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LG.CmoZZA MONFY



ELEMENTS OF THE FISCAL
PROBLEM.



BRITISH IMPORTS AND EXPORTS IN 1902,
IN MILLIONS STERLING.



IMPORTS.

Visible Imports: —

(ii) Gold and Silver ... 31

{b) Food and Liquor 223

(c) Raw Materials ... 160

(d) Manufactures ... 132

(e) Miscellaneous ... 13



Invisible Imports: —

[These are of precisely
the same nature as
the invisible exports
detailed opposite,
but for obvious
reasons their value
is comparatively
small, and certainly
amounts to less than
the item (e).]



Total Imports 559+



EXPORTS.

Visible Exports: —

{a) Gold and Silver ...
(6) Food and Liquor

(c) Raw Materials ...

(d) Manufactures
{e) Miscellaneous

(/) Goods Previously
Imported

(^) Old Ships (not re-
corded) ...

Invisible Exports : —

(a) Net Freight and In-

surance Earnings
of British Ships,
say

(b) Interest earned on

British Invest-
ments abroad,
say

(c) The Indian "Home

Charges"
{d) Interest on Suez

Canal Shares ...
{e) Banking Services,

Com missions,

Remittances of

Pay, &c.



26
16
32
222
13

66



90

90

17

1



Total Exports 573+



ELEMENTS OF THE
FISCAL PROBLEM.




BY



L. G. CHIOZZA MONEY,



Fellow of the Royal Statistical Society, Author of " British Trade and the
Zollverein Issue," etc.



LONDON :

P. S. KING & SON,
ORCHARD HOUSE,
WESTMINSTER
1903.



Hr



PREFACE.



ilj These pages are offered to the public as an elementary

CO

>. treatise upon a very difficult and complex subject. In
en writing them, I had to assume either acquaintance or
"^ want of acquaintance, on the part of the average reader,
with the meaning of such terms as tonnage, wages, draw-
backs, imports. I have decided to treat the subject ah
^ initio, in the hope that those who are intimate with the
a terminology of economics and commerce will forgive the
' passages of elementary exposition for the sake of the
value of the collection of facts which accompanies them.

o L. G. C. M.

a

^ November, 1903.



H71)75



CONTENTS



FRONTISPIECE — BRITISH IMPORTS AND EXPORTS IN I902.



CHAP.

I. INTRODUCTORY

II. WHY WE IMPORT

III. OUR IMPORTS OF FOOD ....

IV. OUR IMPORTS OF RAW AND CRUDE MATERIALS
V. OUR IMPORTS OF MANUFACTURED MATERIALS AND

ARTICLES OF PERSONAL USE .

VI. OUR IMPORTS OF LUXURIES — A SUMMARY

VII. OUR EXPORTS OF GOODS ....

VIII. OUR EXPORTS OF SERVICES ....

IX. THE GROWTH OF AN IDEA ....

X. THE TAXATION OF FOOD AND MATERIALS

XI. THE DIRECTION OF BRITISH TRADE

XII. COLONIAL IMPORTS FROM FOREIGN COUNTRIES

XIII. INDIA

XIV. THE SPECIAL CASE OF AMERICA .
XV. THE POPULATION OF THE BRITISH EMPIRE .

XVI. "dumping" .

XVII. " MOST FAVOURED NATION " .

XVIII. SHIPS AND SHIPPING .....

XIX. WAGES ........

XX. THE PAST, THE PRESENT, AND THE FUTURE



4

8
20



26

34
41
62
72
81

97
III

121

128

135
140
148
162
169
178



INDEX



231



ELEMENTS OF
THE FISCAL PROBLEM.



CHAPTER I.

INTRODUCTORY.

A WISE fiscal policy can, at best, enable a nation to make
the most of its natural advantages. In the long run,
industries must come to be carried on in those parts of the
world best suited to them, and commerce must flow chiefly
in the great highways which Nature has fashioned. But,
of the factors of material prosperity which are under
human control, fiscal policy is not the least, and while the
judgment of the nation upon the question which has arisen
through Mr. Chamberlain's conversion to Protection can-
not ensure commercial supremacy to these islands for
ever, it may lead to the loss of the solid substance of
British prosperity in the vain imagination that a poor
copy of the Dingley tariff will arm us at all points even
as America is armed. The end is not ours finally to
shape, but the manner of our rough hewing of it will be
fraught with momentous consequences to our teeming
population in the near future.

The true claim for Free Trade is not that it has given
us y^'the wealth we enjoy, but that, by favouring no
private interest at the expense of the State, it has given
the nation free play for its energies. No unsuitable
industry has been artificially fostered. The consumer has
been left free to exchange the products of his labours for

F.P \*^ """ ""'""'""' ""* B



2 ELEMENTS OF THE FISCAL PROBLEM.

the best value the world has to offer. Monopoly has not
been suffered to raise its head. The processes of natural
selection have guided the activities of our people into
those channels where most profitably they can be
employed. As a result we have taken full advantage of
our geographical position and resources. Indeed, in some
respects, we have prospered even to a greater extent than
our resources would warrant, because other nations have
chosen in part to waste their gifts by the tariff modi-
fication of their natural development. Thus, there can
be no question that our shipping has gained by the tariff
policy of the United States.

When the inherent advantages of a country are con-
sidered, it must be remembered that these are not only
its fields, forests, quarries, and mines, but its position on
the globe and the extent of its seaboard. Sea carriage is
cheaper than land carriage, and will probably remain so.
That being the case, an island nation, placed in an
advantageous geographical position, should count its sea-
board, and the opportunities which it affords for com-
mercial intercourse, [amongst its greatest gifts. That
which a nation lacks may be brought into it, and the ease
with which, under a wise fiscal policy, supplies can be
procured from oversea, may in great part, or altogether,
atone for native insufficiency.

We have, then, to consider a problem in connection
with which it is not always an easy thing to trace
causation, to differentiate between the gifts of Nature and
the modifications to which those gifts have been subjected
by individual enterprise and acts of legislation. To make
comparisons, therefore, between British Custom House
figures and those of any other nation or nations, and to
draw, from such comparisons alone, inferences as to the
wisdom or unwisdom of a particular pohcy, is an utterly
illogical proceeding.

Mr. Chamberlain appears to believe that, in considering
the position and prospects of British trade and industry,



INTRODUCTORY. 3

it is sufficient to turn to the record of the declared values
of the goods which we ship to places oversea. That is to
say, he does not consider our resources, production and
commerce, but our exports. Moreover, he does not even
consider the whole of our exports, but a part of them,
forgetting that we export services as well as goods, and
that we are not only manufacturers, but engineers,
merchants, shipbuilders, shipowners, and bankers also.
Again, he does not consider our exports of goods fully,
but confines his observations to the movement in their
value. Finally, he passes to a comparison of the progress
of British exports, as measured in this incomplete and
unsatisfactory manner, with those of certain foreign
countries, without reference to the fact that the United
Kingdom, the United States, and Germany differ so
widely in area, population, geographical position, natural
advantages, and relative stage of development, that fiscal
policy is but one of the factors which must be considered
in connection with their comparative progress.

If the nation is to arrive at a wise judgment upon the
fiscal question, it is above all things necessary that those
who place the issues before it should submit the whole of
the available evidence. Our small area, large population,
and limited natural resources combine to make our
position a peculiar one, and it is idle to discuss our out-
ward shipments as though they afforded the sole test of
our prosperity. My purpose in these pages will be, there-
fore, to place before the reader a general survey of the
present conditions of British trade, a survey which, while
it cannot, in the nature of the case, be complete, will aim
at giving a broad view of the subject, and above all
endeavour to avoid the fallacy of drawing general con-
clusions from exceptional instances.



B 2



CHAPTER II.
WHY WE IMPORT.

The United Kingdom has an area of but 120,000 square
miles, and a population of over 42,000,000 people, or about
350 persons to the square mile. The true function of
our external commerce — the gaining of imports — is best
realized by consideration of what the position would be
if we shut every port, burnt our ships, and resolved to
live upon what we could produce by work done upon
our 77,000,000 acres. Let us take stock of what we
have at disposal. There are about 700,000 acres of
inland waters ; 3,000,000 acres of woods and plantations ;
13,000,000 acres of mountain and heath land ; 48,000,000
acres under crops and grass ; 1,600,000 acres of Irish bog
and marsh; and a balance of 11,000,000 acres or there-
abouts, which is, as to a part, barren, and, as to the
remainder, used for roads, towns, pleasure grounds, &c.
On this land we raise a great quantity of food, valued
approximately at ^^300,000,000 per annum. If we cared
to, we could sustain a certain population upon this
food. We could elect to have more bread and less meat
by devoting more acres to wheat and less to pasture, but if
we raised less sheep and cattle, we should have not only
less meat, but less wool and hides. We have little native
timber, but by cutting down rations a little further we
could devote so many more acres to afforestation. Climate
would prevent our indulging in wine, or sugar, or tea, or
coffee, or cocoa, or tobacco, but none of these things is
absolutely necessary, though all of them are mightily
convenient. We should be badly off for manure, but
perhaps could make up for that by using all odd corners



WHY WE IMPORT. 5

of ground, cutting down pleasure grounds and reducing
the width of roads. Our fisheries do well, and land some
3^10,000,000 worth of fish per annum.

Turning to the mineral world, we are very well off when
our small area is considered. Of coal we have enough to
use profusely for centuries. We have also a great deal of
iron ore — although some of the best supplies have given
out — and of that important mineral, limestone, which,
with iron ore and coal, goes to the making of pig-iron.
Then we have good supplies of potters' clay, sandstone,
slate, granite, and the chalk which rejoices the eye of the
returning son of Albion. We have also small supplies of
tin, lead, copper, zinc, and pyrites, invaluable to the
chemical industry. We have more native gold than most
people know of, raising some thousands of pounds' worth
per annum.

Such, speaking broadly, are the natural resources of the
United Kingdom. Applying ourselves to them, and to
them alone, we could live, doubtless, in fair content — if
we knew of nothing better. But Britons are a roving
race, and long years ago sailed away to lands near and
far, and brought back samples not only of a thousand
covetable articles which Providence has not bestowed
upon these islands, but of wonderful stuffs and devices
which no one here had ever happened to make or think
of. From those early years until now we have sent our
ships to every clime, and they have ever been pouring upon
our shores the wealth of the world, until, throughout the
kingdom, in palace and mansion and cottage, are to be
found foreign products.

If we had confined ourselves to the use of what our
own land produced, or could be made by human skill to
produce, we should have been a poor race. Cribbed,
cabined, and confined in our 120,000 square miles, under
skies not always bright, never sure of a bountiful harvest,
denied every product that needs a tropical sun, our wits
unsharpened by contact with other races, our industries



6 ELEMENTS OF THE FISCAL PROBLEM.

unstimulated by foreign example and unfed by foreign
materials, we should have reached but a low degree of
attainment in every department of human effort. By
availing ourselves of the riches of the entire globe, by
bringing goods from the three corners of the world, by
seeking and finding and shipping, we have attained the
commercial supremacy of a world of 1,500,000,000 people.

Let me sum all this in a few words. Our native
resources are barely sufficient to give plain fare, poor
housing and few comforts. Our imports have made us a
rich people.

In spite of the facts I have briefly detailed, however,
there are not wanting those who urge that we should aim
at " self-containment," and who appear to believe it
possible that we could attain that aim by means of import
duties.^ Perhaps the best comment upon the ideal of
economic self-containment for our 120,000 square miles
is to point out that the United States of America, which
has an area of 3,000,000 square miles, or twenty-five
times that of this country, imported in the twelve months
ended June, 1903, in spite of the Dingley tariff, and
although she is so largely indebted to other countries
for shipping services and interest on borrowed capital,
1,025,751,538 dollars' worth of foreign produce, which as
to 218,319,765 dollars consisted of food, and as to
375,150,947 dollars of quite raw materials. If economic
self-containment is not possible to America it is clear that
for ourselves it is an unattainable ideal, unless we consider-
ably reduce our population and are content that the
remainder should have a much lower standard of comfort
than at present. Not to flog a dead horse, however, it is
only fair to say that economic self-containment for the
United Kingdom is a chimera cherished by few Protec-

' Vide Mr. Ernest E. Williams in " Free Trade v. Protection,"
p. 34 : " Economic self-containment, particularly in the matter of food
supply, is a necessity to the well-being of any country, and can in this
country only be secured by a return to Protection."



WHY WE IMPORT. 7

tionists. With the greater breadth of view which has in
some respects accompanied the growth of the Imperial
spirit, a few, at least, of the false ideals of the old Protec-
tionists have faded. It is no longer urged that all the
ships that bring commodities to our shores are inimical to
our welfare. It is admitted that imports from one-fourth
of the human race, the inhabitants of the British Empire,
are consistent with the prosperity of the United Kingdom.
A larger ideal, that of a self-sufficient Empire, has happily
served to widen the insular horizon of many Protec-
tionists. It is to be feared, however, that it merely
presents attractions to some of them because it is a
patent fact that imports from our self-governing Colonies,
especially of manufactured articles, are comparatively
small. Indeed, Mr. Chamberlain's proposals found little
support so long as they were confined to the encourage-
ment of imports from our Colonies. It was the addition
to his programme of a campaign against foreign importa-
tions that filled the average Protectionist with enthusiasm.
If our Colonies were large exporters of manufactured
articles, the opinion of many of our tariff reformers, it is
to be feared, would be found closely to resemble that of
the famous resolution of the Canadian Manufacturers'
Association on a preference for British manufactures.^ It
is the ancient fear of imports which is the basis of the
New Protectionism, even as it was the basis of the Old.

' In August, igo2, the Canadian Manufacturers' Association passed
the following resolution on the Canadian Tariff: "That while such
tariff should be primarily framed for Canadian interests, it should
nevertheless give substantial preference to the mother country, and
also to any other part of the British Empire with which reciprocal
preferential trade can be arranged to mutual advantage, recognising
always that the minimum tariff must afford adequate protection to all
Canadian producers." In other words, the tariff is to be so arranged
that the duties, with the reduction, shall sufhce to afford " adequate
protection."



CHAPTER III.

OUR IMPORTS OF FOOD.

The fear of imports is the beginning of " Protection."
It is an unworthy and illogical fear, for if thought be
taken it will be seen that to import or receive is to gain.
We live on an island, and, to state an elementary fact in
simple terms, an island is richer when goods are brought
into it and poorer when goods are taken out of it. This
sounds very like expounding the obvious, but it is really
necessary to refer to it at a time when our ability to
buy what we want cheaply from the foreigner is treated
as a national misfortune. It is strange that civilised
statesmen should fail to comprehend the commerce of an
island, when even a savage knows that if he takes a laden
canoe across the sea he loses unless he can bring it back
containing as good or better value than that with which
he set out. Because the ships of the Islanders have
returned well laden they have made their owners the
richest people in the world. We shall return to this point
presently, when we come to consider what it is we exchange
or our magnificent imports. My immediate purpose is
to examine them in detail, that we may be quite sure
whether they are harmful or not.

In the first place, as most people know, we import a
large quantity of food. I have already stated that our
home-grown food (for both man and beast) is valued at
about 5^300,000,000 per annum. In addition w^e import
^215,000,000 worth more, making a total of, say,
£500,000,000 of food and fodder. The fodder, so far as it
is consumed by cattle, sheep, and pigs, is also ultimately
food for man in the form of meat, milk, butter or cheese.



OUR IMPORTS OF FOOD. 9

Discussions as to our food imports usually centre round
wheat, but the value of our wheat and wheat flour imports
only accounts for £36,000,000 out of the ;^2i5, 000,000.
Meat imports amount to ^^46,000, 000, and those of butter
to 3^20,500,000. Other big items are cheese, 3r6,ooo,ooo ;
barley, £"7,000,000; oats, £5,000,000; maize, £12,000,000;
fruit, £13,000,000 ; sugar, £18,000,000 ; tea, £9,000,000 ;
eggs, £6,000,000.

There is a widespead impression that, if we increased
our production of wheat, we should be less dependent on
foreign food. The fallacy of this is apparent from the
consideration that increased wheat production would mean
the sacrifice of some part of our meat and milk production.
Our imports of wheat and wheat flour amount to about
100,000,000 cwt. per annum. Even if we returned to the
wheat acreage of 1870 we should only grow an additional
30,000,000 cwt., and require a balance of 70,000,000 cwt.
from oversea. To devote 2,000,000 more acres to wheat
to produce this result would mean that there would be a
reduced production of other foods, which would have to be
imported in their turn. I have dwelt upon this point
because it is sometimes represented that protection for
agriculture would make us independent of food shipments.
I say " sometimes " advisedly, for it is as often found
convenient to represent that our Colonies could easily
supply us with all the food we now obtain from foreign
countries. I need hardly point out that, if the latter
contention were true, it would not matter whether the
sea-borne food were derived from the foreigner or from
our Colonies — the result would be the same to the British
farmer.

Another important consideration is that the wheat we
grow, even on our best wheat lands, is not so nutritious,
not so well ripened, as that imported from America. This
is an effect of climate which it would pass the wit of man
to alter, and should always be taken into account when it
is represented that by stimulating the production of wheat



lo ELEMENTS OF THE FISCAL PROBLEM.



on unsuitable soils the nation as a whole would benefit.
No policy could extend our fields or give us the boundless
prairies of America, but our open ports give us all the
advantages of possessing the best soils and the best
climates for the production of any and every description
of food. In effect we are not islanders with only the
resources of an island at our disposal. We draw upon the
world for our supplies, using its best and most plenteous
stores, whether of grain, or meat, or fruit, or wine. We
have not merely to depend upon the uncertain harvests of
a northern clime — our food supply is safe, for it comes
from many countries, and we rule the seas which bear the
ships that bring our harvests home.

The importance of availing ourselves freely of every
possible source of food supply is shown by a consideration
of the figures relating to our imports of wheat during the
past seven years : —

United Kingdom Imports of Wheat and Flour in Equivalent
Weight of Grain.

In Millions of cwts.






1895-


1896.

17-2

1-3

24
19
54
19
10
52-8
5-0
i-g

6-3
21


1897.


1898.


1899.


1900.


igoi.


igo2.


Russia

Germany

France

Austria

Roumania

Turkey

Bulgaria


23
II
1-6
1-8
20
1-3

453

II-4

10

5'i
8-8
30


151
1-4
23
1-6

I '2

1-8
II

54-1
0-9
10
69
06


64
08
06
10
02
0-3

620
40
0-8
77
95
02


25
05
09
14

602
"■5
03
8-7
8-2
30
07


4-5
1-8
10
1-6
07
o-i
01

57-4
187

80

2-9
I-I


2-6
06
07
i-i

0-5
0-4

0-2

66-8
8-3

8-6

3-3
G-2

1-4


6-6
03

10
o-g

24

03

08


U.S. A

Argentina

Chile

Canada

India

Australia


64-9
4-5
03

12-2

8-8
4-2

O-I


New Zealand ...


Total of above and
other countries


1072


99-5


887


94 4


985


986 lOI


107 9



OUR IMPORTS OF FOOD. ii

It will be seen that the North American supplies are
the steadiest, and that no reliance can be placed upon
wheat imports from any British possession except Canada.
In igo2 the quantity imported from British North America
amounted to only one-fifth of the American supply.
Nevertheless, it is only fair to say that Canada as a food
supplier is a considerable asset, and if Australia, New
Zealand, and South Africa could be depended on for
similar shipments, which unfortunately is not the case,
the discouragement of foreign supplies, although unwise,
would not be such an act of supreme folly as the above
figures show it to be at present.

The detailed analysis of our imports in 1902, which
begins on page 13, divides the items into eight great
classes or groups. The first class is " Food and Fodder,"
and it shows the value of the food we imported in 1902
and the proportions of each item purchased from foreign
countries and British possessions respectively. These
figures establish the remarkable fact that as much as
four-fifths of our imports of food, purchased in the cheapest
and best markets, are derived from foreign countries. The
foods which are derived more largely from British posses-
sions than from foreign countries are few in number. The
only ones of importance are cheese, tea, rice, and mutton,
and, with regard to the last-named, Argentina is rapidly
overhauling New Zealand as a supplier.

The table shows not merely how much food we import,
but how much we retain for home consumption. Our
trade in foreign and colonial merchandise is a very
profitable part of our commerce, but the re-exports are
not stated with any desire to minimise our imports. It
would be better still if we retained the whole of the
3^215,000,000 worth of food in the United Kingdom
instead of reselling ;;^9, 000,000 worth to places oversea.
It would mean the consumption of so much more good food
in our own country. The amount of imported food retained
for home consumption in 1902 is seen to be ;/r2o6,ooo,ooo.



12 ELEMENTS OF THE FISCAL PROBLEM.

I need not dwell upon Table B., which records our
importations of wines, spirits, and mineral waters in igo2.
It will be seen that, deducting re-exports, the amount
retained for home consumption was valued at nearly
3^7,000,000.

Before proceeding further I would like to make it clear
to the reader how the values in the import list are recorded
by our customs officials. Goods imported into the
United Kingdom are usually entered at our Custom
Houses at "c.i.f." values, as they are termed, the " c."
standing for cost, the " i." for insurance, and the " f."
for freight. That is to say, the goods arc enhanced in
value by the addition to the actual price of the commodities
themselves of the cost of insuring them on their sea
voyage, and the cost of the carriage from their port of
origin. I shall return to this point hereafter, when we
come to consider what is sometimes called the " balance
of trade."


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