CHAPTER XIX. EXPORTS AS A TEST OF PROSPERITY.

If a country is progressing, its Trade should increase: not necessarily its foreign trade. Falling exports may indicate fuller employment of home industries which do not export, and increasing exports may indicate Trust dumping or home depression. Free Trade exports, not being exports of superfluity, are no adequate gauge of overflowing abundance.

AMONG the ordinary tests applied to measure a nation’s prosperity, there is one that has not yet been mentioned, the Exports. Before discussing statistics, it would be well, perhaps, to ask what we should expect, as regards its exports, of a country which was otherwise progressing.

There is no question that we should expect such a country’s total Trade to increase, for the very obvious reasons that the number of mouths to feed is increasing; that the working capital—the tools and instruments for creating more wealth—is increasing far more rapidly; and that the Standard of Life is rising, which itself involves that the wealth we are consuming, and taking out of existence as wealth, is increasing, and demands more labour to reproduce it. And if our trade were altogether foreign trade, or if our foreign trade were, and must be, a constant proportion of our total trade, then, of course, our foreign trade ought to be increasing.

But, this is an altogether different thing from saying that a nation’s exports, by themselves, are any adequate measure of its prosperity and progress, or that the evidence of exports outweighs the other evidences. Only a couple of years ago, it was generally accepted that the reason why America was not exporting steel, but, on the contrary, importing it, was the extraordinary demand for steel in America: her great prosperity at that time was taking the form of increasing fixed plant, railways, and buildings. The same was said of us in the early nineties. We were then so busy that we had relatively little to send abroad. This was the time when other countries got their chance. We absolutely refused foreign orders, not that we did not wish them, but because we could not execute them. It is a suggestive reminder of what people seem so often to forget—that our capital and labour are limited, and that we cannot possibly continue, at the rate of the world’s progress, to be the world’s provider.

So, when one sees falling exports quoted as a sign of national decay, the first thing to do is to look around us at home. And when we do so, and see the enormous development in the trade called House Building; when we inquire at the Local Government accounts and find that the Local Debt of England and Wales alone—to say nothing of Scotland and Ireland—has increased from £93,000,000 in 1874-5 to £316,000,000 in 1900-1; and that £145,000,000 of that, or 46 per cent., is entered as Reproductive Debt, this is, capital borrowed for the starting of what are virtually State Industries;—the question arises if it may not very well be the case that the growing capital and labour of this country are finding fuller employment in occupations that do not export. And one may ask, further, if the vast sums now being sunk in better and more sanitary housing for the working classes, are not perhaps a better investment, as regards the nation, than sending out steel rails to develop other countries, or sinking gold mines in the Transvaal. Suppose the vast bogs of Ireland were found to contain a new fuel, or that new sources of coal, petroleum, and the like were discovered in this country, would not capital be withdrawn alike from exporting and from foreign investments and be employed at home?¹

But, if falling exports are not necessarily any sign of national decay, are increasing exports any necessary sign of progress? Look at other countries. The dumping of iron during the last two years from Germany, it is acknowledged, was the dumping of practically bankrupt stock. Yet, no doubt, it accounted for a considerable increase in her exports. Is the dumping from America a sign of her prosperity? It is a sign of Trusts, but Trusts and prosperity are not synonymous. We are told continually that it is in times of depression abroad that we may expect dumping, and that, in particular, the dumping we have most occasion to fear is that of the United States Steel Corporation, which is just now paying off its operatives by tens of thousands. But this dumping will no doubt increase her exports. To say that a country is going to the dogs because her exports do not increase, seems to me about as reasonable as saying that, if a man does not go to the Riviera in spring but stays at home, it is because he cannot afford it!

It is always interesting, and sometimes profitable, to ask the hidden reason of some widespread belief. Why should exports be counted the gauge and measure of national progress? It seems to be the assumption that what a nation exports is its Surplus.

In Professor Gide’s Principles of Political Economy occur these words: “It is certain that for Tyre and Carthage in the old world, and for Venice or the Hanse Towns in the middle ages, trade was everything, and even to-day it holds a very large place in the national life of England. All the same, in great countries at the present time, trade with other nations plays only a moderate part in the general movement of their trade. In this respect, the position of a country differs from that of individuals: in our modern communities, the division of occupation has been pushed to its utmost limits; no one of us produces almost anything except on behalf of his neighbours, or consumes anything but what has been produced by his neighbours. Thus everything we produce and everything we consume must pass by way of trade. It is not so in the case of a country, and particularly of a great country. If we wish to compare such a country with an individual, we should compare it with a landed proprietor living on his estate, who, himself producing the greater part of what he consumes, has no need of buying outside anything but what he does not himself produce, and, consuming too the greater part of what he produces, has no need of selling outside anything beyond the surplus of his crops.”¹

All this is quite true from the standpoint and ideal of a protected country. Since the days of Colbert, France has set before herself the object of being self-sufficient as regards agriculture and manufacture. It is the Nemesis of Protection that her very prosperity makes the realisation of this ideal impossible; she has a surplus and exports it; and, in spite of all her planning, the imports which pay for these exports compete with her home producers and prevent the self-sufficiency.

But it is equally the aim of a Free-Trade country to break down these national barriers, and send its goods for sale anywhere in the world that it can get a better price than, or even as good a price as, at home. If, then, we think of our exports as the sale of a surplus which we cannot consume or do not want at home, we shall, of course, regret to see our exports going down; for the exports, in this case, are thought of as the superfluity of our wealth—the part we can spare and send away in order to buy other things. But when it is realised that foreign countries are not the “dumping ground for surplus,” but part of the one common market of a free-trade country, all that a diminution of exports tells us is, that we are not doing so much trade abroad as we did—which may be a good thing or may be a bad thing.

The point is that a country may gradually find it more profitable to invest its capital at home, and that the growing wealth may find full employment in industries which do not export. If one considers how much of the trained intellect of this country is finding its way into personal services—professional, journalistic, artistic, to say nothing of domestic service—this should be clear enough.

¹So, when Mr. Chamberlain compares the alleged 7½% increase in our exports since 1872 with the 30% increase in our population within the same period, and asks, “Can you go on supporting your population at that rate of increase?” (Glasgow speech, 6th Oct., 1903), the only rejoinder is, “What necessary connection is there between exports and the support of the population?” But even here one may join issue with Mr. Chamberlain. His inference is that, if population has increased while exports have not, there must have been less employment for the people. Sir Robert Giffen, however, reminds us that this is not the case theoretically, and is not the case as a fact. The value of manufactured exports contains two elements, the price of the raw materials and the expenses of manufacture. It is the latter only that indicates and measures the employment of British capital and labour. Even suppose, then, that our manufactured exports, as expressed in terms of value, have not increased, there has been more employment for labour and capital if the price of the raw material has fallen. Now, in 1877, Sir Robert calculated that “the net produce of British labour and capital exported abroad was £140,000,000.” According to the Board of Trade estimate for 1902, it is no less than £224,000,000, the difference being £84,000,000, or 70% of an advance over 1877, in the part of the exports which concerns us. This is confirmed by the calculations of Mr. Bowley. He takes the year 1881 as starting point, “partly for convenience, partly because by that date foreign trade had begun to recover from the sustained depression of 1879.” Between 1881 and 1902, the fall in price of the imported raw materials of our textiles was from a level of 100 to a level of 75, or 25%, while the fall in the price of exported textile manufactures was from 100 to 84 only, or 16%. In the same years, the fall in price of imported unmanufactured metals was from 100 to 96, or 4%, while the exports of metal products actually rose from 100 to 112. The conclusion seems inevitable that, even if the values of our exports had remained constant within these years, the amount of labour and capital employed by them had greatly increased.—Economic Journal, Sept. and Dec., 1903, and National Progress in Wealth and Trade. Mr. Bowley’s calculation of and deductions from the changes in price of imports and exports, and his comparison with the relative figures for Germany, are among the most valuable contributions which the present controversy has called out.

¹Third edition, p. 257; English translation, p. 237. It is characteristic of the author’s anxious and laborious revision that the words do not appear in the last (8th) edition.