BATTLESHIPS OR HOUSES

Evening Star, Issue 18255, 20 April 1923, Page 5

BATTLESHIPS OR HOUSES

SWOLLEN ARMAMENTS AND STABILITY. The appended article from the London ‘ Daily News ’ is by Mr 11. D. Henderson, lecturer in economics at Cambridge. Societies, like individuals, are often influenced in their actions by motives of which they are hardly conscious. Among the causes responsible for the European competition in armaments, and thus indirectly for the Great War, the notion that expenditure on armaments means more employment counted, I believe, fur more than is commonly supposed. Its influence, it is true, was always negative in character. It was never the ground upon which armaments in any country were advocated, or even desired ; hut it served effectively, if subtly, to paralyse opposition. Labor was the organised social force which, by reason of its general outlook and international /ispirations, was most antipathetic to militarist policies, and least susceptible to the ordinary appeals of Jingoism. But it was precisely with Labor that the additional employment in arsenals, abc,,yarrls, etc., carried most weight. NOT CREATION, BUT DIVERSION. And so, while Labor throughout Europe deprecated warlike preparations and often denounced them, it was nowhere capable of resistance that was whole-hearted. Nor is the present position materially different. The Washington Conference was received with many misgivings on the Tyno and on the Clyde, and the employment consideration helped to make the reductions of naval armaments agreed upon less drastic than might otherwise have been possible. Not long ago the ‘ New Statesman ’ made the following comment on the British decision (with the wisdom of which 1 am not concerned) to build the two new battleships permitted by that agreement : The orders will represent a huge waste of public money, but there is the consolation that a good deal of “ work ” will be created. . . . To lay them down now is to build not against any imaginable threat, but merely against a foreign naval list—a palpable absurdity. But they will provide employment. This is not an attitude which in itself promotes large armaments, but it helps to make them possible. What, then, is the real truth about the relations between armaments and employment? Essentially, as is often pointed out, armament expenditure does not represent the creation of additional employment., but merely the diversion of employment from some branches of industry to otheil>. HOUSES. The purchasing power expended on guns or battleships would otherwise have been employed on other things. The State might have used it to build houses or public works, or it might have left it in the pockets of the taxpayer, who would then either have invested it (which means an additional demand for such things as factories and machinery) or extended his personal consumption. In any of these cases it would have meant as much “employment ” as its use for armaments entails ; more, perhaps, if it had been left to the taxpayer, since the process of taxation inevitably involves some incidental waste; while,'if used for the capital equipment of industry, it would have helped to make us later on a more prosperous community. Thus, for every “ job ” which munition works provide they take away a “job” somewhere else. Essentially this argument is sound ; but as a practical counterweight it has two serious weaknesses. The diminution of employment in other directions which armament expenditure entails is, in the first place, not obvious; in the second place, it is hot always immediately true. The first point represents a familiar difficulty, which is always cropping up—the difficulty of attaching as much weight to consequences which are not clearly visible as to those which are. But by itself it would not prove very formidable. THE PASSING OF THE STOCKING. The second point is more serious. If a Government refrains from building battleships, it does not follow that an equivalent amount of purchasing power will be at once expended by either the Government or private individuals on something else. This is true enough “in the Jong run ” ; but, as is often said, it is in the short run that the worker has to live. _ The individual in a modern community no longer hoards large quantities of actual money in a stocking or a safe, but a hoarding of purchasing power ’on the part of society as a whole can none the less take place under the complicated workings of our credit system, and does, in fact, take place during any period of trade depression. Moreover, in every depression a stage is reached when an impetus, given to some, group of trades is all that is required to cause a revival of general business confidence, and thus of general trade activity. At such a time as the present, accordingly, it may actually happen that the building of new battleships will temporarily stimulate rather than check employment m other fields, and this probably was all that the ‘New Statesman’ meant.

ORDERS HELD FOR BAD YEARS. But it is fatally easy to pass from tins to hazy belief that there is a general tendency for armaments at any time to he rather good for employment on the whole, and this is entirely false. . All that is true is that in periods of depression tat nil events, after a- certain stage is reached) an increase of Government expenditure may serve a useful purpose. But the expenditure does not need to be on armaments —why, in the present instance, should it not have heen on housing?—and, what is less obvious, it is the increase that is the vital point, the spending of more money in times of depression than in times of active trade. For this reason it has long been recognised that the State might do something to diminish employment by pursuing a deliberate policy of w’ithnlding orders in good years and placing (hem in bad years, wherever this is possible. But, clearly, it is quito impossible to fit armament expenditure into a programme of this kind. Armaments absorb as much money in good years as in had : and, this being so, the. employment they seem to create is simply a. diversion from other occupations, affording no “consolation” whatsoever for the burdens of the taxpaver. BUDGET CHAOS.

But this is not all. Armament expenditure is the greatest obstacle that exists today to a solution of the unemployment problem. It is armament expenditure that is mainly responsible for the unbalanced budgets of many Continental countries, and consequently for the unstable exchanges which disturb and unsettle the whole course of trade. I do not believe that' it is beyond the power of man to prevent the periodical recurrence of those general trade depressions to which ho has hitherto submitted helplessly. I believe that they have been due hitherto largely, if not entirely, to the failure to secure a stable standard of value—i.e., a stjj’:se general level of prices —which it is well within the competence of a wise monetary policy to secure. I believe, further, that underneath all the vagaries of the present monetary confusion we arc groping our way to the conception of such a policy, indeed, that the drift of events in the next few years is likely to bring the idea of a stable standard of value right into the forefront of practical politics. It is not in my judgment in the least Utopian to hope that by developments along these lines, periods of general unemployment may be virtually stamped out. But here, again, certain conditions are essential —an atmosphere of peace, Governments that are solvent, and prepared in certain matters to co-operate with one another, all of them conditions with which the atmosphere of largo armaments is incompatible.

Unemployment is essentially a matter of fluctuation, of instability; and stability, not “making work,”_ must he tho keynote of any real solution. Large armaments arc the great enemy of all stability.