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That the present war, in spite of its magnitude, 
has only touched the fringe of England's normal life 
is a fact so palpable that it has ceased to be disputed 
except in a few socialist papers. At the beginning of 
the war, in the first few days of excitement, there was a 
fairly wide anticipation that a great economic up- 
heaval must result from war upon such a scale ; but 
as the days went by and the excitement to some 
extent subsided people discovered to their astonish- 
ment that the economic situation was getting better 
instead of worse. It has continued to get better, and 
even the astonishment is no longer expressed. Most 
people have already forgotten the terrible prophecies 
of economic disaster that used to be commonplaces 
among us in all abstract discussions upon the conse- 
K quences of a European war. From the human point 
N of view we may be shocked at the contrast between 
the even tenor of our own lives and the fierce struggle 
I that is raging only a few hours distant across the 
v Channel ; but from the economic point of view we 


have grown accustomed to the fact that the war has 
left this country almost scatheless. 

Our streets during the working hours of the day are 
as fully thronged as ever ; the theatres, which were 
deserted in the early days of the war, are now well 
attended ; the music halls are crowded. As regards 
the definite problem of employment precise figures 
have been available since the establishment of the 
system of National Insurance against Unemployment. 
The insured trades include house-building and ship- 
building and various engineering trades in which em- 
ployment in normal times is apt to be irregular. 
Altogether about 2j million workpeople are insured, 
so that a fairly representative picture of the condition 
of employment throughout the kingdom can be 
obtained from the precise figures of unemployment in 
these insured trades. The figures show that the rate 
of unemployment was slightly greater during the five 
months March to July, 1914, than in the corresponding 
months of 1913. On the outbreak of war in the 
beginning of August the rate of unemployment 
rose with a bound ; but in the early days of 
September it began rapidly to decline and has 
continued to decline, till in November it practi- 
cally reached the level of 1913, which was a year of 
remarkable prosperity. In particular, the shipbuild- 
ing trade is flourishing, and shipbuilders are said 
to be overwhelmed with orders for new tonnage. 

As a set-off against these satisfactory conditions, 
there is undoubtedly a serious depression in the cotton 
trade. This does not, however, result in actual un- 
employment. The cotton trade is probably the best 



organised of British industries, and it has long been 
the custom in that trade to deal with periods of 
trade depression, not by discharging employees, 
but by working short time. By this excellent custom 
the workpeople attached to each mill are kept together, 
and the cost of a period of depression is borne by all 
of them collectively — and by their employers — in- 
stead of falling with cruel severity on a few individuals. 
In normal times the operatives engaged in the cotton 
industry earn very large family incomes, so that they 
can face a period of reduced working time without 
suffering any real distress. The causes of the present 
depression in the cotton trade are complicated, and 
are not all directly connected with the war. The 
situation, though still bad, is considerably better than 
it was. The difficulties arising from the breakdown 
in the financial machinery of exchange with the 
United States are being surmounted ; the difficulty 
of shipping cotton goods owing to the high rates for 
freight and insurance which ruled at the outbreak of 
the war has been greatly dimim'shed ; the improved 
prospects of the trade are marked by the increased 
quotations for shares in cotton mills. 

The only other direction in which anything like a 
serious state of depression exists is among the pro- 
fessional classes and the classes engaged in producing 
luxuries. The closing of the Stock Exchange, for 
example, threw out of employment a large number of 
clerks. The male clerks in many cases were young 
enough to enlist in the army ; but the female typists 
were left without occupation. Architects and lawyers, 
actors and writers, have also found a diminished 


demand for their services, and the same is true of 
jewellers, dressmakers and photographers. Most, 
however, of these sufferers from the war are middle- 
class people who have been in the habit of living 
within their means and saving for the future, so 
that their misfortunes, though very real, are not 
crushi ng . 

That there is nothing approaching destitution in 
any part of the country is proved by the experience 
of committees voluntarily created on the outbreak of 
the war to deal with distress. Here, for example, is 
a letter which the present writer received the other 
day, quite casually, from a personal friend who 
happens to be a secretary of a " Committee for the 
Prevention and Relief of Distress " for the whole of 
one of the northern counties of England : — 

"It is such a long time since I have written 
to you. I have been pretty busy in one way 
or another, but not as far as distress goes. 
There is practically none. So this Committee 
has had nothing to do except to arrange 
hospitality for Belgians." 

On receipt of this letter, the present writer consulted 
the Secretary of the Charity Organisation Society 
and asked him whether his general experience coin- 
cided with this particular information. The reply was 
that he was receiving reports similar in character from 
all parts of the country. 

These are incidental proofs of the statement with 
which this paper began that, while England is 
engaged in the greatest war the world has ever 


known, her people are still enjoying with very 
little interruption their ordinary lives. The primary 
explanation of this apparently strange phenomenon 
is England's sea power. Owing to her command 
of the sea England is able to carry on the greater part 
of her over-sea commerce with almoct the same con- 
fidence and security as in time of peace. That means 
that her industries are still fed with most of the raw 
materials they require ; that her people can still buy 
most of the foreign foods they are accustomed to 
consume ; that her manufactured goods can still be 
sold in most of her usual markets. What she has lost 
is the very important market which Germany pre- 
viously offered for British goods, and the almost 
equally important supply of materials of various kinds 
produced in German factories. She has also suffered 
by the decreased power of her Allies to buy British 
goods in consequence of the interruption to their 
trade by the German invasion of their territory. 

As against these losses must be set the stimulus 
which war itself gives to industry. That is a point 
which pacificists of the Norman Angell type com- 
pletely overlooked in their pre-war prophecies of 
commercial ruin. War creates an immediate demand, 
not only for men to serve in the ranks, but also for 
all kinds of munitions of war, from rifles to woollen 
scarves, from field glasses to corrugated iron sheeting. 
There is consequently a direct call upon the labour 
market and a direct stimulus to an enormously wide 
range of industries. But, it ought to be asked, How 
can these war demands be satisfied except at the 
expense of other industries ? The same sovereign, it 


may be argued, will not pay for both rifles and silk 
frocks, and if there is an increased demand for rifles 
and uniforms there will be a diminished demand for 
frocks and theatre tickets. 

In the main that proposition is true ; but there is 
a very important counter consideration. Normally in 
every country there is a very considerable margin of 
unemployed energy. Few people are doing all the 
work of which they are capable ; many are doing 
none at all. The stimulus of war calls into activity 
this dormant energy, and thus to a considerable extent 
creates out of human resources previously unutilised 
the means of carrying on war. The best illustration 
that can be given is one that is centuries old : when 
the young men go to battle the old men and women 
gather the harvest. A similar process operates even 
in highly industrialised countries like England, where 
agriculture is relatively unimportant. There is in 
England an enormous leisured class of rich or mode- 
rately rich people ; there are also many hundreds of 
thousands of men engaged in different types of em- 
ployment, whose work can be temporarily laid aside 
or transferred to other men who will work longer 
hours ; and finally, there is a very considerable number 
of men who are close to the poverty line because they 
cannot in time of peace find regular work. These 
considerations explain how it is possible for England 
to put an extra million recruits into training and to 
expand her production of all munitions of war 
without trenching upon- her industrial powers of 

But there remains the question of payment. From 


what sources are these men and their munitions paid 
for 1 To some extent, as already indicated, they are 
paid for out of money which would otherwise go to 
maintain what may be called the luxury trades. The 
money saved on frocks and jewellery helps to feed 
the war loan. But England has other resources of a 
peculiarly valuable character. In most years there 
is a steady outflow of capital from Great Britain 
to finance railways and other industrial enterprises 
throughout the world. The probability is that this 
outflow will for the present almost entirely cease, 
and that an appreciable amount of foreign invested 
capital may be recalled. So far as this operates, 
the capital to finance the war will be available 
without checking the supply of capital to domestic 
industries. To put the same proposition more 
broadly, just as England has a margin of human 
material, so she has an immense margin of capital. 
The income of her citizens from foreign investments 
alone is almost equal to the sum raised by taxation 
towards meeting the peace expenditure of her 
Government. She is thus in a position to face 
without any severe strain the expenditure which war 
may involve. 

As regards Government finance m particular, one 
or two facts are worth noting. Both France and 
Germany have for many years past been rapidly 
adding to their national debts even during years of 
peace ; on the other hand, Great Britain, except in 
time of war, lives within her means and pays off 
debt steadily. In the eleven years that have elapsed 
since the closing of the accounts for the Boer War, 


the gross aggregate liabilities of the British Govern- 
ment have been reduced by more than £90,000,000, 
or at the rate of about 8j million pounds a year. In 
the budget for the current financial year the provision 
made for the reduction of indebtedness was at approxi- 
mately the same rate. The maintenance of a sinking 
fund of this magnitude is a proof that England's 
public finance — in spite of the somewhat lavish 
expenditure of the past few years on social reforms — 
is essentially sound. Of the general strength of her 
economic position there can be no question. If 
further proof were needed, it is to be found in the 
response made to the Government's appeal for a war 
loan of the unprecedented amount of £350,000,000. 
The closing of the Stock Exchange prevented the 
speculative subscriptions which are the usual accom- 
paniment of the issue of a big loan ; it also prevented 
the raising of money by the sale of other securities. 
Yet, in spite of these obstacles to success, the whole 
sum asked for, with a satisfactory margin over, was 
promptly subscribed. 

(Signed) Harold Cox. 




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England, Germany and Europe. By James Wycliffe 

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The Economic Strength of Great Britain. By Harold Cox. 

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