hanging over the heads of the nation for an indefinite period is an unprincipled and, on the part of the Government, an almost criminal manœuvre. That constitutional changes may from time to time become necessary we should be the last to deny. When such occasions arise let them be dealt with, not hastily or precipitately, but with such well-considered promptitude as shall attest the honesty and sincerity of the Government, shall ensure a permanent settlement of the questions at issue, and prevent them from being kept alive for purely factious purposes: a system which tends to the chronic unsettlement of the public mind, to the delay of all useful legislation, and to the lowering, we should fear, of the dignity and authority of the

crown.

The prominence given to the finance question in the speech from the throne only confirms what public opinion had already divined-namely, that the Budget will be the most important measure of the present session, Welsh Disestablishment being probably held over to the next; and as it is not improbable that the Chancellor of the Exchequer's proposals may cause some friction be

tween the two Houses of Parliament, the public may be interested in hearing what Sir Robert Peel once said of the treatment of Money Bills by the House of Lords. Peel enjoyed the confidence of the commercial world: all the banking and mercantile interests of the city of London looked up to him as a master of finance. It is needless to say that his reputation as a constitutional statesman was equally high. In a letter to the Duke of Wellington in June 1846, on the subject of an Annuity Bill in favour of Lord Hardinge, "I doubt," he says, "whether we could safely fight a battle against the Lords on the ground that alteration of a Money Bill by the Lords was unconstitutional [italics are Peel's]. I rather think the Commons, whenever a conference takes place with the Lords in consequence of an altered Money Bill, avoid denial of the power of the Lords, though they refuse to acquiesce in the alteration." Thus, according to this high authority, the House of Lords in amending the Budget would be within their constitutional rights, however rarely they may have been exercised.

No. MCXXII.

VOL. CLXXXV.

AN economist who exercises considerable influence on the Free Trade side of the prevailing controversy began an article upon the effect of British imports on the country's industries and export trade, and the incidence of import duties, with the words: "There is a prevalent inability on the part of some controversialists to discern the proposition that imports are always paid for by exports of corresponding value."

Apparently he held, as other economists do, the view that imports and exports stand in a relationship to one another, practically as cause and effect. At all events, he proceeded to state the case for the supporters of the doctrine held generally by Free Traders, that the volume of a country's exports

VOL. CLXXXV.—NO. MCXXII,

largely depends upon, and is determined by, the amount of its imports. Arguing from this standpoint, he met, as he believed successfully, the contention of the Tariff Reformer, and declared as his conviction that the Free Trade policy of the country should be maintained.

The elementary truth contained in the proposition that, in the settling of the reckoning between nations whose traders

give and take commodities from one another, the price of the commodity bought is set off, as far as it will go, against that of the commodity sold, their difference alone being paid in money or the equivalent of money to square the account, has bewildered and misled many abstract econo

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mists, and has given rise to serious economic error and political wrong-doing.

The economist who quoted the proposition, and others of his way of thinking, do not themselves seem fully to apprehend the nature of the transaction between nations upon which they dilate.

To begin with, they do not perceive that the transactions are simply purchases and sales of commodities by individuals, and do not lose their character as such by being added together and called National. Further, they do not recognise that gold -the money of nations-is a commodity, the product of labour, and only differs from other commodities in the special position among them that has been assigned to it. The position is as follows: For convenience in exchanging commodities, an operation which is simply a process of barter, gold has by common consent, and by the Law of Nations, had the power conferred upon it, apart from that attaching to it as a metal, that all commodities bought or sold must have their values expressed in terms of the weight and fineness of gold; and the weight and fineness of gold corresponding to the value of any commodity bought or sold will lawfully discharge the debt contracted by such purchase or sale. Further, when gold is used to square the reckoning between debtor and creditor nations, it simply takes its place as a commodity on the side of the minus quantity of other commodities

The proposition does not go a step further, and those political economists who deduce from it and teach the doctrine of the interdependence of imports and exports of commodities, in the sense that the increase of the former will increase the latter, incur a grave responsibility, and do a serious injury to those of their countrymen who depend for their subsistence upon the wages of labour, which in turn depend upon the volume of the country's industries.

To these economists it is matter of rejoicing that imports exceed exports because of the supposed stimulating effect of the former upon the latter, although none of them can suggest how it works; but at the moment they are disquieted by the diminution in both that has taken place in the last year compared with the previous, and by the constantly increasing number of our unemployed. The faith of their followers, too, has been shaken in their "inter

dependent law" by the fact that, while the value of imports for September 1908 exceeded those of 1907 by the sum of £2,692,756, the value of the

exports of September 1908 was £3,585,114 less than those of September 1907. Such disparities do not harmonise with their doctrine.

Many are at a loss to account for the extraordinary and varying difference between the value of imports and exports, and to explain how the excess value of imports over exports is paid for. The total value of goods imported during 1908 amounted to £593,140,723, and of exports £377,219,579-a differa difference of £215,921,144. The respective figures of 1907 were £645,807,942 and £426,035,083 -a difference of £219,772,859.

If one looks at these figures, it is obvious that there can be no interdependence in the volumes of imports and exports. For if such dependence really existed, and the demand for the production of goods for export grew with an increase in the volume of imports, the imports would exercise this influence on the £215,921,144 which the value of the exports does not meet, and which the country has to provide otherwise to square the reckoning; and one has only to consider whence these £215,921,144 are derived to perceive the absurdity of the doctrine.

Those who have given attention to the subject know that this excess is not all met by direct money payment. They know broadly from what other

sources it is provided, although unable to trace them in detail. They know that inward sea - carriage earned by the British shipowner forms part of them, and helps to swell the official valuation of commodities imported, and that corresponding earnings do not enter into the recorded value of exports, so that exports meet a greater amount of the cost of imports than is shown in statistical tables; but this goes only a small way to square the account. They also know that, in the processes of trade, other revenues earned abroad contribute along with the value of the country's exports to meet the cost of imports. Of these, there are trading profits belonging to British owners derived from foreign commercial undertakings, dividends from investments in foreign Government and foreign railway stocks, and

interest from foreign loans-returns, in short, from British capital invested abroad, because it cannot be equally profitably invested at home. No one can believe that any of these sources of revenue can in any way be increased by an increase in the volume of the country's imports or can be affected one way or

another by what is spent on imports.

It is obvious that imports, large or small, can have nothing to do with these sources of payment, and, if this be so, increased imports can per se have nothing whatever to do with an increase in the demand for articles of export to which they are supposed to give rise.

Certain commodities are imported because they are a necessity, and many, although not necessities, are so useful to a country that cannot itself produce them as to be indispensable. Raw materials, ores, &c., used in the production of commodities which form part of the nation's industrial occupation, are of the former class, and must be imported, and other commodities that we cannot produce may, for this or kindred reasons, stand in a similar category; and luxuries are imported because we like them and can pay for them. But many others are not indispensable, and compete with home productions.

In these circumstances it is our bounden duty to inquire what articles of import come under the category of necessities and what do not, and to take care that the industrial occupations of our people are not curtailed by the unrestricted admission of articles, the embodiment of foreign labour, which might be produced at home and give employment to our people.

It must never be forgotten that every article imported is the embodiment of foreign

labour, and to the extent that such commodities can be produced in our own country they deprive our people of employment. When imports reach nearly six hundred million pounds per annum, the labour they represent, and their possibilities as a source of employment, are enormous.

Whatever else may be said on the subject, it can be absolutely predicated, with respect to the relative value of imports and exports, that when exports come to be reduced from any cause, if no countervailing increase in the indebtedness of foreign nations to this country be found, the imports must be reduced if the country is to remain solvent. It is another way of saying that the individuals of which the nation consists must spend less when earnings decrease.

The nation that continues to import in excess of the value of its exports and of the foreign revenues required for their payment, must, like the spendthrift, part with its reserves of wealth to meet its debts, or become bankrupt.

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It will doubtless occur some one to say, the more the imports the more there will be for ships to carry, and the greater the carriage earnings. But he would be deemed out of his mind who gave a public carrier goods to convey one way in order to give him employment, and who added— "The more you carry that way the more you will get back," which is substantially the contention of economists.