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ways of business. Capital with its brains and labour with its craft must always run hand in hand. Wealth can be created only by an expenditure of each, and it is quite a recognised fact that in industry labour imparts one-half the value of the whole. Capital and its rapid circulation is the chief source of wealth. Whereas, in days of old, it took two or three years for a manufacturer to turn over his capital, now it is done two and three times in the year. This means a considerable modification in prices to the consumer and profits to the producer. If an annual turnover means a profit of 10 per cent. to the manufacturer, a fourfold turnover means the same result with a profit of 2 per cent. on each transaction, the employment of more workpeople, and greater benefits to the consumer. This is the secret of the great success of our Stores" systems, so prominent in London. The poor Irishman who turns out his landlord forgets that he extinguishes the central force which throws money into circulation. The shopkeeper who ignores the advantage of advertising neglects a force of attraction that brings more customers to his counter, and hastens the turnover of his capital. The town that neglects to support a local industry drives away a source of supply and demand which adds materially to the wealth-earning powers of the residents of the place. One hundred labourers removed means 500 mouths no longer to feed and house.

The true secret of success in business is the formation and wide extension of markets. "Any fool can make chocolate," said Menier, "but it takes a clever man to make a market for his chocolate." Given several countries with equal capital available, that country which gives the greatest facilities for the circulation of its capital becomes rapidly the richest and employs the greatest number. That has been the case with the United Kingdom with its insular position, its command of the sea, its great shipping, its cheap post and its cable system, its banking system, and not, as the politician believes, the adoption of the free trade policy of Cobden. We have acquired our commercial supremacy by our roving instincts, by the energy and enterprise of our merchants, by the inventive skill of our engineers, and by our love of freedom and of civil and religious liberty. If we lose it will be by the blindness of our politicians, by the ignorance of the democracy, and by the closing of our markets.


Peel had the insight to foresee the growth of manufactures, and he adapted his fiscal policy to meet its rising wants. He was confronted not only by the objectional corn laws, but by a succession of serious deficits. In fact, in 1842, he had to provide for a total deficit of £10,072,000. The Queen's Speech of 1842 said: "I recommend to your consideration the state of the laws which affect the import of corn, and of other articles the produce of foreign countries." The Whigs fought for a fixed duty on corn of 8s. per quarter, but Peel proposed a modified sliding scale, making the duty vary with the price, giving a preferential rate to the Colonies. His view was to maintain the corn laws in principle on grounds of public welfare, so that the country should not be dependent upon foreign resources for its supply of food. In 1849 the tax fell to a fixed duty of is. per quarter, which was removed by Gladstone in 1869, but reimposed in 1902, and now again abandoned.

Peel was unquestionably a free trader in principle. His budget of 1842 showed this. He said, "I believe that on the general principle of free trade there is now no great difference of opinion, and that all agree in the general rule that we should purchase in the cheapest market and sell in the dearest." (May 5th, 1842).

Peel came to the conclusion that no fresh increase of duty could succeed, for he found that the limit of taxation on articles of consumption had been reached, and that the home markets were seriously affected by excessive duties. The Whigs in 1840 added 5 per cent. to the existing customs and excise duties, and estimated a return of £1,895,000, but only £206,000 was obtained. Peel adopted the reverse policy. He hoped to restore the revenue by relieving taxation. His principles


i. To remove all prohibition and relax all duties of a prohibitory character to a moderate protective scale.

2. To reduce duties on raw materials imported for manufactures to 5 per cent., making some merely nominal for statistical rather than for revenue purposes:

3. Duties on imported articles partly manufactured not to exceed 12 per cent.

4. Duties on imported articles wholly manufactured, 20 per cent.

His object was to increase the importation of foreign produce by reducing their price to

the consumer and to "make this country a cheap country for living, and thus induce parties to remain and settle here." This carried to its logical conclusion means the total repeal of taxes on food, but Peel clearly saw that it was quite legitimate to impose light duties on foods which do not affect the market nor increase the cost to the consumer. duties on raw materials except timber and tallow were removed in 1846.


Peel felt that domestic agriculture ought to be protected as an expediency, and in the physical interests of the nation he was undoubtedly right, but in the interests of the working classes he was equally right in doing everything he could to reduce the cost of living of a class then in dire distress. However, bad harvests, famine in Ireland, the powerful reasoning of Cobden and Bright, the inexorable logic of facts, pure patriotism and a noble nature induced him to waive all ties of party. He boldly accepted the principle of free trade in corn, and he carried out the relaxation of the Corn Laws so as gradually to reduce them to a mere nominal point. Peel changed his opinions with his experience. He was accused by his political opponents of being paradoxical, inconsistent, and contradictory. Is it not well that our statesmen should have open minds? Is it not well that they should be willing to be taught? We live in times of great topseyturveydom, and political circumstances are as changeable as weathercocks in variant breezes. All honour to the faithful servant of the State who, when the public welfare demands it, and convincing facts confirm it, rejects all party ties, throws up political power, eschews all emolument, and reverses political prepossessions in obedience to the dictates of conscience. It is interesting to compare the Revenue of 1842 with that of 1903 :

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The population in 1842, 25,000,000; in 1903,


The Customs and Excise now far exceed the total income of 1842, and in spite of the great reduction of taxation and the introduction of free imports of food and raw materials, Customs still give us £34,000,000!

The great growth of the Post Office is remarkable.

The income per head from all sources was in 1842 £213; in 1903, £3*43.

It must not be forgotten that the British Government has no capital account, and what is usually charged to capital in commercial and industrial business is in Imperial business charged against revenue.


The Bank of England had abandoned cash payments in 1797. They were not restored until 1819 through the action of Peel, which was his first great financial achievement. Our present banking system was settled by Peel in 1844, when he passed the Bank Charter Act. It established a uniform single metallic standard (gold) for the national currency, and determined the power to issue notes by the condition that the Bank must keep in store sufficient bullion to enable it to pay over the counter in coin any notes submitted. The Mint is required to coin its sovereigns in gold at a price of £3 17s. 10дd. per oz. Thus our standard coin has a well-defined legal weight and fineness and its value is constant. So in fact is a, Bank of England note under Peel's Act. As a contrast to this -in our Colony of Hong Kong the medium of currency is the Mexican and British silver dollar, and the fluctuations of the standard as compared with gold are enormous, unsettling and irritating. At one time the dollar was worth 5s., but last Christmas it touched is. 6d., and now (September, 1903) its value is

Is. 10 d. !


Peel, in 1842, imposed an income tax of 7d. in the 1-this is nearly equal to 3 per cent., or more exactly £2 18s. 4d. on every £100not for the " purpose of providing the supplies for the year, but distinctly for the purpose of enabling us to make this great experiment of reducing other taxes." It was thus the precursor of free imports. The income tax has remained, and has proved most useful. It has varied very much with circumstances, but the mean for the last forty years has been 6d. per

1 or 2 per cent., which is now regarded as the normal to which ere long we hope it will be reduced.

Taxation is direct and indirect, but they are not fairly distributed. There is a tendency to fly to direct taxation, because it falls upon the rich, but if it is excessive it must fall ultimately on labour, for the moment it pinches expenditure is reduced, horses, carriages, motors, yachts, boats, servants disappear, hospitality is restricted, and the circulation of money checked. The butcher, baker, fruiterer, grocer, tailor, milliner, et hoc genus omne, find their accounts diminish, demands cease, and the farmer, merchant, manufacturer, &c., pay off hands, and labour is in distress. Surveyed from every point of view stagnation in the circulation of wealth means want of employment and loss to the working man.

Peel's work of tariff reform was carried on and completed by his great pupil Gladstone. The French Treaty, negotiated by Cobden, and completed in 1860, while it modified immensely the restrictions between the United Kingdom and France, did not tend to the introduction of Free Trade between the two countries, and was only of a temporary character. It was not renewed. Gladstone's great financial coup was the abolition of all taxes on paper. His budgets were distinguished by the oratorical charm with which they were delivered. He ameliorated the incidence of the burden of taxation on the labouring classes to the lowest point, until, indeed, direct imperial taxation was wholly removed from them, but he also enunciated a doctrine which has been quite overlooked. "If you want to benefit the labouring classes," said he, "and to do them the maximum good, it is not enough to operate upon the articles consumed by them, you should rather operate on the articles that give them the maximum of employment." He was thus not averse to the taxation of food, and he recognised the equality of the claims of direct and indirect taxation, both for imposition and for remission. Indeed, it is only through the throat that you can force the working man to bear his fair share of the cost of government, while even this contribution from him is dependent on his being maintained in employment. If he be unemployed his aid disappears, and he and his family become a burden on his union or his neighbours. Local rates affect the working man much more than imperial taxes. If when at work he contributes £2 to the revenue, when he is a pauper he costs £15 per annum to maintain. Every working man thrown out of work means, on the average, five mouths left to feed, and thus £75

per annum has to be provided from the rates. There are over 1,000,000 paupers in the United Kingdom, that is I in every 40 persons is relieved by the poor-rates. Those who manipulate the fiscal system of this country are bound to reckon employment as a very potent factor in the consideration of any change.


It is very remarkable that while so much solicitude has been shown by the politician for the welfare of the working man, the working man himself has established a form of protection more restrictive and more injurious to his own interests than the Corn Laws of old. The increase in the rate of wages, the reduction of the hours of work, the limit to the capacity of a day's work, the restriction of output, and the attempt to manage the business of the country by irresponsible agents are far more serious to the commercial supremacy of the country than any suggested fiscal reform. It is difficult to show how and where the shoe pinches, but every employer of labour, every contractor and manufacturer, every architect and engineer who draws up estimates, knows well that the cost and the amount of a day's work have recently materially changed for the worse. I shall revert to this point when dealing with statistics. The increased cost of production and of construction are far more injurious to our trade than any contemplated taxation. We are being beaten in every neutral market, at home and in our own colonies, by fair competition, and there is no difficulty in showing that the losing item is the growth of the cost of labour. For every 100 shillings received by the British workmen, the Frenchman receives 77, the German 78; but the German works 131 hours, and the Frenchman 124 for every 100 hours the Britisher works, and if the foreigner turns out more work per hour, as is maintained, it is not surprising that the British manufacturer is beaten in his own market. I write from personal experience, for in my professional work I have to deal with contracts in every quarter of the world. Moreover, the Americans and the Germans are better trained commercially, and the former particularly is more advanced in the employment of automatic machinery and of more perfect methods of production.

Unrestricted foreign competition has another evil. It handicaps the British working man not only against his own improvident regulations but against the high local rates and taxes

which follow from the cost of Empire and the free asylum we give to the distressed and conscientious foreign objector. Why should not the foreigner pay something towards the revenue of this country? He forces us to pay heavily to get our goods into his market, and we thus support the funds he allots to educate his people in those very principles of commercial and technical education which are employed by him against us as well as to strengthen his navy and therefore to compel us to spend more money on our own.

By our present unrestricted importation of partially or wholly manufactured articles, we also give a preference to other great manufacturing countries like the United States and Germany, for we enlarge their own free home markets by the addition of our own free home market without any quid pro quo whatever on our part. Thus the United States of America, with its population of 78,000,000 and our population of 42,000,000, has a market of 120,000,000, while we are restricted to our own 42,000,000. This gives the United States of America a decided advantage, because it is a well-known fact in production that the larger the quantity produced, within limits, the cheaper the cost of production. This is very marked in the case of steel, and an excellent illustration in the case of bricks was given by a correspondent in the Times of October 13th, 1903. He found he could turn out 60,000 bricks a week at a cost of 22s. per 1,000. He was, however, able, by a new process, to turn out 100,000 per week with the same labour, at a reduced cost of 175. 3d. per 1,000. Fawcett, whose work on 'Free Trade and Protection" is a standard book on Political Economy, admits the right to impose import duties for revenue purposes on articles of food such as tea, sugar, &c., which are not produced at home and even on those which are produced at home like beer, when the excise duty is equivalent to the import duty. He thus admits that Free Trade exists between this country and another even when a tax upon a given commodity produced by each is equal. He, however, strongly objects to any import duty which implies directly or indirectly the protection of a special class of industry. We are all with him on that point, but when it becomes a question of the closing of markets to our own manufactured goods, of the loss of employment by our labouring classes, and of the disappearance of our capital, a general tariff on all manufactured goods may benefit all classes alike.


"Those who maintain high tariffs inflict a far greater injury upon themselves than they do upon us, but it cannot be denied that the English suffer as a nation by the commercial restrictions of other countries." This Fawcett said in 1881. What would he say now if he found loss of exports, diminution of markets, disappearance of capital, and want of employment? His argument is against high tariffs. He did not contemplate a low tariff which did not affect the market price at home, which fell on the foreigner, which benefited the British workman, and which gave the British Government something in hand to negotiate with when diplomatising with our competitors. Those who protest against import duties argue as though they were imposed for retaliation, punishment, or revenge, while those who support them argue that they will protect the home market, maintain more constant employment for capital and labour, and relieve the rates. Which is right? The so-called "Free trader" argues that taxation on imports must be paid for by the consumer and that prices in the home market must go up. If this were so why is it that we, the producers, suffer from the taxation of our exports into other countries? The repeal of the Corn Laws did not affect the price of bread, and the recent imposition of is. per quarter on imported corn was imperceptible in our markets. No sane politician would propose taxation that would raise the total cost of the necessaries of life or repeal the free importation of raw produce.

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4. The great increase of the general trade, and of the wealth of this country, is not due to its fiscal policy, but to the volution of business operations effected by the introduction of practical applications of science by which capital is more rapidly, circulated.


The Fiscal Blue Book containing memoranda and statistical tables and charts collected by the Board of Trade issued in August last, is a mine of valuable financial facts. It is well supplemented by a smaller book on wholesale and retail prices published by the same Department in the same month. Doubt has been experienced of their absolute accuracy,

5. We have not abolished protection, we have only transferred it from a place where it was controllable to a place where it is incontrollable, and injurious to the best interests of the country.

6. While we give no preference to our Colonies at present, we unwillingly give a virtual preference to our active competitors, by enlarging their home markets.






1855 1860 1865 1870 1875

1895 1900

scarcely understood, and are certainly not and a note of caution on this point has been followed.



sounded by the Board of Trade itself, but I purpose to deal not so much with their quantitative as with their qualitative character. As long as they are relatively true over long periods they give the broad facts with which I wish to deal.

In accordance with the method I developed in my address of November 22nd, 1902, I have taken the table of exports of manufactured goods detailed in Section I., p. 3, and chart, Series A. This curve is shown as A B C D in Diagram I.

From this curve I have determined the percentage increase in the annual exports which is shown in the dotted curve E F G H. It will be seen that over the period 1860-75 E to F, this curve approaches very closely to a loga

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