Then the merciless Chancellor of the Exchequer acquainted Parliament with his scheme for raising a part of this Brobdingnagian revenue. Free trade must be partially shelved. There will be a revenue tariff on "luxury" imports. Income-tax in 1916 will be forty per cent. higher and will amount altogether to about fifty cents on every five dollars earned. Even the man with $650 a year will pay, while "plutocrats" with incomes above that figure will be mulcted even more relentlessly. He of $25,000 will pay $5,150, and nabobs with $50,000, $100,000 and $500,000 per annum (England has several in the latter category) will contribute, respectively, $12,650, $30,150 and $170,150. War is hell. No wonder a parliamentary wag, on the day Mr. McKenna introduced "Conscription of Wealth," interrupted with a merry "Why don't you take it all?"
Up to December, 1915, the Government had asked Parliamentary sanction for war credits aggregating $6,500,000,000. But even this staggering total (the war was now costing $25,000,000 a day) was planned to carry the campaign only up to the middle of November. The $500,000,000 loan transaction in the United States only produced funds to be spent there, and it was but half of what was asked. It only indirectly relieves the situation at home. Allowing for the deficit carried over from last year, the latest budget proposes taxes amounting to $1,525,000,000 and loans aggregating $6,425,000,000 for the fiscal year 1915-16. But even the most patriotic experts in Threadneedle Street acknowledge the utter impossibility of raising $6,425,000,000 of genuine money by public loan in Britain per year. They reluctantly predict that the Government will soon be driven to extend its use of fictitious money and paper--on the excoriated German model. The war has already eaten toward the bottom of the stockings and the strong-boxes of Britain where American securities are stored.
As the financier not only of her own colossal requirements in the war, but as banker for her allies, England's money necessities are thus seen to be no less urgent than her need of men and munitions. They comprise, these three M's, the trilogy on which the existence of the Empire now depends. British performances in respect to the cash sinews of war have truly been on a monumental scale. History shows no parallel for the achievement of raising at home in loans and Treasury bills over $5,500,000,000 without abandonment of the gold standard and without resort to inconvertible paper, and yet keeping British credit at an altitude which gives hard-headed Uncle Sam no pause in taking John Bull's I-O-U for another half billion. It is an imperishable tribute to the stamina, prestige, wealth and commercial fabric of the British Empire and to the enterprise and ingenuity of the merchants, manufacturers, shippers, bankers and traders who have made their islands the center of the world's exchanges and London the money-market of the universe.
Lord Northcliffe
But magnificent as has been the past, the financial future can not be viewed except with anxiety. Indebtedness has been piled up sky-high--out of every twenty-five dollars spent since the war began, at least twenty dollars has been borrowed. That was possible because of the superlative excellence of British credit. "Our credit is now almost everything," explains The Economist. "It comes next to the Navy, and the two can not be dissociated. For if either suffer, our food supplies would be in danger. In one sense, credit is at the mercy of the Government and of the Treasury, for a great false step of policy or continuance in a false course would bring disaster. The responsibility of the Prime Minister and of the Chancellor of the Exchequer and of the Cabinet, as a whole, is prodigious. Whatever else we do, we must maintain our financial equilibrium. With that and the command of the seas, we can not be defeated."
Manifestly Britain's economic problem is almost the darkest spot on her overclouded war horizon--the problem of meeting rising obligations out of falling revenue. The Empire suffers from no lack of men; its physical resources are well-nigh inexhaustible. If patriotism does not send them to the trenches of their own free will in adequate numbers, they will be "fetched." There is no longer any question of shortage of munitions. England's own vast industrial plant, as well as that of France, is now occupied almost exclusively in the production of man-killing merchandise for the Allies and is turning it out at high pressure. To the manufacturing equipment of England and France are harnessed, in addition, German bombs and German-incited strikes to the contrary notwithstanding, the limitless productive facilities of the United States and Canada. Britain's one and only nightmare is money, and its corollary aspects, exchange and credit.
No estimate has so far appeared which fixes the 1916 deficit which England will have to meet at less than $7,000,000,000, based on a total war cost for the calendar year of $9,000,000,000. How to grapple with the gigantic task conjured up by such a prospect is not engaging popular attention to any marked degree, though upon its solution depends, primarily, Britain's ability to conquer in this war of exhaustion. With the palpable impossibility of raising the wind at home by successive new public loans; with the necessity to invoke such heroic measures as borrowing $500,000,000 in America to bolster up sterling exchange and keep British credit "intact"; with Englishmen sacrificing their enormous holdings of American securities for the same pious purpose; with the British industrial plant so preoccupied with munitions that it can neither, in accordance with tradition, pay for British imports with British exports nor increase British revenue by the same token; with national expenditure advancing by gigantic leaps and national income restricted as it never was before; with all these immutable conditions staring at Englishmen, it is no wonder that those of them who think, as distinguished from those who merely hurrah, contemplate what looms ahead with anxious concern.
But admittedly grave as the future is, it is by no means hopeless. Britain's plight is not "desperate," as the Germans, seeking to hide their own, are so fond of making believe. Even the misgivings of Englishmen themselves regarding their economic situation would be promptly and legitimately resolved into confidence if the community as a whole could be induced to pull itself together and look facts in the face. In its incorrigible disinclination to do so alone lies danger. The British Empire is not bankrupt. It can hardly ever become so. A recent estimate assessed the income of the Empire, including India, at something over the fabulous sum of $20,000,000,000! It may be embarrassed--it is unquestionably that already--just as the richest of men frequently are, in the midst of titanic transactions which have outrun their calculations. But embarrassment seldom eventuates in ruin, either for men or nations, if they come to grips with it betimes. Thus, disaster can only follow tribulation in the case of Britain if her people, preferring to wallow in happy-go-lucky nonchalance and drift, postpone until too late those sagacious, clean-sweep measures of reorganization and retrenchment which alone, in the opinion of competent judges, can save the situation.
In the preceding chapter I told of the introduction of the Simple Life, of the dawn of the Economy Era in war-time England; but it would be hyperbole to intimate that it has been inaugurated on anything but a superficial scale. Luxury and self-indulgence are still rife. To vast numbers of people, in the classes as well as the masses, the war, far from oppressing them, has brought positive affluence, and with their new riches they have gone in for spending instead of saving. Spartanism in Britain remains a good deal of a theory; it has not become a condition. While Germany, shut off by land and sea, contrives to remain at fighting zenith without her customary imports of $2,500,000,000 a year (she calls Jellicoe's blockade a blessing in disguise because it has compelled her to spend at home what she used to pay out abroad), England's imports of such articles as oranges, cocoa, tea, coffee, tobacco, cheese, rice, meats, pepper and onions have heavily exceeded her importations of the same articles in corresponding peace periods.[1] The Prime Minister tells the country that "victory seems likely to incline to the side which can arm itself the best and stay the longest." Mr. Asquith declares that "that is what we meant to do." But until, for instance, Englishmen realize that by abstaining from tobacco for a year, $40,000,000 of money would be available for the smoke of battle; that if every man, woman and child in the Kingdom puts away 25 cents a week, a new treasure of $600,000,000 could be piled up for war; and that unless waste, extravagance and slothful habits generally are banished, by duke and by docker, as if they were leprous disease, Mr. Asquith's brave words will remain a hollow aspiration. They alone will not enable England to "stay the longest" in the world's most destructive endurance competition.