FINANCE—PUBLIC AND PRIVATE.
PROTECTING THE NATIONAL SOLVENCY.—A STRONG LEAD NEEDED.
(TO THE EDITOR OF THE "SPECTATOR."]
Sia,—The City refuses at present to be enthusiastic about the Treasury circular requiring the Departments to reduce their expenditure for next year by 20 per cent. In the first place, the City- has heard so many times these promises of reforms that it has grown callous concerning them. In the second place, it is clearly perceived that the movement is a compulsory rather than a voluntary one on the part of the Government. Had there been sincerity concerning economy from the moment of the Armistice, we should not have had our industries weighted down with oppressive taxation, and the present acute trade depression might have been averted. In the third place, it is quite clear that, whereas the Spectator long ago advocated voluntary rationing of the spending Depart- ments by the Government as the only means of securing economy, the Government has now been driven to con- sider—at present we are only at the considering stage-- the idea because there is the haunting spectre of the revenue failing to fulfil official estimates. In fact, so far from the Government having endeavoured to make economy in the expenditure the means for relieving taxa- tion and thereby encouraging trade prosperity, it has waited until adversity has threatened a shortage in the wherewithal for meeting the rapacious demands of the extravagant and bureaucratic spending Departments. Small wonder, then, that the City reserves any expres- sions of approval with regard to the latest economy move- ment until it has had unmistakable evidence in the national balance-sheet itself. It is not forgotten that this latest economy letter was drafted within a week or two of the proposals for increasing the remuneration to Members of Parliament.
A good example of the inability of Ministers to perceive the effect of their conduct of the national finances is furnished in the poor success which has attended the Conversion Loan. Out of maturing bonds amounting to something like £700,000,000, only about E150,000,000 has been converted into the 3i per cent. Loan. Yet there were not a few critics at the time of the issue of the loan who complained that the terms were over-generous, and in my own comments in the Spectator I described the terms as fairly attractive to those desiring a long-dated invest- ment. Nevertheless, the issue has been a comparative failure, and the reason is not far to seek. In your issue of April 30th, when commenting favourably upon certain terms of the Loan, I felt obliged to assert that "the present moment was inopportune for the issue of a Conversion Loan." I did not then explain why the moment was inopportune, but I will do so now. It is true that the loan has been greatly handicapped by the continuance of the coal strike and the extreme trade depression, but those circumstances in themselves would not have been sufficient to prevent an adequate response from the investor. Not only, however, were investors affected by the remembrance of the heavy discount to which other Government issues had fallen, but they realized what Ministers seemed utterly incapable of realizing, that until there is economy in the national finances, and until there is an end to the semi-State support of the war upon Capital, there can be no permanent improvement in the national credit. In other words, while the Govern- ment was right in looking ahead with regard to its maturing obligations, it should have deferred the Conversion Loan for a few months with the object of giving practical proof to the community in the meantime of its determination to economize. A few months would have sufficed, if the Government had been in earnest, to produce this impres- sion, and there was no immediate hurry with regard to the loan, inasmuch as the first date of the maturities with which it dealt was not until next year. A Government, however, which was so lacking in perception, and even humour, as to introduce proposals for paying salaries to Members of Parliament free of tax, and giving them free railway passes at a moment when the community was groaning under the burden of an unprecedentedly high Income Tax and extraordinarily high railway fares, may perhaps be excused for having failed to perceive the neces- sity for convincing the investors of this country of its intentions with regard to economy in national expendi- ture before issuing its Conversion Loan. All the same, and because of the favourable terms of the loan and the magni- tude of the Sinking Fund, I think that it will be found that those who have elected to convert their bonds into the long-dated loan will ultimately have no reason to regret their action.
Concerning that matter, however, and indeed concerning the general financial outlook, much will depend upon whether investors, who for the most part constitute the well-to-do and the middle classes, will perceive the necessity for making their power in determining the future of this country felt through organization. At present, as the City views it, there are two huge organiza- tions which inspire and dictate our political and social developments. There is the huge organization repre- sented by the Coalition Government with its bureaucratic power and its political ramifications, and there is the great organization of Labour which to-day is more political than industrial, the trade unions resembling a great political body (with something more than a suggestion of foreign influence) far more than an ordinary industrial union. Between these two great organizations, un- organized capital and the middle classes stand a poor chance of making their voices heard in the counsels of the .nation, and matters are worsened because, although much is said with regard to the sane common sense of the wage- earners, the fact remains that the vast majority of them, either from conviction or from terrorism, appear to give greater allegiance to their trade unions than to the State. Never, perhaps, was the City more conscious of these dangerous elements in the situation than it is to-day ; and while it must be confessed that even those who most clearly discern the dangers are, now as ever, slow to act, I believe that the time is approaching when bankers and business men will realize the necessity for aiding the organization of the forces of the industrious and sober-minded section of the community—whether capitalists or wage-earners— in such a way as to apply a corrective to those forces which at the present time seem to be supreme in swaying every- thing that pertains to political and legislative activities.
Already one banker, Lord Inchcape, has had the courage to write in no measured terms to the Times pointing out the dangers with which the country is confronted, and there would be no one better fitted than he to give a lead in this matter of organization, for he possesses in a remarkable degree great business experience, driving force, and a sane and patriotic outlook upon national and business affairs.
Hitherto the causes which have prevented the organ- ization of Capital have been twofold in character. On the one hand, the investing classes and the middle classes in particular are the busiest section of the community, and their plea of lack of time to attend to matters of organ- ization has been more or less true, though they are probably beginning to perceive the serious results of their inaction. Another motive which has held back Capital from taking a lead in this matter of organizing its forces for political ends has been the desire to "play fair " ; in other words, in no way to abuse the power of capital so that it should be even suspect of a desire to fuse money power with political power. Labour, however, has been less squeamish, and over and over again in recent years has deliberately declared. war against capital and against the community as a whole. I suggest, therefore, that it is time that the City, and indeed the business community generally, should give a definite lead in opposing a movement which if it continues will most assuredly bring financial and commercial disaster. With Germany industriously working long hours at high pressure, how is this country going to compete if high wages, high cost of production, short hours of labour, combined with a ca' canny policy are to be the order of the day? It simply cannot be done, and unless the situation is taken in hand quickly such conditions of distress will arise that, although we won the war, we shall assuredly "lose the peace." Two things are urgently needed. One is the energetic organization of all that is opposed to these forces making for the destruction of our country, so that its power may be felt and understood by the Govern- ment; the other is the organizing of such an educative propaganda as shall successfully demonstrate to Labour itself the needs of the situation. It is no case of Capital warring against Labour, but rather of striving to protect the prosperity of this country, in which every section of the community is concerned. These movements, however, require money and leadership. If it has only the will, the business community, and the City in particular, can supply both, but action must be prompt.—I am, Sir, yours
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