Hartley Withers

“ The more wealthy they grow, the more goods they produce want to sell to us, and they cannot sell to us unless they likewise buy from us. If we helped Germany to grow rich, we also helped her to become one of our best customers and so to help us to grow rich. Trade is nothing but an exchange of goods and services. Other countries are not so philanthropic as to kill our trade by making us presents of their products and from the strictly economic point of view, it pays us to see all the world, which is our market, a thriving hive of industry eager to sell us as as it can. ”

“ As the world developed its productive power, its goods poured into us, as the great free mart where all men were welcome to sell their wares. These goods came in exchange for our goods and services, and the more we bought the more we sold. When other nations took to dealing direct with one another, they wanted our capital to finance the business, and our ships to carry the goods. The world as a whole could not grow in wealth without enriching the people that was the greatest buyer and seller, the greatest moneylender and the greatest carrier. ”

“ But let us recognize that capital, when well and fairly used, is far from being a sinister and suspicious weapon in the hands of those who have somehow managed to seize it; but is in fact so necessary to all kinds of industry, that those who have amassed it, and placed it at the disposal of industry render a service to society without which society could not be kept alive. ”

“ It is easy, however, to exaggerate the effect of the war on our power to finance other peoples. Pessimistic observers, with a pacifist turn of mind, who regard all war as a hideous barbarism and refuse to see that anything good can come out of it, are apt in these days to make our flesh creep by telling us that war will inevitably leave Europe so exhausted and impoverished that its financial future is a prospect of unmitigated gloom. ”

“ This is surely something solid on the credit side of the balance sheet, though it would be a good deal more so if mankind had made better progress with the much more difficult problem of using and distributing its wealth. If the rapid increase of wealth merely means that honest citizens, who find it as hard as ever to earn a living, are to be splashed with more mud from more motor-cars full of more road hogs, then there is little wonder if the results of international finance produce a feeling of disillusionment. ”

“ By our preference for "brilliant" investments, with a high rate of interest and bad security, we invite the floating of rotten companies and waterlogged loans. By our readiness to be deafened by the clamour of the advertiser into buying things that we do not want, we hand industry over to the hands of the loudest shouter, and by our half-educated laziness in our selection of what we read and of the entertainments that we frequent, we open the way to opulence through the debauching of our taste and opinions. ”

“ Economists define capital as wealth reserved for production, and we must always remember that money is only a claim for, or a right to, a certain amount of goods or a certain amount of other people's work. Money is only a title to wealth, because if I have a sovereign or a one-pound note in my pocket, I thereby have the power of buying a pound's worth of goods or of hiring a doctor to cure me or a parson to bury me or anybody else to do anything that I want, up to the buying power of that sovereign. ”

“ If the war teaches us to work hard and consume little, so that when peace comes we shall have a great volume of goods to export, there is no reason why the bill on London should not retain much if not all of its old prestige and supremacy in the marts of the world. For we must always remember that finance is only the handmaid of industry. She is often a pert handmaid who steals her mistress's clothes and tries to flaunt before the world as the mistress, and so she sometimes imposes on many people who ought to know better, who think that finance is an all-powerful influence. ”

“ If no price were offered for capital, we should none of us save, or if we saved we should not risk our money by lending it, but hide it in a hole, or lock it up in a strong room, and so there could be no new industry.
Since capital thus seems to be the subject-matter of finance and it is the object of this book to make plain what finance does, and how, it will be better to begin with clear understanding of the function of capital. All the more because capital is nowadays the object of a good deal of abuse, which it only deserves when it is misused. ”

“ Since the gilded cords of trade and finance have knit all the world into one great market, the proposition that war does not pay has become self-evident to any one who will give the question a few minutes' thought. International finance is a peacemaker every time it sends a British pound into a foreign country. But its influence as a peacemaker is astonishingly feeble just for this reason, that its appeal is to an interest which mankind very rightly disregards whenever it feels that more weighty matters are in question. ”

“ And if there were no railways or factories how could workers find employment?
If every capitalist only got income from the product of his own work in the past, which he had spent, as in this case, on developing industry, his claim to a return on it would hardly need stating. He would have saved his ten thousand dollars or two thousand pounds, and instead of spending it on two thousand pounds' worth of amusement or pleasure for himself he would have preferred to put it at the disposal of those who are in need of capital for industry and promise to pay him 5 per cent. ”

“ Financiers are quite human—quiet, mild, good-natured people as a rule, many of them spending much time and trouble on good works in their leisure hours. What they want as financiers is plenty of good business and as little as possible disturbance in the orderly course of affairs. Such a cataclysm as the present war could only terrify them, especially those with interests in every country of the world. When war comes, especially such a war as this, financing in its ordinary and most profitable sense has to put up its shutters. ”

“ By our eminence in finance and the prestige of a bill of exchange drawn on London, we have also supplied the credit by which goods have been paid for in the country of their origin, and nursed until they have come to the land in which they are wanted, and even until the day when they have been turned into a finished product and passed into the hands of the final consumer. But there is also the indirect advantage that we gain, as a nation of producers and financiers, from the growing wealth of other nations. ”

“ International trade and finance, if given a free hand, may be trusted to bring about, between them, the utmost possible development of the power of the world to grow and make things in the places where they can be grown and made most cheaply and abundantly, in other words, to secure for human effort, working on the available raw material, the greatest possible harvest as the reward of its exertions. ”

“ If, then, the voice of international finance is so feeble when it is raised against the terrible scourge of war, can it have much force on the rare occasions when it speaks in its favour? For there is no inconsistency with the view that finance is a peacemaker, if we now acknowledge that finance may sometimes ask for the exertion of force on its behalf. As private citizens we all of us want to live at peace with our neighbours, but if one of them steals our property or makes a public nuisance of himself, we sometimes want to invoke the aid of the strong arm of the law in dealing with him. ”

“ When war comes, the price of all property shrivels. This was well known to Falstaff, who, when he brought the news of Hotspur's rebellion, said "You may buy land now as cheap as stinking mackerel," To most financial institutions, this shrivelling process in the price of their securities and other assets, brings serious embarrassment, for there is no corresponding decline in their liabilities, and if they have not founded themselves on the rock of severest prudence in the past, their solvency is likely to be imperilled. Finance knew that it must suffer. ”

“ Capital, then, is stored up work, work that has been paid for by society. Those who did the work and took its reward, turned the proceeds of it into making something more instead of into pleasure and gratification for themselves. By a striking metaphor capital is often described as the seed corn of industry. Seed corn is the grain that the farmer, instead of making it into bread for his own table, or selling it to turn it into picture-palace tickets, or beer, or other forms of short-lived comfort, keeps to sow in the earth so that he may reap his harvest next year. ”

“ Picture palaces are crammed nightly, furs and finery have had a wonderful season, any one who has a motor car to sell finds plenty of ready buyers, and second-hand pianos are an article that can almost be "sold on a Sunday." But in the midst of this roar of humming trade, finance, and especially international finance, lies stricken and still gasping from the shock of war. ”

“ At the same time we may hope that as economic progress goes slowly ahead over the stepping stones of uncomfortable experience, borrowing countries will see that it really pays them to pay their yearly bills out of yearly taxes, and that they are only hurting themselves when they mortgage their future revenue for loans, the spending of which is not going to help them to produce more goods and so raise more revenue without effort. War is the only possible excuse for asking foreign nations to find money for other than reproductive purposes. ”

“ And we, we shall die, and Islam will wither away, and the Englishman, leaning far over to hold his loved India, will plant a firm foot on the banks of the Nile, and sit in the seats of the Faithful, and still that sleepless rock will lie watching, and watching the works of the new, busy race, with those same sad, earnest eyes, and the same tranquil mien everlasting. ”

“ Hence it is that when some of those who question the right of capital to its reward, do so on the ground that capital is often acquired by questionable means, they are barking up the wrong tree. Capital can only be acquired by selling something to you and me. If you and I had more sense in the matter of what we buy, capital could not be acquired by questionable means. By our greed and wastefulness we give fortunes to bookmakers, market-riggers and money-lenders. ”

“ When we buy rubbish we do not only waste our money to our own harm, but, under the conditions of modern society, we put the sellers of rubbish in command of the world, as far as the money power commands it, which is a good deal further than is pleasing. ”

“ It may be true that if they had not done so we should have developed the resources of our own country more thoroughly, using it less as a pleasure ground, and more as a farm and kitchen garden, and that we should have had a larger number of our own folk working for us under our own sky. Instead of thriving on the produce of foreign climes and foreign labour that comes to us to pay interest, we should have lived more on home-made stuff and had more healthy citizens at work on our soil. ”

“ Capital, looked at from this point of view, is simply stored up work, and entitled to its reward just as much as the work done yesterday. The capitalist lives on the work of others, but he can only do so because he has wrought himself in days gone by or because someone else has wrought and handed on to him the fruits of his labour. Let us take the case of a shopkeeper who has saved a hundred pounds. This is his pay for work done and risk taken (that the goods which he buys may not appeal to his customers) during the years in which he has saved it. ”

“ It is to the interest of workers that there should be as many capitalists as possible offering as much capital as possible to industry, so that industry shall be in a state of chronic glut of capital and scarcity of workers. Roughly, it is true that the product of industry is divided between the workers who carry it on, and the savers who, out of the product of past work, have built the workshop, put in the plant and advanced the money to pay the workers until the new product is marketed. The workers and the savers are at once partners and rivals. ”

“ We have seen that the benefit that it works is wrought chiefly through specialization, that is, through the production of the good things of the earth in the lands best fitted, by climate or otherwise, to grow and make them. By lending money to other lands, and the goods and service that they have bought with it, we have helped them to produce things for us to consume, or to work up into other things for our consumption or that of other peoples. Thereby we have enriched ourselves and the rest of mankind. ”

“ Capital, then, is wealth invested in industry, finance is the machinery by which this process of investment is carried out, and international finance is the machinery by which the wealth of one country is invested in another. ”

“ If there were not enough people like him to put money into industry instead of spending it on themselves, there could be no railway building or any other form of industrial growth. It is often contended that a reconstruction of society on a Socialistic basis would abolish the capitalist; but in fact it would make everybody a capitalist because the State would have to make the citizens as a whole go without certain immediate enjoyments and work on the production of the machinery of industry. ”

“ To suppose, therefore, that finance is interested in the promotion of such wars is to suppose that it is a power shortsighted to the point of imbecility. In the case of wars which finance is believed with some truth to have helped to instigate, we have seen that it could not have done so if other influences had not helped it. In short, both the occurrence of the present war, and the circumstances that led up to war in Egypt and South Africa, have shown how little power finance wields in the realm of foreign politics. ”

“ And when at the same time the circumstances of their lives, apart from their work, are all that they should not be—bad food, bad clothes, bad education, bad houses, foul atmosphere and dingy and sordid surroundings, it is very obvious that to a large part of working mankind, the benefits of the much vaunted division of labour have been accompanied by very serious drawbacks. The best that can be said is that if it had not been for the division of labour a large number of them could never have come into existence at all ”

“ If they wanted war it was because they believed, rightly or wrongly, that their country had to fight for its existence, or for something equally well worth fighting for, and so as patriotic citizens, they accepted or even welcomed a calamity that could only cause them, as financiers, the greatest embarrassment and the chance of ruin. War has benefited the working classes, and enabled them to take a long stride forward, which we must all hope they will maintain, towards the improvement in their lot which is so long overdue. ”

“ In short, finance, if left to itself, is international and peace-loving. Many financiers are at the same time ardent patriots, and see in their efforts to enrich themselves and their own country a means for furthering its political greatness and diplomatic prestige. ”

“ The great industrial expansion of Germany between 1871 and 1914, has certainly been helped by the paths opened for it all over the world by English trade and finance; and America, our lusty young rival, that is gaining so much strength from the war in which Europe is weakening itself industrially and financially, will owe much of the ease of her prospective expansion to spade-work done by the sleepy Britishers. It may almost be said that we and France as the great providers of capital to other countries have made a world-wide trade possible on its present scale. ”

“ The work we have done for our own benefit has certainly helped others, but it does not, therefore, follow that it has damaged us.
Looking at the matter from a purely business point of view, we see that the great forward movement in trade and finance that we have led and fostered, has helped us even by helping our rivals. In the first place, it gives us a direct benefit as the owners of the mightiest fleet of merchant ships that the world has seen. We do nearly half the world's carrying trade, and so have reason to rejoice when other nations send goods to the ports that we have opened. ”

“ The armament firms are manufacturers with an article to sell, which is important to the existence of any nation with a seaboard; and they are entirely justified in legitimate endeavours to push their wares. The fact that the armament firms of England, Germany, and France had certain interests in common, is often used as a text for sermons on the subject of the unpatriotic cynicism of international finance. It is easy to paint them as a ring of cold-blooded devils trying to stimulate bloodthirsty feeling between the nations so that there may be a good market for weapons of destruction. ”

“ International Finance makes a series of bargains between one nation and another, for the mutual benefit of each, complicated by occasional blunders, some robbery, and, in exceptional cases, horrible brutality. Religion has stained history with the most ruthless massacres, and the most unspeakable ingenuity in torture, all devised for the glory of God, and the furtherance of what its devotees believed to be His word. International politics have plunged mankind into a series of bloody and destructive wars, culminating in the present cataclysm. Finance can only prosper through production ”

“ But if we admit the very worst that the most searching critic of international finance can allege against the proposal that we imagine to be put forward by the Republic of Barataria—if we admit that a loan to balance a deficit and pay for ships probably implies wastefulness, corruption, political rottenness, impecunious Chauvinism and all the rest of it, the question still arises whether it is the business of an issuing house to refuse the chance of doing good business for itself and for the London money-market, because it has reason to believe that the money lent will not be well spent. ”

“ The biggest borrowers of money, in most countries, are the Governments, and so international finance is largely concerned with lending by the citizens of one country to the Governments of others, for the purpose of developing their wealth, building railways and harbours or otherwise increasing their power to produce.
Money thus saved and lent is capital. So finance is the machinery that handles capital, collects it from those who save it and lends it to those who want to use it and will pay a price for the loan of it. This price is called the rate of interest, or profit. ”

“ If we lent money to a friendly nation, and our friend was thereby enabled to lend to a likely foe, we should not have mended matters. The time is not yet ripe for a full discussion of this difficult and complicated question, and it is above all important that we should not jump to hasty conclusions about it while under the influence of the feverish state of mind produced by war. The war has shown us that our wealth was a sure and trusty weapon, and much of the strength of this weapon we owe to our activity in International Finance. ”