shareholders of the various banks, for the bank shareholder has in fact very little to do with the control of the institution which uses his money. . . . The profit which concerns them is not that of their shareholders, but that of the business community as a whole.' This opens the way to an interesting theme which we shall present more fully from a German standpoint in an early issue. Among these annual accountings of the lords of finance to the general public, that of Mr. McKenna, ex-Chancellor of the Exchequer and now chairman of the Midlands Bank, was particularly interesting to Americans on account of its plea for revising the principle on which British note issues are at present regulated, so as to permit a greater quantity to be emitted on the basis of a given quantity of gold. This suggests recourse to recent American precedents, which were also referred to in a different connection by other chairmen. To quote the New Statesman a second time, 'If Mr. McKenna can point to the Federal Reserve system of the United States as giving the financial elasticity which our system lacks, so could Dr. Leaf and Sir H. Goshen point to America as adopting in industry the methods of reorganization which they urge upon the British employer.' On the other hand, the British Government's Mission to inquire into industrial conditions in our country, whose official report will doubtless have appeared before these lines are in print, cautions the country to go slow in copying methods that have been developed in a land where fundamental conditions are as different from those in England as they are in America. In spite of last year's depression, nearly two hundred and thirty-one million pounds sterling of new capital was issued in London. This is practically as much as in 1925, and considerably more than in 1924. One hundred and forty-five millions of this sum was represented by bonds and debentures, forty-six millions by common stocks, and thirty-nine millions by preferred stocks. While most of these increases are credited to domestic British local enterprises, loans to colonial governments amounted to about thirty million pounds, and those to foreign governments to well over twenty million pounds. Average percentage yields upon bond investments range from 5.2 per cent for British municipals to 6.9 per cent for foreign municipals. British railway loans paid 5.12 per cent, while foreign railway loans paid 6.09. Last year Britain's estimated net income from overseas investments was two hundred and seventy million pounds, and that from her merchant marine was one hundred and twenty million pounds—an aggregate increase over 1925 equivalent to about eighty million dollars. North Ireland and Great Britain continue to build more shipping than any other country, though not as large a proportion of the

world's output as before the war. Last year she launched over thirty-eight per cent of the world's new tonnage, or as much as Italy, Germany, the United States, and France, the next four countries in order of rank, combined. Italy and France specialize in big passenger steamers, while British shipyards turn out more merchant tonnage. Among the latest British corporations to reduce capital is Marconi's Wireless Telegraph Company, Ltd. In 1923 and 1924 three million pounds of assets were written off by the directors. This is more than the market value of the present capital, which stands at three and one-half million pounds, but is selling considerably below par. In 1925 the Company earned something over expenses, but no dividend was paid on its common stock, and its assets, more particularly its holdings in associated companies, have continued to depreciate. Several English automobile companies are also embarrassed. Wolsey Motors, Ltd., a subsidiary of Vickers, whose troubles we mentioned a few weeks ago, is in the hands of a receiver; Crossley Motors and its associate, the British Willys-Overland-Crossley Company, Ltd., have written down their capital by about one half; and both Austin and Karrier Motors, Ltd., are now engaged in the same unpleasant task.

In view of the somewhat sensational reports current for the past few years concerning Great Britain's Government-backed campaign to secure control of the world's great oil fields so far as they lie outside the United States, it is interesting to note that the most prominent of these pioneering companies, and one among whose trustees were two Government members, is now in financial difficulties. According to the British Review of Reviews, thousands of investors, attracted into the enterprise partly by the fact that it was at least indirectly under Government patronage, have lost altogether something like thirty million dollars, part of which went into the pockets of British oil promoters of international reputation. Apparently the heaviest losses have been in Central and South America, where large sums of money were expended on what have proved barren prospects. The writer of the article in question is extraordinarily plain-spoken in recommending legal action. 'If no steps are taken, the promoters of British-controlled oil fields will find no lack of imitators. A number of very disgraceful promotions have taken place since the war. In some cases directors, well knowing that fraud has taken place, have compounded felonies. They have no right to do this, even in the supposed interest of shareholders. . . . If the public authorities fail to set in motion the forces of law, they will but help to bring contempt upon the administration of law and justice in this country.' A new board of directors has

since replaced the offending board in the company in question. Apparently the only producing property owned by the Company is in Venezuela.

Business is not news in France to the same extent as in Great Britain, and industrial conditions Business on the Continent

there are reported principally in connection with political debates and bank statements. M. Poincaré told the Finance Committee of the Chamber some weeks ago that he would keep the franc for an indefinite period as near its present ratio to the dollar and pound as possible, implying that the country must pass through a period of experimental stabilization before final stabilization is attempted. Evidence exists that large classes of the population, especially in the towns and cities, are being forced to adjust their scale of living to lower incomes, due to unemployment and short time. But the rise of the franc has benefited the industry of neighboring countries. This is illustrated by an instance reported in the Chamber debates, where two factories producing the same article stand nearly opposite each other, one on the French side and the other on the Belgian side of the international boundary. The French establishment is practically closed down, while the one in Belgium is working night and day.

Germany is discussing a Constitutional amendment, which has been laid before the Reichstag and will probably be adopted by the requisite two-thirds majority, creating a permanent Reichswirtschaftsrat, or Federal Economic Council, to replace with important changes of structure and functions the Provisional Economic Council created by ordinance seven years ago. The latter body was a makeshift conceived in the image of the Socialist and Sovietoid Germany of the revolution. The new Council will have no political connotations, but will be a body of experts with wide authority to promote economic prosperity and to preserve peace in industry. It will have one hundred and twenty-three members, equally divided between representatives of employers, workers, and the public, and in addition to other functions will exercise final jurisdiction in industrial disputes appealed to it from the lower arbitration courts. It will also draft all bills relating to labor and industry which come before the Reichstag. The Committee on Trusts of the German Federation of Industry met in Berlin not long ago to discuss the status of industrial combinations in that country. One speaker contrasted American and German 'rationalization' as follows: 'Their rationality and technical talent enable the Americans to utilize capitalism with the maximum effect. They are particularly aided in so doing by the sympathetic coöperation of the masses, by a strong community spirit, and by the fraternal relations

existing among industrialists and between employers and employees. Germany is handicapped in following this path principally by her dependence upon foreign markets as an outlet for her goods. Consequently she must develop a trust system of her own.' Another speaker emphasized the importance of taking the public into their confidence. The trusts must court publicity instead of shrinking from it. They must have faith in themselves as an inevitable and indispensable form of industrial organization. They must emphasize, however, both in practice as well as in putting their case before the public, the idea of coöperative self-help, and not the idea of monopoly. Judging by press reports, the meeting resembled an uplift gathering. An economic writer in Berliner Tageblatt ascribes what he conceives to be a present world-wide economic crisis largely to the abnormal margin between the purchasing power of the American people and of the peoples of Europe, and asks whether signs are in sight that this margin will diminish. It did not shrink any in 1926, but European wages are rising, and, though still separated from those in our own country by an enormous gulf, are perceptibly nearer the American standard than they were two or three years ago. Another indication of a swing toward economic equilibrium is the appearance of favorable trade balances in several European countries and a shrinkage in the excess of exports over imports in the United States. According to the German financial press, the European Steel Cartel has proved a disappointment, so far as controlling world prices is concerned. A general revision of the agreement is anticipated, partly because Germany, as intimated in our previous issue, insists upon a larger output allotment than was originally given her, for sale in foreign markets. Under the original agreement Germany's quota becomes a larger percentage of the Cartel's total output with every quarterly increase of production. The figures are as follows:

On Basis of 25 On Basis of 291

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Germany Belgium France Luxemburg





Berlin has issued the first Federal loan the Government has contracted since the mark was stabilized. It is for one billion marks, and returns the original subscribers 5.43 per cent upon their investment.

Although the Italian newspapers profess gratification at the result of the Lictorial Loan, subscribers are said to be offering their bonds

privately for twenty points less than they paid for them. If the rumor is true, the Government has managed to capitalize moral suasion for many millions of lire. Official influence is also felt in several depressed industries. The Biella woolen mills and a number of important shipyards and electrical and metal-working establishments, which were threatened with a partial shutdown, are running at full capacity upon government orders. This may explain certain alarming rumors of active war preparations in that country. Italian manufacturers have also profited by the cessation of French competition since the rise of the franc and by the low price of cotton. Cotton mills, however, as well as silk mills, are running on short time. Important deposits of iron ore are said to have been discovered by Italian engineers at Monte Tambura in the Apuan Alps. These are extensive enough, according to the Italian press, to employ ten thousand miners for an indefinite period. It is announced that the Harriman group, which operates the Chiaturi manganese concessions in Georgia, has secured from the Soviet Government control of the Abcheron oil fields, an extensive and promising tract of petroleum-producing country upon a cape extending into the Caspian Sea.

Iron and steel works, like textile mills, are dispersing themselves over the face of the globe. East of Following in the footsteps of India and Australia, South Africa now Suez proposes to establish with government aid an iron and steel industry of her own. Previous efforts to obtain capital for such an enterprise in Great Britain, Europe, and America have failed, as the Afrikanders claim, because the ironmasters of these older countries have tried to prevent the growth of competition elsewhere. Pretoria has vast deposits of mediumgrade ore almost within the city limits, which it proposes that the new company shall have practically gratis. We are not informed, however, where South African furnaces propose to get their fuel. Indian railways must be fairly prosperous if the last report of the Bengal and Northwestern Company is representative; last year it paid its shareholders sixteen per cent, or two per cent more than any previous season in its history.

Chinese customs revenues for 1926 exceeded seventy-eight million haikwan taels, an increase of more than ten per cent over the previous fiscal year. Cotton manufacture was depressed because civil war interfered with yarn sales to the peasants, and spindles stocked up with high

priced American cotton were hard hit when it dropped from twenty-two cents per pound in February to twelve cents in November. On the other hand, China's silk trade experienced a veritable boom during the late summer and early autumn, on account of a revival of demand from America accompanied by the low price of silver, which gave Chinese silk an advantage over Japanese silk in the export market. The Irish Statesman links our policies and trade in China as follows: 'American imports into China in 1925 were 14.7 of the total imports, as compared with the British percentage of imports, which was 9.6. The United States percentage of Chinese exports in the same year was 18.4 of the whole, while the British percentage was 6.1. The Japanese have a larger trade with China than either, taking 24.0 per cent of the exports and sending 31.0 per cent of the imports into China. It seems from the example of the United States that it is possible to conduct an increasing and profitable trade with China without the aid of warships, marines, and regiments of the line. In fact, since 1913 the United States seems to have doubled its imports from China, and more than doubled its exports to China, without concessions or territorial interests, while the possessor of these concessions has in the same time halved its exports to China, while its imports from that country have remained practically stationary. Concessions wrung by the prick of bayonets are not really profitable in the long run.' Perhaps, however, if there had been no foreign concessions in the treaty ports, we should have prospered less than we have done in China.

Japan's foreign trade totaled well toward two and one-quarter billion dollars during 1926, or four times as much as before the World War. Imports exceeded exports, as they always have except during the four war years, but the unfavorable balance was not above normal. Ocean freights, which account for a large fraction of Japan's invisible exports, have fallen to about one third of their maximum rate in 1916. They are still higher than before the war, but during the interval the cost of vessels has risen rapidly. Japan has more ancient and superannuated tonnage than any other maritime nation, about one fifth of her total, which approaches four million tons, being more than twenty-five years old. Wholesale and retail prices in Tokyo now stand at eighty-five per cent of their 1920 level, while wages, although they have fallen slightly during the past year, are still eight per cent above that level.


VOL. 332-APRIL 1, 1927-NO. 4308




MR. CHAMBERLAIN's note to Moscow
and the situation in China so domi-
nated British political
thought in March that do-
mestic questions were rather
relegated to the background.
The press cherished no illu-
sions as to the effectiveness of the
Foreign Minister's protest to the
Soviet Government, and in most
instances was dubious as to its ex-
pediency. Even the Saturday Review
could muster but tepid enthusiasm,
observing: 'It is possible that the
Note is wise as well as justifiable.
Five previous protests have been made
with precisely no result; but we have
good reason to believe that many
leaders in Moscow are deeply disturbed
by the prospect of a breach with
Great Britain.' On the other hand, the
New Statesman, at the opposite Party
extreme, found nothing more
demnatory to say than: 'We are con-
vinced that the vast majority of the
British public is vastly bored with the
Anglo-Russian snarling match; and
it certainly does not want biting as
well as barking. It wants peace, and
believes that with common sense on

both sides we could get it.' The Daily Mail, which leads the Russophobes, stigmatized the Note as 'a display of feebleness and funk,' while the Liberal Westminster Gazette thought it ill-timed in view of the state of affairs in China, but nevertheless fully justified, and the Labor Daily Herald voiced the attitude of its followers as follows: 'Yet now that its complaints are made public, it appears that they are based, not upon such subversive activities, not indeed upon any activities at all, but upon the speeches of politicians and the articles of journalists. To use such material as the basis for a "grave warning," and for a suggestion that unless politicians and journalists moderate their more rhetorical periods a diplomatic rupture may ensue, seems to us to show His Majesty's ministers as equally lacking in sense of proportion and sense of humor.' English opinion has resigned itself with some misgiving to accepting the Canton Party as a temporarily and perhaps permanently-dominant factor in China. The agreement with Mr. Chen, by which Great Britain relinquishes her former privileges in Copyright 1927, by the Living Age Co.


her two principal inland concessions, at Hankow and Kiukiang, grants in principle the main thing for which the Kuomintang is fighting. Furthermore, every diplomatic success the Southerners gain undermines the prestige of their Northern opponents.

In addition to the Balfour Commission Report on Industrial Conditions, to which we refer elsewhere, a second investigating body under Lord Colwyn, also appointed by the Labor Ministry in 1924, to outline a financial programme for the Government, has just presented its findings to the public. Its recommendations are, in brief: no capital levy; an increase in the rate of debt redemption from the present figure of fifty thousand pounds a year to seventy-five thousand pounds a year, and to one hundred thousand pounds a year eventually; and higher taxation to meet this burden. Among the reasons why, in the opiniun of the Committee, the country can stand heavier taxes is that 'the total resources of the wageearning class do not differ much from the pre-war level. . . . General observation points on the whole to some improvement in the standard of living.

While a falling off has occurred in national savings, it is not sufficient to create grave fears.' Among other interesting generalizations is that the earnings of unskilled labor have improved relatively to those of skilled labor, and that there is no reason to think that luxury expenditures have been materially checked by the country's economic trials. The British Labor Party has borrowed a page from Fascist politics in expelling Mr. G. A. Spencer, a miners' leader and a Member of Parliament, because he refused to follow the temperamental and radical Mr. A. J. Cook in the recent coal strike, stood out for a

reasonable settlement, and persuaded the miners of his own district to resume work as members of a new nonpolitical union. Presumably the last offense turned the scales against him. Naturally the anti-Labor and neutral press made much of the incident. The Conservative Saturday Review professes to believe that 'probably a clear majority of the Labor Party regrets it,' and assumes that most of its responsible leaders are in secret agreement with the expelled member on most of the issues involved. Liberal politics are occupying less attention at the moment, although the long-standing dispute over Lloyd George's campaign fund is still a source of acrimonious debate. Lord Rosebery wrote to the Times last February raising some embarrassing questions as to the source of the fund, which is now stated to amount to about ten million dollars, but his inquiry evoked only subdued enthusiasm from non-Liberals, for uncovering the secrets of campaign finance would probably prove equally embarrassing to all political parties. Meanwhile the Outlook has this to say of Lord Grey's efforts to purify the Party: 'Lord Grey and his colleagues on the Liberal Council are undoubtedly doing their best to get the Party wreck off the rocks, and one cannot help sympathizing with them in a difficult task. Liberalism is worth saving, but are they going the right way to save it? They seem to have no particular policy, no constructive message and apart from Free Trade, one cannot quite see what they stand for. Everything is negative, nothing positive, in their attitude; and I cannot see the electorate rallying to the support of men who want to do nothing in particular, even though they do it very well.' By-elections continue to favor Labor, whose last

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