raw material were 22,000,000 lbs. less; but our exports of goods were 4,000,000 lbs. in excess of the exports of 1877. There remains, therefore, 26,000,000 lbs. less wool for home consumption in 1878 than in the previous year. This comparison shows that the depression in the woollen industry is due to diminished purchasing power in the United Kingdom rather than to foreign competition.

of loans to

states.

In considering the falling off in the demand, more Cessation particularly for iron and steel, it is to be remembered foreign that the foreign railways, which were furnished with material from England, were constructed mainly by loans obtained on the London Exchange. It is stated by Mr. Wilson in his volumes on the resources of modern countries, that in the interval between 1866-75, 37,000 miles of railway were constructed in the United States, at a nominal cost of several hundred millions sterling. From 70,000,000l. to 100,000,000l. were raised in Europe by the sale of bonds. In South America, railway extension has been carried on by repeated borrowings in London and Paris. The total amount of foreign loans taken in London has been calculated at 615,000,000l. So long as money could be raised in London, the Republics of South America and the effete Governments of Europe enjoyed a brilliant outburst of fictitious prosperity; but when experience showed how uncertain was the payment of those higher rates of interest, which had allured the credulous public-fifty-four per cent. of the foreign loans issued in London, as it is shown in Mr. Smedley's report, are in default-and when the investigations of the Committee

Benefit from outflow of capital.

Ministerial

extravagance.

of the House of Commons had revealed the chicanery, by which the public had been duped in numerous instances, all confidence in investments of this character was destroyed. The loans being withheld, the trade with the countries we had hitherto supplied with funds, inevitably decayed. No foreign country, as Mr. Wilson remarks, with the exception of France, Belgium, Holland, and Germany, has had in itself resources to buy and pay for the commodities that we have sold to them so freely.

Misrepresentation should be exposed, and the public should be warned against Governments which are persistently in default. It is to be hoped, however, that the revelations of the Foreign Loans Committee will not discourage those sound investments, which, when judiciously made, equally benefit the lender and the borrower. Mr. Mill has truly said that the perpetual outflow of capital into the colonies and foreign countries has been for many years one of the principal causes by which the decline of profits in England has been arrested. It carries off a part of the increase of capital from which a reduction of profits proceeds. On the other hand the emigration of English capital has been the chief means of keeping up a supply of cheap food, and cheap raw materials for industry, to our increasing population.

British trade has suffered from the fierce contest lately waged in Eastern Europe. It has suffered from the extravagance of the present Government. They were careless in expenditure on their first accession to office, and before the cloud of impending war was

seen.

The uncertainties of the future under a government which delights in sensations and surprises, and is swayed by fanciful and imaginative impulses, have been a more serious impediment to the revival of commerce than the increase in the burden of taxation. Security and confidence would have been lightly purchased even at the price of increased taxation. The Government have harassed our commerce by the rash and bellicose spirit in which they have conducted our foreign relations. They have lowered the financial reputation of the country, and demoralised the people, by indulging them in exciting prospects of war and conquest, without attempting to cover the expenditure out of current revenue. Under such a system electors are unconscious that our national resources are being wasted in heedless and unnecessary wars. The conduct of the present Government stands out in striking and unworthy contrast with the more straightforward policy of former Liberal administrators.

penditure.

A passage relating to the Crimean War in the cor- Provision respondence of the late Prince Consort is quoted in of war exMr. Theodore Martin's admirable biography (vol. iii. p. 57). It might be applied with equal force to more recent incidents. Referring to the financial arrangements for the prosecution of the Crimean War, the Prince writes as follows: Gladstone wants to pay for the war out of current revenue so long as he does not require more than 10,000,000l. sterling above the ordinary expenditure, and to increase the taxes for the purpose. The Opposition are for borrowing. The former course is manly, statesmanlike, and honest; the latter is convenient, cowardly, perhaps popular.'

Need of political

cial circumspec

tion.

In the succeeding chapters the various causes to which the depression of trade is attributable, will be further examined and described in more detail than it has been possible to give in a general summary.

It is satisfactory to know that many causes of comand finan- mercial distress may be removed by greater wisdom on the part of statesmen and financiers. We cannot prevent a recurrence of famines among the populations in the East, who are the most extensive consumers of our textile manufactures; but public opinion can control the foreign policy of the country. The waste of capital, which we have deplored in recent years, may be avoided by more circumspection in the future. Many incautious and premature investments will soon become more or less productive. The revenue of the vast network of railways in the United States and Austro-Hungary, in which British capital has been largely embarked, will improve; and a general recovery of credit will follow upon the re-establishment of peace.

Misapplication of capital.

It will be admitted by every unprejudiced mind that our workmen may have injured trade by their indolence and arbitrary demands. Yet their misconduct is subordinate in importance to other adverse influences. Errors of judgment in the application of capital have been the most potent cause of the suspension of industry and the temporary exhaustion of our

resources.

27

CHAPTER II.

THE FALL IN PRICES.

Much money makes a country poor, for it sets a dearer price on everything.-G. HERBERT, Jacula Prudentum.

Saving to

consumers

from re

price of

THE effect of a condition of commercial depression is considerably mitigated in a national point of view by the cheapening of commodities, which is an inevitable duced consequence of the slackening of demand. of demand. When coal. prices are falling and the complaints of the manufacturers continually reach our ears, it is sometimes forgotten that while the general depreciation of values constitutes a loss to the producer, it affords a corresponding relief to the consumer. Mr. Fawcett has given a striking illustration of the loss sustained by consumers from the recent abnormal condition of the coal trade. The sudden increase in the demand led to a rise of 13s. 6d. in the price per ton. The The aggregate production of coal in the United Kingdom is 120,000,000 tons, of which not more than 12,000,000 tons are exported. The rise in price represented therefore an additional charge of 81,000,000l. upon the consumers of coal, nine-tenths of which sum was contributed by consumers in this country, and not less than 13,500,000l. by those who use coal for household purposes, and who received no direct advantage from the general prosperity of trade during the period in