No consideration seems to have been given to the great inflation of values and prices which exist at present in consequence of the war, and to the inevitable reaction which is bound to follow after the war is over. We will not prophesy whether the reaction in values will come immediately after the war; but sooner or later it must And what then? It seems to us that to enter into schemes for the conscription of capital before we can see more clearly the ultimate situation that has to be met, is to pursue a policy that is unwise to an extreme.

To the extent to which a Government might conscript fixed or liquid capital, to that extent would capital cease to give employment to those engaged by its previous operation. And as productive industry and commerce will require all the capital it can possibly obtain if they are to provide adequate employment for the masses who labour, would it be wise for a Government to press the matter? It is to this extent that the masses who labour are interested in this allimportant question.

As mediocrity can never give to the people more than it already possesses, the same may be said of bureaucracy when it attempts to control great business enterprises which it would have to do if it conscripted capital. In the great business world creative genius has opportunities for

development which are not possible in a bureaucratic system. The management of great industrial enterprises is a specialised occupation, and only men possessing the requisite experience, knowledge, judgment and enterprise are capable of doing the work successfully. And these are not to be found in Government offices, but only in the great world outside where men are hardened and tempered by fluctuating fortune and adversity.

The standard of our industrial efficiency can only be a reflection of our industrial leadership. Great industrial organisations are made by great men, and are built up with infinite effort and sacrifice. Sometimes they succeed and sometimes they fail. But the reward of gain is the inspiring force, in success or failure, throughout the great struggle. Wherein can a Government hope to succeed in this great game of speculative enterprise? It is clearly not a Government's business.

The productive capacity of the country has been built up with infinite effort and sacrifice, enterprise and energy by past and present generations. But a mistake in judgment as regards future policy, and the attitude of the Government towards the means of production, may create antagonisms and prejudices, which may lead to the destruction of the whole organisation of industry by the masses who labour in one hour of

passion. All Government policy should be constructive and tend to stimulate productive power; it should be conciliatory without being subservient; and in so far as it may concern the respective interests of management and labour, it should, consistent with national interests, be just but firm. In the pursuit of this practical ideal, however, it will be seen that the theory which underlies the conscription of capital in so far as it relates to the means of production would be destructive of its aim and purpose. No ideal should be pursued or even discussed in critical times like the present which are not possible of realisation; which may raise false hopes and ultimately lead to disappointment.

It may be a perfectly easy matter to put a levy on liquid capital; but if the attempt were made to put a levy on fixed capital and personal capital, insuperable difficulties would be encountered. And to put a levy on one form of capital and not on others would be iniquitous. But even if it were possible it would not be of any advantage to the Government, because if it were to detach fixed capital from its present productive activity and management, it would destroy its existing value and so defeat the end the Government had in view.

It is therefore clear that so long as capital is engaged in productive industry and commerce,

it is performing far better service for the country with its present owners than it would be under Government control. There are cases, of course, that can be argued where men have unduly enriched themselves in consequence of the war; we are not here concerned with the conscience of these gentlemen, the Government can deal with them at the proper time. But apart from the consideration which must be given to capital engaged in productive industry and commerce, consideration must also be given to the interests of those who have rendered faithful service to the country in person and with their savings. It would be an act of injustice on the part of the masses who labour to insist, whilst they are deriving immediate benefit in the form of high wages from the savings which these people have lent to the State, that after the war these same savings should be conscripted.

There are, then, two alternatives before the Government. The first is to conscript capital on the lines suggested by the Socialists with a view to liquidating part of the National Debt. But in so doing it would be necessary for the Government to make provision for the masses who labour until such time as the conscripted capital could be replaced by new wealth which would no doubt take many years to accomplish. The second is to pursue the more economical

and expeditious course of liquidating the National Debt by placing the burden of taxation upon productive Industry and Commerce. From the foregoing remarks it is clear, then, that the duty of the Government is—

1. To create the most favourable working conditions for the development of productive industry.

2. To provide remunerative employment for the masses who labour upon the most humane and scientific principles.

3. That if effect be given to items 1 and 2, productive industry and commerce as a whole shall, in return, liquidate the National Debt, subject to certain conditions we shall mention hereafter.

THE INCOME OF CAPITAL

As we have already shown, capital in its multifarious forms can only maintain its marketable value so long as it retains potential productive power. And the greater its productive power, the greater is its marketable value. By productive power we not only mean capacity to produce, but also capacity to produce profitably. Capital which does not produce profitably has little, if any, marketability. It often happens, however, that dead values are made live values by efficient