TOPICS OF THE DAY.
MR. BALDWIN'S BUDGET.
WE warmly congratulate Mr. Baldwin on his Budget. He has handled the nation's finance from the standpoint of a sturdy optimism, and he is quite right to have done so. We say this not because we think that there are no dangers in the present situation, nor because we believe that all is best in the best possible of worlds. Why we hold it essential for the Chancellor of the Exchequer to look upon the bright rather than the dark side of things, and to expect better times, can easily be explained. For a trading community like ours to assume the worst, and to prepare for it, is -to throw up the sponge. Every trader must be an optimist at heart or go out of business. And the same thing must be said of a State which, like ours, lives by trade. The reason is clear. Commerce lives on credit. Without credit it must dwindle and fade into nothingness. But credit, in the last resort, is founded on the mutual assurance of benefits to come. A, B, C and D, and the rest, are prepared to look forward and base their action upon the belief that not only they themselves, but their peers also, are going to make money in the coming year. Roughly what we mean by credit is the belief in a future profit gained by prudence and hard work, and, above all, through honesty and adherence to bond and contract maintained with one's fellows. But optimism is of the essence of such personal and moral guarantees. There can be no credit when men come together and tell each other that they are not only going to make a loss them- selves in the next trading period, but are fully convinced that everybody else will do the same. In the case of such a consensus of opinion, based not upon any special and peculiar set of circumstances, but on a general belief, the only thing for the trader to do is to go home, put up the shutters and file a petition in bankruptcy.
Credit is, in fact, the outcome of the belief that man is a progressive creature, and that there is practically no limit to the amount of those exchanges, the parents of wealth, which arc made, not only between the people in one community, but between the men of all nations and all continents. That is why credit is the strongest rope in the world. But it is of no use for cables and ties to be strong unless they have something firm to hitch on to. In the case of the credit rope, the only rigid and stable standards are made of optimism. That is why America is the strongest and richest country in the world. Her people grow rich beyond all precedent, but not because they are cleverer inventors, better organizers, better savers than the rest of the world. In many respects they are very wasteful and inefficient traders. Taken as a whole, however, they always believe in a rising market and in each step forward being a lodgment for further advance. It is because of this that they give the world of commerce their law and triumph over time and space. But, though our commercial optimism is not of such a fiery kind as theirs, and has in it a touch of grumbling and of the uncertain British climate, it also is true optimism. We hold our own because, although we will not say so, we all of us at heart believe that the British Empire in general, and the City of London, the Lancashire cotton trade, our shipbuilding and our sea transport businesses in particular, have got in them the elixir of mercantile life.
And here we may say in parenthesis that it is because we realize that credit is the life-breath of trade that we are so strongly against the policy of intensive, and what we might call hothouse, deflation. Deflation and inflation arc equally ruinous when they are the arbitrary acts of government and not the natural results of the balance of trade. It is wrong to produce inflation, but when it has been created it is often even more wrong to deflate. The thing to be aimed at is, of course, stability. You want your measuring-rod to remain as nearly as possible the same. What is the terror of the trader, and what destroys credit and optimism, is the thought that, while you are manufacturing and producing subject to one set of costings, you may have to sell at another and much lower set. You cannot be an optimist if it is quite possible that what you produce at a shilling will have to be sold for ninepence. To create the optimism which is good for trade you want, at the least, stability of values. Further, the trader wants to feel that com- merce will take its own course and settle its own diffi- culties, and that he will not be made the victim of some act of policy, however well meant.
It is because we so fully realize the vitalizing effect of a well-based optimism that we have pleaded so strongly against an over-bold policy in regard to the Debt, and in favour of reduced taxation. It is true, no doubt, that by rapidly paying off debt we release money to the uses of commerce, but those who rely unduly upon this argument are forgetting the psychology of the taxpayer. Unquestionably a reduction in taxes makes for the optimism of which we are speaking. Nothing discourages the belief that there is a good time coming more surely than the constant demands of the Exchequer. Here let us say how strongly we are with Mr. Baldwin in his contention that the essential thing in public finance is to cut down expenditure. To spend less is the remedy for the embarrassed State as for the embarrassed citizen—for the model for State finance is not that of the trading concern but the income and expendi- ture of the individual. Taken as a whole, however, we are in agreement with Mr. Baldwin in regard to the Debt. He is clearly right in thinking that the object to be aimed at is the reduction of the annual interest charge, and he has no less reason on his side when he insists that the decline in the rate of the interest on short- dated loans depends very largely upon a good sinking fund.
The only criticism that we shall make is to express our desire that more consideration should be given to the possibilities of handling the Debt through a system of terminable, rather than perpetual, annuities. But that is a matter which must be dealt with in detail on some future occasion.
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