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coalbeds did not give her natural advantages which the rival colony of Victoria does not possess, then of course we should be able to institute a fair and very useful comparison between the manufacturing progress of Victoria and that of New South Wales. As it is, colonial partisans of Protection and Free Trade have wearied themselves and their hearers with every kind of distortion and qualification of the figures furnished by these two colonies. In 1891 it appeared that Victoria with a rather smaller population and a very much smaller territory, virtually unprovided with coal, was manufacturing £22,000,000 worth of goods against something less than £17,000,000 worth turned out by New South Wales. But, as I have just said, I attach no very great importance to the value of the comparison. If the Reid tariff were to remain in operation in New South Wales for seven or eight years longer, and if the Victorian tariff were to remain unchanged during the same period, then a more useful though still imperfect comparison would be possible. But should Australian Federation come about and both colonies have to dwell together under the same fiscal laws, they will cease to furnish object lessons more or less misleading to Australasian controversialists. To what extent have the Protective tariffs kept up wages and kept down unemployment ? A table already quoted shows how limited their effect was in the first respect. Since that table was drawn up there have been distinct advances in the rate of pay in several trades, though without Trade Union effort and Labour Legislation these might not have been obtained. On the whole it may be said of the Protected employers that they pay their men very well, but women and hoys by no means so well. But for recent legislation the position of the female and child workers in certain colonial factories might soon have been well-nigh as bad as in the sweated industries of Great Britain. On the other hand, as sources of employment, the Protected industries have been of very great service, and the unenviable prominence of the unemployed in New South Wales during the last four years has been a matter of note throughout the colonies.

Meanwhile English students may be warned not to attach too much weight to the fiscal question as a factor in the prosperity or depression of the Australasian colonies. All of these are in the main producers of raw material and gold for the European market. If the prices in London of wool, meat, tallow, wheat, butter and cheese are good, then the colonies are prosperous. If the prices, or most of them are bad, then the colonies are depressed.

Their Protected industries are of importance and value to them. On the other hand, the cheapening of certain articles under the Reid tariff is appreciated by the consumers of New South Wales. But these things are not the main influences which determine the economic condition of Australasia, though in the course of heated fiscal polemics amongst colonists attempts are often made to lift them into that position.

W. P. REEVES

NUMBER OF PERSONS EMPLOYED IN CERTAIN PROTECTED INDUSTRIES IN 1895, IN

NEW SOUTH WALES, VICTORIA, AND NEW ZEALAND.

Industry or Manufacture.

New South Wales.

Victoria.

New Zealand.

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Agricultural implements ... 118
Soap and candles ............

440 Coachbuilding.......

1,130 Breweries and malthouses

848 Woollen mills........

242 Printing establishments ... 4,731 Brick, tile, and pottery works .............

977 Iron, brass and tin works,

and machine-making ... 7,639 Tanning, fellmopgering,

and woolscouring ......... 2,690 Clothing and boots and shoes..........

2,286 Furniture ..........

772 -- -- -- - --------

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NOTE.-It must be remembered that in the year 1895 the Reid Tariff had not come into operation, and New South Wales was a Protectionist colony. 1895 was a year of general colonial depression. If I could give the figures for 1898, they would, I believe, show a marked increase, especially in Victoria and New Zealand. FUTURES IN THE GRAIN MARKET.1

The modern system of “ futures" has proved itself a convenient scapegoat for all the evils of the grain trade. It is charged with being the cause of low prices and of high prices, with increasing trade risks, and with diminishing them till there is no chance for profit. A few years ago the farming class clamoured for the suppression of the speculative market, while recently the Kansas farmers started a movement to contribute a cent a bushel on all their wheat to a fund for the benefit of the most daring speculator of the Chicago market. This confusion of ideas is not unnatural. The last half-century has seen a complete revolution in the trade in agricultural staples, brought about by the great changes in the means of transportation and communication. This transformation of the nature of the market for such commodities has resulted in severe hardships at certain times to certain classes. At the same time the speculative market has come into great prominence, and it is not unnatural that this institution, which is really the natural result of the new conditions, should be held up to criticism as their cause.

Even as late as 1850 the markets for grain were local markets, and in the main prices were determined by local conditions. With the growth of the world-market of to-day the price in each locality came to be determined by the conditions of demand and supply in all parts of the world. A sudden change in the crop conditions of India had an immediate effect on the price of wheat in Birmingham and San Francisco. The trade in these commodities consequently became far more hazardous. No knowledge of local conditions and no foresight regarding them could protect a dealer against disastrous changes in value due to far-off occurrences. The unpredictable forces in the market—the

i The main points in the present essay are treated at greater length in the writer's monograph, “Speculation on the Stock and Produce Exchanges of the United States," Columbia University Studies, New York, 1896.

Konjunkturbecame increasingly important. The more extensive the trade in the great staples became, with the growth of commercial facilities, the more seriously these risks were felt. All great branches of the international trade in raw products became extremely speculative. To buy and store wheat for a future market was no longer a conservative but a hazardous undertaking. The growth of organised speculative markets was in direct response to these conditions. The greater the risks, the greater the opportunity for, and the greater the need of, speculation. It is characteristic of this development that the first organised speculation to become prominent in the trade between England and America was that in cotton. The trade in cotton was completely disorganised by the Civil War in America, and out of this disorganisation arose the speculative market at the end of the sixties. The evidence taken before the German Imperial Commission, appointed in 1892 to investigate the subject of speculation, revealed the fact that every speculative market in Germany arose, as did the cotton market, in response to increased uncertainties of trade.

These markets, however, were not a result of a philanthropic desire to benefit the public, but of the chances for great profit which these trade risks gave. The very conditions which repelled cautious traders attracted those of a speculative turn of mind. Furthermore, new men were attracted to these trades, who were equally willing to deal in wheat or cotton or stocks or anything else, so long as the ordinary cares of the trader were reduced to a minimum and the fluctuations in price were great. In other words, the uncertainties of trade differentiated traders into two classes, out of one of which the class of professional speculators arose. This special class, organised in exchanges, with a perfected method of facilitating business, has arisen to assume the great risks that were becoming intolerable to the trader; and this is its primary economic function.

The way in which trade risks may be shifted to the speculative class is two-fold; first, through the existence of a continuous market; secondly, through the possibility of hedging transactions. The former is due to a general change in trade conditions, the latter is a special device for insurance against loss.

The continuous market is the result of the ceaseless opportunities for trade furnished by market fluctuations. There is an unending stream of business, the bulls and the bears, the buyers and the sellers, making new contracts with every indication of changed conditions of demand and supply. Into this stream the merchant, or the producer, or the manufacturer, may enter at any time to make such contracts as are necessary in his business. Here there is a price fixed for the delivery of goods of various qualities at various times. Suppose a Minneapolis miller receives a bid on 50,000 barrels of flour to be delivered in Liverpool at the end of six months. He has only to look at the prevailing price of wheat to determine at once the prospect of a profit. If favourable, he at once cables acceptance, and the same hour purchases wheat for delivery at such times as will be most convenient for grinding purposes. The price of his wheat and of his flour are known to him at the start, and only the rates of insurance and freight can come in to affect his profit. In the same way a spinner, by buying his cotton regularly for future delivery in response to his contracts for the delivery of the manufactured goods, knows exactly what the results of his business are going to be. It may be said that this buying of wheat and cotton by the manufacturers for future delivery would be possible without the speculative market, just as it is possible for them to sell their products for future delivery. This could happen to some extent, but without the speculative market there would be no continuous market in which a definite price for future deliveries is always quoted. The spinner receives orders for the delivery of his goods at intermittent times, and it is very important that when such an order comes he should be able to contract at once for bis cotton, and so fix his price to the buyer at a moment's notice. If there is a continuous future market for either his raw material or his product, the manufacturer can always accommodate his purchases and sales to one another. If both markets are intermittent this is impossible.

This use of the continuous market, however, is not the merchant's or manufacturer's only safeguard against risk. By a natural extension of the system he has devised a method of almost complete insurance. This is effected by what are called “ hedging sales.” The practice is now so familiar that it scarcely needs description. It consists in carrying two lines of compensating contracts on the part of the merchant or manufacturer, one in the speculative market and one outside. These contracts being always of opposite nature constitute a hedge against all price fluctuations. Take the case of a wheat merchant for example. He is continuously buying wheat at the “ interior points" and selling this wheat to millers, or to exporters. The wheat itself be buys at a cash price and probably wishes to hold it in store till a favourable opportunity for selling occurs. This would doubt

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