The Unity of Western Civilization Part 11

BOOKS FOR REFERENCE

Leach, _The Schools of Medieval England_. Methuen.

Mullinger, J. Ba.s.s, _The Schools of Charles the Great_.

Paulsen, _Geschichte des gelehrten Unterrichts_.

Rashdall, _Universities in the Middle Ages_. Clarendon Press.

Foster Watson, _Grammar Schools_. Cambridge University Press

Woodward, _Erasmus_. Cambridge University Press.

IX

COMMERCE AND FINANCE AS INTERNATIONAL FORCES

Commerce and finance are departments of life in which mankind approaches nearer to unity than in any other. They are practical expressions of the instinct of self-preservation which is the first law of nature. They spring straight from the acquisitiveness which is a universal characteristic of human nature and indeed of animal and vegetable nature. Every living thing wants to acquire food. Adam Smith indeed restricts the trading instinct to mankind. 'The propensity', he says, 'to truck, barter, or exchange one thing for another ... is common to all men and to be found in no other race of animals, which seem to know neither this nor any other species of contracts. Two greyhounds in running down the same hare have sometimes the appearance of acting in some sort of concert. Each turns her towards his companion or endeavours to intercept her when his companion turns her towards himself. This, however, is not the effect of any contract, but of the accidental concurrence of their pa.s.sions in the same object at that particular time. n.o.body ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.'[24]

Mr Cannan, in his edition of the _Wealth of Nations_, very judiciously points out in a note on this pa.s.sage that 'it is by no means clear what object there could be in exchanging one bone for another'. Probably if one rummaged the literature of dog stories one would find plenty of examples of commerce between dogs, and when they perform tricks to get food, we detect the germ of the exchange of a service for a commodity.

When a bee takes honey from a flower and leaves in exchange the pollen from a flower of an opposite s.e.x, it may be said to be at once a merchant, a carrier, and a matrimonial agent, and the brilliant colours with which flowers attract these merchants have been compared to the advertising posters of the human trader. But however the case may be in the animal and vegetable world, there can be no question that the trading instinct appears at a very early stage of human development. In boys the instinct to trade or swop articles appears long before they feel any inclination to fall in love or to give much serious thought to religion. The cla.s.sical example is given by Mark Twain, who relates how Tom Sawyer exchanged one of his own teeth, which had been pulled out that morning, for a tick in the possession of Huckleberry Finn, and then 'the two boys separated, each feeling wealthier than before'. In fact, of course, they both were wealthier than before, because each had got something that he wanted more than the article with which he had parted; and this pleasant result sums up the whole genesis and basis of commerce.

But though commerce is thus merely an expression of an instinct which is primitive and universal, it does not follow that it is its only or even its earliest expression. Perhaps its earliest and most natural expression was through robbery, with or without violence. A primitive savage who saw something that he wanted would probably, if strong enough, hit its owner on the head and take it, and this short and simple method of acquisition still occasionally reappears in the realms of the most highly civilized diplomacy. Nevertheless, at a very early stage its limitations became obvious, and quite at the dawn of recorded history we find commercial transactions referred to as an established branch of human intercourse. The Old Testament story has not gone far before it tells us of buying and selling. In the twenty-third chapter of Genesis we find a very interesting bargain recorded between Abraham and Ephron.

Sarah had died in Kirjath-arba:

'the same is Hebron in the land of Canaan: and Abraham came to mourn for Sarah, and to weep for her. And Abraham stood up from before his dead, and spake unto the sons of Heth, saying, I am a stranger and a sojourner with you: give me a possession of a buryingplace with you, that I may bury my dead out of my sight.

And the children of Heth answered Abraham, saying unto him, Hear us, my lord: thou art a mighty prince among us: in the choice of our sepulchres bury thy dead; none of us shall withhold from thee his sepulchre, but that thou mayest bury thy dead. And Abraham stood up and bowed himself to the people of the land, even to the children of Heth. And he communed with them, saying, If it be your mind that I should bury my dead out of my sight; hear me, and intreat for me to Ephron the son of Zohar, that he may give me the cave of Machpelah, which he hath, which is in the end of his field; for as much money as it is worth he shall give it me for a possession of a buryingplace amongst you. And Ephron dwelt among the children of Heth: and Ephron the Hitt.i.te answered Abraham in the audience of the children of Heth, even of all that went in at the gate of his city, saying, Nay, my lord, hear me: the field give I thee, and the cave that is therein, I give it thee; in the presence of the sons of my people give I it thee: bury thy dead. And Abraham bowed down himself before the people of the land. And he spake unto Ephron in the audience of the people of the land, saying, But if thou wilt give it, I pray thee, hear me: I will give thee money for the field; take it of me, and I will bury my dead there. And Ephron answered Abraham, saying unto him, My lord, hearken unto me: the land is worth four hundred shekels of silver; what is that betwixt me and thee? bury therefore thy dead. And Abraham hearkened unto Ephron; and Abraham weighed to Ephron the silver, which he had named in the audience of the sons of Heth, four hundred shekels of silver, current money with the merchant.'

In this very early and curious example of a bargain we find the seller continually expressing reluctance to sell and asking the buyer to accept as a gift the commodity that he wants. It appears from the sequel that this is merely an example of Oriental politeness. At any rate, the end of the bargain was that Abraham paid the money, four hundred shekels of silver, which is described as 'current money with the merchant', thus apparently showing that this system of payment in metals was already a regular feature of commercial transactions. Coined currency had not yet been developed, for we may note that Abraham weighed the silver.

When we come to the days of Solomon we find something like a developed international trade. The fifth chapter of the first book of Kings describes how Solomon, on taking the throne of his father, sent to Hiram, king of Tyre, and stated his purpose to build a house unto the name of the Lord his G.o.d, asking Hiram to send his servants to hew cedar trees out of Lebanon, and saying that he would give hire for Hiram's servants according to all that he should appoint. Hiram replied that he would do all that Solomon desired concerning timber of cedar and concerning timber of fir. 'My servants shall bring them down from Lebanon unto the sea: and I will convey them by sea in floats unto the place that thou shalt appoint me, and will cause them to be discharged there, and thou shalt receive them: and thou shalt accomplish my desire, in giving food for my household. So Hiram gave Solomon cedar trees and fir trees according to all his desire. And Solomon gave Hiram twenty thousand measures of wheat for food to his household, and twenty measures of pure oil: thus gave Solomon to Hiram year by year.'

According to this arrangement it would appear that Solomon paid for the timber that he imported by exporting to Hiram wheat and oil, but it is shown in a later chapter that the transaction was not a purely commercial one. At the end of twenty years, when Solomon had finished the building of the temple, he gave Hiram as further consideration twenty cities in the land of Galilee, 'and Hiram came out from Tyre to see the cities which Solomon had given him; and they pleased him not.

And he said, What cities are these which thou hast given me, my brother?

And he called them the land of Cabul [explained in the margin as meaning "displeasing" or "dirty"] unto this day. And Hiram sent to the king sixscore talents of gold.'[25]

Apart from this transaction between the two kings, Solomon appears to have developed a very considerable foreign trade, presumably exporting wheat and oil and other agricultural products. His imports appear to have been various. Chapter ten of the first book of Kings states that 'the king had at sea a navy of Tharshish with the navy of Hiram: once in three years came the navy of Tharshish, bringing gold, and silver, ivory, and apes, and peac.o.c.ks.' ... 'And the king made silver to be in Jerusalem as stones, and cedars made he to be as the sycomore trees that are in the vale, for abundance. And Solomon had horses brought out of Egypt, and linen yarn: the king's merchants received the linen yarn at a price.'

The whole question of Solomon's balance of trade is a very interesting one, and deserves the attention of some Hebrew scholar who may be able to throw light upon it. In these days it is rather difficult to see how a purely agricultural country could have found the means of paying for all these articles of pure luxury which Solomon imported so freely. It must be noted, however, that 'all the earth sought to Solomon, to hear his wisdom, which G.o.d had put in his heart. And they brought every man his present, vessels of silver, and vessels of gold, and garments, and armour, and spices, horses, and mules, a rate year by year'. From this it appears that Solomon was able to exchange his wisdom for a very considerable part of the imports which came into his country, and so perhaps we may take it that Solomon's wisdom is the earliest recorded example of what is now known as an invisible export. A modern equivalent would be the articles which English writers contribute to American newspapers and are paid for, ultimately, by the shipment to England of American wheat and cotton. It is also interesting to note in these days, when personal economy and simplicity of life are so freely preached, that Solomon's very luxurious imports were followed by evil consequences, imports of an enormous number of strange women, and a consequent turning away of his heart after false G.o.ds.

When we come to secular history, the very first chapter of the first book of the first history ever written deals with a question of commerce. Herodotus, who has been called the Father of History, opens his work with a few introductory words stating that 'these are the researches which he publishes in the hope of thereby preventing the great and wonderful actions of the Greeks and Barbarians from losing their due meed of glory, and withal to put on record what were their grounds of feud'. And then he plunges straight into his story, as follows: 'According to the Persians best informed in history, the Phoenicians began the quarrel. This people, who had formerly dwelt on the sh.o.r.es of the Erythraean Sea, having migrated to the Mediterranean and settled in the parts which they now inhabit, began at once, they say, to adventure on long voyages, freighting their vessels with the wares of Egypt and a.s.syria. They landed at many places on the coast, and among the rest at Argos, which was then pre-eminent above all the states included now under the common name of h.e.l.las. Here they exposed their merchandise, and traded with the natives for five or six days; at the end of which time, when almost everything was sold, there came down to the beach a number of women, and among them the daughter of the king, who was, they say, agreeing in this with the Greeks, Io, the child of Inachus. The women were standing by the stern of the ship intent upon their purchases, when the Phoenicians, with a general shout, rushed upon them. The greater part made their escape, but some were seized and carried off. Io herself was among the captives. The Phoenicians put the women on board their vessel, and set sail for Egypt. Thus did Io pa.s.s into Egypt, according to the Persian story, which differs widely from the Phoenician: and thus commenced, according to their authors, the series of outrages.'[26]

Commerce is thus a striking example of the unity of mankind, being a practically universal form of human activity which arises as soon as man verges from the earliest stages of barbarism. In the case of individuals it is easy to see how this desire to exchange commodities between one individual and another meant so great an increase in human efficiency that it had only to be thought of to be universally adopted. The primitive savage, doing everything for himself, building his own hut, killing or finding his own food, and making his own clothes, such as they were, was an extremely versatile and self-sufficing person. At the same time the comforts that he enjoyed were probably not very satisfactory. His hut was almost certain to be draughty and to let in rain through the roof; his hunting and finding of food must have very often left him with his larder empty, and the state of his wardrobe was probably simple rather than satisfying. It would inevitably happen that certain members of the tribe would show greater efficiency than others in doing a certain one of these various businesses which are essential even to the simplest form of human life. Thus the tendency to specialization begins to show itself. The skilful hut-builder builds huts not only for himself but for other members of the tribe; he acquires further skill by constant practice and the huts are more quickly built and better when finished. The other tribesmen, in effect, pay him by supplying him with a certain amount of food and clothes. The tendency for specialization would make very rapid progress, and it is easy to see how at a very early date and in the most primitive communities there would be bowyers, arrow-makers, and leather-dressers, and how various kinds of artificers would arise, supplying the wants of the community in some special line, and receiving from the community all the commodities which they required apart from those which they produced themselves. The individuals of the community thus become mutually dependent, and live by one another's production. Hence comes unity, and with it a fresh cause of disunion, owing to the likelihood of quarrelling over the exchanges effected.

As progress developed and the communities at a greater distance became acquainted with one another's wants and the various kinds of goods that certain districts supplied, this tendency to specialization and consequent exchange of goods would grow in an ever-widening circle.

Instead of the tribe being a commercial unity, the zone in which the interchange of goods went on would widen as far as the geographical and other boundaries allowed it. In the same country one district would be found to be specially well adapted for agriculture, and another for pasture; another, being well supplied with metals, would naturally provide a race of smiths and producers of rough tools for industry, and the exchange of commodities between districts with these various capacities would mean that the specialization of production would go steadily further, and that a whole town or village would be found in which the great majority of the inhabitants were at work upon one particular form of industry, relying for the other kinds of commodities that they required upon the activity of a similar community living in the next valley or on the other side of the river. This widening-out process would naturally extend itself over the borders of different countries. Obstacles to this process would be found in the differences of language and probably in the difficulties of transport. On the other hand, it would be greatly stimulated by the different ideas of value that prevailed in different communities. Value depends upon the extent to which anybody wants a thing, also on what he thinks it is worth, that is to say, the number of commodities in his possession with which he is prepared to part in order to secure it. Obviously commodities coming in from foreign countries, and being unknown or rare in the country in which they are offered, if they are otherwise at all attractive, possess a certain amount of what is called scarcity value, which makes them easily saleable by adventurous merchants who arrive with the cargo.

The stories of fortunes made by merchants who travelled among simple native tribes with cargoes of gla.s.s beads and were able to exchange these gaudy baubles for gold or rubber or other commodities which are valuable in civilized countries, have often been told, and opportunities for trading of this kind must have been very much more frequent when communication was comparatively difficult. Value to a great extent being determined by local convention and local habit, the profits of the trader were likely to be considerably increased the further he got from his home market. If he took away with him plenty of things which were in abundant supply at home and consequently cheap, he would almost certainly be able to bring back a large number of things which were plentiful in a far-away community, and consequently cheap for him to acquire, and scarce in his own district and consequently sure of a good market. This difference of standard of value in different countries was a great stimulus to foreign trade, also a great help to bringing mankind together, though it sometimes ended in disillusionment. It has been a.s.serted that even within the memory of man an English merchant traded with a primitive community in which gold and silver were exchangeable weight for weight. For some years he did a very pleasant and profitable trade by taking a cargo of silver and bringing back with him the same weight in gold, the value of which in England happened to be sixteen times as great, or more. Unfortunately, when he made his last voyage he was met at the mouth of the river by a friendly native, who informed him that the community was waiting for him with tomahawks, and he hastily put to sea again. For the rest of his life he cherished a grievance against this curious people with which he had dealt, according to his own view, on perfectly equitable terms, having sold them a commodity at a price to which they were accustomed, and which they regarded as quite correct, with the result that they proposed to murder him because they found that the price was not in accordance with that current in other parts of the world.

By this business of exchange of commodities between one community and another, the process of specialization or division of labour which has already been referred to as its basis has been developed to extraordinary lengths. Its effect has been to increase enormously the wealth available, while at the same time the concentration of the individual has narrowed down his work so that he now no longer specializes on making one commodity, but on making a part of a fraction of a commodity.

Adam Smith's chapters on division of labour are so well known that there is no need to point out the very great economic benefits that arise from it. Clearly, any man who spends all his working time upon one particular process of productive activity acquires thereby a skill and rapidity in carrying out his part of the operation which would be impossible to any worker who has to carry the manufacture of an article from the beginning to its end. Just as we saw, when the primitive savage left off doing everything for himself and took to building huts for the rest of the community, that the huts became much more water-tight and comfortable, so the process goes still further, and building becomes very much more rapid and very much more cheap and efficient when a large number of specialists are set to work on the various very different processes required for the construction of a house. The consequence is that the production of goods is very greatly cheapened and made much more rapid, but at the same time the worker tends to become an artisan instead of a craftsman, and his work is likely to be much more monotonous and much more trying. Instead of seeing his product grow under his hand from its beginning to its end, with constant changes in the nature of its call on his energy and care, he is employed during the whole of his working time on some mechanical process, with the result that he himself becomes something very like a machine. What he has gained in the power to make and acquire commodities cheaply and quickly is offset to a certain extent by the less interesting and varied nature of his work.

It also follows that as the worker becomes a specialist he becomes dependent upon other members of the community for the supply to him of a large number of things which he requires for his own existence. If he spends his life in making one commodity or in making part of one commodity, it is clear that his requirements of all the things that are necessary for life apart from what he makes himself can only be satisfied by the willingness of the community to take the commodity that he makes in payment for those which it produces and of which he is in need. When he works for himself, he only makes things that he knows himself to need; when he works to sell to others, he has to speculate on the hope that the others will want what he makes.

Commerce thus not only shows the unity of mankind by being a universal feature of his existence, but increases that unity by making each individual dependent upon the exertions of his fellows, and on their willingness to take from him stuff which he is turning out; but if commerce thus promotes unity, it also tends to create a certain amount of friction and disagreement between one man and another when differences of opinion arise concerning the value of the product which each man is making, that is to say, concerning the amount of goods which the rest of the community is prepared to give him in exchange.

This consideration is also very strongly evident with regard to international trade. Here the division of labour is a.s.sisted by the difference in the products of different countries. There can be no doubt that the exchange of commodities between one nation and another tends to bring them together and to promote unity and harmony of interests. At the same time it is also likely to be fruitful in quarrels and bickering. We saw that Hiram was very much dissatisfied with the cities in Galilee which Solomon presented to him in the course of their semi-commercial transactions. He appears to have retaliated by making Solomon a very handsome present in gold; but Hiram seems to have been a very exceptional person, and it is probable that most traders who are dissatisfied with the consideration received would not have been so generous in expressing themselves.

International commerce has also been a fruitful cause of disunion rather than unity when various nations have quarrelled with one another concerning the right to trade with a third people. If one nation is trading with another greatly to its profit, it feels that it has a grievance when it finds that a neighbouring nation is sending cargoes to the same destination and undercutting it and taking the cream of the trade. After religion, it is probable that trade has produced more bloodshed than any other form of human activity. At the same time there can be no doubt that on the whole its influence has been strongly on the side of unity and that it has done more to break down international barriers than any other influence that has operated in the course of history. The trader, as such, believes entirely and whole-heartedly in the unity of mankind. All that he wants to do is to buy his products as cheaply as he can and to sell them at the best possible price. Whether he buys at home or abroad, or whether he sells at home or abroad, is a matter of complete indifference to him except that, as has been shown, owing to variations in value in different parts of the world, he is probably likely to be able to make larger profits from foreign trade than in commerce at home. National preferences sometimes induce him to encourage home industry by buying home products when foreign goods would have paid him better, but in so far as this happens, he ceases to be a trader as such and becomes a mixture of trader and patriot. As buyers and sellers, however, mankind is, on the whole, singularly free from international prejudices. It was thought at one time that importation of foreign goods into England would be considerably checked by insisting upon marks of origin, that is to say, that imported goods should be stamped as such. This expectation, however, seems to have been entirely disappointed, since most buyers were not concerned with the question of the country whence the commodity that they bought came, and only considered whether it suited their purses and was what they wanted.

Sometimes there is actually a prejudice in favour of foreign goods, and, curiously enough, this is found to be so even in countries in which a protective policy has been very highly developed. It is, or was a few years ago, common to see in American newspapers, flaming advertis.e.m.e.nts heralding sales of imported goods, which were definitely stated to be such obviously because the sellers thought that they were likely to be able to sell them better because they were stated to be so. It is also a proud boast of English manufacturers that in many countries on the Continent it is common, or was until quite lately, for native manufacturers to sell their goods more easily in their home markets by describing them as English. Political and national prejudice seems to be overruled by the common human desire for something new and strange, and consequently, in spite of all friction that has arisen from international trade, and of the number of wars which have had their origin in commercial questions, there is good reason for the a.s.sertion that on the whole commerce has been a mighty promoter of intercourse among the nations and of the unity of mankind. If it had not been for commerce, the cheapening and quickening of communication could never have been carried out. The trader goes first, and after him the traveller and the tourist.

This claim can be made with perhaps even more certainty when we proceed to the realm of finance. If commerce is international and unifying, finance is perhaps even more so. Finance, of course, arises out of commerce and is an essential part of its machinery. By finance we mean the machinery of money--money-dealing and money-lending. Money becomes necessary as soon as the exchange of commodities, which is the meaning of trade, becomes fairly developed. At first, primitive peoples exchanged their commodities one for another, but a difficulty arose when out of a pair of possible traders one had something which the other wanted but the other had not. For example, if the arrow-maker had arrows to sell and wanted to buy fish, there obviously could be no bargain if his friend who wanted to buy arrows had only got deerskins to give in exchange. It was essential to the development of trade that some commodity should be hit on which could always be taken in exchange and so form a circulating medium. We have seen from the twenty-third chapter of Genesis that a certain weight of silver had in Abraham's time begun to a.s.sume this function. Economic text-books tell us that many other commodities had the form and function of money before the metals came into use. Until quite lately there were many places in which the use of an agreed medium of exchange had not been adopted to facilitate the purposes of commerce. Jevons begins his very interesting book on money by relating how

Some years since, Mdlle Zelie, a singer of the Theatre Lyrique at Paris, made a professional tour round the world, and gave a concert in the Society Islands. In exchange for an air from _Norma_ and a few other songs, she was to receive a third of the receipts. When counted, her share was found to consist of three pigs, twenty-three turkeys, forty-four chickens, five thousand cocoa-nuts, besides considerable quant.i.ties of bananas, lemons, and oranges. At the Halles in Paris, as the prima donna remarks in her lively letter, ... this amount of live stock and vegetables might have brought four thousand francs [160], which would have been good remuneration for five songs. In the Society Islands, however, pieces of money were very scarce; and as Mademoiselle could not consume any considerable portion of the receipts herself, it became necessary in the meantime to feed the pigs and poultry with the fruit,'[27] and so her receipts consumed one another.

This is an example of the inconvenience which the invention of money overcame. In primitive communities it took the form of cowry-sh.e.l.ls or tobacco or gunpowder or any commodity which was in universal request in the place. All the seller wanted to do was to be able to obtain for his product a certain amount of stuff which he could rely on being able to exchange for other things that he wanted. In the end the precious metals, with their strong appeal to human vanity, and their utility for adorning temples and so propitiating divine favour, ousted all other commodities which had been used for money; and they are now to a great extent ousted by pieces of paper, which still, however, represent claims to so much gold.

The discovery of a circulating medium enormously facilitated the progress of commerce, and it was not long before a cla.s.s of people grew up who specialized in this particular form of business and became financiers and moneylenders. Bankers and financiers were known in Rome and Athens, and we know that some machinery existed by which the monetary claims of one country on another could be settled by something that fulfilled the functions of the modern bill of exchange. The actual provision of metallic currency has from the earliest times been almost entirely under the control of the government which took into its own hands, as an essential part of the police protection which it gives to the people, the coining of currency, stamping the coin in such a way that anybody who took one might know that he was getting a certain weight of a precious metal. But the money-dealing business very soon developed the machinery of credit by which anybody who had an enterprise or a venture out of which he expected to make an attractive profit could, if he had sufficient property to pledge, provide himself with the means to finance it between the day that he started on his operations and the day when he brought home his profits: and this business also became international, though not, perhaps, as rapidly as commerce had overstepped the boundaries between one people and another.

In the _Merchant of Venice_ we find Antonio trading with all the countries of the then known world,

From Tripolis, from Mexico, and England, From Lisbon, Barbary, and India,

but we do not find that Shylock was lending money on at all the same international scale. When communication was slow, difficult, and untrustworthy, money-lending at a distance was made very risky, because it was impossible for the lender to keep the watchful eye on the borrower's operations and credit that is required if he is to feel comfortable in his venture. For a Lombard Street banker to lend money to a merchant in Cheapside payable at a year hence was, until comparatively lately, a much safer enterprise than to lend it to a merchant in Paris, because the local borrower was always under the lender's observation. If he were overtrading or living on too lavish a scale it would at once be noticed and reported.

Nevertheless, international finance made steady progress through somewhat obscure beginnings. We know that Philip II of Spain was heavily indebted to moneylenders all over the Continent, and that by his famous repudiation he carried consternation throughout Europe.[28] Edward III was also heavily indebted to Florentine bankers, and he also omitted to pay his debt; and it is said that the descendants of the Florentine bankers still have a claim against the English Crown in consequence[29]; but it was not until after the creation of stock exchanges and the machinery of a public market in securities that international finance became a question of general importance.

Here also the effect has been for unity combined with a good deal of disunion. Twenty years ago it used to be said that feeling in the Western States of America was very strongly anti-English because most of the Western farmers were indebted to English moneylenders, and on the whole it may be said that the relations between the borrower and lender are not likely to be so friendly and so likely to promote unity as those between buyer and seller. There is really no logical reason why this should be so: the basis of the bargain between the two is exactly the same. In commercial transactions one man sells to another because the other man wants something that he has got more than he does. It is exactly the same with the borrower and lender of money. A man borrows because he wants money and is prepared to pay a rate of interest for it.

The lender lends because he has money to lend and wants to earn interest on it. Nevertheless there is something in this relationship which seems to produce discord. It is not many years since the Australian newspapers used to talk of England as John Bull Cohen, implying that the English money market made more than it ought to do by developing, with the help of its financial resources, the production and commerce of the young countries of the world. Perhaps it is human to feel a grudge against a creditor, because the money has to be paid back, whereas a commercial bargain is done with. Nevertheless, after allowing for all the friction that money-lending seems to produce, there can be no question that the establishment of the international market in securities has enormously widened the world's output of commodities, and it has greatly promoted that unity of interests which has brought mankind together more than anything else.

Englishmen are always supposed to be particularly insular. Nevertheless, any one who looks at the Official List daily published by the London Stock Exchange and sees the enormous number of Government and munic.i.p.al loans from all parts of the world, the number of foreign railways, and the number of foreign enterprises of all kinds which are dealt in on the London Stock Exchange, cannot avoid the conclusion that this practice of investing money abroad, which has been followed here to a greater extent than in any other country, must have very greatly widened the Englishman's horizon and forced him to confess that at least from one point of view dwellers in foreign countries have some right to exist. At any rate, in practice English investors not only have shown that they do not recognize international barriers, but there have even been times when foreign securities have actually been preferred to English. A few years ago it was reported by stockbrokers that many of their clients would not invest money at home and insisted whenever possible that it should be placed abroad. To such an extent has this process been carried on that it is now calculated by statisticians that no less than four thousand millions of English money have been placed outside England, about one-half of this having been lent to foreign countries, and about one-half to our own colonies. Here again, as in commerce, there arises a possibility of quarrelling, not only between the lender and borrower but also between rival groups of lenders in different countries. When an economically backward country is being developed with the a.s.sistance of capital from nations which are at a further stage of economic progress, the moneylender is supposed to acquire a certain amount of political prestige and privilege which makes other nations, which have an eye to increasing their influence in the borrowing country, jealous concerning such operations. A curious example was presented not long ago by China.

China wanted to borrow, and probably the only countries which had any genuine surplus of capital available for export were England and France.

Nevertheless, owing to the political side issues involved, Russia, Germany, and the United States also all insisted on taking part in the business of lending money to China. China was compelled to borrow more money than it wanted, so that all these so-called civilized Powers could share in the operation, and the absurdity of the position was increased by the fact that some at least of the Powers which lent the money would have had to borrow it somewhere before they could do so.

This freedom with which England has furnished financial resources to the rest of the world is sometimes called in question as having had, or being likely to have, bad effects upon the activity of production at home. It is quite clear that the progress of international commerce and the division of labour among nations by which commodities of all kinds have been very greatly cheapened could not have been carried out if England and other comparatively far developed countries had not supplied the necessary capital for the development of the relatively backward parts of the earth. If English money had not gone into building railways in America, Canada, Argentina, Australia, and all over the world, and supplying capital to the farmers and others who opened up these countries, food could not have been nearly as cheap as it is or as it was before the war, and clothes and other necessaries of life would have been at a very different price. In fact, it may be said that if England had not acted as she has, as the world's financier, the development of the world's trade to anything like its present scale would have been altogether impossible. If we could feel sure that the distribution of the world's production had been as satisfactory as the wonderful increase in its output, there would be no question that all cla.s.ses in England had been very greatly benefited by its financial activities abroad. As it is, it is sometimes argued that English capital going abroad stimulates production in other countries and increases the demand for labour there, but that the demand for labour in England and its reward might have been on a higher scale if English capital had been kept at home. This is a question which is, happily perhaps, outside my province at present, but it is one which demands serious attention. This much can be said, that the years in which English capital has gone abroad with the greatest rapidity have also been those in which our export trade has been most active, and it is obvious that this must be so, because when England exports capital it does so in the form of lending money either to a foreign Government or to a foreign munic.i.p.ality, or to some company, English or foreign, which is conducting some enterprise in a foreign country.

In whatever way the money is lent the result is that the country to which it is lent is given so much buying power in England and consequently its demand for English goods is to that extent stimulated.

It does not follow, of course, that the whole amount of money that it borrows is actually spent in England. It is possible that the Canadian railway which is raising money in England may spend it by buying steel rails in Belgium, but in practical fact the net result is that somebody or other abroad is given a claim on England which finally, by some roundabout process, takes effect in a demand for English goods and services. At the same time, when one does admit that international finance is essential to international commerce and that the specialization, which is an essential product of commerce, is thereby quickened, we have to remember that the objections, such as they are, which can be put forward against the division of labour among individuals cannot be overlooked altogether when the division of labour is applied to nations.

Dr. Bowley, in his book on England's foreign trade, puts the matter dramatically as follows:--

The limit to the indefinite division of labour is to be found in the social, intellectual, and moral objections to specialization.