management, because the potential productive power is converted into profitable productive power by efficiency of control. Profits, therefore, are the reward of enterprise, prevision, abstinence, thrift and, above all, efficiency.

It is out of the profits of industry and commerce that all taxation is paid and that all income is derived. And profits are merely the differences between actual cost of production, including all payments for use, and the actual price which purchasers are willing and able to pay for the articles of utility, or commodities, that are produced. They are therefore merely the savings of capital expenditure. The distribution of profits is in fact a redistribution of capital in liquid form.

It sometimes happens that great business men become wealthy, but that is because they have, by their enterprise and efficiency, gathered into their hands certain means of production which, so long as the control remains with them, has a certain degree of marketable value if shared with others. But it often happens that the moment these same means of production fall into bad hands, they cease to have any marketable value. To illustrate the point more fully we need only refer to the numerous factories in England and Scotland which, before the war, were in an impoverished condition, either from lack of business, or from inefficiency of manage

ment, or lack of productive power. But the exigencies and the demands of war have forced them temporarily into a condition of prosperity because profitable business has been forced on them whether they liked it or not. The potential productive power of the factories have been essential to the State. In competition in peace times these same factories, however, lacked efficiency and profitable productive power. The temporary prosperity, therefore, has given these factories a marketable value, artificial of course, but which if prudently and efficiently managed might acquire more stability as time progresses.

Capital, therefore, is like the sands of time, it is constantly changing in character and value due, as we have indicated, to varying circumstances, demands, efficiency, time and place. And it mainly rests, as we have shown, for its stability of marketable value upon the national standard of education, knowledge, experience and efficiency, manifested in the national productive power.

There is another form of capital which does not yield profits, but yields pleasure in use, and so long as it can continue to give pleasure in use it will maintain a marketable value. We refer more particularly to private houses, motor-cars, diamonds, pictures, etc., etc. But whilst they do not earn profits in private use, they give employment to many people and so provide them with

income. In the case of motor-cars and horses, there arrives a time when they cease to have any marketable value because of excessive use or age. Further capital expenditure is then necessary to replace them in order that the owners may derive the same pleasure in use, and the same capacity to maintain employment both in maintenance and production.

Some Socialists see an evil in all things that give pleasure in use to those who can afford to pay for them. But they overlook the fact that all things that give pleasure in use necessarily increase the circulation of capital. If fashion inclines a rich man to pay a fancy price for a house in Park Lane, or build an expensive house in the country, that can only be an advantage to the community, because he puts a portion of his liquid capital into circulation. If fashion did not incline men to Park Lane and vicinity for houses, these same houses would merely acquire a nominal value, and a nominal rent, for the very simple reason that they ceased to give a high degree of pleasure in use. But if this came to pass, wherein would it affect the Socialist's conception of life? The population of London cannot all live in Park Lane and vicinity. It would still only be the fortunate few who could live there. And who is to choose?

It will be seen, therefore, that high wages can only be paid, and the highest possible yield of

income obtained, provided industry and commerce are maintained in the highest state of efficiency and productive power. And this necessitates all the forces of the nation working harmoniously to this end. But it also points to the fact that the Government cannot, with any degree of safety, indulge in the policy of conscription of capital for reasons which have been stated. Its safest and wisest course, indeed its only course, is to liquidate the National Debt, and pay for the annual cost of Government, out of the profits of industry and commerce and the income of capital.1 Annual profits and income constitute the live wealth of the country, and the only one that has an immediate and liquid marketable value, and the only one that has a measurable taxable value.

1 The moment income receivable, or interest receivable, passes into actual possession it becomes capital. The amount the owner may save of it depends upon the prudence, abstinence and thrift he may exercise in the use of it.

CHAPTER III

THE REDEMPTION OF THE NATIONAL DEBT

As we have shown, the wisest and safest course for any Government to pursue in liquidating the National Debt and in making provision for the annual cost of Government, is to tax the annual profits of industry and commerce, and the income of capital, these constituting the live wealth of the nation, and the only wealth upon which the Government can safely base its estimates of annual revenue to meet its annual expenditure.

There can be no subject of greater interest to manufacturers, merchants, bankers and organised labour, than the measures of taxation proposed, or that may be contemplated, to cover the ordinary expenditure of the country, to pay the interest charges on the War Debt, and liquidate the War Debt. For the success of our future trading both nationally and internationally will depend in a large degree upon the wisdom and technical ability which the Chancellor of the Exchequer, for the time being, may exercise in the administration of his high office in these respects.