727. Statistics of English trade, 1913-1919.—Statistics of the general trade of the United Kingdom in the war period are given in the following table, to which is added a column showing the excess value of the imports of merchandise and a column showing the excess value of the import (I), or export (E), of gold.

728. Interpretation of the statistics.—Statistics of commerce in the war period are necessarily inaccurate, and two points particularly should be borne in mind in analyzing these figures. (1) The statistics omitted an immense trade in government-owned goods; figures of the actual movement of merchandise should be much larger to give an accurate idea of the facts. The correction would apply particularly to the earlier years of the war, and would affect imports more than exports.5

(2) Prices were rising rapidly, with the inflation of the currency; in 1919 they were about two-and-one-half-fold the prices of 1913. The correction to be applied, to ascertain the physical volume of trade, would affect both imports and exports.

Clearly the trade of the United Kingdom, if measured not in paper values or in gold values but in quantities of physical goods, declined during the war. The shrinkage was most marked in re-exports, of foreign and colonial merchandise. The English had to renounce most of the business that they had been used to transact as middlemen, distributing through the world the goods of other countries. The values of domestic exports also declined at the beginning of the war, and though they returned later to about their former level, the volume of actual wares must have shrunk seriously, to half or less. Only in the case of imports do we find a rise in value that keeps pace with the rise in prices, and indicates a flow of goods that persisted and perhaps increased in amount. These results are what we should anticipate. “Business as usual” is a motto favored by the private merchant, but one which spells ruin for a people engaged in war. To make war effectively they must abandon their usual employments, turn away their regular customers, seek from outsiders only the things that offer a military advantage, but seek all that they can get of those things.

729. Problem of acquiring and of paying for the imports.—The most serious problem for England was to get the goods across a sea infested by submarines, in ships that had constantly to be renewed, through terminals choked by an extraordinary congestion of traffic. This was the vital problem, which strained the energies both of the military and industrial forces of the country, but which by their cooperation was solved. A problem of secondary importance at the time, but important always, was that of paying for the goods.

England had long been used to import goods in excess of those exported. The figures for 1913, £134 million excess value of imports over exports, may be taken as a normal measure of conditions in the recent period of peace. Let the reader, however, glance down the column giving the excess of imports in the years following, amounting 1914-1918 to more than £2,000 million, and he will appreciate the magnitude of the problem involved.

730. Details of the method of payment.—One mode of payment is indicated in the table, in the column of gold shipments. £200 million of gold were exported (in excess of imports) in the three years 1915-1917. The fact that in the year 1914 and particularly in 1918 England was able to add to the government’s gold reserve is striking evidence of the country’s financial strength. The net excess of gold exported, 1914-1918, amounted only to about £120 million, and went but a little way toward payment for the excess of merchandise imported. Reference to an earlier chapter (section 448) will indicate other resources which the country had at its disposal. British ships which carried freight for foreigners during the war received extraordinarily high rates, but many ships were pressed into government service, many were lost, and considerable sums had to be paid to neutral carriers. Net earnings on shipping could hardly have maintained the level of the period before the war, although in one estimate they are credited with a contribution, 1914-1918, of £600 million. A more considerable resource, ideal as a “liquid” asset and adequate in amount to more than any demand that was made upon it, lay in the vast investments that England had made in other countries. The sum of these investments is estimated to have amounted in 1914 to £4,000 million—twice the total adverse balance of merchandise imports. If they had been kept intact the annual returns from them in the five years 1914-1918 would have amounted to nearly half of the bill to be met. Actually they were “mobilized” by the government early in the war, by an arrangement under which the holders exchanged them for government bonds; they were then used as collateral for loans abroad or were sold outright. Estimates of the amount of foreign investments thus sold vary from £500 to £1,000 million. Finally the government borrowed abroad over £1,000 million; that is, it paid the foreigner for the merchandise which he had shipped by getting another foreigner to advance the money to him.

The figures given above are in most cases rough estimates, but even at the minimum they amount to a total considerably above the £2,000 million which was suggested as the sum required. In fact, England was herself lending large amounts abroad in the very period in which she was herself borrowing. She found it necessary to support some of her dominions and allies by loans which amounted altogether to about £1,800 million.6

731. Character of exports and imports.—In general character the trade of the United Kingdom remained unchanged through the war. Four-fifths of the exports, roughly, continued to be articles wholly or mainly manufactured; coal was the all-important item among the raw materials. On the other side of the account three-quarters of the imports continued to consist of food-stuffs, raw materials and articles mainly un-manufactured. On both sides of the account, however, there were great changes in the relative standing of the items in detail, to accord with the shifts in demand occasioned by the war. The exports of textiles were fairly well maintained; they were largely produced by women, and the factories were not adapted to serve other military needs. The exports of iron and steel and their products to all countries except France declined sharply. The production of iron remained nearly constant, and the production of steel increased by one-half, but the metal was urgently needed for military purposes, the shops that worked it up were turned into military establishments, and their products were in large part withdrawn from general trade. In recent years before the war the United Kingdom had exported every year nearly 5 million tons of iron and steel and manufactures thereof. The quantity fell in 1914 to below 4, in 1915-1916 to about 3, in 1917-1918 to about 2. The metal was still leaving the country in this period, but it was destined to a more grim purpose than money-making, and was not recorded in the statistics. Among the imports those items showed the most marked increase which served the primary needs of subsistence (rice, wheat flour, bacon and hams, cheese, milk, cocoa, etc.), or were directly available for military use (fuel oil, gasoline, copper, arms and ammunition, chemicals, etc.).

732. Sources of imports.—The war entailed changes even more sweeping in the direction of English trade than in the items composing it. Among the countries of the world Germany had an importance second only to that of the United States as a source of imports into the United Kingdom. If to Germany be added the other Central Powers, and Belgium, of which all but a small fragment was soon occupied, a territory was cut out which in 1913 had furnished over one-sixth of the imports for consumption in the United Kingdom. The following table indicates how these losses were made good, and where the additional supplies were procured which the war demanded.

The extent to which England satisfied her needs, within the Empire is the more remarkable because of the distance of some of the most important possessions, which put an additional strain on shipping that already had to do double duty.7 Most striking, however, of any feature of the table, is the position of extraordinary importance it gives to the United States, to be explained by the fact that this country was relatively near, was blessed with an abundance of the commodities required, and was inclined to the Entente even before it entered the war. In the years 1917 and 1918 the United States is credited with having “furnished from 50 to 95 per cent of the United Kingdom’s total imports of wheat, wheat flour, corn, oats, barley, bacon, hams, glucose, kerosene, motor spirits, lubricating oil, fuel oil, pig iron and crude steel, raw copper, spelter, raw cotton, tobacco, etc.”

733. Markets for exports.—In times of peace a country is in general more interested in markets for its exports than in sources from which to supply its imports. The condition is reversed in time of war, for reasons that have already been suggested. The Central Powers and Belgium took 13 per cent of the exports of the United Kingdom in 1913, but the closing of this market was of relatively slight consequence at the time. The volume of British products available for export diminished so much that there were few markets to which the flow of goods was maintained. Exports even to the United States barely held their own, in spite of the phenomenal increase of imports from this country.

One country, France, was an outstanding exception to the general rule. The United Kingdom had been used to import from that country more in value than it exported thither. The war effected an abrupt reversal of the situation; imports from France declined, exports thither increased enormously.

The interpretation of these changes is simple. France was the battlefield on the western front. British exports thither were either supplies for the front, or were destined to relieve French labor and products for military service.8 Toward the end of the war France was taking about two-thirds of the total British export of iron and steel manufactures.

By a concentration of resources and energies such as pictured here the war was won. Meanwhile, however, England was neglecting her old customers in various parts of the world, both in the British Possessions and foreign countries. The countries of South America were forced to turn to the United States for manufactures which had formerly reached them from Germany or England; the countries of the Far East were forced to turn to Japan. One of the most serious of the problems of the period following the war was to England the recovery of the markets which she had had to sacrifice in the stress of the conflict.

734. Effects of the war on agriculture.—To follow out the influence of the World War on the internal organization of the countries engaged is beyond the scope of this book. A revolution in commerce such as that described in the last few pages reflected, of course, a corresponding change in internal conditions. The war dissolved old traditions and loosed new forces; the countries engaged in it will never be again what they were before 1914. There is space here only to sketch briefly a few of the changes.

The imperative demand for food, when incoming cargoes were constantly being sunk before they reached port, put on British agriculture a strain which was felt more keenly because of the large proportion of agricultural laborers drawn into military service. One result which promised to have a lasting effect was the introduction of improved mechanical equipment, particularly the modern tractor. The heavy taxes on the owners of large estates forced into the market great areas of land which had been held as a social rather than an economic investment; and laws were passed designed to put agriculture on a more businesslike basis, and particularly to further the growth of small holdings. So deeply rooted, however, are the traditions of English rural life that it would be hazardous to predict the issue of these changes.

735. Effects on industrial organization.—In the more important field of manufacturing industry the changes were likewise sweeping and the permanence of their effect appears to be more certain. Government control was general and despotic. It was heavy-handed, and was often ineffective. It was attended by much friction and waste. It did at least accumulate and disseminate the best technical information and it was ruthless in scrapping antiquated equipment. It stimulated original and constructive thought, if only by reaction against its own arbitrary rules. When manufacturers escaped from it at the close of the war they had already learned much about their business that was new and valuable to them, and were in the way of learning more by their own initiative.

The English, like other peoples, had depended very largely on Germany for synthetic dyes; that is, those dyes which are manufactured in the laboratory by chemical processes, and which have driven most of the natural coloring matters from the field of industry. After the outbreak of the war they suffered for this dependence on two accounts; first in their textile industry by the lack of dyes of good quality and of the requisite variety, second in the field of military operations by the superiority of the Germans in the manufacture of explosives, to which the plant of dye factories is well adapted. Early in the war, therefore, in 1915, “British Dyes, Limited” was formed with the encouragement and financial support of the government. This was a combination of manufacturers using dyes, designed to organize the production of synthetic dye-stuffs by the most advanced methods and with a liberal provision for scientific research. This company did not drive from the field individual producers, who actually made great progress during the war. It is significant, however, of a tendency toward combination, which had been less marked in England than in Germany or in the United States, and which had hampered the English in competition with their rivals. Government control during the war greatly facilitated the movement, which appeared in other industries and promised to break down the separatism of the old-fashioned English manufacturers.

736. Effects on mercantile and financial organization.—In the broader fields of marketing and finance the English took stock of their deficiencies and set to work to remedy them. There was a noteworthy movement toward amalgamation in the banking business, reducing the number of competing units and making more effective the resulting institutions. Particularly significant was the organization under royal charter of the British Trade Corporation, with an authorized capital of £10 million. This company was actually a bank, much like the great German banks of the period before the war, but it was not officially so styled, because it was meant to offer services which had not been characteristic of conservative English banking.

“It will not endeavour to compete with the business of existing British banks and merchants, and it will not accept deposits at call or short notice, except from parties who are proposing to make use of its overseas facilities. Its aim will be to assist with the co-operation of banks and other institutions the inception of new undertakings, and for this purpose it will promote the formation of syndicates and the placing of issues. When British capital is raised by its means for overseas enterprises, it will seek to secure that orders in connection with new undertakings are placed in this country. It will pay special attention to the study of new schemes, and for this purpose it will develop an Information Bureau with representatives abroad which will keep in touch with the Department of Commercial Intelligence of the Board of Trade. It will also be ready to give financial assistance to arrangements for promoting the better organisation of British industries.”

737. Effects on labor.—In the world of labor, as in the sphere of leaders, the war wrought far-reaching changes. The sudden demand for men in the field necessitated the withdrawal of laborers from industry at the very time when the demand for service at home to support the military establishment was most urgent. There followed a strain on the forces of labor which in some cases was allowed to over-tax the capacity of the worker, not only to his own personal injury but also to the disadvantage of the public; while in some cases the laborer, not properly educated in patriotism and thrift, exploited the situation to extort high wages which he spent extravagantly. In the course of time these extremes were evened out, but they illustrate the stresses which permeated the whole industrial structure and which persisted in one form or another until the end of the war. There was necessarily a great “dilution” of skilled labor, with the labor of women and of unskilled men and youths. Trade unions for a time renounced the strict application of their rules, while at the same time they extended greatly their membership. Conflict with employers was postponed, in general, during the course of the war. But the feeling grew strong in the ranks of labor that an undue share of the burden was thrown upon the worker, and that the capitalist-employer had an undue share of the returns and too nearly absolute control. The Russian revolution appears to have had only a very slight influence on the spread of these doctrines, which can fairly be considered the natural product of war conditions in an industrial democracy. With the close of the war a number of labor conflicts came to a head, and one in coal-mining which was long continued, had a particularly serious effect upon industry in general.

738. Control of commerce and commercial policy.—Early in the war the trade of the United Kingdom was placed by the government under strict control. In the emergency of the war it was obviously proper to assure the priority of national over private interests, and the shortage of ships made regulation doubly important. The importation of some wares was prohibited outright, of some wares was restricted to a definite quantity, of some wares was allowed under government license. Similarly exports were placed under control, to keep the needed stocks at home, and to make sure that enemy powers did not profit by British trade. All these measures had a military object, and had no significance with regard to the traditional policy of free trade. In the second war budget, however, taking effect in 1915, the list of dutiable imports was extended to include some manufactured wares (cinema films, clocks and watches, motor cars, and musical instruments), which were subjected in general to an import duty of 33¹⁄₃%. The measure was designed to give revenue, not protection, and it had little practical importance; the importation of most of these articles was soon absolutely prohibited. As a departure from the principles that had been followed in the preceding half century it had considerable significance. Significance attached also to the arrangement in a later budget by which preferential rates, usually two-thirds or five-sixths of the full rate, were established on most of the articles subject to duty, and an opportunity was thus afforded to make some return to the British dominions for the preferences which they had long allowed.

739. Report of the Committee on Commercial Policy.—An Economic Conference of the Allies was held at Paris in 1916, at which was discussed the commercial policy to be pursued by the allied powers at the close of the war. The conference was probably designed to frighten the Germans into making peace, and had no practical results of importance. It did, however, bring to the attention of the English the questions of policy which they must face, and occasioned the appointment of a Committee on Commercial and Industrial Policy after the War, including a number of prominent and influential members, which made its final report in 1918. The substance of the report was as follows.

The committee condemned the plan of establishing a comprehensive tariff to be used in bargaining with other countries, to force concessions in rates from them; and also the plan to impose duties on manufactured imports as a source of revenue. On the other hand it favored duties in specific instances to prevent “dumping,” the sale of goods in a foreign market at prices lower than in the country of manufacture; and it urged, in the light of experience of the war that protection should be afforded, “at all hazards and at any expense,” to industries which it described as “key” or “pivotal.” Such were the industries providing synthetic dyes, zinc, tungsten (for high-speed steel), magnetos, optical and chemical glass, hosiery needles, precision gages, and certain drugs and chemicals. The United Kingdom had depended on other countries, particularly Germany, for the supply of these products, and had then paid dearly for the lack of them. Finally, the Committee approved the principle of imperial preference, and advised that preferential treatment be accorded to the British Possessions in the case of all customs duties established.

740. Safeguarding of Industries Act, 1921.—By an act of Parliament which went into effect in 1921 the most important recommendations of the committee were given the force of law. The act imposed an import duty of 33¹⁄₃% ad valorem on a long list of articles, perhaps 3,000 altogether, defined in detail by the government Board of Trade. The general character of these articles has been already indicated in the preceding section; they were the products of “key industries,” without which other and larger branches of industry would be lamed in operation. Another section of the act was designed to prevent “dumping.” It empowered the Board of Trade to protect industries in the United Kingdom by a duty of 33¹⁄₃% from the competition of articles offered for sale there at prices below the cost of production in the country of origin, or at prices abnormally low by reason of the depreciation of the currency in that country.

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