Silver Commission.

They do not, indeed, allow that its effect has been very great, and make no attempt to estimate it. On the other hand, those who have had to bear the brunt of the fall in prices, and whose experience has compelled them to study closely the course of prices in the markets where they are daily engaged, and their connection with fluctuations in the exchanges, are, for the most part, strongly impressed with the idea that this tendency has all along been of momentous importance. The undetermined factor in this question is, in short, simply the extent to which the fall of exchange has depressed prices in gold standard countries, not the reality of its influence. That the fall does stimulate exports of commodities from, and discourage imports to, the silver standard countries, is commonly believed. Necessarily, therefore, agreement with this principle carries with it agreement with the principle that the fall in exchange increases the supply of commodities in the gold countries, by the double operation of augmenting imports of some descriptions and lessening exports of others. of course, the conclusion follows that such increase of supply must tend to drive down prices of commodities where gold is the standard of value.

And,

But there is a further question arising out of the foregoing observations. If the consequence of the monetary disturbance has been to stimulate.

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exports from silver standard countries, has it not given to producers there-agricultural and manufacturing alike—an advantage over their competitors amongst the gold standard nations? This point has been much discussed within the last ten years, and it was the subject of careful and minute examination in the year 1888 by the Board of Directors of the Manchester Chamber of Commerce. The circumstances then investigated referred to the prodigious growth of the cotton spinning industry in India since 1873. The inquiry was undertaken in compliance with the following resolution, passed at a general meeting of the members of the Chamber held on 31st October 1887:

In view of the recent very rapid increase of cotton spinning in India, and the exports of yarn therefrom, more especially to China and Japan, while at the same time there has been a very serious check to the growth of Lancashire yarn exports to those countries, the Directors are requested to examine and report to a special meeting of the Chamber as to the causes and circumstances which have thus enabled Bombay spinners to supersede those of Lancashire.

The inquiry began in January 1888, and was continued until the beginning of July, by a Committee of the whole Board. The Committee being unable to arrive at a unanimous conclusion, two

Reports were prepared, one of which was adopted by a majority of 10 votes to 7. The following is a copy of this Report:

The Committee, having held twenty-three meetings, and examined numerous well-informed witnesses, report as follows:

:

I. The principal circumstance that has favoured the rapid increase of mills in India, and enabled them to a great extent to supply China and Japan with yarns which formerly were shipped from Lancashire, is their geographical position, which to-day gives them an advantage of at least d. per pound on the portion of their output that is shipped to China and Japan, and 13d. to d. per pound on what is consumed in India. itself. This is an estimate of the net advantage to the Indian spinner over his rival in England, arising from his proximity to the cotton-fields on the one hand, and to the consuming markets on the other; after allowing for his extra outlay for machinery, and consequently enhanced interest and depreciation, as well as greater expenditure in such items as imported coals, stores, etc.

II. Superadded to the geographical advantage which it enjoys, the Indian spinning industry, it will be remembered, was for a long time fostered by the import duty of 3 per cent levied on English yarn, which equalled about 7 per cent per annum on the capital invested in the mills. This so assisted in stimulating the trade, that more mills were built than could profitably be employed, as shown by a fall of nearly 40 per cent, on the average, in the shares of nineteen principal mills in Bombay during the six months ending March 1885, and at the end of that year thirty

five out of fifty-two mills paid no dividend. It cannot be doubted that Indian spun yarns, being thus thrown on the Eastern markets below cost price, had a further powerful influence in the direction of displacing English coarse yarns, and the former having practically gained a monopoly, the newest and best-appointed mills in Bombay are now earning very large profits, and, as might be expected, many new mills are in course of erection there.

III. The Committee have further had under consideration whether amongst the " causes and circumstances" that, as expressed in the resolution, have "enabled Bombay spinners to supersede those of Lancashire," the fall in the value of silver has had any important part. The advantage derived from this cause cannot extend to the main items of the cost of erecting and working mills, namely, machinery, cotton, coals, and imported stores, as the outlay on these in rupees increases in precise ratio to the fall in the gold value of silver; but wages, local taxation, and perhaps other small items, are not immediately affected by that fall, and whilst the process of adjustment is incomplete, the Bombay spinner is advantaged. The advantage thus accruing to him has been represented by one witness as 30d. per lb., and by another as 51d., that is, on the assumption that no adjustment has taken place as between wages, etc., paid in silver in Bombay, and in gold in Lancashire, since exchange was at 24d., viz. in 1872. But then, it is also in evidence before the Committee, that at the earlier period just referred to, freight and all other charges incidental to the transport of cotton and of yarns were much higher, viz. 2.175d. then as against 1.060d. now, or, to put

the case precisely, the Bombay spinner, after paying the then higher rates of freight and other transport charges on his machinery, coals, etc., had a greater net advantage in such charges on cotton and yarn, in competing with Lancashire, than he possesses to-day by 99d., which it will be seen is more than double the benefit set down above as having accrued to him on the items of wages, etc., during the fall in exchange.

Accordingly, as might be expected, it has been shown in evidence that the most important and sudden expansion of the new industry took place in Bombay when these high transport charges were current, and whilst exchange still remained at about the par of 24d.; whereas, during many subsequent years almost no further extension took place, although exchange the while fell rapidly. It may even be added that so great were the advantages enjoyed by the Bombay spinner over his rival in Lancashire at the time referred to, that he was able to initiate, viz. in 1871-5, the competition with him which has since proved so formidable in the neutral markets of China and Japan, although he had then to pay the Indian Government an export duty of 3 per cent, from which the Lancashire spinner was, of course, exempt.

The Committee do not overlook the fact that the Indian spinner escapes the embarrassment to which his English competitor is subject, consequent on sudden fluctuations in the gold value of silver; but they are of opinion that apart from any benefit he has in this respect, or may derive from a low value of the rupee, the natural advantages that he has all along enjoyed, as set forth above, are sufficient to account for his having been able to obtain a virtual monopoly of the