Chapter 10 BANKRUPTCY

"In a lofty room, ill lighted and worse ventilated, situate in Portugal Street, Lincoln's Inn Fields, there sit nearly the whole year round, one, two, three or four gentlemen in wigs, as the case may be, with little writing desks before them, constructed after the fashion of those used by the judges of the land, barring the French polish. There is a box of barristers on their right hand; there is an enclosure of insolvent debtors on their left; and there is an inclined plane of most especially dirty faces in their front.

These gentlemen are the Commissioners of the Insolvent Court, and the place in which they sit is the Insolvent Court itself."

Charles Dickens: "Pickwick." Chap. XLIII.

A bankrupt is not a person who breaks the bank, as is popularly supposed. On the contrary, he is, or ought to be, by his derivation a person whose bank is broken by others. A learned professor tells me that the Florentines of old had some sort of ceremony in which they marched to their insolvent neighbour's office and broke up his bank, or bench, or money table to show the world that he was no longer commercially sound. Until recently in English law bankruptcy was merely a trader's remedy designed to protect an unfortunate business man from life-long imprisonment for debt resulting from unfortunate business ventures. Latterly the privilege of bankruptcy has been extended to every citizen that has a debt of fifty pounds and ten pounds to pay the fees necessary to filing his petition.

But, in order to become insolvent, it is a condition precedent that at some time or another one should have been solvent. And one difficulty about applying any form of bankruptcy laws to the poor is that they are too often born insolvent, live insolvent, and die insolvent. There must be many fellow citizens in this country of ours who never knew what it was for twelve months of their life to have a living wage and be out of debt. As long as we have imprisonment for debt credit of some kind and on some terms ruinous or otherwise is always obtainable. At the present, bankruptcy is almost regarded as a sign of grace, a condition of honourable martyrdom into which the careless and good-natured ones of the world find themselves after a short struggle in the slough of solvency. To the rich it is a very present help in time of trouble, but the poor, never having been sufficiently solvent, can never make use of its aid.

When the worker has a living wage guaranteed him by the State it will be necessary to make him a new bankruptcy law so that the living wage cannot be attached and converted to the use of the Shylocks of this world. The law protects the infant and the idiot from the results of their own foolishness, and we shall find it advisable in the future to extend similar protection to the grown-up idiots and infants who are all too prevalent in the world. Antonio was a normal business man, but he was no match for Shylock, and, though no lawyer can approve of the way in which the Courts treated Shylock, the real lesson of the story is that laws are necessary to protect Antonio, the fool, from Shylock, the knave.

In order, then, that the full blessings of bankruptcy may be made available to the poor, we must certainly tackle the problem of the living wage, which to my mind is the most urgent social question of our time. So many things seem to hang upon it. Rent, taxation, education, physical and moral improvement, eugenics, all the social discussions of the time, land you back on the question of the living wage. Sometimes, I think, we are on the eve of a new era when every capable honest citizen will have the same right to a living wage that he now has to free board and lodging and stone breaking in the workhouse. I would rather have a legal right to a living wage than a vote, unless I was clear that I could use the latter to obtain the former and many better things to boot.

As a matter of dull, dry, literary history all the prophets and singers and poets, from King David, Isaiah and Jeremiah down to Carlyle, Kingsley, Ruskin, Dickens and Tom Hood, have said or sung the praises of the living wage. There are many who regard Jeremiah as a kind of gloomy dean, but for my part I find him most encouraging. When he says: "Woe unto him that buildeth his house by unrighteousness and his chambers by wrong; that useth his neighbour's service without wages and giveth him not for his work," I think that he is absolutely right on the spot. I cannot believe that it was his view that woe would providentially descend upon the man who paid sweating wages and that it would come in the shape of lions and bears or lightning and earthquakes; on the contrary, I read it, that, in Jeremiah's view, it was the duty of citizens to see that their fellows did not behave like this. The prophet intended to tell us that our first duty was to persuade our fellow citizens employing labour to give their workmen a living wage, but if we could not achieve this by reasoning and exhorting them, then it was our duty to give such anti-social churls statutory woe, just as we mete out statutory woe to the naughty ones who get drunk and beat their wives, and, indeed, for the same social reasons.

David and all his biblical backers were as eager as Mr. Philip Snowden and his Socialist friends to promote the living wage, and, as they put it, to "deliver the poor from him that is too strong for him." That, in a phrase, is the modern problem of the living wage. The trust, the combine, the limited company, the corporation or Government office are bound in the nature of things to become the spoilers of the poor and needy unless there is some power delegated by the State to some judicial authority to "deliver the poor from him that is too strong for him."

But it is not sufficient to cite poetry and Psalms and the "Song of the Shirt"-for then your Thomas Gradgrind comes along-a man of realities, sir, a man of facts and calculations, a man who proceeds upon the principle that two and two are four and nothing over, and who is not going to be talked into allowing for anything over-Thomas Gradgrind shakes his square finger at you and says: "How are you going to do it?" And I agree that Gradgrind is deserving an answer. I do not say we must wait until we convince him, for Gradgrinds are obstinate, stubborn fellows, but we must satisfy the majority that we have a fair answer to his objections and a practical programme to propose. The problem cannot be shirked for ever. Even in the prophet Carlyle's day it was a matter in regard to which "if something be not done something will do itself one day and in a fashion that will please nobody."

And shortly the way in which it will come about is by voluntary conciliation, the erection of joint boards of employers and workmen with a right of appeal to a business legal tribunal-something akin to the Railway Commission-which shall have power to make and enforce a decree to the worker of at least so much of his fair share of an industry as shall amount to a living wage. I can see nothing revolutionary in this proposal. It really only follows out the trend of modern legislation. If a man has a smoking chimney, or pollutes a river, or goes about in public with an infectious disease, we fine or imprison him for his anti-social misconduct. Surely a man who pursues an industry that does not make a living wage for the workers in it is equally an enemy of the people, to be dealt with as such by the law! As Mr. Justice Gordon laid it down in the Australian Labour Courts: "If any particular industry cannot keep going and pay its workpeople a living wage it must be shut up." Some day that will be the law of England. No one can deny the common sense of it.

A very encouraging sign of the times is that both sides are discovering the uselessness of strikes. In Mr. Snowden's frank words, "a strike never did much substantial gain to the strikers." It is not only that the strike or lock-out is a crime against helpless women and children, that it wastes the substance and savings of employers and employed and embitters their relations for a generation-all that we knew before; the new and comforting message is that the strike does not "get there," it does not succeed, and therefore, as Mr. Snowden says, "just as war between nations cannot be defended either ethically or economically, so labour disputes are indefensible."

And there are other indications that conciliation and agreement in labour matters are to have a fair trial. Already in the railway world an interesting experiment has been made. I have seen enough of it in the working to know that it is not such a spavined animal as some of our political jockeys would have us believe. When the railway conciliation boards were set up the employers and workmen, where it was possible, agreed upon an independent chairman to sit with them in case there was a deadlock. Several boards of different companies invited me to undertake this honourable position. I need hardly say that I fancied myself not a little at receiving such flattering invitations, and meeting a friend, who was an eminent railway solicitor, I told him the news-not, I suspect, without a note of pardonable triumph in the phrasing.

"What!" he cried; "do you mean to say that the companies and the men have agreed upon you as chairman?"

"That is so," I replied, with dignity, being a little hurt at his surprise and astonishment.

"Well, I'm--. However you'll never have anything to do," he added with a grunt of satisfaction.

"And why not?" I asked.

"Because," he replied, with great deliberation, "if they could agree about you they could agree about anything."

I thanked him for the compliment, but, analysing the saying since, I am not so sure that the commendation I accepted was really proffered to me. Be that as it may, it has turned out to be true. On the few occasions on which my services were required, I have found that things were capable of adjustment and settlement owing to the excellent good feeling on each side and the real endeavour made by everyone to try and understand the other's point of view. This is where the independent chairman is of real service. In explaining to his virgin mind the difficulties of the case, every point in it has to be discussed and explained anew, and in this way the weaker positions of the argument are made clearer to those who are defending them. Thus it becomes easier to give way about some matter of detail, and concession breeds concession.

Without making too much of my own small experience, it bears out my theoretical expectation, and I am satisfied that a conciliatory court for trade disputes is a live business proposition, calculated to save employers much unnecessary woe, and that if Jeremiah had thought of it, he would have proposed to set one up as a practical step towards the living wage.

Until, then, we have established a living wage for the worker, the question of his bankruptcy is in a large measure academic. At present bankruptcy, like divorce, is rightly regarded as a luxury for the well-to-do. I know that to some minds the word "bankruptcy" connotes poverty, but if you look into the facts and history of the matter, you will find that, though bankruptcy may on occasion lead to poverty, a poor man never does, or can, become a bankrupt.

People fail to the tune of five or six million pounds a year, but when you analyse the list of the insolvent you will not find many poor folk among them. There are lords and gentlemen, solicitors and stockbrokers, merchants and manufacturers, builders and farmers, and butchers, bakers, and candlestick makers.

But the nearest you will find to poor people are lodging-house keepers and coffee-house and fried fish shop proprietors. These are precarious trades, and the working man, being a good sportsman, likes to have a gamble in them with his savings. In this way he joins the aristocracy, and becomes an eligible bankrupt. But the labourer and artisan, the real working men, have no more chance of bankruptcy than they have of election to the Athen?um or the Carlton.

Bankruptcy is a legal status jealously guarded by the caste to which it belongs. The poor man reads in the paper of builders and merchants failing for their thousands, of well-paid accountants carefully investigating the history of their financial fall; he puts his head into the Registrar's Court and hears an amiable official receiver sympathetically tracing the career of the well-groomed bankrupt in front of him; he sees the judge present the unhappy fellow with a clean slate, from which all his debts are wiped away, and hears him announce to the unfortunate insolvent the date upon which the law will allow him to start becoming insolvent again.

And the working man thinks to himself of the twenty or thirty pounds that he owes, and how pleasant it would be if an accountant would add it up and a judge tell him that he need not worry any more about it; but when he begins to inquire further into the subject he finds that bankruptcy is one of the good things of this world that he cannot afford.

Bankruptcy, successful bankruptcy, is not so easy of achievement as you might think. It is not everyone who knows how to become a bankrupt. There are a lot of big, expensive law books written on this subject by clever fellows who spend their lives soothing the bankrupt's last hours and winding him up according to law and order, with costs out of the estate, but you need not study these to learn how to become a bankrupt. Most bankrupts are pig-headed fellows, and achieve bankruptcy in their own foolish amateur way. They read the books about it afterwards.

To begin with, you certainly want money, or at least an overdraft and plenty of credit. Intending bankrupts generally wear very good clothes; especially are they particular about the shine of their silk hat. Bankers and intelligent business men have, in all ages, given credit to top hats, white waistcoats, and gold watch chains. The poor man has none of these, and therefore cannot obtain that overdraft which is one of the first essentials of bankruptcy.

The bankrupt has a curious affection for jewellery. He buys large quantities of this commodity, and sells it again at a loss to stave off the evil day and add to his deficiency. I read in the Board of Trade reports of a failure due to gambling and extravagance, in which the debtor purchased jewellery for ￡40,000 and sold it the same day for ￡10,000. If he had been a poor man I think maybe the police would have tried to find a law to give him a rest cure for a few months in one of His Majesty's gaols, but he failed for over ￡70,000, and the probable value of his assets was ￡175.

Perhaps he was a bit of an aristocrat. Anyhow the police left him alone. I cannot even tell you his name, for the kind Inspector-General in Bankruptcy, fearful of causing pain to the sorrowing, never tells you the names and addresses of the people whose history he writes. He speaks of him as "No. 1512 of 1911." The poor fellow had no occupation, his cruel father only allowed him a miserable thousand a year, so what could No. 1512 do but run into debt? The wonder is that he failed for so little as ￡70,000.

No. 614 of 1907 was not much of a record, but he will do as another example. He, too, had no occupation except qualifying for a bankrupt and ultimately failed for ￡21,292 with assets nil. He started his wild career at the age of nineteen with expectations of a fortune when he got to the age of twenty-five. With that charming simplicity and cunning, characteristic of the whelps of the vulgar rich, he proceeded to moneylenders, and at the date of the receiving order had created charges exceeding ￡430,000 on his reversion of such complexity that every mortgagee disputed the right of every prior encumbrancer. This would not matter so much, as all these victims were doubtless moneylenders and a lot of the money would go to estimable lawyers to smooth out the wrinkled parchment muddle, but then at the back of all those were the unsecured creditors, poor tradesmen and others. They were to get nothing.

No. 1103 of 1908 was an even smaller fellow. This debtor was educated at Oxford and, on leaving the university in 1901, he was in debt to the extent of ￡4,500. I have a passion for statistics, and I should like to see a balance sheet showing on one side the expenses of the four thousand Oxford undergraduates during three years of residence, and on the other side the earnings of the same four thousand undergraduates for a similar period in, say, fifteen or twenty years afterwards. I fear it would not be much of an advertisement for Oxford. No. 1103's father paid up his creditors to the extent at least of fifteen shillings in the pound, and gave him a fresh start. He was in trouble again in 1906, through betting and extravagance, and failed for ￡20,392-assets ￡1,103.

The French have an excellent system of declaring these youngsters to be prodigals and putting them under a committee as we do lunatics with property, and no doubt in money matters they are akin to the insane, and are really to be pitied and cared for. But to the poor it must be strange to see debt and the disaster of debt causing such different results in law to different classes of people, and it must be hard for them to understand why they, too, are not fit subjects for the blessings of bankruptcy rather than gaol.

And what am I to say to my friend Joseph the signalman, at twenty-nine shillings a week, when he shows me some of these spicy stories of the Inspector-General's report cut out of the local paper.

"What has it all got to do with you, Joseph?"

"Well," he says, "I've been thinking why should not I do a bit of a failure like No. 1512 of 1911? I can buy a gramophone and a watch, and a few lucky wedding rings and a family Bible, and a plush drawing-room suite on the instalment system, and I can borrow a pound or two on a promissory note. Of course betting and beer cannot be done on the nod in my class of life, but one can owe a bit of rent, and altogether I see my way to do a failure up to, say, thirty pounds. Why shouldn't I go bankrupt?"

"Well, the answer is very simple," I have to tell him. "The rules of the game are made by the rich for the rich, and not for you, Joseph, at all. Oh, dear, no! In the first place you must have a debt of fifty pounds."

"Well," replies Joseph, "I think I could bring it as high as that if I tried."

"And next you must have a creditor to make you bankrupt, and unless he thinks there is some stuffing in you or wool on your back a creditor is not going to waste his time and money making the likes of you bankrupt."

"But," says my hopeful friend Joseph, "what is the meaning of a chap filing his own petition? I've often read of that. Why shouldn't I file my petition?"

"My dear, simple fellow, you surely do not think the clever ones of the earth who look after your interests have not thought all that out? You take your petition to the Bankruptcy Court and see what happens. You will find the usual janitor at the door with his open palm. Of course you are expected to pay a fee-you have learned enough about English Courts to know that you do not get 'owt for nowt' in any of them. But in the Bankruptcy Court, my young friend, they foresaw you coming along and they have put the figure too high for you. Ten pounds, money down! That's the price. If you want to set all the pretty little figures working, the official receiver smiling, the registrar writing it all down, and the judge nodding on the bench, and the Board of Trade publishing statistics about you-ten pounds into the slot, my young friend, and the figures will work.

"But you have not got ten pounds, Joseph, and you could not raise the sum if you tried, so you will have to go back to work and pay twenty shillings in the pound somehow. And don't go and sell your gramophone and drawing-room suite, for they are on the hire system, and that would put you in the dock, where I hope you may never be. No. 1512 bought his ￡40,000 worth of jewels out and out, or said he did, and it was a Paris jeweller, anyhow, and I believe he was one of the 'nuts' and not your class at all, Joseph, but you may take it from me that you must not expect to be treated as he was. Have I said enough, my dear friend? Are you quite satisfied? Bankruptcy, I can assure you, is not for Joseph. Oh, dear, no!"

It is only fair to the law and to the memory of Mr. Chamberlain, who made the law, to remember that when he introduced the Bankruptcy Act of 1883 he invented a system of small bankruptcies called administration orders, whereby poor folk whose debts do not amount to fifty pounds may make a composition with their creditors. Let me set down in his own words exactly what he intended and tried to do. I quote from his speech on the second reading of the Bill:

"What he now desired to call attention to was the clause which followed and which dealt with the case of debtors who owed less than fifty pounds. That was the class of debtors who filled our County Courts with plaints and added very considerably to the number of the occupants of our gaols. It had always been felt to be a great hardship that while a large debtor could with ease relieve himself of all his liabilities he or his trustees might be prosecuting a poor man for thirty or forty shillings, and the latter might be sent to prison without having any means provided for him to make a composition with his creditors, and when, after satisfying the debt, he came out of gaol he was still liable in full to all his other creditors."

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"But the more important provision which he had made for dealing with this subject was that under which a County Court judge might in future make an order for the payment by a debtor who owed less than fifty pounds by instalments or otherwise of all or any part of his debts. A debtor who was brought up on a judgment summons or a County Court plaint might state that he was indebted to other persons, might give in a schedule of his debts and propose an arrangement for discharging them, and, if the Court thought it reasonable, it might at once confirm it, so that a small debtor would thus be in exactly the same position as a large debtor who had succeeded in making a composition with his creditors or in arranging for a scheme of liquidation. Although he had not abolished in all cases imprisonment for debt, yet, if these provisions became law, it could no longer be said that any inequality existed as between rich and poor. The resort to imprisonment to secure payment would be much easier, and a large discretion would be vested on the judges to arrange for the relief to the small debtor by a reasonable composition."

I have set this out at length because it is enormously encouraging to know that thirty years ago Mr. Chamberlain's ideal was to destroy the County Court imprisonment for debt and to give the working man who fell into debt a bankruptcy system similar to that of the rich.

Why did it fail?

Well, it has not been wholly a failure, but it certainly has not fulfilled all its author's generous hopes. In the first place the fifty-pound limit is too small, another reason of its non-success is that it is a voluntary system of some complication in competition with the simple, brutal method of the judgment summons and imprisonment for debt, but probably its unpopularity is chiefly due to the fact that the Treasury has always deliberately crabbed it by imposing harsh and unreasonable fees.

No system of this kind will be successful without compulsion and some clerk of the Court in the position of an official receiver to advise the poor how to go about the matter and to see that the order made is carried out. Such a system is in vogue in some Courts and has proved a success in mitigating imprisonment for debt and holding out a helping hand to those who were drifting into insolvency. But the system as it stands depends too much on the initiative of the County Court judge or the registrar. Thus we find on a working-class circuit like Oldham, Rochdale, etc., there will be over six hundred orders made, whereas in Whitechapel only two orders are made in the same year. Systems favourable to the working classes flourish more vigorously in the North than in the South.

You must not suppose the working man is allowed to cast off his debts in the wholesale way in which the thorough-bred, blue-blooded bankrupt does. Not a bit of it. The order made against him is that he shall pay his debts to the extent of so many shillings in the pound at so many shillings a month. If he does not carry out the order there is prison for him for every instalment he fails to pay if the judge so orders, or at the best his order is rescinded and all his creditors are down on him again as before.

But the main drawback to the business is the extortionate fees charged by the Treasury. Here is a poor devil with twenty-five shillings and a wife and family and, let us say, thirty pounds of debt, and the judge gives him an administration order to pay ten shillings in the pound at five shillings a month. The Treasury are at once down on him. Their fees are always calculated, not on the dividend paid, but on the total amount of the debts, and they insist in every case on two shillings in the pound. Thus, in the case of the man with thirty pounds of debt, the Treasury want three pounds money down before the creditors get anything. In 1911 the Treasury took no less than ￡13,000 in these fees.

In this matter we cannot acquit the law of the offence of grinding the poor. Imagine a wealthy country like this squeezing the insolvent poor out of their weekly pittances instead of helping them to pay their debts. I call it a wicked policy for the State to throw impediments in the way of a working-class man who is struggling out of the back-waters of debt into the fairway of solvency.

Do not let us shut our eyes to what it means, for the Treasury is only our servant and ought to be doing our will, and the responsibility is yours and mine. For we know that every penny of that ￡13,000 comes out of the mouths of hungry women and children or, at the best, robs them of so many boots and so much clothing.

What fees do the Treasury receive from No. 1512 of 1911 and his like? Two shillings in the pound on the rich man's ￡70,000 of debt might enable the Chancellor to treat the poor more leniently. But the rich man pays his entrance fee of ten pounds and is a life member of the Bankruptcy Club. The Treasury never thinks of touching him for a subscription of two shillings in the pound on the amount of his debts. Some day there will come along a Chancellor of the Exchequer who will be a Good Samaritan, and the Treasury will cease to strip the poor debtor of his raiment to the tune of ￡13,000 a year.

Of course it is very easy to blame a public department and throw ugly words at the lords thereof. One gets into a bad habit of blaming those in high places for the inequalities of things. I wonder if I were Chancellor whether I should get rid of that shameful tax on the poorest of the poor. Perhaps not. After all, the Good Samaritan was speculating with his own oil and investing his own twopence. The oil and the twopence of the Exchequer belong to the public and must be dealt with according to the rules of statecraft.

And there may be some grave national danger beyond my humble ken that makes it necessary for England to dirty her hands with that ￡13,000.

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