A Fraudulent StandardCHAPTER II
THE GREAT CRISIS
OUR ignorance and unreadiness for the stupendous struggle in which we are now engaged, has been the subject of much discussion and many heart searchings. Criticisms have been launched against our guardians and caretakersthe governing classesfor their refusal to heed the warnings which for years prior to the war, were constantly sounded, both by events and by well-informed persons.
The Empire is now paying the inevitable penalty for the listlessness and indifference of the public and its leaders to the cry of the alarmists. When we look back over the past nine or ten years, it seems incredible that all the sign-posts pointing to the catastrophe towards which Europe was steadily marching, could have been so completely ignored. It is a sad reflection upon human intelligence to have to admit what history teaches, viz., the general futility of warning the public against dangers which appear more or less remote. From the time that Noah commenced to build his ark until now, calamity prophets have had little return for their warnings but ridicule. Jeremiahs have never been popular. We are all so prone to regard present conditions as permanent, particularly if they are agreeable, that we naturally resent any suggestion of impending trouble or disaster. Like other races, we are much better pupils in the school of Dame Experience than in that of General Advice. If our foresight were as good as our hindsight, no doubt we should be a wonderful people. But although our aptitude in learning from experience is perhaps one of our saving qualities, it is obviously necessary that the lessons from experience should be quite clear and simple. Any ambiguity as to the real cause of our past failures will probably lead us to future failures. Woe betide us if the appalling dangers and disasters, which we have barely escaped during the past three years through unpreparedness, are ever forgotten or ignored. The dangers of military and naval unreadiness are now fully realized by the vast majority of the nation. The dangers from our foolish economic and financial systems are, however, not yet realizedeven by a sensibly small minority. The reason for this is twofold. First, our experience has not yet been sufficiently severe to impress the average citizen with the perils of either food shortage, or our economic dependence upon foreign countries. And in the realm of finance we have been saved from the results of the folly of our banking laws and methods, by the action of the Government in placing the national credit at the disposal of the bankers and moneylenders.
In the second place, certain popular writers have given the public entirely false accounts of the system of peaceful penetration by means of which the enemy was steadily undermining our economic and political independence, and of the financial crisis through which the country passed in the midsummer of 1914, i.e., both the causes which precipitated the crisis and the methods by which a most terrible panic was but narrowly averted. That it is to the interests of certain classes to revert to our pre-war methods when peace is declared, is evident. And it is perhaps only natural that they should wish to preserve these interests, even though they are, at certain times, a menace to the welfare of the nation. But as the strength and safety of the British Empire is of far greater moment than the pecuniary interests of any single class, these interests must not be allowed to obstruct the path of progress. No greater disservice can be done to a nation than to misrepresent or disguise the real causes of its social, political or economic weakness or failures. To deliberately and intentionally falsify the obvious lessons from events, is a crime of the first magnitude. If the Government were to assist a jerry-builder by shoring up his buildings whenever they showed signs of collapse, we might applaud its motives in trying to avoid accidents, but we should certainly consider it censurable if it permitted the culprit to continue his dangerous business without cautioning both him and the public ! And whilst the Government was justified in saving the banks in 1914, it has no right to screen their weaknesses, nor allow the public to believe such obviously untrue statements as those made on their behalf by apologists who assert that the crisis was not brought about by any internal weakness in the English banking system.1
Our financial experience from the moment the war cloud first appeared until to-day, is so important, the lessons to be learnt are of such incalculable value to our future safety and welfare, that the Government ought to publish an absolutely authentic report of everything that happened in regard to its financial transactions with the banks, and the banks methods of dealing with their foreign and domestic clients. Whilst a good deal is already publicly known, very much is still hidden that the public ought to know. For example, why was the Bank Charter Act not immediately suspended in July, 1914, when the crisis was imminent ? Who was responsible for this delay which allowed the crisis to develop ? Is it true that certain banking officials failed to carry out the Chancellors instructions immediately when issued ? Why were Treasury notes issuedinstead of bank notesas on former occasions ? Why was the use of the National Creditwhich belongs to the British publicfirst offered solely to the bankers and not to the public direct ? Why have the bankers been allowed to benefit by their pre-war recklessness at the public expense ? Why was a Moratorium declared which the prompt suspension of the Bank Charter Act might have avoided ? Why are the banks exempt from the operations of the excess profit tax ? And above all, why have our authorities invariably turned a deaf ear to the advice and warnings repeatedly given them by men like Walter Bagehot, Lord Goschen, and Sir Edward Holden ? Why must our Chancellorswith but few exceptionsbe members of or allied to the banking profession ? The public have a right to demand answers to these questions.
With the conclusion of hostilities, we are expecting to enter into a mighty contest in another field. The enemy vows to wage against us an economic war with all his characteristic energy, ruthlessness and unscrupulousness. Are we to enter this struggle as unprepared as we were rushed into the war ? Are all the warnings to be again ignored ? Surely it is but mere sanity to ascertain the real facts regarding our financial and commercial methods ? Are they safe ? Are they warranted to carry us to victory ? Are systems originally devised by certain individuals for their own enrichment, good enough for a nation when engaged in an economic struggle with a powerful industrial foe like Germany ? Are we silently to submit to the re-establishment of institutions which have collapsed on every occasion when exposed to conditions which are likely to reappear from time to time ?
Let us first deal with the financial question. What happened in the fateful summer of 1914 ? I give it in the words of one of the most strenuous apologists of our present monopolistic banking system, Mr. Hartley Withers, for whom a special post in the Treasury department was provided by Mr. Asquiths Government. In his recent book, War and Lombard Street, the author says :
On Friday, July 24, Austria sent its ultimatum to Serbia. On Saturday, July 25, there was something very like a panic on the London Stock Exchange and the Continental Bourses. At the beginning of the next week the foreign exchanges began a series of erratic and unprecedented movements which ended in a breakdown. On Thursday, July 30, the Bank of Englands rate was raised from 3 per cent. to 4 per cent., and on July 31st it was multiplied by 2, jumping from 4 per cent. to 8 per cent. On that day, July 31, some of the other banks were refusing to pay out gold to their customers, and making them take payment in Bank of England notes. Consequently there was a long string of people wanting money for the holidays, waiting to cash notes at the Bank of England. On Saturday, August 1, the Bank rate went up to 10 per cent., and the string of people waiting to cash notes at the Bank of England was still watched by an amused crowd from the steps of the Royal Exchange. All this happened before a shot had been fired on the Continent, and before it was even certain that England would go to war at all. Then came Sunday and Bank Holiday, and war, and then three more days of Bank Holidays and then the general Moratorium.
It was an unpleasant string of surprises, but it was not brought about by any internal weakness in the English banking system. The fury of the tempest was such that no credit system could possibly have stood up against it. In fact, as will be shown, the chief reason for the suddenness and fullness of the blow that fell on London was nothing else but her overwhelming strength. She was so strong and so lonely in her strength that her strength over came her. She held the rest of the world in fee with so mighty a grip that when she said to the rest of the world, `Please pay what you owe me, the world could only gasp out, ` But how can I pay you if you dont lend me the wherewithal ? If there had been any rival who could have taken Londons mantle from her shoulders, and come forward as the provider of credit, London could then have called in her debts. But there was none. The machinery of credit broke down in both hemispheres, and London as its centre had to be given time to arrange matters under the new conditions. (Italics are the present writers.)
The reader who is uninitiated in the practices, phraseology, and peculiar ideas current throughout the realm of finance, may find it difficult to reconcile Mr. Withers history of those eventful days with his conclusions. To most people it would appear that a firm that cannot pay its obligations is either bankrupt or next door to it. The London banks owed their depositors and clients very large sums of legal tender money. No doubt there were larger sums owing to the banks from foreign and domestic clients which they were unable to collect. But that was no fault of the depositors. If I entrust my money to a firm on the express condition that they are to pay me on demand, they must either pay on demand, or they become defaulters. The London bankers had loaned the money belonging to their clients to people all over the worldincluding German firms and German bankers. In fact, Germanys readiness for war, was partly due to the gold and credit facilities furnished her by our cosmopolitan money-lenders ! And now when war was threatened, the British public wanted to know that its money was safe. The bankers were caughtand were unable to fulfil their obligations. Had they been ordinary merchants or manufacturers, they would have gone into liquidation amidst the denunciation of the press and public. They would have been accused of over-trading. Had they been private trusteessolicitors entrusted with funds belonging to clientsthey would have gone to prison ! But our legal code is so curious and so discriminating, that the vices of one class become the virtues of another. According to our financial experts, what is considered weakness in commercial affairs may be strength in banking matters. And the condition known as bankruptcy outside of the charmed circle of banking, is called overwhelming strength within that circle. Finding themselves in such overwhelming strength, the bankers had to close their doors and beg the Government for help. They were compelled to acknowledge their inability to meet their obligations, and in order to save the nation from the perils into which the bankers system of overtrading had landed them, the Chancellor was compelled to offer the immediate use of the National Credit which he provided in the shape of Treasury notes and at the same time declared a Moratorium. But this was not all. Under Peels Bank Charter Act, for sums over two pounds, legal tender was compulsorily payable in gold. The public had deposited with the banks in round figures about £1,000,000,000all of which was payable on demand in gold according to law. The banks obligations were impossible of fulfilment, and the bankers have known this from the time they first accepted these obligations ! No provision was made by Peels Act for Wars, or panicsexcept evasion of contract ! The Government was therefore compelled to allow the banks to evade their obligations by paying out paper money instead of the gold which according to the law they should have possessed. Imagine the Government coming to the rescue of the steel, iron, coal, engineering or building trades, or any branch of industry under similar circumstances, and offering the members similar support ! Not that such support would be foolish or injurious. On the contrary, if our Governments had always shown equal zeal in assisting British trade and commerce in times of depression which they have readily offered to the banking profession, much social misery and unhappiness would have been avoided.
The point to be observed is this : for their own selfish interestsfor the sole purpose of making profitsour financiers are permitted to risk the publics money to any extent, with the certain knowledge that if they over-trade and get into deep water, the Government is bound to save them ! In fact, our joint stock banks are now so powerful they are in the position of demanding the Government support whenever they need it ! So that whilst the public is compelled to take all the risks, the banks are permitted to take all the profits ! Is it any wonder that English banking is the envy of the money-lenders of all nations ?
Again, the Treasury notes represent the National Credit, i.e., the combined credit of the British tax-payers. That credit belongs to the peoplenot to the banks ! But our democratic Chancellor offers it to the bankers to loan to the public on their own terms to whom it already belongs ! Surely never was generosity so lavishly displayed ! And this credit which saves the banks and the nation, which functions as currency just as well as gold, facilitating exchange and commerce, is only permitted to function during National criseswhen the banks are practically insolvent ! But, as we have seen, the law regards banking from an entirely privileged standpoint. The facts as disclosed by the great crisis of 1914, as well as by former crises, prove conclusively that our banking methods are inherently weak and unstable, and quite unable to withstand any extraordinary strain which a war involves. Nothing short of the National Credit is strong enough to carry the nation safely through such a crisis.
Now let us see how nearly the predictions and warnings of various alarmists have been fulfilled. In an Open Letter to Mr. Lloyd George, then Chancellor of the Exchequer, published in 1911 (Dent & Sons), I wrote as follows (page 10) :
Under the fatal ban of our Legal Tender and Bank Charter Acts, all banking enterprise of an original character has been suppressed, and our joint stock banks have had to erect their vast edifices upon the narrow and unstable foundations provided by these laws ! To one who has given the subject any careful thought, the marvel is that we have so long escaped the inevitable debacle, which sooner or later must overtake us ! . . .
Our banking system is built upon a margin of bankruptcy ! No provision whatever is made for any extra-ordinary event, such as a war or panic ! Take any of our great joint stock banks. How many of them can show at any timeeven for window-dressing purposes10 per cent. of cash available against their liabilities ? . . . And one shudders to contemplate what would happen in the event of a great crisis, such as a war with Germany ! . . . No bank is to-day solvent on the basis prescribed by law. Not one could begin to fulfil its obligations in the precious metals. So long as we compel the Bank of England to pay out gold on demand, so long as we maintain our free gold market (chiefly for the benefit of foreigners), so long shall we be liable to a very fluctuating bank rate, and to have our gold taken abroad. . . . It is as certain as that the sun will rise to-morrow that in a great crisis we shall be compelled to suspend our Bank Charter Act and accommodate ourselves to paper money.
Again, in a pamphlet entitled Is a Money Crisis Imminent ? published in November, 1910 (being the substance of a lecture delivered under the auspices of the Banking and Currency Reform League at the New Reform Club, London), the writer also said :
The pending invasion of this country by Germany, and the general Armageddon that is to follow, have occupied the attention of the public for the past few years. Whether the prophets who have foretold of these calamities be true or false, it does not require any profoundly prophetic gifts to foretell of the great financial crisis which sooner or later must overtake us. I cannot understand the complacency of those gentlemen who talk of war so glibly, but show no concern regarding the perils to which our commerce and trade are exposed by a system which is of our own creation, and which is maintained for the benefit of a comparatively few individuals. Certainly if war were to arise, as predicted, a very large number of our mercantile businesses would be utterly ruined ! We should have a banking crisis that would eclipse anything the world has ever known, and the financial system which has been praised so often by our bankers, and those who profit by its continuance, would be found utterly unsound and unable to stand even a fraction of the strain which such a crisis would put upon it ! It would tumble like a house of cards ! . . .
In the event of a war with Germany or a panic leading to a very considerable withdrawal of deposits, our banks would have to close their doors, for they could not pay their obligations to the extent of even ten per cent. ! . . . But apart from the danger of the withdrawal of deposits a still greater danger lies in the possibility of a sudden demand for gold abroad. It is well known that foreign banks and finance houses employ large credits in the London money-marketscredits which can be withdrawn very suddenlyand if at a time of war-panic an attempt were made to withdraw these credits in the form of gold, it is difficult to see how the Bank of England could avoid the suspension of specie payments. It should also be remembered that in a war, the enemy would be interested in damaging our credit to his fullest extent.
So great an authority as Lord Goschen also commented on these dangers. In 1892, when as Chancellor of the Exchequer he addressed the Leeds Chamber of Commerce, he said, No fertile imagination could exaggerate the gravity of the position ! Years prior to this, Walter Bagehot had similarly and eloquently called attention to the supreme weakness of our financial system. And in very recent times our ablest and greatest banker, Sir Edward Holden, has repeatedly sounded notes of warning to his fellow-bankers and to the country generally. But the Bank of England backed by Lombard Street, has been strong enough to defeat every attempted alteration or reform. The advice and warnings have hitherto fallen on deaf ears. Bank dividends have been regarded as of far greater importance than national safety and welfare.
If the reader has any doubt regarding the political supremacy of our financiers, let him read the various speeches on finance delivered in the House by the various Chancellors since the war started. He will then realize how completely the Bank of Englanda privately owned joint stock bankwith its affiliations dominates the Governments financial policy. Our Chancellors, whether Radical like Mr. Lloyd George, Liberal like Mr. McKenna, or Conservative like Mr. Bonar Law, are merely the mouthpieces of the all-powerful money-lending interests of Threadneedle and Lombard Streets. Possessing no special or considerable knowledge of monetary science themselves, our politicians are compelled to listen to and accept the advice of those whose interests lead them to regard the public as their rightful prey, to be plucked whenever the opportunity arises. Hence when these champions of vested interests insisted that the War Loan must under no consideration compete with or depreciate their own securities, our obedient Chancellors acted as instructed, and the rate of interest on these loans was fixed accordingly.
Notwithstanding the obvious lessons of the past as to the inadequacy of our banking methods, taught us by the events both preceding and since the war, so little impression have they made upon the minds of the majority of our bankers, that they have refused to consider any change in their methods for assisting British enterprise in its endeavours to capture the trade of the enemy !
Now let us see what happened to our gold market just prior to the war, and how far these warnings and prophecies were justified. I cannot do better than quote from Mr. Moreton Frewens lucid article in Overseas for February, 1917.
In the fateful days of August, 1914, the cosmopolitan finance, so fashionable in the City of London, had exposed England to a danger of the most formidable kind. Already eager pens are at work counselling that after Peace we shall return to the ancient ways, and it is therefore important to submit the case of that cosmopolitan finance, without any delay at all, and ask the verdict of the Empire. Is there to be, here in London, ever and always, danger of the most imminent and sinister and concealed kind, or ` Never again ? Confronted with these alternatives, can we question which is the reply the Empire will give ?
Very briefly the situation was this. During the two years before the war it had been matter for general comment on all the Bourses of Europe that Germany had been buying immense sums of gold at a premium. I mean, that Berlin was paying for the gold bullion she bought here, more than the price indicated by her own exchange quotations. That very fact, had it stood alone, should have convinced our financiers that Germany intended war, and that she was draining London, the only `free market in the world for gold, of that metal which, since 1873, is the real sinew of war. But I pass over these great gold purchases by Germans, because in that the question of `exchange is involved, and the exchange question few people so much as desire to understand.
But what was it that happened, and in what may be called the War Stores Market, between January and August, 1914 ? When that is properly investigated, as it will be, that investigation will, I am certain, sound the death-knell of all this cosmopolitan credit-mongering built up in the City of London, and synchronizing with and growing out of our ` Free Trade experiment. How then did Germany mobilize her finances of war during those six months ? I hope I may be able to explain this in language that your varied readersthe ranchman, the fisherman, the trapper, the lumberjack, the miner, the farmer of the Empire from John oGroats to Vancouver, from Vancouver via Sydney Heads to Cape Townmay be able to follow, for it discloses the most wonderful tale of financial grand larceny in all the worlds historya tale too, which is certain to attract imitators. Now this is what actually occurred. Germany, of course, needed for her impending war immense supplies of lead and spelter, copper and nickelthese are the products of Canada, Australia, Africa ; also cotton from Egypt, and wool from Australia, a score of half-finished warmanufactures, too, from Great Britain. These are bought, not for cash, but with promises to pay cash three and six months after delivery, in Berlin. Such is the method of the Great International Credit System. Now mark the sequel ! Germany had as against these 'scraps of paper (politely called 'bills in the jargon of the ' City ) war munitions supplied by our Empire of a value of two hundred million sterling (the amount of the indemnity paid by France to Germany in 1871)! Germany, as I say, has had this huge war sustentation fund from England, and had it before ever a shot was fired at all ! But I can hear the seller of lead from Broken Hill say, ' That was not the way my lead, at least, was paid for ! No ! but the actual method was this. Berlin had branches of three of the greatest of her banks in London. As fast as Berlins banks gave these promissory notes to our colonial sellers, they were sent to the London branches of the Berlin banks. These branch banks next passed on these ' bills to the amount of two hundred millions sterling to the dozen great London discount houses, the whole length of Lombard Street. Of course, if the Berlin banks failed to meet these bills when due, all Lombard Street, the Bank of England included, must stop payments. The German Government relied chiefly on this pretty conspiracy of their financial experts in London and Berlin, to keep England out of the war altogether. The Germans said of us ' that is a nation of shopkeepers. If the first note of the war should involve the wreck of the Bank of England, then rely on it, her honour notwithstanding, England is going to 'stay out. Greatly to our honour, these terrible responsibilities did not suffice to dominate a splendid ebullition of public opinion, and though the temptation was horrible, England was kicked into the war by every responsible element in her body politic, and particularly by that vast proletariat which we were told had commenced to doubt its own sense of patriotism !
We are destined in these days at hand to hear such subsidized applause to the great national virtue of Englands ' free gold market, and of the profitable nature of British bill-broking with German bills, but I believe that the public opinion of to-morrow will challenge all these statements. Such profits go to the ' profiteers, while the losses are saddled on the taxpayer. But think of the frightful peril of it all !which indeed is the peril of every section of the British Empire itself ! It is inconceivable that we shall, after the conclusion of peace, permit this traitorous cosmopolitan bill system to be again built up, so that once more we may be fined two hundred millions by the enemy before ever a shot is fired ! It is quite true that the taxpayer will not ultimately be called upon to find any two hundred millions. The Bank of England, guaranteed by the Government (that is by the taxpayer), has succeeded in salvaging at least three-quarters of the whole amount in the last two years, but that fact in no wise reduces the impact of the frightful and almost mortal blow struck at the heart of the Empire in August, 1914, by the mechanism of the German banks so insolently established in London for this very purpose.
Such is Mr. Frewens scathing indictment of a financial system which one could hardly believe to have originated outside of a lunatic asylum !
But who is really to blame ? If the British people are fools enough to allow their statesmen to legislate for the benefit of a special class and of every country but their own, they must not complain if a cunning and unscrupulous Government like Germanys, seizes the opportunity offered to enrich herself at their expense. The great trouble is that our governing class has hitherto consisted of the idle rich and titled youths in search of something to do to escape boredom ; barristers, solicitors, dilettantes, novelists, arm-chair philosophers, schoolmasters and theoristsspecialists in almost everything except the affairs of government. And when questions regarding trade and finance have arisen necessitating legislation, they have sought and received advice from those whose vested interests are opposed to the public interests. Hence we get our monetary and banking laws through the influence of cosmopolitan money-lenders, our foreign trade policy from paid professors, importers, and foreign traders, and our tangled weblike legal system from those who batten on it.
Commenting on our British law practice, an eminent Austrian lawyer once remarked to the writer, Your legal system is the wonder and amusement of the whole world ! A successful English barrister must be a legal artist ! In every other country he is compelled to be a legal scientist.
Turn now to our foreign trade policy. How far are we prepared with a well thought-out plan for countering the enemys intention of seizing our markets when peace is declared ? Here and there certain attempts are being made to formulate a policy. Our Chambers of Commerce have suggested certain half-hearted measures. The Paris Economic Conference resulted in the appointment of a committee which has issued a report. And there apparently the matter rests.2 In the meantime certain organizations, such as the Cobden Club, whose members have learnt nothing from the revelations of the past three years, are actively engaged in disseminating misinformation for the purpose of allaying the public fears, in the hope of inducing us to resume trade relations with the enemy of God and man as soon as the war is over ! Certain writers are either knowingly or ignorantly deceiving their readers by denying Germanys politically aggressive intentions in her trade operations.3 Blinded by their free-import prejudices to the economic dangers confronting us, they seek to lull the public into a false security. These writers and their organizations are as serious a menace to Britains future economic welfare and safety, as the Czars recent Court Camarilla was to the military success of Russia.
Let me say at once that not only are we at present totally unprepared to wage a successful trade war with the enemy, but, judging from the writings of certain economists and financiers, the nature of the coming contest is not even understood. The preparation necessarily involves our getting rid of numerous systems and methods which are barriers to our economic progress, and for which the greed of certain privileged classes coupled with the ignorance and superstition of the people are responsible. It means the repeal of certain legislative acts and possibly the enactment of fresh laws. The lead must be given by the Government. In fact at present a sufficiently strong economic organization to meet the enemy can only proceed from the Government. Many suppose that the coming trade war is entirely an affair for the individual manufacturers, merchants and bankers to deal with. They see neither occasion nor scope for Governmental action. Certain free importers maintain that since international trade is solely an exchange between the individuals of one country and those of another, Government interference cannot help, but can and will, if invoked, hamper our trade and ought therefore to be shunned. These writers ridicule the possibility of a trade war ! How can there be warfare, they naively inquire, over transactions which are mutually profitable and beneficial ? What can Germany do beyond sending us her surplus goods in exchange for ours ? And why object to enrich ourselves from the more efficient productive methods of the enemy ? But these people either forget or ignore the fact that Germanys industries are all organized for co-operative action and collective warfare. And just as the great American financial and industrial trusts and combines have been able to destroy such individual effort and competition as they have objected to, so a nation organized as Germany is, and backed by the solid strength of all her banking and financial institutions with the additional support of their Government, will sweep our unorganized independent manufacturers out of the running in any industry they decide to control, unless some satisfactory measures of defence are provided. The notion that international trade is nothing more than simple barter between the individuals of one country and those of another is no longer tenable. Trade is not to-day the peaceful, civilizing system as pictured by those who are for the most part wholly ignorant of it. It is a competitive struggleoften a very demoralizing strugglefor the control of the factors of wealth production and distribution. Trade competition usually arouses the meanest and most malignant qualities in the human breast. There is nothing ennobling or civilizing in such a contest. The industrial and trade magnate seeks to control men and marketsnot things merely. When Germany sends us her dyes, chemicals, electrical apparatus, machinery and other goods, it is not for the mere purpose of securing our cloth, our wool and other products, nor for any mutual advantages. It is for the purpose of controlling our markets, of preventing us from engaging in the manufacture of similar goods to those she produces, and of making this country eventually subservient to and economically dependent upon herself. Now, economic power is the very foundation of political power, especially in democratic countries. The man who controls industries can readily control those employed in such industries. If his wealth is considerable, he can secure the election of municipal and parliamentary candidates of his own. Look at the political power wielded by the liquor trade in this country ! Look again at that enjoyed by our bankers, landlords, lawyers, railway directors, shipowners, etc. Contrast this with the studied neglect by our legislators of our inventors as a class who, by reason of their comparative poverty are unable to assert any influence on the Government, whatever may be its complexion. Look at the position of the United States where certain financial magnates wield a power greater than that of the President himself ! Look at Italy, how near she came to strangulation at the hands of the Hun bankers and commercial trusts ! Look, too, at Russia, still wrestling in the toils of the peaceful penetrators ! The very end and aim of Germanys peaceful penetration has been the political control of the world ! And how nearly she came to gaining her end, only those who have studied this question are fully able to realize. Those who have read Professor Hausers book, entitled Germanys Commercial Grip on the World, know something of the subtle, subterranean methods she practises, and how wonderfully successful they have been. Trench warfare has long been our enemys favourite method of conducting his trade rivalry. One of the questions future historians will ponder over will be, What hallucination led the German people deliberately to convert the worlds admiration and appreciation of their industrial and organizing ability, into a fierce passion of hatred and abhorrence by their foul and fiendish conduct in the present war, just when their peaceful methods were bringing them within sight of the object they had so patiently and persistently pursued ? Be that as it may, the problem for us is, How are we to cope successfully with our foe after the war ?
One interesting question obtrudes itself at this point. Although the moral standard prevailing in trade and commerce is nowhere particularly high or noble, it is a fact acknowledged universally, that nowhere else is the standard for honesty in business transactions as high as in Great Britain. Germany has openly and avowedly thrown over all pretence to the recognition of any moral code. Her one aim is success. As in diplomacy, so in trade, her people will observe no scruples when competing with their opponents. Will our present moral standards be successful against the ruthless and unscrupulous dealings, the bribery and corruption of the foe ? And those free importers who are pleading for a resumption of our former business relations with the enemy after the war, should ask themselves, whether it is wise, safe or even decent, to deal with a nation of self-confessed bribe-givers, spies, forgerers, cheats, murderers and thieves, who show no signs of penitence, but rather glory in their infamies ?
It is difficult for one familiar with Germanys trade organizations and methods to contemplate this countrys lack of preparation for the approaching economic struggle, without becoming an alarmist ! And how unprepared we are will be seen in the following pages. At present we are handicapped by our own trade methods and banking laws, and our political leaders, or many of them, are entirely ignorant of the fact. A group of influential members of Parliament have indicated their intention of opposing any measures which may place a barrier against the enemys free use of our markets, after peace is declared !
In view of our present knowledge of our enemy, and of his plans and purposes, is our pre-war policy a safe one ? Most readers will admit that tariffs are trade barriers, and they tend to limit the total wealth which the world might enjoy if a free trade system could be safely and universally established. But this is not the point. We are confronted with a danger, not a theory ! The point is, under what system can the British Empire become free from the menace of German intrigue and political aggression ?
We may readily concede to the Free-traders-atany-price that their panacea is effectiveunder certain conditions. If there were no Germany, if the world was one great federation of all civilized nations, then free trade would be the ideal system. If, on the other hand, our object is to protect and support our country and its colonies in a world of hostile races, to build up a great British Empire strong enough to repel all the attacks of Hunnish or other uncivilized hordes, whether white, yellow or black, then we must aim at becoming self-contained, and selfsupporting, and we must refuse the freedom of our markets to all, save our own kinsmen and friends. If there is one message conveyed to us by the events of the past three years which is of more importance than all others, it is that which warns us to make ourselves and our Empire strong and independent militarily, economically, and politically. No one can look back over these eventful years and review its pictures portraying the horrors, treachery and barbarism of the enemy, the shameful cowardice and indifference of certain neutrals, and the sublime heroism of the Allies, without realizing that henceforth the burden of maintaining civilization, chivalry and honour rests exclusively upon the shoulders of the British-speaking races and their Allies.
Our economic preparation for the future must therefore be first, with the view of making ourselves and our Allies strong and independent, and second, to prevent the enemy regaining his former strength and power until he has attained a very much higher stage of morality and civilization.
The following, which confirms much of what I have already written, is from an article in the Sunday Observer of December 5, 1916, by the city editor of that well-known journal :
The German banking problem continues to attract attention in the City. There is a good deal of complaint as regards the delays, and the apparent stubbornness in placing obstacles in the way in some quarters, whenever any question is raised of drastic dealing with the German banking or high financial interests. Probably the real reason is that the influence of the German banks and financiers were so widespread, their power and interest so vast, and the ramifications of their business so general, that it is difficult to move and eradicate the evil without disturbances. But the evil must go. The German banks have done mischief enough. For the past years their tentacles have extended over British trade and commerce. By their business methods and, let it be said, by their enterprise, and the commercial and financial documents which came their way, as a result of the vast commercial business, they have had an insight for years into the business of individual traders, have seen their orders, noted their prices and discovered their markets. It is too much to expect that all this has been done without in many cases British business interests suffering, and without in many cases information of prime importance to the British trader and manufacturer finding its way to Germany.
It is the same trouble with financial matters. The truth is that it is only being realized that the German Government worked with many banks and the German manufacturer and trader, and that their national interests were the main object all the time. It was just the same with commercial methods generally. Twenty years ago, one of the most prominent of our German consuls wrote to the present writer to the effect that he had good reason to believe that trading associations were sending subsidized men from Germany to find employment in British houses with the sole object of capturing British secrets and diverting trade from this country. If he spoke thus privately, it is evident enough that the British Government must have known, and yet no adequate warning was given, and similarly several of the banks were allowed to work mischief in the same way. It is time now that all this tomfoolery ended, and that adequate steps were taken to see that the evil does not exist after the war.
1 Hartley Withers, War and Lombard Street.
2 This was written in March, 1917.
3 See J.A. Hobsons New Protectionism, containing a brazen and impudent denial of Germanys political aggressiveness in her trade methods !