Chapter 5 than the small proportions of the total when considered in

relation to the extent of the national income. For the total, it should be remembered, includes the value of the land of the United Kingdom. Subtracting it, we see that the wealth which has been added to the land is worth not more than about £8,000,000,000, whereas the national income amounts to £1,840,000,000. Thus, in the United Kingdom we have accumulated stock, apart from the market price of the land, only to the extent of about four years' income.

The facts which correspond to these figures are that, in every county and in every township, there are more ugly and uncomfortable houses than beautiful and convenient ones, more inefficient plants than well-equipped businesses, more badly clothed than well-clothed people, more evidences of poverty than of wealth. On every hand we see the need of capital, but while its application is so sorely needed, the few rich who command so much of the national income pour it out in wanton extravagance. The growth of luxury has been accompanied by an increasing want of enterprise in industry and commerce. Even in London the most fruitful opportunities lie neglected. The port is inefficient; the Thames highway has been neglected; north and south Londoners remain strangers because of lack of transit facilities; street traffic is archaic; the important railway termini are dirty, inconvenient and unconnected. All these and many less important things cry aloud for the application of capital. In London and in every other town there is a housing problem, and the housing problem is a problem of capital. If the income of the last 20 years had been patriotically expended there would be no housing problem to-day, and the fixed capital of the country would be very much greater than it is.

Another significant fact is the very considerable investment of British capital abroad, probably amounting, as we have seen, to about £2,600,000,000. These investments are often spoken of as "our foreign investments." There is a grim irony in the phrase. For what in essence are these investments? They left our shores, originally, in the form of exported manufactures, the product of British labour. We had no gold to lend, but some amongst us could command and lend the fruit of our work. These exported products were sent away from our shores by a mere handful of rich persons who saw in foreign or Colonial loans or enterprises the opportunity of gaining a higher rate of interest than at home. Year by year there is returned to those who made the investments, or to their successors in title, a tribute of foreign and Colonial commodities which goes to swell our imports. In 1908 this yearly tribute of imports, for which no present exports have to be exchanged, amounts to about £130,000,000 or £140,000,000. Whether the nation as a whole gains by this tribute depends entirely upon the wisdom and patriotism of those who receive it. If we could ensure its wise use as capital for the promotion of the general welfare, then the United Kingdom would gain materially by the lien which a few of its people possess upon foreign and Colonial activities. But we have no guarantee as to the manner of its use, and too often it but serves to bring to this country commodities which in no way make life "nobler or truly happier." I do not mean that articles of luxury are necessarily imported in payment of the interest on "our" oversea investments, but certain it is that the limited class which owns them are the chief consumers of luxuries. It should never be forgotten that, as has already been pointed out in these pages, the most ordinary raw material may become a vehicle of luxury, and the commonest forms of labour its servants. Certain imports, _e.g._ motor cars or Steinway grand pianos, can be ear-marked as luxuries, but potatoes from Jersey wasted in a long dinner or Douglas pine from Canada built into a racing pavilion are "luxuries" more to be deplored than the importation of Valenciennes lace or Sèvres porcelain by persons of refinement.

It may be well to remark, in passing, that to place a heavy customs duty upon imported luxuries would in no way benefit the nation at large. It would merely stimulate the production of luxuries in the United Kingdom, and so increase the already considerable number of persons engaged in the trades of luxury.

That we have incidentally gained by acting as a world money-lender is indisputable. The case of Argentina is a familiar one. British exports have been largely lent to that country for the construction of railways. Those railways have cheapened Argentine transport, and so placed at our disposal cheap bread and meat. But this benefit has been incidental and, moreover, shared by the world at large. Against such incidental gains we have to place the criminal neglect of our own country. While capital has gone overseas in a never-ending stream, the people whose united activities produced the commodities embodied in that capital have remained poor for lack of the proper investment of capital at home. Large sections of the British people have unconsciously worked for the benefit of the foreigner and of the British Colonist, never realizing that their own country sorely needed all the capital that their labour could create.[39]

We cannot even lay the flattering unction to our souls that the British capital which has been sent abroad has gone entirely to build foreign or Colonial railways, or to develop other useful industries, nor, in so far as it has been usefully employed, can we claim much credit for the fact. The sole motive which has influenced the individuals who have thus disposed of the products of British labour has been individual gain. That gain they have sought without regard to any consideration of patriotism. Foreign nations have had our capital indifferently for war or for peace, for building railways or for constructing warships. A generation ago we wickedly poured our capital into Turkey. A generation ago were born hundreds of thousands of British children who, for lack of the full employment of British capital on British soil, are to-day creatures of the abyss.

The flow of capital to places abroad continues to this hour. If South Africa is booming, the possessors of capital hasten to gather dividends on soil thousands of miles away, and with the interest received in this country, direct British labour to noble or ignoble ends, as may seem good in their eyes. If a foreign war is proceeding, they hasten to lend the belligerents as many millions as may be required at anything from five to eight per cent., and with the interest they give righteous or unrighteous "work" to other British sons of freedom. If a South African mine or a Japanese war loan offers apparent opportunities of quicker profits than putting fresh capital into British ironworks, or founding a new British industry, it is the end of South Africa or Japan which is served. Three per cent. gained at home, of course, is not so desirable as ten per cent. gained abroad. If, therefore, a housing scheme at home promises to yield but three per cent., while the employment of coolies in South Africa promises ten per cent., South Africa and the coolies are "developed"[40] and the housing scheme collapses. This is by no means a rhetorical flourish; it is the statement of a case not more extreme than hundreds which occur every year.

If I have dwelt upon our oversea investments (I use the possessive pronoun for the sake of simplicity of expression) it is because they illustrate in a very forcible way the misuse of British capital. But the neglect of British interests which they illustrate is small indeed when compared with the waste of income upon the pursuit of pleasure and the foundation of worthless industries at home. If the whole of our oversea investments had been made since 1860, the average amount so invested would be not more than £50,000,000 per annum. That consideration enables us to view the matter in its due perspective. The foreigner and the Colonist have gained through the profit-hunting of the few possessors of British wealth, but only to the extent indicated. The oversea investments, with all the taint of national shame which attaches to many of them, sink into insignificance when we consider the wanton waste of labour which has occurred at home. Since 1860 probably as much as £6,000,000,000 of income which should have passed into reproductive capital has been thrown away in forms of expenditure which have been to the degradation of the community. Had that £6,000,000,000 been employed in the promotion of cheap transport, in the attachment of agricultural workers to the soil, in the acquisition of land by municipalities, in the provision of healthy homes for the people, the problems which confront us to-day would be of a different order, and it would not be possible for the dire poverty of one-third of our people to be basely used as a weapon of political warfare.

And while so much of the labour which might have added to the nobility and happiness of the British people has been wasted by direction of a small fraction of their number, no small part of our employed capital is but the tool of mischief. For just as individual capital goes abroad to seek its usury without regard to principle or patriotism, so at home it engages in the most profitable enterprise known to its limited intelligence, without regard to morality or the national welfare. It is often more profitable to appeal to what is worst in human nature than to seek to supply it with things healthy and honourable. "Is there money in it?" is the only touchstone which individual capital applies to enterprise.

Obviously there must be reciprocation between the demand for luxurious articles and the capital employed in their production. The misdirection of labour which we examined in the last chapter connotes a considerable misdirection of capital. Thus the effects of luxurious expenditure are two-fold. There is dissipation of income in the payment for luxurious immaterial commodities which call for no fixed capital, and again there is the expenditure of income upon luxurious material commodities which call capital to their creation. In either case the result is waste. The menial servant is an illustration of the first process. He is divorced from production and his work lost to the nation at large. The commodity which he sells is obsequious hand-service, degrading alike to himself and the person he serves. The purchase of a motor-car is a striking example of the second process. To produce it a considerable plant is required and capital flows to a business profitable because its customers are rich persons who view low priced articles with suspicion.

A striking illustration of a combination of the two processes is afforded by a fashionable hotel and restaurant. Here we have a large amount of capital sunk in an enormous building which is sustained entirely by the expenditure of the wealthy. A host of menial servants are employed, whose lives are a denial of manhood and womanhood. In addition there are nominally useful occupations associated with the conduct of the business. It calls for the manufacture of food, of utensils, and of furniture, and a large number of tradesmen and their nominally useful assistants are regularly employed in connexion with its supplies. A hotel of 700 bedrooms directs the services of an army of people, most of whom would appear in the Census as following useful occupations. The whole concern is for the most part an organization for the waste of capital and labour, and its manifold activities are called into existence by the orders of a very limited number of unduly rich people who desire that hand-service shall be at their command at a moment's notice wherever they may be.

Even more extraordinary is the organization of entire districts in the service of wealth and luxury. Nothing can be more pitiable than the spectacle which is presented by a neighbourhood the inhabitants of which are economically dependent upon the patronage of a limited number of well-to-do residents. The local tradesmen, the local builders, the local carters, the local nurserymen, the local physician, the local boat-builders, the entire local organization, with its little capital and much labour, is under the economic over-lordship of a few persons whose patronage sustains the entire machinery. Little that is useful is produced in the district; but by a process which none of its inhabitants could explain there are imported into it commodities from all parts of the country. Parasites upon parasites, they scramble for the expenditure of the well-to-do, and often contrive to make fat livings out of them. Thus, through the initial evil, the underpayment of labour at one end of the scale, there is created at the other end a class of luxury providers who have no conception of their true position in our social system, or of their uselessness to the community at large.

There remains to consider the tremendous waste of capital which arises from (1) unnecessary competition and (2) weak or bogus company promotion.

In the game of competition frequent attempts are made to establish superfluous businesses in many branches of trade. While industry remains unorganized such waste of capital must continue, for lacking an estimate of the quantity of commodities required in any particular department, the limits of consumption can only be found by fruitless attempts to discover an unsatisfied demand. This blind application of capital, not to service, but in the hope of gain, accounts for the waste of large quantities of labour.

Turning to company promotion, it is certain that hundreds of millions of capital have been wasted in the last twenty years through the dangling of fancy baits before the possessors of unearned increment. The company promoter obtains from Somerset House the names and addresses of shareholders in such concerns as those referred to in Chapter 8, and so is enabled to send to persons who have already tasted the joys of "waiting" a prospectus promising them even larger slices of unearned increment than they already receive. So other millions derived from labour pass into channels of waste.

The waste and misdirection of capital is a far-reaching matter. Lacking capital, which simply means lacking tools, labour cannot be economically exerted, whether in agriculture, in manufacturing, or in distribution. For the use of tools we leave the great mass of our population dependent upon a comparative handful of rich persons. That dependence amounts to an economic serfdom which places the direction of the lives and labours of the people in the hands of the few. The unduly large share of the national dividend possessed by the rich produces in them grave faults of character and purpose which make them indifferent administrators of the capital without which labour is powerless. The unduly small share of the national dividend possessed by the poor is the source of a stream of moral and physical evils which, mingling with the waters of death which descend from the high levels of luxury, produces effects whose causation is only obscure as long as we neglect the study of the Error of Distribution.

[Footnote 38: "Principles of Economics," Vol. i., p. 786.]

[Footnote 39: The same is true of France. Our neighbours across the Channel have fully £1,500,000,000 invested in places outside the country.]

[Footnote 40: At Johannesburg on April 15th, 1905, Mr Lionel Phillips is reported to have said: "The Chinese were housed, fed and looked after better than the working population of England." It may well be.]