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 UNIVERSITY OF CALIFORNIA 
 AT LOS ANGELES
 
 THE FISCAL QUESTION
 
 THE 
 
 FISCAL QUESTION 
 
 ' 
 
 BY 
 
 A. BONAR LAW, M.P. 
 
 FIVE RECENT SPEECHES 
 REVISED BY THE AUTHOR 
 
 LONDON 
 THE NATIONAL REVIEW OFFICE 
 
 23 RYDER STREET, ST. JAMES'S 
 1908
 
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 PREFATORY NOTE 
 
 The Speeches printed in this Volume 
 consist of those delivered in 1907 and 
 1908 of which full reports were available. 
 
 37!
 
 CONTENTS 
 
 Manchester, March 25, 1907 . 
 Newcastle, October 10, 1907 
 London (Hotel Cecil), November 26, 1907 
 Aberdeen, January 31, 1908 . 
 Bournemouth, March 6, 1908 
 
 PAGE 
 I 
 
 27 
 62 
 
 79 
 109
 
 MANCHESTER 
 
 March 25, 1907. 
 
 This is the first time I have had the honour 
 of addressing an audience in Manchester, and 
 it is my intention to confine myself entirely 
 to the question of the fiscal policy of this 
 country. This is a subject upon which I 
 have made many speeches, in different parts 
 of the country, but so far I have never 
 adopted the plan of framing my speeches on 
 the particular industries of the districts in 
 which I have happened to speak. Our case for 
 Tariff Reform is based on broader grounds 
 than that. We are pressing it on the people 
 of this country, not because it will be a good 
 thing for this or that trade, but because, in
 
 2 THE FISCAL QUESTION 
 
 our opinion, it is essential for the well-being 
 of the great industrial population throughout 
 the whole of the United Kingdom. The 
 great industry of which your city is a centre is 
 in a special position, and I readily admit that 
 if it could be shown that the change which we 
 recommend would injure in any degree, how- 
 ever slight, the cotton industry of Lancashire, 
 the industry which is one of the most important 
 in the United Kingdom — it is the most im- 
 portant of our export trade — if that could be 
 shown, then it would indeed be true that it 
 would be an argument so strong against any 
 change in our policy that it would be difficult, 
 if not impossible, to overcome its strength. It 
 is for that reason that I shall endeavour calmly 
 and as fairly as I can to examine the present 
 position of the cotton industry, and to consider 
 what would be the effect on that industry 
 of the adoption of the change in policy which 
 we recommend. 
 
 Let me say at the very beginning that 
 we do not claim, and never have claimed, 
 that all the industries of this country are on 
 the same footing in regard to this question.
 
 THE FISCAL QUESTION 3 
 
 We never have claimed that they are all 
 suffering in an equal degree from what we 
 believe to be the evils of the fiscal system 
 at present enforced in this country. I do not 
 forget that I am speaking in the Free Trade 
 Hall, which brings back to us memories of 
 the great struggle which was waged in this 
 country sixty years ago, and in which 
 Manchester bore so prominent a part. 
 
 Speaking for myself, I believe that the 
 change which was then brought about was 
 at the time, and for many years afterwards, 
 a distinct gain to the people of this country. 
 The argument by which that change was 
 brought about was this — that if we open our 
 doors to the raw materials of foreign countries 
 they will in return buy from us in increasing 
 quantities the manufactured goods we desire 
 to sell. But all that is changed. The Free 
 Trade system which was then enforced has 
 completely gone — just as completely, without 
 any effort on our part, as if we ourselves had 
 made the change. The stream of trade flows 
 freely in one direction now, but it is blocked 
 when it is desired that it should flow in the
 
 4 THE FISCAL QUESTION 
 
 other. We can buy freely, but restrictions 
 are raised against us on every side when we 
 desire to sell. That change, as I said, has 
 been brought about by no action on our part. 
 It is due to the action of foreign countries 
 which used to be our customers, but which 
 are now our competitors. They have de- 
 liberately adopted a fiscal system which is 
 intended to have the effect, and which has 
 the effect of preventing, so far as they can 
 prevent, them from buying any of our manu- 
 factures, while they are free to pour their 
 manufactures into our markets. That change 
 means that these foreign countries, instead of 
 being customers, have become successful com- 
 petitors. The reason of their success is not 
 difficult to find. It was expressed a few years 
 ago by Mr. Andrew Carnegie, in an address 
 to the students of the St. Andrews University, 
 in words very obvious and commonplace, but 
 very true : " The first weapon for capturing 
 foreign markets is to secure the market at 
 home." From the vantage-ground behind the 
 ramparts of their own protective tariffs these 
 foreign countries have built up their own
 
 THE FISCAL QUESTION 5 
 
 manufactures and, in ever-increasing degree, 
 and with ever-increasing success, are pushing 
 forward, in competition with us, not only in 
 the neutral markets of the world, but in our 
 own market as well. 
 
 That brings me to the root principle of our 
 demand for a change in our fiscal system. It 
 is a principle that is not dealt with at all in the 
 older books of political economy that are still 
 the standard, and for this reason : that it did 
 not exist at the time these books were written. 
 What is of greatest importance is the ability 
 of the manufacturer to produce on a large 
 scale. Under modern conditions, the factor 
 which tells most on the cost of production, 
 far more than wages or cost of raw material, 
 is the scale on which you produce, and you 
 cannot produce on a large scale unless you 
 have a large market. We have not a large 
 market. Consider our position in contrast 
 with Germany, for instance. The German 
 manufacturers have a market of sixty millions 
 of people, from which, so far as they can do 
 it, we are excluded. We have a market of 
 only forty millions, and in our market the
 
 6 THE FISCAL QUESTION 
 
 German can compete on equal terms, and 
 in some cases on better terms, with our own 
 manufacturers. The result is that, speaking 
 broadly, our foreign competitors can and 
 do produce on a larger scale, and therefore 
 at a lower cost, than is possible for us, and 
 we are therefore faced constantly with this 
 condition, that no matter how energetically 
 our people — manufacturers and workpeople 
 together — may strive for success, they are 
 always met with this difficulty, that it is not 
 possible for them to produce on the same scale 
 as production is carried on by our foreign 
 competitors. Now I am perfectly ready to 
 admit that the argument which I have just 
 used, which points to the decay or the want of 
 expansion in many, or nearly all, of our staple 
 industries, does not apply to cotton. But as 
 an illustration of the force of this argument 
 take iron. A few years ago we were easily 
 in the first position ; now we are a bad third, 
 and your prosperity is largely dependent on the 
 much greater prosperity enjoyed by Germany 
 and the United States. 
 
 The cotton industry has not suffered in the
 
 THE FISCAL QUESTION 7 
 
 same way. Why ? The reason is perfectly 
 obvious. You do not depend in Lancashire, 
 and have never depended for the sale of 
 your goods, on the markets of your foreign 
 competitors who raise tariffs against us. You 
 depend now on the great neutral markets of 
 the world which even yet have not erected 
 these barriers against us. You still have Free 
 Trade here, and the result is that the history 
 of that trade, the fact that it has been more 
 successful than other industries, really proves 
 the truth of the principle upon which our 
 demand for change is based. You have held 
 your own in the cotton trade because you have 
 been able to organise your industry, produce 
 on the largest scale and make full use of the 
 immense advantage of being first in the field 
 before any of our competitors were there. It 
 is true that the cotton industry has flourished, 
 and though the history of that industry proves 
 that under existing conditions it can be suc- 
 cessfully conducted under a system of free 
 imports, it proves also that free imports are 
 not necessary for its success. There has been 
 expansion of the industry ; but it has not been
 
 8 THE FISCAL QUESTION 
 
 very great. The best test of the expanding 
 prosperity of a trade is the number of people 
 to which it gives employment. Judged by 
 that test it is not expanding at all. The 
 number employed at the last census was 
 absolutely less in spite of the increase in 
 population than the number employed ten 
 years before. In one respect there has un- 
 doubtedly been expansion. The total quantity 
 of raw cotton consumed in the cotton industry 
 in this country has increased. But is it only 
 in this country there has been an increase? 
 Let me contrast the history of the cotton trade 
 in this country with the history of the same 
 trade in other countries. 
 
 I have taken the five years beginning 1881, 
 and the five beginning 1901. In the first 
 period the quantity of cotton consumed in this 
 country was fourteen hundred million pounds, 
 in the second period it had risen to sixteen 
 hundred million pounds. In the United States 
 in the first period the amount was nine hundred 
 million pounds, and in the second had risen to 
 twenty-one hundred millions, an expansion 
 of twelve hundred millions against our two
 
 THE FISCAL QUESTION 9 
 
 hundred millions. I admit that is not a fair com- 
 parison. The United States has the advantage 
 of an immense market of her own and of her 
 own raw material. But make the comparison 
 with Germany, with no such advantage. 
 Even in Germany the expansion has been far 
 greater than with us in the total volume of 
 the trade. In the first period the quantity 
 consumed in Germany was three hundred 
 and thirty million pounds, but twenty years 
 later it had risen to eight hundred million 
 pounds, or more than twice the increase in the 
 United Kingdom. This shows that, although 
 our system makes a successful cotton industry 
 possible, the cotton industry can grow up and 
 expand with a different system from that which 
 prevails in this country. 
 
 But to examine this question in detail we 
 must consider what it is the cotton industry 
 stands to gain and what to lose by the 
 change in our system which we recommend. 
 Take the loss first. I have heard the argu- 
 ment used that if we were to do anything 
 to offend the United States, from whence 
 practically our whole supply of raw material
 
 io THE FISCAL QUESTION 
 
 comes, the United States could put on an 
 export duty which would immediately ruin our 
 trade. But I do not think that is an argument 
 that would be seriously used by any one. The 
 people of the United States have always 
 looked at their fiscal policy as a question 
 of business, and they think we would be fools 
 to look at it in any other light. The true 
 attitude on such questions towards the United 
 States and every other country is not that of 
 a pretended subservience, but the attitude 
 adopted the other day by the Prime Minister of 
 Canada, who, in speaking of the bonding privi- 
 leges given by the United States to Canada, 
 and Canada to the United States, said, " We 
 know from past experience that our American 
 neighbours are not disposed to give anything 
 if they can help it, but they cannot find fault 
 with us if we take a leaf out of their own book 
 and copy their own methods." The Americans 
 would put an export duty on cotton to-morrow, 
 without regard to our susceptibilities, if they 
 thought it would pay them, but not otherwise. 
 We are told that if we adopt the system 
 which we recommend it will add to the cost
 
 THE FISCAL QUESTION n 
 
 of production, that the margin is very small, 
 and the result will be that manufacturers will 
 lose their markets throughout the world. In 
 what way is the cost of production to be 
 raised ? I know that among politicians of the 
 baser sort the pretence is made that we 
 purpose to tax the raw material of your 
 industries. No one ever said so, and no one 
 ever means to do anything of the kind. 
 There is really only one way in which the cost 
 of production might be raised, and that is 
 that the change in the system might result in 
 a general raising of the standard of wages 
 throughout the country, which would mean 
 that higher wages would have to be paid in 
 Lancashire also, and I am convinced there is 
 not a cotton manufacturer in Lancashire who 
 has considered this subject and is opposed to 
 the change, who, if he were candid, would not 
 admit that the root ground of his objection 
 is that he would have to pay larger wages to 
 the men and women working for him. No 
 doubt the operatives in the Lancashire mills 
 could face an increase in their wages with 
 equanimity, but they would be wrong to do
 
 12 THE FISCAL QUESTION 
 
 so if the real effect of it were to lessen their 
 powers of production and diminish the markets, 
 for in the long run the operatives would feel 
 the effect of that quite as much as the em- 
 ployers. To the best of my belief the adop- 
 tion of the changed fiscal policy we recommend 
 would have a tendency to raise the standard 
 of wages throughout the whole of the country, 
 though in my opinion its chief effect would 
 not be so much to put up wages as to give 
 greater steadiness of employment. As against 
 this possible increase in the cost of production 
 through higher wages, what have we got to 
 set on the other side ? Take first the home 
 market. Something like a fifth of your pro- 
 duct is employed in the home market, and 
 obviously anything which gives a greater 
 amount of wages there, through higher rates 
 or through better conditions of employment 
 for the industrial classes of the country, will 
 give them increased buying power, from which 
 the industry of Lancashire, like any other 
 industry throughout the country, is bound to 
 benefit. But the real advantage to the cotton 
 industry will come not so much from the home
 
 THE FISCAL QUESTION 13 
 
 market as from what I may call the Imperial 
 side of this question. 
 
 We are told that Lancashire at the last 
 General Election gave a verdict decisive and 
 final on the question of our fiscal system. I 
 do not accept that verdict. We shall judge 
 better at the next election, when the issue 
 is not confused by a Taff Vale decision, 
 which set the whole of organised labour 
 against it ; when it is not confused by the 
 cry of " Chinese slavery," which enabled one 
 of the political parties of this country to 
 exploit the highest and noblest feelings of 
 our people, their feeling of humanity and pity 
 towards subject races — enabled them to exploit 
 these feelings for partisan purposes. But what- 
 ever the opinion of Lancashire may be on the 
 fiscal question, the men of Lancashire are not, 
 and cannot be, Little Englanders. I think 
 it is not a question of sentiment. The whole 
 future of their industry depends on our con- 
 tinuance as one of the great Powers of the 
 world. What is your chief market to-day ? 
 It is India. But there is not a man who does 
 not know that that is a market for us only
 
 i 4 THE FISCAL QUESTION 
 
 because India is under the British flag, and 
 that if any change took place in that respect — 
 if it were possible, for instance, for India to 
 become self-governing — the whole sentiment 
 of the people of India is in favour of establish- 
 ing and protecting Indian industries. In that 
 case you would be shut out of their markets. 
 If, which is more likely, India were seized by 
 another Power, the result would be the same, 
 and you would be shut out of their markets. 
 Your market in India depends on our power 
 to retain India, and we can only retain India 
 so long as we are one of the great Powers 
 of the world. I have never on a single 
 occasion dwelt, in arguing this question, on 
 what is called the Imperial side of it. I have 
 not done so — not because I do not myself 
 attach importance to that view, not because 
 I do not believe that the democracy of this 
 country is proud of the past history of their 
 country, and desires that that history shall 
 continue — but because I have always believed, 
 and believe now, that the change may be 
 amply justified on trade grounds, and on trade 
 grounds alone.
 
 THE FISCAL QUESTION 15 
 
 But here the trade and the Imperial side 
 go hand in hand. One depends on the other, 
 and it is not any figure of rhetoric, it is simply 
 stating a fact as certain as that two and two 
 make four, that if in the next generation our 
 great competitors, Germany and the United 
 States, increase in population and in wealth 
 in the same proportion as they have increased 
 in the last generation, and we only increase in 
 the same proportion ; at the end of that period, 
 we shall have fallen inevitably to the rank of 
 a third- or fourth -rate Power in the world. 
 How is that fate to be avoided? If it can be 
 avoided at all it can be avoided in one way, 
 and one way only, by making common cause 
 with those great Colonies that have sprung 
 from us ; by combining with them ; by making 
 common interest with them ; and by uniting 
 their strength with ours. If we can do that, 
 then in the future, as in the past, we can feel that 
 the position of the country is secure. I wish 
 you all, and especially those who disagree with 
 me on this general question, to keep this in 
 mind. The proposal for this commercial union 
 was not made by Mr. Chamberlain, it was made
 
 16 THE FISCAL QUESTION 
 
 by no one in these islands, it came originally, 
 and has been pressed ever since by the Prime 
 Ministers of the self-governing Colonies. Of 
 course, we are told that they are doing it only 
 in their selfish interests. I do not believe that 
 is true. Their position is precisely the same 
 as ours, they have the first interest for them- 
 selves and the next for their own friends and 
 relations, and desire, as we do, to strengthen 
 the whole Empire. When the American Re- 
 public was first formed there was no commercial 
 union between the States. It took nearly a 
 generation to do that. But the moment it 
 was brought about, the solidarity of the whole 
 country was secured, and it has never since 
 been shaken. Exactly the same thing has 
 occurred in Germany. The policy of Bismarck 
 would not have been possible if, long before that 
 policy was adopted, the different German States 
 had not been brought into close commercial 
 union by a common system of tariffs through- 
 out their borders. The point of the argument 
 which I have been putting before you is that 
 even from the trade point of view the industry 
 of Lancashire depends on our greatness as a
 
 THE FISCAL QUESTION 17 
 
 nation, and that the one way to secure a 
 continuance of that greatness is by a begin- 
 ning in the direction of close commercial union 
 throughout all the divisions of the British 
 Empire. 
 
 Let me now leave this region of more or 
 less high politics. I prefer to discuss this 
 question on trade grounds. Let us look on 
 the different markets on which you depend for 
 your trade, simply from the point of view of 
 trade considerations. Take first India. That 
 is by far the most important of your markets. 
 In India up to now, for the reasons I have 
 already indicated, we are feeling very little 
 competition. But the competition is begin- 
 ning. It has begun to a small extent from 
 the United States and Germany, but competi- 
 tion is being threatened and has begun from 
 another quarter which is far more dangerous — 
 the competition of Japan ; and the Lancashire 
 manufacturer is now face to face with that 
 competition. I do not believe there is any 
 sagacious manufacturer in Lancashire who is 
 looking out on the world and forecasting 
 the prospects of his trade who does not feel
 
 18 THE FISCAL QUESTION 
 
 that the competition of Japan is going to be 
 soon a deadly competition with which we shall 
 have to deal. The Japanese are already dis- 
 playing in the arts of peace precisely the same 
 qualities they displayed a few years ago in the 
 arts of war. They are showing their capacity 
 to organise and adapt Western methods, and 
 at the same time they have an inexhaustible 
 supply of cheap labour at rates with which it 
 is impossible for this country to compete. 
 I daresay you think that is remote. It is 
 not. The competition in India is bound to 
 be severe, and to come soon. How can we 
 meet it ? 
 
 You cannot meet it on Free Trade grounds. 
 You must meet it on the grounds of Pre- 
 ferential Trade. Speaker after speaker on 
 the other side assumes that Preferential Trade 
 cannot be made to apply to India. There is 
 no part of the Empire that can get more and 
 give more than India. Take even our present 
 taxation. A preference on taxation now im- 
 posed in this country on tea, coffee, cocoa, 
 and tobacco — all of which are largely produced 
 in India, and which can be produced in much
 
 THE FISCAL QUESTION 19 
 
 larger quantities — a preference on these 
 commodities would give an immense stimulus 
 to the whole industrial community of India. 
 But if we adopted — as I think we shall 
 adopt — a system of putting a small duty on 
 foreign corn, and leaving corn grown within 
 the British Empire to come in free, there 
 is in India practically a boundless possibility 
 of expansion in the growing of wheat, and 
 India would share equally with our Colonies 
 in the benefit of such a preference. There 
 is much we can give to India. In return 
 we would have the right to ask, and expect 
 them to grant us, a preference on the manu- 
 factures carried into India, which would make 
 us permanently free from the danger of foreign 
 competition. 
 
 Next to India, the market of most import- 
 ance to Lancashire is Japan, China, and the 
 Far East. Already, even in this period 
 of booming prosperity, already Japan is a 
 diminishing market. Japan has adopted the 
 exact system pursued by the Western in- 
 dustrial countries. She has erected tariff 
 walls, and behind those walls is building up
 
 2o THE FISCAL QUESTION 
 
 a great manufacturing industry in cotton. In 
 a few years she will have ceased altogether 
 to be a market for your goods and will be a 
 competitor, with special advantages in the 
 China market which will make it almost 
 impossible for you to compete against her. 
 If any one looks calmly on that market, the 
 most he can hope for is not for expansion of 
 your markets in the Far East — it is for the 
 continuance of the market there on the 
 present scale. 
 
 The next is South America. There already 
 there are the beginnings of serious competition. 
 Some of the American — South American — 
 Republics have already begun to erect Pro- 
 tective tariffs. There is competition also from 
 Germany, but it is not from this quarter com- 
 petition is most to be feared. The United 
 States have shown that they mean to secure 
 the lion's share of the trade of the South 
 American Continent. It is for that reason 
 that the Panama Canal is being made. They 
 intend as soon as it is finished to secure 
 that the trade of the continent shall as far 
 as possible be monopolised by them. The
 
 THE FISCAL QUESTION 21 
 
 Americans have shown that they do not stick 
 at half methods in trading. Whatever it 
 costs them, they will carry out that intention. 
 
 These are your three great markets. But 
 there is another, and it is that other to 
 which you have to look for expansion, — that is 
 trade within the British Empire — in Canada, 
 Australia, and Africa. I am sure every one in 
 Manchester is deeply interested in the work 
 of the Cotton- Growing Association. It was 
 supported by the last Government, and I am 
 glad to see that it is supported by the present, 
 for every one realises that so long as the great 
 industry of Lancashire is dependent for its 
 supply of raw material on a competing country, 
 so long as that is the case the industry is in an 
 extremely precarious condition. What I wish 
 to point out is this : that gentlemen, many of 
 them strong Free Traders who are support- 
 ing this movement, have all shown in the 
 constitution of the association that they do 
 appreciate the advantage of a preferential 
 system of trade. They have laid it down as 
 a condition that every pound of cotton grown 
 under the auspices of that association should
 
 22 THE FISCAL QUESTION 
 
 come to England and not go to foreign 
 countries. Now in theory that is contrary to 
 all the principles on which our free trade 
 system rests. In theory this is the position : 
 if we insist on getting all cotton grown in the 
 British Empire, the result will be that foreign 
 countries will get on lower terms the cotton 
 grown in other countries. But the gentlemen 
 who are spending their money in fostering the 
 association do not bother about theories ; they 
 desire the cotton, and that it should be all 
 used in Lancashire looms. If that applies to 
 the raw material, you will admit that it applies 
 in equal degree to the other side of the 
 question. If it is wise to secure that the raw 
 cotton shall all come to this country, it is 
 equally wise to secure that the districts from 
 which this raw material comes shall buy their 
 manufactured goods from us rather than from 
 our foreign competitors. There is a great 
 future in that direction. From every part of 
 the Empire where raw cotton can be procured, 
 there, by the nature of the climate, cotton 
 goods are largely used. There is a possibility 
 of almost unlimited expansion of your trade
 
 THE FISCAL QUESTION 23 
 
 within the area of the British Empire itself, 
 and therefore it comes to this : that for the 
 future of our trade the only feasible plan is 
 to adopt a system of preferential trade which 
 will give us in those markets an advantage 
 over our foreign competitors. 
 
 The analysis I have tried to make in regard 
 to this trade of yours brings us practically to 
 the same result which we reach in regard to 
 every big industry in the country. It is this : 
 That for the expansion and future development 
 of that industry we must and can look only 
 to the growth of trade within the British 
 Empire — trade which is already so great, 
 and in the near future is going to be so 
 enormously greater. We can only look for 
 that expansion by adopting what is called 
 sentiment — by adopting the principle that so far 
 as possible we shall trade with our friends, we 
 shall benefit our friends, and our friends will 
 benefit us ; we shall trade with our friends 
 on better terms than with our opponents. 
 
 The arguments I have tried to put before 
 you are, I am convinced, sound arguments. 
 But I know perfectly well that I am sowing
 
 24 THE FISCAL QUESTION 
 
 them, I will not say on barren soil, but on 
 soil that is not prepared to receive them. 
 They are, after all, arguments which affect 
 the future, but votes are given not on fore- 
 casts of the future, but on the condition of 
 the present. I ask you to remember that 
 the abolition of the Corn Laws was carried 
 not by the speeches of Cobden and Bright, 
 but by the Irish famine, and what the Irish 
 famine did for Cobden and Bright the first 
 serious period of bad trade will do for us. 
 
 The cotton trade is passing through a 
 period of unexampled prosperity. Every one 
 knows the reasons for that prosperity, and 
 nearly every one knows, I think, that it is 
 temporary. In every case prosperity of that 
 kind does not last for ever. A period of good 
 trade is invariably followed by a corresponding 
 period of bad trade. But there are special 
 conditions that make it almost certain that 
 the depression in the cotton trade is going 
 to be unusually severe. At the present time 
 new mills have been erected — on a system of 
 finance which is not always sound — and are 
 springing up all over the country. That is
 
 THE FISCAL QUESTION 25 
 
 an expansion in this trade which used to be 
 common in all trades, but which, for the last 
 twenty years, has been conspicuously absent in 
 this country. We should be glad to see it 
 if it rested on a sound basis. The power of 
 production in Lancashire is being enormously 
 increased, and I cannot see where the new 
 demand is to be found that is to absorb that 
 increased production. There are there, I 
 think, the seeds of a great disaster. 
 
 But what is true of the cotton trade, in that 
 respect, is true of all our great industries at 
 this moment. The prosperity in this country 
 is based largely on the far greater prosperity 
 of Germany and the United States, which has 
 mitigated their competition in foreign markets 
 and in our own market. There is bound to 
 be a reaction. It will come, and I think it 
 will come soon. I am not prophesying ; I 
 am trying to look ahead and to judge of the 
 future on the facts that are on record for any 
 one who chooses to study them. I say it 
 cannot last for ever, even in those countries, 
 and when the bad time comes it will be felt in 
 Germany and in America, but it will be felt
 
 26 THE FISCAL QUESTION 
 
 far more intensely by the working classes of 
 this country. The prosperity in Germany and 
 America has had the effect of increasing in 
 extent the powers of production in every one 
 of the great industries in both these countries. 
 Invariably when trade becomes depressed the 
 demand feels it far more quickly than the 
 supply. When the demand begins to fall 
 off at home every manufacturer strains every 
 nerve to keep his mill going full time, and he 
 looks to foreign markets to find an outlet for 
 his surplus production. It is our market that 
 will be affected by that surplus production, and 
 this is the time when, I am firmly convinced, 
 the working men of this country who are 
 looking for work and are not able to find 
 it, will realise that a system which leaves 
 our markets open to foreign competitors, 
 while they close their markets to us, and 
 which enables the goods which our people 
 would like to make, and are not permitted 
 to make, to come and be sold without restric- 
 tion at our own doors, is a system which is 
 bad for them and bad for us.
 
 II 
 
 NEWCASTLE 
 
 October 10, 1907. 
 
 The Tariff Reform movement has now been 
 
 before the country for more than four years, 
 
 and there is great difference of opinion as to 
 
 the amount of progress which it has made and 
 
 is making. One obstacle, perhaps the greatest 
 
 obstacle to its progress, is the confusion of 
 
 ideas as to what Tariff Reform really means. 
 
 The great majority of people refuse on this 
 
 question to think about things, and cannot get 
 
 beyond names. They insist on dividing the 
 
 whole world into two categories — one in their 
 
 eyes must be either sheep or goats, either Free 
 
 Traders or Protectionists. At this time of day 
 
 that is a very absurd method of looking at this 
 
 27
 
 28 THE FISCAL QUESTION 
 
 question. It is absurd from the point of 
 view of experience. All the great industrial 
 countries of the world, except ourselves, have 
 long ceased to look upon their fiscal policy as 
 a question of theory ; they look upon it as a 
 question of business, and treat it as every 
 business question must be treated — entirely 
 on its own merits. Take Germany, for instance. 
 She is a Protectionist country, but she is not 
 entirely Protectionist. Speaking broadly, she 
 is entirely Protectionist in regard to all articles 
 consumed at home, because, rightly or wrongly, 
 she acts on the belief that it is in the interests 
 of Germany that articles consumed there 
 should as far as possible also be manufactured 
 there, and give employment to German work- 
 men. On the other hand, in her shipbuilding 
 Germany is entirely free trade. No duties are 
 levied on any articles used in shipbuilding. 
 
 Such a method of looking at this question is 
 equally absurd from the scientific point of view. 
 More than a dozen years ago the greatest 
 living political economist — a man who was so 
 described in a book published recently for 
 which Mr. Haldane wrote the introduction —
 
 THE FISCAL QUESTION 29 
 
 stated that there is now among scientific men 
 no controversy between Free Trade and Pro- 
 tection. He meant simply that scientific 
 economists had abandoned the idea that it was 
 possible to find any fiscal system which would 
 be suitable at all times and under all conditions, 
 and that the fiscal system of every country 
 must change like everything else to suit the 
 varying conditions not only of the country in 
 which it is imposed, but of the world with 
 which that country desires to trade. Now, we 
 who support the Tariff Reform movement are 
 not advocating some theory which is to be 
 talked about ; we are advocating something 
 practical which we wish to see done. Tariff 
 Reform in the eyes of all those who support it, 
 and in the eyes also of those who intelligently 
 oppose it, means two things. It means taxa- 
 tion of foreign manufactures, and it means 
 preferential trade within the empire. Both 
 these proposals can be supported on grounds 
 quite apart from any question of protection. It 
 is quite possible, for instance, that a man who 
 believes that Colonial preference is economically 
 disadvantageous, might yet support it on the
 
 30 THE FISCAL QUESTION 
 
 ground that in his belief the political advantage 
 would be greater than any merely economic 
 disadvantages. In the same way, it would be 
 quite possible to support the taxation of foreign 
 manufactures, and I believe very many people 
 are now beginning to support this without 
 any question of protection, but simply on the 
 ground that it is necessary for the sake of 
 revenue to broaden the basis of our taxation, 
 and that the best method of broadening it is 
 taxation of foreign manufactures. 
 
 The amount of support which is given to 
 these two objects of Tariff Reform is not 
 equal. The mercantile classes, it is true, in 
 overwhelming numbers support both. The 
 manufacturers are almost unanimous in favour 
 of the change. This is admitted. In one 
 of his speeches on this subject, the present 
 Prime Minister stated that manufacturers 
 were in favour of Tariff Reform on account 
 of their own selfish interests. Let us admit 
 for the sake of argument that this statement 
 is correct. Manufacturers may be trusted 
 to be the best judges of what is in their 
 own interest, but surely it follows that if this
 
 THE FISCAL QUESTION 31 
 
 change is in the interests of manufacturers it 
 must also in the long run be in the interests 
 of the men who work for the manufacturers. 
 If it means a greater volume of business to 
 manufacturers, it must mean a greater amount 
 of employment for the workers. If it means 
 greater profits for the manufacturers, then it 
 ought to mean — and it will be your own fault 
 if it does not mean — better wages for the 
 workmen. But it is not only the manufacturers 
 who support this change. The Chambers of 
 Commerce, which were said by Mr. Lloyd- 
 George the other day in the House of Commons 
 to fairly represent the trade and industry of the 
 country, but which on the whole are more 
 representative of the mercantile than of the 
 manufacturing side of business, have shown 
 clearly by the decision of the Associated 
 Chambers of Commerce last year, and by the 
 vote of the London Chamber of Commerce 
 this year, that these bodies are overwhelmingly 
 in favour of the changes which we desire to 
 see made. 
 
 So far the opposition to this movement has 
 come from the working classes, but their
 
 32 THE FISCAL QUESTION 
 
 opposition is not directed equally against both 
 proposals. I believe it is the case that workmen 
 have yet to be converted to believe in the 
 advantages of Colonial preference, but if the 
 question of leaving our market open without 
 any restriction to manufactured goods which 
 we make and which come in from countries 
 where our manufactures are rigorously excluded, 
 if this question could be put before the working 
 classes by itself and entirely on its own merits, 
 I have no doubt whatever that the vote would 
 be by an overwhelming majority against the 
 continuance of our present system. Members 
 of the present majority in the House of Commons 
 have admitted to me that if our proposal had 
 simply been for the taxation of foreign manu- 
 factures, without any proposal for Colonial 
 preference, which involves the question of dear 
 food, it would have been impossible to resist 
 the movement. 
 
 That this view is correct is proved, if 
 proof were needed, by an instance which has 
 happened within the last few weeks — the 
 placing by our War Office of a contract for 
 horse- shoes in America. There is really
 
 THE FISCAL QUESTION 33 
 
 nothing mysterious about this transaction. 
 It is the inevitable result of our free import 
 system, if that system is to be logically carried 
 out. The effect of this transaction both on 
 employment at home and on our manufacturing 
 industry is precisely the same as the general 
 effect of leaving our home market open with- 
 out restriction to competitors who close their 
 markets to us. But this issue, taken by itself, 
 is comparatively simple. The Labour leaders, 
 therefore, are able to understand it, and in 
 consequence they have expressed unanimously 
 their hostility towards such transactions, and 
 they have expressed it in language quite as 
 strong as could be used by any Tariff 
 Reformer. 
 
 It is perhaps worth while to refer in pass- 
 ing to the speech in which Mr. Haldane 
 defended this transaction. He said that he 
 was going to philosophise, and he has a 
 reputation of being a philosopher, a reputation 
 which is no doubt deserved, but which would 
 certainly never have been gained by his political 
 speeches. When he gets on to a political 
 platform, what Mr. Haldane talks is, well — 
 
 D
 
 34 THE FISCAL QUESTION 
 
 not philosophy. Some philosophers have a 
 very poor opinion of the intelligence of 
 ordinary people. They think they have to 
 talk down to the level of their audience, and 
 they are apt to overdo it. Mr. Haldane 
 certainly overdid it on this occasion. He said 
 that this transaction was an illustration of the 
 beauties of Free Trade. How could the War 
 Office illustrate trade of any kind, free or 
 otherwise ? The War Office buys, but it 
 does not sell ; but trade consists in both 
 buying and selling. It is quite possible that 
 if you could find a nation which consumed 
 only, and did not produce, a free import 
 system would suit that nation best, and there 
 is at least one man who has adopted a really 
 ideal fiscal system — Mr. Carnegie, who is a 
 Protectionist in America, where he makes his 
 money, and a Free Trader in Great Britain, 
 where he only spends it. Mr. Haldane said 
 also that this transaction illustrated the ad- 
 vantages of a Free Trade system, which had 
 the effect of causing us to export manufactured 
 goods and to import raw material, and he 
 expected his audience t"> believe that this
 
 THE FISCAL QUESTION 35 
 
 beautiful theory was illustrated by this transac- 
 tion, when what we are sending to America is 
 raw iron, and what they are sending to us is 
 horse-shoes. 
 
 But, in my opinion, these two proposals 
 — preferential trade and taxation of foreign 
 manufactures — are part of the one idea ; 
 the one is the complement of the other, and 
 the adoption of the one would inevitably lead 
 to the adoption of the other. The object of 
 each is to enlarge the market for our manu- 
 factured goods. In the one case that object 
 is aimed at by means of a preference to be 
 given to us in the Colonies ; in the other case 
 it is aimed at by trying to obtain in our own 
 home market the preference for our own home 
 manufactures which has hitherto been given 
 to the manufactures of foreign countries ; but 
 neither of these results can be fully attained 
 without the other. 
 
 I propose to deal to-night only with the 
 question of Imperial preference. Let us look 
 at this question entirely from the point of view 
 of the trade interests of this country. Let 
 us look at it impartially, just as we should
 
 36 THE FISCAL QUESTION 
 
 regard any other business question. Let us 
 consider what advantages we may reasonably 
 hope to derive from such an arrangement, 
 and let us consider also without prejudice 
 what price we shall have to pay for these ad- 
 vantages, and then judge whether or not the 
 price is too high. Now, what is it from the 
 point of view of trade that is most required by 
 this country? If that question had been asked 
 before this controversy began, every one would 
 have answered, and I think impartial men 
 would answer now, that our greatest need is 
 markets abroad for our manufactured goods, 
 for the goods which give employment to our 
 people. If you have heard or read many 
 speeches on the free import side of this 
 question, you will find that they all speak of 
 the total imports and exports as if all kinds 
 of imports and exports were of precisely the 
 same value. You will find also that in nine 
 cases out of ten they will tell you that Tariff 
 Reformers desire to restrict imports. We do 
 nothing of the kind. We are not so foolish. 
 We desire to see both imports and exports 
 increase, but we desire to see their character
 
 THE FISCAL QUESTION 37 
 
 changed. What we aim at is that a larger 
 and larger proportion of our imports should 
 consist of raw materials, to be worked up at 
 home, and that a larger and larger proportion 
 of our exports should consist of manufactured 
 goods which have given employment to our 
 own workmen. All exports are not of equal 
 value. It is easy, for instance, to sell raw 
 materials. Take coal, of which you know some- 
 thing in Newcastle. Your coal is welcomed 
 with open arms by our greatest competitors, 
 who do their utmost to exclude our manu- 
 factured goods. They do not put a prohibitive 
 tariff on coal. Why ? Do you suppose that 
 they do that to suit us ? They do it because 
 their whole industrial system is based on 
 encouraging the import of raw material and 
 on discouraging the import of manufactured 
 goods. They leave the market for our coal 
 open to please themselves, and no change in 
 our fiscal system would alter their policy in 
 that respect, for they cannot change it without 
 at the same time destroying the whole system 
 on which their industry rests, and without 
 doing themselves, from their own point of view,
 
 38 THE FISCAL QUESTION 
 
 far more harm than they could do us. It used 
 to be maintained — it has indeed been main- 
 tained over and over again by Mr. Asquith — 
 that the export of coal is just as valuable as 
 any other export. That is a strange doctrine, 
 for, after all, coal is capital, and when once it 
 has been removed it cannot be replaced. That 
 view used to be held, but it can hardly be 
 repeated again, for at the Colonial Conference 
 Mr. Lloyd- George, who is President of the 
 Board of Trade, and as President of the Board 
 of Trade may be expected more than any one 
 else to express the views of the Government 
 on a trade question, stated that the exports of 
 raw material were not a test ; that the real 
 test of the trade position of this or any other 
 country is the export of manufactured goods. 
 
 Now, if it be admitted, as Mr. Lloyd-George 
 admits, that what this country chiefly needs is 
 an increasing market for our manufactures, 
 where is that market to be found in the future ? 
 It cannot be found in the great industrial 
 countries which used to be our customers, but 
 which are now our competitors, which are each 
 year supplying more and more completely
 
 THE FISCAL QUESTION 39 
 
 their own requirements, and each year are 
 finding a larger and larger surplus with which 
 they compete with us not only in neutral 
 markets, but even in our own home market. 
 This is a statement which is not made without 
 authority. We have the figures, and these 
 figures show that in spite of the immense 
 expansion during the last twenty years of the 
 total trade of the great protected countries, our 
 exports of manufactures to those countries have 
 been absolutely stationary, and the total last 
 year was no greater than the total fifteen years 
 ago. Such an outlet for our manufactures can 
 be found only in one of two directions. It 
 can be found either in the great undeveloped 
 countries like China or South America, which 
 have not yet erected prohibitive tariffs against 
 us ; or it can be found within the British 
 Empire. These neutral markets are of the 
 greatest importance, but it is the fact that 
 even in these neutral markets we are not 
 holding our own against our great foreign 
 competitors. That statement was questioned 
 in the House of Commons on a fiscal debate 
 last session, when China and South America
 
 4 o THE FISCAL QUESTION 
 
 were pointed to as countries in which our 
 trade was so rapidly increasing. Since then 
 the Board of Trade have published a return 
 giving the total exports to China and South 
 America for the United Kingdom, and also 
 for Germany and the United States, during 
 the last twenty years. What does that return 
 show ? It shows that our average exports in 
 the first five years, beginning 1887, were 31 
 millions, and the average exports of Germany 
 and the United States combined were 17 
 millions ; that is, ours were nearly twice as 
 great as those of these two countries together. 
 Look now at the result in the average of the 
 last five years ending 1906. Our exports have 
 increased ; they were at the rate of 39 millions 
 in the last period, as against 31 millions in the 
 first period, an increase of 8 millions. But 
 what about our competitors ? Whilst our 
 exports have increased 8 millions, theirs have 
 increased 18 millions, and they are pulling up 
 on us so quickly that now their total instead 
 of being little more than half is nearly as great 
 as ours. We are, therefore, not holding our 
 own in these neutral markets.
 
 THE FISCAL QUESTION 41 
 
 The real hope for expansion of our trade 
 in the future lies within the British Empire. 
 Probably there are not many of those whom I 
 am addressing who realise how big a share of 
 our export trade in manufactured goods is now 
 done with the British Empire. If you take the 
 average of the last five years you will find that of 
 our total exports of manufactures nearly 40 per 
 cent were sent to countries within the British 
 Empire, but that is not all. The Board of 
 Trade have analysed the export of manu- 
 factured goods. They have analysed them in 
 proportion to the amount of labour employed 
 in their production. This analysis shows that 
 our exports to the Colonies consist of goods in 
 a far more finished state than our exports to 
 foreign countries, so that from the point of 
 view of the amount of employment given, it 
 is no exaggeration to say that nearly half of 
 our total exports in manufactures are now sent 
 to countries within the British Empire. But 
 we have to look at the state of trade not only 
 at this moment ; we have to look at the 
 tendency of trade. We have to think not of 
 to-day only, but of to-morrow as well. Now,
 
 42 THE FISCAL QUESTION 
 
 not only is our trade within the Empire by 
 far the most important to us at this moment, 
 but it is the only market for our manufactures 
 which has been and is steadily expanding. It 
 is our greatest market now. What is it going 
 to be in the future ? Take, for instance, 
 Australia and Canada. They are even now 
 small nations ; they are going to be great 
 nations. Canada alone has resources almost, 
 if not quite, as great as those of the United 
 States. Population is for the first time pour- 
 ing into her borders. She is going in the 
 future — and in the immediate future — to do 
 an enormous trade. That trade with the 
 Colonies will be done by somebody, but how 
 can we hope to increase our share of it, or 
 even to retain the share we now have without 
 a preference ? 
 
 Great as has been the expansion of our 
 trade with the Colonies during the last fifteen 
 years, the expansion of trade of the foreign 
 countries with the same markets has been 
 greater still. How can it be otherwise? If 
 we find it, as we do find it, increasingly difficult 
 to meet foreign competition on our own home
 
 THE FISCAL QUESTION 43 
 
 market, where all the conditions are in our 
 favour, is it not obvious that it will be much 
 more difficult to meet the same competition 
 in other parts of the British Empire if we 
 have no preference ? Here is the position. 
 The British Empire is for us even now far 
 and away our best customer ; it is going to 
 be a customer of infinitely greater importance. 
 An enormous trade, and the precise kind of 
 trade which is needed by us, will be done 
 by somebody with the British Colonies. It 
 rests with us now — it will not rest with us for 
 ever — it will not rest with us long, I believe, 
 — to decide whether or not that great and grow- 
 ing trade is to be done with us or with our 
 competitors — whether it is to give employment 
 to British or to foreign workmen. 
 
 That is the case, such as I can state it, of 
 the advantages which may be expected from 
 preference. What is to be said on the other 
 side ? The case for free imports was presented 
 to the Colonial Conference under the best pos- 
 sible auspices. It was presented by two of the 
 ablest men in the Government, Mr. Asquith 
 and Mr. Lloyd-George, and it was presented
 
 44 THE FISCAL QUESTION 
 
 by them when they had ample time in which 
 to prepare their arguments, and when they had 
 also the advantage — and no small advantage 
 it is, as I know from experience — of having 
 at their disposal the whole Civil Service to 
 supply or verify the facts by which they wish 
 to support those arguments. It may there- 
 fore be safely assumed that the case against 
 preference presented at the Conference is the 
 strongest which can possibly be made out. 
 Now what was the free import case ? As 
 regards Mr. Asquith, his speech dealt, not so 
 much with the question of Colonial preference 
 in particular, as with the general controversy 
 between Free Trade and Protection. He 
 made, so far as I remember, only one assertion 
 directly bearing on the points which I have 
 been bringing to your notice. He stated that 
 our trade with foreign protected countries has 
 been increasing more rapidly than our trade 
 with the Colonies. That statement, even if it 
 includes raw materials, is absolutely inaccurate. 
 If it refers, as it ought to refer, to manufactured 
 goods alone, it is grotesquely inaccurate. Mr. 
 Lloyd-George, as a matter of fact, did not
 
 THE FISCAL QUESTION 45 
 
 contest — indeed admitted to the full — the 
 advantages which I have tried to bring to 
 your notice. His language was, indeed, 
 simply a statement of our case, and is stated 
 so well that it is worth while reading to you 
 the exact words used by him : — " Any reason- 
 able and workable plan that would tend to 
 increase the proportion of the produce which 
 is bought by us from the Colonies, and by the 
 Colonies from us and from each other, must 
 necessarily enhance the resources of the empire 
 as a whole." 
 
 He admits the advantages, but refuses to 
 adopt our policy for one reason, and one reason 
 only — the dear loaf. He maintains, in other 
 words — and that is the other side of the 
 subject to which I shall now refer — that the 
 price that we should have to pay is too high. 
 Well, what is the price ? There is no difficulty 
 about that. All our opponents focus their 
 opposition on one point — the dear loaf. This 
 dear loaf cry is simply a bogey dressed up to 
 frighten the weak-minded, and it has now 
 become not merely a bogey but a dishonest 
 bogey. It is not, however, any the less
 
 46 THE FISCAL QUESTION 
 
 dangerous on that account. We have had 
 our lesson. There never was a cry more 
 unreal or more dishonest than the Chinese 
 slavery agitation. There never was a greater 
 political fraud perpetrated in any country, but 
 the criminals are not in the dock ; they are 
 sitting in high places, employing themselves, 
 amongst other things, in perfecting New 
 Hebrides Conventions. We must therefore 
 strip this bogey, and when we have stripped it 
 we shall find that there is nothing left but the 
 hollow turnip with the candle nearly burnt out. 
 No one has ever proposed that there should 
 be protective taxation of food in this country. 
 No one here has ever suggested, no one in 
 the Colonies has ever asked for, more than a 
 very small duty upon food stuffs. The pro- 
 posal is that there should be a duty on foreign 
 wheat of 2 s. and a duty somewhat similar in 
 amount on certain other food stuffs. Two 
 shillings a quarter means less than Jd. on the 
 price of the 4 lb. loaf. Of course our opponents 
 all tell us that the consumer will pay this duty, 
 and indeed by a process which they do not 
 explain, and which is certainly not arithmetic,
 
 THE FISCAL QUESTION 47 
 
 they say that the cost will be raised by far 
 more than the duty. " The consumer pays 
 the import duty," they all say, and I suppose 
 most of them believe that this is an axiom of 
 political economy. It is an axiom only of the 
 platform ; it is not an axiom of the study. 
 No economist, living or dead, ever made such 
 a statement. The extent to which the import 
 duty will be paid by the consumer depends 
 entirely on circumstances ; and the chief cir- 
 cumstance on which it depends is the amount 
 of competition between the duty-paying and 
 the free supply. In this case, more than half 
 of our total consumption is grown at home or 
 within the Empire, and with this free supply 
 the foreign proportion would from the first 
 have to compete. Suppose such a preferential 
 arrangement were made to-morrow, what would 
 be the result ? It is quite true that as so large 
 a proportion of our wheat comes from the 
 United States, if the whole of the American 
 supply were in the hands of one man, and 
 he refused to compete, we should be forced 
 to go to him for the balance which could not 
 be obtained elsewhere. Such a course of
 
 48 THE FISCAL QUESTION 
 
 action on his part, however, would have the 
 very effect which would be most against his 
 interest. It would stimulate production within 
 the Empire ; the next year he would send us 
 less ; each subsequent year the supply from 
 America would grow smaller until the market 
 was entirely lost. I do not think, therefore, 
 that any one who realises the practically 
 illimitable possibilities of expansion within 
 the British Empire, and who realises also 
 what the effect of competition is in every 
 trade, can honestly doubt that the effect of 
 such a preferential arrangement would be 
 rather to increase than to diminish the supply, 
 and therefore rather to lower than to raise 
 the price. And there is another consideration 
 which in this connection I would like to point 
 out. Does not the course of the market since 
 the present Government came into office itself 
 show how unreal this bogey is ? The price 
 has risen more than four times the amount 
 of the proposed duty ; yet we hear very little 
 about the dear loaf, and the deadly effects 
 which were to have been produced by 2s. have 
 not been produced by 9s., 10s., or 12s.
 
 THE FISCAL QUESTION 49 
 
 But let us assume the worst. Let us admit 
 for the sake of argument that the whole of the 
 duty would be added to the price paid by the 
 consumer. Even in that case, surely the evil 
 is not a great one. Revenue must be raised 
 in some way, and if a certain amount of money 
 is raised by a duty on wheat, a similar amount 
 can be remitted from something else. That 
 is surely very elementary, and without going 
 into the argument with which you must be 
 familiar — that if a household has to pay in the 
 course of a week a certain amount more for 
 bread, but obtains the tea used in that house- 
 hold for precisely the same amount less, the 
 pocket of the householder would not be any 
 lighter — without going into that argument, 
 surely it is evident that when something like 
 60 millions of our revenue is raised by duties 
 on food and drink which are consumed by all 
 classes, it must be possible so to readjust these 
 duties as to diminish rather than to increase 
 the cost of living to the working classes. 
 Here, then, are the two pictures : On the 
 one hand a dearer loaf which is at least 
 problematical, and the evil effects of which
 
 5 o THE FISCAL QUESTION 
 
 in any case could readily be met by a re- 
 adjustment of our taxation ; and on the other 
 hand you have a secure hold upon the markets 
 which are even now by far the most important 
 as an outlet for our manufactures, and which 
 in the future are going to be so enormously 
 more important. 
 
 Now I cannot close this subject without some 
 reference to the new Australian tariff now pro- 
 posed. Nothing since the fiscal controversy 
 has been started is more interesting, nothing 
 for any one who understands the question is 
 more amusing, than the attempt which is being 
 made by the free import press — and I am 
 sorry to say by some of the Unionists who 
 call themselves free fooders — to use the new 
 Australian tariff as a means of creating pre- 
 judice against the whole system of Imperial 
 preference. 
 
 No one either at home or in the Colonies 
 who advocates Colonial preference has ever 
 suggested that the result of it will be to 
 induce the Colonies to cease to develop their 
 own manufactures, to confine themselves simply 
 to the production of raw material, and to buy
 
 THE FISCAL QUESTION 51 
 
 their manufactured goods from us. Such an 
 aim, even if it were desirable, is obviously 
 impossible. The Colonies would never make 
 such a bargain, and more than that, I do not 
 believe that there is any one who looks upon 
 the Empire as a whole, who considers that the 
 increasing strength of any part is an increase 
 in the strength of the whole, who would desire 
 that such an arrangement should be made 
 even if the Colonies were willing to accept it. 
 The development of a country which depends 
 solely on raw material must be extraordinarily 
 slow, and it is therefore in the interest of the 
 whole Empire not only from the point of view 
 of national strength, but from the point of view 
 even of our trade, that the Colonies should 
 develop in the most rapid way possible. 
 Imperial preference does not mean free trade 
 within the Empire. If there were free trade 
 there could be no preference. The case for 
 Colonial preference is, and always has been, 
 that even after the Colonies have developed 
 their own industry to the greatest extent that 
 they find desirable or possible, there will still 
 be an enormous surplus of manufactured goods
 
 52 THE FISCAL QUESTION 
 
 which they must import from somewhere, and 
 that it is greatly to our advantage that they 
 import this surplus from us. In looking, there- 
 fore, at the new Australian tariff there are two 
 points, and two points only, which should be 
 taken into consideration. The first is, whether 
 or not after the new tariff is adopted Australia 
 will still continue to be a great importing 
 country? In the Fiscal Blue-book published 
 by the Board of Trade a few years ago an 
 attempt is made to estimate the extent of the 
 tariff barriers erected by many countries against 
 our manufactured goods. Australia stands at 
 the bottom of that list. The tariff of Germany 
 against us is estimated at 25 per cent, that of 
 Canada at 16 per cent, and that of Belgium, 
 the protected foreign country with the lowest 
 tariff, at 13 per cent, whilst the tariff barrier 
 of Australia is only 6 per cent. Nor is this 
 all. The compiler of that Blue-book points 
 out the obvious fact that the protection effected 
 by a duty does not depend solely on the 
 amount of the duty, but depends also upon 
 whether or not the industry of the country 
 imposing it is in an advanced or backward
 
 THE FISCAL QUESTION 53 
 
 condition. He points out, for instance, that 
 a 25 per cent tariff in Germany with a highly 
 developed industry is more protective than 
 100 per cent might be in a more backward 
 country. I have examined the new Australian 
 tariff as carefully as I could. I have compared 
 the new proposals with the existing tariff, and, 
 as far as I can estimate it, the extent of the 
 changes will not mean an increase of more 
 than 50 per cent in the tariff. But even 
 suppose the increase is 100 per cent, that 
 would still leave the Australian tariff lower 
 than the tariff now in force in Canada, even 
 taking the Canadian preference fully into 
 account. In the face of these facts, is it not 
 absurd to suggest that the new Australian 
 tariff is going to ruin our trade with Australia ? 
 It is absurd in the light of experience, and it 
 is equally absurd from the point of view of 
 theory. Take Canada, for instance. It is not 
 so long since Canada, for the first time, im- 
 posed a protective tariff, and yet, in spite of 
 that tariff — indeed, I believe partly in con- 
 sequence of it — in consequence, that is, of the 
 much more rapid development of Canada since
 
 54 THE FISCAL QUESTION 
 
 it was imposed, our exports to Canada are far 
 greater than they were when she levied 
 duties only for revenue, and are steadily 
 and rapidly increasing. It is equally absurd 
 from the point of view of theory. There is 
 no axiom of political economy which our 
 opponents are fonder of quoting than this : 
 " Exports must be paid for by imports." 
 That axiom is true, with some important 
 exceptions, which it is not necessary for me 
 to go into to-night. Australia now does a 
 larger foreign trade in proportion to the total 
 volume of her trade than probably any other 
 country, and for a very long time to come, at 
 all events, Australia can only export raw 
 material, and cannot hope to export manu- 
 factured goods. But she cannot export if she 
 does not import, and, therefore, however high 
 she may make her tariff, if she is to do any 
 foreign trade at all she cannot make it so high 
 as to prevent imports. I am sure that Mr. 
 Deakin and the Australian Government believe 
 that the effect of the increase of their tariff will 
 be precisely the same as the effect in Canada. 
 They believe that it will hasten generally the
 
 THE FISCAL QUESTION 55 
 
 development of the country, and that the result 
 of it will be to increase not only her exports 
 but her imports, and in the light of the 
 experience not only of Canada but of every 
 country which by means of a tariff has de- 
 veloped backward industries, I believe that 
 that expectation is likely to be realised. I 
 hope, therefore, that I have made this first 
 point clear, that I have convinced you that in 
 spite of the increase of the Australian tariff, 
 Australia will continue to be a great importing 
 country, and that, indeed, in the long run, the 
 total volume of her imports is more likely to 
 be increased than diminished. 
 
 The second point to consider in connection 
 with the Australian tariff is whether or not the 
 preference given to us is of real value to the 
 trade of this country. That it would be 
 possible for Australia to give a preference 
 which would be of immense value to us no- 
 body can doubt. Taking the average of the 
 five years ending in 1905, our exports to 
 Australia amounted to 20 millions, and those 
 of foreign countries to 13 millions, and the 
 foreign exports are practically all manufactured
 
 56 THE FISCAL QUESTION 
 
 goods of precisely the same kind which we 
 export, and in the sale of which we compete 
 with these countries. The striking thing, 
 however, about these figures is not the 
 present position, but the tendency of the 
 trade. Twenty years ago, in the ten years 
 beginning in 1880, the average of our exports 
 to Australia was 2 1 millions ; whilst the 
 average of foreign countries was 6 millions. 
 In these twenty years foreign imports have 
 doubled, while ours have actually declined. 
 This fact was brought out at the Colonial 
 Conference. Mr. Lloyd -George was struck 
 by it. He admitted that it was surprising, 
 and all the more surprising because, although 
 the exports of foreign countries have been 
 increasing with great rapidity in all our 
 colonies, Australia is the only colony where 
 ours have actually fallen. He said this fact 
 would require looking into. It does. But 
 when he has looked into it, he will have no 
 difficulty in finding the explanation. Of all 
 our colonies, Australia is the only one to which 
 our imports have actually diminished, and of 
 all our colonies, it is Australia alone which up
 
 THE FISCAL QUESTION 57 
 
 till now has given no preference to British 
 manufactures. Australia could give a most 
 valuable preference to us, but if she had not 
 done so, I do not see how we could possibly 
 have any just cause of complaint. His 
 Majesty's Government at the Colonial Con- 
 ference refused absolutely to consider the 
 proposals for mutual preference which were 
 urged upon them unanimously by all the self- 
 governing colonies. They refused even to 
 grant a preference on existing duties, on 
 Cape tobacco and Australian wines for in- 
 stance, which was so strongly urged upon 
 them at the Conference, and this refusal could 
 not be justified — and they did not attempt to 
 justify it — on any practical grounds. It would 
 at the worst have pleased the Colonies ; it 
 could not have injured us, yet they refused 
 to grant it. Under these circumstances, 
 what possible ground for complaint could 
 we have had if Australia had acted in pre- 
 cisely the same way — if she had arranged 
 her tariff absolutely without reference to us, 
 and had given nothing but a purely nominal 
 preference, giving it merely to show that she
 
 58 THE FISCAL QUESTION 
 
 was still in favour of the principle ? You 
 cannot have it both ways. You cannot have 
 your cake and eat it. You cannot slam, bolt, 
 and bar the door against preference to the 
 Colonies, and expect them to open wide their 
 doors with a preference to us. I do believe that 
 Australia would have been justified in adopting 
 that course, but personally I should have been 
 greatly disappointed if she had adopted it. At 
 the time of the Conference I saw a good deal 
 of the Australian Prime Minister, Mr. Deakin, 
 and the oftener I met him the higher was the 
 opinion I formed of him. He is, I believe, 
 one of the big men of the Empire, and big men 
 are always rare. He has room for the larger 
 citizenship. He is Australian, but he is British 
 too, and he desires wherever he can do it 
 without injuring Australia to help us even in 
 spite of ourselves. He believes also, or I am 
 greatly mistaken, that though the present 
 Government is supported by an overwhelming 
 majority, that Government is not eternal. He 
 is firmly convinced that the ideal which he has 
 kept before him throughout the whole of his 
 public life, the ideal of a British Empire united
 
 THE FISCAL QUESTION 59 
 
 in reality as well as in name, by bonds of interest 
 as well as by the tie of sentiment, where the 
 good of each will always seem to be the good 
 of all, is an ideal which will some day — and at 
 no distant day — capture the imagination of the 
 British people. What in my belief Mr. Deakin 
 has aimed at in framing this tariff is to make 
 sure that even if at the outset the effect of the 
 tariff should be to reduce the total volume of 
 imports into Australia, the preference given to 
 us will enable us so largely to increase our 
 share of the imports that at the very worst our 
 total will be increased rather than diminished. 
 
 Perhaps, however, the best way to enable 
 us to realise what the value of the preference 
 is would be to imagine that it was given, not 
 to us, but to one of our foreign competitors. 
 Suppose Germany had this preference, which 
 we profess to despise, and we had to fight 
 against it on the Australian market, what would 
 we think about it then ? From the first the 
 Germans have been under no illusion on this 
 subject. Not so very long ago the free 
 importers were speaking of the Canadian 
 preference precisely in the same terms in
 
 60 THE FISCAL QUESTION 
 
 which they now speak of the Australian 
 preference, but the moment that preference 
 was given the Germans knew what it meant to 
 them. They took the most extreme course 
 open to any Government short of war, by 
 raising retaliatory duties against Canada in 
 order to destroy that preference, and the result 
 of their action is still going on, as our preference 
 with Canada, so far as Germany is concerned, 
 is doubled by the surtax placed by Canada on 
 German goods. The Germans see the effect 
 of the Australian tariff equally clearly. Their 
 press at this moment is full of articles pointing 
 out the alarming result which it will have on 
 their trade, but perhaps nothing that I could 
 say could more completely convince you that 
 there is some value in this preference than to 
 read an extract from one of the leading German 
 newspapers. The Frankfurter Zeitung says 
 that Germans expect of their Government that 
 it " will energetically and with all the means at 
 its disposal protest in the right quarter against 
 the granting of preferential tariffs in favour of 
 British productions, so as to avert the danger 
 threatening German trade."
 
 THE FISCAL QUESTION 61 
 
 The examination which I have been able 
 to make of this tariff convinces me of three 
 things, and I am sure that the more closely it 
 is studied the more prominently these three 
 facts will stand out. The first is, that Australia 
 will continue to be a great importing country ; 
 the second is that the preference proposed for 
 us will be of real value to our trade ; but the 
 third is that if we really desire to increase or 
 even to retain our share in the trade of the 
 Colonies in the future, we must cease to look 
 upon this question as a question of theory. 
 We must give a preference on our market 
 if we expect to receive a preference on theirs.
 
 Ill 
 
 LONDON, HOTEL CECIL 
 
 November 26, 1907. 
 
 It is easy to criticise the actions of the 
 
 present Government ; it is easy, and I enjoy 
 
 it, but that is not enough. Mr. Balfour said 
 
 nothing truer at Birmingham than this : that 
 
 a political party which hoped to succeed must 
 
 not be content with criticism, but must have a 
 
 positive policy of its own and a policy in which 
 
 it really believes. Political life for those who 
 
 are actively engaged in it is something in the 
 
 nature of a game, and a very interesting game 
 
 it is too. I believe also that any man who is 
 
 of any use in politics or anything else will have 
 
 a certain amount of personal ambition, but if 
 
 that were all, if success meant only gratifying 
 
 62
 
 THE FISCAL QUESTION 63 
 
 these personal ambitions and getting rid of one 
 set of men in order to take their places — if 
 there were not behind all that some principle 
 for which at any moment men engaged in 
 political life would be ready to sacrifice even 
 their personal ambitions, then politics would 
 be of all games the most pernicious and the 
 most contemptible. The Unionist Party have 
 in Fiscal Reform — which is, I believe, in itself 
 the greatest of all Social Reforms, and on 
 which all other Social Reforms depend — a 
 policy which is well fitted to fire the imagina- 
 tion and rouse the enthusiasm of every one who 
 is keenly anxious for the present well-being 
 and future greatness of his country. Consider 
 what it means from the political side. Let us 
 look with a calm and unprejudiced mind on 
 the changes which during the last quarter of 
 a century have taken place in the relative 
 position of the great nations of the world. Let 
 us look at the immense growth in population, 
 in wealth, and in power of some of these 
 nations, which may perhaps some day be our 
 enemies. Let us contrast their growth with 
 the relatively small increase in the same
 
 64 THE FISCAL QUESTION 
 
 respects in the United Kingdom, and let us 
 realise, as we must, how impossible it is that 
 the expansion with us can keep pace with 
 theirs. Then surely it is not a matter of 
 controversy that if we have to depend upon 
 the United Kingdom alone it will in a com- 
 paratively short time be absolutely impossible 
 for us to maintain our position as one of the 
 Great Powers of the world. If that destiny — 
 that evil destiny as I think it — is not to be ours 
 it can only be avoided by uniting our forces 
 with those of our sister States, whose career is 
 only beginning, and whose powers of expansion 
 are altogether unlimited. Now, the simple 
 fact that every one of our self-governing 
 Colonies without exception looks upon a closer 
 commercial union as the best step, as indeed 
 the only step, towards a closer political union 
 ought in itself to make any one who really 
 desires that closer union hesitate long before 
 turning a deaf ear to their proposals, even 
 though he believes that they are economically 
 unsound. It is quite probable that the people 
 of this country do not yet realise the material 
 advantages of preferential trade, but this I am
 
 THE FISCAL QUESTION 65 
 
 sure of — they do not desire to see this question 
 settled without examination, they are not 
 willing that the door should be closed once 
 and for all on any theoretic grounds, but that if 
 it is settled it should be settled after a careful 
 examination of the practical advantages and 
 disadvantages of the proposals. But what 
 have our Government done ? They have, as 
 one of their own followers has just told us, 
 snubbed the Colonies. They have refused to 
 give a preference even on existing duties, 
 although they themselves admitted that such 
 an arrangement could do us no harm. They 
 have refused it on the ground, as they tell us, 
 of principle. Of that step I am sure the 
 country does not approve. They have, so far 
 as in their power lies, closed this road towards 
 closer union, and closed it simply on the 
 grounds of pedantic adhesion to a theory. 
 
 Last week there was a meeting which for 
 the sake of old associations is specially interest- 
 ing to us, a meeting of the Unionist Free 
 Traders. This particular meeting was of 
 unusual interest because of the presence of 
 Lord Cromer. There is no one who is more 
 
 F
 
 66 THE FISCAL QUESTION 
 
 ready to acknowledge the great services which 
 Lord Cromer has rendered to his country than 
 I am. There is no one who would feel less 
 inclined to speak of him with anything but 
 respect, and I am sure there is no audience 
 which would be less willing to hear him spoken 
 of in such a way. At the beginning of his 
 speech Lord Cromer stated that he had re- 
 examined the subject and remained a convinced 
 Free Trader. If he had been content with 
 that then his views would have had the weight 
 which naturally attaches to his great personality, 
 and if this were a question which ought to be 
 settled by authority then his authority would 
 weigh largely with his countrymen. But Lord 
 Cromer was not content with this statement ; 
 he gave his reasons for his opinions, and when 
 any man does that we must judge of the value 
 of his authority by the strength of his 
 arguments. It is quite true, as Lord Cromer 
 pointed out, that it is impossible to cover much 
 of the ground of this question in one speech, 
 but his was a fairly long speech, and pre- 
 sumably he brought forward the arguments 
 which seemed to him strongest. Strange to
 
 THE FISCAL QUESTION 67 
 
 say, as Lord Cromer would himself have 
 noticed if he had followed this conflict as 
 closely as some of us have had to do, the 
 arguments used by him are arguments which 
 played a great part in the early stages of this 
 controversy, but which have become so dis- 
 credited that they have practically passed from 
 the political platform. He used two arguments 
 only directly relevant to the fiscal question. 
 
 His first argument was to quote with 
 approval the statement that the change in the 
 fiscal policy of Germany, though it had added 
 to the wealth of the few, had actually made 
 the conditions of the working classes of 
 Germany worse than it was before. This 
 is a respectable phase of the horse-flesh 
 argument, which, as you all know, played so 
 important a part at the last general election. 
 But this is an argument which has now 
 disappeared from respectable platforms, and 
 is left to politicians of the baser sort, and 
 even they have used it sparingly since it 
 became known that a number of the skilled 
 artisans who were driven by our Government 
 out of employment at Woolwich had taken
 
 68 THE FISCAL QUESTION 
 
 refuge in German workshops. It might be 
 possible to argue with some degree of 
 plausibility that the condition of German 
 workmen is not superior to that of workmen 
 in the United Kingdom, but that any one 
 should deny that there has been during the last 
 twenty-five years an enormous improvement in 
 the condition of the German working classes 
 seems to me almost incredible. Let us apply 
 to it any test you please and the result is 
 always the same. In the first Fiscal Blue- 
 Book published by the Board of Trade the 
 statement is made that during the last twenty- 
 five years the rise in wages had been greater 
 in Germany than in any other country, and in 
 the same volume the statement is also made 
 that during that period there had been a heavy 
 fall in the cost of food. As another test take 
 the Savings Bank deposits. In the twenty 
 years from 1880 to 1900 the deposits per head 
 in Germany had increased ,£4:19:4, whilst 
 the increase in the United Kingdom was only 
 £2 : 6s. Take unemployment : during the last 
 few years — and it is only in the last few years 
 that statistics are available in Germany — the
 
 THE FISCAL QUESTION 69 
 
 rate of unemployed amongst Trade Unionists 
 has been between 1 and 2 per cent in 
 Germany and nearly 5 per cent in the United 
 Kingdom. Take another test, and one which 
 I think is important. It might surely be 
 naturally expected that the rate of emigration 
 from any country would be largely in pro- 
 portion to the condition of life in that country, 
 and what do the figures show? In 1880 
 the number of emigrants from the German 
 Empire was 117,000; in 1905, in spite of the 
 immense increase of the population in the 
 interval, the number was only 27,000. If 
 more proof were needed it could be found in 
 the reports of commission after commission 
 of British workmen, who have investigated 
 the condition of their class in Germany, and 
 have all without exception expressed their 
 surprise at the favourable position of the 
 working classes. I could quote innumerable 
 extracts in support of this statement, but I 
 content myself with quoting the report of a 
 visit to Germany given recently to the Labour 
 Leader, in which the writer says that during 
 his whole visit he never saw a ragged man, a
 
 70 THE FISCAL QUESTION 
 
 dishevelled woman, or a barefooted, hungry 
 child. Finally, and to my mind this is the 
 most conclusive proof of all, let me point out 
 this fact : from the beginning of their pro- 
 paganda Socialists in Germany have been 
 teaching, as Socialists are now teaching in 
 England, that the effect of the capitalist 
 organisation of society is to make the condition 
 of the working classes become continually 
 worse. But now Bernstein, the ablest of 
 modern Socialists, has himself declared that this 
 doctrine is so obviously contrary to the actual 
 experience of the working men whom they are 
 trying to influence that it must be altogether 
 abandoned. The fact is, the statement quoted 
 by Lord Cromer is not one whit less absurd, 
 shows precisely the same ignorance, and is 
 just as incredible as it would be for one of the 
 "Little England " majority in the House of 
 Commons who are constantly running down 
 British rule in Egypt and everywhere else, to 
 assert that the work of Lord Cromer had 
 simply been to increase the wealth of European 
 capitalists and to leave the position of the 
 Egyptian worse than he found it.
 
 THE FISCAL QUESTION 71 
 
 Lord Cromer's second argument was that 
 if we changed our free import system we 
 increased the danger of war. Now this implies, 
 does it not ? that our fiscal system is a pro- 
 tection to us against foreign hostility. In 
 politics our memories are proverbially short, 
 but they are not so short as that. It is only 
 a few years ago, during the Boer War, that 
 the whole of the Press of the Continent — we 
 all remember it — was seething with hatred 
 against this country, when every day we were 
 living in terror of attack from some European 
 Power. What was it saved us then ? Was 
 it our open ports ? It was the support of our 
 Colonies, and it was the strength of our Navy. 
 But look at this argument from another point 
 of view. We are only proposing to do on 
 a modified scale what is done by every one of 
 the other great nations of the world. They 
 all look upon the fiscal system as something 
 to be settled entirely according to their own 
 interests. They put on taxes to keep out our 
 manufactured goods. They encourage the 
 import of our raw materials, in each case not 
 to please us but solely to please themselves.
 
 72 THE FISCAL QUESTION 
 
 They look upon this as a matter of business, 
 and would think we were fools if we did not 
 look upon it in the same light. If we pre- 
 tended to be actuated by any other motives 
 they would not dislike us less ; they would 
 only despise us more. Now in contrast to 
 this argument of Lord Cromer, let me give 
 the views of another statesman who has also 
 played a great part in the history of the British 
 Empire. Sir Wilfrid Laurier recently used 
 these words : " We know from past experience 
 that our American neighbours are not disposed 
 to give anything if they can help it. But they 
 cannot find fault with us if we take a leaf out 
 of their own book and copy their own methods." 
 Now, here are two methods of looking at the 
 same problem. Which is the more likely to 
 win for us the respect of other nations ; which 
 in the long-run is the more likely to avoid 
 those very evils of war on which Lord Cromer 
 dwelt ; which is the better method for a self- 
 respecting nation ? 
 
 But we are all at one on the merits of the 
 fiscal question, and what I think is most 
 interesting to us is to consider what are the
 
 THE FISCAL QUESTION 73 
 
 chances of the success of our cause. I have 
 from the first been an enthusiast in regard 
 to it. I have never doubted its ultimate 
 success, but I have always realised that two 
 conditions must exist before we can succeed. 
 The first of these conditions is a period of 
 bad trade. That a period of bad trade would 
 come was always inevitable, and all that the 
 present Government have done has been to 
 hasten and probably intensify it. It is coming 
 now. We have had during the last few years, 
 judging by volume, an unusually prosperous 
 time in our over-sea trade ; but there are 
 few people actually engaged in that trade 
 who would not admit that our comparative 
 prosperity has been largely due to the far 
 greater prosperity in countries with a different 
 fiscal system — in Germany and the United 
 States — a prosperity which has mitigated the 
 severity of their competition against us, both 
 in neutral markets and on our own home 
 market. These countries have had a period 
 of prosperity which both in intensity and dura- 
 tion is altogether unparalleled. It is now 
 coming to an end. It cannot last for ever.
 
 74 THE FISCAL QUESTION 
 
 None of us suggests that any fiscal system is 
 going to do away with fluctuations of trade. 
 All we say is that one system is better than 
 another, and that ours is the worst. During 
 the prosperous periods of those countries their 
 productive capacity has increased to an extent 
 that is almost incredible, but when bad times 
 come the aim of every manufacturer is to keep 
 up his output so as to keep down his cost, 
 and with a falling off in the home demand 
 the output can only be kept up by increased 
 exports, largely to the one great market 
 that is open to them, that of the United 
 Kingdom. We know what has happened 
 before, and I don't think one runs much risk 
 in prophesying that there is going, and soon, 
 to be a dumping of manufactured goods upon 
 the British market on a scale which has never 
 been approached before. When our workmen 
 see the goods which they would gladly make 
 but are not permitted to make, pouring in 
 from foreign countries which exclude our 
 manufactures, then the victory will be won 
 for us. 
 
 The second condition necessary for success
 
 THE FISCAL QUESTION 75 
 
 is that the party identified with this movement 
 should, from the Leader downwards, be whole- 
 heartedly and enthusiastically in favour of it. 
 How important that is our Opponents can 
 teach us. On the day after Mr. Balfour's 
 speech in Birmingham I happened to see the 
 poster of the Daily News. This is what it 
 contained: "Mr. Balfour at Birmingham: 
 Still on the Fence." Now, think what that 
 means. These Free Import papers and Free 
 Import speakers have been constantly telling 
 us that if the Unionist Party identified itself 
 with Tariff Reform we should condemn our- 
 selves to a generation of Opposition. If they 
 believed that, do you suppose that would have 
 been the poster of the Daily News} If they 
 believed that, the poster would have been in 
 the largest type obtainable, " Balfour a Pro- 
 tectionist." They do not believe it. They 
 know that their only chance is our hesitation, 
 that our union means their defeat. It is 
 natural for them to take that line, but do 
 not let us play their game. If Mr. Balfour 
 is still on the fence after his Birmingham 
 speech then so am I. What is the ground
 
 76 THE FISCAL QUESTION 
 
 for suggesting that he shows hesitation? Is 
 it because he said that he proposed small 
 duties ? Do we not all agree with that ? 
 We are Tariff Reformers, but we are also 
 Conservatives, and we would always desire 
 that any change for which we are respon- 
 sible should be as little revolutionary as 
 possible. Is it because he said that he 
 wished to avoid courts -martial and driving 
 men out of the party ? Who of us does not 
 agree with that also ? The age of miracles 
 has past. We do not desire to adopt the 
 method of Gideon and drive from our camp 
 every one who will not pronounce the shibboleth 
 in precisely our way. We desire, on the 
 contrary, to keep, if we possibly can, every one 
 who agrees with us on all other questions, to 
 make it as easy as possible for him to be with 
 us and not against us on this great question 
 also. But I don't wish to be misunderstood 
 in what I have just said. That does not 
 mean, as I rather gather that Lord George 
 Hamilton tries to imagine that it means, that 
 the fiscal question is to be an open question 
 with us, and that constituencies in selecting
 
 THE FISCAL QUESTION 77 
 
 candidates will take no account of their views 
 on this question. Think what that would 
 imply. As a party we are looking forward 
 to victory. When our party is returned to 
 power it is committed, Leader and party 
 alike, to a change in our fiscal system. 
 The first constructive work of the Govern- 
 ment must be to make that change, and any 
 one who would vote against this proposal, 
 no matter in what quarter of the House 
 he sits, would give a vote, which, if successful, 
 would turn out the Unionist Government. 
 We have been called the " Stupid Party," and 
 I notice that Mr. Haldane, who no doubt has 
 great originality, but who probably expends 
 so much of it in other directions that he has 
 none left for the political platform, recently 
 repeated this idea by telling his audience that 
 all that was needed to make every one a 
 Liberal was to improve his education. We 
 may be stupid, but we are not quite so stupid 
 as to return as our representatives men who 
 will oppose our policy. This problem is one 
 which is solving itself and which need not 
 worry us. Mr. Balfour at Birmingham left, as
 
 78 THE FISCAL QUESTION 
 
 every leader must leave, the selection of 
 candidates to the individual constituencies. 
 We can certainly trust the constituencies not 
 to return as their representatives men who 
 will oppose the policy in which they them- 
 selves believe and which is the clearly- 
 accepted policy of their Party and of their 
 Party's Leader.
 
 IV 
 ABERDEEN 
 
 January 31, 1908. 
 
 I thank you, Mr. Chairman, for the very- 
 kind, and more than kind, words in which you 
 have introduced me to this audience, and I 
 thank you, ladies and gentlemen, for the 
 welcome which you have given to me as one 
 of those who are bearing a part now, and a 
 small part, in that fighting phalanx of which 
 Lord Leith has spoken. I felt some doubt 
 when I agreed to come here as to the subject 
 upon which I should address you to-night, 
 but I have decided to speak to you on the 
 fiscal question. I can assure you that that 
 is not because it is the easiest question 
 for me ; for any one who has had experience 
 
 79
 
 80 THE FISCAL QUESTION 
 
 — and I have had a little — knows that it is 
 far easier to make a speech attacking the 
 Government than to attempt to find, not 
 perhaps something new, but something which 
 has even the appearance or novelty, in regard 
 to a subject on which I have spoken so often. 
 It is a further disadvantage that I am afraid 
 any serious attempt to deal with this subject, 
 which must be in the nature of an argument, 
 is bound to be dull. But, ladies and gentle- 
 men, I am not afraid of that. 
 
 I well remember the last occasion on which 
 I addressed an audience in this city. I spoke 
 then on the same subject. It was immediately 
 before the last General Election, and I then 
 referred to a statement which had just been 
 made by Mr. Asquith that Fiscal Reform was 
 dead, that it was a subject on which the people 
 of this country had absolutely and finally given 
 their decision. Will he say that now ? There 
 is no one so blind as not to see the great 
 advance which that movement has made, and 
 is making. It is admitted and deplored by the 
 Radical press of the country. The advance is 
 shown not only in the increase of courage and
 
 THE FISCAL QUESTION 81 
 
 enthusiasm among those who support it, but 
 quite as much by a weakening all along the 
 line among those who are opposed to it. It 
 used to be said that this movement was due 
 entirely to a freak on the part of Mr. 
 Chamberlain ; that it had no vitality except 
 what was given to it by his great personality. 
 But what has happened? He has fallen out 
 of the fighting line, though only for a time, as 
 we all most earnestly trust, and during his 
 retirement he has had the joy of seeing the 
 movement which he initiated advance far 
 more rapidly than it did even during the 
 wonderful campaign conducted by him in 
 the autumn of 1903. The whole spirit of the 
 Unionist party in regard to this question is 
 changed. It is now the one clear issue at 
 every by-election ; it forms the staple of all 
 Unionist speeches, and whether they like it 
 or not, it must of necessity form the staple of 
 our opponents' speeches as well. It is true, 
 as was said by Mr. Balfour in Glasgow the 
 other day, that the Unionist party is resolute 
 in the cause of Fiscal Reform ; but it is true 
 also, though he did not say it, that the whole
 
 82 THE FISCAL QUESTION 
 
 party is equally resolute in its determination 
 to give him at the earliest possible opportunity 
 the majority which will enable him to carry 
 out the programme, moderate yet clear and 
 unmistakable, which was laid down by him in 
 Birmingham. On the other hand, the free 
 import citadel is being undermined quite as 
 much by the weakness of its defenders as by 
 the attacks of its assailants. As an illustration 
 of this weakness take this instance. The steel 
 trade in America has during the past few years 
 undergone an expansion which is almost in- 
 credible. But the home demand is falling off, 
 and the steel manufacturers are seeking — as 
 every one who looked an inch beyond his nose 
 knew they would be seeking — for an increase 
 in their sales abroad to make up for the falling 
 off in the demand at home. In pursuance of 
 this policy the American steel manufacturers — 
 it is reported on authority which I have done 
 my best to verify and which I believe to be 
 accurate — presented a pistol at the head of the 
 Welsh tinplate makers. They said to these 
 British manufacturers, " We wish to sell to 
 you the steel out of which you make your tin
 
 THE FISCAL QUESTION 83 
 
 plates, and if you will not buy that steel we 
 will make the tin plates ourselves and destroy 
 your trade." The Daily Chronicle, a leading 
 London Radical paper, wrote an article on this 
 subject. It did not say now as it would have 
 said two years ago, as all free import speakers 
 have been saying until the other day, " Very 
 well, if they can send tin plates, from whatever 
 cause, cheaper than we can produce them, then 
 the more the better. We will take their tin 
 plates ; we will thank them for their generosity, 
 and in return we will make something else 
 which will pay us better." On the contrary, 
 this paper said that such a thing must not 
 on any terms be permitted, and it actually 
 made, as a means of preventing it, a pro- 
 posal more extreme and more contrary to 
 all Cobdenite traditions than has ever been 
 made by any Tariff Reformers. It actually 
 proposed that the British Government should 
 prohibit the export of tin to the United States 
 from all parts of the British Dominions. Of 
 course, the Chronicle comforted itself by saying 
 that the threat was a vain one, because the 
 Americans could not produce tin plates at a
 
 8 4 THE FISCAL QUESTION 
 
 price which could compete with those of the 
 British manufacturer ; but this statement is 
 just an illustration of that ignorance of actual 
 facts which is so characteristic of the advocates 
 of free imports. So recently as half a dozen 
 years ago, the whole of the tin plates used in 
 Canada were supplied from this country, but 
 during the interval, in spite of the large home 
 demand which made it unnecessary for the 
 Americans to make any special effort to secure 
 foreign markets, they have captured more than 
 a third of the tinplate trade of Canada. If 
 they could do that when times were good, what 
 will they do now that they are bad? It is 
 obvious that they are in a position to carry out 
 their threat, and when they have done so the 
 Chronicle, willingly or unwillingly, must be on 
 our side. 
 
 As another illustration, take the contract 
 for horse-shoes to be used in our army, placed 
 in a foreign country, and which was so largely 
 discussed in the press during the autumn. I 
 am not going into the merits of this trans- 
 action. I only wish to point out the attitude 
 towards it of one important section of the
 
 THE FISCAL QUESTION 85 
 
 supporters of the present Government. A 
 Labour congress of some kind happened to be 
 sitting at the time, and an enterprising London 
 newspaper published interviews with a great 
 many of the Labour leaders. These gentle- 
 men — every one of them — without a single 
 exception, condemned that transaction, and 
 condemned it in language more extreme than 
 had been used by any Tariff Reformer. Why ? 
 I have a high opinion of the ability of the 
 Labour members of the House of Commons. 
 I would not insult their intelligence by 
 suggesting that they did not see quite as 
 clearly as Mr. Haldane or Mr. Asquith that 
 such a transaction is the logical, and indeed 
 the inevitable result of our free import system. 
 But this is a transaction which to the ordinary 
 working man is not complicated. He under- 
 stands it, and because he understands it, he 
 will not have it. The Labour leaders more 
 even than any other Members of Parliament 
 are not representatives ; they are delegates, 
 and are therefore quickly influenced by the 
 feeling of those who return them to Parliament. 
 Mr. Burns suggested the other day, at Leeds
 
 86 THE FISCAL QUESTION 
 
 I think, that the Government should go behind 
 the leaders and get at the men. That is what 
 this movement has done. It is influencing 
 the rank and file, and the leaders, whether they 
 like it or not, must toe the line. 
 
 But the citadel is falling, not only through 
 the weakness of the garrison, but partly also 
 on account of something very like treason on 
 the part of one of the commanders within the 
 walls. 
 
 The President of the Board of Trade is a 
 remarkable man, and I have for him personally, 
 from many points of view, the greatest respect. 
 I admired, for instance, even while I detested 
 his views, the courage with which he stuck to 
 his guns during the South African War. His 
 attitude presents a remarkable contrast to that 
 of the Liberal Imperialists, as they call them- 
 selves, who supported the policy of Lord Milner 
 so long as it was popular ; but who, when it 
 was no longer popular, joined in a vote in the 
 House of Commons which was an insult and 
 was intended to be an insult to Lord Milner, 
 an insult inflicted upon him solely on account 
 of that policy which these men had themselves
 
 THE FISCAL QUESTION 87 
 
 enthusiastically approved. But there are two 
 Lloyd-Georges. There is the Lloyd-George, 
 the platform orator, who talks what he calls 
 Free Trade, and who talks, as I shall show 
 later, very loosely ; and there is the Lloyd- 
 George the administrator, who by the aid of, or 
 in spite of, a free import majority, has passed 
 through the House of Commons two great and 
 far-reaching measures of Tariff Reform. Some- 
 body appealed from Philip drunk to Philip 
 sober, and we can appeal now from Mr. Lloyd- 
 George on the stump to Mr. Lloyd-George 
 at the Board of Trade. Almost his first act 
 was to pass the Merchant Shipping Bill. That 
 was a measure in which I naturally took the 
 keenest interest, because it carried out almost 
 to the letter the recommendations of a Com- 
 mittee of which I had been chairman. I am 
 not going to discuss that Bill now, but I may 
 point out that its one object, and this will not 
 be denied by any one who impartially studies 
 it, its one object was to protect British ship- 
 owners, not from competition but from unfair 
 competition, and this is the only kind of 
 protection which any of us desire. His second
 
 88 THE FISCAL QUESTION 
 
 act went much further. Last year he passed 
 his Patents Bill. The object of this Bill was 
 to compel foreigners who enjoy the protection 
 of the British Patent Laws to manufacture 
 their goods in Great Britain. Mr. Lloyd- 
 George boasted the other day, and boasted 
 with justice, that the effect of this Bill is 
 already manifest, that many foreigners are now 
 putting down works in this country, and are 
 thus preparing to give employment to British 
 and not to foreign workmen. If that is 
 desirable in the case of patented articles, is it 
 not equally desirable in the case of other 
 manufactured goods ? What is the distinction ? 
 There is not an argument from what is called 
 the Free Trade side which can be used in 
 the one case which would not apply with 
 equal force in the other. If the articles can 
 be produced to the best advantage in this 
 country, the foreign manufacturer would with- 
 out any compulsion produce them here. If 
 they can be produced to better advantage 
 abroad, then why compel him to produce 
 them here ? Would we not — you know the 
 beautiful theory — would we not pay for these
 
 THE FISCAL QUESTION 89 
 
 goods by something which can be produced to 
 better advantage in this country, and would we 
 not therefore be gainers by having them still 
 produced abroad ? I defy any one to produce 
 an argument from the free import point of 
 view in support of this Bill which will stand 
 a moment's examination. Yet Mr. Lloyd- 
 George has adopted the principle in one case, 
 while so far he is apparently unwilling to adopt 
 it in other similar cases. Why has he adopted 
 it here ? He gave the reason the other 
 day at Cardiff. He said that he had been 
 accused by heresy hunters of departing from 
 the eternal verities, but he added, " I judge 
 each of these questions on its own merits, and 
 that is the only practical way of doing business." 
 That is our whole case for Tariff Reform. 
 The fiscal policy of this or any other country is 
 not a question of right or wrong. It is simply 
 a question of business, and all that Tariff 
 Reformers wish is, as Mr. Lloyd-George said, 
 that each question should be judged on its 
 merits, and on its merits alone. 
 
 I ask you, therefore, to put out of your mind 
 altogether the names, or rather the nick-names,
 
 9 o THE FISCAL QUESTION 
 
 which are attached to our proposals, and to 
 consider what these proposals are. Tariff 
 Reform means two things. It means the taxa- 
 tion of foreign manufactured goods coming 
 into this country, and it means a rearrangement 
 of our taxation so as to secure the largest 
 amount of preference within the British Empire. 
 These two proposals mean the same thing ; 
 their object is preference — preference for our 
 manufactures, for the goods which give em- 
 ployment to our people ; in the one case on our 
 own home market, and in the other case on the 
 over-sea markets of the British Empire. Let 
 us consider first preferential trade, and let us 
 look at it apart altogether from political or 
 rather national considerations ; let us look at it 
 entirely from a trade point of view, from the 
 point of view of the material interests of the 
 people of this country. Is preference of any 
 value to us ? I mentioned earlier some 
 examples of the weakening of our opponents 
 on these questions ; here is another. In the 
 early stages of this controversy they all told us 
 — Mr. Asquith among them over and over 
 again — that the preference was of no value.
 
 THE FISCAL QUESTION 91 
 
 This was put very clearly in a way which I 
 well remember, in the House of Commons, by 
 Sir Charles Dilke, who said that I was one 
 of the very few people in this country who 
 attached any value to the Canadian preference. 
 But facts in the long-run have their effect. 
 Our opponents do not say that now. At the 
 Colonial Conference the value of the preference 
 was admitted by Mr. Asquith, grudgingly 
 indeed, but still definitely ; and by Mr. Lloyd- 
 George most generously, for he said that it 
 had been of enormous advantage to the trade 
 of this country. Well, if they think it is of 
 any value, however small, surely they have no 
 right to decide against it, and to decide against 
 it without any examination ; but that is exactly 
 what this Government have done. Surely, 
 any man of common sense, any one who looked 
 at the business of the nation from the same 
 standpoint that he would look at his own 
 business, would have thought that the next 
 step was clearly marked out for him. The 
 next step surely ought to have been to examine 
 with the utmost care what the value of the 
 preference really is, and to examine with equal
 
 92 THE FISCAL QUESTION 
 
 care what the disadvantages connected with it 
 would be ; what, in other words, we should 
 have to pay for it. This is what I wish to do 
 to-night. 
 
 What is the value of the preference ? 
 Every one will admit that from a trade 
 point of view what is chiefly needed by 
 this country is an outlet abroad for our 
 manufactured goods. Where is that outlet 
 to be found? It cannot be found in the 
 great industrial countries which are now our 
 competitors. Mr. Asquith, indeed, made at 
 the Colonial Conference the statement — 
 amazing it would be if it were not so common, 
 for all his speeches on this subject have two 
 striking characteristics, dogmatism as to theory 
 and inaccuracy as to facts — he made the 
 statement that our trade with those foreign 
 protected countries was growing more rapidly 
 than our trade with the British Empire, and 
 he made that statement although he had before 
 him the figures on this very subject prepared 
 by the Board of Trade. What do these figures 
 show? In 1890 our exports of manufactured 
 goods to these foreign protected countries
 
 THE FISCAL QUESTION 93 
 
 amounted to 87 millions sterling. In 1906 — 
 an exceptional year when our exports to these 
 countries were 10 millions greater than the 
 previous year, an exceptional year because 
 of the extraordinary home demand in these 
 countries — our exports amounted to 90 millions, 
 or an increase of 3 millions. But what 
 about our trade with the Empire? In 1890 
 our exports there amounted to 78 millions 
 sterling; in 1906 they amounted to 107 
 millions, an increase not of 3 millions but of 
 29 millions. As a matter of fact, even now, 
 of our total exports of manufactured goods 
 something like 40 per cent, or not far short of 
 a half, go to countries within the British 
 Empire. Or as an indication of the importance 
 of this trade, look at it in another way. The 
 two foreign countries from which we chiefly 
 draw our food supplies are the United States 
 and Russia. Our exports per head of the 
 population in those countries are to United 
 States, 5s. 9d. ; to Russia, is. id. ; whereas our 
 exports to the food -producing colonies are 
 New Zealand, £j : 5s. ; Australia, £4. : 4s. ; 
 Canada, £2 : 2s. per head. The extent of the
 
 94 THE FISCAL QUESTION 
 
 imports of these countries from us is limited 
 only by their power to buy, which depends 
 on the extent of their exports. If you give 
 them a preference it will increase their ex- 
 ports, and at the same time it will increase 
 their purchases from us exactly in proportion 
 to that increase in exports. The British 
 Empire, therefore, is now by far our most 
 important customer, but as Mr. Balfour truly 
 said, we have to consider not only the state 
 of trade, but the tendency of trade. These 
 colonies are going to be great nations. Some 
 of them, Canada, for instance, will have, I 
 believe, in the lifetime of some of those whom 
 I am addressing, a population greater than that 
 of the United Kingdom to-day. They are 
 going to do an immense import trade, and 
 an immense import trade of manufactured 
 goods, the very kind of goods which we desire 
 to sell. They are going to do this immense 
 trade with some one. It rests with us now : 
 it will not rest with us for ever. It will not 
 rest with us long, as is shown by the inter- 
 mediate tariff which Canada has arranged with 
 France and Italy, which has already diminished
 
 THE FISCAL QUESTION 95 
 
 the value of our preference — an intermediate 
 tariff which, if it were also arranged with 
 Germany and the United States, would 
 practically take away altogether that preference. 
 It rests with us now, but it will, I believe, rest 
 with us only till the next General Election, 
 to decide whether that great and growing 
 trade is to be done with us, or with our 
 competitors. 
 
 I have so far considered one side of this 
 question — the value of preference. Let us 
 now for a little look at the other side, let us 
 consider what we should have to pay in order 
 to secure that preference. The disadvantages 
 are easily estimated, for all our opponents 
 concentrate their attack upon one point — the 
 dear loaf. The dear loaf played its part, and 
 a very important part, at the General Election 
 two years ago, but that part is now played out. 
 It was no doubt an effective weapon, but it 
 was a weapon something in the nature of a 
 boomerang, and it is now returning to wound, 
 and perhaps to kill, those who used it. In his 
 latest speech Mr. Asquith has been complain- 
 ing of the use made by the Unionist party in
 
 o6 THE FISCAL QUESTION 
 
 Mid-Devon of the rise which has taken place 
 in bread since the present Government came 
 into office, and nothing shows more clearly 
 how hardly the Government have felt hit by 
 that election than the bitterness, and, indeed, 
 the venom, of Mr. Asquith's speech. There 
 is a humorous side even to politics, and surely 
 nothing can be more comic than to find Mr. 
 Asquith groaning about the misrepresentations 
 of his opponents. He owes his present position 
 to the peculiar methods adopted in regard to 
 every controversy at the last election by the 
 party to which he belongs. He has as a fellow- 
 member of his Cabinet the gentleman who was 
 responsible for the picture-poster of Chinese in 
 chains, which was scattered broadcast through- 
 out the country, and he has as colleagues in 
 the House of Commons now hundreds of 
 gentlemen who won their election by posters 
 similar to that which was used two years ago 
 in Herefordshire — a constituency where to- 
 morrow we shall hear of another Unionist 
 victory — a poster which bore the legend: 
 " Every vote given to Clive is a slice off your 
 loaf." And he complains of misrepresentation !
 
 THE FISCAL QUESTION 97 
 
 Mr. Asquith says that to assert that the Liberal 
 party is in any way responsible for the rise in 
 the price of wheat is not only a falsehood, but 
 a scandalous falsehood ; and he defines a 
 scandalous falsehood as a statement which is 
 not only untrue, but known to be untrue by 
 those who utter it. This definition is not very 
 scientific, for a statement is not a falsehood at 
 all — I should think — unless the man who makes 
 it knows it is untrue ; but the definition may 
 pass. Now, I shall consider in a moment 
 whether or not the statement is true, but in 
 the meantime let us examine the arguments 
 by which Mr. Asquith proves that it is un- 
 true. He compared the prices of wheat in 
 this country and in Germany, and made these 
 two statements — first, that it is a fact well 
 known to economists that the price in a 
 country imposing a duty is always higher 
 than the price in a Free Trade country plus 
 the duty ; and, second, that the price in 
 Germany has risen nearly twice as much as 
 the price in this country. He arrived at this 
 result by comparing the prices in the two 
 countries of different kinds of wheat which 
 
 H
 
 98 THE FISCAL QUESTION 
 
 are not comparable, and he also selected as 
 the time of his comparison a special period 
 — September — when the harvest was just 
 over in Germany, when it was found to be 
 unusually short, and when there had not 
 been, therefore, sufficient time to supply that 
 shortage by imports from abroad. Now, I do 
 not say that these statements are scandalous 
 falsehoods, but I do say that they do not 
 represent the facts, and I say further that 
 Mr. Asquith ought to have known — though 
 I do not accuse him of having known — that 
 they could not represent the facts. He ought 
 to have known this for two reasons. The first 
 of these reasons is, that he took his information 
 from a document issued by the Liberal Publica- 
 tion Department, the same body which was 
 responsible for the circulation of the lies about 
 Chinese slavery, and the source of his informa- 
 tion alone ought to have convinced him that 
 the chances were a hundred to one against 
 that information being accurate. He ought 
 to have known it also for another reason. 
 The first price which he took in Germany — 
 that of 1906 — which had, of course, to be very
 
 THE FISCAL QUESTION 99 
 
 low in order that the rise might seem very 
 great, the price actually given by him, was 
 lower than the British,price plus the duty, and 
 what then became, even taking his own figure, 
 of "the fact well known to economists." But 
 what are the real facts ? I take them not from 
 the Liberal Publication Department, or from 
 the Conservative Publication Department for 
 that matter, but from a document issued by 
 one of Mr. Asquith's colleagues, the President 
 of the Board of Agriculture. According to 
 this official authority, which compares kinds 
 of wheat that are comparable, the price of 
 wheat at the end of last year in Germany was 
 actually lower than our price plus the duty, 
 and more than that, the rise in Germany was 
 actually less instead of being twice the amount 
 of the rise in this country. 
 
 But now consider whether or not the 
 Liberal party are responsible for any part of 
 this rise. What is it that has caused the rise ? 
 It is of course the shortage of supply, and I 
 have not the slightest hesitation in saying that 
 if this country some years ago had given a 
 preference to the wheat-growing portions of
 
 ioo THE FISCAL QUESTION 
 
 our Empire, that would have stimulated and 
 increased the supply, and would also have 
 widened the area from which the supply 
 comes, and thus made it less dependent upon 
 weather conditions. In proof of the correct- 
 ness of the opinion which I have just expressed, 
 let us compare the prices of wheat in this 
 country and in France. At this moment, and 
 for months past, the price of wheat in France, 
 in spite of a duty of 12s. 2^d., has been if any- 
 thing lower than the price in this country, not 
 lower than our price plus the duty, but actually 
 lower than our price irrespective of duty. 
 Now, does not this clearly prove that the 
 price of wheat is regulated solely by supply 
 and demand, and that the effect of a duty upon 
 prices is only one among many considerations, 
 and often a very unimportant one? Why 
 is it that the price is lower in France ? It 
 is because the bulk of their supply is pro- 
 duced at home, is therefore free from import 
 duty, and with that free supply any importa- 
 tion from abroad would have to compete. 
 Establish a system of preference, and our 
 position will at once greatly resemble the
 
 THE FISCAL QUESTION 101 
 
 position of France. Even now, of our total 
 supply of wheat more than a half is produced 
 within the Empire, and would therefore be 
 free, and with that free supply the foreign 
 producer would from the first have to compete ; 
 but in a short time the preference would so 
 stimulate the Empire supply that the price 
 would be regulated by the free supply, and 
 with us, as with France, the duty would play 
 an altogether negligible part in fixing the price. 
 I have so far considered one aspect of this 
 question, that of preferential trade in the 
 oversea portions of the Empire. I shall now 
 try to consider — and it must be very briefly — 
 the other aspect of it, that of our home market. 
 Fiscal Reformers propose to raise part of our 
 revenue by a duty upon foreign manufactured 
 goods coming into this country. The effect 
 of that would be to give a preference to our 
 own manufactures on our own home market — 
 a preference which is greatly wanted, and 
 which is indeed, I believe, indispensable if we 
 are to retain our position as one of the great 
 manufacturing countries of the world. Our 
 opponents have been telling us constantly —
 
 102 THE FISCAL QUESTION 
 
 though they are a little more piano now — that 
 the increase in our oversea trade as shown 
 by the Board of Trade returns has knocked 
 the bottom out of the scaffolding which Mr. 
 Chamberlain had so elaborately erected. But 
 what bearing has this increase of trade on this 
 controversy ? No one has ever said that our 
 system is so bad that no matter how great 
 may be the general trade expansion of the 
 world we can get no share of it. If it were 
 as bad as that there would be no free im- 
 porters. This increase of trade, therefore, 
 could only be an argument against our views 
 if it could be shown that the increase had 
 not been shared in, to at least as great an 
 extent, by other countries with a different 
 fiscal system. But every one knows that, 
 taking both the home and export trade into 
 account, the prosperity of Germany and the 
 United States has been infinitely greater than 
 the prosperity with us, and, more than that, 
 that a large part of our expansion is really due 
 to the wonderful prosperity of those countries, 
 which has lessened the severity of their com- 
 petition with us both at home and abroad.
 
 THE FISCAL QUESTION 103 
 
 As an illustration of the kind of thing which 
 our opponents have been saying I shall give 
 you one example, a statement made by Mr. 
 Lloyd- George at the Colonial Conference. 
 He compared the expansion in two particulars 
 of the trade of the United Kingdom with that 
 of the United States. In spite, he said, of the 
 natural gas in America which enables one or 
 two men to do the work of a score, we were 
 beating the Americans out of the field. Now 
 every one knows that natural gas did play 
 an important part in the early industrial life 
 of Pittsburg, but I thought that every one 
 knew — though apparently the head of the 
 Trade Department of the United Kingdom 
 does not know — that for practical purposes 
 that gas is exhausted and no longer counts. 
 It was in regard to machinery and manufactured 
 goods that Mr. Lloyd-George made this state- 
 ment. I have examined the figures. What 
 do they show? Take machinery first. In 
 1890 the exports included under the heading 
 of machinery from the United Kingdom 
 amounted to 16 millions. In 1906 they 
 had risen to 26 millions — an increase of 10
 
 io4 THE FISCAL QUESTION 
 
 millions. In the case of the United States 
 in the first year their exports were 2 millions ; 
 in the last year they were 16 millions — an 
 increase of between 13 and 14 millions. Take 
 next manufactured goods. In 1895 — and these 
 are the years actually mentioned by Mr. 
 Lloyd-George himself — our exports of manu- 
 factured goods were 193 millions; in 1905 
 they had risen to 309 millions — an increase 
 of 116 millions. In the case of the United 
 States — in 1895 the exports were 38 millions, 
 and in 1905 they had risen to 127 millions — 
 an increase of 89 millions, an increase with us 
 of 60 per cent, and with the United States of 
 234 per cent. And this is what Mr. Lloyd- 
 George calls beating the Americans out of 
 the field ! Perhaps, after all, he is right in 
 thinking that natural gas does play a not unim- 
 portant part in this controversy, but if so, it 
 is natural gas, not of American, but of Welsh 
 origin. 
 
 As a means of comparing the expansion 
 of this country and Germany I shall give you 
 one set of figures only. The real test of the 
 expansion of industry in any country is the
 
 THE FISCAL QUESTION 105 
 
 growth of its production, that is, both the 
 home and foreign trade must be included. 
 Before, therefore, we can judge of the import- 
 ance of the exports of manufactures, we must 
 also take into account the imports of manu- 
 factures, and give the net exports ; that is, the 
 exports after the imports have been deducted. 
 Last year I moved in the House of Commons 
 for a trade return giving the figures made out 
 on this basis. The return has now been 
 published, and I shall give you the result. 
 In the average of the five years ending 1886 
 our net exports of manufactures were 136 
 millions ; in the average of the five years 
 ending in 1906 our net exports were 138 
 millions. In the case of Germany, in the 
 first period their net exports were 5 1 millions ; 
 in the second period they had risen to 113 
 millions — an increase, not of 2 millions as 
 with us, but of 62 millions. Now, in the face 
 of these figures, is there any one who can 
 doubt that the trade expansion of Germany 
 is going on at an infinitely more rapid rate 
 than with us ? 
 
 But, after all, the fiscal question is at
 
 106 THE FISCAL QUESTION 
 
 bottom a question of employment, and we 
 have some material available to enable us to 
 judge of the effect of our system upon employ- 
 ment. There are two sets of figures. The 
 first is emigration. Now, I think every one 
 ought to admit that if employment is good and 
 improving in any country, the tendency will be 
 for emigration to diminish. If, on the contrary, 
 employment is bad, emigration will tend to 
 increase. What are the facts ? With us 
 emigration is steadily increasing. Ten years 
 ago the number of emigrants from the United 
 Kingdom was about 60,000. In 1907 it had 
 risen to 237,000. Now, compare this condition 
 of things with that in Germany. Before the 
 fiscal system of Germany was altered, the 
 amount of emigration was nearly as great as 
 with us, but in 1906, from the whole German 
 Empire, with a population about 50 per cent 
 greater than ours, the total number of 
 emigrants was 30,000, as against 237,000 from 
 the United Kingdom. The other figures 
 available are the returns of unemployment 
 amongst trade unionists. Since this fiscal 
 controversy was started the average number
 
 THE FISCAL QUESTION 107 
 
 of unemployed among trade unionists has been 
 more than 5 per cent. It is now 6 per cent. 
 Contrast again the position in Germany. 
 During the same period the average number 
 of unemployed amongst trade unionists in 
 Germany — and a larger number give returns 
 than is the case in the United Kingdom — has 
 been less than 2 per cent. Now, I do not 
 say that any change in our fiscal system will 
 do away with fluctuations in trade and with 
 fluctuations in employment. I do not say 
 any change in the fiscal system will do away 
 with unemployment ; but I do say that with 
 us unemployment is not a passing phase 
 due to trade conditions, but that it is chronic, 
 is with us always, and with us to a greater 
 degree even in times of good trade than in 
 Germany even in times of bad trade. I notice 
 that Mr. Winston Churchill said the other day 
 in Manchester that there was more unemploy- 
 ment in Germany than in the United Kingdom. 
 He had been a good deal interrupted by his 
 lady admirers, and possibly his nerves were 
 shaken. He may perhaps have meant nothing, 
 but perhaps he referred to a paragraph which
 
 108 THE FISCAL QUESTION 
 
 had appeared in some of our papers based on 
 a statement made by a Socialist leader in 
 Germany, that there were 60,000 unemployed 
 in Berlin. We have now the official figures 
 given by the German Unemployed Bureau, 
 and the number is reduced from 60,000 to 
 30,000. Now, remember that Berlin is not 
 only a great city, but the capital of Germany, 
 that there is therefore almost certainly, just as 
 is the case in London, more unemployment in 
 Berlin than in other parts of Germany. Yet, 
 taking this into account, what do these 30,000 
 really mean? If you take the whole adult 
 male population of Berlin, this 30,000 means 
 an unemployed percentage of somewhere about 
 4 per cent, that is 2 per cent less than the 
 unemployed amongst trade unionists now in 
 this country. And yet every one knows that 
 unemployment is felt far more, is far more 
 widespread, and causes far more suffering in 
 the ranks of the casual labourers than in the 
 ranks of the skilled artisans, who are included 
 in the trade unionists' returns, and this per- 
 centage of unemployed in Berlin includes both 
 the skilled and the unskilled.
 
 V 
 BOURNEMOUTH 
 
 March 6, 1908. 
 
 I see it is now constantly stated in the 
 Radical papers that we who are pressing 
 forward the Tariff Reform movement have 
 dropped the Imperial side of it, and are 
 advocating it on the grounds of what they 
 call Protection, pure and simple. No state- 
 ment could be more untrue. It was his sense 
 of the advantage, of the necessity indeed, of 
 closer union of the Empire which alone caused 
 Mr. Chamberlain to take the momentous step 
 by which he originated this movement ; and it 
 is the same feeling which animates and inspires 
 all of us who are determined to carry that 
 movement to a successful issue. 
 
 If any one will consider calmly, and with an 
 109
 
 no THE FISCAL QUESTION 
 
 unbiassed mind, the rapid increase in wealth, 
 in population, and in power of the other great 
 nations of the world, of Germany for instance, 
 and the United States, and if he will consider 
 also the increase in the same respects of the 
 United Kingdom, then it is not a figure of 
 rhetoric, it is not a matter of argument, it is 
 a question simply of arithmetic to say that 
 if that relative increase goes on at the same 
 rate, and if our strength is limited to the 
 United Kingdom, then in a comparatively 
 short time our position as one of the great 
 nations of the world will be gone, and gone 
 for ever. That is a fate which has overtaken 
 empire after empire in the past. It is the 
 fate which, in spite of anything we can do, 
 may possibly be ours, but that is not a future 
 to which I believe the people of this country 
 would willingly look forward. If it can be 
 avoided at all, it can be avoided only by 
 making common cause with the men of our 
 own race who have gone from our midst to 
 people other lands, by joining their strength 
 to ours, and by becoming with them one nation, 
 united in reality as well as in name.
 
 THE FISCAL QUESTION in 
 
 It is quite true that at the last General 
 Election, and for some time afterwards, it 
 seemed as if the feeling, which, for want of 
 a better name, I must call the Imperial spirit, 
 were dead. That is natural. Nations are 
 like individuals. If we have a hot fit, it is 
 invariably followed by a cold fit. We had our 
 hot fit during the South African War. The 
 reaction — the cold fit — was inevitable, and it 
 came. But those who think that the result 
 of the last election represented the real and 
 permanent feeling of the people of this country 
 will have a rude awakening. They are having 
 it now, for in every bye- election the result 
 shows more and more clearly that though 
 we have a " Little England " Government 
 supported by a " Little England " majority, 
 we are not a Little England people. 
 
 What other step towards this closer political 
 union which is necessary for our existence is 
 possible except by means of a closer commercial 
 union? What is the alternative? Our opponents 
 tell us that there is the tie of sentiment. They 
 say that we ought to be satisfied with it ; that 
 it is all the stronger because it is so flexible.
 
 ii2 THE FISCAL QUESTION 
 
 The tie of sentiment is indeed there. It is 
 the spirit without which union is impossible, 
 but it is not enough. Take an analogy from 
 human life. What is it that constitutes our 
 individuality. It is not our body ; it is some- 
 thing more intangible than that. It is the 
 same with this question. The tie of sentiment 
 is the spirit, but just as a body without the 
 spirit is dead, so the spirit without the body 
 is dead also. It must be organised. We 
 must clothe it with a body through which 
 alone it can act. Remember this also, that 
 the proposal for a closer commercial union as 
 a step towards a closer political union did not 
 originate with Mr. Chamberlain, or with any 
 one in this country. The proposal was made 
 first by the Colonial Prime Ministers, and it 
 has been pressed by them persistently and 
 unanimously ever since. At the Colonial 
 Conference of 1897 the one tangible result 
 was a suggestion that a system of preferential 
 trade should be seriously considered. At the 
 Conference of 1902 other proposals with the 
 view of a closer union were considered. They 
 were all rejected by the Prime Ministers as
 
 THE FISCAL QUESTION 113 
 
 impracticable, and again, the one clear and 
 substantial result of that Conference was the 
 resolution passed by all the Prime Ministers 
 in which they promised to try to secure for 
 us a preference on their markets, a promise 
 which has since been amply fulfilled, and a 
 request that in exchange for this preference 
 we should give them a preference also. At 
 the last Conference, which is fresh in all our 
 minds, the position was the same. Here again, 
 the one subject in which the Colonial Prime 
 Ministers were interested was the subject 
 of preferential trade. And are not the Prime 
 Ministers right in thinking that closer com- 
 mercial union is the real way to secure closer 
 political union? All history proves that they 
 are right. It was the commercial union of 
 Germany which alone made a united German 
 Empire possible. In the case of the United 
 States the union was little more than nominal 
 until Alexander Hamilton succeeded in creating 
 a commercial union, and in doing so he sur- 
 mounted difficulties greater certainly than those 
 which now confront us. The same lesson is 
 taught even by our own country. The union
 
 ii 4 THE FISCAL QUESTION 
 
 between Scotland and England was a union 
 in name only, without any force behind it, 
 until the two countries were united in the bonds 
 of common trade interests. The Colonies have 
 made the offer of preference. They have per- 
 sistently pressed it upon us. Have we not 
 already delayed too long ? Time and again 
 the Sibyl has come to us with her books. Time 
 and again we have rejected them. They are 
 growing fewer in number. We have neglected 
 many opportunities. We cannot afford to 
 neglect any more. Already, even since the 
 Conference last spring, we have lost some- 
 thing ; we have indeed lost a great deal. 
 A new Australian Tariff has been proposed 
 in which a preference is given to us, and a 
 preference which I really believe, considering 
 the contemptuous way in which the proposals 
 of the Colonies were treated at the last 
 Conference, is far more generous than we 
 had any right to expect ; but the preference 
 is not half so good as it would have been 
 if our Government had made any effort, 
 however small, to meet the wishes of Australia. 
 That loss, however, can be remedied, but a
 
 THE FISCAL QUESTION 115 
 
 change has taken place in regard to Canada 
 which cannot be so easily reversed. Since 
 the Conference, Canada has arranged an inter- 
 mediate tariff with some countries which, so 
 far as these countries are concerned, largely 
 destroys our preference. Fortunately for us, 
 this arrangement, so far, has not been made 
 with the countries which are our great com- 
 petitors ; but if the Canadian people really 
 believed that the result of the last election 
 represented the final decision of the people 
 of this country, then it is absolutely inevitable 
 that this intermediate tariff would be extended 
 to Germany and the United States. And 
 if it is once extended to them, not only will 
 the advantage of our preference with Canada 
 almost entirely disappear, but such a step on 
 the part of the Canadian Government is one 
 which it would be difficult, if not impossible, 
 to retrace. 
 
 But personally, and in saying this I believe 
 I speak for all Tariff Reformers, no matter 
 how strongly I believed that preferential 
 trade would be of advantage to our national 
 position, no matter how strongly I believed
 
 n6 THE FISCAL QUESTION 
 
 that even from the point of view of material 
 interests it would be ultimately of advantage 
 to us, if I believed at the same time that its 
 immediate effect would be to demand sacrifices 
 from the poorest section of our own people 
 and add to their burdens, then I could not 
 advocate it. I could not advocate it because 
 that portion of our population has no margin 
 out of which it would be right to pay a premium 
 of insurance, however great their future 
 advantages might be. And that is the way 
 in which this case is always presented to jthe 
 country by our opponents. They tell us that 
 we are asked to make sacrifices for the sake 
 of some intangible political advantages, and 
 for the benefit of our Colonists, who are 
 individually better off than the people of this 
 country. They make that statement, but they 
 never attempt to prove it. It is absolutely 
 untrue. I do believe that a system of pre- 
 ferential trade would be of great advantage 
 to the Colonies, that it would tend to hasten 
 their development and increase their strength, 
 but I am sure of this, that however great the 
 advantage may be to the Colonies, it would be
 
 THE FISCAL QUESTION 117 
 
 infinitely greater to the people of this country, 
 and, above all, to our artisan population, who 
 depend upon outside markets for the sale of 
 the goods which they manufacture. 
 
 If the political side of this question be left 
 out of account, then it becomes entirely a trade 
 question, and should be decided in precisely 
 the same way in which a business man decides 
 any business transaction. We should, that is, 
 examine carefully and with an unprejudiced 
 mind what advantages we can reasonably 
 expect from the arrangement, and we should 
 examine with equal care what the disad- 
 vantages of it would be. We should weigh 
 the advantages against the disadvantages and 
 judge by the result. That is what I propose 
 to do. The disadvantages fortunately are 
 easily estimated, for our opponents have all 
 concentrated their opposition on one point — 
 the dear loaf. The dear loaf played a great 
 part in the last election. It was a bogey 
 skilfully dressed up. It was not only a bogey, 
 but a dishonest bogey, for those who used it 
 knew — they could not fail to know — that the 
 lurid pictures which they painted on thousands
 
 n8 THE FISCAL QUESTION 
 
 of platforms could never be realised as the 
 result of any proposals now put forward. It 
 was one of the chickens hatched at the last 
 election which has now come home to roost. 
 It is an ugly bird, and they do not like it. 
 This question of the dear loaf was debated two 
 nights ago in the House of Commons. That 
 debate was extremely interesting, for this 
 reason, that it shows how completely the whole 
 position is changed. Our opponents are not 
 now the attackers ; they are themselves on 
 the defence. The course of prices since the 
 present Government has come into office has 
 at least proved this, that our present system 
 carries with it no guarantee of cheap food. 
 The resolution to which I referred was moved 
 from the Radical benches. It was extra- 
 ordinarily mild in form. It asked the House 
 of Commons to affirm merely that the rise in 
 the price of bread was due to natural causes, 
 and that the effect of preference would tend to 
 raise the price. This resolution was no doubt 
 intended as a condemnation of preferential 
 trade, but if that were the object the issue 
 raised is really a ludicrous issue. It leaves
 
 THE FISCAL QUESTION 119 
 
 out of account one side — and] by far the most 
 important side — of the question. It does not 
 consider at all the advantages which we are to 
 get by a preference for our goods on Colonial 
 markets ; it deals solely with the price which 
 we will have to pay in order to secure that 
 preference. Now it would be quite possible 
 for any one to accept literally the words of 
 that resolution, and still believe that pre- 
 ferential trade would be, even from the pocket 
 point of view, of enormous advantage to the 
 people of this country. If we admit that the 
 price of wheat would be raised to the extent of 
 the duty, even then the evil is surely a small 
 one. Taxation must be imposed upon some- 
 thing, and if a certain amount of money is 
 raised from the taxation of grain, a similar 
 amount can be remitted from the taxation of 
 something else. And when we remember the 
 enormous sum which is now raised in this 
 country by the taxation of food and drink 
 consumed in every household, then surely no 
 one can deny — no one at least can honestly 
 deny — that we could, if we chose, so readjust 
 taxation as to make the burden upon the
 
 120 THE FISCAL QUESTION 
 
 poorer classes of the community smaller rather 
 than greater than it is now. But I am quite 
 willing to deal with the issue which they have 
 themselves selected. They all tell us that 
 the whole of an import duty must be borne by 
 the consumer, and they even go farther than 
 that, for they say that much more than the 
 duty would be added to the price. In making 
 that kind of statement they all pretend — and I 
 suppose many of them really believe — that 
 they are asserting a law of nature, or at least 
 that they are repeating an axiom of political 
 economy. They are doing nothing of the 
 kind. No economist has ever said that the 
 whole of an import duty will invariably be paid 
 by the consumer. Every economist, on the 
 contrary, has admitted that the extent to which 
 the consumer will pay the duty will depend 
 upon circumstances, and the circumstance 
 upon which it chiefly depends is the extent of 
 the competition between the free and the taxed 
 supply. But our opponents are not quite 
 unanimous even in this view. In the early 
 stages of this controversy one of them, Lord 
 Rosebery, condemned preferential trade on
 
 THE FISCAL QUESTION 121 
 
 precisely the opposite ground ; he condemned 
 it because in his opinion preference would 
 so stimulate production in the wheat-growing 
 areas of the Empire, that the price would be 
 lowered, and the result would be bad for our 
 agriculture. I believe Lord Rosebery was 
 right. What is it that causes the rise and fall 
 in price ? The duty is only one, and often 
 an unimportant one, of the elements which 
 produce these fluctuations. The price is 
 regulated by supply and demand, and anything 
 which tends to increase the supply will tend 
 to lower the price. Preference would un- 
 doubtedly increase the supply, and its effect 
 upon prices at a time like the present, when 
 scarcity is caused by bad weather conditions, 
 would be greater even than the increase of 
 supply, for the wheat -growing areas of the 
 Empire are scattered over the whole world, 
 are to be found under every clime, and the 
 stimulus to a supply so wide-spread would 
 tend to neutralise weather conditions. 
 
 In proof of the statement which I have 
 just made, take the comparison at this moment 
 of the prices of wheat in the United Kingdom
 
 122 THE FISCAL QUESTION 
 
 and in France. For the last four or five 
 months, in spite of a duty of more than 12s., 
 the price in France (this was admitted even 
 by the President of the Board of Trade on 
 Wednesday) has been about the same — if 
 anything lower than the price in this country 
 — not lower than our price plus the duty, but 
 lower than our price irrespective of duty. The 
 contention of free importers always has been 
 that a duty will go into the pockets of the 
 home producers, that they will be able to 
 secure always the world's price plus the duty. 
 Why is it that this theory is entirely killed by 
 the present prices in France? It is because 
 French producers are themselves able to 
 supply almost the whole quantity consumed 
 in France. It is therefore a free supply 
 which regulates the price, and the duty, at 
 present at least, is an absolutely negligible 
 quantity. Establish a system of preference 
 within the Empire, and our position will soon 
 be precisely the same as the position in France. 
 At first, it is true, we shall still require to obtain 
 half of our supply from foreign sources, but the 
 effect of the preference will be that every year
 
 THE FISCAL QUESTION 123 
 
 a larger and larger proportion of our supply 
 will be produced within the Empire, will 
 therefore be free, and in a short time with us, 
 as with France, the free supply would entirely 
 regulate the price. 
 
 It is at least a very striking coincidence 
 that since the present Government — which 
 certainly led the people of this country to 
 believe that under them everything was going 
 to be cheap — came into office, all articles of 
 general consumption have greatly risen in 
 price. Bread has risen ; beef, butter, and coal 
 are all at high prices. There is, however, one 
 exception, and a very curious exception — sugar. 
 Sugar is the one article of general consumption 
 which not only has not risen in price, but is 
 actually now below the average price. You 
 all remember the terrible outcry made on every 
 Radical platform when, six months after the 
 Convention, the price of sugar rapidly advanced. 
 The cause of that rise was patent before the 
 eyes of every one. There was admittedly an 
 immense shortage of supply owing to drought 
 on the Continent ; but then natural causes had 
 nothing whatever to do with the rise — it was
 
 i2 4 THE FISCAL QUESTION 
 
 all the result of the wicked Convention ! At 
 that time Members of Parliament — and not 
 irresponsible politicians, but gentlemen who 
 now fill important positions in the present 
 Government — told us that we had added a 
 permanent burden of 18 millions a year to the 
 people of this country. Well, last year the 
 total supply of sugar imported into this country 
 did not cost 18 millions, so that if these gentle- 
 men were right, but for the Convention the 
 sugar producers would not only have given us 
 the sugar for nothing, but would have paid us 
 something for consuming it ! Now the argu- 
 ments and the prophecies which are being 
 used about wheat are precisely the same as 
 those which were then used about sugar, and I 
 ask you to judge of the probability of their 
 present predictions by the result of their 
 predictions in the past. I remember that in 
 a debate on the Sugar Convention in the 
 House of Commons, I, as representing the last 
 Government, had to reply to Sir William 
 Harcourt. He was a great Parliamentary 
 figure, and he put the case very strongly and 
 very adroitly. He placed us in this dilemma.
 
 THE FISCAL QUESTION 125 
 
 He said : " Unless the price rises, it will not 
 benefit the West Indies ; if it does rise, it 
 will impose an intolerable burden upon the 
 consumers at home." That is precisely the 
 conundrum which is now being put to us 
 in regard to preference. If, we are told, 
 preference does not raise the price, it will not 
 benefit the Colonies ; if it does raise the price, 
 it will impose an intolerable burden upon us. 
 This they think is an unanswerable conundrum ; 
 and yet how absurd it is in the eyes of any 
 one who has had experience of trade. I am 
 addressing, I am sure, many business men, and 
 there is no business man who does not know 
 that one of the greatest assets any one in 
 business can have is a number of customers, 
 of friends, who will give him a preference not 
 at a higher price — no one ever expects that — 
 but at the same price. Or look at this problem 
 itself. Let us assume that on the two sides of 
 the border there is land in Canada and in the 
 United States, equally suitable from every 
 point of view for the production of wheat, that 
 the chief market for that production is the 
 United Kingdom, but that a preference is
 
 126 THE FISCAL QUESTION 
 
 given to the wheat produced on one side of 
 the line and is not given to the production on 
 the other side. Is it not obvious that under 
 such conditions settlers will be attracted to the 
 country, capital will pour into the country 
 which has the preference, and not into the 
 country which is without it, and that this 
 result in itself, irrespective altogether of price, 
 would be of incalculable benefit to Canada? 
 The answer to this kind of difficulty is precisely 
 the same as the answer which we gave to Sir 
 William Harcourt. We said, in reply to him, 
 that after the Convention was in operation the 
 beet-producing countries would still try to 
 keep up their supply, that so long as there was 
 any margin of profit, however small, that 
 supply would not be reduced, and if by degrees 
 the beet supply was diminished it would be 
 more than counterbalanced by an increase in 
 the cane supply. What we then said has been 
 more than justified by the result. We have 
 not raised the price of sugar. We have not 
 diminished the supply, and we have enormously 
 benefited the sugar-refining industry at home 
 and the cane-producing countries throughout
 
 THE FISCAL QUESTION 127 
 
 the whole of the Empire. Give us the same 
 power — and I believe at the first opportunity 
 the people of this country will give us the 
 power — give us the same power in regard to 
 wheat and the result will be precisely the same. 
 We shall not diminish the supply, we shall not 
 raise the price, we shall only change the source 
 of supply, and by changing the source we shall 
 benefit not only the wheat-growing portions of 
 the Empire, but to at least an equal extent 
 we shall benefit the workmen in our own 
 country who produce the supplies which will 
 be needed in those wheat-growing areas. 
 
 So far we have considered only one side 
 of this question, we have considered only what 
 we had to give. Let us now briefly examine 
 the other and more important side. Let us 
 consider what we shall receive in return for 
 what we should have to give. Fortunately it 
 is no longer necessary to argue in favour of 
 the value of preference. In the early days of 
 this controversy its value was not admitted. 
 Over and over again I have heard it denied 
 in the House of Commons, and at that time 
 nothing seemed to me more discouraging than
 
 128 THE FISCAL QUESTION 
 
 that men, presumably intelligent, should not 
 admit that preference was of value to us ; 
 for, apart altogether from figures, it surely 
 ought to be evident to the man of meanest 
 capacity, or even to the man of the most 
 exalted intellect, that if we can compete at 
 all on equal terms, we must compete much 
 more successfully if we have a great advantage 
 over our trade rivals. But facts in the long 
 run have their effect. They do not now deny 
 the value of preference. On the contrary, it 
 was admitted at the Colonial Conference by 
 Mr. Asquith and by Mr. Lloyd-George, who 
 said that it had been of enormous advantage 
 to our trade. It would really be strange if 
 they did not admit it, for the figures of our 
 trade with every one of our Colonies which 
 has granted a preference prove its value. 
 But its value is perhaps most strikingly 
 proved by the figures of our trade with the 
 one Colony which up to the present has not 
 given us a preference. Australia is one of 
 our most important customers, but so far we 
 have had no preference from Australia, and 
 although during the last twenty years the
 
 THE FISCAL QUESTION 129 
 
 imports of Australia from foreign countries 
 have enormously increased, she is the only 
 Colony to which during that period there has 
 been no increase in our exports. Australia 
 is now giving us a preference, and the effect 
 of it, I am sure, will immediately become 
 apparent. Its effect will be exactly similar to 
 the preference given by New Zealand, which 
 is so striking that I will give you the figures. 
 The New Zealand preference was given at the 
 end of 1903. The imports in 1903 — the last 
 year before the preference — from foreign 
 countries of goods on which a preference was 
 granted amounted to ,£695,000. Four years 
 later, in 1906, the imports from foreign 
 countries had fallen ,£150,000 to ^543,000. 
 But while the imports from foreign countries 
 were falling, what happened to our imports? 
 In 1903 they amounted to £1,500,000; by 
 1906 instead of falling they had increased, 
 and increased to the extent of more than half 
 a million. 
 
 On previous occasions I have proved the 
 value of trade within the British Empire by 
 a comparison of the figures of that trade with 
 
 K
 
 130 THE FISCAL QUESTION 
 
 those of our trade with foreign countries. I 
 shall take a different method to-night, and a 
 method suggested by an incident which has 
 only recently come under my notice. You 
 know that one of the arguments most 
 frequently used by free importers, and an 
 argument which I think has been most 
 effective, is that in this country we are free 
 from the baneful influence of trusts. As a 
 matter of fact the statement is not true, for 
 it could be easily shown that during the last 
 few years many combinations precisely similar 
 to those which have been made abroad have 
 arisen in this country. But even assuming 
 that we are free from trusts, do we not feel 
 the influence of them ? Recently a Radical 
 newspaper, the Westminster Gazette, has 
 published a long series of articles showing 
 the effect of the operations of the Beef Trust 
 in this country. According to these articles 
 the price which we have to pay every day 
 for beef is regulated by a cable from Chicago, 
 and that price is determined not in the least 
 by the cost of the article. The American 
 Trust exacts every farthing which it is possible
 
 THE FISCAL QUESTION 131 
 
 to screw from our people, and the extent of 
 the exaction is limited only by the amount of 
 home-grown beef with which the foreign trust 
 has to compete, and according to this news- 
 paper the proportion produced at home is 
 every year being steadily diminished. Now 
 if these facts are correct, it is surely obvious 
 that a small duty could not possibly raise the 
 price. The only check on the price now is 
 the competition of the home production, and 
 if such a duty succeeded to any degree in 
 increasing the home production its effect would 
 be to lower and not to raise our price. But 
 the Beef Trust is not the only one. Over 
 and over again, through combinations, through 
 corners in America, the price of cotton, for 
 instance, and even of wheat, has been raised 
 to famine prices, and we have had to pay those 
 prices. What then is the good of telling us 
 that we are free from trusts if, more than any 
 other people, we are the victims of trusts ? 
 
 The incident to which I have referred is 
 connected with this subject. I noticed a few 
 months ago that a large quantity of steel rails 
 — some 30,000 tons — had been imported from
 
 i 3 2 THE FISCAL QUESTION 
 
 Russia for use on British railways. That 
 seemed astonishing. There would have been 
 nothing surprising if the importation had come 
 from Germany or from the United States. 
 That is precisely what has always happened 
 in dull times in those countries with other 
 steel manufactures. It is happening now, 
 for large quantities of steel, especially from 
 Germany, are coming every day into our 
 ports, but that such an importation should 
 come from Russia, a country industrially so 
 backward, is most astonishing. I felt there 
 must be some curious explanation for it, and 
 with some difficulty I have found out what the 
 explanation is. Four years ago our rail-makers 
 entered into an international combination with 
 the rail-makers in other countries. The agree- 
 ment was a secret one. I have not seen it ; 
 but I have made inquiries in many quarters, 
 and the facts which I am now going to tell 
 you are, I am sure, substantially accurate. 
 The condition of that combination was that 
 our rail-makers should receive a share of the 
 rail trade of the world approximating closely 
 to the consumption of the United Kingdom
 
 THE FISCAL QUESTION 133 
 
 and the rest of the British Empire, and in con- 
 sideration of securing that share of the trade 
 our manufacturers were debarred absolutely 
 from competition in the neutral markets of the 
 world. This agreement had to be renewed a 
 few months ago, and in the interval it was 
 found that the trade of the British Empire was 
 far greater than our rivals were willing to leave 
 to British manufacturers. Under the new 
 arrangement our makers are still prevented 
 from any competition in neutral markets, and 
 they do not secure anything like the whole of 
 the trade of the Empire, but a large part of 
 that also has to go to our foreign rivals. Now, 
 gentlemen, think what this means. The other 
 parties to this combination, the rail-makers in 
 Germany for instance, do not need to make 
 any bargain about their own home markets, 
 their Government secures that market for 
 them. We alone who are defenceless have 
 been compelled to make an arrangement, 
 which I know many of our rail-makers strongly 
 dislike, and to which they only consented as 
 their one means of self-preservation, for they 
 knew that if they did not agree to it, foreign
 
 i 3 4 THE FISCAL QUESTION 
 
 rails would be poured into the market even of 
 the United Kingdom. What an object lesson 
 this is on the advantages of our proposals ! 
 We have it in our power without making any 
 bargain with anybody to secure for our own 
 manufactures our own home market, and the 
 Colonies have all shown that they are perfectly 
 ready, in return for a moderate preference to 
 them, to give us security so far as foreign 
 competition is concerned on their markets as 
 well. Adopt our proposals, and we at once 
 obtain security for the products of our own 
 workmen throughout the British Empire, and 
 we remain free, as our rivals are free to-day, 
 to compete also in the neutral markets of the 
 world. 
 
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