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ECONOMIC PROBLEMS 
 
 OF 
 
 PEACE AFTER WAR 
 
CAMBRIDGE UNIVERSITV PRESS 
 C. F. CLAY, Manager 
 
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 Fetter Lane, E.G. 4 
 
 EDINBURGH 
 
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 All rights reserved 
 
ECONOMIC PROBLEMS 
 
 OF 
 
 PEACE AFTER WAR 
 
 THE W. STANLEY JEVONS LECTURES AT 
 UNIVERSITY COLLEGE, LONDON, IN 19 17 
 
 BY 
 
 WILLIAM ROBERT SCOTT 
 
 M.A., D.Phil., Litt.D., LL.D. 
 
 Adam Smith Professor of Political Economy in the University of Glasgow 
 and Fellow of the British Academy 
 
 Cambridge : 
 
 at the University Press 
 
 1918 
 

 - 'p^ ' j-ii 
 
 As Demosthenes, with often breathing up the hill, 
 amended his stammering ; so we hope, with sundry 
 labours against the air, to correct our studies. 
 
 Lyly, Campaspe. 
 
 First Edition 1917 
 Reprinted 1918 
 
 As' 
 
FOREWORD 
 
 "\ T doubt there will be an increasing number of those persons, 
 ■^ ^ who develop great wisdom after the event, who will tell us not 
 only that they expected a great European war in which Germany 
 would be opposed to us but that they predicted the outbreak 
 in the summer of 1914. There may be a gireat satisfaction in 
 paulo-post-futurum vaticinations, but the majority 6f us will be 
 candid enough to admit that hostilities were unexpected, and 
 the outbreak found the nation very gravely unprepared. It 
 would be wise that peace should not find us unready for it; 
 and the following pages constitute an attempt to state some of 
 the problems which will then confront us. 
 
 Warmly as the coming of a satisfying peace will be welcomed, 
 it must be admitted that it is difficult to picture the social and 
 industrial conditions which must then be dealt with. " War," as 
 Burke said, " never leaves where it found a nation." Very many 
 phenomena wiU be greatly changed, and the framing of detailed 
 forecasts is likely to result in disappointment. But it seems 
 possible that something may be accomplished ir applying 
 general principles based upon the teaching of Economics or on 
 the experience of somewhat similar conditions in the past, or, 
 again, upon known dispositions of human nature. Conclusions 
 of this character will not, and cannot, predict details, but they 
 may present an outline of the general appearance which economic 
 life may assume, and it will be at least of some value to have 
 an indication of the course which progress may be expected to 
 
 03 
 
vi Foreword 
 
 take, even though we cannot tell all the partictilar diversions 
 that may be encountered. 
 
 When the enquiry is stated in this way, there is a difficulty 
 at the start. In so far as reliance must be placed upon previous 
 economic analysis, how far does it apply during a state of war? 
 Is a study of the Economics of War a possibility? If so, what 
 is to be said of patriotism, and is it possible that the two ideas 
 should be reconciled or is any reconciUation required? 
 
 The making of arrangements of several kinds "for the 
 duration of the war," suggests the conception of the period of 
 hostilities as a species of economic dies non, and one wonders 
 if this view is valid. Again, there is the restriction of individual 
 freedom both by military service and by very many emergency 
 measures, and the problem suggests itself as to what will be 
 the relation of the State to economic activities after the war. 
 Will vested interests in State-control of industry survive the 
 war? 
 
 Then, as a special branch of these questions, there will be 
 the position of overseas trade — will it be missionary or militant ? 
 The prominence of the submarine and Ukewise of air-craft may 
 exert an influence upon the communications of Greater Britain. 
 Defence may assume new forms, and will it be that the joint- 
 effect of the embers of national animosity and the frustrating 
 of the so-called German peaceful penetration may introduce 
 a new arrangement of trade within Greater Britain and with 
 Allied nations? 
 
 Whether we will or no, forecasts of the future must be 
 framed. But hitherto this has been attempted in detail and 
 purely empirically. Is it not possible to formulate the chief 
 conditions which affect the faculty for anticipating the future, 
 so as to have some means of correcting errors which may be ex- 
 pected to arise from the abnormal circumstances ? For instance. 
 
Foreword vii 
 
 may not the possible optimism of the first months of peace 
 involve some risk of a crisis ; or again, if that be avoided, may 
 not there be a later danger-point when revived commerce and 
 industry might be pulled up sharply by a scarcity of capital? 
 
 Some light on the last question may be obtained from con- 
 sideration of the psychological basis of saving. This, together 
 with the chances of war, has revolutionised many standards of 
 living. Such standards, again, are largely influenced by habit, 
 and this suggests the further problem whether it may possibly 
 happen that standards of life may be constituted on a propor- 
 tionately lower scale, leaving a larger margin for peace-time 
 savings than in the past. 
 
 Finally, what is to be the future arrangement of industry ? 
 " Organisation " seems to have become a term which is supposed 
 to supply an answer; but that can scarcely be, when it is 
 commonly used in different meanings. Is it possible that the 
 influence of Evolutionary theory may have disguised the 
 fundamental facts? May it not be that what has been con- 
 sidered a process is in reality a problem — namely how to unite 
 in any act of Production the various factors (both human and 
 inanimate) with the least resistance? WiU there be State- 
 intervention in this, and wHl it help or hinder? Should it take 
 place, would it impair initiative? 
 
 These problems have many affinities, and they meet and 
 interlace at many points. This fact, as well as the form of 
 lectures into which the attempted solutions have been cast, 
 will explain the reasons why the same topic is treated in different 
 places — usually because the aspect is somewhat different from 
 that previously discussed. But when the word "solutions" 
 is used, it is not to be understood in the sense of a promise to 
 solve these and other problems which have presented themselves. 
 It is easy to dogmatise about the future ; it is di£&cult to trace 
 
viii Foreword 
 
 continuity when there has been a great upheaval such as that 
 at present. Between the present time and the period at which 
 the economic life will have become normal again, some, and it 
 may be many, causes will come into action, the existence of 
 which at present can be little more than guessed at. In such 
 cases prediction may show more boldness than discretion. But 
 that does not mean that the attempt to provide for the future 
 is to be abandoned as a hopeless labour. Rather something 
 may be accomplished, if, as a result of careful analysis, a way is 
 discovered of re-stating a troublesome problem in a form that 
 makes it more manageable. This, it is true, is not a solution, 
 but it may be a very considerable step forward towards the 
 solution. 
 
 W. R. S. 
 
 April, 191 7. 
 
CONTENTS 
 
 FOREWORD p. V 
 
 I. THE ECONOMrC MAN AND A WORLD AT WAR. 
 
 Current opinion since the outbreak of war often speaks of the 
 " violation of economic laws ' ': the opposition between the conceptions 
 of the " economic man " and of " economic chivalry " : the ultimate 
 unity of patriotic and economic motives during war time : limitations 
 and extensions of the liberty of the individual during hostilities : 
 the State becomes the temporary trustee of the freedom of action 
 which the citizen relinquishes for the time : therefore it is desirable 
 that no sound part of the organisation of peace time should be 
 scrapped, while, conversely, the upheaval of war affords oppor- 
 tunities of removing functions of the industrial and social organism 
 which had survived their period of usefulness : industry of the 
 new peace will be less sordid and more efficient : the probable 
 increase of invention and other improvements : the experience of 
 this after the Napoleonic wars: the fullest fruits of peace will 
 only be obtained through the revivifyihg of the nation in greater 
 harmony at home and amity amongst the nations . . p. i 
 
 II. "FOR THE DURATION OF THE WAR." 
 
 Emergency measures presuppose a static conception of industry : 
 the arresting of some social function does not mean that it can be 
 isolated so as to resume its previous activity when the war has 
 ended: during the period of suspension the process of adaptation 
 to environment continues, and it is not improbable that the sus- 
 pended function will be released in circumstances which will be 
 greatly changed : the magnitude of hostilities is some measure of 
 the diversion of labour which has been necessary — Adam Smith on 
 the proportion of the population which can be supported as soldiers, 
 Coleridge on overseas commerce in time of war: the mode and 
 some of the consequences of transfer of labour since 1914 : mobilisa- 
 tion of industry intended to be for the duration of the war : how 
 far the experience of previous wars is valuable: the scope and 
 limitations of the historical method : the verdict of historians of 
 the future on the extent of voluntary effort since 1914 : Mazzini 
 on national regeneration through sacrifice : compulsion and the 
 
X Contents 
 
 range of State activity after the war — J. S. Mill's prophecy : effect 
 of national animosity upon trade after the war: German peaceful 
 penetration: war economics dominated by the short period, post- 
 bellum economics by the long period : economic collaboration of 
 Great Britain with the Dominions and the Allies: the "golden 
 dream" of Adam Smith: its economic and political aspects — 
 Jevons on the function of the statesman . . . . p. 21 
 
 III. COMMUNICATIONS OF A MARITIME STATE. 
 
 Kant's prophecy that barbarous methods of warfare would result 
 in a war of extermination : German submarine methods and the 
 "custom of the sea": losses of shipping in war: the experience 
 of the Napoleonic wars: Great Britain lost from 1803 to 1814 at 
 least 40 per cent, of her shipping and the position was only saved 
 by new construction:- the experience of the present gives rise to 
 serious considerations regarding the future : the essential differences 
 between the maritime and the land State : the protection of the 
 ocean routes connecting the parts of Greater Britain is a vital 
 problem : the view of Adam Smith : the development of inter- 
 Imperial communication : the nationality and status of seamen 
 in British ships : one of Germany's greatest errors has been the 
 violation of the "custom of the sea": great seamen on the high 
 purpose of their caUing — Camoens, Sir Walter Raleigh, Nelson's 
 admirals : future problems of the defence of communications : the 
 extension of warfare to a third dimension : the relative advantages 
 and disadvantages of ocean routes and land routes in the future : 
 the problem of inter-Imperial communication, which, in principle, 
 conforms to the conditions of a coasting trade: the ideal of 
 maximum Uberty in relation to adequate security . . p. 41 
 
 IV. THE SURPRISES OF PEACE. 
 
 The surprises of war and of industry during war : the faculty of 
 anticipating the future : difficulty in forming forecasts in war : 
 the effect of a sudden declaration of hostilities — Sir F. Baring on 
 the outbreak of war in 1793: during the first two years of the 
 present war forecasts may be described as having been " sub-normal " : 
 the exceptional difficulties of anticipating the state of commerce 
 and industry during the early years of peace — Dr Venn on the 
 chaotic basis of conviction : forecasts, however, were being made 
 in 1916: the danger of a rebound from comparative pessimism to 
 undue optimism : the danger of applying old principles (which 
 may have become little more than catchwords) to new conditions: 
 the opposite evil of regarding post-war conditions as divorced from 
 those of the previous peace : the need to recognise both continuity 
 and new phenomena : immaterial conditions are relatively more 
 predictable than material ones : the awakening of the nation from 
 the comparative lethargy of the latter part of the nineteenth 
 century : Emerson's view of the reserve of strength in the English 
 
Contents xi 
 
 character: the efiect of the aroused national spirit on invention: 
 the reaction of the quickened national apprehension in the making 
 of too many changes : the risks of commercial disorganisation after 
 peace: two possible danger-points which might result in crises 
 followed by long-continued depression : the possibility of protracted 
 labour disputes: the hope that there may be not only political 
 peace but also labour-peace . . . , . • P- 59 
 
 V. SAVING AND THE STANDARD OF LIFE. 
 
 During war the State may demand the wealth as well as the services 
 of its subjects : the reason it borrows a part of the sums required 
 for war-expenditure : sales of investments abroad : the danger of 
 the latter: the conduct qf war demands economy: this may be 
 enforced by taxation or be voluntary when the resources saved 
 are lent to the Government: the conditions and effects of saving: 
 by the force of habit systems of desires had become fixed and rigid, 
 so that there were large parts of personal expenditure determined 
 by a conventional standard : the needs of the time and the general 
 upheaval of war have tended to cause a breaking up of the former 
 systems of desire : the revolution in standards of Hving : in so far 
 as economy has been adopted, voluntarily or enforced, new habits 
 of expenditure are being formed, and these may tend to persist : 
 the need for greater saving, even when the war is ended, in order to 
 hasten industrial recuperation by providing the necessary capital 
 
 p. 8i 
 
 VJ, ORGANISATION RE-ORIENTATED. 
 
 Future generations of economists will no doubt criticise the analyses 
 and theories of the present day, as it is necessary for present-da;y 
 writers to do with those of the past : the impUcations of termino- 
 logies: the conception of organisation: changes in the naming 
 of industrial phenomena: the element of metaphor and theory 
 involved in the idea of the industrial organism: the influence of 
 Evolution : organising of industry and also of labour : organising 
 of other factors of Production : the State and industry : industrial 
 organisation first a Productive category, possibly tending now to 
 be rather a Distributive one : internal resistance in the industrial 
 organism : industry conceived apart from the biological implications 
 of Evolution : the framing of a scheme of Production : the incom- 
 plete co-operation of the human agents in Production : the future 
 influence of the State in relation to individual initiative : the 
 psychological aspect of the relation of individuals to the State. 
 Industry to be conceived less as an evolutionary process than as a 
 problem, namely the attaining of a harmonious' relation between the 
 human agents concerned in each individual act of Production : 
 the larger part of the practical steps in the future will be the recog- 
 nition of the probkm as to the need for a less imperfect co-operation 
 of the various factors of Production P- 99 
 
xii Contents 
 
 APPENDIX.— STATISTICS OF SHIPPING DURING WAR. 
 
 I. Number of Ships of Great Britain and the 
 
 Colonies, 1792, 1803, 1913 .... 
 
 II. Losses of Shipping from 1803 to 1814 . 
 
 III. Prizes taken from the French and by the 
 
 French from 1803 to 181 4 
 
 IV. Ships prosecuted as Prize from 1803 to 1807 
 INDEX p. 121 
 
 p- 
 
 119 
 
 p- 
 
 119 
 
 p. 
 
 120 
 
 p- 
 
 120 
 
THE ECONOMIC MAN AND 
 A WORLD AT WAR 
 
He was a man 
 Versed in the world as pilot in his compass. 
 The needle pointed ever to that interest 
 Which was his lodestar. 
 
 The Deceiver, A Tragedy. 
 
 Noble princes and knights, it is known throughout the world how 
 ye, abandoning those delights which ye might have possessed in 
 your hands, have chosen rather to follow the honourable profession 
 of arms, and encounter all dangers to gain the praise of prowess and 
 redress wrongs,... this indeed is to your fair renoWn and to the service 
 of Almighty God, for in this have ye done that for which ye were 
 bom, succoring the oppressed and beating down the evil-doers. 
 But in this, what should most elate us is the defiance which we have 
 thus given to two so high and powerful princes as are the Emperor 
 of Rome and King Lisuarte, with whom, if they will not be brought 
 to reason and justice, we must perforce have great debate and warfare. 
 Noble sirs, what then have we to expect? Certes nothing but that 
 defending the right and reasonable cause against those who would 
 support injustice, we shall gain yet more victories, such that the 
 whole world shall ring therewith. 
 
 Amadis of Gaul (Sou they 's Version). 
 
THE ECONOMIC MAN AND 
 A WORLD AT WAR 
 
 Ministers in Parliament and writers in the Press have often, 
 since the outbreak of war, alluded to the violation of economic 
 principles, assuming that this has been one of the consequences 
 of the existence of a state of hostilities. The Latin maxim inter 
 arma, leges silent is applied to the suspension or abrogation of 
 what was known formerly as economic law. But it may be 
 guessed that there is involved here some confusion of ideas which 
 are essentially different in their nature. In so far as Political 
 Economy makes any claim to be considered to be a science, it is 
 difficult' to conceive it as one of an intermittent character, the 
 conclusions of which only apply in time of peace. Indeed, if that 
 were so, what are we to say of the whole former subject-matter 
 of the study during a period of hostilities? Has it disappeared, 
 or has it so changed its form that it has been subsumed under 
 some subordinate part of the military art?' After the long 
 years of peace which this country has enjoyed, it adds to the 
 chaos if we must think of economic activity as anarchical, or 
 as existing only on sufferance threatened by a sword of Damocles 
 suspended over it. The Defence of the Realm Act and the 
 almost innumerable administrative measures which have re- 
 sulted from it, show that both the extent and the manner of 
 commercial and industrial activity have undergone great 
 changes since the summer of 1914, and in the making of these 
 changes principles, whicli were formerly accepted, have been 
 avowedly disregarded. 
 
 When this situation is considered, a half-formed impression 
 begins to emerge, namely that there is no little difference of 
 opinion as to what is the nature of economic investigation and 
 
 I — 2 
 
4 The Economic Man and a World at War 
 
 its teaching. If we evoke from the past that enigmatic spirit 
 — "the economic man" — he would no doubt have much to say 
 of the present situation. If he be conceived solely as "a being 
 who desires to possess wealth and as capable of judging of the 
 comparative ef&cacy of means for obtaining that end," and if 
 abstraction be made "of every other passion or motive except 
 those which may be regarded as perpetually antagonising prin- 
 ciples^," then the spirit in which wealth and larger things than 
 wealth are being sacrificed must appear strange and anomalous. 
 But "the economic man" proved the Delphic oracle of the 
 nineteenth century whose sajdngs masked under a clear-cut 
 precision many practical ambiguities. His personality, imder 
 the guise of an abstract simplicity, concealed almost bafiling 
 complexities. Nor has he been happy in some of his cornmen- 
 tators, so that one is inclined to exclaim with Dangle in The 
 Critic, "Egad, I think the interpreter is the harder to be under- 
 stood of the two." It is needless to repeat the sneers of Carlyle 
 and Ruskin against a series of conceptions which the latter 
 held to be "absolutely incompetent or absolutely false^," but 
 the existence of a discrepancy in the point of view may be 
 illustrated by two opposed quotations from two works which 
 bear the same title — Wealth and Welfare — and, by an even 
 greater coincidence, from pages numbered alike in each of the 
 two books. The earlier volume was written by Commander 
 Hastings Berkley and was printed in 1887. He declares that 
 "from the orthodox school there grows up in logical sequence, a 
 system of Political Economy, which, but for the good sense and 
 good feeling of the generality of men, would issue in the most 
 revolting applications*." The second Wealth and. Welfare is 
 the well-known treatise of Professor Pigou in which it is stated 
 that "the purpose of economic investigation is not primarily 
 scientific, if by science we understand the single-eyed search 
 after knowledge for its own sake, it is rather practical and 
 
 * Mill, Essays on Some Unsettled Principles of Political Economy, 1844, 
 
 P- 137- 
 
 ^ Ruskin, Munera Pulveris, 1886, p. xviii; Time and Tide by Wear 
 and Tyne, 1872, pp. 176, 177. 
 
 ' p. 4- 
 
The Economic Man and a World at War 5 
 
 utilitarian^." Certainly it would be a most jaundiced critic 
 who would apply the epithet "revolting" to the broad humanity 
 of the later book, and this shows us that there is a misconception 
 which requires to be discussed, and, as a result of the discussion, 
 perhaps removed. 
 
 In order to secure a firm foundation for the treatment of 
 Economics and War, it is necessary first to clear up the concep- 
 tion of the "economic man" in this connection. Those who 
 formed the celebrated abstraction were perfectly clear in their 
 own minds that the abstract conception was no more than a 
 starting-point. Thus J. S. MiU, while for purposes of study 
 he concentrates attention upon the desire of Wealth, points 
 out at the same time that social phenomena are interdependent 
 and that " there is, perhaps, no action of a man's life in which 
 he is neither under the immediate nor the remote influence of 
 any impulse but the desire of wealth*." The other desires 
 were treated, or to be treated, in separate branches of Social 
 Science; and it was only when the results of these had been 
 brought into relation with those provided by Political Economy 
 that the "economic man" emerged from his isolated abstracted- 
 ness and became a real human being. Much of the miscon- 
 ception has been due to the impatience with which some readers 
 accepted the homo economicus as an actual typical British 
 citizen, thus neglecting the synthesis which is clearly con- 
 ditioned by the previous abstraction. Accordingly, to charge 
 the "economic man" with a neglect of morals is as much out 
 of place as to blame a theory of chess with failing to take 
 account of the art of cooking^! Or in other words we are in 
 fact trying to treat pure Economics as if they were both Applied 
 and Social Economics*. 
 
 It has been claimed for the " economic man " that "he was 
 not selfish*," and he was certainly not a pacifist. Ricardo 
 explicitly takes account of and approves a war which involved 
 
 1 p. 4. ^ J. S. Mill, System of Logic, ii. pp. 494-8. 
 
 ^ Pareto, Manuel d'Economie Politique, IPa-ns, 1909, i. p. 18. 
 • Walras, Elements d'Economie Politique Pure, 1874, pp. 32, 33. 
 '' Marshall, Present Position of Economics, 1885, p. 28. 
 
6 The Economic Man and a World at War 
 
 some "great national interest^," and Professor Edgeworth, 
 when dealing with a similar abstraction, expressly states that 
 the fundamental principle works under two aspects — the one 
 being a state of war and the other one of contract^. 
 
 Thus it follows that, even the severe and rigid conception 
 of the " economic man " does not exclude his entering voluntarily 
 into a state of war when his interests require it ; or it may perhaps 
 be added, when those interests which he included in his own, 
 or regarded as his own, demanded it. But the modern economist 
 has supplemented the conception of the "economic man" by 
 an explicit declaration of his relationship to the community of 
 which he is a citizen, and this development has brought more 
 nearly within the range of economics a definite recognition of 
 social relationships. That attitude makes the participation of 
 the man of affairs in a necessary war more clear and not far 
 from inevitable. A wide view of the citizen's real interest 
 may show him that his continued free enjoyment of all that 
 he has is menaced by external forces or that those forces would 
 impose intolerable conditions upon the exercise of his skill and 
 labour. Therefore he must risk his life in order that he may 
 thereby do what he can to safeguard his whole future. And so 
 in its ultimate issue an unavoidable war becomes the supreme 
 speculation in which all that one has and life itself are staked. 
 Nor is this all. Present events give an unlooked-for definiteness 
 to a speech of remarkable insight made by Dr Marshall in 1907. 
 In it he discussed economic chivalry, connecting it with that 
 chivalry of arms which is described by its historian as "having 
 effected more than letters could accomphsh in the ancient 
 world ; for it gave rise to the personal merit which in the 
 knight, and in his successor, the gentleman of the present day, 
 checks the pride of birth and the presumption of wealth^." 
 
 • "Essay on the Funding System" in Works (1852), p. 539. 
 
 * "Economic Calculus — Definitions — The first principle of Economics 
 is that every agent is actuated only by self interest. The workings of this 
 principle may be viewed under two aspects, according as the agent acts 
 without, or with, the consent of others affected by his actions. In wide 
 senses, the first species of action may be called war; the second, contfoct." 
 Mathematical Psychics, 1881, pp. 16, 17. 
 
 " Charles Mills, History oj Chivalry, 11. p. 359. 
 
The Economic Man and a World at War 7 
 
 Chivalry at its best inculcated the achievement of high emprise, 
 the scorning of accidentcil advantages, the keeping of faith, 
 protection of the weak and humility. So Dr Marshall envisages 
 a chivalry in business which fosters public spiirit and a delight 
 in doing noble and difficult things because they are noble and 
 difficult. "It includes a scorn for cheap victories and a delight 
 in succouring those who need a helping hand. It does not 
 disdain the gains to be won on the way, but it has the fine 
 pride of the warrior who esteems the spoil of a well-fought 
 battle, or the prizes of a tournament, mainly for the sake of 
 the achievements to which they testify, and only in the second 
 degree for the value at which they are appraised in the money 
 of the market^." The inner importance of success is that it is 
 "good prima facie evidence of leadership." " Men of this class," 
 Dr Marshall continues, "live in constantly shifting visions, 
 fashioned by their own brains, of various routes leading to the 
 desired end ; of the difficulties which nature will oppose to them 
 on each route and of the contrivances by which they hope to get 
 the better of her opposition''." In the ceaseless effort of man to 
 express himself and to realise himself he is aware that the only 
 way to make real and actual the thought which is conceived 
 in his mind is to work it out as a fact in the world of things. 
 He imagines a solution for some problem that confronts him, 
 but the proof that his solution is valid can be best effected by 
 actual trial. As' it has been said— "the will is simply the man. 
 Any act of will is the expression of the man as he at the time is. 
 The motive issuing in his act, the object of his will, the idea 
 which he sets himself to realise, are the same thing in different 
 words.... In willing he carries with him, so to speak, his whole 
 self to the realisation of the given idea^." 
 
 War changes the circumstances in a tragic manner, but 
 not the fundamental conditions. The quality of leadership is 
 demonstrated where the stakes are the greatest. The sacrifice 
 of comfort and ease which business exacts is demanded upon 
 
 • Marshall, "Economic Chivalry" in Economic Journal, xvii. p. 14. 
 
 - IMd. p. 15. 
 
 " T. H. Green, Prolegomena to Ethics, 1890, p. 158. 
 
8 The Economic Man and a World at War 
 
 a vastly larger scale but for the same end, namely the making 
 objective the aim, subjectively conceived. But, if it be granted 
 that this applies to those who are leaders in industry when they 
 are forced to exchange the arts of peace for those of war, what 
 is to be said of the position of the rank and file ? Is there no 
 chivalry for these, are they condemned to remain a mere com- 
 monalty? M. Maurice Barres shows that ancient chivalry 
 extended from the knights to the people, and he quotes the 
 following significant saying : 
 
 Nul n'est vilains s'il ne fait vilenie. 
 
 He adds "c'est un vers des Chansons de Geste, comme ce 
 pourrait 6tre un vers de Corneille, comme c'est la pensee de 
 chaque Frangais et Fran9aise en 1916^^." 
 
 The British system also recognises the initiative of the 
 private soldier and gives him opportunities. His ef&ciency 
 resembles the pride of the craftsman in his work with the added 
 conception of the spirit of co-operation and systematised effort. 
 The same idea of combined struggle, which has long been a 
 commonplace in the organisation of labour, is found both in 
 the field and in the war-workshop. In the former it is gloriously 
 common in the achievements of the battalion or the company, 
 just as in the latter it shows itself in the pride which the platers 
 and riveters of our shipyards take in the services of the ships 
 they had helped to build at the battles of the Dogger Bank or 
 off the coast of Jutland. Some commanders, reputed great, 
 have dealt with their troops as Omar Khaj^am imagined that 
 Destiny dealt with man : 
 
 'Tis all a Chequer-board of Nights and Days 
 Where Destiny with Men for Pieces plays : 
 
 Hither and thither moves, and mates, and slays, 
 And one by one back in the Closet lays^. 
 
 Rather in the modern British system, soldiers are recognised 
 as men, not as inanimate pieces in a vast war game, and their 
 individual responsibility and initiative are encouraged. Hence 
 they feel they have an active share in the achievements in which' 
 
 ^ M. Barrfes, Le Blason de la France, igi6, p. 15. 
 " FitzGerald's Translation (Edition i). 
 
The Economic Man and a World at War 9 
 
 they participate. Modern, chivalry in war was well described 
 during Marlborough's campaigns by a writer in The Spectator. 
 "The fine gentleman in that band of men is such a one as I have 
 now in my eye, who is foremost in all danger to which he is 
 ordered. His officers are his friends and companions as they 
 are men of honour and gentlemen; the private men are his 
 brethren, as they are of his species. They wish him in danger 
 as he views their ranks, that they may have occasions to save 
 him at their own hazard. Mutual love is the order of the files 
 that he commands.... Such is his regiment who knows mankind, 
 and feels their distresses so as to prevent them^." It is from 
 this spirit that there has been distilled that "fine extract, that 
 pure essence which endures to all ages, while the grosser part, 
 the residuum, may psiss away and be lost in the course of time*." 
 
 Further, there is the same economic chivalry in the national 
 service of non-combatants when, for instance, business men 
 devote valuable time to serving, gratuitously, upon important 
 committees which are concerned with functions in safeguarding 
 the national interest. The same tendency is clearly observable 
 when professional men (as for instance doctors) transfer their 
 services to the State, not only at a considerably less remuneration 
 than they had received previously, but also with grave risk to 
 the future of their respective practices. Nor in this estimate 
 should the extent of the largely unpaid work of women, in new 
 and strange duties undertaken on behalf of the country, be 
 overlooked. 
 
 These reflections have been confined of set purpose to con- 
 siderations which are economic or which are derived from 
 economic sources. It is almost needless to add that all that 
 has been said is immensely strengthened by the moral and 
 patriotic motives which move in the same direction with more 
 sovereign power. And what the investigation of the present 
 situation reveals is that the influence of the latter is not 
 counteracted by economic desires and principles, but rather 
 confirmed and increased. 
 
 * The Spectator, No. 152. 
 
 2 Speech by V.'iUiam Windham, 22nd Dec. i8o5. 
 
lo The Economic Man and a World at War 
 
 When this reasoning is pressed to its logical conclusion, it may 
 appear to encounter difficulties. One of these is the operation of 
 the Military Service Act. If I may assume for a moment that 
 the general line of argument is not received with dissent, I can 
 well imagine the thoughts of some to take the direction that 
 action which has an economic reference, even when it results 
 in the undertaking of military service, must be assumed to be 
 voluntary; but the case of the man, who did not attest and who 
 is "deemed to have enlisted," involves his discharging duties 
 against his will. To this it may be replied that some at least, 
 and in all probability many, of those who came under the 
 Military Service Act were in the apparently paradoxical position 
 that, being conscripted, they undertook military duties which 
 they themselves desired and thus their service was in essence 
 voluntary. The apparent contradiction is resolved by the fact 
 that these men held strongly that others of the same age and 
 physique as themselves should perform similar national service. 
 But this leaves a residuum of men who (apart from grounds of 
 conscience) showed themselves reluctant to rise to the height 
 which it was held the situation required. From one point of 
 view this is a case in which the views of the majority must 
 prevail against those of the minority, even, to the extent of 
 putting constraint upon the latter. From another it may 
 fairly be contended that industrial freedom is far from being 
 untrammelled. In a negative sense freedom may be enjoyed 
 perhaps by one who lives the Cynic life of absence of desire, 
 but for the normal man there are all the limitations which his 
 station in life imposes on him. Thus the member of a Trade 
 Union found his conditions of work determined for him in many 
 ways. In certain cases he was not' free to work for a specified 
 employer, nor was he allowed to work upon certain conditions. 
 As a rule, he may be held to have accepted the general policy 
 of his Union ; but, in several trades, the exercise of his skill 
 was dependent upon his having joined the trade organisation. 
 So what has happened in the war has been that a great national 
 crisis has made it necessary to limit individual choice in certain 
 directions in order to level up the service of citizens whose 
 
The Economic Man and a World at War 1 1 
 
 patriotism was distinctly below the average to the standard 
 already achieved, voluntarily, by others who have been more 
 far-seeing and alert. In other words, necessity has compelled 
 the exaction of the same service from the laggards which the 
 majority have offered of their own free will. Then measures 
 to save the State demand fortitude and action which in 
 other circumstances would be held to have been extreme. As 
 Sir Walter Raleigh expressed it "in times of extremity, when 
 resolution must be taken for the saving or utter loss of the 
 State, then no regard is to be had of justice or injustice, mercy 
 or cruelty, honour or ignominy, but rather, setting aside all 
 respects, that course is to be followed which defends the lives 
 and liberties of men^." 
 
 Compulsion does not cease with the provision of men for 
 the forces. It affects the daily life of those who remain over in 
 almost numberless ways under the Defence of the Realm Act 
 and other emergency measures. Here it may appear that the 
 organisation of commerce is fettered by a multitude of restric- 
 tions, though it should be noted, on the other side, there are 
 cases in which pre-war restrictions have been removed tempor- 
 arily. Thus it would appear that the economist is confronted 
 with a new world, in which much is changed. First there 
 came the dislocation of commerce caused by the outbreak of 
 hostilities, and after that the State ordains rules, so that, in 
 some trades, the merchant in effect ceases to be a merchant 
 and becomes a quasi-bureaucrat. 
 
 It is in these circumstances that it has been hastily inferred 
 that many economic generalisations have been abrogated. But 
 in all the complexity of life it is impossible to state in detail 
 all the conditions which are involved in a given situation. 
 There afe many that for long periods do not exert any important 
 influence upon the effect which is investigated. A revolutionary 
 change in the surroundings may suddenly force these neglected 
 conditions into an unwonted prominence. It follows that what 
 has happened is not that previous reasoning has been proved to 
 be erroneous, but that elements in the chain of causation have 
 * Sir W. Raleigh, " The Cabinet Council " in Works, 1757, i. pp. 116, 117. 
 
1 2 The Economic Man and a World at War 
 
 acquired new values. In a great war there is a change in 
 relations between different social activities, and economic law 
 occupies a new position when Salus populi suprema est lex. At 
 the same time while national security, instead of being assumed, 
 must be fought for with the greatest intensity, and in Adam 
 Smith's language "defence is greater than opulence," under 
 modern conditions opulence plays a striking part in the 
 efficiency of defence. And so the relation between warlike and 
 economic activity is a reciprocal one but under the governing 
 condition that the latter is now directed in the main towards 
 ends which are largely belligerent. Are we then to conclude 
 that this economic activity is Protean in character — in time 
 of peace being directed to the maintaining of peace and in time 
 of war to the destructive energies of war? In other words, 
 does the same activity at one time build up only to destroy 
 its own work? This would be in effect a reversion to the 
 doctrine of Herakleitus concerning the primal fire that con- 
 sumes all things and from which again a new world is re-created^. 
 
 This view, it seems to me, neglects the fruits of our past 
 experience which, on the whole, has taught us that commerce 
 tends towards peace amongst the nations rather than to war. 
 To say that it furnishes means for war is not to imply that it 
 is a necessary cause of war. 
 
 The essential lesson of industrial development is that its 
 chief concern is in peace. But to secure a peace, which 
 will be satisfactory, great sacrifices are demanded. And a 
 full understanding of the situation is made difficult by the 
 temporary separation of the standpoint of the individual and 
 the nation. During war the attention and effort of the 
 individual must be concentrated with the greatest intensity 
 upon the present, that of the nation will be directed towards 
 the larger outlook upon the future as it will be moulded by 
 the momentous events now being transacted. It follows that 
 for the time, but it is to be hoped only the time, the freedom 
 of the individual must be absorbed in that of the national 
 
 ^ Tcvpbs T dvTaf/.dpetT6ai irdvTd /cat irvp awavTiav^ uairep -xjtvffov xpi)M*^a Kai 
 
The Economic Man and a World at War 13 
 
 effort. His true and permanent interest is interwoven with 
 that of his country. But in war it is impossible for the indi- 
 vidual to determine the means by which this larger interest 
 is to be advanced. Strategy, diplomacy and high finance all 
 develop in secrecy during the actual conduct of hostilities. Thus 
 the citizen must temporarily relinquish some of his rights as 
 against the State, but only for his own future benefit. It is for 
 these and similar reasonfe that in time of war industry becomes 
 subject to avery large measure of governmental control. Wireless 
 telegraphy and rapid communication have created new problems 
 in the conduct of war, and the manufacturer or trader is cut off 
 from many of the sources of intelligence upon which he was wont 
 to rely in time of peace. Accordingly, instead of depending upon 
 his own initiative and judgnjent, he must be directed, to a greater 
 or less degree according to circumstances, upon the general 
 plan which is only known in all its details to the responsible 
 authorities. It is their function and duty to use the labour 
 and other resources of the country in such a manner as they 
 believe will best aid the accomplishment of the nation's aim. 
 
 There seems to be a popular way of thinking which is con- 
 tinually urging the Government to concentrate on the war 
 and upon nothing else. Such advice — ^like much well-meant 
 counsel — is directed in the wrong direction. It is the individucil 
 who should direct his life in this way during war time, by doing 
 what is known to be of national importance under existing 
 circumstances. But the Government of the country at the 
 present time is in a peculiar sense the custodian of the future. 
 It is responsible for this not only in the conduct of hostilities, 
 but also in so far as the individual resigns to it his direction of 
 his business concerns, and to that extent, at least, the Govern- 
 ment becomes the trustee for the future of industry and social 
 life. For the more effective conduct of hostilities the good 
 citizen surrenders his own initiative ; but that power of freedom 
 of industry and labour, which is temporarily in abeyance, must 
 be conserved for the country when peace returns to it. 
 
 It is possible that there has been an unconscious common 
 sense in the principle which has not as far as I am aware been 
 
14 The Economic Man and a World at War 
 
 formulated, but which appears to direct much of our war 
 economics, namely for the Government to make changes in 
 the economic system only when these are shown to be unavoid- 
 able for the more efficient prosecution of the war. There are 
 violent contrasts in our economic life. In a diminishing 
 number of instances it continues as in pre-war times, in some 
 it is modified by governmental interference, while in others 
 it is transformed. Regarded apart from the past and the future, 
 it is full of contradictions. Why should one man give up good 
 wages and sustain the risks of active service for the relatively 
 small army pay and allowance, while his neighbour, who is 
 unfit for service, is securing higher earnings? Why should 
 some make profits out of the present abnormal circumstances? 
 Why should one man risk his career by accepting a commission 
 in the army, while another makes a fortune by obtaining 
 another kind of commission, namely to use his talents in the 
 service of the State ? Questions of this type could be multiplied 
 almost indefinitely, and much argument would leave each 
 conundrum much as it was when the discussion began. It 
 appears to me that some confusion arises by considering the 
 position as if it were static, whereas it is in reality a transition 
 state towards something else. But what is that something 
 else to be ? Is it to be a state of war ? because, if so, we cannot 
 begin too soon to reform conditions which are anomalous if 
 this is to be the world's destiny. On the contrary, the one 
 great aspiration, which is shared alike' by all the belligerents 
 and by neutral nations, is for a stable and abiding peace. There- 
 fore, regarding this as the goal, it may not be unwise to re'frain 
 from scrapping more of the economic arrangements of peace 
 time than is unavoidable. It may be claimed for this method 
 that there is a double economy of resources ; first, during war, 
 in saving the amount of labour which would be required for 
 the establishing of a complete war-ecbnomy, and secondly in 
 minimising the dislocation which will be involved in the transi- 
 tion from war organisation to peace organisation. The more 
 complex the former, the greater the disturbance is likely to be. 
 So that it seems sound practiced wisdom to make emergency 
 
The Economic Man and a World at War 15 
 
 changes where these are shown to be desirable for military 
 purposes, but not otherwise. Then the return of peace will 
 find us with the essential parts of our industrial system ready 
 to resume their former functions, instead of having to re- 
 construct them, perhaps under conditions of considerable 
 difficulty. 
 
 These appear to be the governing factors in the industrial 
 system in time of war. Naturally, precedence must be accorded 
 to efficiency in the organising of the nation's resources for war. 
 But, subject to this condition, the minimum amount of disturb- 
 ance of the normal economic organisation is the wiser course. 
 . It must not be overlooked that the success of the Navy has 
 been remarkable in keeping open the routes for communication 
 with countries overseas ; and, in order to make full use of this 
 goods must be produced to exchange for supplies drawn from 
 foreign countries. This fact enables us — or at least should 
 enable us^ — to avail ourselves of labour and capital at home, 
 which could not otherwise be used for war purposes, in obtaining 
 commodities useful for these ends by producing those goods 
 which are necessary to be exchanged for them. 
 
 The strength of the British Empire may be represented as 
 a majestic slow-moving force, which reaches its maximum 
 momentum comparatively slowly. Because we were unpre- 
 pared and because the resources are enormous the harnessing 
 of these to war takes time. From the first preparations for 
 hostilities until that maximum will be reached about five 
 years would not be too long to complete a task of so great 
 a magnitude. But the time which will be required to reach 
 the maximum (if that be necessary) is in itself a testimony 
 to the vastness and complexity of the resources with which 
 we began — forces evoked from the man-power of all the 
 Continents of the world, backed by the mobilised finance of the 
 world's greatest money-power and supplied by the willing 
 labour of a population which has always been foremost in the 
 manufacturing arts. Such a force, as one imagines it, develops 
 its greatest effectiveness only gradually, but it will have the 
 fuller staying power. 
 
1 6 The Economic Man and a World at War 
 
 This reasoning brings to light another condition which is 
 implicit in the economic situation during war. War in all its 
 sordidness seems inevitably to be material, and yet, in the 
 present struggle, ideas are of supreme importance. Ultimately 
 the real battle is between two opposed conceptions of life. We 
 must be careful that in winning the war we do not lose the ideal 
 for which we drew the sword. The British ideal is the Anglo- 
 Saxon conception of freedom as opposed to the Germanic 
 principle of State organisation, for which the State is every- 
 thing and the individual -nothing, which was described by 
 Macaulay as being that "of all political fallacies which has 
 perhaps had the widest and most mischievous operation^." 
 During hostilities freedom is conceived as political, but the issue 
 of the war will determine the governing principle of economic 
 activity for a long time to come. The logical consequence of 
 victory in \yar will be the maintaining of our industrial ideal 
 of liberty, with its voluntary organisation and its development 
 of individual initiative. 
 
 The maintaining of that ideal must not be understood to 
 mean a return to the same conditions of industry which existed 
 before the war. Freedom takes many forms in its details, and 
 a nation obtains that type of liberty, political and industrial, 
 which it has deserved. In our commercial and industrial 
 organisation, as it existed during the first decade of the present 
 century, there were many things which required amendment. 
 The nation will emerge from this war poorer in material wealth 
 but enriched in character. This will prove the necessary 
 foundation for industrial and social advance. Our commercial 
 machine had grown up very gradually and there were many 
 parts in it which caused friction in its working. With clearer 
 vision and a wider outlook, it will be possible to reform much 
 and to improve much. When the smoke of battle clears away, 
 when submarines no longer disturb the depths of the sea and 
 air-craft cease to vex the calm stillness of the upper air with the 
 rattle of their guns, men wiU return to the arts of peace which they 
 were forced to abandon for those of war. They will return to 
 ' "£3537 on MachiavelU" in Essays, 1885, p. 48. 
 
The Economic Man and a World at War 17 
 
 us having learnt much, and perchance having forgotten some- 
 thing. The task before them will be the reaping of the full 
 fniit of their perils and their toils in recreating industry and 
 commerce in a manner which will be worthy of them and of 
 their race. We shall have bought peace and security at a 
 very great price, but that price should bring a bonus eventually 
 in a better and more efficient industry. As yet it is possible 
 to see only its general character, but not its details; just as 
 one views a city in the far distance. It will, I think, be less 
 sordid than the industry of the past; free, too, but with a 
 well-ordered freedom. Efficiency, both of men and machines, 
 can be increased, while, if this is accomplished, the condition of 
 workers will be better. Production, also, will be larger, for 
 after a long period of somnolence, the nation will be more 
 awakened and alert. What is more important, the quality and 
 conditions of production will be improved, and it is to be hoped 
 that the old pride of the craftsman in his work will return in 
 an intensified form and will manifest itself on a much greater 
 scale, for it will be reinforced by the whole strength of an 
 improved and extended organisation of industry. 
 
 It may seem that this tentative forecast involves a certain 
 degree of economic faith. And this is justified at an epoch 
 when, in the graphic phrase of Sir Thomas More, "things are in 
 so great a fermentation'^," and spiritual forces are freed from 
 the restraints that clogged their activities. This is a psycho- 
 logical basis upon which to build and it is confirmed by past 
 experience. The revivifying effect of the Napoleonic wars was 
 anticipated by Chalmers and confirmed after the event by Tooke. 
 The first wrote in 1794 after the outbreak of hostilities " I engage 
 to maintain that what has happened in our former wars will again 
 happen in the present war in a greater or less degree ; that we 
 shall lose some of our external commerce, while we shall pro- 
 bably gain the extent of our losses from some other source, 
 that the spring of our trade may be pressed down by the preval- 
 ence of war, but will rebound on the return of peace ; that our 
 domestic industry will be little affected by distant hostilities, 
 
 * Utopia, 1737, p. 29. 
 S. 2 
 
1 8 The Economic Man and a World at War 
 
 whilst consumption will run on in its usual channel without 
 the obstructions of warfare ; and that, upon the restoration of 
 tranquillity, enterprising people of this happy land will carry 
 the energy, which they have ever derived from war, into the 
 usual avocations of peace ; so as to have hereafter, as they have 
 uniformly had, more trade and more shipping and ampler, 
 means of acquiring wealth when hostilities shall cesise than they 
 had when they were goaded into unprovoked hostilities by a 
 restless enemy^." In parts of Chalmers' forecast we may note 
 cases where events did not follow the course he anticipated, 
 though often in exceeding rather than in falling short of his 
 expectations. Thirty years afterwards, when Tooke reviewed 
 the great struggle, he pointed out that a state of war diminishes 
 the supply of commodities, but that there are counteracting 
 causes, amongst which he mentions the increased activity, 
 industry and intelligence in the great maSs of the population 
 remaining, so that as much or even more may be produced 
 than before ; increased accumulation of capital ; improvements 
 in agriculture and machinery tending to increase production 
 with the same or less capital and labour. And he concludes 
 that " all these circumstances concurred in this country during 
 the whole of the late contest, and the consequence was an 
 increase of production and population in spite of the opposite 
 tendency arising out of a state of war^." This is confirmed by 
 another contemporary observer — Joseph Lowe, who spoke of 
 the "late war" as having "involved a sacrifice of property not 
 inferior to the sacrifice of lives. To this double drain on our 
 resources what has been the grand counterpoise ? Our progress 
 in the arts of peace : the power of extracting a larger subsistence 
 from the soil; a larger revenue from our labour and capital^." 
 Present conditions do not appear to justify any less courage 
 in facing the future of commerce than that shown by Chalmers 
 
 * G. Chalmers, An Estimate of the Comparative Strength oj Great Britain, 
 1794, p. xxi. 
 
 ^ T. Tooke, Thoughts and Details on the High and. Low Prices from 1793 
 to 1822 (1824), p. 209. 
 
 ' J. Lowe, The Present State of England in regard to Agriculture, Trade 
 and Finance, 1824, p. 292. 
 
The Economic Man and a World at War 19 
 
 over a century ago. A calm, but at the same time a balanced 
 confidence in what is to come will be most in accord with the 
 new forces which are even now coming into operation. If we 
 make good use of these, there is much more to be hoped than 
 to be feared. 
 
 The energising of the nation through the time of trial will 
 result in greater efficiency when the present struggle is ended. 
 Discoveries of new processes and methods, with improvements 
 in old ones, will lead not only to a more productive industry ; 
 but, it is to be hoped, also to a better industry. Europe will 
 awake from the nightmare of armaments with which it has been 
 too long oppressed. As the murk of the battle cloud clears 
 one sees the first signs of a fairer dawn in which the arts 
 of industry, broadened and deepened and at the same time 
 more humanely organised, can accomplish in the next genera- 
 tion more than even was dreamt of by the discoverers of the 
 great Victorian era. And further, great as these gains may be 
 they will be surpassed by more immaterial improvements. The 
 general quickening of the national spirit may be expected to 
 lead in the end to greater national unity and ultimately perhaps 
 to more international co-operation. Thus it will be possible to 
 obtain eventually the full fruits of peace in greater harmony 
 both at home, and also by the securing of that long-continued 
 amity amongst nations which commerce requires for its stable 
 and regular development. 
 
 2- 
 
"FOR THE DURATION OF 
 THE WAR" 
 
Assiduo labuntur tempora motu 
 Non secus ac flumen. Neque enim consistere flumen. 
 Nee levis hora potest: sed ut unda impellitur unda, 
 Urgeturque prior venienti, urgetque priorem, 
 Tempora sic fugiunt pariter, pariterque sequuntur; 
 Et nova sunt semper. Nam quod fuit ante, relictum est; 
 Fitque quod haud fuerat: momentaque cuncta novantur. 
 
 Ovid. 
 
"FOR THE DURATION OF THE WAR" 
 
 From 1917 back to 1492 seems a far cry, but in that year 
 there was printed in English at Antwerp by Gerard Leeii a 
 version of the Dyalogus or Communyng hetwixt Salomon and 
 Marcolphus. A few sentences from this quaint mediaeval 
 discussion may serve as an introduction to the subject of the 
 present lecture. It may be premised that the sa3dngs of 
 Solomon in the dialogue may be supposed to represent the 
 wisdom of the wise, while the retorts of Marcolphus, who was 
 "right rude and great of body but right subtyll and wyse of 
 wyt," indicate the comment of shrewd, untutored common 
 sense. With the apparent inconsequence which characterises 
 the dialogue, after counsels by Solomon and sarcastic comments 
 by Marcolphus upon learning, self-praise, and the training of 
 the young, the discussion proceeds : 
 
 Salo. All maner k3mdes turne agen to theyre furste nature. 
 Mar. A wome tabyll cloth tumyth agen to his furste kynde^. 
 
 Both the aphorism of Solomon and particularly the rejoinder 
 to it show the peculiarly static conception of social phenomena 
 during the Middle Ages, and one wonders how far it finds a 
 parallel in the modern expedient of making changes for the 
 duration of the war in the apparent expectation that when 
 peace comes the clock can be put back; and, in the words 
 put in the mouth of Solomon, things will " turne agen to theyre 
 furste nature." But what will happen if, in the metaphor of 
 the homely critic, the institutions have become worn and 
 
 ' This is the Dyalogus or Communyng betwixt the wyse king Salomon and 
 Marcolphus (facsimile, 1892). 
 
24 "For the Duration of the War" 
 
 obsolete, how can the "worne tabyll cloth" patch its own 
 holes? Indeed, may we not further ask, if some part of our 
 industrial or social system had shown itself to be imperfect 
 before the war, why should it be replaced after the war with 
 the original holes, as the Indian tailor is said sometimes to copy 
 a garment given him as a pattern by reproducing all the defects 
 of wear or accident in the original? 
 
 Even under assumed static conditions the difficulties of 
 emergency measures for the diu^ation of the war are great. 
 Those conditions however represent in reality an artificial 
 simplification of the problem. Industrial life is essentially 
 dynamic, and it may be most fitly compared to an organism. 
 It is impossible to immobilise any part or function of an organ- 
 ism without producing compensating activities in it, and the 
 change is likely to be the greater the more abnormal the circum- 
 stances are. Acceptances and bills of exchange may be "placed 
 in cold storage," but this applies to the actual documents. 
 The activities of international trade, of which they were the 
 instruments, must either cease or else be supplied from some 
 other source. Whatever attempt is made to isolate and immo- 
 bilise a particular function, the process of adaptation to environ- 
 ment continues ; and therefore, even if the use of that particular 
 function is temporarily suspended by governmental regulation, 
 it will be found impossible to restore it to precisely the same 
 work which it formerly performed and in the same manner, 
 because other parts of the organism and its surroundings will 
 have changed. Further, there is always the possibility that, 
 during the interval of suspension, some other organ will have , 
 endeavoured to adapt itself to the function previously exercised 
 by the first. In addition another condition may be expected. 
 The catastrophic circumstances of war produce new economic 
 phenomena, and the industrial organism at once begins to 
 adapt itself to these. Thus new functions are acquired, often 
 by existing organs undertaking changed functions, or some 
 new organs may appear. Once these have been estab- 
 lished they will tend to persist, only falling gradually into 
 disuse if the conditions after the war make it impossible for 
 
"For the Duration of the War" 25 
 
 them to continue. And so, upon this hypothesis, some — and 
 it may be much — waste of economic energy appears possible 
 in the first years of peace, so that the whole position, as affected 
 by emergency economic measures, requires more detailed 
 analysis than it has yet received. 
 
 In circumstances of crisis, danger or under abnormal con- 
 ditions, "when the work of years is crowded in a single hour^," 
 time appears to be as it were stretched, out, owing probably to 
 the many experiences which are forced into it and the insist- 
 ence with which they press themselves upon the attention. 
 Thus the rush of experiences extends time, as De Quincey has 
 shown^, and a period which seems short when marked on the 
 calendar appears to be very remote. In this way the early 
 days of the war seem already to be far away, and in one sense 
 almost to have become matters of history. For this reason 
 some of the emergency measures are even now almost forgotten, 
 either because they were withdrawn or because people soon 
 became habituated to them and gradually accepted them with- 
 out recalling their original emergency character. These various 
 steps during the first two years and a half of war fall naturally 
 into several distinct groups. First there were provisions 
 which were designed to prevent a crisis on the outbreak of 
 hostilities. It has been hinted that possibly less interference 
 might have sufficed*, but there seems sound wisdom, backed 
 by the teaching of history, in Ricardo's dictum that a crisis 
 is likely when a country emerges from a long peace intd a 
 state of war*, and all the more if the latter comes suddenly. 
 The second group consisted of a variety of measures related 
 to agreements with Trades Unions, whereby the customs of 
 the latter were relaxed in order to facilitate recruiting by intro- 
 ducing labour to replace that diverted to undertake military 
 service. The majority of the agreements between employers 
 and employed are for the duration of the war, though others 
 
 » Dow, Sethona, Act ii. ' De Quincey, Works, 1862, i. p. 259. 
 
 ' Keynes, "War and the Financial System," Economic Journal, xxiv. 
 
 p. 483- 
 
 * Ricardo, Works, 1852, p. 160. 
 
26 "For the Duration of the War" 
 
 are to terminate as the men displaced return and are available 
 for their former work. Closely connected with these are the 
 further developments required for the dilution of labour. 
 Next come all the orders arising directly out of a state of 
 hostilities, most of which, but by no means all of them, may be 
 grouped under the measures against Trading with the Enemy^ 
 and for the Defence of the Realm^. A separate and miscellan- 
 eous class comprises changes in the social and economic system 
 which arose either out of the foregoing acts, proclamations or 
 orders or from the war itself. • Finally in the third year of the 
 war action by the State in relation to the food supply of the 
 country with which the question of transport (particularly by 
 sea) was connected became so important as to constitute a 
 distinct group. 
 
 As has already been shown, military reasons have involved 
 great and widespread interference by the State with the 
 pre-war conditions of trade. The forces consume many more 
 commodities than in previous wars; and thus the schedule of 
 goods, which the Entente Powers by their command of the sea 
 endeavour in their own interest to deny to the enemy, tends to 
 grow longer and longer. Added to this, there is the existence 
 of the blockade of Germany, which is complicated by the transit 
 trade through the adj oining neutral countries. As a consequence, 
 freedom of exporting commodities must be rigorously supervised. 
 It follows that one of the great advantages of our cause, by a 
 curious paradox, results in a limitation of trade which is greater 
 than if we had been weaker. This is a permanent condition 
 as old as strategy and as unchanged as the sea itself. Its effects 
 have been described by Coleridge in a passage of great power, 
 written during the Napoleonic war, which applies almost 
 word for word to the struggle with Germany. "Surely," he 
 wrote during the days of the Continental System, "never 
 from the beginning of the world was such a tribute of admiration 
 paid by one power to another, as Buonaparte within the last 
 few years has paid to the British Empire ! With all the natural 
 
 1 Proclamation Aug. 5, 1914, No. 1252 et seq. 
 ° 4 and 5 Geo. V, c. 29. 
 
"For the Duration of fke War" 27 
 
 and artificial powers of almost the whole of continental Europe, 
 with all the fences and obstacles of all public and private 
 morality broken down before him, with a mighty Empire of 
 fifty millions of men, nearly two thirds of whom speak the same 
 language, and are as it were fused together by the intensest 
 nationality ; with this mighty and swarming Empire, organised 
 in all its parts for war, and forming one huge camp, and himself 
 combining in his own person the two-fold power of monarch 
 and commander-in-chief; with all these advantages, with all 
 these stupendous instruments and inexhaustible resources of 
 offence, this mighty being finds himself imprisoned by the enemy 
 he most hates and would fain despise, insulted by every wave 
 that breaks upon his shores, and condemned to behold his vast 
 flotillas as worthless and idle as the sea weed that rots around 
 their keels^ ! " 
 
 War causes enormous diversion of labour. It was not only 
 for the manning of the long linesiof siege-works which at one 
 period encircled the Central Powers, but also for the supply 
 of the manifold needs of the Navy and the Army that a force 
 behind the fighting front must be mobilised. And this has 
 been effected by action of the State in very large measure. 
 Adam Smith estimated that in his time the civilised States of 
 Europe could not support as soldiers without ruin more than 
 one per cent, of their populations^. The progress of mechanical 
 invention and the accumulation of wealth have made it possible 
 to maintain much greater numbers in the field. Before the 
 present war it was usually taken as a basis of calculation that 
 a continental country could mobilise ten per cent, of its popula- 
 tion. That proportion has certainly been largely exceeded 
 during the present contest, but by how much will not be known 
 until after peace has been made. Up to the present, estimates, 
 believed to be well informed, have placed the percentages 
 reached by some of the belligerents at 16. Whether this high 
 proportion can in Adam Smith's phrase be maintained "without 
 ruin by the country which employs them," is a matter which 
 
 ■ Coleridge, The Friend, Section i. Essay vii. (Ed. 1867, p. 146). 
 ' A. Smith, Wealth of Nations (ed. Caiman), 11. p. 191. 
 
28 "For the Duration of the War" 
 
 only the future can determine. It is however significant that 
 Plutarch puts into the mouth of Hannibal the saying that 
 unless he could bring Fabius Maximus to battle, he must be 
 defeated in the end owing to the superiority of the Romans 
 in men and resources. In view of the great, and perhaps the 
 extreme mobilisations, it is clear that there is an important 
 advantage upon the side of that combination of Powers which 
 is able to keep its forces adequately supplied for the longer 
 period. This fact is an important one, and it has a bearing 
 upon emergency measures which will call for discussion later. 
 
 Diversion of labour involves replacement of labour, but it 
 must be in the right direction. By the third year of war the 
 belligerent countries between them may be calculated to have 
 mobilised between 40 millions and 50 millions of men for naval 
 and military service. To this immense total some addition 
 must be made for the increase in the forces of neutral countries. 
 So far as all these were not professional soldiers and were 
 workers there is a gross loss to the world's production. That 
 however is not a net loss, if it had been the war would soon 
 have ended. The displaced labour is partly replaced by great 
 employment of women, by retired men returning to work, by 
 increased use of machinery, by greater efficiency and finally, 
 in varying degrees, by the setting prisoners of war and subject 
 populations to forced labour. Still emergency labour cannot 
 fill the whole gap in the general production and the shortage' 
 will be unequally distributed between different industries. 
 Those, which supply the technical needs of war, exercise a • 
 paramount demand both for labour and materials ; and, there- 
 fore, the deficiency is felt more severely amongst the remainder. 
 At this stage the facilitating transfer of labour by governmental 
 action became necessary, and almost simultaneously the third 
 year of war brought a new problem. While the production of 
 commodities, with the exception of munitions and goods of a 
 similar character, was decreased, consumption in the United 
 Kingdom of those goods was not proportionately diminished. 
 Then there came the season of 1916-17 during which crops 
 were short. This is a phenomenon which has marked the 
 
"For the Duration of the War" 29 
 
 progress of many previous great wars, almost as if Nature were 
 determined to endeavour to force peace by starving the com- 
 batants. In all probability the effect of an unfavourable 
 season is accentuated by a scarcity of agricultural labour, 
 destruction of food and scarcity of means of transport. Thus 
 several circumstances concurred to induce State action in the 
 directing of labour and the control of food supplies. 
 
 This, however, is only one side of an exceedingly complex 
 problem. In so far as sea-routes are open, the AUied Powers 
 are in the position of being able to employ neutral labour to 
 supplement that of their own people. This supplementing is 
 complete for the period of the war when payment for goods 
 purchased abroad is made by a foreign loan. The process in 
 fact resolves itself into a borrowing of the commodities. But 
 a sounder method is to pay for such goods as it is necessary 
 to import by means of exports, and this again requires the 
 allocation of labour to produce the exports. So it follows that 
 wide and comprehensive regulation by the State both of labour- 
 power and of consumption was considered necessary. 
 
 At this stage of the argument some points of interest, 
 perhaps mainly theoretical, emerge. In so far as the State 
 effects a transfer of labour from any type of production which 
 is judged less necessary in the national interest to another 
 which is more necessary, it may have to face a loss of revenue 
 from the lessened taxable capacity of the transferred labour 
 in its new employment. Suppose for instance that a woman's 
 "beauty doctor," who returned her income from her occupation 
 as £1,000 a year, is diverted to the making of munitions at which 
 she earns only a fraction of the former amount, it is clear that, 
 in the first instance, the State by reason of the transfer will 
 secure less from her both in direct and indirect taxation. But 
 this is not a final result. The phenomenon has an influence 
 on the revenue both forwards and backwards. The remainder 
 of her former income was expended in various ways and will 
 have yielded profits to those who supplied the goods and 
 services which she demanded. Once the "beauty-parlour" is 
 given up, all those who employed her services are left with a 
 
30 "For the Duration of the War" 
 
 surplus income to be expended in other directions (whence 
 the State can derive revenue) or alternatively it may be possible 
 to intercept it directly in the form of taxation. Therefore the 
 apparent loss is largely reduced, but not altogether. In highly 
 specialised employment the immaterial wealth in the acquired 
 skill may be temporarily wasted with resulting loss. But 
 that loss might not be so great as one would anticipate. Thus 
 instead of setting this woman to make munitions, it might be 
 possible, if she had real skill, to employ it in attending to soldiers 
 who had been partially disfigured by wounds. In fact the 
 success of transfer of labour will depend upon the utilisation of 
 any acquired aptitudes in some thing that is specifically war 
 work. 
 
 The transfer of labour to produce goods for export has 
 problems of its own. Suppose, for instance, that it takes the 
 form of exchanging British goods manufactured under con- 
 ditions of Increasing Return for foreign goods which were made 
 under conditions of Diminishing Return. Here the military 
 and the economic problems must be distinguished. It may be 
 granted that the commodities exported have no value for 
 military purposes, while those imported ai;e important from 
 this standpoint. From the economic point of view it might 
 appear that in the exchange we are, in fact, giving more labour 
 for less labour; and therefore, if the goods in question could 
 be supplied in sufficient quantities at home, it would seem to 
 follow that labour could be used to better advantage in the 
 making of them here. But in this case, as so often elsewhere 
 in the study of war conditions, we have to deal with short 
 periods only. Ultimately, in manufacturing industries the 
 labour required for producing machinery has to be taken into 
 account, while in the short war period the machinery is 
 already in existence. Indeed, taking into account the slow 
 but none the less real diversion of demand from luxuries, the 
 tendency would have been for machinery to be left idle, which 
 was formerly employed to meet ' this demand, unless it had 
 been used to supply the export trade. 
 
 The mobilisation of industry under the direction of the 
 
"For the Duration of the War" 31 
 
 Government is ipso facto intended to be for the duration of the 
 war. It will, however, have important after-effects. In the 
 words of Burke "war never leaves where it found a nation." 
 "For the duration," as the soldiers succinctly put it^, may 
 mean much in the determination of the state of industry and 
 social life in the years of peace. How far this will happen 
 will depend upon the spirit in which the present and future 
 changes are effected. It is said that James I called for his 
 old shoes because they were easiest, and many of us fate the 
 upheaval of war with old ways of thinking, because they are 
 easiest, and we have so long been accustomed to them. This is 
 in effect the fatal attempt to live in two worlds of thought at 
 the same time to which the satire of Terence may be applied 
 when he speaks of an attempt to rave rationally^- But there 
 is an extreme upon the other side, which starts from the con- 
 ception of this war as "unparalleled" and "unprecedented," 
 and takes practical measures by making a series of fresh starts, 
 as if mankind had been plunged into a new existence. It is 
 unlikely that this course is the best for the main object of 
 securing a victorious decision in battle, and it would react 
 unfavourably upon the future of industry and commerce. The 
 trained faculty of economic analysis can be applied to the new 
 circumstances, as' to the old, not by using former generalisations, 
 but by an examination of the fresh phenomena with a view 
 to ascertaining their real meaning, that being precisely the 
 element in the situation which is liable to be apprehended 
 wrongly by the casual observer. Further, for a nation which 
 has fought many victorious wars in the past we have strangely 
 ignored the assistance which our history could have given us. 
 
 ^ The following is an extract from a conversation of a war correspondent 
 with a soldier in Mesopotamia. "I was surprised at the loyalty the 
 'sausage' evoked. It was more than professional interest; it amounted 
 
 almost to affection. I asked a private in the L s how he hked his new 
 
 work. 'I wouldn't mind taking on this 'ere job for the duration,' he told 
 me." Times, December 20, 1916. 
 
 2 Nihilo plus agas, 
 
 Quam si des operam, ut cum ratione insanias. 
 
 Eunuchus, Act i. Sc. i. 
 
32 "For the Duration of the War" 
 
 This defect has been urged at the same time by Dr Cunningham 
 as regards Economic History*, and by Count Charles de Souza 
 as regards Military History. The comment of the latter as an 
 unprejudiced outsider, but at the same time an enthusiastic 
 admirer, is particularly interesting. "The British," he writes, 
 "in spite of their love for tradition, have another and a more 
 detrimental tendency than the one above stated; they are 
 prone to disregard the teachings of history*." The "teaching" 
 of history, however, requires to be most carefully interpreted, 
 at least as regards commerce. It is the experience of the past, 
 but at the same time it is often difficult to discern the extent 
 to which it applies to the present. It is always necessary to 
 discover which are the significant events in the two sets of cir- 
 cumstances and afterwards to enquire the extent to which they 
 are similar. It is only then that the lesson, if lesson there be, 
 can be assimilated and perhaps applied in practice. Hence we 
 are not so much concerned with parallels, as with a species of 
 analogical reasoning, resembling to some extent that employed 
 in Bishop Butler's Analogy of Religion, but used in a reverse 
 direction. 
 
 As yet we stand too near epoch-making events to be able 
 to discern their true import, though 
 
 the soul is a roM that abides. 
 But her ears are vexed with the roar aiid her face with the 
 foam of the tides. 
 
 Yet it may perhaps be guessed that, when the historian of the 
 future comes to understalid it all, he will be impressed most 
 with the immensity of the voluntary effort of the country, 
 not only in the undertaking of military service but in vast 
 numbers everywhere doing what they could for the common 
 cause. There is a most remarkable passage in the speech 
 which Mazzini delivered in 1848 upon the death of the brothers 
 Bandiera. It runs "the Angel of Martyrdom and the Angel of 
 
 ' Cunningham, Progress of Capitalism in England, 1916, pp. viii, 
 26, 27. 
 
 * De Souza, Germany in Defeat, Third Phase, 1916, p. 135. 
 
"For the Duration of the War" 33 
 
 Victory are brothers; but the one looks up to heaven, and the 
 other looks down to the earth, and it is only when, from epoch 
 to epoch, their eyes meet between earth and heaven, that 
 creation is embellished with a new life, and a people arises, 
 evangelist and prophet, from the cradle or the tomb." As the 
 Roman soldiers, who had undermined the temple at Veil (which 
 was then besieged) heard the priest proclaiming that " the Gods 
 offer victory to him who shall finish this sacrifice," they seized 
 and carried the entrails to Camillus who completed the rite: 
 so superiority in continuing to sacrifice to the end will be the 
 earnest of final and complete success in the present contest. 
 It has been the greatness and at the same time the intensely 
 concentrated character of the war which made the freewill 
 offering of the people, vast as this was beyond anything pre- 
 viously imagined, not yet sufficient, and compulsion had to be 
 added. There remained some who might have replied to the calls 
 and advice of the Government and of the Food Controller in the 
 words of the song of Hassan of Bassorah in the Arabian Nights : 
 
 Censor of me, leave blame and stint advice! 
 Thou bringest wearying words and wisdom vain. 
 
 It is probable that, even if voluntary sacrifice had been 
 altogether adequate, instead of not quite adequate, the State 
 would have required to exercise functions, unusual to it, in 
 order to organise the services offered. The need for com- 
 pulsory powers made such action inevitable. It is at this 
 point that special care must be taken in regard to the future 
 of industry. The national conscience feels that this war is one 
 for liberty. And to ensure success the individual resigns his 
 personal freedom for the time to the State in order to aid in 
 achieving the common aim. The State thus becomes in a 
 very special sense the trustee of the liberty of the people : 
 
 'Twas a large trust, and must be managed nicely i. 
 
 That trust resembles one of the most solemn acts of a regi- 
 ment before it goes on active service, namely when it places 
 
 1 Otway, The Orphan, Act ii. Sc. i. 
 
34 "For the Duration of the War" 
 
 its flags in the safe keeping of a Church or of that body which it 
 most reveres. In the same way the Government has become 
 the depositary of the liberties of the greater part of the nation. 
 This process will tend to produce consequences which may lead 
 to dangerous economic results. Under a system of State-regu- 
 lation of industry, initiative must be checked. In very many 
 cases the merchant and the worker' cannot employ their respec- 
 tive energies in the manner which seems best to them. Instead 
 of acting as each considers most advantageous, he must proceed 
 under direction from outside, and so there is the danger that 
 habits of dependence may replace those of alert enterprise. In so 
 far as this is a risk, it is one which must be taken in view of the 
 vast issue which is at stake, and it constitutes what might be 
 described as one of the " invisible " sacrifices of the war. Clearly 
 it should be minimised as far as possible by refraining from pledg- 
 ing the future of commercial and industrial freedom to a greater 
 extent than is absolutely unavoidable. But this is not the 
 only possibility. It may be that experience of governmental 
 restraint has set up a counter-tendency, none the less powerful 
 because at present inarticulate. Patriotic men everywhere 
 abstain from criticism and complaint, recognising that there may 
 be important facts connected with the conduct of the war with 
 which they are not acquainted; and, even when their judgment 
 condemns governmental action, they console themselves with 
 the reflection that it is only for the duration of the war. Thus, 
 upon this hypothesis, the declaration of peace will release a 
 strong counter-tendency, which might easily be carried to 
 extremes. On the other side, governmental control tends in 
 itself to establish a species of vested interests, which will press 
 for their continuance. In imagining an extension of State- 
 activity, not much more than that which exists at present, 
 J. S. Mill was of opinion that not "all the freedom of the press 
 and popular constitution of the legislature would make this or 
 any other country free otherwise than in name. And the evil 
 would be greater, the more efficiently and scientifically the ad- 
 ministrative machinery was constructed — the more skilful the 
 arrangements for obtaining the best quaUfied hands and heads 
 
"For the Duration of the War" 35 
 
 with which to work it^." Though Mill's fears may have been 
 extreme, there is more than a substratum of truth in his pessi- 
 mism. What is required at the present time is to refrain from 
 taking action, £is far as is possible, which would, if taken, 
 determine the future. Often there are several ways of effecting 
 a given aim, and it is desirable that, when there is such a choice, 
 the future freedom of initiative should not be curtailed ; while 
 on the other side, in so far as State-action has shown itself 
 beneficial, the way should be left open to use it in limited fields 
 when peace has been secured. 
 
 Grotius points out that serenity of mind in the conduct of 
 war cannot be retained, unless attention is paid to the ultimate 
 attainment of peace^. But peace after this war will differ 
 from the peace before it, and that will have an effect upon the 
 immediate future of commerce, particularly in foreign trade. 
 Much fury has been added to the fire, and the hysteria of hate 
 cannot pass away immediately, "National dislike easily and 
 quickly transfers itself from the field of battle to that of com- 
 merce'." Such passion, as Bacon said long ago in adapting 
 a metaphor of Seneca, is "like ruin which breaks itself upon 
 that on which it falls*." It is unfortunate that the self-destruc- 
 tion of hate is not accomplished at once — it is a slow suicide 
 which only ends after long years. To hope that future trading 
 relations with enemy nations will be amicable for some years 
 to come would be to display an ill-informed optimism. The 
 nation has a right to demand security for the industry of its 
 people, and to see that any resources which are judged vital 
 for its safety are managed by its own subjects, or, at least, are 
 not under foreign control. But an impartial examination of 
 the situation is likely to show that the quantity of industry 
 affected will not be very great. Apart from this, feelings of 
 resentment occasioned by the grievous wrongs which we have 
 suffered may be expected to urge a trade policy which will differ- 
 
 1 J. S. Mill, On Liberty, 1887, p. 65. 
 
 ^ Grotius, De Jure Belli et Pads, xxv. 2. 
 
 ' Clark, Proposed Customs Union of the British Empire, 189S, p. g. 
 
 ' Bacon, Works, 1765, i. p. 522. 
 
 3—2 
 
36 "For the Duration of the War" 
 
 entiate against the products of recently hostile nations. This 
 is only natural, and the impulse will be supported by one type 
 of thought which had become prominent before the war. So 
 far as this spirit prevails, it will mean an aggressive policy in 
 external trade and extensive State-interference with it. At the 
 present stage dogmatism upon one side or the other would be 
 unwise, indeed in the past this whole subject has suffered from 
 dogmatic treatment. We must be prepared to face facts and 
 to deal with them as wisely- as may be. The bias of ill-feeling 
 left by the war will be towards limitation of foreign trade with 
 Germany in particular. It will be impossible to confine differ- 
 entiation; and, in so far as it will be established, it may be 
 likely to extend. Prohibitions, protections, subsidies and 
 guarantees, all result , in directing commerce into channels 
 which are believed to be politically advantageous. If a political 
 advantage cannot be shown, the well-worn free trade arguments, 
 in my judgment, still apply. But the estimation of political ad- 
 vantage will be extraordinarily difficult, for the distinguishing of 
 ' it wiU be distorted by the remaining elements of rancour and 
 bad feeling. As yet we do not know precisely what was the 
 extent and the consequences of the so-called German policy 
 of peaceful penetration. Much Shoiild depend upon what will 
 ultimately have been proved as to its real nature. For some 
 years, until the efficacy of the guarantees of a lasting peace 
 have been tested by time, it would be the height of foUy to 
 run any avoidable risks. Thus the problem contains a large 
 element which is purely political, and all that the economist 
 can do is to point out that temporary conditions will be upon 
 the side of State-interference. Besides the smouldering fires 
 of national resentment, there will be the immediate recollection 
 of the horror of war and the firm conviction that nothing 
 possible will be wanting in national preparedness. Closer 
 relations with our Allies, who rely more upon State-action than 
 we have been in the habit of doing, will also exert an influence, 
 and the probable future partnership of the Dominions will oper- 
 ate in the same direction. The war will have lasted long enough 
 to habituate people's minds to the environment of hostilities, 
 
"For the Duration of the War" 37 
 
 and they will not be able to divest themselves of their whole 
 mental outlook just because peace has been proclaimed. 
 
 War economics are mainly, though not altogether, dominated 
 by the consideration of "short periods." The wider aspects of 
 post-war phenomena will involve the broader vision of the 
 "long period." Here a fundamental condition will be the new 
 exigencies of national defence, particularly in providing for 
 an adequate naval strength. It may be anticipated that 
 this will lead to a much closer collaboration of the Dominions 
 and Possessions both in policy and financial responsibility, 
 while the latter will react upon commerce. One method by 
 which this object might be attained would be the establishment 
 of a Customs Union for the British Empire, and those parts of 
 it which at present derive most of their revenue from import 
 duties could easily adapt themselves to the change. The 
 correlate of a Customs Union would be a freer trade within the 
 Empire; which in process of time might develop into inter- 
 Imperial free trade. Even before the present war Professor 
 Nicholson, who spoke from the free trade standpoint, wrote as 
 follows: "If, then, a Customs Union could be adopted by the 
 British Empire with a provision for the assignment of a certain 
 proportion of the yield for Imperial purposes, especially defence, 
 it would be absurd to object merely on the ground of the diffi- 
 culty of imposing equivalent excises. Internal free trade 
 throughout the Empire, though possible without any Customs 
 Union, would be promoted and strengthened thereby, and the 
 benefits of real commercial union are too great to be cast 
 aside on account of a literal interpretation of free trade, which 
 is as little defensible as the literal interpretation of a scriptural 
 text badly translated from the original^." Such "a Customs 
 Union for the whole British Empire would be the most powerful 
 instrument that ever existed, if it could be used effectively, 
 either for commercial agreements or for retaliation^." This 
 view is based on one of the two "Utopian" schemes of Adam 
 
 ' Nicholson, A Project of Empire, 1909, p. 264. It may be noted that 
 this scheme included other taxes besides Customs duties. 
 * Ibid. p. 265. 
 
38 '■^ For the Duration of the War'' 
 
 Smith^ (the other having been his recommendation of free 
 trade for Great Britain), and I refer to this "golden dream" 
 of an Empire in actuality rather than "in imagination" in 
 order to eliminate the feelings of anger which cannot fail to 
 exist during a war such as this has been and are likely to survive 
 for some years as an aftermath of the struggle. That forecast, 
 it wiU be noticed, is founded, not upon passion, but upon the 
 fundamental needs of defence. From the economic point of 
 view it is reinforced by the prospects of commercial agreements 
 with the Allied nations. Thus, if consolidation of the Empire 
 proceeded by this method, there would be a loss of freedom of 
 external trade in one direction and a gain in another direction. 
 Changes in foreign relations have made great and important 
 additions to the list of the Allied nations, and thus the proportion 
 of our pre-war trade which was carried on with countries now 
 united with us has become much larger since the beginning of 
 the war. This is open to possible commercial agreements in 
 addition to the suggested Imperial Customs Union. But the 
 magnitude of the trade affected will, in all probability, make 
 the framing of such agreements, in the event of the task 
 being attempted, more complex. Much will depend upon the 
 character of the peace which will be secured, namely whether 
 it will be one which will render a continuance of a species of 
 mobilisation of commerce necessary, or, upon the contrary, 
 whether that will not be necessary. In any case, it is probable 
 that, for some time to come, commerce with countries lately 
 hostile will be subject to limitation ; while, upon the hypothesis 
 of a Customs Union and commercial agreements, there would 
 probably be a reduction in trade with the few nations which 
 will remain neutral until the end of the war. Also the obscure, 
 though none the less important, effect upon the shipping in- 
 dustry must not be lost sight of. As yet it is difficult to estimate 
 the balance of economic gain or loss, whether it will incline 
 to one side or to the other. As for the political advantage, 
 it may be the political necessity, that is for the statesman to 
 determine. In the words of the economist, whose work these 
 1 A. Smith, Wealth of Nations (ed. Cannan), 11. p. 419. 
 
"For the Duration of the War" 39 
 
 lectures commemorate, "The legislator is neither chemist, nor 
 physicist, nor physician, nor economist, nor moralist, but all 
 of these in some degree, and something more as well, in the 
 sense that he must gather to a focus the complex calculus of 
 probabilities, the data for which are supplied by the separate 
 investigators 1." More than in the past a well-balanced judg- 
 ment will be required, something which will be sound, sane 
 and impersoijal like the (j)p6vi/j,o<; of Aristotle with at the 
 same time that rare quality of political intuition that divines 
 the future. The latter is to be sharply distinguished from those 
 who frame merely attractive schemes which,' while grandiose in 
 conception, fail when tested by reality. The difference is well 
 expressed in the lines, of Savage : 
 
 Men, wild of brain by heated fancy swayed 
 'Stead of sage judgment; judgment, that of old 
 Has founded, modelled, rendered empires great. 
 And settled standard laws*. 
 
 The future of external trade cannot be developed further 
 until in the next lecture something has been said about the 
 character of the commerce of a maritime power, but there still 
 remains one aspect of freedom of commerce which calls for com- 
 ment. In the discussions of the organisation of trade during 
 the early years of the present century one aspect of the subject 
 received undue prominence. Free trade, from the politician's 
 point of view, meant absence of duties upon British imports: 
 free trade from the economic point of view means the maximum 
 commercial and industrial opportunity both in trade at home 
 and overseas. Production at home can be made much more 
 free. It has been restrained by much inertness, and also by 
 many conventions and customs which are anachronisms in the 
 world of to-day and which, if they were continued, would 
 be serious impediments in the world of to-morrow. Also, it 
 is to be hoped that the period of emergency restraint of 
 trade will not leave any unnecessary survivals when industry 
 
 * W. S. Jevons, The State in Relation to Labour, 1882, p. 29. 
 " Savage, Sir Thomas Overbury, Act 1. 
 
40 " For the Duration of the War " 
 
 has readjusted itself after the war. Great Britain took up 
 arms in defence of liberty, and it would be one of the most tragic 
 ironies of history if we secured political freedom for oppressed 
 nations on the iield and found that freedom of industry had 
 been partly lost at home. Knowledge, application and judg- 
 ment should be effective in securing to the nation the immaterial 
 fruits of its trials; so that the fine spirit of achievement in 
 circumstances of the greatest difficulty and danger may have 
 free play in resuming the material development which was 
 arrested by the war. 
 
COMMUNICATIONS OF A 
 MARITIME STATE 
 
Kept than the sea about in speciall. 
 
 Which of England is the towne wall. 
 
 As though England were likened to a citie, 
 
 And the wall environ were the sea. 
 
 Kepe then the sea that is the wall of England: 
 
 And than is England kept by Goddes hande; 
 
 That as for any thing that is without, 
 
 England were at ease withouten doubt. 
 
 And thus should every lond one with another 
 
 Entercommon, as brother with his brother, 
 
 And Uve togither werreless in unitie. 
 
 Without rancour in very charity. 
 
 In rest and peace, to Christes. great pleasance. 
 
 Without strife, debate and variance. 
 
 Libel of English Policie, exhorting all England to keepe 
 the Sea (written about 1437). 
 
COMMUNICATIONS OF A 
 MARITIME STATE 
 
 During the wars of the French Revolution the aged philo- 
 sopher Kant wrote his essay on a perpetual peace, an ideal 
 which he described as no mere empty dream, but as a problem 
 which, by approximating solution little by little would, at 
 length, accomplish its aim^. It needed no little courage to 
 • enunciate this ideal at the time, and Kant was so conscious 
 of this that he began his treatise by a reference to the place 
 where he had found his title. It was the inscription upon a 
 picture of a cemetery. And he goes oh to say that in the wars 
 which will happen before the coming of that peace which will 
 be unbroken, no combatant should use such barbarous methods 
 as would render mutual confidence impossible at the cessation 
 of hostilities, else the end can be nothing but a mere truce, 
 to be followed by a war of extermination which would indeed 
 establish a perpetual peace — but only in a vast cemetery of the 
 human race. Rather he would aim as his ideal at the precept, 
 "Search first the kingdom of pure practical reason with its 
 justice and this other thing (namely perpetual peace) wiU be 
 added unto you." Of late years it has been the fashion amongst 
 certain classes in Germany to regard Kant's treatise as the 
 result of senility. One recalls Nietzsche's address to the warrior, 
 -"Let your peace be a victory! Say ye that a good cause will 
 hallow even war ? I say unto you a good war halloweth every- 
 thing.... And when your soul waxeth great, it waxeth haughty, 
 and in your exaltation there is wickedness^." The element of 
 
 • First printed in 1795. 
 
 2 Euer Friede sei ein Sieg ! 
 
 Ihr sagt, die gute Sache sei es, die sogar den Krieg heilige ? Ich sage 
 euch: der gute Krieg ist es, der jede Sache heiIigt....Und wenn eure Seele 
 gross wird, so wird sie iibermiithig, und in eurer Erhabenheit ist Bosheit. 
 Also sprach Zarathustra, 1893, p. 63, 
 
44 Communications of a Maritime State 
 
 wickedness in the infliction of avoidable suffering in the conduct 
 of hostilities must appear to us to have been unnecessarily 
 increased by many of the actions of Germany; and, after 
 every possible allowance has been made, it must be admitted 
 that not a few of her actions have put back the customs 
 of humanity in warlike operations by more than five hundred 
 years. Some of these methods may possibly have an effect 
 upon our maritime communications in the near future, and 
 therefore the subject will repay a brief study. 
 
 Invention in the end has been a great benefactor of humanity, 
 but often in its first stages it entails suffering. Nature seems 
 to deliver up her se.crets reluctantly and at the peril of those 
 who try to wrest them from her. The tale of inventors who 
 have been killed or maimed by their discoveries is long, but it 
 is a new and somewhat disquieting feature that the device of 
 the submarine has been directed to taking toll of innocent lives. 
 This is utterly repugnant to the custom of the sea in the building 
 up of which our nation has borne the larger part during almost 
 a thousand years. Thus an old treaty of Edward I maintains 
 the ideal of taking surety and giving safeguards for the wardship 
 of peace, right and equity amongst all manner of peoples 
 frequenting the seas named in the document"^- That tradition 
 has developed till it reached the picture of the perfect seaman 
 given by the poet Spenser : 
 
 Then which none more upright, 
 Ne more sincere in word and deed profest; 
 Moste voide of guile, most free from fowle despight. 
 Doing himselfe and teaching others to doe right^. 
 
 The law of the sea, namely to keep harmless women and 
 children; and, in time of war, merchant sailors also, has been 
 broken with tragic frequency in the undersea campaign of 
 
 * Possibly the original is worth quoting : " De seurt6 prendre & savegarde 
 doner en tous cas que mestier serra, & par ordinance de tous autres faits 
 necessaries a la garde des pees, droiture & equite entre toute manere des 
 gentz taunt d'autre seignurie come leur propre par illeque's passanz." 
 Printed in Mare Clausum, 1635, p. 276. 
 
 - Spenser, The Faerie Queene, iv. 6, xviii. 
 
Communications of a Maritime State 45 
 
 Germany. And one cannot help wondering if Kipling writes 
 a new "Song of the English" will he still sing: 
 
 We must feed our sea for a thousand years. 
 
 For that is our doom gnd pride, 
 As it was when they sailed with the Golden Hind, 
 
 Or the wreck that struck last tide — 
 Or the wreck that lies on the spouting reef 
 
 Where the ghastly blue-Ughts flare. 
 If blood be the price of admiralty. 
 If blood be the price of admiralty. 
 If blood be the price of admiralty. 
 
 Lord God, we ha' bought it fair! 
 
 But is submarine ruthlessness, added to other perils of the 
 sea, a "fair price"? Our whole experience — older than ocean 
 travel and extending over all the oceans of the world — answers 
 that' it is not. There is something humanising in the spirit 
 of wide waters which has, established the convention of saving 
 life at sea, a convention — if it may be so named — which has' 
 become so firmly fixed amongst our seafaring people that it 
 scarcely needs to be spoken. The German submarine policy — 
 however much allowance may be made for the callous irrespon- 
 sibility of nerve-shaken individual commanders — shows an 
 inability to recognise the whole spirit of the customs of the sea, 
 which gives rise to several grave reflections. And these 
 thoughts are serious, not only from the point of view of material 
 damage, but from that of the spiritual principle. Even were 
 the material damage much greater than it has been or is likely 
 to be, that would be of infinitely less importance to a maritime 
 power, such as we are, than the explicit disregard of this 
 fundamental principle. 
 
 As a matter of fact our forefathers suffered and overcame 
 worse things than we are likely to experience, as may be seen from 
 an investigation of the losses of shipping during the Napoleonic 
 wars. That enquiry is not an easy one, for there are unfor- 
 tunately several gaps in the statistics, but sufficient data can 
 be collected to present a general picture of the effect of those 
 struggles on our shipping. Usually the situation is regarded. 
 
46 Communications of a Maritime State 
 
 from its final result which left us with more ships than at the 
 beginning, but the stages by which that result was arrived at 
 are not without a lesson, and perhaps some comforts- 
 It may be premised that in 1792 the number of ships owned 
 by Great Britain, the adjacent islands and the Colonies was 
 16,079, with a tonnage of 1,540,145 or an average of 96 tons 
 per ship^. By 1803 the number of ships had increased to 
 20,893, the tonnage to 2,167,863, giving an average of 104 tons 
 per ship*. It is an interesting and instructive coincidence 
 that in 1913 — after no years — the number of ships belonging 
 to the United Kingdom and registered under the Merchant 
 Shipping Act of 1894 was almost exactly the same, being 
 20,938, while the gross tonnage had increased very greatly 
 giving an average of 932 tons per vessel*. This figure of 
 approximately 21,000, as representing the number of ships 
 of Great Britain and the Colonies in 1803 and the number of 
 ships of the United Kingdom in 1913, is worth remembering, 
 since it affords a convenient basis of comparison of losses at 
 the two periods. 
 
 During the Napoleonic wars the Government of the time, 
 was not communicative concerning British losses of shipping, 
 and the position has been obscured by the record of history 
 having contented itself with the final result, thereby omitting 
 what is important at present, namely the processes by which 
 that result was attained. As is well known, the end of the 
 Napoleonic wars left our mercantile marine stronger than it 
 had been in 1803 or at any previous date. But much had to 
 
 * As far as the existing position is concerned due allowance must be 
 made for the increased importance of shipping, both for military and 
 other vital needs. The final cure for the submarine menace is the technical 
 one of the capture or destruction of hostile undersea craft, but until that 
 is attained with certainty, it is practical wisdom, both from the standpoint 
 of the present and the future, to build at least enough shipping to make 
 good the losses. 
 
 ^ G. Chalmers, A n Estimate of the Comparative Strength of Great Britain, 
 1794. P- 285. 
 
 ' G. R. Porter, Progress of the Nation, 1838, Sections in. and XV. p. 171. 
 
 * Statistical Abstract, 1914, p. 300. 
 
Communications of a Maritime State 47 
 
 be done and suffered before this consummation was reached. 
 It is often supposed that we gained by ships captured from 
 the French; but, as a matter of fact, the balance of captures 
 was very much against us. The French took no less than 
 twelve times as many British ships as we succeeded in seizing 
 French vessels. It is true that many American prizes were 
 secured, but not nearly enough to make good our losses to the 
 French. It is almost paradoxical that naval strength means 
 large shipping losses, since the Power which can keep the sea 
 risks its vessels, as distinguished from the enemy which is 
 compelled to confine much of its' mercantile marine to its ports. 
 Also the usual casualties to ships continued, indeed the per- 
 centage was rather higher owing to the greater risks of ordinary 
 navigation during hostilities. 
 
 For these and other reasons the position of British mercantile 
 shipping during the first fifteen years of the nineteenth century 
 was one of extraordinary interest, and it is necessary to inves- 
 tigate how it happened that, in spite of losses by war and ship- 
 wreck, it increased by the end of the war. The absence of 
 complete records of the state of British shipping makes it 
 desirable to devise a method of estimating the total losses and 
 the means taken to meet them. There are fairly complete 
 returns of the total registered shipping each year and also of the 
 prize ships remaining on the register, while there are particulars 
 of the amount of new construction. Data as to vessels purchased 
 from foreigners or sold to foreigners do not appear to be avail- 
 able. If then we start with the registered tonnage in 1803 and 
 add to that the amount of vessels built up to 1814 and that of 
 prize ships, we should arrive at the total available tonnage at 
 the later date. But we have the tonnage in 1814 ; and, accord- 
 ingly, if that be deducted from the first total, the remainder will 
 represent a fairly close estimate of the shipping lost through all 
 causes during the twelve years. In that period the reduction 
 in tonnage, calculated in this way, was over 40 per cent, or an 
 average of about 4 per cent, per annum^. Indeed it may well 
 
 "• See Appendix for the details. 
 
48 Communications of a Maritime State 
 
 have happened that, during those eventful twelve years, we 
 lost one-half the shipping which we owned at the beginning. 
 Moreover the losses were not evenly distributed. In 1810 they 
 reached the maximum as far as has been recorded, the prizes 
 taken by the French in that year having exceeded the average 
 of the whole period by 50 per cent, and being double that of 
 some years in it. Further, at the beginning the total amount 
 of tonnage actually declined. It was 2,269,000 in 1804, and 
 it had fallen to 2,264,000 tons in 1806. Gradually new con- 
 struction began to make good losses of all kinds, and it was 
 only in this way that the final satisfactory position was reached. 
 This result was not attained at once. At first construction 
 declined. In 1804 it was 70 per cent, of the average of the two 
 previous years, and it fell by successive steps till 1808 when 
 the total was only 42 per cent, of that of 1802-3. Afterwards 
 there Wcis an improvement. By i8ir it was nearly normal, 
 and it became quite normal in 1815. The total amount of new 
 building amounted to more than one-half of all the tonnage of 
 1803, and it is not too much to say that it was the strenuous 
 and unremitting activities of our shipyards which saved the 
 situation. Without such extreme application Great Britain 
 would have emerged from the war with its sjiipping seriously, 
 and even dangerously, depleted. 
 
 After the lapse of a century shipping has become much more 
 important to all maritime countries, and the tragedy of the 
 situation for the whole world, which has arisen through German 
 piracy, is that the destruction, instead of the capture of 
 mercantile vessels, may leave the world's stock of shipping 
 very greatly reduced. The degree of construction will depend 
 upon the extent to which the world's shipyards, as a whole, 
 can repair losses while the war is actually in progress. It is 
 one of the ironies of the position, that Germany, which is 
 responsible for the scarcity by the inhumanity of its submarine 
 and mining operations, is the only Power from which large 
 actual captures of shipping have been made. Up to December, 
 1916, Captain Schroder estimated that i4-i per cent, of its 
 mercantile marine had been taken and was then being used by 
 
Communications of a Maritime State 49 
 
 the Allies, while j-z. per cent, had been sunk^ Thus at that 
 date the German mercantile marine had been decreased by over 
 20 per cent. The year 1917 has at least doubled that loss. The 
 declaration of war by the United States involved the seizure of 
 almost another 20 per cent, of the pre-war tonnage, to which is 
 to be added that taken over by other Powers. It follows that 
 at the end of 1917 Germany had lost close on 50 per cent, of the 
 shipping she owned in 1914. Against these losses is to be set a 
 small quantity of tonnage captured (mainly by the seizure of 
 Allied vessels at the declaration of war) and also the amount 
 of new construction which has been effected in German ship- 
 building yards during the last three and a half years. - 
 
 War is necessarily a transitory condition, but it is inevitable 
 that the present struggle contains the seeds of much which will 
 influence economic development in the future, perhaps even 
 for generations to come. And this will be particularly applicable 
 to shipping. Our conception of the position of Greater Britain 
 and its communications with the rest of the world has remained 
 too long in embryo. It is scarcely yet an explicit thought; 
 indeed, to adopt the terminology of Kant, it is not even a- cate- 
 gory but the mere schematism of a category. Is it possible 
 to give it reality from the economic point of view, when account 
 is taken of possible changes in the near future ? I think that 
 to some extent this may be accomplished, though imperfectly. 
 
 The whole idea of a maritime State differs in its essentials 
 from that of a land Power. The main gate of England does 
 not face the Continent of Europe but is a water gate opening 
 to the Atlantic. Our great concern is not with territory but 
 with ocean routes for trade. The protection of these is the 
 fundamental consideration in the defence of Greater Britain. 
 Thus the oracle the Athenians found so hard to interpret, 
 namely that ships are the only impregnable defence^, still 
 remains true. The maritime State differs from the land Power 
 in so far as the centre of gravity of the latter remains relatively 
 
 1 From the report of Schroder's paper in the Maasbode of Rotterdam, 
 Dec. 29, 1916. 
 
 ^ Herodotus, vii. 141. 
 
 S. 4 
 
50 Communications of a Maritime State 
 
 fixed, whereas that of the former shifts with the ceaseless change 
 of the element from which it derives its whole vitality. 
 
 Communication by sea is the life-nerve of the existence of 
 the British race in its present geographical distribution. It 
 is only in this way that various members of the great family 
 can specialise in the kind of production for which their country 
 fits them by exchanging these with the others and with the 
 rest of the world. The extent to which Great Britain has 
 depended upon imported food is a commonplace, while the 
 Dominions depend no less upon outside markets for the sale 
 of the commodities which they chiefly produce. The main 
 reason that transport by sea has been sought throughout 
 history is its cheapness in comparison with that by land^. Ports 
 are required partly for coaling partly for safety, and a hinterland 
 behind the ports for the industrious population which supplies 
 and consumes the goods which are conveyed by the ocean 
 routes. It appears to be a German gloss upon history that the 
 most bitter and most protracted struggles during more than 
 two thousand years have always raged round coast-lines and 
 harbours^. There is a deeper wisdom in Bacon's remark that 
 "it was not the Romans that spread upon the world, but it 
 was the world that spread upon the Romans: and that was 
 the true way of greatness*." 
 
 What railways and canals are to inland states, secure ocean 
 routes are to Greater Britain and its Possessions. They are 
 the essential arteries by which its life-blood circulates. It 
 follows that shipping may add to the wealth of a land Power, 
 but is not essential to it: whereas to the maritime State it 
 constitutes the necessary link that unites the parts together; 
 as it has been finely said, ships are 
 
 Swift shuttles of an Empire's loom that weave us, main to main. 
 
 The provision of shipping is of special importance to a country 
 whose destiny is upon the sea. It must have an effective 
 
 "■ Mahan, The Influence of Sea-Power upon History, 1660-1783, p. 15. 
 ^ Von Biilow, Imperial Germany (Eng. Trans. 1914), p. 25. 
 ' Bacon, Essays, On Plantations, 
 
Communications of a Maritime State 5 1 
 
 control of the instruments upon which its internal communi- 
 cations depend. Even Adam Smith gave an approval, which 
 was only slightly qualified, to the Navigation Acts, describing 
 them as being "as wise as if they had been dictated by the 
 most deliberate wisdom^." This passage is too often quoted 
 apart from its context and an understanding of what it implies. 
 Adam Smith wrote of these Acts in view of the naval position 
 of Holland in the second half of the seventeenth century, 
 which he thought was then "the only naval power which could 
 endanger the safety of England." Accordingly, the degree of 
 approval which he gives to these measures (and by inference 
 to other restrictions designed for the same object) is conditioned 
 by there being, at the time they are enforced or continued, 
 a foreign naval Power sufficiently great to prejudice the security 
 of Great Britain and the Colonies. In the near future it would 
 appear that it would suffice if British-owned shipping main- 
 tained a somewhat similar proportion to that of the remainder 
 of the world which it occupied in the years before the war. 
 It may indeed be necessary that this proportion should be 
 improved upon, since inter-Imperial communication leaves 
 much to be desired. Strictly speaking that communication, 
 regarded from the economico-political point of view, resembles 
 a coasting trade — it is between two British ports, however 
 widely separated they may be — and there can be no better 
 form of national development than to improve it by judicious 
 measures. Closely connected with this problem is the manning 
 of the ships. Long before the war there was a movement for 
 British sailors in British ships. If this meant what the words 
 imply, namely, the employment of sailors born in Great Britain 
 only, it was too narrow. In 1913 887 per cent, of the total 
 seamen were British subjects, and ii'3 per cent, foreigners, 
 while the percentage of the latter tends on the whole to declines- 
 It would appear that, apart from certain special services, such 
 as that of pilots, the proportion of foreigners gives little ground 
 for anxiety. But, considering the importance of the seaman in 
 
 ' A. Smith, Wealth of Nations (ed. Cannan), i. p. 428. 
 * Statistical Abstract, 1914, p. 303. 
 
52 Communications of a Maritime State 
 
 the organisation of the British States and his essential function 
 in their interconnection, his status should be improved. By 
 the exigencies of ocean voyages, a large part of the seafaring 
 population is debarred from exercising the important function 
 of citizenship in voting for members of Parliament. It is a 
 serious defect that an interest, upon which so much depends, 
 should be able to. record its suffrages only with irregularity. 
 Though some changes in method would be necessary, it should 
 be possible to devise a scheme by which opportunities would 
 be given to the great majority of sailors to record their votes 
 probably upon a special franchise suited to them. The delay 
 which would be involved would not be very greatly in excess 
 of that which occurs in completing an election in the con- 
 stituency of Orkney and Shetland. In particular if the time 
 comes when there will be some representative body for the 
 British Empire, the men who control the essential mechanism 
 which connects the parts should have an opportunity of making 
 their voice heard in the determination of the policy of the 
 whole. 
 
 Adequate shipping requires sufficient naval force for its 
 defence'. Even in time of peace, the seas must be policed, 
 in order to prevent wrong and injury being done. Piracy and 
 slave trading soon show sporadic attempts to recommence, if 
 control is withdrawn. That the seas have become safe for 
 international commerce is a great, but almost unrecognised, 
 work of the navies of the maritime Powers and in a high degree 
 of that of Great Britain. Thus there has grown up what may 
 be called for the sake of brevity the modern custom of the sea; 
 and, in my view, it has been one of the greatest errors of 
 Germany that this has been violated by the inhumanity of her 
 submarine operations and the policy of indiscriminate mine- 
 laying. Unless there can be guarantees against the recurrence 
 of this, it will mean the loss of much progress made in the past 
 towards maintaining safety of life at sea; since, even in time 
 of peace, the implied menace would still remain. The better 
 minds amongst seamen in the modern world have had a deep 
 and almost religious sense of the high purpose of their calling. 
 
Communications of a Maritime State 53 
 
 For instance Camoens makes Vasco da Gama pray in the 
 following terms: 
 
 Be now the saviour God, 
 Safe in thy care, what dangers have we past! 
 And shalt thou leave us, leave us now at last 
 To perish here — our dangers and our toils 
 To spread thy laws'. 
 
 Raleigh concludes his Observations upon the Navy and Sea 
 Service with the words : " for well we know, that God worketh 
 all things here among us mediately by a secondary means, the 
 which means of our defence and safety being shipping and 
 sea forces are to be esteemed as His gifts and then only available 
 and beneficial when He withal vouchsafeth His Grace to use 
 them aright^." In a more concise form one of Nelson's com- 
 manders expressed his ideal to be inflexibly just in order to be 
 effectively humane*. 
 
 Justice and humanity have been the main characteristics 
 of the great seafaring nations, and these must remain the 
 essence of the development of oversea communications. It is 
 these that have made the freedom of the seas and only by these 
 can the freedom of the seas be maintained. And from this 
 there follows that security of sea-borne commerce which mari- 
 time nations require. 
 
 The circumstances of the British peoples, as a maritime 
 State, have involved for the sake of their trade a preponderance 
 in shipping and therefore adequate sea power to protect that 
 shipping. It is for the world to judge whether the law of the 
 sea, by which Great Britain bound herself and which she 
 enforced, is more conducive to civilisation and progress than 
 that which Germany proppses to substitute for it. 
 
 The present war might almost be said to have added a 
 third dimension to hostilities. Prior to the twentieth century 
 
 1 The Lusiad, Book vii. (Mickle's Translation), cf. Roteiro da Viagem fez 
 Dom. Vasco da Gama em 1497, 1838, pp. j., 41. 
 
 ^ Raleigh, Works, 1751, 11. p. 107. 
 
 ' Sir Alexander Ball, Governor of Malta. Coleridge, The Friend, 
 3rd Landing Stage, Essay 3. 
 
54 Communications of a Maritime State 
 
 battles were confined, with a few minor exceptions, to the 
 surface of the earth and of the sea. Now they have been 
 extended from the horizontal to the vertical plane by the 
 new engines of air-craft and submarines. Both have an effect 
 upon communications. As far as the experience of this war 
 has shown, eveh when the submarine has been used as by 
 Germany, it has an effect in the temporary interruption of 
 shipping; but it appears to conform to Mahan's description 
 of the ultimate futility of commerce destroying^, since it has 
 not sufficed to liberate Germany's ocean trade, that having 
 ceased for all practical purposes since the war began. There 
 is the converse side in the relation of air-craft to communications 
 by land. In the latter case it would seem that, in at least one 
 respect, the aeroplane has an advantage over the submarine. 
 It is usual to speak of ocean routes, but, in an open sea, the 
 course from one port to another can be varied, if necessary. 
 A successful attack by a submarine has no effect in impairing 
 the route itself — to bomb the sea is useless — but a successful 
 attack upon land communications has relatively permanent 
 results. Damage to bridges or the permanent way of a railway 
 will require time for repair. Traffic by sea is almost indefinitely 
 flexible. It is like some of the enchantments in old romances, 
 where however the body, which is protected by magic, is 
 wounded the hurts close themselves immediately. But the 
 injury inflicted upon land communications requires time to be 
 repaired, and alternative routes are often fully used already. 
 Thus, on the whole, it may be conjectured that the balance 
 of invention is not unfavourable to the defence of marine 
 transport, and it might even have tended to be favourable if 
 the dictates of humanity in war (which it was believed were 
 firmly established) had been observed. 
 
 These are highly technical points which fall largely, though 
 not altogether, outside the scope of the present discussion. 
 But they have an intimate connection with a related topic 
 without some reference to which the reasoning would be incom- 
 plete. Warfare, as has been shown, has extended into the 
 ' Mahan, The Influence of Sea-Power upon History, 1 660-1 783, p. 329. 
 
Communications of a Maritime State 55 
 
 third dimension. Is it possible that commerce may iiltimately 
 do the same; and, if that should happen, what would, be the 
 effect upon the communications of Greater Britain? This 
 cannot be described as an altogether speculative proposition, 
 since before the war a company had been formed in Germany 
 for the carrying of passengers by air-ships, and during the war 
 a few spectacular voyages were made by cargo-carrying sub- 
 marines between Germany and the United States. 
 
 On the supposition that in the future submarines might be 
 employed to carry cargo to a considerable extent, it seems 
 probable that such a development would not produce any 
 marked effect upon intercommunication between > Great 
 "Britain, the Dominions and Possessions. The submersibles 
 would require ports and loading and unloading facilities not 
 very dissimilar from the present day cargo vessel ; if anything, 
 secure and well-equipped harbours would be more rather than 
 less necessary. Accordingly, the advantage which the British 
 Empire enjoys in its fuel stations would certainly not be 
 diminished; and therefore, if this change came, it would lead 
 to no disturbance in the communications of Greater Britain. As 
 to its probability, apart from some limited special use which 
 might be discovered for submersible craft, they do not appear 
 likely to be of importance in commerce. At present they have 
 an advantage for purposes of war (which may or may not be 
 permanent) in that they can escape detection when occasion 
 requires it. The future course of invention cannot be predicted, 
 but, as far as available information extends, it is evident that 
 in the more immediate future the cost of carrying freight by 
 submersible would be prohibitive. 
 
 It has already been shown that the invention of aerial 
 navigation has given a maritime Power advantages as regards 
 communications over one whose strength is on land. Should 
 air-ships be adapted to commercial purposes, the balance of 
 advantage would be in part reversed. Assuming that passengers 
 are carried, and that foreign Powers would give facilities for 
 landing for the supply of petrol, the advantage of ports would 
 be to some extent neutralised. Access to the sea would no 
 
56 Communications of a Maritime State 
 
 longer be as important as it is at present. Should this 
 development come, it would in all probability apply first to 
 urgent passenger traffic, since a very great saving in time 
 could be effected. This would have an important effect 
 upon the representative and administrative organising of 
 the consolidation of Greater Britain. For purposes of 
 government, distance is measured more by the time consumed 
 in travelling from place to place than by actual mileage, 
 and therefore so great an increase in the speed of transit 
 would bring the Dominions and Possessions nearer to Great 
 Britain, and would remove many difficulties in the smooth 
 working of a representative system. An Imperial Aerial mail 
 might bring the towns of eastern Canada as near London, in 
 terms of time, as the north of Scotland was before the war. 
 Necessarily Other places would be similarly brought closer, 
 but the reduction in the time spent in travel would confer 
 the largest relative advantage on the more distant places to 
 which it was applicable. The conveyance of goods by air as 
 yet belongs to the province of the writer of scientific romances. 
 But who can say with confidence that it is impossible? In any 
 case such a change is not likely to come quickly ; and, even 
 should it take place eventually, much will have happened 
 in the meantime. The distribution of population may have 
 changed as between different parts of the Empire, and some of 
 the Dominions, now called new countries, will be on the way to 
 become old countries. Trade routes would not be greatly 
 changed, though the density with which they were used 
 would possibly be different. Even assuming that considerable 
 freight were diverted from the sea to the air, nothing much 
 would happen beyond the smoothing out of some of the routes 
 in places to make them straighter. Granting that pur ports 
 would be less essential — being now used by that traffic still 
 carried by sea — the geographical dispersion of British territory 
 might be expected to suffice, at least in part and perhaps 
 altogether, to make good the loss of traffic at the existing ports. 
 It would be favourably situated to tap many of the important 
 new routes. Where there was a long stretch of ocean to be 
 
Comtnunications of a Maritime State 57 
 
 traversed conditions would remain much the same, except 
 where the ocean route greatly diverges from a straight line 
 owing to the configuration of the land. On the other side, 
 where there is a sea route and an overland route, it would not 
 follow that the air course would follow the shortest straight line 
 over the land. Possibly the same conditions — ^which account 
 for the irregularities in railway maps, namely the collection 
 of traffic — would compel the new service to descend at those 
 places (or some of them) where goods are at present collected 
 for transportation. 
 
 Looking back over the history of invention during the last 
 quarter of a century, and taking account of the acceleration 
 that may follow this war, many and surprising discoveries may 
 be anticipated. The nature of these cannot of course be fore- 
 casted; but, judging by the possible application of some which 
 have been considered as hypothetical, while there will be gains 
 and losses, there is nothing in what can be guessed concerning 
 future developments, even of a revolutionary character, in 
 communication which need occasion serious anxiety. Rather, 
 given energy and determination, a continuance of success in 
 overseas trade may be expected. 
 
 While these considerations are necessarily highly speculative, 
 no apology need be made for discussing them. The Greeks had 
 a saying that the best prophet was he who guessed rightly^, 
 and peace treaties and reconstruction involve the looking ahead 
 for a period so great that we can do little more than guess. But 
 it is at least something to guess not ignobly, when the future 
 of an Empire is concerned. On the material side in a maritime 
 State such as that which unites Great Britain with the Britons 
 beyond the seas, there are few things more important than 
 shipping, the indispensable mechanism of intercommunication. 
 The nature of that State has given us a place of importance 
 upon the seas; but its greatness, both in peace and war, will 
 depend upon the "inflexible justice" with which it is used. 
 This thought has been the golden thread that runs through the 
 best of our naval history, and it grows as time goes on. It is 
 
58 Communications of a Maritime State 
 
 this which, in the end, will be our most powerful plea at the bar 
 of history, when our case is tried. If, when the full tale is told, 
 it will appear that British sea power made for the progress of 
 civilisation, then as a nation we may claim to have offered 
 soniething, not wholly unworthy, towards the progress of 
 humanity. 
 
 The extent and the limits of this idea present extraordinary 
 practical difficulties when it comes into contact with that of 
 the defence of our commerce and internal communications 
 between the parts of Greater Britain. In time of peace the 
 minimum of restraint is likely, on the whole, to accord most 
 with both ideals. No doubt there are difficulties now and 
 difficulties will remain in the future, but the conception of inter- 
 Imperial voyages as being of the nature of purely internal 
 communications of Greater Britain affords a distinction which 
 may be of practical use. Apart from this, the general conclusion 
 of this enquiry leads to a result similar to that in the previous 
 lecture, namely that, after the necessary provision is made for 
 defence of our commerce, the maximum amount of liberty is 
 in agreement with the principle of justice. It is thus, and as 
 far as can be seen thus only, that we can be effectively humane 
 to all who would use the sea and seek the hospitality of our 
 ports for any legitimate purpose. 
 
THE SURPRISES OF PEACE 
 
Quo teneam vultus mutantem Protea nodo? 
 
 Horace. 
 
THE SURPRISES OF PEACE 
 
 Bacon in one of his Essays speaks of innovations as "the 
 births of time," and it cannot be questioned that the peace 
 which will follow the present upheaval of the nations will con- 
 stitute a new epoch in history. The time of war and trial has 
 been fruitful in surprises, many of which were disagreeable. 
 As far as can be judged from the apparent changes of plan by 
 the military authorities of the chief countries involved in hos- 
 tilities, war produced many situations and problems which had 
 not been anticipated by those who had made it their life-long 
 study. Certainly, in commerce and industry, all those who have 
 studied the changes of the past three years will be candid 
 enough to confess that their expectations have often been 
 falsified by events. Nor is this limitation of the practical 
 judgment a matter to occasion wonder when the circumstances 
 are understood. Rather, the surprising fact has been, not 
 that commercial and financial calculation hsis been so fallible; 
 but, in the unprecedented circumstances, that it was not much 
 more faUible. Experience in business is largely personal, and 
 therefore its more immediate influence is limited to the space 
 of one or two generations. It is true that in the past it has 
 been our fate to take part in many great wars, but it is a matter 
 of doubt to what extent war-time commerce in previous 
 campaigns resembled that which is carried on at present. 
 Even in the last hundred years the mechanism of commerce has 
 been transformed. Not only has the world been drawn closer 
 together, but the ramifications of credit have been enormously 
 extended. Diplomatists talk of world power, but there was the 
 fact of a world commerce in which all the chief producing 
 countries appeared to be inextricably interwoven by reason of 
 mutual dependence and mutual engagements. The comparative 
 
62 Tlie Surprises of Peace 
 
 isolation of the Central Powers was an event which seemed in 
 advance to have been impossible without the rending asunder 
 of the whole fabric of commercial relations. And if the attempt 
 is made to return in imagination to the world as it appeared in 
 1913, it is not remarkable that there were some who held that 
 the intricacy of international commerce would make a long- 
 continued war impossible. Yet our present experience shows 
 that, though there was great dislocation, trade has been able 
 to flow in some of the old channels and even to open up new 
 ones in the attempt to meet the demands of war. In fact the 
 recuperative power of British industry has- been proved by the 
 cour§e of events, as far as it has yet revealed itself, to have been 
 very greatly underestimated. 
 
 Modern commerce finds its supreme expression in the antici- 
 pation of the future. The application of science to industry 
 tends to lengthen the time of production, while on the other 
 side what is produced is usually both greater in volume and 
 more efficient in character. The protraction of that production 
 which seeks a world market makes the forecasting of the demand, 
 which is not yet in existence, a necessity in almost all important 
 industries. The producer must create from within his own 
 mind the vision of those conditions with which he is concerned 
 as they will be, not merely in the future but at a fixed date in 
 that future. It is necessary for him to divine how forces, which 
 he cannot control, will behave, and at the same time he must 
 co-ordinate with these forces other causes the action of which 
 he can direct to a greater or less extent. Stated in this abstract 
 form, the practical problem seems to be one of remarkable 
 difficulty; but, in normal circumstances, it is accomplished 
 with sufficient general precision. The task of the producer 
 is facilitated by the continuity of events, where the changes 
 which happen are regular, and move in certain directions which 
 can be estimated. Many conditions which exert great weight 
 in the ultimate effect remain relatively unchanged; and in 
 normal circumstances, these may be neglected in framing fore- 
 casts. But in the abnormal state of war all this is changed. 
 Not only do new and highly uncertain phenomena emerge with 
 
The Surprises of Peace 63 
 
 disconcerting suddenness, but the causal values of old conditions 
 change. And the function of judging and laying plans for the 
 future is rendered more difficult by the fact that, despite the 
 somewhat vociferous claims of " scientific management," the 
 higher forms of commercial skill have remained essentially an art, 
 and thus the process is largely instinctive, as it is almost in- 
 articulate. Those who are most successful can rarely explain 
 the thought-processes by which their conclusions have been 
 reached, indeed it sometimes happens that their own account 
 of the reasons which have prompted their actions represents not 
 those that in reality determined them, but merely such as chanced 
 to remain in their memory wheh the course of their mental 
 activity came to be reviewed in reflection. There, as in other 
 instances of what is. sometimes called the "creative imagina- 
 tion," the thinker becomes absorbed in that which his mind is 
 fashioning, and the stages of progress towards a final practical 
 result become merged in the actual end to be attained. It 
 follows that this submerged character of much of the planning 
 of practical life makes it exceedingly difficult to incorporate 
 important new conditions in the forecast and at the same time 
 to give due weight to the altered values of those old conditions 
 which survive. In such circumstance?, particularly if hostilities 
 come without warning, the first result is a feeling of conster- 
 nation. What happened in 1793 was described in graphic 
 terms by Sir Francis Baring, the founder of the famous house 
 of Baring Brothers.. "A circumstance," he wrote, "which very 
 materially contributed to produce the distress of 1793 was the 
 sudden, unexpected declaration of war. That dreadful calamity 
 is usually preceded by some indication which enables the 
 commercial community to make preparation. On this occasion 
 the shbrt notice rendered the least degree of general preparation 
 impossible^." But the financiers and traders of the last half 
 of the eighteenth century were far from being unacquainted 
 with war; whereas at the beginning of the twentieth century 
 there had been little experience of any but very minor contests. 
 
 * Tooke rather disputes the effect of the war in contributing to the 
 discredit of the period. History oj Prices, i. p. 177. 
 
64 The Surprises of Peace 
 
 Accordingly, the shock and the disturbance of the summer of 
 1914 were all the greater, and enterprise was at first stunned. 
 
 Gradually and, at first, very tentatively, business began to 
 adapt itself to the new and strange conditions. The very state 
 of hostilities which had dislocated commerce forced it to resume 
 by the insistent demand for naval and military supplies of all 
 kinds. Just because we are living with war-industry around us, 
 and because changes have come gradually, these are liable to 
 escape attention in the midst of the exceedingly grave pre- 
 occupations of the time. One of these characteristics of com- 
 merce in war time is the limitation of prevision. The control 
 of industry in the interests of diplomatic and military exigencies, 
 uncertainties of supplies of materials and difficulties in obtaining 
 labour, the new risks of communications overseas, the fluctua- 
 tions of military' succe.ss in various theatres of war, all unite 
 in making any estimates of the future hazardous in the extreme. 
 Also there are influences which are mainly psychological. The 
 general attitude of the mercantile community in the early 
 months of war had an important influence upon the scale of 
 production during the first stage of hostilities. In the sixteenth 
 and seventeenth centuries there was a prevalent opinion 
 (which was probably erroneous) that commerce prospered 
 during war. Hence there was enterprise and confidence, with 
 the frequent result that the ill-developed credit system of those 
 times was unable to bear the double strain of financing war- 
 expenditure and supporting an active state of industry, with 
 the result that crises ensued^- In 1914 the unexpected 
 declaration of war, the strangeness and the dread of hostilities 
 upon so large a scale and the almost complete absence of data 
 conduced to the contrary consequence, and at the beginning 
 of the present struggle production was severely curtailed. The 
 majority of those directing industry contented themselves at 
 that stage by waiting upon events instead of attempting to 
 anticipate and control them. The great risks of so great a war 
 under modern conditions in its effects upon commerce were felt 
 so strongly that they tended to crush initiative. 
 
 ' Scott, Joint Stock Companies, 1. pp. 464-470. 
 
The Surprises of Peace 65 
 
 The attitude of mind which I have endeavoured to interpret 
 was only a first stage though an important one. Towards the 
 end of 1914, or at least early in 1915, it was succeeded by a new 
 phase. Some of the most serious risks of the first weeks jrfwar 
 (such as a breakdown of credit or a general interruption of 
 ocean trade) seemed to have disappeared. The circulation of 
 money, disbursed by the Government, began to act as a stimulant 
 to trade, and a number of industries became active. Such 
 activity however was not normal. It was confined to a group 
 of trades, such as those contracting for the Governm^t, and 
 later to others which experienced an improved demand through 
 the increase of wages in munition areas. At this time there 
 was a second danger-point, namely the risk of speculation in 
 commodities. Shortage and interruption of supply with rising 
 prices tended towards a disposition to accumulate stocks, but 
 this was checked by the intervention of the State, on the one 
 side by a gradual and growing control of markets and on the other 
 by the institution of excess profits duty. In principle, widespread 
 diversions both of demand and supply have caused temporary 
 monopolies of stocks of certain goods, while .there has also 
 been something of a monopoly in several kinds of skill and 
 specialised ability. In such cases, especially in periods of 
 national crisis, it is desirable that the Government should 
 regulate the supply of stocks and services where war has 
 created unexpected monopolistic advantages for individuals. 
 That regulation again acted as a distinct checbupon the nascent 
 speculative activity. Further, the combined difficulties of 
 obtaining labour and raw materials compelled very many 
 manufacturers to restrict themselves to short views, and they 
 were forced to content themselves with attempting merely 
 "to carry on," rather than to frame large plans for the future. 
 
 External influences co-operated with purely mental qucdities 
 in limiting and restraining anticipations of the future. The 
 chances of war, the fluctuations of campaigns extending over 
 such a wide area, the personal anxieties arising out of the 
 dangers of relatives in the Army, all together exerted an influence 
 upon the faculty of judgment. Nervous strain inevitably, 
 
 s. 5 
 
66 The Surprises of Peace 
 
 though insensibly, checks the inaaginative faculty, at least 
 amongst a northern race. This is not a necessary consequence, 
 sometimes it is found to induce an extreme mental activity in 
 which there is an element of fever and excitement. There is 
 over-stimulation, and the poise of the judgment is impaired. 
 As far as this war has proceede'd there are few signs of the latter 
 characteristic. Generally speaking the broad effect upon 
 commercial forecasts has been to emphasize the need of caution 
 and a disposition to avoid the forming of extensive plans for 
 the largely unknown conditions which will arise after the war. 
 In this attitude of mind there appears to be an element of 
 uncotiscious adaptation to our surroundings at the time. Stress 
 of emotion — and it is only those who are either sub-human or 
 super-human who can view the agony of civilisation without 
 passion — ^inevitably influences the reason and imagination, 
 even to the extent of playing havoc with the measuring of 
 evidence^. Thus, although the inspiration of great events may 
 be missed, it seems on the whole to be wiser to restrict anticipa- 
 tion. Commerce, industry, credit and finance for the time 
 have been made subservient to the military art. It is as if 
 they have been moved to quite a different plane from that 
 upon which they had their being in time of peace. Thus the 
 activity of mind in forecasting the future in the later stages 
 of the war is not so much abnormal as sub-normal. Psycho- 
 logical and external conditions both tend to restrict it. No 
 doubt it chafes against the restraint which it feels is checking 
 its power; but it seems better, for the time, to recognise the 
 limits which war creates, rather than, by ignoring these, to 
 risk a catastrophe by neglecting all those difficulties, whether 
 subjective or objective, which the circumstances of the time 
 impose. 
 
 This analysis is only the starting-point for an approach to 
 the main problem of the present lecture, namely how, with the 
 data at present available, we are to regard the future of com- 
 merce when peace has been re-established. In this discussion 
 there will be involved not only the forecasts of men of affairs, 
 ^ Venn, Logic- of Chance, p. 65. 
 
Thei^ Surprises of Peace 67 
 
 but the interest of the general community. For a nation whose 
 trade was its very existence, there has been in the past a pre- 
 valent lack of attention to the state of industry and commerce. 
 In the present century much thought and effort had been given to 
 schemes of social betterment, and this was laudable. But when 
 war is ended, the rapidity of recovery from its material losses 
 will be very largely conditioned by the extension and success 
 of commerce. Since every citizen will be affected personally 
 by the rate at which that recovery takes place, the underlying 
 condition in the future state of commerce will be of surpassing 
 interest and importance to him. It follows that industrial 
 and commercial conditions in the firs^t years of peace deserve 
 the most careful consideration. But the forecasting of the 
 future is subject to quite exceptional difficulties. In igi6 and 
 up to the spring of 1917 activity of mind in the making of 
 well-judged anticipations may be described as sub-normal, 
 partly for reasons already stated, partly too through other 
 causes. The stress of the times has called many of those, 
 who direct industry, to the performance of other tasks which 
 are designed to aid the national cause, and consequently much 
 thought' and energy must be diverted to these special duties. 
 Also, except perhaps in some of the specifically war industries, 
 the assistance of all the younger men, who filled comparatively 
 responsible positions, has been withdrawn. As a result, 
 almost all the leadership has become concentrated in the hands 
 of the middle aged or of those who are older. Hence something 
 of the buoyancy and hopefulness of youth has been absent ; and 
 it may be doubted if the stimulus of a great national endeavour 
 can wholly make good what is wanting. 
 
 Altogether apart from the subjective side, there are all the 
 uncertainties which arise out of the situation itself. At any 
 time the imagining of the future is difficult. Even in normal 
 times the possibilities of error are great. These have been 
 described in a somewhat different connection by Dr Venn in 
 the following terms: — "Our conviction generally rests upon a 
 sort of chaotic basis composed of an infinite number of infer- 
 ences and analogies of every description, and these moreover 
 
 5—2 
 
68 The Surprises of Peace 
 
 distorted by our state of feeling at the time dimmed by the 
 degree of our recollection of them afterwards, and probably 
 revived from time to time with varying force according to 
 the way in which they happen to combine at the moment. 
 To borrow a striking illustration from Abraham Tucker, the 
 superstructure of our convictions is not so much to be compared 
 to the solid foundations of an ordinary building, as to the 
 piles of the houses of Rotterdam which rest somehow in a deep 
 bed of soft mud. They bear their weight securely enough, 
 but it would not be easy to point out accurately the dependence 
 of the different parts upon one another. Directly we begin to 
 think of the amount of our belief, we have to think of the argu- 
 ments by which it is produced — in fact, these arguments will 
 intrude themselves without our choice. As each in turn 
 flashes through the mind, it modifies the strength of our con- 
 viction ; we are like a person listening to the confused hubbub 
 of a crowd, where there is always something arbitrary in the 
 particular sound which we choose to listen to^." If this be 
 the case in ordinary times how much more difficult is the 
 problem, \yhen, to adapt the metaphor, we do not know whether 
 the upheaval amongst the nations may not have caused the soft 
 mud at the foundation to shift ? Or when there is added to the 
 noise of the crowd the concussion of great guns heard in the 
 distance? There are few who have the power of abstraction 
 and concentration which according to one account is attributed 
 to Archimedes who is said to have been found by a Roman 
 soldier so deeply immersed in a problem that he was not aware 
 that Syracuse had been stormed 2- Rather one notes as more 
 human the tragic note in the postscript of a letter I received 
 from a Belgian colleague during the German advance in 1914 — 
 "as I write," he said, "I hear the guns of the enemy — and they 
 seem to be coming nearer." 
 
 It is clear that estimates of the future are beset with excep- 
 tional pitfalls. Indeed it almost seems that in the special 
 circumstances prediction is useless. Yet there remains a 
 certain sturdy optimism which refuses to be discomfited, and 
 ' Logic of Chance, pp. 66, 67. ' Plutarch, Life of Maycellus. 
 
The Surprises of Peace 69 
 
 anticipations, some of them not well informed, are being 
 ventilated with enthusiasm, and often advanced by vigorous 
 propaganda. It not infrequently happens either that those 
 most acquainted with the circumstances offer no opinion or 
 else, it may be, that two men with apparently equal opportunities 
 of judging reach opposite conclusions as to the future. Thus 
 there is the danger that schemes for reconstruction — to mention 
 only one instance — may be initiated and developed by those 
 who are unable to envisage possible future events in their true 
 perspective: And there may be another danger also. What 
 I have called the sub-normal power of anticipation will not last 
 amongst the business community. When an Allied victory 
 has been secured, the mainspring of hope and enterprise which 
 has been pressed down for so long, will be released, and there 
 wiU be a disposition to expect too much from the peace which 
 will then be inaugurated. For many years, even before the 
 war, Europe had been existing in the uneasy nightmare of 
 excessive armaments. If, as is deeply to be hoped and as may 
 be expected, it seems that the menace of militarism has been 
 dispersed like an evil dream, there will be the beginnings of 
 exceedingly confident expectations of what the future holds for 
 commerce. Then the disposition may be to discount the 
 coming years in too optimistic a spirit. A rebound from 
 caution is always a possibility, with the risk of expecting too 
 much with consequent disappointment. 
 
 It seems then that whether we wish it or not, even now, 
 anticipations of the early years of peace must be made, indeed 
 are being made ; and it will not be out of place to enquire if 
 either economic theory or past experience suggests anything 
 that is likely to be helpful. It is perhaps easier to deal with the 
 mental attitude involved, negatively rather than positively in the 
 first instance. The natural disposition is to begin by framing 
 schemes which are designed to remedy some pressing incon- 
 venience which has impressed the popular imagination. This 
 has always been a common aftermath of war, and it is a necessary 
 element in reconstruction. Closely connected with it is the 
 effort to restore former conditions which had been replaced by 
 
"JO The Surprises of Peace 
 
 less desirable ones during the period of hostilities. Here much 
 will depend upon the method employed. Piecemeal views are 
 strongly to be deprecated. Action in the first case may be 
 unnecessary and even prejudicial, for the phenomena it is 
 designed to remedy may be such as would not in any case 
 survive the end of the period of transition from war to peace. 
 Hence the efforts to remove them are not only largely wasted but 
 they set up new conditions which in their turn lead to further 
 effects. Or, in the second case, it is desirable to ascertain, 
 in the first instance, whether those conditions it is proposed to 
 put in the place of others are the best in the new circumstances. 
 It is far from being obvious that methods which were best in 
 1914 wiU be equally satisfactory in the first year of peace. 
 What appears to be required is a serious attempt to envisage 
 social conditions or commerce, as the case may be, with a wide 
 and comprehensive outlook in order to discern as far as possible 
 what of former practices should be retained and what should be 
 replaced by something new and better. 
 
 Further as a nation we are largely dominated by phrases. 
 What are called principles are often no more than catchwords. 
 They may represent a point of view as long as the circumstances 
 to which they are applied remain fairly stable, though even 
 there the living reality will often be found to have outgrown 
 the formula which expressed it more or less accurately at an 
 earlier stage. But in all those countries over which the tornado 
 of war has passed, the things themselves will in many cases 
 have suffered great changes, and the old principles, which 
 were already little more than catchwords, will no longer apply. 
 It is once more the wasteful effort to pour new wine into the 
 old bottles, when the owner of the latter will probably blame 
 the potency of the liquid and not his own false economy. 
 There is a fable of Julius C. Hare which exactly illustrates this 
 point. "Once upon a time," he tells us, "there was a certain 
 country, in which from local reasons, the land could be divided 
 in no way so conveniently as into four-sided figures. A mathe- 
 matician, having remarked this, ascertained the laws of all 
 such figures, and laid them down fully and accurately. His 
 
The Stirprises of Peace 71 
 
 countrymen learnt to esteem him a philosopher; and his pre- 
 cepts were observed religiously for years. A convulsion of 
 nature at length changed the face and local character of the 
 district: whereupon a skilful surveyor, being employed to lay 
 out some fields afresh, ventured to give one of them five sides. 
 The innovation is talkt of universally, and is half applauded 
 by some younger and bolder members of the community : but 
 a big mouthed and weighty doctor, to set the matter at rest 
 forever, quotes the authority of the above mentioned mathe- 
 matician, that fixer of agricultural positions, and grand landmark 
 of posterity, who has demonstrated to the weakest apprehensions 
 that a field ought never to have more than four sides : and then 
 he proves to the satisfaction of all his hearers, that a pentagon 
 has more^." Here, difficult as it will be, the only safeguard 
 will be a resolute search for the facts and a deliberate and at 
 the same time a fairly expeditious facing of the facts, when 
 discovered. For it is to be remembered that the resumption 
 of civil life in all its manifold activities will not wait on the 
 niceties of economic classification and ratiocination, as it was , 
 carried on in the past. While examination of facts should 
 be thorough, to be of use, it must at the same time be 
 rapid. The task is enormous; and, when it is remembered 
 how difficult the general public found it to face the realities of 
 the situation in the midst of times of crisis during hostilities, 
 not more than a modified success can be anticipated when every- 
 thing seems fair and promising after peace has been concluded. 
 Reliance upon former principles is the resource of one type 
 of mind — that which is commonly called conservative, and which 
 in reality overestimates the importance of continuity. There 
 is the opposed attitude, wjiich seeks and is stimulated by 
 variety. The latter type is liable to overestimate the magnitude 
 of the changes which will have been effected by the war and its 
 consequences. To it all things will seem to be new ; and it will 
 be eager to try new methods. Here again there will be waste 
 of effort, since, implicitly, continuity is denied; and former 
 experience is regarded as so much lumber. But experience 
 1 Guesses at Truth (1873), p. 94. 
 
7 2 The Surprises of Peace 
 
 is valuable, if rightly used — the problem will be to discover 
 how far it is applicable to the new circumstances. In fine, 
 from this point of view, there will be a double problem — on the 
 one side to trace continuity with the past; and, on the other 
 to recognise and to give due weight to the changes which will 
 be inevitable. 
 
 Further it is not to be expected that the war-organisation 
 which has been developed during the last two years can be 
 replaced immediately by the new peace-organisation which will 
 succeed it eventually. Rather, there must be a period of 
 transition. The mere signing of a peace treaty cannot of 
 itself at once recreate the normal mechanism of ordinary 
 industrial life. Demobilisation alone will take time. Also the 
 restoration of the accustomed channels in which commerce 
 was wont to flow, or the discovery of new channels, cannot be 
 effected without some delay. At this stage it will be necessary, 
 though difficult, to believe that it is transitory, not permanent. 
 And yet it will be impossible to wait until the final, normal, 
 industrial life has been re-established. Here the element of time 
 in all practical forecasts is of outstanding importance. It is 
 not only necessary to frame a moderately accurate forecast of 
 conditions that are to come. As has been finely said, the best 
 practical minds "should have ears to hear the distant rustling 
 of the wings of Time. Most people only catch sight of it as it is 
 flying away. When it is overhead, it darkens their view^.'' 
 But more than this, the valuable estimate is not that which 
 will prove right at some time, but which is fulfilled at a time 
 that has been fixed in advance. It must predict what will 
 happen, not in an undetermined future, but in one a certain 
 number of months ahead. 
 
 Calculation where the conditions will be so fluctuating and 
 so uncertain seems to exist only in the form of "a licensed 
 irregularity." Prices, credit, currency, labour and tariffs all 
 together make a kaleidoscope of apparently baffling changes. 
 Yet beneath all the mutabihty there will be a nexus of fixity. 
 Tliis is to be sought less in external conditions than in the 
 ^ Guesses at Truth, p. 416. 
 
The Surprises of Peace 73 
 
 broad facts of human nature. In other words, those things 
 that are connected with immaterial wealth may be expected 
 to be relatively more predictable than other conditions which 
 are more material. Not that the two can be disconnected 
 except in analysis, since, rather, the former is the foundation 
 of the latter. Much has been said and written of the materialism 
 of life in the opening years of the present century, and yet it has 
 been one of the paradoxes of recent months that, "while there 
 never has been a war in which material appliances have been so 
 important, at the same time, it is no less true that there never 
 was one in which immaterial wealth, and even moral ideals, 
 were so supreme^." And some estimate, even if only a tentative 
 one, may be formed of the more probable developments of the 
 immaterial characteristics which wiU influence social and econo- 
 mic changes in the first years of peace. The nation will have 
 been roused from the lethargy into which it had fallen during 
 the long years of commercial success of the Victorian era. It 
 would be idle to believe that the experience of the severe test 
 of war will leave the national character unaffected. Even 
 more, when the epoch-making nature of the contest is kept in 
 view — at once the final overthrow of mediaevalism and the last 
 Crusade — will it be seen to be impossible that there should be 
 any complete return to the pre-war outlook. There is more 
 than a fragment of truth in the saying that "things are what 
 we make them," and the process of fashioning them depends to 
 no small extent upon the spirit in which we undertake the task. 
 We can only discern dimly what it is probable that historians 
 will emphasize, namely the majesty of thoughts and ideas 
 which have mobilised the populations of more than half the 
 world and at the same time have inspired them to face extreme 
 hardships and horrors. How is it possible to imagine that 
 after such an experience, the mental attitude of those who 
 control and carry on commerce and industry will be what it 
 was before? Old ways of thinking will have been changed; 
 and, it may be, will have been transformed. There is a passage 
 of deep significance in which Emerson expresses his conception 
 1 Scott, " On Repairing the Waste of War" in Scientia, July, 1916. 
 
74 The Surprises of Peace 
 
 of the English character. "The slow, deep English mass 
 smoulders with fire, which at last sets all its borders in flame. 
 The wrath of London has a long memory, and, in its hottest 
 heat, a register and rule. Half their strength they put not 
 forth. They are capable of a sublime resolution, and if hereafter 
 the war of races, often predicted and making itself a war of 
 opinions also (a question of despotism and liberty coming from 
 Eastern Europe), should menace civilization, these sea-kings 
 may take once more to their floating castles and find a new 
 home and a second millennium of power in their Colonies^." 
 Civilization has been menaced, but it has been the men of the 
 Dominions who have came in their "sea castles" to aid in saving 
 the liberties of Europe. What is truly striking in Emerson's 
 tribute to the English character (and what is even truer ol 
 British character as a whole), is the amount of strength and 
 force which is held in reserve save in times of crisis. It appears 
 to resemble the secret reserve of some companies which is 
 carefully concealed. It seems that it is impossible to use this 
 hidden strength unless in an extreme emergency. The demands 
 of war have forced the calling out of these reserved powers of 
 character, mind and strength. Indeed it is not too much to 
 say that the exigencies of the struggle have revealed them. 
 When the emergency is over these powers will not sink back 
 at once to their previous quiescence. Once set in motion, their 
 activity will continue, though in all probability at a slowly 
 diminishing rate. Reference has also been made to the antici- 
 pated acceleration of invention and improvements in commercisd 
 methods generally, which, as they come to fruition, will increase 
 the productivity of industry. 
 
 These are all important elements in forecasting the character 
 and dimensions of industry when it is resumed under a peace- 
 organisation, and they are almost entirely favourable. But, 
 at the same time, it must be fully recognised that there are also 
 tendencies implicitly contained in the state of hostilities which 
 may exercise an unfavourable influence, and to that extent would 
 neutralise, and, it might even be, counterbalance those already 
 * English Traits, "Essay on Character." 
 
The Surprises of Peace 75 
 
 described. The quickened mental apprehension which usually 
 follows a great war cannot be confined to the removing of social 
 and industrial functions which have survived their usefulness. 
 It is at once critical and constructive. And the criticism is 
 applied widely. Thus there is at least the danger that methods 
 and institutions may be displaced in favour of others which 
 prove in the end to be not better but worse. And so, while 
 there is gain in the hastening of improvements and reforms 
 which would otherwise have been long delayed; at the same 
 time, there is all the wiasted effort of the failures which result 
 from overdriving the chariot of reform. That there will be 
 such mistakes is inevitable; but, balancing gains against 
 losses, it may be expected with a considerable degree of con- 
 fidence that the final advantage will lie on the side of the former. 
 This shows the remarkable contrast in the consequences of war 
 upon material wealth and immaterial wealth respectively. 
 The amount of positive destruction and the disorganisation of 
 production ipake it probable that the best that can be expected 
 is that, after the re-establishment of normal conditions, the 
 total annual production of goods (that is, what is called " the 
 real national income") will not be less than it was immediately 
 before the war. In other words, all the increase in national 
 wealth which would have taken place, if there had been no war, 
 has been lost. On the other hand, there is at least a chance, 
 indeed it might be said a fair degree of probability, that the 
 growth of immaterial wealth of the kind just described will be 
 accelerated and not checked by the fact that a war has taken 
 place. If this be so, it may be expected that ultimately, 
 though after some delay, this improvement will react in . a 
 favourable manner upon material wealth also. 
 
 It would be idle to ignore the comparatively serious risks 
 of renewed disorganisation of commerce even after peace has 
 been restored. It is exceedingly difficult to form an opinion 
 as to what will be the final effect of the war upon credit. 
 During hostilities confidence and the discounting of the future 
 has been sub-normal. But when peace is in sight there is a 
 possibility of a wave of optimism in business, which wiU demand 
 
76 The Surprises of Peace 
 
 more of the future than the existing conditions will admit. 
 In this case it is possible that credit might be overstrained, 
 and a crisis would result which would be followed by depression. 
 Again, if that danger-point were safely passed, another would 
 be reached a few years after peace had been concluded. At 
 first people may act cautiously and exercise great discretion. 
 Their expectations would be comparatively moderate, and 
 these would be fulfilled. Gradually, as time went on, boldness 
 would succeed caution, and the scale of enterprise would be 
 extended rapidly. But soon there would be cause for alarm, 
 since the scarcity of capital at that stage might easily precipitate 
 a crisis. Much of the employment of capital in the first two 
 or three years after peace must be in uses which will yield a 
 very slow return, such as the building of houses or the making 
 of the more durable instruments of production, as for instance, 
 ships. New capital will be scarce in any case, and much of 
 that which must be first employed after the war, will have 
 brought in very small returns two or three years after peace. 
 But if, at that time, many and extensive schemes have been 
 launched, they will have pledged themselves, in effect, to raise 
 capital which will not be available to the extent required, and 
 this would impose a strain upon credit which it might not be 
 able to bear. 
 
 Another possible cause of a dislocation of industry when 
 the war is over would be the occurrence of widespread and 
 protracted labour disputes. Since the labour position during 
 the war has been far from clear, it is all the more difficult to 
 speak of that which is likely to follow it. At the outbreak of 
 war a number of important wages-disputes appeared to be im- 
 minent. These were dealt with, in the first instance, by the 
 endeavour to postpone discussion during the conduct of hos- 
 tilities. 'The length of time over which the war extended as well 
 as other causes made it appear desirable to attempt to make 
 some readjustments of rates of wages and occasionally of con- 
 ditions of employment while the struggle still continued. Though 
 there have been a number of disquieting incidents, on the whole 
 a considerable degree of success has been attained, and this 
 
The Surprises of Peace ']'] 
 
 suggests a measure of hope for the future. We are perhaps 
 a little too prone to regard friction in the fixing of wages as a 
 phenomenon apart from others which co-exist with it. General 
 conditions, as well as the attitude of mind of employers and 
 employed are exceedingly important. During the war both sides 
 should have begun to learn that there is a patriotism in daily 
 work as well as in other types of national service. The need 
 for this will not cease when the war ends, for larger and more 
 efficient production will be required to help in making good 
 some of the losses. Moreover the sharing in common dangers 
 has united all classes of the community to a much greater 
 extent than had been the case in recent years. To regard 
 serious labour disputes as inevitable is a gloomy prognostication 
 which in effect presupposes a permanent imperfection in the 
 industrial system. Disputes involve colossal economic waste, 
 and it is a question if the nation will be able to afford them. 
 The question of confining causes of disputes and eventually 
 perhaps removing them altogether, is one of the most serious 
 problems with which the industry of the future is faced. 
 Hitherto, perhaps, too much dependence has been placed on 
 the mere mechanism of prevention and too little upon the 
 attitude of the parties to each other. To borrow a metaphor 
 from medicine, preventative rather than curative measures are 
 required. If the chief causes of friction could be first isolated 
 and later rendered innocuous much good would have been 
 accomplished. If the new spirit of harmony and seriousness 
 is rightly directed immediately upon the close of hostilities, 
 the way would at least be prepared for further progress. After 
 the orgy of strife which has devastated some of the fairest lands 
 of Europe, there will follow a time of calm, which should be taken 
 advantage of to the fullest extent in order to establish better 
 relations at home in our industry as well as internationally. 
 The war has given us what social reformers have longed for 
 vainly during the last half-century, namely the opportunity of 
 making a fresh start as far as that is possible. If we fail to 
 take advantage of it, there will be a tragic waste of a chance 
 which occurs only once in several generations. 
 
78 The Surprises of Peace 
 
 Just two hundred years ago Nicholas Rowe — then poet 
 laureate — wrote two odes upon Peace. While his verses leave 
 something to be desired as poetry, there is much in the senti- 
 ments which he expressed that fits the times upon which we may 
 soon hope to enter. 
 
 Our passions, like the seasons, turn; 
 And now we laugh, and now we mourn. 
 Britannia late oppressed with dread. 
 Hung her declining drooping head: 
 A better visage now she wears. 
 And now at once she quits her fears: 
 Strife and war no more she knows. 
 Rebel sons nor foreign foes. 
 . Safe beneath her mighty master 
 In security she sits. 
 Plants her loose foundations faster. 
 And her sorrows past forgets. 
 
 And in his OAe to Peace in 1718 he continues: 
 
 Thou fairest, sweetest daughter of the skies. 
 Indulgent, gentle, life-restoring Peace! 
 With what auspicious beauties dost thou rise. 
 And Britain's new revolving Janus bless! 
 
 Awake the golden lyre 
 
 Ye Heliconian choir! 
 
 Swell every note still higher. 
 
 And melody inspire 
 
 At heaven and earth's desire. 
 
 Hark, how the sounds agree 
 
 With due complacency! 
 
 Sweet Peace! it is all by thee. 
 
 For thou art harmony. 
 
 The hope that the coming peace will bring harmony at 
 home as well as abroad will be an inspiration in the reconsti- 
 tuting of industry after the war. Though dif&cult, it should 
 not prove impossible; rather the very difficulty of the task 
 should be only a spur to our best endeavours. And so one sees 
 the possibility of a more contented and harmonious industry, 
 which may be in itself a portion of the compensation for some 
 of the sacrifices of the nation. 
 
The Surprises of Peace 79 
 
 To sum up, it seems to me that there can be no single 
 forecast of the future of commerce and industry in the first 
 years of the peace. The factors which will determine its state 
 are numerous, and much will depend upon the momentum of 
 each at any given moment. No doubt there will be many 
 surprises, just as there have been during the time of war. But, 
 as regards the general character of trade at that time, these 
 need not be unpleasant ones, provided our expectations are 
 not too great. If the position be faced with courage and tact, 
 it seems that there is little to fear and much to hope. By 
 diverting only a part of the determination, which has been 
 shown on the battlefield, to the arts of peace, very great things 
 can be accomplished. Thus the first need of peace will be to 
 direct the new national spirit to industry and to utilise it to the 
 full. French strategists have a phrase — "the exploiting of a 
 victory" — in the sense of securing the full consequences of a 
 successful operation. The true exploitation of our victory in 
 the world-war will be the securing for the peaceful pursuits of 
 commerce all that is VcJuable in the lessons which our people 
 have been learning during the time of war. 
 
SAVING AND THE STANDARD 
 OF LIFE 
 
Tj x*'p'' ®" iTTrelpciv, aWa jifi SKig t^ BvKaKtf. 
 
SAVING AND THE STANDARD 
 OF LIFE 
 
 The question of saving receivecj much attention during the 
 greater part of the year 1916, and will become more prominent 
 in the concluding stages of the war. It is, or should be, now 
 unnecessary to add another to the many exhortations which 
 were addressed to the attention of a reluctant public. Rather 
 than this it is proposed to attempt to develop some underlying 
 conditions which appear to me to be fundamental in relation both 
 to the present position and also to that which may be expected/to . 
 arise in the years of peace. The latter is particularly important 
 in its possible reactions upon the provision of capital for recon- 
 struction to which attention has already been directed. 
 
 Theoretically, the Government of a country, which is engaged 
 in a war which is vital to its national existence, has the right of 
 demanding the service of all its subjects, and of requisitioning 
 all their wealth. But in regard to the latter there are certain 
 practical difficulties to the obtaining of the whole earnings 
 and liquid wealth of all the people. Naturally the civil 
 population must be allowed to subsist, and the sum for sub- 
 sistence would vary according to the size of the family. Also 
 it would be in the interest of the State that the efficiency of 
 all kinds of workers should be at least maintained and, if possible, 
 even increased, but the amount necessary for efficiency would 
 vary according to the class of work to be done. Again, there are 
 sums available for the service of the State which could never 
 be obtained by the tax-gatherer, but which will be lent to the 
 Government voluntarily upon a sufficient inducement being 
 offered. Thus the abstract theoretical position encounters the 
 practical administrative difficulty, namely that the State 
 
 6—2 
 
84 Saving and the Standard of Life 
 
 requires immense resources to be obtained rapidly and with 
 the least possible diversion of workers from more urgent kinds 
 of national service to act as revenue officials. Accordingly, 
 a method has been adopted which aims at obtaining a large 
 amount by taxation and the remainder by loan. 
 
 During a great war the importance of adequate financial 
 resources cannot possibly be overestimated. Where, as in the 
 case of the Grand Alliance, many nations are fighting together, 
 the resources of which in wealth differ widely, a decisive success 
 will be largely conditioned by the richer nations in the combina- 
 tion being able to supply the needs of those countries whose 
 resources are less developed. The keeping open of trade- 
 routes has enabled the Allies to employ the labour of a very 
 great part of the neutral world in manufacturing for them. 
 But this has involved the payment of the foreign producers, 
 and that again demands that the British Government should 
 have, adequate supplies for this and other purposes. 
 
 The mechanism of war finance is intricate, but its broader 
 aspects can be easily grasped — if only one starts with the right 
 point of view. The national income has been estimated by 
 some statisticians as exceeding £3,000 millions per annum in 
 1916. Owing to the rapid rise in prices this figure is un- 
 certain; but, even if it be accepted as a convenient round 
 number, it has to be remembered that expenditure in 19 17- 
 18 may exceed £'2,']qo millions. With the tendency towards 
 rising prices, it would not be possible to maintain the popula- 
 tion upon the balance of the aggregate income if all war- 
 expenditure had been taken by way of tax and loan; and 
 accordingly it has been necessary to draw upon our accumu- 
 lated wealth by the sale of investments to foreign countries. 
 But there can be little doubt that too great an amount of these 
 has been disposed of, owing to too little having been provided 
 by way of tax and loan, particularly by the former. Foreign 
 investments have been valuable in the past in aiding us in 
 paying for our imports, and in placing us in the position of 
 exporting such goods as we produced at a great relative advan- 
 tage. If we sell too many of our foreign investments in order 
 
Saving- and the Standard of Life 85 
 
 to finance the war, we are in danger of being left at a con- 
 siderable disadvantage in the early years of peace in being 
 compelled to produce exports in order to pay for our imports, 
 which exports may be produced under much less favourable 
 conditions of comparative cost. The fact that much of our 
 present war-expenditure consists of disbursements upon behalf 
 of the Dominions and Allies, for which we shall receive securities 
 later, affords some measure of the extent to which we can afford 
 to sell foreign investments. If those sales do not exceed the 
 amount lent to the Dominions and Allies, the transaction becomes 
 in effect an exchange of external investments, and to that extent, 
 within certain narrow limits, we shall eventually be no better 
 or no worse off. But, if, on the other hand, such sales 
 exceed the sums lent, then pro tanto our position after the war 
 would suffer. And to the degree that this exists, saving has 
 proved deficient; while, if saving had been sufficiently great 
 to leave us a surplus upon what has been described as the 
 exchange of foreign investments, to that extent the arrest of 
 our progress in overseas trade during the war, which may show 
 itself in the first years of peace, would be proportionately 
 counteracted. 
 
 Moreover the situation must be considered in relation to the 
 demand for commodities. The existence of the huge govern- 
 mental demand (which is represented quantitatively by the 
 immense war-expenditure) is in effect the call for goods and 
 services which are required for the efficient prosecution of war. 
 To a large extent this is a new demand. Therefore it is necessary 
 that the command over goods and services, which is represented 
 by income, should be diverted from personal expenditure and 
 transferred to the State. Any civilian demand that is in excess 
 of that required for efficiency is, in effect, the employment of 
 labour for non-essential ends, — and, what is more important, 
 the diversion of commodities and services from the forces to 
 purposes which are useless from the standpoint of the national 
 interest. In view of the necessity of the times, it fallows that, 
 if the patriotism of the country does not suffice to effect the 
 necessary diversion voluntarily, it must be made compulsorily. 
 
86 Saving and the Standard of Life 
 
 more especially since, in the later stages of the war, the supply 
 both of labour and commodities will not suffice for any non- 
 essential consumption. 
 
 The movement towards a great increase in saving has been 
 weakened and distracted by much suppressed recrimination 
 between different classes of the community. Each section of 
 the people sees with lynx-eyed clearness the real or alleged 
 extravagances of another section, while it ignores its own. 
 Neither knows nor cares to know of any new sacrifices the other 
 may have made. What is required is a uniform standard, 
 and then for each person to forget that "after-you" attitude 
 of politeness as regards war-savings, and perform his own part. 
 The standard which the times demand is not difficult to define, 
 however hard it may be to attain it in practice. Like other 
 luxuries, that of idle able-bodied workers of any class must be 
 dispensed with, and a war of the magnitude of this one requires 
 the co-operated efforts of all, whether the work be paid or unpaid. 
 In any estimate of the national strength voluntary labour, 
 whether in the care of the wounded or in other directions which 
 increase the efficiency of the forces, must be included; indeed 
 in the past, and never more than in the present, such public 
 service has been one of the glories of the country. For these 
 and other workers of all kinds the standard of expenditure 
 wliich the circumstances ordain is that which will maintain 
 their respective efficiencies in the duties they are called upon 
 to perform, while all the remainder should be handed over to 
 the State, either in taxation or as a loan. Even if efficiency 
 be interpreted in no narrow sense (since, in order to obtain 
 the best results in invention and ideas, a liberal expenditure 
 upon the worker is necessary) this may seem a hard saying, 
 but in reality it is the course which prudence requires. That a 
 decisive and early victory shall be obtained it is wisest to 
 mobilise our resources for a war of indefinite duration. The 
 Germans and even some of our own unimaginative pessimists 
 have anticipated an early exhaustion of our resources — the 
 former with glee and the latter with a sinking heart. From the 
 beginning of the war I have never doubted that we could 
 
Saving and the Standard of Life 87 
 
 furnish the necessary supplies (provided these are admini- 
 stered with reasonable economy), not only to the longest date 
 to which the war could possibly be protracted but even beyond 
 that date. Statistics show that this can be done and to doubt 
 that it will be done is to assume that the country values money 
 more than life, that men will risk their lives in battle but that 
 they will not draw upon their bank balances. The fact of our 
 financial endurance may be enough from the financial point 
 of view, but it is not enough from that of wider national in- 
 terests. If we so organise ourselves now that it will prove 
 beyond the possibility of doubt that we possess the most ample 
 financial staying power, this will show the enemy that there is 
 no reasonable chance of his being aided towards a decision by 
 our financial exhaustion; and thus peace will be brought 
 nearer, in part by the adequacy of the supplies so placed at 
 the disposal of the Grand Alliance, in part by the frustration 
 of the hopes of their enemies. 
 
 A comparison of the demands of the situation with the 
 actual amount of saving may at first occasion a feeling of keen 
 disappointment in the mind of the superficial observer. The 
 need for conserving our resources for purposes of the war was 
 only recognised slowly and partially. But we have to take 
 our people as we find them, and few of their friends could claim 
 for them that they are exceptionally gifted with imagination. 
 Indeed their general attitude in this respect has been a strong 
 proof of their pacific character, and a pathetic instance to 
 devotion to the old ways of peace. At the beginning of the 
 war it seemed that the peaceful progress of the Victorian era 
 had been dissolved in the battle chaos of Armageddon, and it 
 was little wonder that men and women clung to the ideal of the 
 ordered English home as a small oasis of peace in a world at war. 
 
 It would not be just to charge the nation during the early 
 months of the war with a neglect of its duty and interest. We 
 can see now that the Press and responsible public men were 
 too optimistic. There appears to have been a most ill-judged 
 economy of truth when it was feared it would be unpalatable 
 to the general public. War upon the present scale was a 
 
88 Saving and the Standard of Life 
 
 wholly new experience, and out rulers seem to have misjudged 
 the fortitude of the people. Therefore the historian of the 
 finance of the Great War will be well advised to estimate the 
 financial sacrifices of the nation in 1914 and 1915, not in the 
 light of his own knowledge of the naval and military situation, 
 but in that afforded by the information then available. More- 
 over, the whole drift of the opinion which had been formed 
 upon the basis of these data was in favour of an early peace, 
 and the expenditure was slow in working towards its maximum. 
 Thus all the popular indications failed to emphasize the great 
 need, even then, for the beginning of rigorous personal economy. 
 Every week during which the public.was lulled in a false financial 
 security was creating new difficulties for the future; since, 
 before long, profits and wages in war-industries began to in- 
 crease, and those who received them soon entered upon 
 enlarged scales of expenditure, thus diverting labour from war 
 needs to the production of things which were not necessary. 
 
 It is true that the teaching of history should have warned 
 us that the war must involve a tremendous financial strain, 
 and that it was neglecting one of our great assets not to adjust 
 personal expenditures so as to leave a surplus available towards 
 meeting it as soon as possible. But few find in the past any 
 guida-nce for the present, nor were there any to listen to the 
 warnings of those who pointed out that unproductive consump- 
 tion of wealth in war foreshadowed scarcity in the future. 
 
 For these and other reasons the universal national saving 
 which was needed was slow in starting; and, even at the end 
 of igi6, there were many whose income afforded them a surplus 
 beyond the amount required to maintain their efficiency who 
 had not even begun to save. Still, when one considers the 
 whole situation and while it must be admitted that amongst 
 very large sections of the population saving was very far from 
 being upon an adequate scale, there is this to be said in explana- 
 tion, namely that economy to the extent required would involve 
 something of a revolution in accepted standards of living. For 
 many years past the tendency had been towards raising the 
 standard, and this was a slow process. It was one in which 
 
Saving and the Standard of Life 89 
 
 the community, in the shape of a certain class or a certain 
 street in a suburb, acted upon the individual, and the individual 
 in his turn reacted upon the community, but both influences 
 had been towards an ascending scale growing gradually by 
 successive accretions. Thus the desires which were satisfied 
 in the spending of income had become welded together in a 
 system in what may be described as superimposed strata of 
 which the lower were regarded as relatively solid and fixed. 
 The marginal calculus was applied rather to the upper strata, 
 usually in the choice amongst alternative additions to the 
 previous desires, sometimes in the substitution of a new satis- 
 faction for a previous one which for some reason was abandoned. 
 It follows that the quantity of saving which is requisite under 
 war conditions introduced a new factor which involved a re- 
 vision of the whole system of exp,enditure. The would-be saver 
 would have required to dig down to strata of his desires which 
 he had accepted for long as a fixed part of his life and select 
 some of these which could no longer be satisfied. Further, 
 in the economic life, habit effects a species of incrustation of 
 desire. We have found by sad experience how often the hopes 
 which we cherish in making our purchases deceive us, and the 
 gratification of a new desire is more or less on its trial. We 
 watch it and weigh the result against the expenditure which 
 the gratification of the desire has involved; and if it passes 
 this test, it comes in time to be taken more and more upon 
 trust ; and when the habit is once well established, unless there 
 is a considerable alteration in the amount of the income, this 
 desire is not scrutinised in the estimation of the utilities from 
 our purchases. In this way habit becomes a kind of mental, 
 labour-saving device. 
 
 The progress of economy will have the effect of breaking 
 through the incrustation of former habits of comparatively free 
 spending; and, in time, new habits will be formed which will 
 be based upon a more Spartan regime of life. Pre-war systems 
 of desires were first broken up, and then gradually re-organised. 
 The desire for national security had been satisfied before the 
 war at a comparatively low cost and that too almost uncon- 
 
90 Saving and the Standard of Life 
 
 sciously, since most of the expenditure upon it was taken 
 from individuals by means of taxation which later experience 
 has shown to have been upon a moderate scale. The war has 
 transformed this desire from being unimportant to one of the 
 greatest moment ; and, instead of being only dimly recognised, 
 it has now come most insistently into consciousness. The duty 
 of the citizen is no longer discharged by providing his quota of 
 taxation, but the needs of the time compel him to give his 
 personal service, and in cases where there is a surplus of income 
 after satisfying his immediate necessities to lend liberally to 
 the State. It follows that a radical change— almost a revolution 
 — has been effected in the system of desires. First the income 
 will frequently be reduced by increased taxation. War prices 
 alone would involve very considerable readjustments in the 
 satisfaction of necessary wants. Scarcity of commodities in the 
 later stages of the war, added to a high level of taxation, will 
 force economy. Some things cannot be purchased, while the 
 consumer of others is rationed. Thus old standards of living 
 are no longer possible. The systems of desires have been 
 broken up, and they will only gradually reconstruct themselves 
 upon a new and lower standard. In fact the concomitants of 
 war have acted as a solvent of habits of expenditure for the 
 majority of the nation in a manner which has not been known 
 for centuries. 
 
 This is the inevitable necessity of the psychology of war 
 finance. But a revolution in the systems of desire of a whole 
 nation cannot fail to have noteworthy effects in the future. 
 Voluntarily or involuntarily the war is forcing the formation 
 of habits of economy. From the financial standpoint there is little 
 difference how the result is reached, so long as the resources which 
 are required are in fact obtained ; but from that of the future of 
 commerce and industry the method of economy is of surpassing 
 importance. The conserving of national strength by saving 
 is a conception which does not appeal to the minds of those who 
 have either been brought up in a contempt of niggardliness or 
 who have been nourished on vague but bitter hostility to the 
 abstraction which they term " Capitalism." Upon such weaker 
 
Saving and the Standard of Life 91 
 
 brethren economy has to be enforced either by governmental 
 control of certain commodities, or by prohibition of them or by 
 high taxation of luxuries which in extreme cases may become 
 penal. We have no experience of the manner in which the in- 
 voluntary economy, which measures of this type will enforce, will 
 eventually react upon the standard of life. All that is possible 
 is to reason as to the probable effect from general principles. 
 The first and natural conclusion would no doubt be that the 
 removal of forced economy will promote a reaction and that, 
 when restraint upon purchases of commodities is removed, the 
 tendency will be for the great mass of the public to indemnify 
 themselves for their previous enforced abstinence by making 
 very much larger, if not excessive, purchases. But there are 
 other factors which, though involving several uncertainties at 
 present, tend to limit, if not to counteract, this forecast. It 
 assumes that the system of desires after the war will remain 
 the same as that before it. This is improbable. In the house- 
 hold expenditure of all classes, save the very poorest, there was 
 great waste. The period of scarcity will constitute a time of 
 compulsory training in domestic economy; and, for a time, 
 the fruits of this hard teaching in the school of experience will 
 remain. Then again the standard of life for each class must 
 inevitably be changed, and just as it established itself upon a 
 lower scale with painful slowness, so, when the pressing need 
 for war economy is over, it will move in the reverse direction 
 with considerable deliberateness. Standards of life possess a 
 remarkable inertia and seem incapable of rapid change. Also, 
 if the period of economy is moderately protracted, the force of 
 the formation of new habits must be allowed for. It was this 
 characteristic which delayed the fruits of war saving ; but once 
 the dead weight of habit has been overcome, new habits begin 
 to form in a regime of economy, and these again, once they have 
 become established, tend to persist. For these reasons, it may 
 be inferred that even involuntary economy will have some 
 degree of persistence. Nor is this result in any degree viti4ted 
 by the commonly expressed consolation that sacrifices of the 
 kind described are only "for the duration of the war." This 
 
92 Saving and the Standard of Life 
 
 is one of those devices by which human nature solaces itself 
 when forced to make an abrupt transition which as a rule it 
 detests. There is always a revulsion from the unknown, but 
 when the unknown has become not merely the known but the 
 usual, there is the same disinclination towards change in personal 
 habits. The economies which people first loathed are found 
 after a time to become less distasteful and later they have 
 become entwined with the accepted environment, eventually 
 forming a recognised part of it. 
 
 Where economy is voluntary the case is clearer. In many 
 classes much of the pre-war expenditure was not willed explicitly. 
 It was rather ordained by the conventional standard of life of 
 that class. Not infrequentlj^ the war has revealed that these 
 standards were wasteful in themselves and that the satisfactions 
 they yielded were vastly overrated. Often they were accepted 
 because people had nothing with which to compare them. 
 Now the opportunity has arisen to contrast the old standard 
 with a new and modified one; and, in terms of utility, the 
 comparison has not been found to favour the former. The 
 growth of indolence and the pursuit of enjoyment in recent 
 years have had the effect of causing the neglect of many of the 
 old household economies. It is still not uncommon to see 
 elderly people who in their youth were the younger members 
 of families which had been brought up during the "hungry 
 forties" exercising numerous small economies, such as the 
 making of paper spills to save matches. The continuance of 
 these practices through two whole generations shows the remark- 
 able persistence of habit. In addition to this influence, there 
 are others which will operate in the same direction. During the 
 war the mutability of human affairs has been dramatically im- 
 pressed upon everyone. But, fortunately for us, the increased 
 uncertainty has never been so extreme that it has given grounds 
 for anyone to believe that the Fates were implacably hostile 
 to him. Thus it may be expected that there will be a greater 
 disposition to effect savings in order to provide against the 
 future. Many of the conventions which we inherited from the 
 nineteenth century have been dissolved in the smoke of war. 
 
Saving and the Standard of Life 93 
 
 and it may be anticipated that some of them will return no 
 more. To some extent the- new world of the first years of peace 
 will be. full of surprises and risks, for which it is prudent to 
 provide. And to do this will involve the continuance of the 
 saving habits of the war for a number of years after it is ended. 
 These various lines of thought suggest the general con- 
 clusion that a proportion of specific war saving will continue 
 for some years after peace. If this conclusion be well founded, 
 it affords very considerable help towards the solution of a 
 difficult problem which is otherwise perplexing. It appears 
 that the need for capital, when peace has been made, will be 
 exceedingly great. Modern military operations result in a 
 wholesale destruction of buildings and plant in many regions 
 where serious operations have taken place. In addition, the 
 detestable German method of laying waste the towns, villages 
 and eveii the orchards from which they have been compelled to 
 retreat will involve a very great outlay of capital in restoration. 
 Shipping has suffered, not only by the sinking of vessels by 
 pubmarines, but also through the arduous nature of the service 
 required from such craft as have been used as auxiliaries to 
 the fleet or as transports. Repairs and extensions of buildings 
 and plant have been postponed in many cases. Such new savings, 
 as have been made by belligerent nations during the war, were 
 employed in aiding the financing of their great war-expenditure, 
 and thus none of them has been able to provide capital (as 
 several of them had been in the habit of doing in the past) 
 for the development of new countries which have hitherto been 
 dependent upon nations with great stores of accumulated 
 wealth for the provision of the larger and more costly improve- 
 ments, such as railways, harbour facilities and machinery. 
 Hence these new countries have been compelled to postpone 
 many plans for proposed works which had been approved 
 before the war. Thus, if capital is left free to seek its best 
 market after the peace, these countries will compete keenly 
 for it with the home demand for the prosecution of delayed 
 repairs, and both of these again with what will be an even 
 more urgent need, namely the restoration of the material 
 
94 Saving and the Standard of Life 
 
 destruction of war in the restoring of ruined buildings, the 
 replacing of injured plant and the construction of new shipping 
 to make good the loss of that which has been sunk. It is clear 
 that the proportion of the National Dividend saved before the 
 war in Great Britain would be far from sufficient to meet the 
 claims upon it, more particularly when it is remembered that, 
 unless the desire for accumulation is increased, the higher scale 
 of taxation after the war (which will be necessary to pay 
 interest upon the immense war debt) would tend to diminish 
 the surplus from which savings would be made. Here then we 
 are face to face with one of the vital factors which will aid in 
 determining the rate at which the material losses of the war will 
 be repaired. And delay tends to be cumulative in its pre- 
 judicial effects; since an improvement, postponed through 
 scarcity of capital, bars the way to other subsequent develop- 
 ments which depend upon it. In fact, in this respect, the war 
 has had the effect of intensifying conditions which had already 
 begun to show themselves. For the decade prior to the war 
 capital was becoming less abundant. For this there were two 
 main reasons. After a long period during which there had 
 been no expensive wars, there came within a short space the 
 Chino- Japanese, the Italo-Abyssinian, the Graeco-Turkish, the 
 Russo-Japanese, the South African and both the Balkan wars. 
 Withjn this period also rapid progress was being made in 
 the construction of large works and factories in a number of 
 countries which were far from being in a position to supply 
 their own needs for capital. Hence it is not diflicult to imagine 
 the reasons which have led many observers to predict a famine 
 of capital when the great new demands for it are superimposed 
 upon those which existed in 1914. But reflection should con- 
 vince us that famine is too strong a word to employ to describe 
 the situation which may be expected to arise. To some extent 
 the war generated compensations for its own destruction. Some 
 of the expenditure has gone to provide new factories and plant 
 to increase the output of munitions and other supplies. In so 
 far as these instruments of production can be adapted to the 
 making of commodities which are in demand in time of peace, 
 
Saving and the Standard of Life 95 
 
 to that extent the return of peace will find a number of 
 industries both more fully and more adequately equipped than 
 they were prior to the war. It is true that the distribution of 
 capital in industry during the war has been imperfect when con- 
 sidered in relatioh to the requirements of peace. From that 
 point of view some industries will have too much capital in 
 fixed plant and buildings, and others will have too little. Then 
 in another direction war-expenditure has not been all loss. 
 Neutrals who have been supplying belhgerents with food, 
 munitions and other supplies have increased their trade, and 
 they have been adding to their capital at an increased rate 
 during the progress of hostilities. Hence it follows that one 
 or two which were already lending nations in 1913 will be able 
 to add to their annual exports of capital, if they desire to do so. 
 Others, which had been formerly borrowing nations, will be in 
 a position to supply a larger proportion of their future needs for 
 capital, but it is probable that not many will be transferred from 
 the class of debtor, to that of creditor, countries. ^ 
 
 When all is said it remains true that, if these grounds only 
 be taken into consideration, capital would be exceedingly 
 scarce. Granting that neutrals will be so situated that they 
 will have more to invest and that the war itself will have over- 
 capitalised a few industries, there remain all the needs of making 
 good war's destruction and postponed improvements in the 
 beUigerent countries and of meeting the balance of the demand 
 of new countries. It is in this connection that several of the 
 British Dominions are in danger of being great sufferers. Their 
 exceedingly patriotic contributions of men and money have 
 placed them at a serious disadvantage as contrasted with 
 neutral nations which were in an approximately similar stage 
 of economic development. Therefore, unless the Dominions 
 can obtain capital to overtake a part of the arrears of develop- 
 ment they are liable to find their progress arrested and their 
 relative position as producers to have deteriorated as compared 
 with the Argentine. But it is fortunate that there is a way 
 of escape from this suggestion, not indeed of stagnation but 
 of seriously arrested growth. There remains the possibility of 
 
96 Saving and the Standard of Life 
 
 increased saving being continued for a considerable period after 
 the end of the war. " For the duration of the war " was accepted 
 as a species of Abracadabra which postponed, if it did not solve, 
 all our most pressing difficulties. But no economic difficulty 
 can be placed in cold storage, in the sense that it remains fixed 
 and immobile till it is brought back to the outer air. The 
 insistent call made by the needs of mankind always causes 
 efforts to be put forth to satisfy them, and, if one type of want 
 is suppressed (though this is often difficult), other new wants 
 arise to take its place. Thus when the factors, which had been 
 withdrawn, are restored to the world of industry, it is found 
 to be changed. It follows that there will be few cases in which 
 economic conditions have been postponed for the period of the 
 war where they can be restored in their former environment; 
 while they have been held in abeyance, their former environment 
 has been changing. In the special case of accumulation, war 
 saving has been slowly forcing a revision of standards of life, 
 and experience begins to show that this fundamental revision 
 has revealed prospects of a less complex scale of living. More- 
 over the formation of new habits of saving, once they are well 
 established, will have a tendency to persist. The inertia of 
 social customs is both exceedingly great and protracted. The 
 driving force of the necessities of war was at first — at least in 
 appearance — broken against this powerful resistance. But as 
 the war progressed, gradually, though with painful slowness and 
 with exasperating deliberateness, the mass of habit and custom 
 began slowly to change, and that change itself will become 
 fixed with a marked tendency to persist. J. S. Mill speaks 
 of the phenomenon which I have been describing as an authentic 
 and highly important psychological fact when actions, "which 
 men originally did for a motive of some sort, they continue to 
 do from habit. Sometimes this is done unconsciously, the con- 
 sciousness coming only after the action : at other times with 
 conscious volition, but volition which has become habitual and 
 is put into action by the force of habit, in opposition perhaps 
 to the deliberate preference." Therefore it follows that the 
 economy of war time will become largely habitual; and, even 
 
Saving- and the Standard of Life 97 
 
 though it was begun for a special object with a definite time 
 limit, after the end of the war it may be expected that, for 
 these reasons, saving will be considerably larger than it was 
 immediately before the war. This conclusion affords very con- 
 siderable prospects of an augmentation of the quantity of 
 capital which will be necessary to diminish the industrial and 
 social stagnation which would otherwise have been caused 
 by hostilities. Adequate capital wiU be the cordial which will 
 best revive commerce when it can flourish again in a peaceful 
 world. This prospect holds out hope for the future and a 
 definite exhortation for the immediate present. Saving during 
 war time is trebly advantageous. It possesses the usual benefit 
 of constituting a provision for the saver, it is incumbent upon 
 non-combatants as their aid towards the prosecution of the war 
 and finally, in the manner which I have shown, it will be a 
 material aid in the reconstitution of industry when peace 
 returns. 
 
 s. 
 
ORGANISATION RE-ORIENTATED 
 
 7—0 
 
Ol6v i<TTLV iv ^vm^ivocs TO ne-Xi; toO <ri,iJ.aTos, tovtov ?X" '•*•' ^^O" 
 Suaribai. ra Xoytica, npbs /liav Tiva ifvvipyiav KaT€aK(va,Tii4»a. 
 
 Marcus Aurelius. 
 
ORGANISATION RE-ORIENTATED 
 
 It has been said that the examination which was held 
 formerly for candidates who desired to enter the service of the 
 Chinese Government was the most exhaustive test of the kind 
 in the world. But there is another unperceived examination 
 which is even more thorough. That is the criticism to which 
 our theories will be submitted by posterity. Just as we, in 
 our turn, signalise the shortcomings of our predecessors and 
 sometimes wonder at the conclusions which seemed to stare 
 them in the face but which somehow or other they failed to 
 apprehend; so, in the future, our own analyses and the inter- 
 pretations of the things we experience will be examined similarly 
 — and doubtless with a precisely similar result. That clarity 
 of vision, which the lapse of time gives to most intellectual 
 processes, will have been at work, reveali^g defects of investi- 
 gation and weaknesses in reasoning. Moreover, the simile of an 
 examination suggests an interesting speculation in the treatment 
 of the economic enquiries of a past generation by that which 
 succeeds it. To some extent the examiners, cannot be fully 
 equipped for their task, for they can never have a first-hand 
 acquaintance with the phenomena, concerning the interpretation 
 of which they must act as judges. It is necessary for them to 
 pronounce an opinion mainly from an analysis of what has 
 been written by their predecessors, interpreted by the commen- 
 tary which has been furnished by the progress of events. But 
 the written word is very far from being adequate as the vehicle 
 by which economic meanings are to be expressed. The in- 
 vestigator always sees more in the phenomena than he actually 
 records in what he is able to write about them ; and, not only so, 
 but the meaning his words convey to him will be slightly different 
 
I02 Organisation Re-orientated 
 
 from that gathered from them by his readers. Also, a striking 
 analysis or an attractive theory soon becomes stereotyped in 
 a term or a phrase ; and this natural labour-saving device for 
 the mind usually means a loss of meaning. The naming of 
 theories, almost invariably, involves a sacrifice of the full reality 
 of thought. This is a common experience in many studies. 
 The foundation of a school, too, often means the gradual 
 sterilising of the, richness and completeness of the attitude of 
 mind which initiated the new development. What was at first 
 a living thought becomes conventionalised, and may at last end 
 by being no more than a phrase. And economic studies seem to 
 be peculiarly subject to this defect. The material with which 
 they deal is continually changing, at least in its external form 
 and sometimes, it may be, in many of its more essential charac- 
 teristics. Thus renewed efforts must be made to reduce to 
 scientific rule its somewhat Protean variations ; and, once the 
 first path has been beaten out, each succeeding wayfarer wears 
 something away from it. It is true that a few may add much, 
 they may cut off an occasional corner or smooth down an 
 approach which was at first too steep for comfort and con- 
 venience. But the fact seems to remain that the words, which 
 enable the truth to be revealed, at the same time almost might 
 be imagined to be jealous of t^at revelation, and they in time 
 come to imprison a part of the original living thought which 
 they were designed to perpetuate. And, further, a termino- 
 logy eventually becomes a species of idola fori. As it grows 
 popular, it acquires a species of momentum. It is like a moving 
 stairway upon which one steps without being conscious of its 
 existence and which carries us on when in fact we imagine we 
 are standing still. 
 
 It is needless to say that classification, definitions and ter- 
 minologies are necessary and are exceedingly helpful. But it 
 is advisable, at the same time, to recognise that they have 
 certain minor disadvantages, and a clear statement of these 
 will go some way towards the neutralising of them. To over- 
 come them completely is not possible — that can only be 
 accomplished when, in the fuUness of time, there has been a 
 
Organisation Re-orientated 103 
 
 sufficient interval to provide a verification of the theory or 
 upon the contrary to produce the phenomena which show that 
 the theory was incomplete. 
 
 These general reflections are suggested by what one may 
 imagine those subsequent generations, which wiU examine our 
 work, may say of it. In a dim way, which may be the fore- 
 runner of a new dawn or which again may itself be only a "false 
 dawn," one feels that perhaps in a few directions the economics 
 of the present day may suffer some degree of danger through 
 having being captured by phrases — which are good servants 
 but the worst possible masters. They are like the old family 
 retainer — who is more often met with in fiction than in real 
 life. He makes himself indispensable and one comes to depend 
 upon him more and more, till in the end he dictates rather than 
 serves. In something the same way the word of the phrase, 
 which was once the epitome of an analysis of a group of 
 phenomena, comes to be taken as a formula, and then as a 
 substitute for enquiry. Thus there is the danger of what 
 metaphysicians call the hypostatisation of an abstraction. 
 Further it may happen that the word or phrase which at the 
 beginning was no more than the condensed expression of analysis 
 may come in time to gather to itself accretions of meaning, 
 which involve theory as well as analysis. And the difficulty 
 becomes intensified if, by frequent use, the fine edges of the 
 original meaning will be, as it were, worn away, and the accre- 
 tions of signification differ in different minds, though the precise 
 divergencies may not be formulated. 
 
 It may be wondered if some process of the kind described 
 may not have begun to happen in connection with the term 
 "organisation." It would be difi&cult to discover a recent 
 systematic treatise on the theory of Political Economy which 
 does not mention the "organisation of industry," and since the 
 beginning of the war, we have heard much of organisation in 
 very many connections and the term is used once more to 
 indicate anticipated or desired changes in industry when the 
 war will have been ended. 
 
 All students of economics will have a conception of what 
 
104 Organisation Re-orientated 
 
 « 
 is meant by the organisation of industry. This description 
 
 replaced the older one of "division of labour" and that of still 
 earlier date, namely "system" — though the latter survives 
 in the common title of "a system of Political Economy." 
 The meanings derived from the source whence organisation 
 itself comes have themselves varied. Aristotle mednt something 
 very different from what the modern reader might have expected, 
 when he called his Logic, to "Opyavov. "Organon" to the 
 Greek conveyed, as its root significance, the idea of instrument, 
 just as we continue to speak of church organs, the conception 
 being that of the musical instrument. Thus the original 
 "organisation" would have been — to make a somewhat un- 
 pleasing compound — instrumentalisation, that is to cause 
 anything to serve as an instrument or even as a tool. But, 
 by the time the term was used by economists, the prevalence 
 of the evolutionary doctrine had superadded a distinct meaning, 
 namely the idea of something living, as when we speak of an 
 organism or of organic ; and it was in this sense that the adop- 
 tion of organisation by economists was in effect the announce- 
 ment of a new truth or at least a new point of view, namely the 
 characterisation of specialised industry working for a common 
 end as a special kind of social organism, and it has eilways 
 seemed to me that the organisation of industry was precisely 
 that process by which such an individual organism came into 
 existence. 
 
 At this point, analysis, almost unconsciously, becomes 
 involved in theory. In a sense an industrial organism is a 
 metaphor. It resembles the earlier distinction between natural 
 and artificial bodies, as when "the body politic" was included 
 under the latter heading. The social organism is in reality no 
 more than an analogical expression, and there is no little danger 
 of confusion if we treat it in reasoning as anything more than 
 the intellectual counter which in fact it is. No doubt we can 
 speak of an industrial organism "adapting itself to its environ- 
 ment," of its "developing new functions," of "its possession 
 of rudimentary organs," of its "struggle for existence," and so 
 on. But after all, these expressions are similitudes, not the 
 
Organisation Re-orientated 105 
 
 actual descriptions of the real process. The close contact of 
 Economics with other sciences has often led it to borrow much 
 from them, not only in positive data but in the more subtle 
 way of adopting their point of view. In this case the economist 
 has learnt the language of the evolutionary biologist ; and, in 
 using that language, he is influenced by its theoretical implica- 
 tions. These, from their nature, are adapted to describing the 
 physical rather than the human and mental relationship, and the 
 tendency is to regard industrial processes perhaps a little too 
 much from the outside. We reach an admirable life-history of 
 industrial organisms, but we may not have yet penetrated to 
 the full comprehension of their inner consciousness, simply 
 because the apparatus of investigation does not include the 
 necessary equipment. When we endeavour to conceive an 
 industrial organism in its inner meaning, it wiU be found to 
 contain within itself the idea of its own development. It not 
 only adapts itself to its environment but, even more, it adapts 
 that environment to itself. Accordingly, adaptation involves 
 not so much the fitting of the organism to something external 
 to itself, but to its own self externalised, that is to say, it may 
 modify a previous environment, and the new environment will 
 thus contain the effect of that action. It wiU no longer be 
 wholly alien, but wiU include in it the working of the organism, 
 but separated off from itself. Later that organism may feel 
 a need to adjust itself to its surroundings as now constituted; 
 but, in so acting, it is in reality fitting itself to external things 
 which are not wholly alien, but embody in them a former 
 activity of the organism. 
 
 The industrial organisation, with which the economist is 
 concerned, involves an organiser or organisers whose function 
 it is to provide the plan or scheme and also to see that it works. 
 Into that plan there must be fitted both animate and conscious 
 agents and inanimate things. Either class may be tractable 
 or intractable. They may co-operate in the general plan or 
 they may enter into it only under constraint. The Physiocrats 
 were in the habit of speaking, of Nature working with man, 
 but Nature at that time was rather personified. The truth 
 
io6 Organisation Re-orientated 
 
 seems to be that inanimate forces and things sometimes lend 
 themselves to an industrial scheme and sometimes they do not ; 
 and, in the latter case, they are only made tractable with 
 great difficulty. As a mere speculation the difference in their 
 behaviour might be explained by a theory of monads of varying 
 degrees of affinity to man, or in other ways. In principle, the 
 co-operation of the human agents in a scheme of production 
 should be harmonious, if we postulate that each is free to enter 
 upon it or not, as he pleases. If, on the other hand, they are 
 assigned to their work by forces outside their own control, they 
 may be expected to resist, since their labour wiU tend to become 
 in essence forced labour. Their freedom as human beings has 
 been taken from them and, unless they sink to a merely sentient 
 existence, they will strive to assert it, even if only by chafing 
 against the bonds which they feel are confining them. It is 
 only possible that this resistance should be avoided, if aU were 
 satisfied with the wisdom and beneficence of the power which 
 assigned them to the special task which they were called upon 
 to perform. In the actual world of to-day neither of the two 
 conditions, just described, is fulfilled exactly. The great 
 majority of people are certainly not assigned a definite task 
 upon rigorous conditions cis to the kind of work and the 
 place where it is to be carried on. But, on the other side, 
 freedom is not perfect. It is limited in many directions, 
 sometimes by want of early opportunities, sometimes by the 
 choice made once for all by parents. Hence it often happens 
 that the subordinate human elements in the carrying out of a 
 scheme of production only co-operate imperfectly. The im- 
 perfection of this relationship gives rise to another tendency 
 which is exceedingly interesting from this point of view. There 
 is not only organisation of production but also organisation of 
 labour. The fact is plain, but the idea of it is possibly somewhat 
 perplexing from the evolutionary standpoint. We start with 
 the conception of relatively self-complete, so-called, industrial 
 organisms. But one function of these, namely the labour, 
 sets up an independent organisation of its own. In its initial 
 form this was simple and intelligible, where, for instance, the 
 
■ Organisation Re-orientated 107 
 
 workers in one organism formed an organisation of their own. 
 But under modern conditions we find a great extension, whereby 
 the workers, not only in a whole trade, but also in several 
 trades, form an organisation to protect their interests ; while, 
 at the same time, they continue to discharge their original 
 functions in the productive organisation to which they belong. 
 This development constitutes a species of giddy dance of bio- 
 logical categories. Functions split off from the' primary organ- 
 ism assume new forms and yet remain in their original milieu. 
 And the situation is further complicated by the complementary 
 organisation of yet another set of functions, cutting again 
 across the conception of the productive organism, in so far as 
 employers again organise to resist the pressure of those they 
 employ. When one considers the essentials of the situation 
 it may be conjectured that the conception of industrial organ- 
 isms seems to be on the way to pass into another which 
 may eventually absorb it. May it not be that there will be 
 a development towards a homogeneous organisation of each 
 factor in production which discharges any relatively distinct 
 function — such for instance, as organisation of enterprising 
 ability, waiting, the bearing of risk and so on ? The idea of an 
 extended federation of industries in the same trade and of those 
 in allied trades seems to point in this direction. This would 
 ultimately result, at least in appearance, in a few very large 
 organisations, each fighting for the maintenance of its own 
 function, and that to the apparent detriment of the other 
 functions. The productive organisms would seem to be in 
 process of transformation into distributive organisms. But to 
 continue the biological metaphor, there may not only be an 
 extensive character in organisation, it may become fissiparous ; 
 at a certaih stage, minor functions may break off from the 
 organisation in which they were formerly contained and form 
 a new one of their own. This would be almost inevitable, for 
 it is difficult to see how these monster organisations could be 
 formed and continue without in the end causing a grave restric- 
 tion of the freedom of the members. The latter would be in 
 danger of discovering that they had bartered their liberty for 
 
io8 Organisation Re-orientated 
 
 what turned out to be no more than a mess of pottage in the 
 scheme of distribution. 
 
 Further, unless the nation is to be completely industrialised, 
 the organisations, which have just been discussed, will never 
 contain all the people. Therefore behind them there still remains 
 the State. What is to be its relation to industrial organisation — 
 will the close connection of war-time continue or will there be 
 a reversion to some stage varying between the discontinuity of 
 the middle of the nineteenth century and the somewhat queru- 
 lous attitude of the first decade of the twentieth? In the first 
 period the State aimed at playing the part of an Epicurean god, 
 in the second at being a human providence — and neither with 
 any great success. Centralisation, under a democratic system, 
 means devolution by successive stages ; and war-time experience 
 points to the conclusion that organisation becomes more and 
 more entangled in a labyrinth of committees — the career of 
 which may recall the sharp saying of a writer during the Civil 
 Wars, namely that these bodies are iona feritura?-. 
 
 Nor are these the only possibilities. It is not only a question 
 of the State controlling industry, but also the converse one of 
 industry or of a group of industries exerting an undue influence 
 upon policy. This seems to be a case in which we have been 
 affected, especially since the war, by German methods. It is 
 now believed that the Prussian bureaucracy was successful in 
 directing commerce towards large national ends. This in effect 
 was the neo-mercantilism which flourished during the years of 
 the spiritual decline of Germany. It may be a good maxim 
 "fas est et ab hoste doceri," but, in this respect, our attitude 
 may be judged to be more than a little illogical, since the 
 fundamental cause of conflict has been the different and irre- 
 concilable ideas of living; and, at the core of the German 
 system, which we repudiate, has been the denial of the British 
 conception of personal freedom through a system of over- 
 elaborated organisation. Granted that we are not a logical 
 race, it would probably surpass even our capacity for digesting 
 contradictions to wage a war at an enormous expenditure of 
 ^ C. Walker, Relations and Observations, 1650, p. 14. 
 
Organisation Re- orientated 109 
 
 life and treasure in order to be free to lead our own lives, and 
 then when the struggle was ended to accept voluntarily a great 
 part of that very conception of living against which we had 
 waged war. To do this would be, in the graphic phrase of an 
 old writer, "to fight our liberty into slavery." It is true that 
 nations have done even stranger things than this, but the 
 example is not one which calls for imitation. 
 
 The primary idea of industrial organisation was productive, 
 then it seemed to veer towards a growing emphasis upon 
 distributive conditions and to that it is possible that ends of 
 State-policy may be added. In the biological reference there 
 is implicit something of a teleological reference, and it is not 
 out of place to ask what is the end of industrial elaboration. 
 The simple creed of Adam Smith with its belief in "the invisible 
 hand" solved all difficulties by finding the greatest common 
 good in the free play of that division of labour which we now 
 call organisation. At the moment we think more of the 
 "hidden hand" than of "the invisible hand," showing a shifting 
 of the point of view whence may follow actual action which 
 will have important commercial and social consequences. 
 A yery few years ago most economists, if they had been forced 
 somewhat reluctantly to define the end of organisation, would 
 have found it either in the more efficient production, or possibly 
 in the more equitable distribution, of wealth. But, again, there 
 is the sceptical query how far does organisation in its modern 
 developments affect either end in reality? Attention has 
 already been drawn to the segregation of functions which may 
 be conceived to tend towards an internecine struggle. This, 
 however, is not to be taken without further enquiry as an 
 absolutely disadvantageous state. There are some forms of 
 activity which only reach their maximum effects when they 
 encounter resistance. Accordingly, it may at least be imagined 
 that industrial activity is of such a nature that internal friction, 
 or even strife, is conducive to progress instead of being a 
 restraint upon progress. No doubt to the manager who is 
 fresh from a fruitless discussion with the representative of a 
 Trade Union or to the Labour leader who has recently met an 
 
no Organisation Re-ortentatedi 
 
 intractable employer this may appear a far-fetched and baseless 
 abstraction. Each conscious agent who takes part in the carry- 
 ing out of a scheme of production is apt to consider his function 
 as being the whole or representative of the whole of the process. 
 But when that process is considered in its entirety and each 
 function is relegated to its proper place, it is at least conceivable 
 that a moderate amount of internal friction is stimulative in 
 the end. While that view is maintainable, there are reasons 
 against its final acceptance. Assuming even that a moderate 
 amount of resistance is required to call forth the best activity, 
 that is likely to be found, during as long a period as one need 
 consider, in the resistance which some of the forces of Nature 
 wiU continue to offer to being harnessed to the service of man. 
 The added resistance, arising from defective co-operation and 
 often positive hostility amongst the human factors, represents an 
 unnecessary hindrance which, as it seems to me, must inevitably 
 hinder progress, whether it be conceived over a moderately 
 long period or over a very long one. This is clear as regards 
 the former, but not perhaps altogether as regards the latter. 
 Might it not be argued that, as functions become effete, a certain 
 amount of internal disturbance is required to free the industrial 
 organism of them? It is true that external conditions woul,d 
 serve the same end eventually. Competition means the 
 removal of dying or dead methods. But competition may be 
 conceived as exerting its full force in the world of atomic, 
 industrial organisms, where each was relatively free to survive 
 or perish as the fates, as evolution, ordained. But if the possible 
 trend of organisation, not according to firms but according to 
 industrial functions, be a possibility, it is obvious that competi- 
 tion will be limited. The scale upon which it operates will be 
 immensely enlarged, but its working will be slow and much 
 less ilexible. It would produce not changes but revolutions. 
 Under these circumstances new adjustments in these few large 
 organisms should come by mutual internal adaptations from 
 within, effected not by violence, but by co-operation. 
 
 Then there is the other alternative already outlined, namely 
 that these overgrown organisations will be themselves unstable. 
 
Organisation Re-orientated 1 1 1 
 
 'A 
 
 Should they succeed in establishing themselves, their very 
 magnitude may bear within it the seeds of dissolution. 
 Megalomania appears to have extended from the dream of 
 power and wealth to that of social arrangements. It may 
 well be questioned whether it can develop in such a manner 
 as to include efficiently within it the diversified temperaments 
 and abilities of a people with racial individuality, which again 
 is the germ of initiative. Standardised humanity, which has 
 been the dream of some social idealists, is not only a delusion ; 
 but, if it were possible in this country, it would be that evil 
 form of slavery which conquers the mind by a subtle education 
 begun from the earliest years when the victims — for victims 
 they would be — were unable to resist. 
 
 So far the biological conception of evolution may lead us, 
 but beyond the result becomes an impasse. It may be that 
 at present this is as far as the available information, even when 
 helped liberally by speculation, can extend. But it is at least 
 worth attempting an envisaging of the situation apart from 
 some- entangling implications in the terminology we have been 
 using. It appears that there are two fundamental facts in the 
 situation. One is the framing and working out of a plan which 
 requires to use both human and natural agents. The other 
 is that the human co-operation is not wholly voluntary ; and 
 groups of these agents, while continuing to perform their task 
 in the scheme of production, unite with others, whose interests 
 are similar, and this association may impede the execution of 
 the original plan of production — as for instance in the case of 
 a strike or lock-out. In fact there are two different kinds of 
 relations belonging to the same people and which may be 
 antagonistic, as in the case of Syndicalism. As already hinted, 
 this cutting across lines of economic division may increase 
 further with new kinds of association. And, if the State 
 becomes directly involved, the centre of gravity suffers a 
 radical change. The citizen cannot be dissociated from his 
 economic activities, and still less the economic activities from 
 the citizen. The human industrial unit is held to need the 
 care of the State in some of' his industrial relations, as in the 
 
112 Organisation Re-orientated 
 
 case of the Factory Acts or of Labour Exchanges. During the 
 war experience has shown that all the belligerent States have 
 exerted very large measures of control over industry, commerce 
 and credit. No doubt there have been special reasons which 
 have made this course inevitable or appear to have been in- 
 evitable. It is a usual experience that Governments are slow 
 to relinquish authority which they have assumed even tem- 
 porarily. And what complicates the future position is that 
 this relationship of the State to commerce has at least two sides. 
 On one of these, new limits to individual initiative are imposed. 
 The State lays down new conditions which must be taken into 
 account in the framing of industrial plans. But on the other 
 hand, the intervention of the State is believed by many to in- 
 troduce helps rather than hindrances. There are industries to 
 which its active intervention will bring some advantage. Thus 
 a closer relation of the State to trade would introduce another 
 line of cleavage in industrial association. First it would divide 
 all those interests which believed that they secured advantage 
 by aid from the State in any form from all the remaining 
 interests. But it might be expected that some of the trades 
 and other bodies which thought they would secure benefit from 
 such intervention would find by experience that they procured 
 either only an inconsiderable one or possibly a balance of 
 disadvantage. Hence the non-advantaged interests would be 
 reinforced as time went on. Eventually, though not imme- 
 diately, a reaction might be expected; and, after the tide of 
 State-action in relation to industry had flowed strongly, it 
 would later begin to ebb. It would foUow that in time, though 
 possibly after a considerable time. State-action would diminish. 
 Too much should not be made of the control of industry during 
 the war, because when the circumstances are examined closely, 
 it may fairly be contended that it is not so much the State that 
 has taken over certain industries, as that certain functions of the 
 great public departments have been delegated to representatives 
 of these industries, under certain broad principles mutually agreed 
 upon. It is too soon yet to pronounce upon the consequences, 
 both direct and indirect, but there are disadvantages which 
 
Organisation Re-oinentated 1 1 3 
 
 have already begun to reveal themselves for those who are able 
 to look beneath the surface. Further, the special peculiarity 
 of industry during a period of hostilities must be carefully 
 noted. At a vast number of points it must be subservient to 
 efficiency in the waging of war. Some trades supply the forces, 
 others have to be limited because their ramifications are 
 dangerous, others are checked by a withdrawal of labour to 
 augment the army or by a reduction of raw materials in the 
 interests of national endurance, others again must be encouraged 
 as a means of aiding in the rectifying of the Exchanges. It 
 would seem that aU this would pass away soon after the declara- 
 tion of peace. But that may or may not happen according to 
 circumstances. If it be the general desire to re-establish civil life 
 as soon as possible and as quickly as possible, all the interferences 
 of the State with trade (which have just been described) ought 
 to be abandoned, not indeed suddenly, but with the least delay 
 which is compatible with as easy a transition as can be effected 
 from war-conditions to peace-conditions. That is one alter- 
 native, but there is another. It may be that feelings of 
 hostility against the late enemies will outlast actual war, and 
 at the moment this appears to be not improbable. In that 
 case, commerce will continue to retain some of its war-time 
 organisation. It will be militant not missionary; and, to that 
 extent, it will be directed by political and not by strictly 
 economic aims. It follows necessarily that' in these activities 
 it would be in close relationship with the State. 
 
 In the minds of many this whole question is represented 
 exclusively as one of tariffs. But it is vastly greater than that. 
 The regulation of foreign commerce by means of customs 
 duties is only one aspect — and that not the most important — 
 of the action of the State with regard to commerce. What 
 really is most important is the mental attitude. The former 
 one was individualistic, in so far as each distinct industrial entity 
 endeavoured to do the best it could for itself by its own powers. 
 If it accepts and relies upon State-assistance it must pay the 
 price in a certain sacrifice of initiative on balance. State-aid 
 to some industries may give scope for larger schemes and for 
 
 s. 8 
 
1 1 4 Organisation Re-orientated 
 
 greater projects, but it can only be to the detriment of all the 
 remaining trades in which the tendency will be towards a 
 limitation of enterprise. The fundamental problem will be 
 the extent to which industry will barter its freedom for State- 
 assistance. Curiously enough the answer seems to be deter- 
 mined more by psychological than by purely economic con- 
 siderations. During the last quarter of a century, in spite of 
 almost endless disappointments, there has been a growing 
 disposition to rely upon the State. This seems to be mainly 
 an attitude of mind. It may be in part a reaction against the 
 extreme and almost anarchical individualism of the third 
 quarter of the nineteenth century. Also the administration 
 of public departments has been greatly improved, and it would 
 be illusory to apply much of what early economists wrote about 
 governmental action to that of the present day. Yet behind 
 all this, one seems to discern traces of a certain national fatigue, 
 which is by no means indisposed to cast some of its burdens 
 from its shoulders on the proverbial broad back of the State. 
 Here, more than ever, one longs for some charm that would 
 wrest the secret which the future holds. Will the new national 
 spirit be more energetic and self-reliant than the old? Will it 
 come with a sense of power, and a desire to be self-sufficient? 
 Or again will it discover some means of uniting the general 
 and the individual interest, without the sacrifice of the freedom 
 and initiative of the latter? The causes which will make the 
 eventful decision are! already coming into existence, but as yet 
 it is impossible to detect the character and more particularly 
 the power which each will exert in the final result. 
 
 What then is the conclusion to which the various aspects 
 of the previous discussion lead or is any conclusion possible? 
 Although no single precise answer can be given, certain elements 
 of a statement may perhaps be discovered. In the first place 
 the prevalent idea of industrial organisation seems to miss 
 certain parts of the truth through some of the implications of 
 evolutionary theory. Progress is considered rather from the 
 outside, and the form of statement is better adapted to the 
 biological conception of animate but non-intelligent existences, 
 
Organisation Re-orientated 1 1 5 
 
 than to that of the effort of man with his consciousness, will and 
 reason. Thus we obtain something of a life-history of the in- 
 dustrial system, but we seem to be in danger of failing to find 
 its soul. We are shown a mere process when in fact, as it 
 seems to me, we are faced with a problem. That problem is 
 not mathematical, physical or biological, but at once intellec- 
 tual and emotional. From one point of view it embodies the 
 ceaseless striving of man to express himself in the work of his. 
 mind or of his hands. If he is organised in the old Greek sense 
 of being a mere instrument, used as a tool by another, then so 
 far his daily toil is something that not only neglects but is 
 even alien to his humanity. Thus there is a lack of harmony 
 in the human factors which co-operate only partially in a scheme 
 of production. The problem of the future will be the harmon- 
 ising of this discord. Man is on the way to master inanimate 
 things, but hitherto the failure has been in treating human 
 beings too much like things. Man's place in industry is not 
 to be mastered but to provide free and willing service. Speciali- 
 sation of industry has specialised skill and at the same time it 
 has gone far towards eliminating interest in the actual product 
 of any large scheme of production. In this respect the master- 
 craftsman of the Middle Ages had a marked advantage over 
 the artisan of to-day. The armourer, the mason or the silver- 
 smith hot only took a pride in his work, but he marked it with 
 his sign. Individuality of skill has been lost in the complexity 
 of mass-production. Thus the problem will be to complete 
 speciaHsation by giving it a soul. Our industrial organism is 
 as yet barely half alive, to reach its full development it must 
 devise means of securing the harmonious co-operation of the 
 full mental and physical energies of all the specialised human 
 functions in production. As it is Man stands against Nature 
 with the better half of his powers unused, because he is divided 
 against himself. 
 
 And so one sees the vision of what the work of the world might 
 be. Industrial production at present has no common mind, only 
 hands. It has yet "to find itself" in the sense of discovering 
 it is not a mere process but something much more than that. 
 
1 1 6 Organisation Re-orientated 
 
 In order to reach its full development, it must succeed in awaken- 
 ing a general consciousness with a common will. Each worker 
 requires to contribute his own special skill and at the same time 
 to recognise it as a part of the whole which he thereby aids in 
 producing. As Man in industry becomes reconciled to himself, 
 it will be possible for him to advance to a degree of control 
 over Nature which will be much greater than that of the present. 
 Thus there is a possibility of external things becoming in some 
 dim future not merely tractable but even malleable to the mind 
 and the will of man. 
 
 This, it may be said, is economic Idealism. And one ventures 
 to say why not? Is it not a mean view of economic study to 
 confine it to classifying and analysing phenomena, without 
 endeavouring to see where its generalisations appear to be tend- 
 ing? The physical scientist points out where the things with 
 which his special study is concerned are either not used or not 
 used ,to the best advantage. May not the economist try to 
 show how in our present system much of human power is simply 
 waste material? According to most of the thinking that has 
 long been prevalent this may seem to be a reversal of the 
 economic point of vievsf and to be almost revolutionary. But 
 if the conclusions be well founded, and if it is recognised that 
 there is a great problem confronting our whole industrial life, 
 we should be more than half-way towards the solution. In 
 few cases is the saying of Hesiod that the beginning is half 
 the whole, more true'^ ; and, like other practical problems, the 
 solution may prove easier than the mere recognition that 
 there was a problem for which a solution was required. When 
 the time comes and that solution has been discovered, the next 
 generation may recognise it as a new industrial revolution, 
 greater than that of the eighteenth century, for it will transform 
 the relation of rnen to men not that of men to machines. And 
 perhaps when some economic historian comes to write about it 
 all at a Ikter date, he will often pause to wonder why it was so 
 long before it was noticed that so great a need existed. 
 
APPENDIX 
 
 8-3 
 
APPENDIX 
 
 STATISTICS OF SHIPPING DURING WAR, WITH 
 LOSSES AND THE AMOUNT OF SHIPBUILDING 
 
 I. Number of Ships, Great Britain and Colonies, 
 1792, 1803, 1913. 
 
 Average tons 
 Numbers Tonnage per ship 
 
 1792 16,079 1,5.10,145 96 
 
 1803 20,893 2,167,863 104 
 
 net gross 
 
 1913! 20,938 12,119,891 19,604,900 932 
 
 II. Losses of Shipping, 1803 to 1814^. 
 
 Tons 
 Tonnage of Ships, 1803 ... ... ... ... 2,167,863 
 
 Ships built, 1803 to 1814' 1,089,067 
 
 Increase in Prize ships remaining on the Register* 205,674 
 
 3,462,604 
 Tonnage of Ships in 18 1 4 ... ; 2,616,965 
 
 Losses and Deductions 1803-1814* ... ... 845,639 
 
 ' United Kingdom only. 
 
 ^ State Papers, Admiralty Records, Secretary's Department, Misc. 
 354-357 ; Treasurer's Ledger, Greenwich Hospital ; High Court of , 
 Admiralty, Misc. 491, 492 ; Chalmers, Comparative Strength of Great Britain ; 
 Colquhoun, Treatise on Wealth, Power and Resources of the British Empire ; 
 Porter, Progress of the Nation (1838); Hansard, 1814-1815; Danson, Our 
 Next War ; Norman, The Corsairs of France. 
 
 ' The Records of the Custom House for 1812 and 1813 were destroyed 
 by fire, and the shipbuilding for those years has been taken at the average 
 of 181 1 and 1814. 
 
 * This form of statement (which is the only one possible in the circum- 
 stances) underestimates the losses, since prize ships lost, retaken by the 
 French or destroyed are not counted. Also, if there was an excess of ships 
 purchased over ships sold, the amount of that excess would swell the losses. 
 
 ' For the reasons stated in the previous note this figure is to be taken 
 as a minimum one. 
 
1 20 Appendix 
 
 III. Frizes taken from the French and by the French 1803-1814, 
 and records of shipbuilding in the United Kingdom and 
 
 the Colonies. 
 
 
 
 
 
 
 
 Ships built in Great 
 
 
 
 
 Britain and 
 
 in the 
 
 
 French ships 
 
 British ships 
 
 Colonies 
 
 
 taken by the 
 British 
 
 taken by the 
 French 
 
 
 
 
 Number 
 
 Tonnage 
 
 1803 
 
 33 
 
 222 
 
 1407 
 
 135.692 
 
 1804 
 
 53 
 
 387 
 
 991 
 
 95.979 
 
 1805 
 
 39 
 
 507 
 
 1001 
 
 89,584 
 
 1806 
 
 33 
 
 519 
 
 772 
 
 69,198 
 
 1807 
 
 33 
 
 559 
 
 770 
 
 68,000 
 
 1808 
 
 49 
 
 469 
 
 568 
 
 57.140 
 
 1809 
 
 28 
 
 571 
 
 596 
 
 61,396 
 
 1810 
 
 67 
 
 619 
 
 685 
 
 84,891 
 
 1811 
 
 37 
 
 470 
 
 870 
 
 115.638 
 
 1812 
 
 34 
 
 475 
 
 867I 
 
 106,800^ 
 
 1813 
 
 18 
 
 371 
 
 867I 
 
 io6,86oi 
 
 1814 
 
 16 
 
 145 
 
 864 
 
 97.949 
 
 IV. Ships prosecuted as Prize from 1803 to 1807. 
 
 A little further light upon the shipping position can be obtained 
 from a return to Parliament entitled a "Paper presented to the 
 House of Commons respecting Ships prosecuted as Prize during the 
 late War and the Present^." This return only records the name of 
 the vessel and that of its commander. The majority of these were 
 neutrals. There is much duplication. Apparently the same ship 
 reappears several times in the list, and in a number of cases mention 
 is made of a vessel being prosecuted on its second and even its third 
 capture. Some small war-ships are included, and it appears there 
 may have been English craft charged with trading with the enemy'. 
 Of the total prosecuted, there are no particulars as to how many 
 were actually condemned as prizes. The following are the totals 
 of the ships prosecuted: 
 
 1803 468 
 
 1804 289 
 
 1805 485 
 * 1806 840 
 
 1807 869 
 
 2,951 
 It will be seen from the previous appendix that tliis total was not 
 greatly in excess of the ships seized and actually condemned by the 
 French in the same period. 
 
 ^ Estimated. ^ Accounts and Papers, 1808, ix. 173. 
 
 * The Lord Nelson, prosecuted in 1807, was hkely to have been an 
 English ship. 
 
INDEX 
 
 Archimedes 68 
 Aristotle 39 
 
 Bacon 35, 50, 60 
 
 Ball, Sir Alex. 53 
 
 Baring, Sir F. 63 
 
 Barrfes, M. 8 
 
 Belief, basis of 67, 68 
 
 Berkley, Commander 4 
 
 Business management, as an art 
 
 61, 63 
 Butler, Bishop 32 
 
 Chalmers, G. 17, 18 
 Clark, A. B. 35 
 Classification 102 
 Coleridge 26 
 Crises 25, 63, 64, 76 
 Cunningham, W. 32 
 Customs Union of British Empire 
 37 
 
 Defence of the Realm Act 3, 11, 26 
 Desires and habit 89 
 de Souza, Count C. 32 
 Diminishing Return 30 
 
 Economic chivalry 7 
 
 endurance 15 
 
 Idealism n6 
 
 life 14 
 
 "Economic mai^" the 4, 5 
 Edgeworth, F. Y. 6 
 Efficiency 17, 18, 39 
 Emergency measures 11, 23-5, 
 
 65, 112 
 Emerson 74 
 Extravagance 86, 87 
 
 Finance of war 84, 83 
 Food Controller 33 
 Forecasting the future 62 
 Freedom of industry 13, i6, 40 
 
 Governmental interference 13, 23, 
 24. 28, 33, 34, 36, 65, 112, 113 
 Green, T. H.. 7 
 Grotius 35 
 
 Hare, Julius C. 70-72 
 Historical method 32 
 
 Idola fori 102 
 Immaterial wealth 75 
 Increasing return 30 
 
 Jevons, W. S. 39 
 
 Kant 43 
 Keynes, J. M. 23 
 
 Labour, displacement 28 
 
 disputes 76, 77 
 
 freedom of 40 
 
 replacement 28 
 
 Libel of English Policie 42 
 Lowe, J. 18 
 
 Macaulay 16 
 
 Mahan 50, 54 
 
 Marshall, A. g, 7 
 
 Mazzini 32 
 
 Mill, J. S. 4, 5, 34, 35. 96 
 
 More, Sir T. 17 
 
 Napoleonic wars 18, 26, 44, 46 
 National security 89 
 
122 
 
 Index 
 
 Navigation Acts 51 
 Nicholson, J. S. 37 
 Nietzsche 43 
 
 Organisation, analysed 103-111 
 
 Pareto 5 
 
 Peace and aflermath of war 35-37 
 
 — disorganisation of in- 
 
 dustry 75 
 — emergency measures 23 
 
 — immaterial wealth 75 
 
 — improvements 19 
 
 — "long periods" 37 
 
 — reconstruction 69 
 
 its surprises 61 
 
 perpetual 43 
 
 Peaceful penetration 36 
 Physiocrats 105 
 Pigou, A. C. 4 
 Plutarch 28, 68 
 Production 17, 39 
 Psychology of saving 89, go 
 
 • war finance 90 
 
 Raleigh, Sir W. 
 Ricardo 6, 25 
 Rowe, Nicholas 
 Ruskin 4 
 
 II. 53 
 
 78 
 
 93 
 
 Saving 87-92 
 
 and reconstruction 
 
 Schroder, Captain 48 
 Scott, W. R. 64, 73 
 Selden 44 
 Shipping and defence 52 
 
 — invention 54, 57 
 
 Shipping and losses 1803-14 46, 
 47, 119, 120 
 
 — seamen 51, 52 
 
 — the "custom of the 
 
 sea" 44 
 
 — — future 49 
 
 its importance 49, 57 
 
 Smith, Adam 27, 37, 38, 51 
 State interference with trade 36 
 
 organisation 16, 33, 34, 108 
 
 Syndicalism in 
 
 Systems of desires broken up 89 
 
 Taxation 29, 30, 83, 90, 91, 94 
 
 Terminologies 102 
 
 Tooke, T. 18, 63 
 
 Trades Unions 25 
 
 Transition from war to peace 72 
 
 Tucker, Abraham 68 
 
 Venn 66, 67 
 Von Biilow 50 
 
 Walker, C. 108 
 
 Walras 5 
 
 War and crises 63 
 
 — — diversion of labour 27, 29 
 
 — — economic law 3, 12 
 
 — — exports 29 
 
 — — forecasts 62 
 
 — — immaterial wealth 16 
 
 — — improvements 18, 19 
 
 — — labour 28, 29 
 
 — — monopolies 65 
 
 — — "short periods" 37 
 
 — — ways of thought 31 
 
 — expenditure 84 
 
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