Delphi complete works of.., p.557
Delphi Complete Works of Stephen Leacock, page 557
Popular prejudice was right. Mill’s theory would be correct in a world in which there was no unemployment and in which demand and supply, production and consumption were held in a beautifully balanced equipoise. In a real world there is another element to be considered, what one might call “economic impetus”. By this we mean the value of “starting something”. A pebble rolling down a slope may hit and start a big stone, that rolls and launches a rock and sets in movement an avalanche. Punching through a dike a hole an inch in diameter may start a torrent of water moving that will flood a valley. One feeble joke at a dull dinner may unloose a flood of merriment. So, too, in the economic world. All industry hangs together. Where one stumbles, it affects the next, and presently all fall. Where one quickens the others start to life. The consumer of one is the producer of the other. The spendthrift smoking his cigar sets to work the unemployed cigar-maker, who starts into activity the unemployed baker, who rouses the miller, who wakes up the farmer, who starts the agricultural-instrument maker, who pays the dividends that go to the spendthrift, who buys the cigars that start the cigar-maker and so on. The House-that-Jack-Built, in point of continuous concatenation of consequences, is nothing to the economic world of to-day. When the economic theory of impetus is fully analysed and fully written out it may be found to contain in it the missing elements needed for the solution of the economic paradox.
Here then is a general plan for imperial concession companies, great or small, working with investor’s capital, gathered anywhere and everywhere, supplying work, moving workers, exploiting resources — in a word, “starting something”.
They can begin on a big scale or a little, by the action of one government, or two together, or all together.
Many people instinctively hate the idea of companies with concessions of privilege and monopoly. It seems like trading away the “people’s rights” to the gifts of nature. It is. And when the people in question are mostly two or three thousand miles away from their rights, haven’t used their rights for a hundred years, have no work and no chance of any, the best thing that one can do with their rights is to trade them. At any rate, all the concessions given can be terminable. They can revert to the State at a valuation after fifty years or a hundred years — some day.
So much for the work to be done and the general method of doing it. Let us turn to the investor and consider his run for his money. In a sporting race like the British, that is all he asks, a “run for his money”. Will he get it?
CHAPTER III. THE INTEGRATION OF CREDIT, CURRENCY, AND CAPITAL
IN THE MATTER of credit, currency and capital, as in all else, the situation of the British Empire presents a bewildering disintegration. As in all else, if the difficulties can be surmounted, the integration of these elements would give stimulus, strength and stability. The British Empire, as such, has no public debt and makes no use of its public credit. In the Empire there is not one public debt, but thirty-seven. There is the debt of Great Britain and Northern Ireland, amounting to about £7,631,000,000; the public debt of India £743,250,000; a public debt for each of the Dominions — Canada, Newfoundland, Australia, New Zealand, South Africa and the Irish Free State: for the near-dominion, Southern Rhodesia; for the representative colonies, the Bahamas, Barbados, Bermudas, etc.; and for a long list of minor colonies and dependencies such as is furnished in the Statesman’s Year Book or any similar compilation. The grand total runs to £9,955,205,000.
Public Debt of the British Empire as Compiled in the
Statesman’s Year Book of 1929
£
Great Britain and Northern Ireland
7,631,000,000
Europe:
Irish Free State
17,000,000
Asia:
Borneo, Brunei, and Sarawak
49,000
Ceylon
12,657,000
Cyprus
180,000
Hong-Kong
342,000
India
743,250,000
Straits Settlements
25,654,000
Federated Malay States
9,355,000
Other Malay States
729,000
Africa:
Kenya Colony and Protectorate
10,000,000
Uganda Protectorate
1,108,000
Zanzibar
100,000
Mauritius and Dependencies
1,766,000
Nyasaland Protectorate
775,000
Seychelles
4,000
Southern Rhodesia
4,095,000
Swaziland
55,000
Union of South Africa
223,233,000
Nigeria
23,559,000
Gamba
84,000
Gold Coast and Protectorate
11,791,000
Sierra Leone and Protectorate
1,730,000
America:
Bermudas
70,000
Canada
463,198,000
British Guiana
2,675,000
British Honduras
327,000
Newfoundland and Labrador
15,004,000
Bahamas
176,000
Barbados
591,000
Jamaica, etc.
4,922,000
Leeward Islands
289,000
Trinidad
3,282,000
Windward Islands
476,000
Australia:
Australian Commonwealth
494,129,000
New Zealand
251,396,000
Fiji
154,000
£9,955,205,000
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For the present purpose it does not matter whether the compilation in the table is absolutely and exactly up to date. It is the principle of the thing which is under discussion. What I want to show is that there is here an absolutely unused asset, of vast money value — namely, the collective credit of the British Empire. The present debts of Great Britain and the Dominions are separate debts. We in Canada are not liable for the payment of the debt of the United Kingdom, and the United Kingdom is not responsible for the payment of our Canadian debt nor of the Australian. Credit in the Empire has been carefully cut up into bits like everything else. At the present time the public debt of the United States stands (1929) at about $16,500,000,000. The credit of the United States to-day is higher than that of any other country. This does not necessarily arise from the fact that the United States is richer — when wealth is computed in available monetary value — than any other country. It means that in the judgment of those who have funds to lend the United States is more likely to repay its debts and fulfil its obligations than any other country.
The relative credit of the United States and the United Kingdom and other countries can easily be compared. It is only necessary to know what rate per cent is payable as interest on their securities and how much investors are willing to pay to get them. In the spring of 1930 United States taxable securities are sold at a rate that will bring to the purchaser an income of four per cent, or less, on his investment. Other Governments can only get money at higher rates than this. The arithmetic of the matter is complicated by the varying termination dates of the loans; but the general comparison of present values would show that the United Kingdom and Canada have to pay five per cent at their present credit, Australia nearly five and a half, and all other British Dominions at rates above five per cent.
The details of the case and the temporary fluctuations from day to day are of no import to the present discussion. The broad general conclusion emerges that the United States can borrow money at a rate about one per cent lower than can the United Kingdom or any constituent of the British Empire. But if all the public debts of the United Kingdom and of the Dominions were pooled into a single Empire debt, with all the financial power and tax resources and national wealth and assets of the Empire behind it, the situation would look very different. Without a doubt the credit of such an amalgamation would stand higher than the credit of each and any of its components. Two and two, as often happens, would make more than four.
In practice it would not be possible to pool the entire debt. There would be too much squabbling over the process. But it would be possible — it would be very easy — to create a guaranteed Empire debt to consist of a part — one could easily say, one-half — of the debts of the United Kingdom and the Dominions. India could be left out. Its place in the Empire is too problematical. Any constituent commonwealth which wanted to might stay out. The Irish Free State probably would do so. As yet the modest efforts of the Free State in five years had only raised a debt by March 1927 of £17,000,000 or about £5 14s. per capita. The Canadians have a Dominion net debt of about $280 per capita which the Irish might not be willing to share. But if they did refuse it would only be by misunderstanding the nature of the operation proposed. This is not really a question of sharing another person’s debt, but sharing along with other persons the alleviation of part of a debt, without any cost whatsoever. It is, in other words, a piece of financial magic in which something is got out of nothing.
Let me show by an illustration what would happen. When the Canadian Confederation was formed the British Government felt itself interested in effecting the union of the provinces as a matter of Imperial defence. It therefore undertook, as an inducement towards confederation, to guarantee the interest on a loan raised to build a railway to connect (Central) Canada with the sea — the Intercolonial Railway. On the strength of this guarantee the Dominion of Canada borrowed £3,000,000 at three per cent, whereas its other and ordinary borrowings of the period were at the rate of over six. The guarantee never cost the British Government anything more than words and ink. To consolidate the Empire debt, or part or half of it, it would not be necessary to alter in any way the present mechanism of paying interest. All that would be needed would be for the United Kingdom to guarantee, say, $1,500,000,000 of the public debt of Canada, and Canada to guarantee a similar proportion of the British debt. It would be a mutual guarantee of each for all and of all for each. The current burden of interest would fall just in the same proportion as now, but in each case it would be lighter. The conversion could not be forced. But each Government could take advantage of the termination of each loan as it fell in to pay it off with money borrowed at a lower rate. A lifting of general Empire credit by even one-half of one per cent would affect a colossal saving on the total — indeed, about $300,000,000 a year.
It would be wiser to issue Empire-guaranteed loans in a distinctive and recognizable form, with a special kind of scrip and a special terminology. Forms count, and the visual symbol of a thing is often needed for its appreciation. But the general plan of what to do is among the simplest, the most immediate and the most certain of the means of Imperial integration.
A still further strengthening and consolidation of Empire credit could be brought about by amalgamating into a guaranteed issue all the redeemable Government paper money of the United Kingdom and the Dominions. At the present time each of these constituent parts of the Empire, apart from bank-notes, issues paper money which, in theory at any rate, is redeemable in gold coin. In the case of Canada the redemption has shown itself recently (1929) to be theoretical rather than actual. The fall of the Canadian currency to a discount of two per cent as compared with United States currency was a serious blow to the credit and the investment market of the Dominion. It is as difficult as it is needless to say just how this depreciation could have happened in a country as soundly based and as solvent as Canada, in which the Treasury could easily buy, borrow, or mint enough gold to answer any fluctuation of the exchanges. In this as in other countries there is, of course, a standing temptation to inflation of this sort. The rising value of the United States dollar when bought with Canadian funds tends to check purchases of American goods and tends to favour the Canadian manufacturer. But any advantage of this sort is transitory and illusive. Any possible gain is offset a hundred times by the harm done to national credit, which checks investment at the source. The worst thing that can happen financially to Canada is that it should compare with the United States as a country of ramshackle finance beside a country of absolute integrity where a promise to pay means payment. Those who look back and remember the discredit cast on all American investment and enterprise by the threatening shadow of depreciated silver currency in the ‘nineties, and then contrast the situation with the solidity of American monetary structure of to-day, will need no further lesson in the point.
The maintenance of the gold standard is absolutely vital to financial stability. Economists dream in vain of a system of regulated currency without gold, under which an impossibly sagacious board of men, inconceivably above private interest, control the rise and fall of credit and prices as one turns on a tap or tunes a piano. Such a system, if it ever came into operation, would supply new and glorious opportunities for fraud beside which anything now in Wall Street would look like a Sunday school. The only basis for value is in fact, and a gold coin with a mint behind it is a fact. The return from the delirium of war inflation to the sanity of gold redemption was as necessary as it was bitter.
Nor would there be any better way of enduring the gold standard in the Empire than to consolidate by a general guarantee of redemption the paper-money issues of the Empire Governments. As beside the guarantee of the debt, this would only be a minor operation. The very solidity of the guarantee would prevent a rush anywhere for redemption of notes in gold. New issues would have to be accepted for each constituent of the Empire by all the others on terms agreed. But that would only serve to make the issues all the sounder.
There can be no doubt that the unity of Empire finance and trade would be greatly assisted if it were possible to go further than this and to establish a uniform system of money and measures. It is, of course, true that as long as each constituent of the Empire maintains in law and practice an accepted gold standard, the particular units of the coinage make no difference to the mechanism of the exchanges. This is true all the world over. British gold sovereigns, American gold dollars, along with gold francs of the present, gold roubles of the past and ingots of new gold from the mines, all form a universal currency. Hence in a purely theoretical way it might be said not to matter if England and Australia count in sovereigns and Canada and Singapore count in dollars. But in practice it matters a whole lot. The common mass of people are actuated by ideas and appearances as well as by realities. The aspect of a single gold coinage, stamped indifferently at Ottawa or London or Melbourne or Pretoria, everywhere the same, everywhere legal tender and everywhere the basis of public credit, would be most impressive for the stability of the Empire. It would serve every day as an outward and visible symbol of the tremendous latent wealth upon which such a monetary system is based.
Unification of the coinage and currency of the Empire would mean that either dollars and cents or else pounds, shillings and pence have got to be abandoned. There is no question which of these two currencies ought to be thrown overboard. It is true that pounds, shillings and pence are overwhelmingly the currency of the British Empire. The dollar is used only in Canada, Newfoundland, the Straits Settlements, Hong-Kong, and in a secondary way in the West Indies. But there is no comparison between the two currencies in point of commercial convenience and common sense. Counting in pounds, shillings and pence is as out of date and as inadequate as Japanese picture writing and the Turkish current script. The Japanese, we are told, realize the defect of their system and will shortly change it. In Turkey, Mustapha Kernel Pasha has already burnt his books behind him and set a whole generation of little Turks fumbling and mumbling their way into phonetics. It is time that England imitated such a forceful outlook, and such willingness to make a present sacrifice for a final gain.
Pounds, shillings and pence were right enough before the Hindoos and the Arabs brought the decimal system of place numbers into Europe. Till then, people only counted in a clumsy way, with fingers, with little sticks, with tallies, or with an abacus, and multiplication was beyond the common man. The Arabic notation was familiar to European scholars as early as the year 1400, but in England, until well into Tudor times, the accounts of manors and parishes and even of monasteries and colleges were kept in Roman figures. Even when the decimal system of counting was introduced, the money of England remained in its primitive multiples of the dozen and the score. The Spaniards, on the other hand, fitted their money to the new arithmetic and from them the thaler and the centavo — the dollar and the cent — went round the world. Spain gave the system to the new world where it appears in decimal currencies of the United States and all of Latin America. The French Revolution gave it to France, from which it spread later to the Latin Union of Belgium, Italy and Switzerland (1865), to Germany under the Empire, 1875, to Austria and Hungary in 1870, Japan in 1871 and Russia in 1897. England alone goes on counting on its fingers and scratching its head when it vainly tries to multiply a penny halfpenny by five and a half per cent.
