20 SHIPPING AN INVISIBLE EXPORT CHAP.

foreigners as well as for British merchants, will be paid a very large sum for this service. The amount was estimated by Giffen, in 1898, as £90,000,000. An independent calculation,' on quite different lines, was put forward by the Board of Trade in 1903, and makes it £89 millions.2

This is the first item which explains our apparent Balance of Imports. Our exports are really £90,000,000 more than the statistical exports shown by the official returns.3

1 Memoranda, Statistical Tables, and Charts, with reference to various matters bearing on British and Foreign Trade and Industrial Conditions, p. 99. This is the Blue Book called out by the present fiscal enquiry (Cd. 1761), and published in August, 1903. It should certainly be in the hands of all who wish to make a serious study of the fiscal question. As I shall have constantly to refer to it, I may, for convenience' sake, call it in future references the Board of Trade Blue Book.

2 Giffen's calculation was first made in 1882 (Essays in Finance, Second Series, p. 132), and was revised in 1898 (Royal Statistical Society's Journal, 1899, p. 11). His method was to take the British gross tonnage earnings at £15 and £5, for steamers and sailers respectively, at the former date, and at £12 and £4 at the latter. The Board of Trade, on the other hand, took the total exports and imports of the principal countries of the world, which are, of course, the same goods valued at points of departure and arrival; accepted the £224,000,000 difference in their value (see p. 43) as representing freights and insurance; halved this sum to represent our share of the carrying tonnage of the world; deducted 9 per cent. for colonial ships, and further deducted £12 millions for coals and stores purchased abroad, harbour and other dues; and arrived at the figure of £89 millions.

3 The importance of Shipping as a British export industry may be realised by remembering that £90,000,000 is just about the value of our cotton and woollen exports combined.

III.

A SECOND INVISIBLE EXPORT

21

II. There is another Export of Services, or Invisible Export, which works out in the same It is not only ships that do business outside the boundaries of our country, but Men.

way.

If a journalist, sitting in his study in London, writes an article for a German newspaper, that newspaper has, presumably, to pay him. His export of service goes under a postage stamp, but the value of what is contained in the wrapper is not, one may hope, represented by the stamp. If the German paper pays him by sending a couple of guineas' worth of German books, then this is an import of goods, although, as passing through the post it would not appear among official imports.

This is merely an illustration of the fact that there are very large classes in this country who perform services for foreigners which have no embodiment in material goods. If one considers what is involved in the statement that London is the clearing house of the world-that a bill or draft on London is the best and most widely known form of international currency-one will understand that British bankers, sitting in London, do business all over the world, and that the payment for these services must come in goods, or in other services. But, besides bankers, there are the fire and life insurance companies, and the great army of commission merchants, who do business very much in the same way.

Services like these cannot be put into statistical figures there is no possible means of getting at them-but, the more one considers the magnitude

22

INTEREST AND PROFITS

CHAP.

of this business, the more one will be disposed to say that several millions should be added to our statistical exports on this account.

These, then, are the two great Invisible Exports. One may question the exactness of any figure put on them-may take a few millions off it, or add a few millions to it. But a country which does half the shipping trade of the world, and is, at the same time, the headquarters of the banking trade of the world, must have a very large sum due to it by way of payment, and this must come in some valuable shape. If it does not come in imports of goods or services, in what does it come? Or where does this "invisible" export appear as a statistical export?

III. There still remains a good deal to make up the Balance, But there still remains a large department of international relations which has not yet been taken into account. Nations buy from and sell to each other. But they are also connected with each other as debtors and creditors. This must affect imports and exports.

The third item, then, of the balance is due to the fact that we have, notoriously, been lending to all the world and investing capital all over the world, and that the returns come home annually in the shape of goods.

How much our capital lent and invested abroad may amount to, is a matter of rather rough calculation. It is variously estimated from £2,000,000,000 to £2,500,000,000.

III.

ON FOREIGN INVESTMENTS

23

The corresponding returns which pay income tax in our country amount to £62 millions,1 but these include only the interest on foreign and colonial securities, coupons, and railways. To this must be added the dividends on miscellaneous industrial undertakings abroad. After all deductions on account of other countries which have lent and invested capital with us, we may accept the Board of Trade conclusion that "£62} millions is a minimum figure, which is probably largely exceeded." In 1898, Sir Robert Giffen estimated it at £90 millions, and probably more.3

It will be noticed that, while the Invisible Exports should be added to the statistical exports, the income from capital invested abroad takes shape as, and accounts for, a permanent excess of Imports. In other words, if, from this moment, we stopped lending and investing abroad, we should still receive, year after year, till the capital was repaid, some £60 to £90 millions worth of value, and most of that value would be embodied in goods.

1 In 1904, £65 millions.

2" Unfortunately, there are no official figures with regard to the investments of foreigners in this country, though they are certainly very much smaller in the aggregate than British investments abroad. America is the only foreign country, so far as known, which has made important investments in the United Kingdom in recent years," Board of Trade Blue Book, p. 102. On this whole subject, the admirable article in the Blue Book should be referred to.

3 Royal Statistical Society's Journal, March, 1899. Giffen's calculation, however, includes Pensions, etc., from India and other countries to civil servants living here, of which the Board of Trade estimate says nothing.

24

BOARDING EXPENSES

CHAP.

It is not quite correct to say that this represents an import against which there is no export. In many cases, there may have been an export of goods, at the time when the loan was made, to the full amount of the loan, as, for instance, when a colonial government borrows to build a railway, and gets the rails and rolling stock from England. It may, on the other hand, represent no sending of goods at all. If India wants to borrow another million from us, and is owing us £18 millions a year as it is, all she has to do is to lay hands on a million's worth of goods that otherwise would have come home to us as imports, and keep them-in which case the loan would take shape as a diminution of imports into this country.

The point to emphasise is that, in any case, the contracting of the debt, or the investment of the capital, is in the past. But the obligation to pay the interest is a permanent obligation on foreign countries to export a stream of value to England as our imports.

Here, again, one may question the exactness of the figures. But if Great Britain has sent out capital to other countries and these countries. have not sent a corresponding amount of capital to it, it seems undeniable that there must be a permanent excess of imports into Great Britain to pay the interest.

IV. There is another class of Imports which stands on the same line with the returns from capital invested abroad. It has been happily