This demand was no new thing, but it was brought to a climax by events during and after the war. When the war broke out, our representative in Egypt was still only "Agent and Consul-General," and was theoretically and legally on the same footing with the representative of all other Powers; when it ended, he was "High Commissioner," governing by martial law under a system which we called a "protectorate." This to the Egyptians seemed a definite and disastrous change for the worse. Throughout the forty years of our occupation we have most carefully preserved the theory of Egyptian independence. We have occupied and administered the country, but we have never annexed it or claimed it to be part of the British Empire. We intervened in 1882 for the purpose of restoring order, and five years later we offered to withdraw, and were only prevented from carrying out our intention because the Sultan of Turkey declined, at the instigation of another Power, to sign the Firman which gave us the right of re-occupying the country if order should again be disturbed. In the subsequent years we gave repeated assurances to Egyptians and to foreign Powers that we had no intention of altering the status of the country as defined in its theoretical government by Khedive, Egyptian Ministers, and Egyptian Council or Assembly. And though it was true that in virtue of the army of occupation we were in fact supreme, by leaving the forms of their government untouched and refraining from all steps to legalise our position we reassured the Egyptians as to our ultimate objects.

In the eyes of the Egyptians the proclamation of the Protectorate and the conversion of the "Agent and Consul-General" into a "High Commissioner" armed with the weapons of martial law seriously prejudiced this situation, and though they acquiesced for the period of the war, they were determined to have a settlement with us immediately it was over, and took us very seriously at our word when we promised to review the whole situation when that time came. The truth about the "Protectorate" was that we adopted it as a way out of the legal entanglement which would otherwise have converted the Egyptians into enemy aliens when their suzerain, the Sultan of Turkey, entered the war against us, and we did it deliberately as the preferable alternative to annexing the country. But we have neither explained to the Egyptians nor made clear to ourselves what exactly we meant by it, and in the absence of explanations it was interpreted in Egypt as a first step to the extinction of Egyptian nationality.

AFTER-WAR MISTAKES

Had we acted wisely and expeditiously at the end of the war we might even then have avoided the trouble that followed. But when Egyptian ministers asked leave to come to London in December, 1918, we answered that the time was not opportune for these discussions, and when the Nationalist leaders proposed to send a delegation, we said that no good purpose could be served by their coming to Europe. This heightened the alarm, and the Nationalists retorted by raising their claims from "complete autonomy" to "complete independence," and started a violent agitation. The Government retaliated by deporting Zaghlul to Malta, whereupon the country broke into rebellion. Lord Allenby now came upon the scene, and, while suppressing the rebellion, released Zaghlul and gave him and his delegation the permission to go to Europe which had been refused in January. It was now decided to send out the Milner Mission, but there was a further delay of seven months before it started, and during all that time agitation continued.

When the Mission arrived it quickly discovered that there was no possible "Constitution under the Protectorate" which would satisfy the Egyptians, and that the sole alternatives were further suppression or the discovery of some means of settlement which dispensed with the Protectorate. The Mission unanimously came to the conclusion that though the first was mechanically possible if the cost and discredit were faced, the second was not only feasible but far preferable, and that the right method was a treaty of Alliance between Great Britain and Egypt, recognising Egypt as a sovereign State, but affording all necessary guarantees for imperial interests. Working on those lines the Mission gradually broke down the boycott proclaimed against them, convinced the Egyptians of their goodwill, induced all parties of Egyptian Nationalists to come to London, and there negotiated the basis of the Treaty which was described in the Report. The main points were that there must be a British force in the country—not an army of occupation, but a force to guard Imperial communications—that there must be British liaison officers for law and order and finance, that the control of foreign policy must remain in the hands of Great Britain, and that the Soudan settlement of 1898 must remain untouched, but that with these exceptions the Government of Egypt should be in fact what it had always been in theory: a Government of Egyptians by Egyptians.

Had the Government accepted this in December, 1920 (instead of in March, 1922), and instructed Lord Milner to go forward and draft a treaty on this basis, it is extremely probable that a settlement would have been reached in a few weeks; but Ministers, unhappily, were unable to make up their minds, and there was a further delay of three months before the Egyptian Prime Minister, Adli Pasha, was invited to negotiate with the Foreign Office. By this time the Nationalist parties which the Mission had succeeded in uniting on a common platform had fallen apart, and the extremists once more started a violent agitation and upbraided the moderates for tamely waiting on the British Government, which had evidently meant to deceive them. The situation had, therefore, changed again for the worse when Adli came to London in April, 1921, and it was made worse still by what followed. The negotiations dragged over six months, and finally broke down for reasons that have never been explained, but the probability is that Egypt had now got entangled in Coalition domestic politics, and that the "Die-Hards" claimed to have their way in Egypt in return for their consent to the Irish settlement. The door was now banged in the face of all schools of Egyptian Nationalists, and Lord Allenby was instructed to send to the Sultan the unhappy letter in which Egypt was peremptorily reminded that she was a "part of the communications of the British Empire," and many other things said which were specially calculated to wound Egyptian susceptibilities.

The Egyptian Prime Minister resigned, and for the next five months Lord Allenby endeavoured to govern the country by martial law without an Egyptian Ministry. Then he came to London with the unanimous support of British officials in Egypt to tell the Government that the situation was impossible and a settlement imperative. The Government gave way and British policy was again reversed, but three opportunities had now been thrown away, and at the fourth time of asking the difficulties were greatly increased. The Nationalists were now divided and the Moderates in danger of being violently attacked if they accepted a moderate solution. It was found necessary to deport Zaghlul Pasha and to put several of his chief adherents on trial. Suspicions had been aroused by the delays and vacillations of the British Government. A settlement by treaty was now impossible, and Lord Allenby had to give unconditionally the recognition of sovereignty which the Mission intended to be part of the treaty, putting the Egyptians under an honourable pledge to respect British rights and interests. In the circumstances there was nothing else to do, but it is greatly to be desired that when the constitution has been completed and the new Assembly convened, an effort should be made to revert to the method of the treaty which particularly suited the Egyptian character and would be regarded as a binding obligation by Egyptians.

THE HOPE OF THE FUTURE

In regard to the future, there is only one thing to do and that is to work honestly to its logical conclusion the theory now adopted, that Egypt is a self-governing independent State. Egyptians must be encouraged to shoulder the full responsibilities of a self-governing community. It would be folly to maintain a dual system which enabled an Egyptian Government to shunt the difficult or disagreeable part of its task on to a British High Commissioner. Whatever the system of Government, there is no escape for either party from the most intimate mutual relations. Geography and circumstances decree them, but there is no necessary clash between the imperial interests which require us to guard the highway to the East that runs through Egyptian territory, and the full exercise of their national rights by Egyptians. Egyptians must remember that for many years to come the world will hold us responsible for law and order and solvency in Egypt, and we on our part must remember that Egyptians have the same pride in their country as other peoples, and that they will never consent to regard it as merely and primarily "a communication of the British Empire." In any wise solution of the question any sudden breach with the past will be avoided, and Egyptians will of their own free will enlist the aid of British officials who have proved their devotion to the country by loyal and skilful service. The hope of the future lies in substituting a free partnership for a domination of one race by the other, and with a genial and good-humoured people, such as the Egyptians essentially are, there should be no difficulty in restoring friendship and burying past animosities. But there must be a real determination on both sides to make Egyptian independence a success and no disposition on either to give merely a reluctant consent to the conditions agreed upon by them and then to throw the onus of failure on the others.

I deeply regret the schism between the different schools of Nationalists in Egypt. As we have seen in Ireland, Nationalism is threatened from within as well as from without, and it is a great misfortune that in settling the Egyptian problem we missed the moment in 1920 when the different Nationalist parties were all but united on a common platform. Extremist leaders have the power of compelling even their friends to deport them and treat them as enemies, and I assume that Zaghlul put Lord Allenby under this compulsion, when he decided that his deportation was necessary. But Zaghlul was one of the few Nationalist leaders who were of peasant origin, and his followers stand for something that needs to be strongly represented in the Government if it is not to take its complexion merely from the towns and the wealthy interests. The fellah is a very different man from what he was in the days of Ismail, and it is improbable that he will again submit to oppression as his forefathers did but it is eminently desirable that there should be in the Government men whom he would accept as leaders and whom he could trust to speak for him.

Above all, it is to be hoped that, having conceded the independence of Egypt, we shall not slip back into governing the country by martial law with the aid of one party among the Egyptians. That would be merely an evasion of the difficulty and a postponement of troubles. There are a good many difficulties yet to be overcome, and the progress of events will need careful watching by Liberals in and out of the House of Commons, but if at length we steer a straight course and bring political good sense to the details of the problem, there is no reason why we should not satisfy the Egyptians and put Anglo-Egyptian relations on a good and enduring basis. In dealing with Egypt as with all Eastern countries, it should constantly be borne in mind that manners, character, and personality are a chief part of good politics. To a very large extent the estrangement has been caused by a failure to understand and respect the feelings of the Egyptian people, and here, as in India, it is important to understand that the demand of the Eastern man is not only for self-government, but also for a new status which will enable him to maintain his self-respect in his dealings with the West.



THE MACHINERY OF GOVERNMENT

BY RAMSAY MUIR

Professor of Modern History in the University of Manchester, 1913 to 1921.

Mr. Ramsay Muir said:—One of the most marked, and one of the most ominous, features of the political situation to-day is that there is an almost universal decline of belief in and respect for our system of government. This undermining of the confidence that a healthy community ought to feel in its institutions is a perturbing fact which it is the plain duty of all good Liberals to consider seriously. We need not be deterred by the old gibe that Liberalism has always cared more about political machinery than about social reorganisation. The gibe was never true. But, in any case, no projects of social reorganisation have much chance of success unless the political machinery by means of which they have to be carried into effect is working efficiently. Moreover, since most of the projects of social reform which are being urged upon our attention involve an enlargement of the activities of the State, it is obvious that we shall be running the risk of a breakdown unless we make sure that the machinery of the State is capable of meeting the demands which are made upon it. We must be satisfied that our engine has sufficient power before we require it to draw a double load. In truth, one reason why the engine of government is not working well is that it has been required to do a great deal more work than it was designed for. The time has come to consider carefully the character and capacity of our machinery of government in view of the increased demands which are certain to be made upon it in the future.

Our national political system may be divided into two parts. On the one hand, there is the working machine, which goes on, year in, year out, whether Parliament is sitting or not, and which would still go on quite well for a time if Parliament never met again. We call it the Government, and we habitually and rightly hold it responsible for every aspect of national policy and action, for legislation and finance as well as for foreign policy and internal administration. On the other hand, there is what Burke used to call "the control on behalf of the nation," mainly exercised through Parliament, whose chief function is to criticise and control the action of Government, and to make the responsibility of Government to the nation a real and a felt responsibility. The discontents of to-day apply to both parts of the system, and I propose to deal with them in turn, first inquiring what is wrong with the working machine of government and how it can be amended, and then turning to consider how far the control on behalf of the nation is working badly, and how it can be made more efficient.

In what I have called the "working machine" of government there are two distinct elements. First, there is the large, permanent, professional staff, the Civil Service; secondly, there is the policy-directing body, the Cabinet. Both of these are the objects of a great deal of contemporary criticism. On the one hand, we are told that we are suffering from "bureaucracy," which means that the permanent officials have too much independent and uncontrolled, or imperfectly controlled, authority. On the other hand, we are told that we are suffering from Cabinet dictatorship, or, alternatively, that the Cabinet system is breaking down and being replaced by the autocracy of the Prime Minister. There is a good deal of prima facie justification for all these complaints.

THE GROWTH OF THE CIVIL SERVICE

First, as to bureaucracy. It is manifest that there has been an immense increase in the number, the functions, and the power of public officials. This is not merely due to the war. It has been going on for a long time—ever since, in fact, we began the deliberate process of national reconstruction in the years following 1832. In itself this increase has not been a bad thing; on the contrary, it has been the only possible means of carrying into effect the great series of reforms which marked the nineteenth century. And may I here underline the fact that we Liberals, in particular, have no right to criticise the process, since we have been mainly responsible for it, at any rate in all its early stages. When our predecessors set up the first Factory Inspectors in 1833, and so rendered possible the creation of a whole code of factory laws; when they created the first rudimentary Education Office in 1839, and so set to work the men who have really moulded our national system of education; when they set up a bureaucratic Poor Law Board in 1841, which shaped our Poor Law Policy, and a Public Health Board in 1848, which gradually worked out our system of Public Health—when they did these things, they were beginning a process which has been carried further with every decade. If you like, they were laying the foundations of bureaucracy; but they were also creating the only machinery by which vast, beneficial and desperately needed measures of social reform could be carried into effect.

And there is yet another thing for which Liberalism must assume the responsibility. When Gladstone instituted the Civil Service Commission in 1853, and the system of appointment by competitive examination in 1870, he freed the Civil Service from the reputation for corruption and inefficiency which had clung to it; and he ensured that it should attract, as it has ever since done, much of the best intellect of the nation. But this very fact inevitably increased the influence of the Civil Service, and encouraged the expansion of its functions. If you put a body of very able men in charge of a department of public service, it is certain that they will magnify their office, take a disproportionate view of its claims, and incessantly strive to increase its functions and its staff. This is not only natural, it is healthy—so long as the process is subjected to efficient criticism and control.

But the plain fact is that the control is inadequate. The vast machine of government has outgrown the power of the controlling mechanism.

We trust for the control of the immense bureaucratic machine, almost entirely to the presence, at the head of each department, of a political minister directly responsible to Parliament. We hold the minister responsible for everything that happens in his office, and we regard this ministerial responsibility as one of the keystones of our system. But when we reflect that the minister is distracted by a multitude of other calls upon his time, and that he has to deal with officials who are generally his equals in ability, and always his superiors in special knowledge; when we realise how impossible it is that a tithe of the multifarious business of a great department should come before him, and that the business which does come before him comes with the recommendations for action of men who know ten times more about it than he does, it must be obvious that the responsibility of the minister must be quite unreal, in regard to the normal working of the office. One thing alone he can do, and it is an important thing, quite big enough to occupy his attention. He can make sure that the broad policy of the office, and its big new departures, are in accord with the ideas of the majority in Parliament, and are co-ordinated, through the Cabinet, with the policy of the other departments. That, indeed, is the true function of a minister; and if he tries to make his responsibility real beyond that, he may easily neglect his main work. Beyond this consideration of broad policy, I do not hesitate to say that the theory of ministerial responsibility is not a check upon the growth of bureaucracy, but is rather the cover under which bureaucracy has grown up. For the position of the minister enables him, and almost compels him, to use his influence in Parliament for the purpose of diverting or minimising parliamentary criticism.

A CHECK UPON BUREAUCRACY

How can this growth of inadequately controlled official power be checked? Is it not apparent that this can only be done if a clear distinction is drawn between the sphere of broad policy, in which the minister both can be and ought to be responsible, and the sphere of ordinary administrative work for which the minister cannot be genuinely responsible? If that distinction is accepted, it ought not to be impossible for Parliament without undermining ministerial or cabinet responsibility, to devise a means of making its control over the ordinary working of the departments effective, through a system of committees or in other ways.

The current complaints of bureaucracy, however, are not directed mainly against the ineffectiveness of the machinery of control, but against the way in which public work is conducted by government officials—the formalism and red-tape by which it is hampered, the absence of elasticity and enterprise; and the methods of government departments are often compared, to their disadvantage, with those of business firms. But the comparison disregards a vital fact. The primary function of a government department is not creative or productive, but regulative. It has to see that laws are exactly carried out, and that public funds are used for the precise purposes for which they were voted; and for this kind of work a good deal of red-tape is necessary. Moreover, it is essential that those who are charged with such functions should be above all suspicion of being influenced by fear or favour or the desire to make profit; and for this purpose fixed salaries and security of tenure are essential.

In short, the fundamental principles upon which government departments are organised are right for the regulative functions which they primarily exist to perform. But they are altogether wrong for creative and productive work, which demands the utmost elasticity, adaptability, and freedom for experiment. And it is just because the ordinary machinery of government has been used on a large scale for this kind of work that the outcry against bureaucracy has recently been so vehement. It is not possible to imagine a worse method of conducting a great productive enterprise than to put it under the control of an evanescent minister selected on political grounds, and supported by a body of men whose work is carried on in accordance with the traditions of the Civil Service.

If we are to avoid a breakdown of our whole system, we must abstain from placing productive enterprises under the control of the ordinary machinery of government—Parliament, responsible political ministers, and civil service staffs. But it does not follow that no productive concern ought ever to be brought under public ownership and withdrawn from the sphere of private enterprise. As we shall later note, such concerns can, if it be necessary, be organised in a way which would avoid these dangers.

THE CABINET

We turn next to the other element in the working machine of government, the Cabinet, or policy-directing body, which is the very pivot of our whole system. Two main functions fall to the Cabinet. In the first place, it has to ensure an effective co-ordination between the various departments of government; in the second place, it is responsible for the initiation and guidance of national policy in every sphere, subject to the watchful but friendly control of Parliament.

Long experience has shown that there are several conditions which must be fulfilled if a Cabinet is to perform these functions satisfactorily. In the first place, its members must, among them, be able to speak for every department of government; failing this, the function of co-ordination cannot be effectively performed. This principle was discarded in the later stages of the war, when a small War Cabinet was instituted, from which most of the ministers were excluded. The result was confusion and overlapping, and the attempt to remedy these evils by the creation of a staff of liaison officers under the control of the Prime Minister had very imperfect success, and in some respects only added to the confusion. In the second place, the Cabinet must be coherent and homogeneous, and its members must share the same ideals of national policy. National business cannot be efficiently transacted if the members of the Cabinet are under the necessity of constantly arguing about, and making compromises upon, first principles. That is the justification for drawing the members of a Cabinet from the leaders of a single party, who think alike and understand one another's minds. Whenever this condition has been absent, confusion, vacillation and contradiction have always marked the conduct of public affairs, and disastrous results have followed.

In the third place, the procedure of the Cabinet must be intimate, informal, elastic, and confidential; every member must be able to feel that he has played his part in all the main decisions of policy, whether they directly concern his department or not, and that he is personally responsible for these decisions. Constitutional usage has always prescribed that it is the duty of a Cabinet Minister to resign if he differs from his colleagues on any vital matter, whether relating to his department or not, and this usage is, in truth, the main safeguard for the preservation of genuine conjoint responsibility, and the main barrier against irresponsible action by a Prime Minister or a clique. When the practice of resignation in the sense of giving up office is replaced by the other kind of resignation—shrugging one's shoulders and letting things slide—the main virtue of Cabinet government has been lost. In the fourth place, in order that every minister may fully share in every important discussion and decision, it is essential that the Cabinet should be small. Sir Robert Peel, in whose ministry of 1841-6 the system probably reached perfection, laid it down that nine was the maximum number for efficiency, because not more than about nine men can sit round a table in full view of one another, all taking a real share in every discussion. When the membership of a Cabinet largely exceeds this figure, it is inevitable that the sense of joint and several responsibility for every decision should be greatly weakened.

MODERN CHANGES IN THE CABINET

I do not think any one will deny that the Cabinet has in a large degree lost these four features which we have laid down as requisite for full efficiency. The process has been going on for a long time, but during the last six years it has been accelerated so greatly that the Cabinet of to-day is almost unrecognisably different from what it was fifty years ago. To begin with, it has grown enormously in size, owing to the increase in the number of departments of government. This growth has markedly diminished the sense of responsibility for national policy as a whole felt by the individual members, and the wholesome practice of resignation has gone out of fashion. It has led to frequent failures in the co-ordination of the various departments, which are often seen working at cross purposes. It has brought about a new formality in the proceedings of the Cabinet, in the establishment of a Cabinet Secretariat.

The lack of an efficient joint Cabinet control has encouraged a very marked and unhealthy increase in the personal authority of the Prime Minister and of the clique of more intimate colleagues by whom he is surrounded; and this is strengthened by the working of the new Secretariat. All these unhealthy features have been intensified by the combination of the two strongest parties in Parliament to form a coalition; for this has deprived the Cabinet of homogeneity and made it the scene not of the definition of a policy guided by clear principles, but rather the scene of incessant argument, bargaining, and compromise on fundamentals. Finally, the responsibility of the Cabinet to Parliament has been gravely weakened; it acts as the master of Parliament, not as its agent, and its efficiency suffers from the fact that its members are able to take their responsibility to Parliament very lightly.

All these defects in the working of the Cabinet system have been much more marked since the war than at any earlier time. But the two chief among them—lessened coherence due to unwieldiness of size, and diminished responsibility to Parliament—were already becoming apparent during the generation before the war. On the question of responsibility to Parliament we shall have something to say later. But it is worth while to ask whether there is any means whereby the old coherence, intimacy and community of responsibility can be restored. If it cannot be restored, the Cabinet system, as we have known it, is doomed. I do not think that it can be restored unless the size of the Cabinet can be greatly reduced, without excluding from its deliberations a responsible spokesman for each department of government.

But this will only be possible if a considerable regrouping of the great departments can be effected. I do not think that such a regrouping is impracticable. Indeed, it is for many reasons desirable. If it were carried out, a Cabinet might consist of the following members, who would among them be in contact with the whole range of governmental activity. There would be the Prime Minister; there would be the Chancellor of the Exchequer, responsible for national finance; there would be the Minister for Foreign Affairs; there would be a Minister for Imperial Affairs, speaking for a sub-Cabinet which would include Secretaries for the Dominions, for India, and for the Crown Colonies and Protectorates; there would be a Minister of Defence, with a sub-Cabinet including Ministers of the Navy, the Army, and the Air Force; there would be a Minister for Justice and Police, performing most of the functions both of the Home Office and of the Lord Chancellor, who would cease to be a political officer and be able to devote himself to his judicial functions; there would be a Minister of Agriculture, Industry, and Commerce, with a sub-Cabinet representing the Board of Trade, the Board of Agriculture, the Ministry of Mines, the Ministry of Labour, and perhaps other departments.

Ministers of Public Health and of Education would complete the list of active administrative chiefs; but one or two additional members, not burdened with the charge of a great department might be added, such as the Lord President of the Council, and one of these might very properly be a standing representative upon the Council of the League of Nations. The heads of productive trading departments—the Post Office and the Public Works Department—should, I suggest, be excluded from the Cabinet, and their departments should be separately organised in such a way as not to involve a change of personnel when one party succeeded another in power. These departments have no direct concern with the determination of national policy.

On such a scheme we should have a Cabinet of nine or ten members, representing among them all the departments which are concerned with regulative or purely governmental work. And I suggest that a rearrangement of this kind would not only restore efficiency to the Cabinet, but would lead to very great administrative reforms, better co-ordination between closely related departments, and in many respects economy. But valuable as such changes may be, they would not in themselves be sufficient to restore complete health to our governmental system. In the last resort this depends upon the organisation of an efficient and unresting system of criticism and control.

THE HOUSE OF COMMONS

In any modern State the control of the action of Government is largely wielded by organs not formally recognised by law—by the general movement of public opinion; by the influence of what is vaguely called "the city"; by the resolutions of such powerful bodies as trade union congresses, federations of employers, religious organisations, and propagandist bodies of many kinds; and, above all, by the Press. No review of our system would be complete without some discussion of these extremely powerful and in some cases dangerous influences. We cannot, however, touch upon them here. We must confine ourselves to the formal, constitutional machinery of national control over the actions of Government, that is, to Parliament, as the spokesman of the nation.

An essential part of any full discussion of this subject would be a treatment of the Second Chamber problem. But that would demand a whole hour to itself; and I propose to pass it over for the present, and to ask you to consider the perturbing fact that the House of Commons, which is the very heart of our system, has largely lost the confidence and belief which it once commanded.

Why has the House of Commons lost the confidence of the nation? There are two main reasons, which we must investigate in turn. In the first place, in spite of the now completely democratic character of the electorate, the House is felt to be very imperfectly representative of the national mind. And in the second place, it is believed to perform very inefficiently its primary function of criticising and controlling the action of Government.

First of all, why do men vaguely feel that the House of Commons is unrepresentative? I think there are three main reasons. The first is to be found in the method of election. Since 1885 the House has been elected by equal electoral districts, each represented by a single member. Now, if we suppose that every constituency was contested by two candidates only, about 45 per cent. of the voters must feel that they had not voted for anybody who sat at Westminster; while many of the remaining 55 per cent. must feel that they had been limited to a choice between two men, neither of whom truly represented them. But if in many constituencies there are no contests, and in many others there are three or more candidates, the number of electors who feel that they have not voted for any member of the House may rise to 60 per cent. or even 70 per cent. of the total.

The psychological effect of this state of things must be profound. And there is another consideration. The very name of the House of Commons (Communes, not common people) implies that it represents organised communities, with a character and personality and tradition of their own—boroughs or counties. So it did until 1885. Now it largely represents totally unreal units which exist only for the purpose of the election. The only possible means of overcoming these defects of the single member system is some mode of proportional representation—perhaps qualified by the retention of single members in those boroughs or counties which are just large enough to be entitled to one member.

The main objection taken to proportional representation is that it would probably involve small and composite majorities which would not give sufficient authority to ministries. But our chief complaint is that the authority of modern ministries is too great, their power too unchecked. In the middle of the nineteenth century, when our system worked most smoothly, parties were composite, and majorities were small—as they usually ought to be, if the real balance of opinion in the country is to be reflected. The result was that the control of Parliament over the Cabinet was far more effective than it is to-day; the Cabinet could not ride roughshod over the House; and debates really influenced votes, as they now scarcely ever do. The immense majorities which have been the rule since 1885 are not healthy. They are the chief cause of the growth of Cabinet autocracy. And they are due primarily to the working of the single-member constituency.

The second ground of distrust is the belief that Parliament is unduly dominated by party; that its members cannot speak and vote freely; that the Cabinet always gets its way because it is able to hold over members, in terrorem, the threat of a general election, which means a fine of L1000 a head; and that (what creates more suspicion than anything) the policy of parties is unduly influenced by the subscribers of large amounts to secret party funds. I am a profound believer in organised parties as essential to the working of our system. But I also believe that there is real substance in these complaints, though they are often exaggerated. What is the remedy? First, smaller majorities, and a greater independence of the individual member, which would follow from a change in the methods of election. And, secondly, publicity of accounts in regard to party funds. There is no reason why an honest party should be ashamed of receiving large gifts for the public ends it serves, and every reason why it should be proud of receiving a multitude of small gifts. I very strongly hold that in politics, as in industry, the best safeguard against dishonest dealings, and the surest means of restoring confidence, is to be found in the policy of "Cards on the table." Is there any reason why we Liberals should not begin by boldly adopting, in our own case, this plainly Liberal policy?

REPRESENTATION OF "INTERESTS"

There is a third reason for dissatisfaction with the composition of the House of Commons, which has become more prominent in recent years. It is that, increasingly, organised interests are making use of the deficiencies of our electoral system to secure representation for themselves. If I may take as instances two men whom, in themselves, everybody would recognise as desirable members of the House, Mr. J.H. Thomas plainly is, and is bound to think of himself as, a representative of the railwaymen rather than of the great community of Derby, while Sir Allan Smith as plainly represents engineering employers rather than Croydon. There used to be a powerful trade which chose as its motto "Our trade is our politics." Most of us have regarded that as an unsocial doctrine, yet the growing representation of interests suggests that it is being widely adopted.

Indeed, there are some who contend that we ought frankly to accept this development and universalise it, basing our political organisation upon what they describe (in a blessed, Mesopotamic phrase) as "functional representation." The doctrine seems to have, for some minds, a strange plausibility. But is it not plain that it could not be justly carried out? Who could define or enumerate the "functions" that are to be represented? If you limit them to economic functions (as, in practice, the advocates of this doctrine do), will you provide separate representation, for example, for the average-adjusters—a mere handful of men, who nevertheless perform a highly important function? But you cannot thus limit functions to the economic sphere without distorting your representation of the national mind and will. If you represent miners merely as miners, you misrepresent them, for they are also Baptists or Anglicans, dog-fanciers, or lovers of Shelley, prize-fighters, or choral singers. The notion that you can represent the mind of the nation on a basis of functions is the merest moonshine. The most you can hope for is to get a body of 700 men and women who will form a sort of microcosm of the more intelligent mind of the nation, and trust to it to control your Government. Such a body will consist of men who follow various trades. But the conditions under which they are chosen ought to be such as to impress upon them the duty of thinking of the national interest as a whole in the first instance, and of their trade interests only as they are consistent with that. The fundamental danger of functional representation is that it reverses this principle, and impresses upon the representative the view that his trade is his politics.

But it is useless to deplore or condemn a tendency unless you see how it can be checked. Why has this representation of economic interests become so strong? Because Parliament is the arena in which important industrial problems are discussed and settled. It is not a very good body for that purpose. If we had a National Industrial Council charged, not with the final decision, but with the most serious and systematic discussion of such problems, they would be more wisely dealt with. And, what is quite as important, such a body would offer precisely the kind of sphere within which the representation of interests as such would be altogether wholesome and useful; and, once it became the main arena of discussion, it would satisfy the demand for interest-representation, which is undermining the character of Parliament. In other words, the true alternative to functional representation in Parliament is functional devolution under the supreme authority of Parliament.

But still more important than the dissatisfaction aroused by the composition of the House is the dissatisfaction which is due to the belief that its functions are very inefficiently performed. It is widely believed that, instead of controlling Government, Parliament is in fact controlled by it. The truth is that the functions imposed upon Parliament by increased legislative activity and the growth of the sphere of Government are so vast and multifarious that no part of them can be adequately performed in the course of sessions of reasonable length; and if the sessions are not of reasonable length—already they are too long—we shall be deprived of the services of many types of men without whom the House would cease to be genuinely representative of the mind of the nation.

Consider how the three main functions of Parliament are performed—legislation, finance, and the control of administration. The discussion of legislation by the whole House has been made to seem futile by the crack of the party whip, by obstruction, and by the weapons designed to deal with obstruction—the closure, the guillotine, the kangaroo. A real amendment has been brought about in this sphere by the establishment of a system of committees to which legislative proposals of various kinds are referred, and this is one of the most hopeful features of recent development. But there is still one important sphere of legislation in which drastic reform is necessary: the costly and cumbrous methods of dealing with private bills promoted by municipalities or by railways and other public companies. It is surely necessary that the bulk of this work should be devolved upon subordinate bodies.

When we pass to finance, the inefficiency of parliamentary control becomes painfully clear. It is true that a good deal of parliamentary time is devoted to the discussion of the estimates. But how much of this time is given to motions to reduce the salary of the Foreign Secretary by L100 in order to call attention to what is happening in China? Parliament never, in fact, attempts any searching analysis of the expenditure in this department or that. It cannot do so, because the national accounts are presented in a form which makes such discussion very difficult. The establishment of an Estimates Committee is an advance. But even an Estimates Committee cannot do such work without the aid of a whole series of special bodies intimately acquainted with the working of various departments. In short, the House of Commons has largely lost control over national expenditure. As for the control of administration, we have already seen how inadequate that is, and why it is inadequate.

These deficiencies must be corrected if Parliament is to regain its prestige, and if our system of government is to attain real efficiency. For this purpose two things are necessary: in the first place, substantial changes in the procedure of Parliament; in the second place, the delegation to subordinate bodies of such powers as can be appropriately exercised by them without impairing the supreme authority of Parliament as the mouthpiece of the nation. I cannot here attempt to discuss these highly important matters in any detail. In regard to procedure, I can only suggest that the most valuable reform would be the institution of a series of committees each concerned with a different department of Government. The function of these committees would be to investigate and criticise the organisation and normal working of the departments, not to deal with questions of broad policy; for these ought to be dealt with in relation to national policy as a whole, and they must, therefore, be the concern of the minister and of the Cabinet, subject to the overriding authority of Parliament as a whole. In order to secure that this distinction is maintained, and in order to avoid the defects of the French committee system under which independent rapporteurs disregard and override the authority of the ministers, and thus gravely undermine their responsibility, it would be necessary not only that each committee should include a majority of supporters of Government, but that the chair should be occupied by the minister or his deputy.

DEVOLUTION

Nor can I stop to dwell upon the very important subject of the delegation or devolution of powers by Parliament to subordinate bodies. I will only say that devolution may be, and I think ought to be, of two kinds, which we may define as regional and functional. To regional bodies for large areas (which might either be directly elected or constituted by indirect election from the local government authorities within each area) might be allotted much of the legislative power of Parliament in regard to private Bills, together with general control over those public functions, such as Education and Public Health, which are now mainly in the hands of local authorities. Of functional devolution the most important expression would be the establishment of a National Industrial Council and of a series of councils or boards for various industries endowed with quasi-legislative authority; by which I mean that they should be empowered by statute to draft proposals for legislation of a defined kind, which would ultimately receive their validity from Parliament, perhaps without necessarily passing through the whole of the elaborate process by which ordinary legislation is enacted. I believe there are many who share my conviction that a development in this direction represents the healthiest method of introducing a real element of industrial self-government. But for the moment we are concerned with it as a means of relieving Parliament from some very difficult functions which Parliament does not perform conspicuously well, without qualifying its supreme and final authority.

One final point. If it is true, as I have argued, that the decay of the prestige and efficiency of Parliament is due to the fact that it is already overloaded with functions and responsibilities, it must be obvious that to add to this burden the responsibility for controlling the conduct of great industries, such as the railways and the mines, would be to ensure the breakdown of our system of government, already on the verge of dislocation. In so far as it may be necessary to undertake on behalf of the community the ownership and conduct of any great industrial or commercial concern, I submit that it is essential that it should not be brought under the direct control of a ministerial department responsible to Parliament. Yet the ultimate responsibility for the right conduct of any such undertaking (e.g. the telephones, electric supply, or forests) must, when it is assumed by the State, rest upon Parliament. How is this ultimate responsibility to be met? Surely in the way in which it is already met in the case of the Ecclesiastical Commissioners or the Port of London Authority—by setting up, under an Act of Parliament, an appropriate body in each case, and by leaving to it a large degree of freedom of action, subject to the terms of the Act and to the inalienable power of Parliament to alter the Act. In such a case the Act could define how the authority should be constituted, on what principles its functions should be performed, and how its profits, if it made profits, should be distributed. And I suggest that there is no reason why the Post Office itself should not be dealt with in this way.

It is only a fleeting and superficial survey which I have been able to give of the vast and complex themes on which I have touched; and there is no single one of them with which I have been able to deal fully. My purpose has been to show that in the political sphere as well as in the social and economic spheres vast tasks lie before Liberalism, and, indeed, that our social and economic tasks are not likely to be efficiently performed unless we give very serious thought to the political problem. Among the heavy responsibilities which lie upon our country in the troubled time upon which we are entering, there is none more heavy than the responsibility which rests upon her as the pioneer of parliamentary government—the responsibility of finding the means whereby this system may be made a respected and a trustworthy instrument for the labours of reconstruction that lie before us.



THE STATE AND INDUSTRY

BY W.T. LAYTON

M.A., C.H., C.B.E.; Editor of the Economist, 1922; formerly Member of Munitions Council, and Director of Economic and Financial Section of the League of Nations; Director of Welwyn Garden City; Fellow of Gonville and Caius College, Cambridge, 1910.

Mr. Layton said:—The existing system of private enterprise has been seriously attacked on many grounds. For my present purpose I shall deal with four: (1) The critic points to the extreme differences of wealth and poverty which have emerged from this system of private enterprise; (2) it has produced and is producing to-day recurrent periods of depression which result in insecurity and unemployment for the worker; (3) the critics say the system is producing great aggregations of capital and monopolies, and that by throwing social power into the hands of those controlling the capital of the country, it leads to exploitation of the many by industrial and financial magnates; (4) it produces a chronic state of internal war which saps industrial activity and the economic life of the community.

I shall not attempt to minimise the force of these objections; but in order to get our ideas into correct perspective it should be observed that the first two of these features are not new phenomena arising out of our industrial system. You find extreme inequalities of distribution in practically all forms of society—in the slave state, the feudal state, in India and in China to-day. Nor is this the first period of history in which there has been insecurity. If you look at any primitive community, and note the effect of harvest fluctuations and the inevitable famine following upon them, you will recognise that the variations of fortune which affect such communities are more disastrous in their effect than the trade variations of the modern world.

But after all qualifications have been made these four indictments are sufficiently serious and must be met, for it is these and similar considerations which have driven many to desire the complete abolition of the system. Some wish to abolish private property, and desire a Communist solution. Others practically attack the system of private enterprise, and wish to substitute either the community in some form or another (e.g. state socialism), or some corporate form of industry (e.g. guild socialism).

THE LIBERAL BIAS

Liberals, on the other hand, reject these solutions, and desire not to end the present system but to mend it. The grounds for this conclusion need to be clearly expressed, for after all it is the fundamental point of doctrine which distinguishes them from the Labour party. In the first place, there is the fact that Liberals attach a special importance to the liberty of the individual. The general relation of the individual to the State is rather outside my subject, but we start from the fact that the bias of Liberals is towards liberty in every sphere, on the ground that spiritual and intellectual progress is greatest where individuality is least restricted by authority or convention. Variety, originality in thought and action, are the vital virtues for the Liberal. It is still true that "in this age the mere example of Nonconformity, the mere refusal to bow the knee to custom, is itself a service." The Liberal who no longer feels at the bottom of his heart a sympathy with the rebel who chafes against the institutions of society, whether religious, political, social or economic, is well on the road to the other camp. But the dynamic force of Liberty, that great motive power of progress, though a good servant, may be a bad master; and the perennial problem of society is to harmonise its aims with those of the common good.

When we come to the more specific problem of industry, which is our immediate concern, a glance at history shows that the era of most rapid economic progress the world has ever seen has been the era of the greatest freedom of the individual from statutory control in economic affairs. The features of the last hundred years have been the rapidity of development in industrial technique, and constant change in the form of industrial organisation and in the direction of the world's trade. Could any one suppose that in these respects industry, under the complete control of the State or of corporations representing large groups of wage earners and persons engaged in trade, could have produced a sufficiently elastic system to have permitted that progress to be made? In reply to this it may be said that though this was true during the industrial revolution, it does not apply to-day; that our industries have become organised; that methods of production, population, and economic conditions generally are stabilised, and that we can now settle down to a new and standard form of industrial organisation. But this agreement is based on false premises. The industrial revolution is far from complete. We are to-day in the full flood of it. Look at the changes in the last four decades—the evolution of electricity, the development of motor transport, or the discoveries in the chemical and metallurgical industries. Consider what lies ahead; the conquest of the air, the possible evolution of new sources of power, and a hundred other phases which are opening up in man's conquest of nature, and you will agree that we are still at the threshold of industrial revolution.

I may mention here a consideration which applies practically to Great Britain. We are a great exporting country, living by international trade, the world's greatest retail shopkeeper whose business is constantly changing in character and direction. The great structure of international commerce on which our national life depends is essentially a sphere in which elasticity is of the utmost importance, and in which standardised or stereotyped methods of control of production or exchange would be highly disastrous. Liberal policy, therefore, aims at keeping the field of private enterprise in business as wide as possible. But in the general discussion of political or personal liberty in economic affairs, we have to consider how far and in what way the freedom of private enterprise needs to be limited or curtailed for the common good. We must solve that problem. For Liberals there is no inherent sanctity in the conceptions of private property, or of private enterprise. They will survive, and we can support them only so long as they appear to work better in the public interest than any possible alternatives.

RETROSPECT AND PROSPECT

My object, then, is to show how a system which embodies a large amount of private enterprise can be made tolerable and acceptable to modern ideas of equity. For this purpose we need to consider (1) what have we done in that direction in the past? (2) what is the setting of the economic problem to-day, and (3) what is to be our policy for the future?

Dealing first with wealth and wages, the whole field of social legislation has a bearing upon them, including particularly education, elementary and technical, the Factory Acts, and a great mass of legislation which has affected the earning powers of the worker and the conditions under which he labours. Just before the war we had come to the point of fixing a minimum wage in the mines, but an even more important factor was that we had introduced the Trade Board system, which had begun to impose a minimum wage in certain trades where wages were particularly low. But the most important direct attack upon the unequal distribution of wealth was by taxation in accordance with the Liberal policy of a graduated and differential income-tax, and still more important by taxes upon inheritance; for it has long been recognised that though it may be desirable to allow men to accumulate great wealth during their lifetime, it by no means follows that they should be entitled to control the distribution of wealth in the next generation and launch their children on the world with a great advantage over their fellows of which they may be quite unworthy. On the question of insecurity it cannot be said that any serious attack has been made on the problem of how to diminish fluctuations of trade, but again the Liberal solution for dealing with that difficulty was to remedy not the cause but its effects by insurance.

On the question of monopolies and exploitation, though we hear a great deal of the growth of capitalistic organisation, in fact we find that, of the three greatest industrial countries in the world, Great Britain is the least trust-ridden, mainly because of its free trade system. In the case of enterprises not subject to foreign competition, we had begun to develop a fairly satisfactory system of control of public utility services which were of a monopolistic character.

Finally, there had been growing up a complete system of collective bargaining and conciliation, and though we always heard of it whenever there was dispute and strife, the ordinary public did not know that this machinery was working and developing in many great and important industries a feeling of co-operation or at all events of conciliation between the two sides. I only mention these points very briefly in passing in order to show that with the evolution of modern industry we were already feeling our way, haltingly and far too slowly, it is true, towards a solution of its most serious defects.

Turning to the present situation, we have to face the fact that Great Britain is to-day faced with one of the most serious positions in its economic history. We must make allowances for the readily understood pessimism of a miners' leader, but it should arrest attention that Mr. Frank Hodges has recently described the present situation as the coming of the great famine in England. For nearly two decades before the war there was occurring a slight fall in the real wages of British workpeople. Food was becoming dearer, as the world's food supply was not increasing as fast as the world's industrial population, and the industrial workers of the world had, therefore, to offer more of their product to secure the food they needed. Hence the cost of living was rising faster than wages, except in trades where great technical advances were being made. There is some reason to fear that the war may have accentuated this tendency.

For some years the distant countries of the world have had to do without European manufactured goods. You are all aware of the tendency, for example, of India, Australia, and Canada to develop their own steel resources and to create manufacturing industries of all kinds. Moreover, we have lost part of our hold on the food-producing countries of the world by the sale of our capital investments in those countries to pay for the war. These and other considerations all suggest that we may find it increasingly difficult to maintain our position as one of the main suppliers of the manufactured goods of the world. In such circumstances we shall be hard put to it to maintain, far less raise, the pre-war standard of living.

How then are we to cope with this problem of retaining our economic position? We can only hope to do it if the present financial difficulties and obstructions working through the exchanges, by which international commerce is restricted and constrained, are removed. We can only do it if and so long as the conception of international division of labour is maintained. And we can only do it if—granted that we can induce the world to accept this principle of international division of labour—we can prove ourselves, by our economic and productive efficiency, to be the best and cheapest producer of those classes of goods in which our skilled labour and fixed capital is invested.

Assuming the financial difficulty is overcome, and that the old regime of international specialisation revives, can we still show to the world that it is more profitable for them to buy goods and services from us than from other people? Can we compete with other industrial countries of the world? The actual output of our labour in most cases is far less than its potential capacity, partly because of technical conservatism, and partly for reasons connected with the labour situation. How are we to mobilise these reserve resources. I have only space to deal with the second of these problems. In Germany labour is well disciplined, and has the military virtues of persistence and obedience to orders in the factory. But we cannot hope to call forth the utmost product of our labouring population by drill-sergeant methods.

In America this problem is a different one, because the American employer is often able to take full advantage of his economic position. For he has a labouring population of mixed nationality, which does not readily combine, and he can play off one section against the other. British employers cannot, if they would, deal with British labour on the principle of Divide and Rule. There is only one method by which we can hope to call forth this great reserve capacity of British labour, and that is by securing its confidence. If Free Trade is one of the legs on which British prosperity rests, the other is goodwill and active co-operation between the workman and his employer. How is that goodwill to be gained?

The solution of that problem is only partly in the hands of the politician; that is one of the reasons why it is extremely difficult to suggest an industrial policy which is going to hold out the hope of reaching Utopia in a short time. But it is obviously essential somehow or another to develop, particularly among employers, the sense of trusteeship—the sense that a man who controls a large amount of capital is in fact not merely an individual pursuing his own fortune, but is taking the very great responsibility of controlling a fragment of the nation's industrial resources. And we have also to develop a conception of partnership and joint enterprise between employer and employed.

STATE OWNERSHIP: FOR AND AGAINST

What policy in the political field can be adopted to further these objects? Reverting once more to the fourfold division which I made at the outset, but taking the points in a different order, there is first the question whether there should be a great extension of State ownership, management, or control of monopolies and big business. In spite of the experience of the war, I suggest tentatively that no case has been made out for any wide or general extension of the field of State management in industry. This, however, is not a matter of principle, but of expediency, where each case must be considered on its merits. Liberals should, indeed, keep an open mind in this connection and not be afraid to face an enlargement of the field of State management from time to time. There are, however, two special cases to be considered: the mines and the railways. As to the mines, the solution Mr. McNair puts forward is on characteristically Liberal lines, because it will endeavour to harmonise the safeguarding of the interests of the State with the maximum freedom to private enterprise and the maximum scope for variety in methods of management. As to transport, we have recently passed an Act altering the form of control of British railways.

Personally I think the question whether railways should or should not be nationalised is very much on the balance. It is obviously one of the questions where objections to State management are less serious than in most other cases. On the other hand, we may be able to find methods of control which may be even better than State management. I do not think the Act of last year fulfils the conditions which Liberals would have imposed on the railways, for the principle of guaranteeing to a monopoly a fixed income practically without any means of securing its efficiency, is the wrong way to control a public utility service. If we are going to leave public utilities in the hands of private enterprise, the principle must be applied that profit should vary in proportion to the services rendered to the community. In this connection the old gas company principle developed before the war is an admirable one. Under it the gas companies were allowed to increase their dividends in proportion as they lowered their prices to the community. That is a key principle, and some adaptation of it is required wherever such services are left in private hands. My own view is that an amended form of railway control should first be tried, and if that fails we should be prepared for some form of nationalisation.

TRUSTS AND MONOPOLIES

But if we refuse at present to enlarge the sphere of State management, we are still faced with the problem of dealing with trusts and monopolies. In this matter, as in so many other instances, the right policy has already been worked out. Under the stimulating conditions which obtained during the war, when old-established methods of thought had been rudely shaken, progressive ideas had unusually free play; and you will find in the general economic policy adumbrated during and immediately after the war much that Liberals are looking for. On this question of monopolies, we should put into force the recommendation of the Committee on Trusts of 1919, with one qualification. The policy I suggest is the policy of the majority, namely, that we should give very much enlarged powers of inquiry to the Board of Trade, and that a Tribunal should be set up by which investigations could be made. But I would go further, and, taking one item from the Minority Report, I would add that either to this Tribunal or to the Board of Trade department concerned there should be given in reserve the power in special cases to regulate prices. I do not think it would be necessary often to use that power, indeed the mere inquiry and publicity of results would be sufficient to modify the action of monopolies. But such a power in reserve, even though price-fixing in ordinary circumstances is usually mischievous and to be deprecated, would have a very salutary effect.

In the case of public utilities of a standard kind, into which the element of buying and selling profits does not greatly enter, we should endeavour to start the experiment of putting representatives of the workpeople on the boards of directors, but in carefully selected cases, and not as a general rule. My own view is that if we are ready with the machinery of investigation, and are prepared to deal in these ways with public utilities at home where foreign competition is absent, we have little to fear from trusts.

DISTRIBUTION

As regards distribution and wages, in the first place we should adhere to our traditional policy, developing the system of differential and graduated taxation, and we should be prepared, if unequal distribution of wealth continues, to limit further the right of inheritance. This is not a new Liberal doctrine: it is many decades old. On the question of wages we have to recognise that unless we can secure an increase in terms of food and other commodities of the national production the State cannot radically modify the general standard of living in the country; or by administrative action raise the level of wages which economic conditions are imposing on us. But the State can and should enforce a minimum in certain industries, provided that minimum is reasonably in harmony with the competitive level of wages. Such action can prevent workers whose economic position is not a strong one—and this applies particularly to many women's employment—from being compelled to accept wages substantially less than the current standard. I therefore welcome the gradual extension of the Trade Board system, provided it follows the general principle recommended in the Cave Report—that the community should use its full powers of compulsion only in regard to the minimum, and that so far as all other classes of wages are concerned, the State should encourage collective bargaining. With this proviso, compulsory enforcement of a minimum could also be extended to the workpeople covered by Whitley Councils.

As regards all wages above the minimum the Cave Committee recommended that, provided they are reached by agreement on the Board, and provided that a sufficiently large proportion of the Board concur, the wage so determined shall be enforced by civil process, whereas in the cases of the minimum, the rates would be determined if necessary by arbitration of the State-appointed members of the Board, and non-payment would be a penal offence. The Trade Boards now cover three million workers. Two million are in occupations for which Trade Boards are under consideration, and there are a further two million under Industrial Councils or Whitley Councils. If State powers are to be employed in trades employing seven millions of the eighteen million wage-earners of the country, the scope of those powers needs to be very carefully defined.

THE CASE FOR PROFIT-SHARING

Many Liberals are, however, asking whether this is sufficient and whether it is not possible for the State to intervene to alter the distribution of the product of industry in favour of the wage-earner. In particular, they are wondering whether it is possible to secure the universal application of some system of profit-sharing. The underlying principle of profit-sharing is indeed one which we must look to if the whole-hearted assistance of labour is to be enlisted behind the productive effort of the country. But the profit we have to consider is the profit over which the worker has some influence. There is no merit in inviting him to share in purely commercial profits or losses which may be due to some one else's speculation or business foresight. It is futile to imagine you can reverse the functions of labour and capital, and say that capital should have a fixed wage, and that the employee should bear all the risks of the industry.

Again, in some cases it is suitable that profits should be considered in regard to a whole industry, but in others only in regard to a particular firm or section; and finally the rate of profit suitable to various trades varies between very wide limits. In short, there can be no universal rule in this matter which can be enforced by Act of Parliament.

Nevertheless, we must all desire to proceed along the lines of associating the pecuniary interests of the worker in the success of the enterprise, and if any one can suggest a way in which direct assistance to that end can be given by political action, as distinct from industrial, he will be doing a great service. I may add that there is an argument in favour of profit-sharing which is of the utmost importance and which was recently expressed by a prominent industrialist: who declared to me that at long last and after much opposition he has come round to believe in profit-sharing, because it enables him to show his men the balance sheet. The solution adopted last year in the mining industry contains the sort of elements we wish to see adopted in principle. The men are given, through their officials, the results of the industry. They see that they cannot get more than the industry can pay, and though the present economic conditions are putting the men in a desperate state to-day, the miners, who were often regarded before the war as the most pugnacious in the country, are not burning their employers' houses, but are studying how the economic conditions of the industry can be improved for the benefit of themselves and their employers.

INDUSTRIAL PUBLICITY

This brings me to the question of publicity, which is at the root of the whole problem. We desire the principle of private enterprise to remain. The one thing that can destroy it is secrecy. We argue that the self-interest of the investor makes capital flow into those channels where economic conditions need it most. But how can the investor know where it should go when the true financial condition of great industrial companies is a matter of guesswork? Again, we rely upon our bankers to check excessive industrial fluctuations. How can they do this if they do not know the facts of production? The public should know what great combines are doing, but they do not know; and how can we expect the man in the street to be satisfied when his mind is filled with suspicions that can be neither confirmed nor removed?

It is of the utmost importance to seek for greater publicity on two main lines. The illustration of the mines suggests one—production and wage data. There are only three industries in this country—coal, steel, and ships—in which production statistics exist. I suggest that in many of our great staple industries a few simple data with regard to production should be published promptly, say every three months. The data I have in mind are the wages bill, the cost of materials, and the value of the product. It is desirable that this should be done, and I believe it can be done, for almost every great industry in the country. These three facts alone will bring the whole wages discussion down to earth.

Then on finance, I suggest that one of the first things a Liberal Government should do should be to appoint a commission to overhaul the whole of our Company Law. This is not the occasion to enter in detail into a highly technical problem. But I would call attention to the following points: There is no compulsion on any joint-stock company to publish a balance sheet. It is almost the universal practice to do so; but as it is not an obligation, the Company Law lays down no rules as to what published balance sheets must contain. Again, the difference between private and public companies must be considered; a private company which employs a great mass of capital and large numbers of work-people—a concern which may cover a whole town or district—should in the public interest be subject to the same rules as a public company. Thirdly, in view of the amalgamation of industry, the linking up of company with company, there must be reconsideration as regards publicity in the case of subsidiary companies. Finally, I think we have been wrong in assuming that a law applicable to a company with a modest little capital is suitable to regulate the publicity of a great combine controlling tens of millions of capital. Some attempt should therefore be made to differentiate between what must be told by the big and by the little concerns respectively. I am well aware of the myriad difficulties that this demand for publicity will encounter. But difficulties exist to be overcome. And they must be overcome, for of this I feel certain: that if the system of private enterprise dies, it will be because the canker of secrecy has eaten into its vitals.

A NATIONAL INDUSTRIAL COUNCIL

I have left very little time for dealing specifically with the question of industrial relations, though much that I have said has a bearing upon it. There has been great disappointment with the results of the Whitley Council movement. Many thought they were going to bring in a new era. But they have not lived up to these hopes, firstly, because they came into being at a time of unexampled economic difficulty, and, secondly, because they were introduced into industries where there was no tradition of co-operative action—being established mainly in industries lying between the entirely unorganised and the highly organised trades. But we must persist in encouraging Whitley Councils, and still more in the associated objective of encouraging works committees. The basis of industrial peace is in the individual works. Co-operation cannot be created by Act of Parliament, but depends upon the development of opinion among employers and workmen. Starting from Works Councils up through the Whitley Council, Trade Boards, or National Trade Union machinery for the negotiation of wages, we arrive at the National Industrial Council, which is the point at which the Government can most directly assist the movement towards more cordial relations. The plan of this Council is ready. It was proposed and developed in 1919, and I personally do not want to change that plan very much.

But I think it is of the utmost importance that we should embody in our Liberal programme the institution of a National Industrial Council or Parliament representing the trade organisations on both sides. Whether it should represent the consumers, I, personally, am doubtful. It should be consulted before economic and particularly industrial legislation is introduced into Parliament. It should be the forum on which we should get a much better informed discussion of industrial problems than is possible in Parliament or through any other agency in the country. The National Council also needs to have specific work to do. I would be prepared to see transferred to it many of the functions of the Ministry of Labour, or rather that it should be made obligatory for the Minister of Labour to consult this Council on such questions as whether it should hold a compulsory inquiry into an industrial dispute. I would also throw upon it the duty of advising Parliament exactly how my proposals as to publicity are to be carried out, and would give it responsibility for the Ministry of Labour index figures of the cost of living upon which so many industrial agreements depend. I believe if we could set out a series of specific functions to give the plan vitality, in addition to the more nebulous duty of advising the Government on industrial questions, we should have created an important device for promoting the mutual confidence of which I have spoken.

The suggestions I have made are perhaps not very new, but they seem to me to be in the natural line of evolution of Liberal traditions. Above all, if they are accepted they should be pursued unflinchingly and persevered with, not as a concession to this or that section which may happen to be strong at the moment, but as a corporate policy, which aims at combining the interests of us all in securing increased national wealth with justice to the component classes of the commonwealth.



THE REGULATION OF WAGES

BY PROFESSOR L.T. HOBHOUSE

Professor of Sociology, London University.

Professor Hobhouse said:—The wages, hours, and general conditions of industrial workers are of interest to the community from two points of view. So far as the less skilled and lower paid workers are concerned, it is to the interest and it is the duty of the community to protect them from oppression, and to secure that every one of its members, who is willing and able to contribute honest and industrious work to the service of others, should be able in return to gain the means of a decent and civilised life. In this relation the establishment of a minimum wage is analogous to the restriction of hours or the provision for safety and health secured by Factory Legislation, and carries forward the provision for a minimum standard of life. The problem is to determine upon the minimum and adjust its enforcement to the conditions of trade in such wise as to avoid industrial dislocation and consequent unemployment.

With regard to workers of higher skill, who command wages or salaries on a more generous scale, the interest of the community is of a different kind. Such workers hardly stand in need of any special protection. They are well able to take care of themselves, and sometimes through combination are, in fact, the stronger party in the industrial bargain. In this region the interest of the community lies in maintaining industrial peace and securing the maximum of goodwill and co-operation. The intervention of the community in industrial disputes, however, has never been very popular with either party in the State. Both sides to a dispute are inclined to trust to their own strength, and are only ready to submit to an impartial judgment when convinced that they are momentarily the weaker. Nor is it easy when we once get above the minimum to lay down any general principles which a court of arbitration could apply in grading wages.

For these reasons the movement for compulsory arbitration has never in this country advanced very far. We have an Industrial Court which can investigate a dispute, find a solution which commends itself as reasonable, and publish its finding, but without any power of enforcement. The movement has for the present stuck there, and is likely to take a long time to get further. Yet every one recognises the damage inflicted by industrial disputes, and would admit in the abstract the desirability of a more rational method of settlement than that of pitting combination against combination. Such a method may, I would suggest, grow naturally out of the system which has been devised for the protection of unskilled and unorganised workers, of which a brief account may now be given.

THE ESTABLISHMENT OF TRADE BOARDS

Utilising experience gained in Australia, Parliament in 1909 passed an Act empowering the Board of Trade (now the Ministry of Labour) to establish a Trade Board in any case where the rate of wages prevailing in any branch was "exceptionally low as compared with that in other employments." The Board consisted of a number of persons selected by the Minister as representatives of employers, an equal number as representatives of the workers, with a chairman and generally two colleagues not associated with the trade, and known as the Appointed Members. These three members hold a kind of casting vote, and can in general secure a decision if the sides disagree.

No instruction was given in the statute as to the principles on which the Board should determine wages, but the Board has necessarily in mind on the one side the requirements of the worker, and on the other the economic position of the trade. The workers' representatives naturally emphasise the one aspect and the employers the other, but the appointed members and the Board as a whole must take account of both. They must consider what the trade in general can afford to pay and yet continue to prosper and to give full employment to the workers. They must also consider the rate at which the worker can pay his way and live a decent, civilised life. Mere subsistence is not enough. It is a cardinal point of economic justice that a well-organised society will enable a man to earn the means of living as a healthy, developed, civilised being by honest and useful service to the community. I would venture to add that in a perfectly organised society he would not be able—charitable provision apart—to make a living by any other method. There is nothing in these principles to close the avenues to personal initiative or to deny a career to ability and enterprise. On the contrary, it is a point of justice that such qualities should have their scope, but not to the injury of others. For this, I suggest with confidence to a Liberal audience, is the condition by which all liberty must be defined.[1]

[Footnote 1: I may perhaps be allowed to refer to my Elements of Social Justice, Allen & Unwin, 1921, for the fuller elaboration of these principles.]

If we grant that it is the duty of the Boards to aim at a decent minimum—one which in Mr. Seebohm Rowntree's phrase would secure the "human needs" of labour—we have still some very difficult points of principle and of detail to settle. First and foremost, do we mean the needs of the individual worker or of a family, and if of the latter, how large a family? It has been generally thought that a man's wages should suffice for a family on the ground that there ought to be no economic compulsion—though there should be full legal and social liberty—for the mother to eke out deficiencies in the father's payment by going out to work. It has also been thought that a woman is not ordinarily under a similar obligation to maintain a family, so that her "human needs" would be met by a wage sufficient to maintain herself as an independent individual.

These views have been attacked as involving a differentiation unfair in the first instance to women, but in the second instance to men, because opening a way to undercutting. The remedy proposed is public provision for children under the industrial age, and for the mother in return for her work in looking after them. With this subvention, it is conceived, the rates for men or women might be equalised on the basis of a sufficiency for the individual alone. This would certainly simplify the wages question, but at the cost of a serious financial question. I do not, myself, think that "human needs" can be fully met without the common provision of certain essentials for children. One such essential—education, has been long recognised as too costly to be put upon the wages of the worker. We may find that we shall have to add to the list if we are to secure to growing children all that the community would desire for them. On the other hand, the main responsibility for directing its own life should be left to each family, and this carries the consequence, that the adult-man's wage should be based not on personal but on family requirements.

WOMEN'S WAGES

But the supposed injustice to woman is illusory. Trade Boards will not knowingly fix women's rates at a point at which they can undercut men. Nor if women are properly represented on them will they fix their rates at a point at which women will be discarded in favour of male workers. In industries where both sexes are employed, if the women workers are of equal value with the men in the eyes of the employer, they will receive equal pay; if of less value, then, but only then, proportionately less pay. It is because women have received not proportionately but quite disproportionately less pay that they have been undercutting men, and the Trade Boards are—very gradually, I admit—correcting this error. For well-known historical reasons women have been at an economic disadvantage, and their work has secured less than its worth as compared with the work of men. The tendency of any impartial adjustment of wages is to correct this disadvantage, because any such system will attempt to secure equality of opportunity for employment for all the classes with which it is dealing. But it is admitted that there is a "lag" in women's wages which has been but partially made good.

If the standard wage must provide for a family, what must be the size of the family? Discussion on the subject generally assumes a "statistical" family of man and wife and three children under age. This is criticised on the ground that it does not meet the human needs of larger families and is in excess for smaller ones. The reply to this is that a general rate can only meet general needs. Calculation easily shows that the minimum suited for three children is by no means extravagant if there should be but two children or only one, while it gives the bachelor or newly married couple some small chance of getting a little beforehand with the world. On the other hand, it is impossible to cater on general principles for the larger needs of individuals. The standard wage gives an approximation to what is needed for the ordinary family, and the balance must be made good by other provision, whether public or private I will not here discuss. I conclude that for adult men the minimum is reasonably fixed at a figure which would meet the "human needs" of a family of five, and that for women it should be determined by the value of their services relatively to that of men.[1]

[Footnote 1: I am assuming that this value is sufficient to cover the needs of the independent woman worker. If not, these needs must also be taken into account. As a fact both considerations are present to the minds of the Trade Boards. A Board would not willingly fix a wage which would either (a) diminish the opportunity of women to obtain employment, or (b) enable them to undercut men, or (c) fail to provide for them if living alone.]

How far have Trade Boards actually succeeded in fixing such a minimum? Mr. Seebohm Rowntree has put forward two sets of figures based on pre-war prices, and, of course, requiring adjustment for the changes that have subsequently taken place. One of these figures was designed for a subsistence wage, the other for a "human needs" wage. The latter was a figure which Mr. Rowntree himself did not expect to see reached in the near future. I have compared these figures with the actual minima for unskilled workers fixed by the Boards during 1920 and 1921, and I find that the rates fixed are intermediate between the two. The subsistence rate is passed, but the higher rate not attained, except for some classes of skilled workers. The Boards have in general proceeded with moderation, but the more serious forms of underpayment have been suppressed so far as inspection has been adequately enforced. The ratio of the female to the male minimum averages 57.2 per cent., which may seem unduly low, but it must be remembered that in the case of women's wages a much greater leeway had to be made good, and there can be little doubt that the increases secured for female workers considerably exceeded those obtained for men.

THE QUESTION OF A SINGLE MINIMUM

Criticism of Trade Boards has fastened on their power to determine higher rates of wages for skilled workers, one of the additional powers that they secured under the Act of 1918. There are many who agree that a bare minimum should be fixed by a statutory authority with legal powers, but think that this should be the beginning and end of law's interference. As to this, it must be said, first, that the wide margin between a subsistence wage and a human needs wage, brought out by Mr. Rowntree's calculations, shows that there can be no question at present of a single minimum. To give the "human needs" figure legislative sanction would at present be Utopian. Very few Trade Boards ventured so far even when trade was booming. The Boards move in the region between bare subsistence and "human needs," as trade conditions allow, and can secure a better figure for some classes of their clients when they cannot secure it for all. They therefore need all the elasticity which the present law gives them.