the import duties arranged for his particular trade. It is a bad thing when elections begin to turn on trade and not on politics. It is a worse thing when people are encouraged to look for everything to be done for them by Government, which, if it once makes itself responsible for the prosperity of our trade, will soon find itself held responsible for every commercial depression.

All these objections are insignificant compared with that which follows from the double complexity of trade and government. On the one hand, there is the complexity of modern politics. The Government has too much to do already. It does not do it very well. If, in addition to the necessary business of politics, it now takes upon itself the arbitrament of our world-wide trade, it will manage both badly. Trade, like war, would have to be conducted in a bureau, over which Parliament itself has only a limited control. How if the muddle of a War Office were followed by a muddle of a Trade Office? The truth is that the past of the Government hardly makes it safe to trust it with further powers. On the other hand, there is the complexity of English trade. Few politicians have the time or the experience to understand it. In this very controversy far too much has been made of the exports, because the Government sees so much of them in Customs. Meanwhile, the balance of trade manages itself partly by the energies of traders and partly automatically in the money market. For politicians to play with this complex machinery is like a child playing with a watch. It is a pity to diminish the self-reliance of commercial men. It is a dangerous experiment to begin the imposition of political taxes for commercial purposes, when trade is balancing itself out of income and not out of capital.

I have ventured, Sir, to intrude on you this letter, because on April 9, 1901, you did me the honour of

publishing a letter in which I called attention to the extravagance of Government, and contended that it was time to consider our finances as a whole and to view internal in the light of external, and local in the light of central, expenditure. It is that letter which gives me a claim to write this. Matters are worse now. Never was there more urgent need for a comprehensive inquiry, not confined to import duties under the one head of Customs, but extended to our whole revenue, expenditure, and debt. The Unionist Government has proved an expensive affair. In eight years it has raised our ordinary expenditure by at least 35 millions a year, and our National Debt to the sum of nearly 800 millions. It is continually threatened with increased expenditure on the Army and Navy, and on education. The revenue to meet this expenditure is unsound. The income-tax is at 11d., when it ought to be no higher than 6d., so as to be capable of being raised again in the event of war. The death duties are a tax levied on the capital of individuals, but spent by Government as income instead of being put to reserve. In addition to its own expenditure the Government annually collects ten millions of local subventions to be irresponsibly spent in the municipalities. Rates go on increasing, and diminishing the power of paying taxes. Local loans have so swollen the whole indebtedness of the country that the Stock Exchange can no longer float them. Consols are depressed. When should we be able to provide funds, if we were driven into a war?

In these circumstances I submit that the true policy of the Chancellor of the Exchequer should not be that which is proposed either by the Prime Minister or by Mr. Joseph Chamberlain, but should be a complete reform of our whole system of finance. The Government has a much better way of helping our trade, our Empire, and our country.

It should begin with a real and general fiscal inquiry. It should next consider the possibilities of economy and sound finance. It would find that, as I and afterwards with much more authority Sir R. Giffen suggested, it has become necessary to give notice to the municipalities that local subventions must be gradually withdrawn, and would thus find itself possessed of ten millions a year. It would find, on the other hand, that not only the incometax should be reduced to 6d., by which it would lose 14 millions, but also that the death duties should be put to national capital, by which it would lose a further 13 millions a year. It would find that it must turn a deaf ear to mere educationists, and that it ought to introduce more economy into the Post Office, and especially into the telegraph system, which costs more than it pays. It would find, after all, that every penny of new import duties would still be wanted for ordinary expenditure. Besides, it would find that much more control should be exercised over municipal extravagance. But if all this were achieved, then at last out of the reduced income-tax and out of the capital of death duties there would be the comfort of a national reserve for War. There are two other ways in which Government could assist the people, both negative, but both important. It should abstain from crippling trade by severe restrictions, and from allowing it to be crippled in municipalities by arbitrary rates. It should beware of destroying the liberty and selfreliance of every individual who, in matters of his trade, as Adam Smith said, can judge much better than any statesman or lawgiver can do for him. We seem in danger of forgetting that free trade meant not only the free importation of the necessaries of life, but also the freedom of traders from the meddling of Governments. October 13.

193

THE SOVEREIGNTY OF THE PEOPLE

The Papal Note with proposals for peace, as sent to the belligerent Governments, was published on August 14, 1917.

FROM The Times, SEPTEMBER 5, 1917.

On two successive days your columns have contained two opposite views of democracy; the one ideal, the other real. On August 30 the ideal view appeared in the reply of the President of the United States to the Pope's Note. The President, who appears from The Times of to-day to think that equal justice is the heart of democracy, virtually proposed in his reply to the Pope the democratization of Europe in the following passage:

'We believe that the intolerable wrongs done in this war 'by the furious and brutal power of the Imperial German 'Government ought to be repaired, but not at the expense of the sovereignty of any people-rather in vindication of the 'sovereignty both of those that are weak and of those that are strong.

On August 31 the real view appeared in your summary of the Moscow Conference, as follows: 'The Army cannot fight without food and munitions. Wild'cat agrarian schemes imperil the food supply. Can the Government repudiate them? Munitions are not produced 'while the demands of Labour amount to confiscation. Can 'the Government restrain them?'

These two views, one favourable and the other unfavourable to democracy, are incompatible; or they can be reconciled only by supposing that the President of the United States is writing about the ideal sovereignty of the people as it ought to be, and as he would wish it to be propagated in Europe, whereas the Russians are enacting the real sovereignty of the people as it is in Russia, and may be expected to be in other European nations with all the extravagant demands made by Labour in the

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name of the people and the powerlessness of the Government to repudiate or even restrain them.

It will be objected that the President of the United States is not imagining an ideal, but proposing to transfer the actual and practical democratic institutions of America to Europe. But it is not so; nor is it possible in present circumstances. He is at the head of a republic, which is, in the first place, strictly limited by a written Constitution modelled on the mixed constitution of England in the reign of George III, in the second place rendered stable by the carefully designed Confederacy of the United States, and in the third place spread over a territory ample for its inhabitants and remote from the border wars and diplomatic complications of the crowded nations of Europe. Europe and America are so different that the American Constitution could hardly be transplanted to Europe. Rather, whereas what exists in the United States is the sovereignty of a single people limited by a scientific Constitution, what would most probably be produced in Europe would be a mob of sovereignties of multifarious peoples limited by nothing. In the frightful ferment caused by the war the probability is that the peoples of Europe would not submit to limited Constitutions like that of the United States, but would each adopt an unlimited sovereignty of the people, which would, as Aristotle said, tend to become a tyranny of the people, or even would fall into an anarchy, such as that which exists actually in Russia, and potentially wherever Labour tends to become more powerful than the State.

The reply of the President of the United States to the Pope's Note really contains two points, which are not necessarily connected. It is partly a discussion of the proposed terms of peace, about which I am not qualified to express an opinion. It is partly a propaganda in favour of extending demo