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experts could make. It is clear, however, that important and lasting changes have taken place under both these heads, and a consideration of them is necessary in settling any particular wage claim. It is possible, for example, that the higher level of unemployment in the cotton industry as compared with woollen and worsted, wages bearing about the same relation to pre-war rates in both industries, is to be attributed to the greater dependence of cotton on export; and that in engineering important changes in methods of production, tending to increase the value of semi-skilled and diminish that of skilled labour, have had their influence only delayed by the Restoration of Trade Practices Act.

III

The changes we have considered so far are changes affecting the relations between wages in different occupations, the result of which will be to alter pre-war relations. It may seem that to attend exclusively to these is to neglect a more important aspect of the wages problem, that of the general level of real wages. The general level cannot, however, be regarded as altogether a separate question; it is only the average of the particular levels; when all the influences affecting these have been considered, the influences determining the general level must have been considered. As a figure, it is the resultant of the figures of the particular levels, and its ascertainment must wait on the settlement of these. There is, however, a sense in which it is a separate question, or at any rate a question requiring separate consideration. In considering wages in a particular industry, it is natural to concentrate attention on the factors peculiar to that industry and to neglect wider underlying influences affecting the industry of the country as a whole. It is worth while, therefore, making an attempt to indicate and classify the wider influences which tend, not to raise wages in some industries and depress them in others, but to raise wages in all industries or to depress them in all.

The attempt is the more necessary inasmuch as, in considering wages in any particular industry and making allowances for changes that have affected it peculiarly, it is necessary to frame some idea of the movement of wages as a whole, to serve as a sort of base line from which to make these allowances. With pre-war wage relations dislocated and every trade uncertain where its wage level will settle, the actual average level will mean very little, and some estimate of the possible and probable general level after the war becomes necessary. It is the combination of this element with the other that makes disputes so difficult and obstinate, and prevents settlements from having any finality. Workers in trades that have improved their relative position resist reductions not only on selfish grounds, but also because they feel they are fighting the battle of the wage-earners as a class; while workers whose relative position has been worsened tend to regard the reductions, to which the state of trade has compelled them to submit, as merely a temporary concession, which will not prevent the recovery of their old relative position when trade improves.

This new aspect of the problem—the general influence of the war on wages and the resultant general level that individual trades must assume—is so vast and offers such unlimited scope for inconclusive estimates that I hesitate to approach it. If I offer a few fragmentary observations upon it, it is not because I believe they provide a satisfactory answer to the problems raised, but only because the general refusal to face the problem is obstructing any satisfactory handling of post-war wages disputes, and merely to discuss it is useful. Moreover, in the absence of any discussion the tendency is in public discussion to take the pre-war level of money wages, allow for the change in the cost of living as measured by the Ministry of Labour index-number, and take the result as a guide to what the post-war general level of wages should be. This procedure involves two unwarrantable assumptions : first, that the post-war level will be identical with the pre-war level of real wages; and, second, that changes in the cost of living may be taken as an index of what industry can pay in wages.

A priori it is unlikely that an event so great as the war would have no effect on the level of real wages; the general influences of the war to which I shall turn in a moment support this a priori conclusion. The habit of comparing wage rates and cost of living is to be deprecated also because it tends to keep alive as a norm or standard the pre-war system of wages, and so to obstruct the modifications rendered necessary by the changes we have already reviewed. Cost of living is an unsafe index of what industry can pay, because the cost of living of the wage-earner depends mainly on the price of goods which British industry does not produce. We import half our food; our own activities are devoted largely to fine manufactures for export. It is necessary in the present unsettled state of credit and the currency to adjust money wages to changes in the value of money; but this should be done, if it is to be done automatically, by using an index-number of prices in which the prices of the things that England sells have at least as much weight as the prices of the things she buys. As it happens, the movement of the cost of living since the war has not diverged greatly in time or direction from the movement of commercial conditions in general; but that is due to the inability of farmers in America and other new countries to curtail production of wheat and meat as soon as it became unprofitable. Once they have cut their losses, agricultural prices are likely to rise and to send the cost of living up; there is no similar reason for believing that industrial receipts will rise, so that, if we insist on basing wages on cost of living, we may make it impossible to employ even the present proportion of our industrial population.

Some consideration of the general influence of the war is therefore necessary. It seems to me it may be summed up by saying that the war reduced the country's economic resources and restricted its commercial opportunities.

The country's resources have been reduced. A country's chief resource is its working population, and it is a surprising result of the fall in the birth-rate during the war that the male population of working age increased more rapidly during the war than the total male population. But the industrial quality of this population was lowered. The 700,000 men whose lives were lost were most of them in the prime of life, trained and experienced in their work; the youths who have grown up to take their places have still to be made industrially, and a large proportion of them had their industrial training abbreviated, and their industrial experience at the most vital period interrupted, by war service. Moreover, of the surviving majority of the military population, a million are in receipt of disablement pensions.

By the side of the loss of labour force is to be set the loss of capital. While population has continued to grow, five years' normal additions to capital have been lost. Large additions to capital equipment for munitions purposes were made; but the value of this for the ordinary purposes of peace must be heavily discounted, and against it must be set the loss of material capital in commercial industry due to neglect of repairs and renewals during the war, of the magnitude of which the £60,000,000 compensation granted by the Government to the railways is an indication. Nor has any progress since the Armistice been made in repairing the loss of capital. The big figures of subscriptions to new industrial issues conceal a big reduction in the amount of saving; their size is due solely to the inflation of values. Converted to 1913 values at the average price level of each year, the £1,073 millions of new subscriptions in the four years 1919 to 1922 represent only £473 millions, little more than two years' saving at the pre-war rate.

These lessened resources are further reduced by the diversion into uneconomical channels that we have already noticed. The overcrowding of the munition industries, the chief factor in disturbing pre-war relations between rates in different occupations, involving as it has done the specialisation of labour to tasks for which the world at peace had little demand, is equivalent to a reduction in the amount of the labour exerted by the population. The similar diversion of capital is equivalent to a reduction of capital, which is expressed in the present-day Stock Exchange values of the securities of mushroom munition firms. The diversion of both labour and capital into these relatively unproductive channels continued right through the trade boom that followed the Armistice.

This reduction in the country's resources is reflected in the figures of physical volume of output in those industries in which we have any measure. Coal and pig-iron production, in spite of large increases in numbers employed, never reached during the boom 90 per cent. of the 1913 level; manufactured exports reached 80 per cent. of the 1913 volume in only one quarter. In steel production and shipbuilding there was attained for a short period a rate of output exceeding the pre-war rate; but it was followed by an equally exceptional decline in output and a growth of unemployment. The general reduction of hours led in most industries to a reduction in output, which has not been yet, though it may be in a few years, made up by an improvement in the pace of work.

While the country's resources have been reduced, the world's effective demand for the country's services has also been reduced. More than any other country Great Britain has built on world peace. In the nineteenth century we developed an industrial organisation of extraordinary efficiency for the purpose of supplying a world that is willing and able to take our products, but at the same time extraordinarily dependent on such a world. Any big changes in the direction of this organisation—whether to satisfying a larger portion of the country's domestic demand and a correspondingly smaller foreign demand, or in the way of compensating by an enlarged Imperial trade for the reduction in our European markets—involves a loss; it is an attempt to use

the machine for a purpose different from that for which it was constructed; and, although a gradual change in direction is constantly going on, it is effected without loss only because it is gradual and because it is the result of purely commercial, not political, influences. The war has affected both the willingness and the ability of the world to take British products—the willingness, because it intensified nationalist feeling and stimulated nationalist economic policies; the ability, because it dislocated the industry and reduced the resources of other belligerents as it did ours—and we are experiencing our dependence in the form of abnormal unemployment.

The significant features in our foreign trade are the reduction in the volume of our exports and the steady trend back to the pre-war distribution by markets. The volume of exports of United Kingdom products, as measured by exports at 1913 prices, reached its highest point since the Armistice in the June quarter of this year, when it was just over 80 per cent. of the 1913 volume. The trend of trade is indicated in the following table of percentages :

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It does not look as if there were any easy alternative to our pre-war commercial relations; it is a world with similar, if diminished, wants that we have to work for. We may have gained at certain points—Europe is probably more dependent, not less, on British coal—but in the main the war has tended to reduce for the time being the country's real income from exchange, as it has reduced the resources with which it gains that income.

A more favourable view of the prospects of British industry would be taken if we looked only at the statistics of profits. The companies, whose results the Economist gives each year, showed returns on their preference and ordinary capital at an average rate of 10:3 per cent. on their ordinary share capital in 1921 and 7 per cent. in 1922—extraordinary figures in view of the unemployment that prevailed. These figures, however, are

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