part in the general carrying trade, and though her losses have been heavy, the resources of her shipowners have been swollen by large war profits. If we consider British shipping as unable to maintain itself in the face of open competition, it is obvious that we must discriminate against neutrals, and against our Allies, as well as against our present enemies.

We have still to ask, however, whether a general revival of the policy of the Navigation Acts is likely to have the result of increasing our mercantile tonnage. The considered opinion of our ablest shipowners, as embodied in the joint Report of the Chamber of Shipping and the Liverpool Steamship Owners' Association, is that 'any return to the general principles of 'the old Navigation Laws . . . would be against the best 'interests of our foreign commerce and of our mercantile 'marine.' There is something a little Gilbertian about the idea of protecting a particular industry by measures which the leading representatives of that industry regard as injurious; but shipowners, like other men, are not infallible, and in this case they are not unanimous. It is necessary therefore to consider the proposal on its merits.

In the first place, it is to be noted that not one of the special conditions which made for the success of the seventeenth century Acts exists to-day. In the seventeenth century the Colonies were completely subservient, economically and politically, to the mother country; their trade was in its infancy, but was already capable of affording employment to all English shipping likely to be displaced from other routes, and its great expansion in the immediate future was assured. No one would suggest to-day that it would be possible to enforce on the Overseas Dominions a policy which they were unwilling to accept; and it is at least doubtful whether they could be permanently induced to acquiesce in a system involving restrictions upon their right to trade with any States with which profitable commercial relations could be maintained, in such ships as provided the most efficient means of transport. But apart from this initial objection, the benefits to be obtained by the reservation of the Empire trade would be small. British shipowners had already secured before the war the carriage of upwards of 90 per cent. of the trade between the United Kingdom and the Overseas Dominions and Colonies, and at least 75 per cent. of the carrying trade between the British

Overseas Possessions and foreign countries.* So long as the British services maintain their efficiency there is no reason why this proportion should not be maintained, and since no general revival of the Navigation Acts could exclude the shipping of any foreign country from participation in the direct trade between that country and the Empire, the margin of additional employment obtained for British ships would be insignificant compared with the threatened loss of the general carrying trade through retaliatory measures adopted by other nations.† For here, again, the position existing in the time of Cromwell and Charles II. is exactly reversed. Then our principal competitor was one small country which prospered by carrying on a large entrepôt trade; to-day our competitors-with the exception of Norway-are industrial communities possessed of great natural resources, with whom we have a direct trade of vital importance to ourselves. Then we had little to fear from retaliation; to-day all these countries, and all countries coming under their economic or political influence, would combine to organize a system of retaliation which would be exceedingly effective.

Before the war it was calculated that some 40 to 45 per cent. of British ocean-going shipping was engaged in traffic between foreign ports. To some writers and speakers this has appeared a source of weakness. In reality it was one of the main factors of our strength in peace and in war. We have for long imported goods in excess of the value of those shipped from the United Kingdom, and it was to a considerable extent through the services of our ships as general carriers, and by banking and insurance services closely connected with the carrying trade, that the balance of the exchanges was maintained. Moreover, the services of our ships in carrying, for instance, Brazilian coffee to the United States and Argentine maize to Scandinavia, have done much to develop markets for our own products and fields for the investment of our capital. It must be remembered also that the ability of a tramp steamer to carry, at a reasonable freight, coal from the United Kingdom to South America, or grain from Australia to Great Britain,

* Chamber of Shipping Report.

† Of the foreign tonnage entered and cleared at ports in the United Kingdom before the war one-half was bound from or to the country in which the ships were owned.

depends upon the prospect of securing a remunerative charter for the homeward or outward voyage respectively. And it is only by vessels ready to take their part in the general carrying trade of the world that the assurance of such continuous employment can be attained.

Since it is impossible to exclude foreign shipping generally from the direct trade of the United Kingdom, we are unable, in fact, to reserve to British shipping sufficient employment for such a body of tonnage as we possessed before the war, and must possess if we desire to render ourselves potentially independent of foreign services. The British ships engaged in traffic between foreign ports form a floating reserve of cargo space upon which we can call, through the operation of the freight markets, whenever a sudden expansion of trade or the withdrawal of foreign shipping renders the supply of tonnage inadequate to our needs. In time of war this reserve can be brought, as it has in fact been brought during the past two years, under direct State control, and diverted from its normal employment to the exclusive carriage of such goods as it is most essential for us to procure or to send abroad. Should any disabilities be imposed upon British shipping in open competition for the general carrying trade of the world, this reserve of cargo space would disappear, and we should be deprived of the power to call upon the services of additional tonnage under the British flag when the need for carrying space became acute.

There is, however, one minor application of the principle of the Navigation Laws to which the considerations discussed above do not so obviously apply. The Association of Chambers of Commerce has laid down as an axiom that the reservation of the coasting trade is as much an integral national right and necessity as the preservation of our frontiers and internal 'communications'; and 'Fairplay' has suggested that the threat of such a measure would form an effective means of securing for British shipping a share of the American coastal trade, as it would result in those boats being prevented 'from accepting business elsewhere.' With regard to this point it may be observed that out of 69,000,000 tons arrived and departed with cargoes in the coasting trade, during 1913, foreign tonnage amounted to a bare 600,000, which did not prevent some 44,500,000 tons of foreign shipping entering or

clearing at British ports in the foreign trade. It will surely need some greater and more certain prospect to induce us to embark on the dangerous and doubtful game of retaliation. There appears to be some suggestion that the Imperial coasting trade should be considered as covering all traffic within the Empire, and that participation in this traffic should be denied to ships belonging to nations which close their own coasting trade to British shipping. But, even so, the blow which we have it in our power to strike appears to be disproportionately small as compared with the danger of retaliation. It is not a question of rights but of expediency, and whether from the point of view of commerce or of shipping, the experience of the past suggests that the imposition of restrictions on trade tends, under modern conditions, to damage the country imposing those restrictions even more than the rivals at which they are aimed.

During the period of transition the greatest need of this country will be an adequate supply of tonnage from whatever source it can be obtained. When commercial conditions are re-established, the chief need of manufacturers and consumers will be unrestricted access to markets and producing centres. So far as the mercantile marine is concerned, its restoration and future progress will depend upon the demand for its services and its freedom to accept the cargoes on offer. At such a moment it would be peculiarly unwise to introduce any measure tending to impede the movement of trade or to restrict the activity of the freight markets. Nor is it necessary, in considering the question, to draw any distinction between the requirements of commercial prosperity and of national defence. Ships are not built to look at but to carry goods, and if we desire the tonnage under the British flag to be maintained at its former level, we must leave it free to compete on its merits for the carrying trade of the world. To run the risk of handicapping it in such competition for the sake of reserving a monopoly in any particular trade, or of forcing our way into any small section from which we are excluded, would be to jeopardize the continuance of that great and elastic carrying power which is as essential to our safety in war as to our prosperity in peace.

C. ERNEST FAYLE.

PROBLEMS OF BRITISH BANKING

Report of the Treasury Committee on Bank Amalgamations (Cd. 9052). 1918.

THE

HE great English banks, or perhaps we ought rather to say the English bankers, are on their trial. In the overhaul of our financial foundations, which is being undertaken as a preliminary to the reconstruction of our economic system after the war, the present-day bankers appear to many of their critics to be old-fashioned, effete, out of date. Mr. Runciman finds them to be lacking in the spirit of adventure. Lord Leverhulme describes them as rabbits tout court. The bankers might reply that the coneys are but a feeble folk, yet make they their houses in the rocks,' and since the banking superstructure has weathered the blasts of war there cannot be much amiss with the financial foundations. Nevertheless, in this period of universal ruin and reconstruction, it is fitting that bankers with the rest be brought up for trial.

One answer they are already making to the critics—the practical answer of amalgamation. Eight of the leading joint stock banks have resolved themselves into four separate banking units. There is, of course, nothing new in amalgamation. The absorption of the smaller country banks by the great central institutions of the metropolis has been a familiar feature of the banking development of the past half century. Even as late as 1896 there were reported to be 196 country banks in England alone, of which only twenty-eight now retain a separate existence. What is novel in the present movement is the absorption of the central institutions by each other.

It is as difficult to analyse the motives as to determine the issues of the recent large bank amalgamations. To say that they are made in the public interest is to beg the question. 'I have never known much good,' says Adam Smith, done by those who affected to trade for the public good.' The public will probably consider that its interests are more likely to be