which shows a smaller rate of increase (in spite of the increased area of our colonial possessions) that we are invited to expend large sums upon armaments, and to use them for the sake of territorial expansion. Is this good business?

The true "economy" of our industrial foreign policy, however, requires us to take into consideration the whole national expenditure upon armaments. The taxation imposed upon the British nation in order to support the cost of our increasing army and navy is defended chiefly on the ground that it is necessary in order to safeguard our colonial possessions and to enable us to secure new markets by increasing the area of the Empire. When Cobden and Peel fought against this policy, denouncing the increased expenditure on armaments in the "fifties," they were compelled to rely upon general considerations of prudence and economy. The folly of pressing the people with taxation during a time of peace, of increasing the insurance fund when a pacific Free Trade policy was diminishing the risks against which provision must be made, the insidious danger of allowing military authorities to direct our foreign policy and to call upon the nation blindly to defray the expenses of this policy-such was the line. of argument urged in 1850.

The words uttered by Sir Robert Peel in the House of Commons, March 12, 1850, are fraught with deep prophetic significance.

"I will say, that in time of peace, you must, if you intend to retrench, incur some risks. If in time of peace you must have all the garrisons of our colonial possessions in a state of complete efficiency-if you must have all our fortifications kept in a state of perfect repair-I venture to say that no amount of annual expenditure will be sufficient; and if you adopted the opinions of military men, who say that they would throw upon you the whole responsibility in the event of a war breaking out, and some of our valuable possessions being lost, you would overwhelm this country with taxes in time of peace."

Nothing but the unparalleled and unpredicable commercial prosperity of England, during the last fifty years, has prevented us from feeling yet the "overwhelming" pressure of the policy which Peel condemned. But while Peel saw clearly, and Cobden stubbornly maintained, the danger of basing our national policy upon the false paradox Bellum para, si pacem velis, the economic fallacy of this military policy was far less demonstrable than it is now. Our foreign

and colonial trade in 1848, when Cobden first attacked the policy of increased expenditure on armaments, was less than £170,000,000 in value, and during the next twenty years it more than tripled in its value. If then we were warranted in taking a narrow "business" view of expenditure on armaments, it might well appear that, in view of this enormous expansion of trade, the increase of the "insurance" premium was amply justified; or, regarding the army and navy as

instruments for pushing British commerce throughout the world, we might consider their use to be attended by success.

But during the last twenty-five years this argument of "payment by results" cannot for one moment be maintained. The enormous increase of expenditure on armaments which has taken place since the beginning of the "seventies" is attended by no corresponding increase of our total trade, and, as we have already seen, the colonial trade, which might seem to offer some "business" justification of expenditure on armaments, exhibits but a trifling increase.

It is difficult for a business man to escape the interpretation put by Mr. A. J. Wilson upon these facts.

"If the insurance premium' on our commerce abroad represented by the cost of our navy has risen 100 per cent. in twenty-five years, while the value of that commerce, import and export together, has not risen 15 per cent., what inference can be drawn except either that the outlay is a gross and cruel imposition upon the country, or that our conduct towards foreign nations has become so exasperating of late years as to have enormously increased the risk of war with powerful enemies, either alone or in combination against us?"

So far as trade statistics have any value, they convict us of conducting our national trade with a reckless folly which would quickly bring any individual merchant into the Bankruptcy Court. In total contravention of our theory that trade rests upon a basis of mutual advantage to the parties that engage in it, we have undertaken enormous expenses with the object of "forcing new markets, and we have signally failed in the attempt; the only regular and palpable result of the expenditure has been to keep us continually embroiled with those very nations who are our best customers, and with whom, in spite of all impediments of ill feeling and jealousy, our trade makes the most satisfactory advance.

One implication of our policy remains for brief consideration-the assumption that our national prosperity demands a constant expansion of external markets. This assumption is without foundation. Some considerable foreign and colonial trade we certainly require, in order to enable us to get the food and raw material we cannot produce at home such import trade we require, and an export trade which shall correspond to it. A progressive nation, evolving new material wants, and with an increasing population, must increase her foreign trade,

unless she can substitute home products for imported goods. It is, however, a grave error to regard increase of foreign or colonial trade as an index of the real prosperity of a nation. Increased trade is, indeed, a sound measure of prosperity, for it implies that an increased quantity of commodities is made and consumed; but there is no advantage in an increase of foreign, as distinct from home, trade. On the contrary, home trade is a more solid and substantial basis of industrial prosperity than foreign trade for two reasons. First, it is less amenable to fluctuations arising from commercial and political policies over which we can exercise no control, and which sometimes are designed expressly for our injury. Secondly, the gain arising from home trade is double instead of single, the full advantage which both parties obtain from exchange being kept within the nation.

It is no idle platitude to urge that less attention should be devoted in our public policy to measures for acquiring foreign markets and for promoting foreign trade, and more to the development of home markets. We are not compelled to spend all our energy and superfluous cash in wrangling with other nations for markets in Africa and Asia which will take our low-class manufactured wares.

A large majority of the working class population of Great Britain is not adequately provided with the material requisites of a decent human life. Among our own people there lies an immense potential market for the conveniences and comforts of life. A progressive nation, with an infinite capacity of developing new tastes and new needs, should harbour no fear of failing markets. Even when our population is amply provided with the clothing, hardware, and other manufactured goods which we are forcing at so great expense upon the "lower races," a consummation which is yet remote, there is no reason why our productive energy, diverted into other channels, should not continue to find, in the ever-rising standard of national comfort, a market whose expansion is able to keep pace with every growth of industrial power. With each increase of production is created a corresponding power of consumption vested in the owners of productive factors. If these owners of consuming power exercise it in such way as to make the standard of national consumption rise with every increase of producing power, no such pressure of the needs for foreign markets as we now experience would be felt. Why, then, it may be asked, does this pressure actually occur? Why does not an expansion of home markets take off, by a rising standard of national consumption, every increase of production? In economic terms, the answer must be this. Though a potential market exists within the United Kingdom for all the "goods" that are produced by the nation, there is not an "effective" demand, because those who have the power to demand commodities for consumption have not the desire, since their material needs are amply satisfied, while those who have

the desire have not the power. Stated otherwise, the working classes of this country possess an insufficient proportion of "effective demand"; the actual rise in their standard of comfort, though in some cases considerable, has not been at all commensurate with the growth of productive power of the nation, especially in manufactures. The upper and a large section of the middle classes, who own an excessive proportion of goods that are produced, do not desire themselves to purchase and consume, and, since they cannot find a sufficient home market among the workers, are compelled to struggle with classes of other nations in the same predicament for foreign markets, which seem to them limited in extent at any given time. If direct testimony to this fact and its consequences is desired, it is found in the large surplus of our national income which, being needed neither for home consumption nor for capital in home industries, seeks foreign investments, -a sum which, though it admits no precise computation, must far exceed a total of two thousand million pounds sterling. It is possible, indeed, that the growing pressure of the need for foreign investments must be regarded as the most potent and direct influence in our foreign policy. Our surplus products, which the working classes cannot buy and the wealthier classes do not wish to buy, must find customers among foreign nations, and, since those who sell them do not even desire to consume their equivalent in existing foreign goods, they must lie in foreign countries as loans or other permanent investments. A portion of the yield of these investments is represented in the excess of our import over export values, but only a portion, a large part going to swell the sum of the investments. Thus, in the first resort, it is the excessive purchasing power of the well-todo classes which, by requiring foreign investments, forces the opening up of foreign markets, and uses the public purse for the purposes of private profit-making.

Excepting for the legitimate purpose of furnishing such foods and raw materials as cannot be economically raised at home, the prosperity of an industrial nation does not require a constant expansion of foreign markets. A juster and more equal distribution of wealth will, by stimulating home consumption to keep pace with every increase of producing power, make our industries largely independent of the need of finding new markets in parts of the world where we stir national animosities involving incalculable risks and an expensive policy of insurance and aggression.

So long as the mass of our population remains poor, and with a slowly rising standard of comfort, while our productive power advances rapidly, the demand for a continual expansion of foreign markets is inevitable; and since we have lost all belief in the pacific economy of Free Trade, we must continue to fight for them, if, as seems probable,

we cannot get enough of them without fighting. If, however, by organisation, or by legislation, or by the concession of the employing classes to the demands of humanity and sound politics, the working classes could obtain a larger proportion of the power of "effective demand" into their hands, which they would use for the rapid raising of their standard of life, the economic and moral dangers of our present industrial foreign policy would be sensibly diminished. The struggle for foreign markets, which necessitates vast armaments, does not arise from the normal exchange of commodities between nations, but is the result of an unnatural and impolitic contraction of home markets in the advanced industrial nations of the world. Just in proportion as the proletariat of these nations obtains fuller opportunities for the satisfaction of its growing needs in a civilised progressive society, absorbing in its consumption the greater share of every increase of industrial wealth, will this insane and immoral strife for distant markets tend to disappear.

The issue, in a word, is between external expansion of markets and of territory on the one hand, and internal social and industrial reforms upon the other; between a militant imperialism animated by the lust for quantitative growth as a means by which the governing and possessing classes may retain their monopoly of political power and industrial supremacy, and a peaceful democracy engaged upon the development of its national resources in order to secure for all its members the conditions of improved comfort, security, and leisure essential for a worthy national life.

This is no rhetorical antithesis, but the plain and very practical issue which Cobden and his friends strove to place before the Liberal party half a century ago. The refusal to face this issue, the adoption instead of a half-hearted and inconsistent Free Trade policy, has crippled the principles and grievously impaired the working efficiency of Liberalism. Recent history, forcing the economic aspects of foreign policy everywhere to the front, presents with ever stronger emphasis this choice of national life. Enlightened by the growing testimony of two generations of experience to the dangers, the expense, and the impolicy of seeking markets by forcible expansion of the area of Empire, will not the Liberal party learn at length to give to Free Trade that fuller trust which its principles demand, and the refusal of which has hitherto so grievously impaired its benefits?

We have examined the fundamental assumptions of our present policy, and have found them utterly untenable. The prosperity of England does not depend upon continual expansion of foreign trade. Even if a constant supply of new foreign markets were necessary, they are not in fact secured by "forcing doors open" and extending the area of empire. Considered as a business expenditure for the