PREFACE


At a time when Finance is of greater importance than ever before, it
is hoped that this small volume may be of interest and value to the
public, and help the application of war's lessons to the problems that
face us in peace.

The contents, with the exception of the last article on "Money or
Goods?" (which appeared in the Trade Supplement of the _Times_ for
December, 1918), have already been published in _Sperling's Journal_,
from September, 1917, to March, 1919; they have been left as they were
written, except for a few verbal corrections.

I desire to express my thanks to the Editors of _Sperling's Journal_
and of the _Times_ for their kind permission to reprint the articles.

H. WITHERS.

June, 1919.




CONTENTS


I
THE OUTLOOK FOR CAPITAL
The Creation of Capital--The Inducement--War and Capital

II
LONDON'S FINANCIAL POSITION
London after the War--A German View--The Rocks Ahead--Our Relative
Position secure--Faulty Finance--The Strength we have shown--The Nature
and Limits of American Competition--No other likely Rivals

III
WAR FINANCE AS IT MIGHT HAVE BEEN--I
Financial Conditions in August, 1914--No Scheme prepared to meet the
Possibility of War--A Short Struggle expected--The Importance of Finance
as a Weapon--Labour's Example--The Economic Problem of War--The
Advantages of Direct Taxation--The Government follows the Path of Least
Resistance--The Effect of Currency Inflation

IV
WAR FINANCE AS IT MIGHT HAVE BEEN--II
The Changed Spirit of the Country--A Great Opportunely thrown
away--What Taxation might have done--The Perils of Inflation--Drifting
stupidly along the Line of Least Resistance--It is we who pay, not
"Posterity"

V
A LEVY ON CAPITAL
The Objects of the Levy--Its Origin and History--How it would work in
Practice--The Attitude of the Chancellor--The Effects of the Scheme in
discouraging Thrift--Its Fallacies and Injustices--The Insuperable
Obstacles to its Application--Its Influence on Production--One of the
Tests of a Tax--Judged by this Test the Proposed Levy is doomed

VI
OUR BANKING MACHINERY
The Recent Amalgamations--Will the Provinces suffer?--Consolidation not
a New Movement--The Figures of the Past Three Decades--Reduction of
Competion not yet a Danger--The Alleged Neglect of Local
Interests--Shall we ultimately have One Huge Banking Monopoly?--The
Suggested Repeal of the Bank Act--Sir E. Holden's Proposal

VII
THE COMPANIES ACTS
Another Government Committee--The Fallacy of imitating
Germany--Prussianising British Commerce--The Inquiry into the Companies
Acts--Will Labour Influence dominate the Report?--Increased Production
the Great Need--Will it be met by tightening up the Companies Acts?--The
Dangers of too much Strictness--Some Reforms necessary--Publicity,
Education, Higher Ideals the only Lasting Solution--The Importance of
Foreign Investments--Industry cannot take all Risks and no Profits

VIII
THE YEAR'S BALANCE-SHEET
The Figures of the National Budget--A Large Increase in Revenue and a
Larger in Expenditure--Comparison with Last Year and with the
Estimates--The Proportion borne by Taxation still too Low--The Folly of
our Policy of Incessant Borrowing--Its Injustice to the Fighting Men

IX
COMPARATIVE WAR FINANCE
The New Budget--Our own and Germany's Balance-sheets--The Enemy's
Difficulties--Mr Bonar Law's Optimism--Special Advantages which Peace
will bring to Germany--A Comparison with American Finance--How much have
we raised from Revenue?--The Value of the Pound To-day--The 1918 Budget
an Improvement on its Predecessors--But Direct Taxation still too
Low--Deductions from the Chancellor's Estimates

X
INTERNATIONAL CURRENCY
An Inopportune Proposal--What is Currency?--The Primitive System of
Barter--The Advantages possessed by the Precious Metals--Gold as a
Standard of Value--Its Failure to remain Constant--Currency and
Prices--The Complication of other Instruments of Credit--No Substitute
for Gold in Sight--Its Acceptability not shaken by the War--A
Fluctuating Standard not wholly Disadvantageous--An International
Currency fatal to the Task of Reconstruction--Stability and Certainty
the Great Needs

XI
BONUS SHARES
A Deluge of Bonus Shares--The Effect on the Market--A Problem in
Financial Psychology--The Capitalisation of Reserves--The Stock Exchange
View--The Issue of Bonus-carrying Shares--The Case of the A.B.C.--A
Wiser Variation from Canada--Bonus Shares on Flotation--An American
Device--Midwife or Doctor?--The Good and Bad Points of both Systems

XII
STATE MONOPOLY IN BANKING
Bank Fusions and the State--Their Effects on the Bank of England--Mr
Sidney Webb's Forecast--His Views of the Benefits of a Bank
Monopoly--The Contrast between German Experts and British
Amateurs--Bankers' Charges as affected by Fusions--The Effects of
Monopoly without the Fact--The "Disinterested Management" Fallacy--The
Proposal to split Banking Functions--A Picture of the State in Control

XIII
FOREIGN CAPITAL
The Difference between Aims and Acts--Should Foreign Capital be allowed
in British Industry?--The Supremacy of London and National Trade--No
need to fear German Capital--We shall need all we can get--Foreign
Shares in British Companies--Can and should the Disclosure of Foreign
Ownership be forced?--The Difficulties of the Problem--Aliens and
British Shipping--The Position of "Key" Industries--Freedom to Import
and Export Capital our Best Policy

XIV
NATIONAL GUILDS
The Present Economic Structure--Its Weaknesses and Injustices--Were
things ever better?--The Aim of State Socialism--A Rival Theory--The New
Movement of Guild Socialism--Its Doctrines and Assumptions--Payment "as
Human Beings"--The "Degradation" of earning Wages--Production
irrespective of Demand--Is that the Real Meaning of Freedom?--The Old
Evils under a New Name--A Conceivably Practical Scheme for some other
World

XV
POST-WAR FINANCE
Taxation after the War--Mr. Hoare's Scheme described and analysed--The
Position of the Rentier--Estimates of the Post-War Debt--The Compulsory
Loan Proposal--What Advantages has it over a Levy on Capital?--The
Argument from Social Justice--Questions still to be answered--The Choice
between a Levy and Stiff Taxation--Are we still a Creditor Nation?--Our
Debt not a Hopeless Problem--Suggestions for solving it

XVI
THE CURRENCY REPORT
Currency Policy during the War--Its Disastrous Medievalism--The Report
of the Cunliffe Committee--A Blast of Common Sense--The Condemnation of
our War Finance--Inflation and the Rise in Prices--The Figures of the
Present Position--The Break in the Old Relation between Legal Tender and
Gold--How to restore it--Stop Borrowing and reduce the Floating
Debt--Return to the Old System--The Committee's Sane Conservatism--A
Sound Currency vital to National Recovery

XVII
MEETING THE WAR BILL
The Total War Debt--What are our Loans to the Allies worth?--Other
Uncertain Items--The Prospects of making Germany pay--The Right Way to
regard the Debt--Our Capital largely intact--A Reform of the Income
Tax--The Debt to America--The Levy on Capital and other Schemes--The
only Real Aids to Recovery

XVIII
THE REGULATION OF THE CURRENCY
Macaulay on Depreciated Currency--Its Evils To-day--The Plight of the
Rentier--Mr Goodenough's Suggestion--Sir Edward Holden's Criticisms of
the Currency Committee--His Scheme of Reform--Two Departments or One in
the Bank of England?--Not a Vital Question--The Ratio of Notes to
Gold--Objections to a Hard-and-fast Ratio--The Limit on Note Issues--The
Federal Reserve Act and American Optimism--Currency and Commercial
Paper--A Central Gold Reserve with Central Control

XIX
TIGHTENING THE FETTERS OF FINANCE
The New Meaning of Licence--The Question of Capital Issues--Text of the
Treasury Regulations--Their Scope and Effect--The Position of the Stock
Exchange--Wider Issues at Stake--Should Capital be set Free?--The
Arguments for and against--Perils of an Excessive Caution--The New
Committee and its Terms of Reference--The Absurdity of prohibiting
Share-splitting--The Storm in the House of Commons--Disappearance of the
Retrospective Clause--A Sample of Bureaucratic Stupidity

XX
MONEY OR GOODS?
"Boundless Wealth"--Money and the Volume of Trade--The Quantity
Theory--The Gold Standard--How is the Volume of Paper to be
regulated?--Mr Kitson's Ideal