absorb the whole of the surplus goods. On that hypothesis, of course, the workers would produce more per hour of work, for no higher pay. They would be working, not perhaps harder, but more effectively. But they would all be employed, and though the direct result of the increased output would be to benefit the consumer, we must remember that wage-earners are themselves consumers. If a similar increase in productivity per unit, leading to a lowering of the price were obtained in all industries, the whole of the increased output might be absorbed, and consequently, although the workers might receive the same money wage, they would be buying their goods more cheaply. Thus, their real wages, or their actual purchasing power, would be higher.

Now, in most countries there is a very large margin of unemployed workers, and one of the great problems confronting us is to absorb it. Taking England as a unit, if a concerted effort were made to lower production costs more quickly than in other countries, I think there is very little doubt that we could greatly increase our export trade. We should be able to sell a larger amount of goods, and it is possible that we should absorb our unemployed. In this connection we must remember that about 30 per cent of the value of the goods that leave the factory gates of England are sent abroad, and 70 per cent are consumed at home. That shows how largely we are dependent upon an export trade.

Now, we may rightly ask ourselves if it is just materialistic selfishness to advocate an immediate and enthusiastic effort to reduce production costs in this country, and to calculate that if we do so we shall be able to increase our trade abroad. Do we not win our foreign markets at the expense of other countries?

I would like, therefore, to suggest that in all our industrial policy, no matter what it is, we should apply the following tests to our industrial methods.

(I) Industry should create goods or provide services of such kind and in such ratio as may be beneficial to the community taking that word in the widest sense and not losing sight of the interests of humanity as a whole.

(II) In the process of wealth production, industry should pay

the greatest possible regard to the general welfare of the community and pursue no policy detrimental to it.

(III) Industry should distribute the wealth produced in such a manner as will best serve the highest ends of the community. If our industrial methods fail to pass these three tests, they are wrong.

But I submit that if we maintain free trade, “winning markets" really means rendering the most effective service. In selling manufactured goods more cheaply, we are rendering the world, in that respect, a better service than other nations, and only in so far as we succeed in doing this shall we win foreign markets. There is another point to bear in mind. At the present time, the cost of our manufactured goods is so high that in Australia, in Japan, in South Africa, and in other countries, people say: "We really cannot continue to grow raw materials and exchange them with Great Britain for manufactured goods, because her goods are so dear: we get so little from her in exchange that the transaction is not worth while." So they adopt one of two courses. They either do without the goods, or they begin to manufacture goods themselves. Thus, we are failing to render to the nations the service which we have rendered in the past, namely, to manufacture goods for them so efficiently, so economically, that it pays them to go on producing raw materials where it can be done to the greatest advantage, and then exchanging these raw materials with our manufactured goods. They are obliged to adopt an economically undesirable course and make goods themselves, while we lose our job as manufacturers for the world.

There is, however, one contingency which I must face quite frankly. In spite of the fact that ultimately, the workers can only gain by the increased productivity per unit which enables prices to be lowered, the immediate effect of that increase may be, and probably will be, an increase of unemployment. We cannot refuse to face this possible result of dislocation and of a transitional stage. But I think, in fact I am sure, that it will only be temporary, and it may be brief. The fact is that, speaking industrially, Great Britain and some other countries have had a drunken bout. A drunken man, I believe, passes

through a period of great elation, when all the world looks. rosy. Then comes the sobering process—it is bound to come, but it is not pleasant, and it involves a violent headache. We must become industrially sober before we can carry on; and we must pay the penalty of that drunken bout in which we have indulged.

To look back for a moment-how did we in Great Britain secure the world markets? How did we become a manufacturing country? Firstly, we got a start. We had coal and iron and a fine sea coast; we were placed geographically in an advantageous position, and we had the pull of the rest of the world. Secondly and this was by no means a thing to be proud of nationally— we sold cheaply, in the markets of the world, very largely because we underpaid our labor, in comparison, for instance, with Canada, Australia, the United States and New Zealand. Now, to-day, we have lost both those advantages-I am using the word in its economic sense. First, we have no longer got the start; and secondly, as regards the payment of labor, we are much nearer to Australia, New Zealand, Canada and the United States than we have ever been before. Even if there had been no crisis, no great depression, we should have run the great risk of losing our export market, unless we had regained our lost ground by greater efficiency.

Now, what must we do? We must increase our industrial efficiency. I make no apology at all for reiterating the word "efficiency". We have been discussing various ways in which it may be increased, and we must go on studying those ways with all possible care and earnestness. We must work very hard, and we must be bold and progressive, going right out into the world—into Japan, China, and Mexico, and doing all we can to capture those foreign markets.

I think we might do something towards reducing the volume of unemployment by encouraging emigration. I do not look on that as a policy of despair. Recently there has been a tendency for the processes of manufacture to develop more rapidly than the processes concerned with the production of raw materials, so that the manufacturing population is getting topheavy as compared with the population engaged in agriculture, and the

like. To rectify that lack of balance by getting some of our people to go out and produce raw materials will tend towards industrial stability. I think it is extremely important that we should all of us face the fact that there is no smooth road to good times. It is a hard road that we have to tread, and it cannot be made easy by mere kindly sentiment, or even good will. There are certain economic corners that have to be turned; and there are certain economic laws with which we are bound to comply.

Now, is it not possible for us to arrive at some way of meeting the economic situation without Capital and Labor fighting each other? We need unselfish patriotism in industry to-day, just as much as it was needed in the time of war. Here are we as a nation, and, for the matter of that, as a world community, up against very serious economic difficulties, and we shall never overcome them if each party thinks primarily of itself, and only secondarily of the other parties. Can we not approach the problem in a patriotic spirit that embraces the whole world, and ask what service we can render? What can we all do to help this old world to win through, against the tremendous odds which it has to face? We must get rid of suspicion and selfishness, and all engaged in industry must do their part.

The crux of the matter is the human element in businessthe relationship between the employer and the worker. Is it possible, under the existing system of industry, to secure their cordial coöperation? To do so is essential if both Capital and Labor are to be fully and efficiently employed, and if the worker's standard of life is to rise.

Frankly, I think that if, by a process of evolutionary changes, it is not possible to secure such coöperation, the position is absolutely desperate. In a highly industrialized country such as England, dependent for its very life on export trade, which must be fought for, inch by inch, in a keenly competitive world market, to attempt by revolutionary methods to replace the capitalistic system by something else, would be to commit national suicide.

Suppose you overthrow that system to-morrow; what are you going to put in its place? Within a month, if you would avoid starvation, you must substitute a system capable of successfully competing in the markets of the world, and of

getting forty-five million people out of bed in the morning, washed, clothed, fed, and back to bed again every day!

I do not want to shirk any criticism of Capitalism, and certainly not to discourage study and wise experiments as to any desirable changes which may be made in it, but I regard as a dangerous enemy of his country the irresponsible revolutionary whose policy is merely destructive, and who has nothing to substitute for what he takes away. I believe our only hope is to evolve, as rapidly as may be, out of our system as we find it to-day, to something better, and this can only be done by changing men's perspective, their motives and ideals. Change these, and the system will soon remould itself to interpret a new dynamic. The present system, like all others, is merely an instrument for carrying out the desires of the men who made it. Change human desires, replace selfishness by unselfishness; and a spirit of acquisitiveness by a spirit of service, and then, those engaged in industry will develop it in the interest not of a class but of the whole community.

I want to say a few words to employers. Employers are sometimes called captains of industry, and I would like us to regard ourselves as captains. Now, a good Army captain, while doing his utmost to win the war, is ever mindful of his men. He often has to lead them into danger-sometimes to death— yet he seeks, whenever it is possible, to secure their safety and wellbeing. He is more mindful of them than of himself. He does not refuse the privileges of an officer, but neither does he abuse them, or forget that they entail proportionate responsibilities. So I appeal to employers for intense sympathy with the men they are leading.

Now this must take practical form, and I think that there are five things we must do.

First of all, with regard to wages-let us always ask ourselves how much can we afford to give, not how little can we induce men to work for. There is no blinking the fact that the standard of

many of our working people is too low. We want to raise it, and we cannot do so with soft words and with kindly thoughts. In the main, we must raise it by efficient administration and organization, and every time we fail, or slack, or do slipshod