CHAPTER XII THE DEPRESSION OF TRADE, ITS CAUSES AND ITS REMEDIES1 For more than half a century both our Government and our mercantile classes have acknowledged the importance of political economy, or the science of the production of wealth; and they have made it their guide in trade, in manufacture, in foreign commerce, and in legislation. During the same period we have had advantages that perhaps no nation in the world's history ever enjoyed before. It is during that period that steam has been applied to railways; during that time the great gold discoveries which added so much to our wealth, and gave such an enormous impetus to our trade, took place. We, especially, profited by these things, because we had as it were the start of other nations in possessing enormous stores of coal and iron, in the working of which we were pre-eminent. While the railway system was being developed all over the world, it was we who, to a large extent, supplied the coal and iron, and also the skill and labour, used in making these railways. During this same period, too, our colonies have increased with phenomenal rapidity, and have supplied us with customers for the commodities which we produced, while they also afforded a magnificent outlet for our surplus population. With such advantages as theseadvantages which we shall in vain search through history to find ever occurring before-it might be thought that we should have got on very well, and must have had a period of continuous prosperity even if we had had no infallible guide to teach us how to conduct our trade and commerce. Yet after fifty years of these unexampled advantages, after fifty years of following what was professed to be an infallible guide, we yet find ourselves at the present day (1886) in the terrible quagmire of commercial depression. All over the country trade is, and for many years now has been, dull; everywhere there are willing workers who cannot find employment. In all our great cities we have stagnation of business, poverty, and even starvation. Certainly, according to the doctrines of the political economy which we have followed none of these things ought to have happened; we ought to have had a continuous and enduring course of success. 1 This article is the substance of a lecture delivered at Edinburgh in 1886, and published as one of a series of Claims of Labour Lectures. It is an abbreviation of my little book on Bad Times, and is reprinted here because I believe it contains views which are as true and as applicable now as they were then. I have not attempted to alter the colloquial style of the lecture, nor have I brought up the figures and statistics to the present time, because the argument it embodies is a general one and will continue to be applicable so long as our political, financial, and social arrangements remain substantially unaltered. Now the need of a thorough inquiry into what are really the causes of this commercial depression is very great, because until we clearly perceive what has produced it, we shall be virtually in the dark as to how to find a remedy for it. I consider, then, that a true conception of the various causes which have brought about this state of things, which, according to our professed teachers, ought never to have occurred, will enable us to lay down more surely what ought to be the radical programme of the future. In 1885, when the matter became the subject of extensive discussion in the press and in Parliament, we had the most extraordinary chaos of opinion as to what was the real cause. I noted at the time at least eight different suggested causes. One great authority in Parliament stated that there was no accounting for it,political economy did not explain it. Other great authorities agreed in this view, and the result was the appointment of a Parliamentary Commission of Inquiry. Another suggestion was that it was all a fallacy, and that there was really no depression at all. This was put forward by an eminent member of Parliament who was connected with money-making in the city. To this class of people no doubt there was no depression; money-making and speculation of all kinds went on as briskly as ever. Another suggestion-I am sorry to say the one adopted by the Conference of Trades Unions of Englandwas general over-production, an explanation which hardly needs refutation, since it has been refuted so often. Other suggestions were, that it was our free trade that caused it; and that it was due to the protection which still existed in foreign countries. Then, again, a very general view, and to some small extent a true one, is, that the continuous succession, for three or four years at all events, of bad harvests had something to do with it; but then there was another remarkable suggestion made, that the rather good harvest we had some few years ago was the cause of the more recent depression. That was seriously put forward in a pamphlet published under the authority of the Cobden Club, for it was stated that this good harvest rendered it unnecessary to import so much corn from America, and thus led to a depression in the shipping trade, and that affected all other trades. The last of this series of explanations was, that it was all due to the currency, that it was due in fact to there having been an appreciation of gold and a depreciation of silver, one or both. The Main Features of the Depression. Now it appears to me that a little consideration of the true character, extent, and duration of the depression, will show us that none of these causes can possibly have been the real and fundamental one, nor even all of them combined. In the first place, the depression has lasted almost continuously for twelve years. It commenced suddenly at the end of the year 1874, and has extended not only throughout this country but, more or less, to every great commercial country in the world. I think, taking into account this long continuance, that no such depression is on record, at all events during the present century. Now the characteristic features of this depression are, as I have said, bad trade all over the country, both wholesale and retail, and in every department of industry, with a few exceptions which I shall point out presently. What is bad trade? Bad trade simply means that there is a deficiency of purchasers. Why is there a deficiency of purchasers? Simply because people who ought to be the purchasers have not got the money to purchase with. It is simply diminished consumption-universal diminished consumption and the only direct cause of universal diminished consumption is poverty. Our purchasers, both in foreign countries and at home, have been less able to buy. There is not the slightest reason to believe that they have not been willing to buy, that they did not want the goods, but it was simply that they were not able to purchase them. This implies that whole communities are poorer than they were. The home trade suffering as well as the foreign trade show that the great body of our own people are poorer. I do not mean to say that the entire country is not more wealthy-I believe it is but nevertheless the masses, who are always the chief support of our home trade and our staple manufactures, are poorer. The same thing is clear of our customers in the different countries of the world, the greater part of those that purchase from us are also poorer. Curiously enough, just in the very height of this depression, there appeared some authoritative pamphlets by Mr. Giffen, Mr. Mulhall, and Professor Leoni Levi, proving exactly the reverse, demonstrating, in their opinion, that the people were never so well off, and that they were far richer than they ever were before; and we were told to believe this when at the same time it was universally admitted that their purchasing power had diminished to such an extent as to cause this widespread diminution of trade! This then, I say, is a statement of the immediate cause of the depression-universal impoverishment. Now we must endeavour to ascertain what is the cause of this universal impoverishment. To illustrate more clearly the period when the depression began, and what was its nature, I have drawn out a diagram giving our imports |