annuity as if it were all clear income. The purchaser of £100 of consols at, say, £110, purchases nothing more than the right to receive £2 15s. per annum till April, 1903, and £2 10s. per annum thenceforward to April, 1923, and thereafter unless and until the Government pays him off with £100. Consequently the premium of £10 is, to all intents and purposes, sunk in the purchase of a terminable annuity. Unless he sells his consols again, and that at a somewhat early date, it is obvious that the purchaser will never see his £10 again, and, consequently, if he wishes to keep his capital undiminished, he will make provision for replacing it out of income. The Post Office Savings Bank is the largest purchaser of consols in the world. Its apologists sometimes say that only a small portion of its consols have been bought at a premium, but this is by no means the case. Consols have been over par since the early months of 1894. On December 31, 1893, the Post Office possessed £33,799,053 consols. On December 31, 1897, it possessed £73,726,859, an increase of almost forty millions. By the present time, the amount bought at a premium must amount to nearly fifty millions. The premium on this vast amount has been sunk without the slightest provision for replacement, and it is by merrily paying away its assets that the Post Office has been able to keep up the payment of a usurious rate of interest to Savings Bank depositors. If the Savings Bank adopted the sound practice of other banks, and valued its Government stocks at the price at which they might reasonably be supposed to be saleable in a very considerable panic, or even if it took the less cautious but reasonable course of valuing them at par, the diminution of assets from year to year would be so painfully obvious that Chancellors of the Exchequer, if not Postmasters-General, would long ago have taken alarm. But in virtue of an antiquated act of parliament, which was reasonable enough when consols were below par, but is now altogether and palpably absurd, the Savings Bank balance-sheet values Government stocks at the market price of the day. So for the last few years the Post Office, like some less apparently respectable concerns, has been able to conceal its annual losses by writing up the value of its remaining assets, and has even shown a rapidly increasing surplus of assets over liabilities. According to its accounts the surplus has been as follows: Now at December 31, 1893, the Consols, the Two and a Half and Two and Three-quarter per cents. (redeemable 1905), the Local Loans stock (redeemable 1912), and the Egyptian guaranteed stock (redeemable by annual drawings), held by the Post Office, were in the aggregate valued at £283,984 under par. In 1894 they were valued at £2,578,071 over par, in 1895 at £4,982,170 over par, in 1896 at £9,666,341 over par, and in 1897 at £11,670,475 over par. If, then, these redeemable stocks had been taken at par in each of the five years, the surplus of assets over liabilities would have been as follows:December 31, 1893 1894 £3,225,945 Thus, in the three years, 1895, 1896, and 1897, the Post Office appears to have reduced its real surplus by £2,353,360. This does not represent the whole of the loss actually incurred, since some of the other assets are valued on the same principle. In the case of the whole mass of Government stock taken together, the absurdity of that principle is slightly obscured by the increase in the quantity of stock held. To see it in its naked simplicity we should look at the holding of Two and a Half per cents., which has remained throughout the period at £9,079,171. In 1894 this holding was valued at £9,260,754, in 1895 at £9,396,942, in 1896 at £9,601,223, and in 1897 at £9,646,619. It is surely obvious to the meanest capacity that this rise of value is, to the Post Office, absolutely non-existent in fact. The stock is redeemable at par in 1905, and the Post Office intends to hold it till that date, when it can obviously be worth very little more than £9,079,171, though it may possibly be worth a good deal less. There are, obviously, only two courses properly open to the Post Office. Either it may take the stocks at a reasonable price, not above par, and stick to that price like any respectable bank, or it may take the stocks at market value, and make due provision out of income for their inevitable depreciation from that price to par. At present it does neither, and its accounts have become a sham, which disguises from the taxpayers that a million a year is being taken from the national assets and paid as a subsidy to those of the poorer and lower middle class who are able to accumulate capital. EDWIN CANNAN. REVIEWS. INDUSTRIAL DEMOCRACY. BY SIDNEY AND Beatrice Webb. [2 vols. xxii., 929 pp. 8vo. 25s. net. Longmans. London, 1897.] It would be difficult to exaggerate the importance of the book which lies before me. It is distinctly a very great work. I feel tempted to compare it to the Politics of Aristotle, and to say that it stands to the "History of Trade Unions," by the same writers, in somewhat the same relation in which the Politics may have stood to Aristotle's Collection of one hundred and fifty-eight City Constitutions. I am not sure whether the authors will care about the comparison (which they might possibly find pedantic), but it is meant as a compliment. The most remarkable thing about the book is its high philosophical quality. Though it deals with a subject which has hardly, till very recently, been thought worthy of a place in general history, though it relates to an institution which has been on the whole treated with slighting contempt or positive condemnation at the hands of the older economists, Mr. and Mrs. Webb have seen that the trade union movement will stand out, to the philosophical historian of the future, as perhaps the most important part in the history of our century; and that whatever be the ultimate solution of the social, economical, and political problems which lie before us, trade unionism represents (so to speak) the first stage in the inevitable social reconstruction. Other movements and agencies may co-operate, the trade union movement may be largely transformed in the process of development, but trade unionism has had the largest share in the process which has already raised the highest grades of labour so far above that condition of subsistence wages and absolute dependence upon capital which we were once assured by economists of the "dismal" school was its permanent and inevitable destiny, and that it is by far the most hopeful of those agencies which are preparing the way for the next stage in social development. It is especially in the analysis of trade union constitutions that we are most constantly reminded of the Politics. The variety of constitutional types afforded by the trade unions is at least as great as that exhibited by the city constitutions which inspired the efforts of the VOL IX.-No. 1. I first systematic political philosopher. However different our authors' principles of criticism, they exhibit the same sense of the difficulties and dangers attending every possible constitution, the same consciousness of the necessity for compromise, and yet the same lively faith that there is an ideally best type of constitution, though it is one which has always to be more or less modified in practice by the circumstances of the particular case, which so strongly dissociate Aristotle from the mere idealist on the one hand, and from the mere opportunist on the other. We may add one feature of Mr. and Mrs. Webb's political thinking, for which we naturally do not find a parallel in the political thought of antiquity. It is full of the idea of a necessary and inevitable evolution in industrial organization, entirely unaccompanied, however, by that childish fatalism which spoils so much of the political and social teaching of the professed evolutionists. Our authors are aware that the evolution in the past has been the work of human thought, and they feel that the business of the political thinker is not merely to chronicle evolution, but to make it. We cannot stay to trace in detail the history of the trade union constitutions, beginning with the period of pure Democracy-Democracy more extreme than that of the ancient rós, or the primitive Swiss canton,-in which every member voted on everything, and the officers did little but order the beer for the meetings; the gradual advance to an organization which gave increased power and permanence to the elected officials, and then to a stage in which it was discovered that the power of the union depended largely upon the possession of paid and permanent (though, of course, removable) officials, who give their whole time to the work, rapidly develope into a professional class, and even threaten to form an oligarchy, whose struggles with the Democracy (in everything except the fact that their power is no way based upon personal wealth) recall the political struggles of ancient states and mediaval guilds. The great constitutional problem of trade unionism is to combine democratic control by the many with the strength arising from the expert knowledge and trained judgment of the few; and the difficulty is likewise increased when, as must be the case if unionism is to exert its maximum strength with effect, the union assumes the form of a complicated federation, especially when the trade (as with the textile trades) is one which extends throughout the kingdom, and when the head-quarters of the union are in London, where they are apt to get out of the touch with their distant constituents, and the constituents to grow distrustful of their ascendency. Mr. and Mrs. Webb hold that the special problem of trade unionism is also the great political problem of the future. In general government, the great problem of Democracy is how to combine the principle of popular control with the advantages arising from the superior education, experience, and traditional aptitude for affairs which have hitherto been possessed by the "governing classes" of the past. It is less easy to feel confident that the solution of the problem will or ought to take the form suggested by our authors. They foresee the gradual transformation of the Member of Parliament into a trade union official, whose superior knowledge and experience will generally enable him to get his advice taken by his constituents, but who (after explaining and expressing his view to the best of his ability) will be prepared in the last resort to bow to their wishes, and vote for the policy which, in his private capacity, he is still inclined to criticize and condemn. It cannot be denied that to some extent the relations of a member to his constituents are destined to approximate more than they have done already to this model. But the differences of opinion which divide the members of a trade are mainly differences as to means, not as to ends, as to details rather than as to principles; they are not the differences that awake passion and spring from character. Trade union politics hardly raise those fundamental questions of social aim, of foreign policy, of ethical and religious ideal which normally constitute the difference between great national parties, and which are apt to give rise to disagreements within the party. On such questions it is impossible to expect that people will be content to be guided by the advice of their expert representative to the extent that the average trade unionist will, if he is wise, be guided by the judgment of his professional official, or to desire that earnest men will consent to be the spokesmen of opinions which they abhor. It would take us too far from our subject to ask how far, in other ways, the kind of M.P. whom our authors seem to have in view is likely to satisfy the ideal of those who hope the most from the democratical statesmanship of the future. The greater part of the book is taken up with expounding what I may call the theory of trade unionism. It expounds the objects at which trade unions aim, and the methods which they have used for the attainment of their objects. As a matter of history, both aims and methods have varied considerably. The plan of the authors is to elicit from the mass of conflicting policies what is becoming in actual fact the main stream-so to speak of trade union policy, to reduce that policy to a coherent and intelligible theory, to defend it from objections, and to indicate what (in the opinion of the members) should be the future course of its development. It will be unnecessary to give readers of the Economic Review a bare outline of what trade unionism |