men individually.' The following is a comparison of melters' earnings in several countries before the war :

The weight of steel made per shift is approximately in the ratio of: English, 10; American, 1·5; German, 2·0. Thus the German workman got little more than a quarter of the Englishman's wage, and turned out twice as much work. The accuracy of these startling figures was challenged, but the general conclusions of the Committee appear to have been fully established.

Assuming that we can reconstruct the national finances on the lines I have indicated and at the same time increase our production over the pre-war level by about 50 per cent., what is the economic problem which we shall have to face after the declaration of peace? We shall have to provide work for four or five million men who are at present in the Army and Navy or employed as munition workers, and one million women who are employed in munition works. At the same time we shall have to readjust our foreign trade policy to the new position which we shall hold in international finance.

A sub-committee of the executive of the Labour Party have put forward an interesting programme of reconstruction. The report states, inter alia, that, in order 'to prepare for the possibility of any unemployment either during demobilisation or in the first years of peace, the Government should make preparations for putting instantly in hand' a large number of social and other domestic reforms involving a huge outlay. It is disappointing to find that an important body, which will have so large a share in the determination of the future economic policy of this country, should have taken such purely domestic views of our post-war problems. We cannot afford an extravagant programme of internal

development until we have restored our position in foreign trade.

The report states: To-day no man dares to say anything is impracticable.' I will dare to say that it is impossible to evolve a satisfactory and adequate scheme of economic reconstruction unless it is based upon (1) a great increase in the production of commodities and services in the United Kingdom, and (2) a vast expansion of our foreign trade. We all recognise that domestic reforms are urgently necessary, that our agricultural industry must be fostered, and that home industries, particularly the dye and chemical industries, must be greatly developed; but, whatever schemes we may adopt, we shall ultimately find that they are of little account unless they comply with the two conditions which I have laid down above. The expansion of our foreign trade is, therefore, a matter of profound importance.

The Government are at present spending in this country about 51. millions per day. During demobilisation they will probably spend not much more than 2,000,000l. per day. Who is going to take the place of the Government as the purchaser of commodities or services to the value of 3,000,000l. per day? It will be a much more difficult task to move from war production to peace production than it was to move from peace production to war production. In the latter case we had at our disposal the wealth and resources accumulated through a century of industrial expansion. The manufacturer, in transforming his works, knew that he had behind him a Government contract, at, to say the least of it, remunerative prices, with no risk of bad debts or a falling off in the demand. How is the British manufacturer to shape his peace programme and to move from war production to peace production with a heavy burden of taxation, a problematical demand for his products, and an unknown volume of competition from foreign manufacturers? Before the war we imported mainly foodstuffs and raw materials and exported manufactured goods and coal, and it does not seem probable that the war will make any fundamental alterations in our dependence upon foreign trade. As to foodstuffs, in spite of the progress made in agriculture, we shall hardly be able to produce all the food we require in these Islands.

As to raw materials, we shall be still more dependent upon foreign supplies than we were in 1914.

Through the command we had of the markets of the world, and the economic momentum given to our trade by the interest on our investments abroad and the earnings of our shipping, insurance companies, etc., we could, before the war, determine in a large measure the nature of our imports. It is of vital importance that we should arrive at a clear understanding of our international position as it will appear after the war, and ascertain whether we shall still possess this command of the markets of the world. Shall we still be a creditor nation? Shall we have capital available for large investments abroad?

We began the war as the greatest creditor in the world because we carried, financed and insured more than one-half of the world's sea-borne commerce, and the world was indebted to us for 2001. millions a year by way of interest on investments. Our pre-war foreign investments have shrunk from 40007. millions to 30007. millions, but, on the other hand, we have made new investments abroad during the war to the extent of 15007.-20007. millions. Before the war the foreign holding of our national debt was negligible. At the end of the current financial year it will probably amount to 15007. millions. If these conclusions are approximately correct, we stand to receive only 2007. millions as interest on investments; that is, assuming half our loans to our Allies are good. On the other hand, we shall have to pay 751. millions per annum by way of interest on British Government securities held abroad. On balance, therefore, we should stand to receive 1257. millions by way of interest on investments.

With regard to food imports, for the five years preceding the war our purchases, including drink and tobacco, averaged 2701. millions per annum. Even if we prove able to provide food supplies at home for five days in each week, which I very greatly doubt, the cost of food for the two days will, owing to the increase in prices, probably amount to as much as the pre-war imports for three days per week. Our mercantile marine has shrunk from over 20 million tons gross to between 16 and 17 million tons gross; but, owing to the high freights that must obtain for some years after the war, it seems not

unreasonable to assume that our earnings from shipping will be in the neighbourhood of 2001. millions per annum. Until the international financial system has been reestablished it would not be reasonable to expect that our earnings from our share in the financing of international trade will approach the pre-war standard; but, on the other hand, earnings from insurance, underwriting, etc., will probably be increased.

We should, therefore, be able to count upon a credit balance of over 4007. millions per annum.

On the basis of these calculations we should, therefore, be nominally as well off as we were before 1915; but, on the new basis of prices, a credit of 3951. millions after the war will not be worth anything like a credit of 4001. millions before the war, and to this extent we shall be in a less favourable position in relation to international trade.

All the conditions essential to a vast development of international trade should be in existence after the war. The principal trading countries of the world have depleted their stocks of manufactured goods and raw materials; and all neutral countries which produce foodstuffs and raw materials have, under the stimulus of economic pressure, enlarged their capacity for production of these commodities. In our own case we have increased the power equipment of our industries. We have introduced labour-saving appliances and revolutionised our industrial methods. We shall have a larger industrial population, including women, than we had before the war; and, when demobilisation has been in operation for a year or so, our production-that is to say, our wealth-producing power-should be at least 50 per cent. greater than it was before the war.

One of the most difficult questions in connexion with the expansion of our foreign trade will be the problem of the foreign exchanges, some of which are now heavily against us. We do not know with any accuracy the extent of foreign holdings of our Treasury Bills, Exchequer Bonds and Currency Notes, etc., but we do know that the aggregate amount must be very considerable. In the course of his Budget speech Mr Bonar Law told us that, during the past financial year, the United States had made us advances to the extent of nearly 500 millions. With regard to Egypt, the 'Times of Nov. 28, 1917, stated: "There is ample evidence that practically the entire surplus income of the country (i.e. Egypt) since the outbreak of war, computed at about 407. millions, had been invested in War Stock, principally British.' The building-up of our gold reserve is, therefore, a matter of the first importance.

Altogether, I estimate that from the beginning of the war down to the end of 1917 we borrowed abroad, or through the sale of investments obtained credits abroad for, sums amounting altogether to 350l. millions in 1915; 6007. millions in 1916; 900l. millions in 1917-a total of 18507. millions. Of this total about 9007. millions represent British holdings of foreign securities, principally American, which we have sold back to America, Japan, etc., leaving us with a net indebtedness of, say, 1000Z. millions. Against this we may place the remainder of our pre-war foreign investments, say, 3000l. millions:

£

Balance of ante-bellum investments abroad 3000 millions. Add Investments made abroad during the war (that is, loans to the Dominions and one half of the loans to Allies), say.

1000

Less monies owing to the United States, etc., down to March 31, 1919 .

The conditions under which our foreign trade will be carried on during the years immediately following peace cannot possibly be the same as before the war. We