THE SELF-SUPPORTING FALLACY.
ON Monday the Times published a long extract from the Chicago Daily News containing a glowing account of the way in which Germany had become self- contained under the industrial direction of a certain Dr. Walther Rathenau. That credit may be due to this German industrialist for organizing the industries of Germany to meet the emergency of war is possible, but the idea that the German people, or any other people, deliberately desire their country to be self-contained as a matter of permanent policy is a sheer absurdity. Everybody knows that one of the distinguishing charac- teristics of German State policy during the past forty years has been the deliberate attempt to encourage German export industries in every possible way. Yet the encourage- ment of exports must of necessity entail the encouragement of imports. By no possible means can. any State escape from the law of commerce that in the long run exported goods or services are paid for by imported goods or services. Germany could not possibly have encouraged her export trade without simultaneously encouraging her import trade, unless she had been willing to give away her exports for nothing. Nor is Germany the only country that has either consciously or instinctively encouraged external commerce. From the dawn of time human beings have ever sought to increase their individual prosperity by exchanging products with one another, and as civilization becomes more complex so does the complexity of exchanges increase. No individual can remain self-sufficient unless he is willing to remain a naked savage, and no nation can be self-contained unless it is prepared permanently to accept an extremely low standard of living. So far from Germany desiring at the present time to be self-contained, it is quite evident that her whole State policy rebels against that compulsion. She is constantly striving to maintain some kind of export and import commerce through neutral countries, and is assisted, unfortunately, in that ambition by the excessive complacency of our own Foreign Office in dealing with neutral commerce. She is also at this moment engaged in trying to break through Serbia, partly no doubt in order to save the Dardanelles, but also in order to open up a great outlet of commerce which shall be beyond the control of British sea power. The whole truth is that Germany, finding herself deprived by our sea power of the greater part of her external com- merce, has reorganized her industrial life with a view to meeting, as far as is possible, the new conditions imposed upon her. So far as these new conditions have compelled her people either to work harder or to consume less there may be a limited gain to the German State, though clearly at the expense of German individuals. The individual does not gain when.he has to work harder for the same pay, or to consume less than he wishes to enjoy ; but the State inay gain by the concentration of effort implied in this widespread individual sacrifice. Nevertheless there remains a net loss to the nation, and it is clear that the rulers of the German State are themselves convinced that there is such a not loss, for otherwise they would not be so eager to regain the possibility of external commerce, It has been argaied that the restriction of German com- merce, by compelling the German nation to be approxi. mately self-contained, has relieved Germany of some of the difficulties which we experience in financing oversea commerce. There can be little doubt that Germany would gladly exchange her difficulties for ours. Whether, indeed, we have not done mischief to ourselves by exaggerating our own difficulties is a question that deserves very careful consideration. There are two broad facts which the public nifty well compare : first, that twelve months ago, when there was an outcry in the City of London about the difficulty of American exchange, America owed us large sums of money ; secondly, that six months later, when a similar outcry began again, we owed large sums of money to America. It is not unreasonable to believe that if the Government had stood aside in both cases the difficulties of exchange would probably have settled them- selves. At any rate these difficulties, such as they are or ware, are insignificant in comparison with the difficulty which Germany experiences in obtaining articles essential to her industrial life or to her military efficiency from foreign countries. In this connexion it is worth while to call. attention to the extraordinary activity of our own oversee, commerce in spite of the fact of war. During the nine months ended on September 80th last our total oversea trade, adding imports'andexports together (excluding bullion in each case), was £1,028,000,000. The corresponding figure in the year 1905, not for nine months, but for twelve months, was 4978,000,000. It was, indeed, not till 1906 that our total oversea trade for twelve months turned the thousand million point. Since then our trade has year by year increased so rapidly that now in nine months, in spite of the war, we are doing more external trade than we wore ten years ago in twelve months. This comparison is necessarily based upon the value of goods exported and imported, and notoriously some of the present values are very much higher than they were ten years ago. This specially applies to such imported com- modities as wheat. It applies much less, as a detailed examination of the figures will show, to the values of our exported goods, and it is therefore worth while to make another comparison based solely on export figures. During the last nine months the value of British goods exported from the United Kingdom was 4283,000,000, That is exactly the figure reached for the export of British goods for twelve months in the year 1902. If we add a proportionate amount to our present exports, so as to get an estimate for the whole year, we roach the figure of 4377,000,000, which is almost exactly the figure reached for the whole year in the years 1908 and 1909, so that as regards exports alone, in spite of the war, we are doing as well as we were less than ten years ago. Such a result is a marvellous tribute to the manner in which our Navy has kept the seas open for our commerce, and also to the manner in which our merchants and manufacturers have been, not merely steadily, but with extraordinary rapidity, extending our export industries during recent years of peace. There can be not the slightest doubt that the Germans would rejoice beyond measure if they could point to any such figures as these.
Those British pessimists, however, who are always decrying the achievements of their own country, and always helping to advertise German goods in neutral markets by booming the exploits of Germany, are now arguing that we shall be hampered after the war by the fact that we have borrowed abroad, whereas Germany has been borrowing only from her own citizens. If this argument were used solely as a criticism of the terms upon which the Anglo- French Loan has been floated in New York, there would be something to be said for it. It is clearly disadvantageous to borrow abroad at a higher rate of interest than we could have borrowed at home. But the argument of those people among us who cannot rid themselves of the habit of admiring all things German goes much further than this. They seem to imagine that German industries will necessarily be in a stronger position after the war because all Germany's loans have been internal. To quote the article from the Chicago Daily News to which the Times gives so much prominence : " At the end of the war Germany will hardly have a penny of debt to foreign countries. She will be economically unassailable." Thal it is an advantage not to have a debt to foreign countries is obvious, but to go on to say that Germany will be economically unassailable because her War Debt is wholly internal is an absurdity. The argument overlooks the essential fact that industry and commerce are carried on not by nations but by individuals or by individual firms. After the war every German manufacturer will find that his buildings and plant and his house and every permanent form of wealth he possesses are heavily mortgaged, and that the interest upon this mortgage is a first charge upon his business. It is quite true that 'the interest will be payable to other Germans, but that fact will not reduce his expenses of •production. From his ,point of view the burden upon his future industry is exactly as great if the interest is payable to Germans as it would be if the interest were payable to Americans. Nor is there any way of his escaping this increased cost of production except by repudiating his debt. Thus, so far from German industry being unassailable after the war, it will be heavily embarrassed by the debts which the German Government have contracted to pay for the war. Our own position will be-relatively better, not indeed because we have borrowed ?thread, but because we have raised at any rate some portion of our •war oxpenditure out of current taxation. The great blunder we have made—though Germany has made it to-an .even greater extent—is in borrowing so much and paying so little out of revenue. What we have to aim at, if we wish to safeguard the future, is •not the pursuit of any such folly as making our country self-contained by destroying our external commerce, but the economizing of all our resources both by an increased output of wealth and by diminished individual consumption.
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