The World in Chains Part 4

Here, before pa.s.sing on to more general considerations, we may notice incidentally--it is brought out in the first quotation--that the taxation of war profits reduces them proportionately but can never annul or quite overtake them. That is sufficiently obvious; but the fact must be preliminarily emphasised because it is quite commonly a.s.sumed that the mere imposition of a tax of 50 or 60 or 75 per cent automatically solves the problem of war profits. As a matter of fact, taxation so far from solving the problem leaves it essentially unchanged, and really connives at and recognises the practice. The problem remains, in spite of taxation, that one section of the nation is enriched by a process which necessitates the misery and death of other sections. We may therefore in a broad discussion of the problem leave out of account the proposed and adopted palliatives of taxation.

Secondly, we may notice--this is brought out in the second quotation--that profits directly produced by the war are not limited to the period of the war. This again is really axiomatic, being only another form of the plat.i.tude that it takes longer to construct than to destroy: but it means that even a short war of sufficient intensity will ensure a long period of profits, and therefore it noticeably aggravates the conclusions to which I hope to lead.

A fundamental point is that the profit on freights, excused immediately by the destruction of s.h.i.+pping,[38] leads indirectly to profits on such other commodities as food and coal, not only on account of the actual scarcity resulting, but also because any reason for increasing prices is made a pretext for increasing profits.

But the scarcity of all general commodities is caused not only indirectly by the primary scarcity of s.h.i.+ps, but also directly by the same conditions of warfare as those which affect s.h.i.+pping. That is to say, just as the intensified activity of the nation at war creates a livelier demand for s.h.i.+ps, so it also creates a greater demand for all the ordinary commodities of living: and just as war by destroying s.h.i.+ps reduces the available supply, so by its general destructiveness it reduces the supply of other commodities: and just as war by destroying s.h.i.+ps makes extraordinary profits for s.h.i.+powners, so by destroying tables and teacups it makes unusual profits for the makers of tables and teacups. In short, destruction creates demand, and demand gives occasion for profit.

This is a disquieting statement; because though one might hesitate to deduce from it that any particular merchant must be in his commercial capacity a conscious advocate of war for the sake of gain, it certainly suggests that the body of trade must automatically and by a sort of instinct of self-preservation be an element in the nation that makes for war.

That is the kernel of my thesis;[39] and it is certainly a happy coincidence that the possibility of its truth seems at last to be dawning on another writer, and one more expert than myself in the handling of commercial theory. On the very morning after the last few sentences were written the following paragraph occurred in Mr. Emil Davies' "City" article in the _New Statesman_:--[40]

It is only as the reports and accounts for 1915 come out that a correct idea can be formed of the benefit this catastrophic war has been to the majority of our large industrial concerns. The following is a list of companies whose reports and accounts have appeared during the past few days. The difference between the profits for the two years shown is even greater than appears, for in practically every case the 1915 profit is stated after allowing for the excess profits tax, additional depreciation or extra reserves, most companies now adopting these and other devices to render less conspicuous their war-time prosperity.

1914 1915

Smithfield and Argentine Meat Co. 25,732 142,055 Waring and Gillow 35,217 100,885 Projectile Co. 30,739 194,136 Lanarks.h.i.+re Steel 28,144 45,985 Frederick Leyland Steams.h.i.+p 337,188 1,196,683 Sutherland Steams.h.i.+p 94,600 295,200

Waring and Gillow's sudden prosperity is not due to any better business in the ordinary furniture trade, but to war contracts. The Projectile Company figures are astonis.h.i.+ng even for an armament company; after applying 47,500 in satisfying the balance of the prior claims of the Debentures, the Ordinary Shares receive their first dividend--one of 50 per cent. No sane man would accuse leaders of these great industrial concerns of doing anything to bring about an outbreak of war; many of them have, indeed, paid a heavy price for their prosperity in the shape of the loss of sons or near relatives; but when all is said and done, the fact that a war should put many half-bankrupt concerns on their legs, and make fairly prosperous companies three or four times more prosperous than before the war, is an influence in an undesirable direction.

FOOTNOTES:

[Footnote 33: Moreover, as I hope to suggest later, even these losses to a few individual _industries_ do not necessarily imply losses to the _capital_ involved, which in some cases has been diverted or adapted to other industries more appropriate to the times. For a review of Trade profits in 1916 see the _Manchester Guardian_, January 1, 1917.]

[Footnote 34: See Appendix I.]

[Footnote 35: Quoted in the _New Age_, March 16, 1916.]

[Footnote 36: April 8, 1916, from the "City" article by Emil Davies.]

[Footnote 37: My italics.]

[Footnote 38: The rise in freights is a good example of the way in which abnormal profits are extorted from the public as soon as any scarcity puts them at the mercy of the trader. (See above, p. 45.) The rise in freights is unalloyed profit, for the s.h.i.+pping companies have no increased risk, since the Insurance Companies are guaranteed by the State.]

[Footnote 39: Which was first drafted in a letter to _The Garton Foundation_ more than a year ago.]

[Footnote 40: April 29, 1916. One might also mention for its verisimilitude the situation described at the end of Mr. F. Brett Young's novel _The Iron Age_ (Secker, 1916), in which the insolvent ironworks of Mawne are saved in the nick of time by the declaration of war.]

-- 2

Trade lives on Increasing Demand

All war, whatever temporary dislocation of business it may involve, must ultimately, as a princ.i.p.al form of destruction, a.s.sist the intensive cultivation of demand which const.i.tutes nearly the whole of modern trade. The industrial revolution of the nineteenth century with all its labour-saving machines was originally an economy of necessary production; by the middle of the century it overshot its mark, and hastened the world to the brink of the opposite disaster of over-production. In the present commercial era we are still suspended over that dreadful brink. Nothing can stop the accelerated flux of mechanical production; and we are saved from falling into the abyss only by the unnatural increase of ordinary consumption. The consumption of the ordinary markets, even when stimulated by the most violent tonics of advertis.e.m.e.nt, is strictly limited, and the limits have long been overtaken. The accelerated consumption could only be maintained by the discovery of new markets, which was undertaken by means of the political catch-words of Imperialism and Colonial Expansion;[41] or else by the wholesale destruction of existing supplies. As the number of new markets and their capacity for consuming things they don't want is ultimately just as limited as the number and capacity of home markets (for obviously the time must come when all the Chinamen and Koutso-Vlachs and South Sea Islanders have already been supplied with ready-made brown boots and tinned salmon), only one method remained by which Commerce and Industry might escape, or at least postpone, the penalty of half a century of over-production. This was by the partial destruction of the world's existing supplies. If this could be arranged, there might be a genuine demand for them to be replaced.

-- 3

War a form of Destruction

Now as a form of destruction war is easily first. Quite apart from the obvious destruction of commodities that takes place when a country is ravaged and invaded, as in the case of Belgium and Northern France, it should be remembered that the methods of supplying an army in the field involve the sheer waste or destruction of very nearly half the food and equipment provided.[42] This is not necessarily the result, as might be expected, of official incompetence. It may on the contrary be the result of official foresight, which must allow in warfare for all the changes and chances of communication, and knows that it is better to waste a million tons of beef than to risk the starvation of a single regiment.

Such waste, in other words, is a condition of warfare. Add to this the preventive destruction of stores and baggage which takes place whenever troops are compelled to retreat: in this way about a million pounds'

worth of stores were carefully burned before the evacuation of Gallipoli; and not a hundred yards of trench is ever abandoned without the jettison of about a hundred pounds' worth of equipment. Add to this the fact that every shot fired, from the mere rifle bullet to the largest sh.e.l.l, does a proportionate amount of material damage when it finds its billet: the bursting of a six-inch sh.e.l.l will do, I suppose, on an average, as much damage in half a second as an ordinary fire can do in twenty-four hours. Add to this again the fact that the very force which propels every bullet and every sh.e.l.l is released by destroying by instantaneous combustion a certain amount of valuable chemical products.

Then, besides all this direct destruction of commodities which must ultimately be replaced, or which at least some kind contractor may plausibly offer to replace, consider for a moment the increased wear and tear of every sort of equipment both civil and military, from steam-rollers and rolling-stock to boots and bandages and walking-sticks, which a state of war must involve. Or consider again that the mere mobilisation of an army implies that several hundred thousand men, whose annual income before was less than 100 a year, are now living at the rate of 400 a year.[43]

Anyone who cares to examine in detail all these forms of waste and destruction, and all these forms of unnatural and feverish consumption, will begin to understand to what an extent war stimulates the demand by which alone Trade can survive.

FOOTNOTES:

[Footnote 41: Also, of course, by the campaign for Preferential Tariffs, which, it was hoped, would have increased consumption by excluding a few foreign compet.i.tors from colonial markets.]

[Footnote 42: Cf. the many stories of beef and other rations being supplied to troops in such quant.i.ties that the units responsible for their consumption were obliged to bury them. These stories come mostly from Flanders. At home the same superabundance may have been the undoing of many a Quartermaster-Sergeant, who, not knowing what to do with such a plethora of beef, and having a proper superst.i.tion against throwing away good food, was tempted to sell it for about a penny a pound to the local butcher.]

[Footnote 43: And the fact that they are doing so at the public expense is, of course, only an additional advantage to the traders who supply their needs; as they do not risk losing any of their money through bad debts.]

-- 4

War stands to benefit Neutral as well as Belligerent Nations but not to the same extent

In Western Europe at least all markets are practically open markets. No tariff however scientifically graduated will really divert the natural flow of trade to any considerable extent.[44] Consequently it might appear that all nations stand to benefit in the same way, but in varying degrees, from the intense local demand set up in the nation at war. Thus British Trade was exhorted in a sincerely rapacious article by Captain Dixon-Johnson[45] to s.n.a.t.c.h the opportunity presented by the Balkan War; and the unparalleled boom in American trade during the present war is another obvious example. This suggests at once that the benefit occasioned by war is not a national benefit, diffused vertically through every cla.s.s of the belligerent nation; but a cla.s.s benefit diffused as it were horizontally through the commercial strata of all nations within supplying distance of the centre of disturbance. On the other hand, of course, the immediate local demand is stronger than the demand communicated to remoter markets and more easily supplied; in other words the commercial cla.s.s of the belligerent nation are more immediately and more intensely benefited by the state of war than the same cla.s.ses of neighbouring nations, although in war as in peace the commercial cla.s.ses of every nation are one.[46] Also the outbreak of war, even if it does not entirely sever a country from foreign sources of supply, is bound to cause a certain dislocation; if communications are not altogether interrupted they are more difficult and uncertain than in normal times; so that the trade of the belligerent country is always given a greater impetus than that of its neutral neighbours, and in such cases a particular industry which has been threatened by the compet.i.tion of foreign imports may be actually rescued from extinction. Even the temporary dislocation of trade is a benefit to trade in the nation at war; for it enables existing stocks to be sold at exaggerated prices.[47]

FOOTNOTES:

[Footnote 44: From this it follows incidentally that a high tariff is of no advantage to the community as a whole, but only to a particular section of the community. For the idea that it will benefit the whole community is based on the a.s.sumption that it is possible to divert a particular sort of foreign import; actually the tariff will not exclude the import if there is a natural demand for it, but it will provide an excuse for every dealer wholesale or retail to increase his profit on the article taxed by about double the amount of the tax; i.e. if an imported article pays a duty of sixpence, the price to the consumer of all such articles whether imported or home-made will be raised a s.h.i.+lling.]

[Footnote 45: In the July, 1914, issue of the _Asiatic Review_, to which I have already referred.]

[Footnote 46: I need hardly say that in speaking of the commercial cla.s.s I do not include its instrument the workers. The international Socialist movement has not yet succeeded in uniting _them_; but the exhortation addressed to them by Marx has been obeyed instead by the capitalists.]

-- 5

The greater the Capital, the greater the War Profit?

The over-production in modern industrial states, from which Trade can only be saved by some such catastrophic remedy as war, may be attributed not only to the tyranny of machines, but also to the financial jugglery known as over-capitalisation. If it could be shown that over-capitalisation were a consequence of national wealth it would follow that the richer nations would enjoy a greater benefit from war than their poorer neighbours. But this will only be true if we do not measure national wealth by the average wealth of every citizen; if we speak in this case of national wealth quite apart from any question of its equitable distribution, and are careful to distinguish it from national welfare; a wealthy nation in this case would have to mean a nation blessed with a cla.s.s of wealthy capitalists, or supporting a large parasitic colony of the persons described as financiers; and such a nation would have as a corollary to be blessed with a cla.s.s of workers disproportionately large and disproportionately poor. For if industrial conditions are fair over-production is impossible.

FOOTNOTES:

[Footnote 47: Here, for instance, is an illuminating sentence from a private report on Greek trade during the Balkan Wars: "I commercianti Greci hanno guadagnato molto durante la guerra, perche hanno venduto tutte le merci che avevano in deposito a prezzi molto piu alti, che la gente era obbligata di comperare a cagione che non potevano importare merci straniere."]

-- 6

The Blessings of Invasion

If war is regarded primarily as a commercial stimulant, we might carry the argument farther and conclude that invasion and even ravage are actually beneficial to the trade of a country that suffers them; for ultimately they must make way for a direct demand on the spot for the primary commodities of life. Houses, fences, roads, factories will all have to be replaced. It is obvious that the war will have to be followed by a time of rebuilding.[48] It might be urged that such a phase of convalescence would be r.e.t.a.r.ded or altogether prevented by the lack of private capital for such an enormous enterprise. But private capital, thanks to the credit system, is practically inexhaustible so long as it is required for a genuinely productive purpose: and even if it failed in this case to come forward, the money required would certainly be advanced out of the indemnity which will have to be provided for the invaded provinces, or would be guaranteed in some other way by the Government concerned. In which case Trade, even after the conclusion of peace, would rejoice in another period of Government contracts. If it be admitted, however, that we have not sufficient data to make this suggestion more than probable, we can at any rate be certain of the effect produced by the mere numbers of an invading army or a defensive garrison. The Jewish traders of Salonica enjoyed a time of unexampled prosperity in 1912 and 1913, owing to the mere presence of the Turkish, the Greek and the Bulgarian armies, to whom they sold out at their own prices.[49] They are now repeating the process with the English and French armies; and in the interval they were kept busy restocking the Macedonian villages depleted or destroyed during the campaign of 1912.

As for the small shopkeepers of Flanders any member of the British Expeditionary Force will tell you that they are at present so prosperous that even a German bombardment will hardly drive them from their counters.

FOOTNOTES: