade for the year, and of our revenue for the nine months, ending on December 31st enable us to form some estimate of our national prosperity. They are sufficiently remarkable to startle even the most optimistic. For the first time in our history the total volume of our foreign trade largely exceeds the enormous figure of one thousand millions sterling. Imports have increased by 7.6 per cent., exports by 13.9 per cent., and the re-export trade by 9.5 per cent. To give the figures :—The total value of imports was £607,988,000, an increase of £42,968,000 over those of the preceding year; exports reached £375,673,000, an increase of £45,856,000 ; while re-exports were £85,163,000, an increase of £7,383,000. The details are as satisfactory as the totals. Among the imports, it is raw material and articles mainly or wholly manufactured in which the chief increase lies, the advance being over 12 per cent. Among the exports, the growing items are largely articles wholly or mainly manufactured, the increase being 13.5 per cent. To take one item, the increase in the export of iron and steel is 25 per cent. in value and 26 per cent. in quantity. Nor has the first impression made by these Returns to be corrected by much writing down on account of increased prices. It is true that the prices of many articles and commodities were higher last year than the year before ; but the general rise in prices is estimated at only 6 per cent., which leaves an ample margin for quantitative increase. Many conclusions may be drawn from these figures, but one is insistent. We are experiencing an unexampled wave of prosperity. Free- trader and Tariff Reformer alike can make but the one deduction. The increase in the imports of raw material and partially manufactured goods, and in the export of wholly or partially manufactured articles, shows that during the past year there has been a high pressure laid upon our producing activity. The demand has forced an expansion of supply. The Tariff Reformer may argue, as the Times does, that the dumping of iron has ceased because America is too prosperous and is unable to supply her own requirements, or that we are relieved of some Continental competition because trade is so good with our neighbours. We should prefer to put it that a general wave of prosperity is passing over the world, and that our existing economic system enables us to take full advantage of it.
The Revenue Returns for the last nine months are equally comforting. The increase over the corresponding period in 1905 is £1,497,800. The Chancellor of the Exchequer, having in view the lowering of the duty on tea and the repeal of the duty on coal, calculated to receive in 1906-7 £1,223,000 less than in 1905-6. To take the separate items :—There was an estimated decrease of £2,245,000 in Customs. But up to date the decrease has only been £674,000; and even if we assume that this item will decline during the current quarter by another £700,000, the total decrease will still fall far short of the estimate. Excise, estimated to decrease by £30,000, shows for the nine months an increase of £107,000. The Death-duties were assumed to grow by 4280,000, but the actual growth during three-quarters of the financial year has been £1,495,000. The increase in the
Income-tax Returns was put at £150,000; it is already £167,000. And in "miscellaneous items" an estimated deficit on the year of £13,000 has been changed to an increase on the nine months of £336,800. One or two items, such as stamps, show more than their estimated decrease, and it looks as if the Post Office and Telegraph receipts might fall short of their estimated increase. But these are minor figures compared with the great totals of increase. Mr. Asquith can scarcely avoid having in hand at the end of the financial year a balance over his estimates of something between £2,000,000 and £3,000,000, and if he succeeds in effecting certain savings in expenditure, as seems probable, be may have a surplus of from £5,000,000 to £6,000,000. At present, of course, the trade prosperity is not fully reflected in the Revenue Returns, except to some small degree in Customs. But a prosperous commerce, high wages, and continuous employment are bound very soon to give a new elasticity to the revenue, and next year we may look to see its effects. It is true that the enormous receipts from Death-duties last year were rather in the nature of a windfall, and that millionaires cannot be expected to die with such regularity and profusion in every financial year. The objection is fair, but it must not be pressed too far. It seems to us that every Chan- cellor of the Exchequer is justified in looking for much larger receipts from the Death-duties during the coming decade than have accrued during the past. The great fortunes have been most of them made within the last thirty years, and their possessors are only just beginning to die. We should not be surprised to see the Death-duties double their yield during the next twenty years.
We have no wish to draw any partisan moral from these facts. National prosperity is far too variable and transient a thing to permit of dogmatism. All we can say is that now and then great waves of economic well- being pass over the earth, but we cannot as yet die: entangle the causes. We know that they will not last for ever, and we also know that when they depart they will return. The cause of the disappearance of prosperity is more obvious than that of its advent. Great prosperity means that the commercial body becomes choked with its own surplus. Energy slackens ; men retire from business and place their capital in some unproductive investment, like land or pictures ; the prices of labour and of capital rise till they pass beyond the limit where the cost of pro- duction and the market value can be made to balance; demand declines • and we are in once more for a period of slackness of trade. The body economic cures itself of its humours by a period of abstinence and low vitality. All this is plain enough, and therefore we have no wish to claim this bumper year as proof positive that Free-trade is the only true system. What we can say is that our existing regime, by giving our trade elasticity, has put it in the way of benefiting to the full by any general prosperity. We can point out, also, how dangerous the empirical method is in economic science. If Mr. Chamber- lain had been victorious three years ago, and a Protective tariff had been established, we do not believe that it would have prevented this wave of prosperity. Its effects would not have been felt for some years. But Pro- tectionists would at once have claimed the prosperity as e clear proof of the merits of their policy. We know that it would have had nothing to do with it, but it would not have been easy to resist such an argument from apparently simple facts. The truth is that in economics arguments from periods of years are very fallacious unless a very great area of time is taken, and the results are corrected by negative tests. The Westminster Gazette this week furnished a good illustration. Take Mr. Chamberlain's favourite thirty years, 1872-1902. Exports increased by only 9 per cent., while exports of manufactures actually decreased by 3 per cent. But if we advance the period four years, and make it 1876-1906, we find exports increasing by 83 per cent., and exports of manufactures alone by 65.5 per cent. Thirty years may seem a fair test area, but the shifting of the boundaries four years on can utterly upset all its lessons. The more reason, there- fore, when we have an economic doctrine which we may reasonably call axiomatic, to trust to its guidance in our policy rather than to hasty empirical generalisations.
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