288 



i)is(:ovi:i<v 



on the liands of the Disposal Board, and of firms which 

 had purchased war stores in bulk and not yet disposed 

 of them, began to act as a wet blanket on business 

 enterprise. 



(6) The financial disorganisation caused by the war 

 is having a very prejudicial effect upon trade and 

 employ^Tlent. This operates in two entirely different 

 ways, (i) It has led to a marked rise in the rate of 

 interest which seriously checks new enterprises requiring 

 capital. A development which might be soundly 

 financed, if money could be borrowed at 3 i or 4 per 

 cent., may be outside the scope of practical politics if 

 money has to be borrowed at 6 or 6 i per cent. (2) The 

 foreign exchanges are badly out of joint. It is not 

 merelj' that our producers are liable to be undersold by 

 certain Continental countries, and that many foreigners 

 cannot afford to buy our goods because sterling stands 

 at such a high premium in terms of their currencies, 

 but that, owing to the violent fluctuations in the foreign 

 exchanges, a large speculative element has been intro- 

 duced into all foreign trade, which tends to discourage 

 our manufacturers from selling abroad. 



(c) The high costs of production since the war are 

 restricting sales ; amongst the factors leading to high 

 costs of production may be noted . (i) the enhanced 

 rate of interest referred to above ; (ii) the high prices 

 of raw materials ; (iii) high rates of wages, and this 

 in its turn leads to high prices of raw materials, 

 e.g. coal ; and (iv) low daily rates of output. In many 

 ways the last is the most serious of all. It is partly 

 accounted for by reduced hours of labour, but the out- 

 put per hour in many industries has fallen, whereas 

 reduced hours should enable a higher hourly output 

 to be secured. High wages themselves are not incom- 

 patible with low costs of production, but liigh wages 

 in conjunction with slow working makes production 

 very costly. 



(d) The war has left most of the combatant countries 

 seriously impoverished and e.xhausted, and with greatly 

 reduced purchasing power. Quite apart from the pro- 

 blem of the foreign exchanges mentioned above, several 

 of the Continental countries are obliged to devote 

 practically their whole energies to feeding themselves 

 and repairing the damages of war, and they conse- 

 quently have no surplus products available to exchange 

 \vith other countries. In view of the importance of 

 foreign trade to this country, the temporary loss of 

 several Continental markets is very prejudicial both 

 directly and indirectly. It is not merely that Con- 

 tinental countries are buying less from us, but they 

 are also buying less from various overseas countries, 

 e.g. coffee from Brazil and cotton from India, a fact 

 which diminishes the purchasing power of overseas 

 countries in our markets. 



(iii) (a) Much the most serious of the other special 



influences which are accentuating the present outbreak 

 of unemployment is the series of big strikes which 

 have occurred since the Armistice, e.g. the moulders' 

 strike, and, in particular, the recent coal dispute. 

 Industrial disputes nearly always throw some workers 

 out of employment, quite apart from those who are 

 on strike, or who are locked out, and in the case of 

 the coal dispute whole industries have been closed 

 down for want of fael. Restarting an industry after 

 it has been closed down is never a very rapid process, 

 but it is particularly slow when it occurs at a time of 

 general trade depression. 



(b) Certain industries, in particular the Lancashire 

 cotton trade, are at present adversely affected by the 

 Indian trade boycott. 



II 



Even a brief examination of the problem of unem- 

 ployment would hardly be satisfactory without some 

 reference to the possible measures which may be taken 

 to remedy the evil. The ideal to be aimed at is 

 undoubtedly the restoration of industry to ordinary 

 working conditions, so that a full output can be 

 disposed of at remunerative prices. In what way, 

 if any, can a return to good trade be hastened bj' State 

 action ? Temporarily, the State can stimulate trade 

 in at least two ways : on the one hand, it can place 

 huge orders in various directions as happened during 

 the v/ar, when the State was the largest customer of 

 most industries ; on the other hand, it can inflate the 

 currency and cause prices to rise, which encourages 

 industrial expansion. This also tended to happen 

 during the war. These " remedies," like alcohol and 

 drugs administered to human beings in strong doses, 

 stimulate the patient for a time, but then have very 

 unpleasant after-effects, the patient ultimately feeling 

 more miserable than he did originally. Industry 

 is suffering now from the unpleasant after-effects 

 of big Government orders and of war-time inflation. 

 The war-time trade prosperity was entirely artificial, 

 and just as a repetition of strong doses of alcohol or 

 drugs would sooner or later kill the patient, so a repeti- 

 tion of excessive Government orders and inflation would 

 sooner or later lead to national bankruptcy. As a 

 State drugging of industry with excessive orders and 

 inflation cannot restore natural trade prosperity, and 

 will ultimately involve most pernicious consequences, 

 such a policj' cannot be recommended, and it is there- 

 fore necessary to explore other possible lines of action. 



The methods of dealing with unemployment can be 

 divided into two classes . (i) those concerned with the 

 eliminating of the causes of the evU, and (2) those 

 concerned with alleviating the evil when it has arisen. 

 Wliilst it is obviously true of unemployment, as of 

 illness, that prevention is better than cure, the difficulty 



