THE DEPRESSION IN TRADE.
• if a campaign, or Lord Beaconsfield's two or three cam- paigns, were the one thing needed to set British trade in motion. Peace was promised, and peace was pronounced better even than war. With peace, every customer of England would develop a fiery thirst for English fabrics. When the thousand-and-one good reasons in the state of Europe why English spindles stood idle and English blast-furnaces were cold, had been exhausted, there were always commercial depression in the United States and famine in China and India to fall back upon. Now the Berlin Congress has done its work according to its method of doing work, England is at peace, and free to deluge Cyprus and Asia Minor with Man- chester prints ; even China is declared free from famine, and India is breathing again. Yet the Trade and Navigation Returns for August do not reflect any of the radiant satisfaction which welcomed home the Plenipotentiaries from Berlin. The figures are sulky. They report a falling- off in value of gross imports of nearly 9 per cent., as com- pared with August, 1877, and of nearly 21- per cent. in value of exports.
Great Britain is paying away more money and being paid less than two years back. That the mere amounts of exports and imports do not balance need disturb no one. They seldom do. Exports being calculated at the Custom House without, and imports with the profit at which the goods will sell, imports in a country like this are sure to ex- ceed the nominal value of exports. Yet the exports may bring to the exporter a larger sum of money than would purchase all the imports. But if imports continue to grow and exports to diminish, a time must come when the country has actually to withdraw some of its old savings to buy the balance it needs of imports. This point would seem to have been reached in England. Any one who could calculate the money- value of British savings, could calculate also the time it would take before England must cease to buy from very incapacity to pay. The adverse balance of the British foreign trade account is not represented exactly by the difference between the Custom-House estimates of exports and imports. A large quantity of foreign produce is re-exported. The residue may not be beyond the power of Great Britain to pay for out of her enormous invested income, and so far, the only harm done is that she will for the time cease more or less to save and invest. But the differ- ence against Great Britain between the money paid in by foreigners to her account, and the money she pays to them, is far from the total extent of the loss British trade is now incurring. If the figures of the present and past months be compared, a very menacing condition of things will reveal itself. It will be seen that not merely have the exports been diminishing incessantly for every month in the last year and a half, but that latterly exports have been falling in value, not in quantity. Foreigners have been obtaining the same quantity for a lower price. Manchester, and New- castle, and Birmingham have been working for the foreigner not half-time but half-price. English manufacturers have been, in fact, attempting to bribe foreign customers into taking goods they do not want by their cheapness. Our readers know what is urged in favour of such a course of trade. British manufacturers cannot afford, it is said, to leave their manufacturing apparatus idle. They are still more afraid of letting their old customers grow disused to English goods, and a prey possibly to alien blandishments. Nothing, it is laid down as an axiom, is harder to recover than a lost
market. Rival manufacturers from Belgium and the United States, who must, like English manufacturers, either manu-
facture at a loss or not at all, might, it is threatened, step on to the unoccupied territory, and intrench themselves too strongly to be expelled on a revival of a healthy demand.
Foreign rivals might, we suspect, be suffered with impunity to sell goods at a loss, except for the importunate cry the capital invested in North Country mills and furnaces is inces- santly raising for employment. In the prosperous years of British manufacturing industry, the enormous balances of profits were invested, as a matter of course, in the business which produced them. So long as there were ever new worlds for cotton and hardware to conquer and proselytise, all went well. But for the present, at any rate, the process of annexation by English yarn and iron has paused. It is not so much that drought has withered up many millions of Lancashire's customers ; that other millions have begun to spin cotton and forge steel for themselves ; or even that they threaten to spin and forge for the millions of Madras, and China, and Russia, as soon as those countries have revived sufficiently from war and starvation to care for cotton goods and steel rails, and to be able to buy them. The Madrassee and the Chinaman will recur to foreign cotton goods now that famine has relaxed its grasp, and railway-building will renew its activity. English manufacturers, with the advantage they have in their accumulated capital, may probably in the long- run beat foreign competitors out of the market. The real danger to English industry is that the theory of its develop- ment assumes that the foreigners' craving for the especial goods that industry supplied must increase in exact proportion to the additional capital accruing from the profits of the original business. Mr. Mundella pointed out to the Associated Cham- bers of Commerce at Sheffield this unsoundness in English trade. Its capital has been increasing at a rate out of pro- portion to the natural demand for its products. Manufacturers have been unable to suppose that there could be too much of a good thing. They would doubtless plead that the trade which does not go forward goes back. It is perfectly true, but it is a question of degree. No one would advise a manufacturer to starve his business by putting all its profits into some different investment. The greater, however, the profits during a favourable period of trading, the clearer the expediency of establishing a reserve. Persons engaged in the cotton and iron trades appear not to have known that it was possible to prepare, not necessarily for a rainy day, but for a check in the rate of progress. Everything made out of their special trade was put back into it, with the result that they are now returning to their customers the profits they made in past years out of them. For a larger supply of goods they are being paid the same as for the former supply. We should like to hear from a manu- facturer what would have been the effect of investing yearly in the Lancashire cotton trade one-fourth, instead of, it may be, three-fourths of the profits made in the palmy days. The one-fourth would have been very far more than the other cotton manufacturers of the world could have added annually to their business fund. Wherever, in the good days, English competed, for instance, with United States' cotton-prints, they would have had a sufficient advantage in cheapness to keep the market. But in less prosperous times, like the present, there would not have been a huge population requiring support, and a huge capital requiring profit, out of a dwindling market which can only be bribed and treated into accepting Man- chester goods by way of a favour. In taking such a course, Lancashire would have been doing only what every prudent capitalist does. A banker does not lend money on nothing but land ; a wise landowner does not employ every farthing of surplus -from his rental in buying fresh estates. But Lancashire had one idea ; it was, that the sole thing needful was to use all its resources for the single end of manufacturing, not better cotton, but more cotton. All the skill was absorbed in the endeavour to improve, not the product, but the producing machinery. China-clay has year by year made Lancashire cotton less, instead of more desirable. The energy and money would not have been all thrown away had they been used for turning out work more beautiful in itself, or better adapted to the requirements of the market ; but nothing of the kind appears to have suggested itself to the manufacturers. We are speaking of the general rule. There are individual exceptions to the rule, but manu- facturers as a class turned their eyes exclusively upon the pro- ductive power of their machinery. None were so naively sur- prised as many of themselves to learn that the prostration of some scores of millions in Asia with famine could have any- thing to do with them, so long as Preston had as powerful mina as Rochdale, and Rochdale as Blackburn.
For the time the evil brought about by overtrading must be endured ; it cannot be cured. There is the excess of invested capital, including the workpeople who are as much capital as the mills. Half-time will not bring in the legitimate profit on a capital which is double the amount capable of pro- fitable employment. To close the mills altogether might be cheapest in the end, as it is to strike a bad debt off a trader's books. But that would be to decide to starve half Lancashire, which has, masters and men, its subsistence locked up in them. Happily, the prophets of good times must turn out right sooner or later, and their predictions are as courageous as ever. The markets of Asia and of Eastern Europe, which have been closed by war and famine, must soon again be opened. No one can foretell whether it will be next month, or half a year hence, or two years. But Lancashire is entitled to trust that it may be soon enough to render needless so sharp a remedy for past over-trading as a complete cessation of present trade. We will hope that this change may come speedily, and Lancashire will then have an opportunity of repentance. If it pursue its old course, and suppose that trade can be developed, not by improving quality, but by increasing quantity, and by invest- ing all its profits in a single branch of industry, the depression of the last few years will become chronic. The world has discovered it can have too much of Manchester goods. Lanca- shire must discover a newer tune for Europe and Asia to dance to than sized cotton. If it desire to make a reasonable profit on its growing capital, it must use a little inventiveness, and vary its note.
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