Finance-Public and Private

Industrial Depression

IT would be a pity if certain favourable factors in the present situation such as the influx of gold, the growing strength of the Bank of England's position, the rise in British Funds and the advance in certain Industrial shares, for the most part connected with new and luxury industries, should obscure the serious character of the industrial crisis through which the country is passing. In those quarters where apparently the view is held that the cure of our industrial troubles can be accom- plished on the Cone system, bullish articles have appeared for the last two years leading the public to suppose that we were on the eve of a revival in our big industries. This view I have never been able to support in these columns and, at the risk of the charge of pessimism, I have felt it necessary to emphasize the serious aspects of the prolonged depression in coal, iron and steel, cotton and the railway industries. In particular, I have drawn attention on many occasions to the persistent fall in English Railway stocks and to the fact that it was im- possible to recommend investment with any confidence even at the lower level of values, for the simple reason that the position seemed to present something like a deadlock where it was impossible to see the chances of any early improvement owing to the railway systems being worked upon a wholly uneconomic basis.

SERIOUS LOSSES.

It is rather surprising, but it is yet another instance of the apathy and patience of the British investor, that so little in the way of public complaint should have been heard with regard to the continued fall in securities in .which so many hundred million pounds of British capital is invested. For the fall not merely in the Ordinary stocks but even in the prior charge issues is becoming a most serious matter. Here, for example, is a list of the Ordinary stocks of English Rails and also a few of the Prior Charge issues, showing the fall which has taken place during the past seven_months.

L.M. & S.. .. .. ..

Do. 4 per cent. Deb. ..

Do. 4 per cent. Pref. ..

Great Western Ord. .. ..

Do. 4 per cent. Deb. .. Do. 5 per cent. Cons. Pf. .. London & N. Eastern Prefd. Ord. Highest point this year. 761 86 79 1031 871 1011 441

Present price. 561 791 701 831 S2

941 231 ..

...

..

• .

• . .• •. Fall. 20 61 81 191 54 61 211 Do. Defd. .. .. .. 171 111

Do. 3 per cent. Deb. .. 621 561 • • . .

4

51

1611

Do. 4 per cent. 1st Pref. .. 72 601

Do. 4 per cent. 2nd Pref. .. 661 424 • . 24/ Southern Prefd. Ord. .. .. 79/ 701 • •

94

Do. Defd. .. .. .. 40 301 • . 91 Do. 4 per cent. Deb. .. 851 791 • • 61 Do. 5 per cent. Pref. .. 961 901 • •

51 Dealing only with the decline which has taken place during the present year, the depreciation in capital value in English railway stocks can scarcely be far short of £100,000,000, while a much heavier loss would be revealed if comparison were made with the quotations current at the time of the groupings some five years ago, although even then Home Railway stocks had suffered a pretty severe fall from their old pre-War level.

AN INTERESTING COMPARISON.

In my article last week I dealt so fully with some of the causes possibly responsible in part for the falling off in revenues of English railways, that I do not propose to comment to-day at any great length with regard to the matter. With regard to the question of railway freights on goods, however, I cannot forbear from quoting an extract which appeared in the Times City article of last Saturday. The remarks in the Times were based upon the accompanying table, which had been forwarded by a correspondent, the table making a comparison between British and Continental railway rates for iron and steel bars, joists, &c.

Commenting on these figures, the Times says ; " It may be claimed that the relatively higher rate per ton per mile with our shorter hauls still makes the net rate paid less than the much lower rate per ton per mile for the longer

*Belgian tariffs for same distance.

Dis- tance. Miles.

10 84 93 113 121 Great Britain. Export Inland (Exceptional rates.) (20-ton (15-ton Per ton. lots). lots).

To :- Per ton. Per ton.

s. d. s. d.

Birmingham .. 5s. 8d. 2-ton lots 1 2 1 9

15s. 5d. 2-ton lots 12 5 8 14s. 2d. 4-ton lots

Bristol.. .. 1 ls. Od. 2-ton lots

Manchester .. {14s. 4d. 2-ton lots 2 9 5 11 14s. 2d. 4-ton lots

Leeds .. 21s. Od. 2-ton lots

17s. Od. 4-ton Iota 2 11 6 2

London 19s. 5d. 2-ton lots 3 0 8 4 * To these tariffs apparently there should be added some addition for terminal services, but this would not exceed the equivalent of 6d. per ton.

In France the tariffs for 20-ton lots are 2s. Id. for export and 2s. 3d. per ton for inland places for ten miles ; over a distance of 84 miles the rates are 5s. 8d. and 6s. 9d. ; over 93 miles 6s. and 7s. Id. ; over 113 miles 6s. 7d. and 7s. 10d. ; and for 121 miles 6s. 10d. and 8s. 2d. respectively.

distances on the Continent, nevertheless it serves to nullify the geographical advantage of the British iron and steel industries."

WAGES.

• The one further point I would wish to make with regard to possibly railway reforms concerns the question of wages. Lest it should be supposed that I am challeng- ing the actual charges paid by the railway companies to various grades of employees, I would say that there are few probably who consider that the wage is in excess of the services rendered, at all events in the higher grades. On the contrary, in some of the more responsible positions held by engine drivers, signalmen, &c., the rate of pay, even allowing for certain privileges attaching to employees in the railway industry, would seem to be to the dis- advantage of the more responsible railway servants when compared with the wages received by unskilled labour in many other industries.

SHORTCOMINGS.

On the other hand, where the railways seem to be handicapped is in the insistence laid down by trade unions with regard to universal conditions of employment in the matter of wages and hours, quite irrespective of the actual amount of work afforded. Moreover, if the management of our railways over the past decade had been less concerned with groupings and monopolies, and had paid more attention to the need for earning fresh revenues, the position would probably have been very different from that which exists to-day. We know that for the drastic cutting down of capital which has recently taken place in some of the iron and steel industries of the country, ineffective management, as well as War misfortunes, must be held responsible, and unless railway stockholders wake up I am not at all sure that we may not even see some unpleasant developments in connexion with our railway capital. If nothing is to be altered, either as regards management or impossible trade-union regulations, someone has got to pay the piper.

UNEMPLOYMENT.

There is, however, another aspect to this matter of induStrial depression which is in a sense even more serious than the losses suffered by individual shareholders. At the Annual Banquet, last week, given by the Lord Mayor, at the Mansion House, to the bankers and merchants of the City of London, the Chancellor of the Exchequer was chiefly constrained to present a satisfactory picture of the financial position of the country. It was, however, impossible for- Mr. Churchill to ignore the state of affairs in some of our heavy industries, and there were two sentences in his speech which have attracted considerable attention in financial and business quarters. Referring to the figures of unemployment, Mr. Churchill said that it was great source of disappointment and concern to the Government that in the fou-rth year of their stewardship unemployment should have risen " and that they should be compelled to resort to some of those remedial measures which we had hoped we had left behind for good in 1925." And later in his speech, dealing with the same question, he stated that the special measures required for the emergency would be announced shortly by the Prime Minister in the course of the Parliamentary Debate.

RELIEF PLANS.

So grave is the crisis, both financial and social, expressed in the depression in the coal and other heavy industries, that few will be inclined to indulge in any captious criticism with regard to relief measures put forward by the Government. At the same time, it seems vital that we should carefully distinguish between improvements brought about by artificial measures and those which result from a real revival in wealth-producing activities. Unfortunately, so much of the proceeds of the inroads on capital during the past decade have merely gone in temporary reliefs which have done worse than nothing to deal with the real problem with which industry was confronted. Even more important is it to recognize the demoralizing effect of the subsidy system. Once the principle is adopted there is no escape from its many ramifications. The management of an industry may be able to demonstrate clearly to the employees that the wage is an uneconomic one and that sacrifices on the part of all are required if the industry is to remain on a paying basis. If, however, the point at issue is to be taken out of the arena of business and there is to be an appeal to Governments for subsidies, then, of course, in plain English, it means that the situation has to be met out of capital resources, and that, in its turn, means that the process cannot be carried on indefinitely.

OBSTACLES TO BE OVERCOME.

There is no greater problem in England at the present time than the re-creation of conditions giving adequate employment and wage to the people, but unless the problem is worked out on lines requiring the maximum amount of effort on the part of each individual in the community, the desired result can never be reached. Time was when it was hoped that the problem of unem- ployment, at all events, might be solved along the lines of 'Empire co-operation and that, with gigantic areas awaiting development, there should be not only a prospect of work for all, but work of a kind adding necessarily to the economic strength of the Empire. Unfortunately, however, we find in Australia and some other countries the same narrow disposition on the part of Labour which is apparent here, so that the advent of British labour is keenly resented by their confreres overseas. The pathway to prosperity seems, indeed, to be blocked in many direc- tions, and while doubtless the difficulties will be overcome in due course, I am still of the opinion that an under- estimation of the difficulties has something to do with the industrial depression and social unrest which afflicts the country to-day.

ARTHUR W. KIDDY.