bankers) are so safe, so straight, so sensible, from an American point of view so unenterprising, that they are able to build up a bigger credit fabric on a smaller gold basis, and even carry this building to a height which they themselves have decided to be questionable. This "psychological reserve" is the priceless possession that has been handed down through generations of good bankers, and every individual of every generation who receives it can do something to maintain and improve it.But it was not always thus, and it is merely the many ramifications of the English commercial and financial world that have brought this about. In the end the Americans will imitate it, or they will suffer from a hopeless disadvantage in their financial competition with England. Commercial development is broadly illustrating one profound truth: that the real basis of social morality is self-inter- est. If English banks and insurance companies have become absolutely honest in their administration, it is because the dishonesty of any one of them threatened the prosperity of all.
Must we assume that the Governments of the world, which, presumably, are directed by men as far-sighted as bankers, are permanently to fall below the[Pg 81] banker in their conception of enlightened self-interest? Must we assume that what is self-evident to the banker--namely, that the repudiation of engagements, or any attempt at financial plunder, is sheer stupidity and commercial suicide--is for ever to remain unperceived by the ruler? Then, when he realizes this truth, shall we not at least have made some progress towards laying the foundations for a sane international polity?
The following correspondence, provoked by the first edition of this book, may throw light on some of the points dealt with in this chapter. A correspondent of London Public Opinion criticized a part of the thesis here dealt with as a "series of half-truths," questioning as follows:
What is "natural wealth," and how can trade be carried on with it unless there are markets for it when worked? Would the writer
maintain that markets cannot be permanently or seriously affected by military conquests, especially if conquest be followed by
the imposition upon the vanquished of commercial conditions framed in the interests of the victor?... Germany has derived, and continues to derive, great advantages from the most-favored-nation clause which she compelled France to insert in the Treaty of Frankfurt.... Bismarck, it is true, underestimated the financial resilience of France, and was sorely disappointed when the French paid off the indemnity with such astonishing rapidity, and thus liberated themselves from the equally[Pg 82] crushing burden of having
to maintain the German army of occupation. He regretted not having demanded an indemnity twice as large. Germany would not repeat the mistake, and any country having the misfortune to be vanquished by her in future will be likely to find its commercial prosperity compromised for decades.
To which I replied:
Will your correspondent forgive my saying that while he talks of half-truths, the whole of this passage indicates the domination of that particular half-truth which lies at the bottom of the illusion with which my book deals?
What is a market? Your correspondent evidently conceives it as a place where things are sold. That is only half the truth. It is a place where things are bought and sold, and one operation is impossible without the other, and the notion that one nation can sell for ever and never buy is simply the theory of perpetual motion applied to economics; and international trade can no more be based upon perpetual motion than can engineering. As between economically highly-organized nations a customer must also be a competitor, a fact which bayonets cannot alter. To the extent to which they destroy him as a competitor, they destroy him, speaking generally, and largely, as a customer.
The late Mr. Seddon conceived England as making her purchases with "a stream of golden sovereigns" flowing from a stock all
the time getting smaller. That "practical" man, however, who so despised "mere theories," was himself the victim of a pure theory,
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and the picture which he conjured up from his inner consciousness has no existence in fact. England has hardly enough gold to pay one year's taxes, and if she paid for[Pg 83] her imports in gold she would exhaust her stock in three months; and the process by which she really pays has been going on for sixty years. She is a buyer just as long as she is a seller, and if she is to afford a market to Germany she must procure the money wherewith to pay for Germany's goods by selling goods to Germany or elsewhere, and if that process of sale stops, Germany loses a market, not only the English market, but also those markets which depend in their turn upon England's capacity to buy--that is to say, to sell, for, again, the one operation is impossible without the other.
If your correspondent had had the whole process in his mind instead of half of it, I do not think that he would have written the passages I have quoted. In his endorsement of the Bismarckian conception of political economy he evidently deems that one na-tion's gain is the measure of another nation's loss, and that nations live by robbing their neighbors in a lesser or greater degree. This is economics in the style of Tamerlane and the Red Indian, and, happily, has no relation to the real facts of modern commercial intercourse.
The conception of one-half of the case only, dominates your correspondent's letter throughout. He says, "Germany has derived, and continues to derive, great advantage from the most-favored-nation clause which she compelled France to insert in the Treaty of Frankfurt," which is quite true, but leaves out the other half of the truth, somewhat important to our discussion--viz., that France has also greatly benefited, in that the scope of fruitless tariff war has been by so much restricted.
A further illustration: Why should Germany have been sorely disappointed at France's rapid recovery? The German people are
not going to be the richer for having a poor neighbor--on the contrary, they are[Pg 84] going to be the poorer, and there is not an
economist with a reputation to lose, whatever his views of fiscal policy, who would challenge this for a moment.
How would Germany impose upon a vanquished England commercial arrangements which would impoverish the vanquished and enrich the victor? By enforcing another Frankfurt treaty, by which English ports should be kept open to German goods? But that is precisely what English ports have been for sixty years, and Germany has not been obliged to wage a costly war to effect it. Would Germany close her own markets to our goods? But, again, that is precisely what she has done--again without war, and by a right which we never dream of challenging. How is war going to affect the question one way or another? I have been asking for a detailed answer to that question from European publicists and statesmen for the last ten years, and I have never yet been answered, save by much vagueness, much fine phrasing concerning commercial supremacy, a spirited foreign policy, national prestige, and much else, which no one seems able to define, but a real policy, a modus operandi, a balance-sheet which one can analyze, never. And until such is forthcoming I shall continue to believe that the whole thing is based upon an illusion.
The true test of fallacies of this kind is progression. Imagine Germany (as our Jingoes seem to dream of her) absolute master of Europe, and able to dictate any policy that she pleased. How would she treat such a European empire? By impoverishing its component parts? But that would be suicidal. Where would her big industrial population find their markets?[15] If she set out to develop and enrich the component parts, these would become[Pg 85] merely efficient competitors, and she need not have undertaken the costliest war of history to arrive at that result. This is the paradox, the futility of conquest--the great illusion which the history of our own Empire so well illustrates. We British "own" our Empire by allowing its component parts to develop themselves in their own way, and in view of their own ends, and all the empires which have pursued any other policy have only ended by impoverishing their own populations and falling to pieces.
Your correspondent asks: "Is Mr. Norman Angell prepared to maintain that Japan has
