CHAPTER XXI. EMPLOYMENT AS AFFECTED BY EXPORTS AND IMPORTS.

It is said that we are exporting raw materials which employ little labour, and importing manufactures which, made at home, might employ much. But Coal employs more labour for its value than most manufactures. Most of the manufactured imports, again, are materials of our industries. Of the remainder, there are some our consumers will have; some, foreigners can make better; some would require skilled labour, which, probably, is already profitably employed in other ways. But are we not forgetting that all these imports must be paid for, and that, to take over the making of them ourselves, is to displace those who now are making for export? Neither Free Trade nor Protection, in themselves, can secure employment for a nation.

IF it is proved that there is no stagnation of exports; that the total exports are increasing satisfactorily, and the exports per head even more satisfactorily; one would think that there is no reason for alarm, or for any attempt to regulate either demand or supply. The imports from abroad are being paid for in goods produced at home; as the former increase, so do the latter. But here we encounter an objection which seems to strike many as plausible;—that the things we are exporting are not the right things, and that the things we are importing are the wrong things. England, it is said, has long been the workshop of the world and should remain so; to secure this, we ought to be importing raw materials and sending them out as manufactures, whereas, as a fact, we are exporting more and more raw material, and importing more and more manufactures.

The preliminary question, of course, is whether this statement would be accepted if it were found that the export of raw materials is relatively more profitable than the export of manufactures.¹ But we may pass this by, and concentrate our attention on the suggestion which has caught hold on the public during the present controversy, that raw materials employ little labour and manufactures employ much; and that, in these two ways, the character of our foreign trade is diminishing the Employment of the nation.

If one were content with a cheap victory, it might be asked, Is it employment we want? Have we not, up till now, been rejoicing that we are in such comfortable circumstances that we could reduce the working day to nine hours? Have not many good people been saying that the time had come for the golden age: “eight hours for sleep, eight hours for play, eight hours for work, and eight shillings a day”? If, by all the ordinary tests, our people are getting wealthy hand over hand, may we not rest easy in our minds about not having enough work to do?

But the retort would be a little cheap, and is, besides, not quite straightforward. That we have been able to reduce the statutory hours of labour in this country, is certainly not due to any curtailment in our demand for goods, or to any contentment with the amount of wealth we already have. If, indeed, we were satisfied to live as our ancestors did, a very few hours of labour would produce over-supply. But as wealth increases and the standard of living rises, wants increase, and the new wants of a progressive people make more demands on industry than the simpler ones did. There is not less product from the working world, but infinitely more, the explanation being that we have been, in many directions, economising human wear and tear by transferring the heavy work to machinery, and, moreover, sending larger amounts of the growing labour into occupations which know no limit of factory acts and hours. In the abstract, then, there is not the slightest fear of labour, as a whole, having too little to do. But it may be quite honestly argued that the foreigner is taking some of our employment from us.

I. Let us ask, then, what raw material it is, the export of which should give us anxiety. The answer, of course, is Coal. In 1897 and 1898, we exported 35 million tons; in 1899, 41 millions; in 1900, 44 millions; in 1901, 41 millions; in 1902, 43 millions—roughly, about a fifth part of our total output.

There is an argument often advanced about the export of coal which does deserve serious attention. It is that coal is “natural capital,” given us by a beneficent Creator; that it is the very source of our manufacturing greatness; that, unlike other forms of capital, it is irreplaceable; and that, accordingly, it is shortsighted to dig it out, as we are doing, and send it away to the foreigner.¹ It is very much the argument put forward by the old-fashioned professor against printing lectures he had repeated for many years; that, if he did, he would have nothing left to say.

Considering, however, that we are not merely sending coal but selling it, it seems to me that we are exchanging a very precarious form of wealth for other forms which are, probably, less precarious. Our coal will last, according to a moderate estimate, for another hundred years without the cost of raising it being increased. At present it realises a comparatively high price. But what will become of that high price if a new fuel is found, as it probably will be long before the century is out; or if the long-sought-for economy is discovered which will save the 90 per cent. energy that now goes out of the chimney; or if the opening up of coal deposits nearer our foreign markets diverts the supply from us?

But when the export of Coal is objected to on the entirely different ground that it is a product which employs little labour in the getting, there is no hesitation about the answer. It is that the price of our ordinary coal is made up of 60 per cent. of pure wages, while the price of Welsh coal is made up of 80 per cent, of wages. That is to say, coal, value for value, employs far more labour than manufactures generally, the wages element in our cotton manufactures, for instance, being estimated at about 50 per cent, of the total value, less that of the raw material.¹ Is it possible that those who make assertions in this irresponsible way were comparing bulks and not values, and thus came to the conclusion that, as compared with a small parcel of jewellery, a cwt. of coals must contain little labour, because it takes a cart to hold a few shillings worth?

II. What has just been said disposes of the suggestion that, in importing manufactures, we are curtailing the employment of our own people, in so far as we are depriving ourselves of the chance of making such manufactures for export. If we export coal in payment of imports, we are employing more labour than we should by exporting manufactures.

But it does not dispose of the objection that we have been, and should remain, the workshop of the world, and that there is something wrong if we are importing more and more manufactured goods that compete with ourselves. Let us, then, look at the imports complained of.

According to the Board of Trade Blue Book, p. 73, our imports of manufactured or partly manufactured articles from the seven great nations, in 1902, were as follows: Italy, £2 millions; Russia, £3 millions; Germany, £16 millions; Belgium, £20 millions; Holland, £20millions; United States, £20 millions; France, £31 millions. In all, £112,000,000.

Take, first, the partly manufactured articles, and analyse the lists. A mere glance at the £20 millions from the United States shows that, of this, £10½ millions are what certainly would be called “raw materials” by an ordinary uninstructed man. There are £2½ millions of unwrought and partly wrought Copper, £3½ millions of Leather, £1½ millions of various kinds of Oil, £½ million of pig and sheet Lead, £900,000 of Paraffin and paraffin wax, £136,000 of crude Zinc, £128,000 of Slates, £12,000 of Stones, etc.¹

There is nothing quite so obvious in the imports from the other countries; but a careful examination would show that there are comparatively few things in the £112,000,000 which do not form the basal or auxiliary materials of many of our industries.

Take, second, the wholly manufactured articles. Among the larger categories, from Germany come Works of Art, Bronzes, China, Machinery, Musical Instruments, Toys: from Belgium, Clocks, Embroidery and Needlework, Hats and Bonnets, Laces, Pictures, Silk Stuffs: from Holland, Buttons and Studs, Leather goods, Silks, Pictures: from France, Embroidery, Artificial Flowers, Hats and Bonnets, Laces, Musical Instruments, £9 millions of Silk manufactures, and over £5 millions of Woollen manufactures: from Italy, Works of Art, Stones. The list is a long one, and contains a great number of small imports. There is no doubt that we could make all these things.

But we forget three things. The first is that we are not only the “workshop of the world,” but the wealthiest consuming nation of the world. We demand whatever takes our fancy, and we should not be in the least willing to limit our consumption to the peculiar products of Great Britain. We do not take the word of our milliners and dressmakers that English goods are every bit as good as French; our womenkind send to Paris for hats and dresses, and make special trips to the Bon Marché for frills and furbelows. We should never think of shutting out works of art from Italy because there are artists in England, or pianos from Germany in order to force our musicians to play on English ones. We should regard any such proposals as nothing better than the old attempt to put back the clock of civilisation and enact sumptuary laws to our own hurt.

The second is that, as regards many of these manufactures, there is a very good reason why we do not prefer British made goods. We import, for instance, £4½ millions of ladies’ woollen dress fabrics, mostly from Roubaix, because, rightly or wrongly, we consider French colour-dyeing superior to Bradford dyeing.

The third is that, even where we could make things as beautiful, and as cheap, and as good as the foreigner, we have not an unlimited amount of capital, and the capital we have may be fully and more profitably employed in making other things. And we have very far from an unlimited amount of skilled labour. True, in bad times we have a good many unemployed, and, at all times, we have several millions of wage earners below the efficiency standard. But do these millions consist of watch makers, musical instrument makers, artists, and the like? Or are they people who could not be set to such skilled work, whatever wages were offered them? Are the “unemployables” not vastly more than the “unemployed”? Is our employment really curtailed because we do not import things which we might make?¹

Yet this is persistently represented as “loss”—as if one could lose what one never had! “In thirty years the total imports of manufactures which could just as well be made in this country have increased £86,000,000, and the total exports have decreased £6,000,000. We have lost £92,000,000. £92,000,000 of trade that we might have done here has gone to the foreigner, and what has been the result for our own people? The Board of Trade tells you, you may take one-half of the export as representing wages. We therefore have lost £46,000,000 a year in wages during the thirty years. That would give employment to nearly 600,000 men at 30s. per week of continuous employment. That would give a fair subsistence for these men and their families, amounting to 3,000,000 persons.”¹ This quotation brings us back to first principles. Suppose we did manufacture all these things at home and stopped the imports from the foreigner, would this be pure gain? Have we forgotten the producers here who have, all the time, been making the exports that must be sent to pay for these imports, and whose employment would be curtailed in the same proportion as the new employment increased? As Mill put it—and put it so tersely that the completeness of the statement is apt to be overlooked: “The alternative is not between employing our own people and foreigners, but between employing one class and another of our own people. The imported commodity is always paid for, directly or indirectly, with the produce of our own industry; that industry being, at the same time, rendered more productive, since, with the same labour and outlay, we are enabled to possess ourselves of a greater quantity of the article.”²

This kind of appeal to popular ignorance is thoroughly bad. It would be just as true, and just as false, if “Englishmen” and “Scotsmen” were substituted respectively for “home producers “and “foreign producers,” and the statement were made to London working men that they were losing employment by the goods that Glasgow working men were making for them. What the increase of foreign manufactured imports shows is simply the increased division and specialisation of industry—the area of competitive service widening beyond the national boundaries, in manufactures as in everything else.¹

What very much hides the absurdity from us is the now fashionable way of speaking of foreign competition in terms borrowed from warfare. Imports are an “attack”; when they become numerous, they are a “conspiracy”; and we are asked if we are going “to take all that lying down.”¹ Seeing that we have been doing just the same kind of thing to foreign countries for about a century, the question surely is: Are we all, then, engaged in a mortal struggle to destroy one another’s industries? Or are we sending each other cheap goods to sell in one another’s markets—extending the area of Competitive Service beyond our home boundaries?

The subject of Employment as affected by the character of goods imported and exported suggests the wider subject of Employment as affected by a protective system. It is sometimes assumed that Protection secures the employment of the nation better than Free Trade does. There are really two questions here, and the issue is confused unless they are kept distinct. The first is: Does Protection give more employment? the second: Does it secure more regular employment?

I. The idea that Protection gives more employment seems to argue rather dangerous ignorance of what does employ the nation. Any government can “make work” for its citizens so long as the pockets of the taxpayers hold out; but this is simply diverting the employment of the people from its ordinary channels into the channels on which the government spends. Any war scare, for instance, that sends the Clyde shipyards a few cruisers to build, gives employment to one of the great trades, and secures the activity of the many subsidiary trades dependent on it. But the extra money taken out of the taxpayers’ pockets for any such purpose leaves the citizens generally with so much less to spend, and the other parts of the kingdom suffer by Glasgow’s gain. The only thing that can increase general employment is the increase of productiveness; that is to say, in essence, the increase of wealth. The “demand for labour” is not a fund of money in the pockets of employers. If there were no outside employer, and each gang of workers paid one of their number a wage to organise them, the wages of these workers would depend on the amount they could produce and the prices at which they sold it. It is the whole product of the working world that determines and limits the “demand” for all the factors of production which represent the working world; the greater that product, the greater the demand for labour among other factors.¹ In short, we employ each other. The more I produce, the more I hold up in my hand as the price of the services which I ask you to render me, and, the more we all produce, the more do we all have to offer. If we call this product the National Income or National Dividend, the question resolves itself into this: whether the National Income is increased by Protection; whether a government, by taking thought, can secure that its individual producers produce more. It is a pious imagination that a very wise government, by taking over the industries of the nation, might do better than private enterprise and produce a greater net product. But this is not the question; all we are concerned with is whether a government, by taxing goods from outside, can give its individual producers greater stimulus and better direction than free competition with other countries can. As a matter of theory, this would be difficult to prove, and experience does not seem to give it any support.

II. The idea that Protection ensures greater regularity of employment seems to rest on the belief that, under it, more security is given to capital by the partial monopoly of the home market. This also seems to verge on the dangerous doctrine that the giving of employment is the end of the matter: it has a family resemblance to the popular belief that, by reducing the hours of labour, the unemployed will be taken up. The protected industries occupy much the same position as particular industries favoured by government orders at the expense of the taxpayers; regularity of employment is secured at the expense of the quantity produced; the demand for labour ultimately suffers by the diminution of the national product. Here, again, confirmation by statistics or experience is entirely lacking. That an industry declines and disappears under Free Trade is no proof either that Free Trade has killed it or that Protection would have kept it alive.¹ The fact is that neither Protection nor Free Trade will ensure constant equilibrium of demand and supply, and this is the only way in which steadiness of employment might be secured. Protected producers, just like Free Trade producers, put themselves at the mercy of demand; they make, for the most part, in anticipation of orders, and, often enough, they find that their anticipations were mistaken. All goes well so long as trade is brisk. But when a lull comes, supply cannot easily be slacked off; more is being turned out than is taken off; and depression sets in, spreading its contagion through the organised web. All this is obviously independent either of Free Trade or Protection. All one would say is that Protection, as tending to attract capital and labour into artificial channels and oversupply them, rather acts against the mobility which is the best security of regular employment.

¹Mr. Bowley has done good service in raising this point. He shows that, between 1881 and 1902, while our exports of manufactured textiles have fallen from a price level of 100 to a level of 84, exported raw materials show a rise in price from 100 to 114, and he adds that “the price of coal does not account to any great extent for the phenomenon except in 1900 and 1901.” This, of course, in itself does not prove relative profitableness, but it suggests questions. Compare footnote, p. 203.

¹It should be noted that a large proportion—probably as much as one-half—of the coal which appears as exported is really for navigation purposes. Very little is sent abroad for manufacturing. It has been pointed out by Mr. D. A. Thomas that “coal enters into the production of every manufactured article, and therefore the export of such commodities indirectly involves the export of coal. For instance, every ton of pig iron requires the consumption of something like two tons in its production, and its shipment abroad virtually means, therefore, the export of two tons of coal, while the export of a ton of wrought iron or steel means considerably more. Consequently if any restriction is placed on the export of coal on the ground that we are shipping abroad capital that cannot be replaced, logically we must place a corresponding restriction on the export of every manufactured article into the production of which coal enters.”—British Industries under Free Trade, p. 367.

¹Board of Trade Blue Book, p. 360.

¹“These are not the sort of things which we speak of as manufactures’ when our own export trade is concerned. It is an obvious reflection that, if slates, stones, crude zinc, and copper are to be spoken of as ‘manufactures,’ we might as well include coal in the same category.”—Sir Robert Giffen, in a letter to the Times.

¹If all the labour that is employable were employed, there would, of course, be no question about the advantage of such imports. But the unemployed are always with us. It is a little startling to find that, in the best times, there are always some 2 per cent. of workers, in the organised trades, who do not find work. To whatever cause this may be ascribed, it certainly cannot be laid at the door of Free Trade. But, as regards the present question, what would require to be proved is that the amount of unemployment in protected countries is less than in our own, and this would be difficult to do. There are no adequate and strictly comparable international statistics as to skilled and unskilled labour—remembering that such statistics, to be of any value, must extend over a period long enough to allow of being put into rates of progress—and none which distinguish what Mr. Booth has called the three phases of irregularity, the short, the seasonal, and the cyclical. In this country we have the returns of unemployed made to the Board of Trade by the principal trade unions, the figures including London dock labourers, iron and steel workers, the building, textile, engineering and other trades. It may be noted that the mean percentage of unemployed during 1903 was 5.1. The average percentage for the ten years 1894-1903 was 4.1. Between 1888 and 1903 the percentage varied from 2.1 to 7.5. “It is quite impossible to study these figures,” says Mr. Bowley, “without coming to the conclusion that the years 1890 to 1900, at any rate, were years of exceptionally good employment.”—Times, Nov., 1903.

¹Mr. Chamberlain at Newcastle, Oct. 20, 1903. Observe that the £6,000,000 we once had is lumped with the £46,000,000 we never had, and both are called “loss”! Is this any better logic than the schoolboy’s “Pins have saved many thousands of lives—by people not swallowing them”?

²Principles of Political Economy, v. 10, 1.

¹Perhaps the case may be put shortly thus. Belgium has been employing a capital of £100,000 in making goods for London and Leeds. London and Leeds have each been employing a capital of £50,000 in making goods for Belgium. The import of Belgian goods is stopped by a prohibitive tariff. By the same act, the export of English goods pro tanto is stopped. The London capital finds a market for its products in Leeds, and the Leeds capital finds a market for its products in London. Only British goods are now found in the two markets. But has this increased employment? Increased employment could only come from London and Leeds putting down new capital, and exchanging their products. But then they might just as well sell the goods produced by this new capital to Belgium and import Belgian goods in return. There is no more employment in the one case than in the other.

¹“Agriculture has been practically destroyed. Sugar has gone. Silk has gone. Wool is threatened. Cotton will go. How long are you going to stand it?” says a great orator. And his hearers, being Englishmen and born fighters, stand on the seats, and cheer. Sir Edward Grey was not far wrong: “The time is coming when, if an Englishman says that England is prosperous, he will be called a Pro-Boer; while if anybody writes telling of a trade that is doing badly, he will very likely be called ‘one of our leading experts,’ and have his letter sent to the Times, with Mr. Chamberlain’s imprimatur.”

¹The whole matter is contained in these pregnant words of Marshall: “The net aggregate of all the commodities produced is itself the true source from which flow the demand prices for all these commodities, and therefore for the agents of production used in making them. Or, to put the same thing in another way, this national dividend is at once the aggregate net product of, and the sole source of payment for, all the agents of production within the country; it is divided up into earnings of labour; interest of capital; and, lastly, the producer’s surplus, or rent, of land and of other differential advantages for production.”—Principles, p. 609. See my Distribution of Income, which is, practically, a working out of this single paragraph.

¹“The cotton manufacture is generally regarded as the most stable and thoroughly organised of our great industries, but it appears from the census returns that in the single state of Massachusetts 21 mills, with an aggregate of 154,016 spindles, and 1 mill with 180 looms, which reported to the census of 1890, were not in existence when the census of 1900 was taken. Seven of these mills with 47,680 spindles were dismantled and their machinery sold; 13 mills, with 101,156 spindles, stood idle in 1900, or had been turned to other manufacturing purposes. One mill was burnt and not rebuilt; and one was consolidated with a neighbouring mill under new corporate organisation. In addition to these cotton mills there were 15 mills manufacturing cotton small wares, which went out of existence during the decade. Such a record indicates that unprofitable operation is constantly in progress side by side with more successful enterprise. In this particular industry, advance in machinery has been so rapid that it is calculated that a cotton mill must practically renew its machinery once every ten years if it would keep its plant in a condition that will permit profitable production, in competition with other establishments manufacturing the same class of goods, with the latest pattern of machinery, and the most labour-saving devices, the most effective methods of management, and facilities for the largest production at the lowest labour cost.”—Twelfth Census of the United States, 1900, vol. vii. p. 65.