THE NEW ECONOMICS By CUMBERLAND & HAERISON THE NEW ECONOMICS THE NEW ECONOMICS BY MARTEN CUMBERLAND AND RAYMOND HARRISON LONDON CECIL PALMER OAKLEY HOUSE, BLOOMSBURY STREET, W.C.: /7/ FIRST EDITION 1922 COPY RIGHT PRINTED IN GREAT BRITAIN AT THE NORTHUMBERLAND PRESS LIMITED, NEWCASTLB-UPON-TYNE PREFACE BY a strange trick of fate, social economics has come to be regarded by the majority as a monopoly of the professors, though no subject is so intimately connected with the affairs of everyday life. The business man who finds that a period of good trade inevitably gives place to a period when trade is slack and " no one is buying " ; the housewife, surveying with dismay a continuous rise in prices ; the householder, writing to his daily paper to complain of high taxation (which he has been taught to associate with nothing more fundamental than the " wastefulness of Government Departments ") ; the workman who goes on strike for higher wages to meet the increased cost of living; the employer who declares a lock-out to reduce wages, when trade is bad ; the ex-service man who vii viii Preface marches the streets in a vain hunt for work all are alike victims of the economic system, though they may be ignorant of the workings of the system on which they are dependent for life itself. The general public are content to regard economics as a subject beyond their com- prehension, and the workings of our financial system as a mystery not to be penetrated by the many ; and to preserve this illusion, the public, it must be admitted, are quite prepared to suffer. We live to-day, owing to the failure of our financial system, in a world of high prices, unemployment and imminent war. The last century has witnessed rapid develop- ments in the productive processes, yet our credit-system, which exists to distribute the product of industry and should have adapted itself to the requirements of large-scale production, is still in the hands of the moneylenders; so that the general standard of living is lower to-day than it was before the beginnings of machine production. The remedy for our ills, the adoption of Preface ix a sane credit-system, has been made public in the writings of Mr C. H. Douglas; but against the petty jealousy of our " labour leaders " and " social reformers " and the sturdy indifference of the masses, the truth is no longer mighty and may not prevail. We wish we could persuade the average individual that he has not solved the problems of government when he has voted a number of time-servers into Parliament or on to the executive of his Trade Union. The politician and " labour leader " are not as a rule more intelligent than other men, but only more personally ambitious ; and there is really no reason why the commonalty should permit them to do its thinking. There may, perhaps, be some excuse for the public ignorance. The Press is corrupt, practically without exception; and the average text-book on economics, penned by some professor or other, might well have been written in the Dark Ages, so closely will it cling to the superstitions that were then prevalent. The ideas of Mr C. H. Douglas, first Preface published in " The New Age," have revolutionised thought on this subject. For those, however, who have no previous knowledge of economics and the intricacies of the financial mechanism, some preliminary survey will be found useful, and this the present volume is intended to supply. Beginning with simple definitions, it discusses the current economic system and leads up by easy stages to the Douglas analysis, which it professes to explain in simple language that can be understood by everyone. We trust that readers will not be satisfied with a mere perusal, but that they will press for a public inquiry into our credit-system. In apathy, we are fighting against civilisation just as surely as if we were actively allied to the forces that are working for destruction. There is not a day to be lost ? in the short space of time now at our disposal, if we are to prevent Europe from slipping back into the night of barbarism. CONTENTS FACE PREFACE . . . . . vii INTRODUCTION The Meaning 1 of Economics I CHAPTER ONE Wealth and Money ..... 5 CHAPTER TWO Labour and Capital . . , . .17 CHAPTER THREE Production and Development ... 27 CHAPTER FOUR Demand and Distribution . . . -31 CHAPTER FIVE Work and Wages . . . . . 38 CHAPTER SIX Credit and Banking . . . . .44 CHAPTER SEVEN A Standard of Value ..... 53 xii Contents CHAPTER EIGHT Foreign Exchange . . . . .65 CHAPTER NINE Rates of Exchange ... . .72 CHAPTER TEN The Control of Credit 80 CHAPTER ELEVEN Commercial Prosperity . . . .85 CHAPTER TWELVE The Mismanagement of Industry . . .91 CHAPTER THIRTEEN Malthus and Other Night Fears . . .100 CHAPTER FOURTEEN The Fight for Export Markets . . .113 CHAPTER FIFTEEN How Prices are Fixed . . . . .122 CHAPTER SIXTEEN The New Economics ..... 131 INTRODUCTION THE MEANING OF ECONOMICS THE subject of Economics has earned for itself, in the past, the undesirable nickname of " the dismal science." It has, unhappily, well deserved it. Partly through ignorance and loose thinking, partly through the urge of vast pecuniary " interests,"* it has generally arrived at conclusions, which, if true, would render the great mass of mankind devoid of any material hope for the future. Luckily the main conclusions of men like Adam Smith, Ricardo, Malthus, J. S. Mill, etc., are rapidly proving themselves false. New spirits and new minds are approaching the subject of Economics and revealing fresh and wonderful truths, truths which, when appreciated by the million, will show a A The New Economics glorious future lying before us, represented in practical, tangible things, which we have but to stretch out our hands to grasp and make our own. The word Economics is of Greek origin, and means, simply, the law of the house, or the science of household management. The business of National Economics consists, simply, in supplying the community in the most economical fashion with the things it requires. The problem each nation is confronted with is how to feed, clothe, and adequately house her population. The nation that fails in achieving this has failed in her Economics, however great and glorious she may appear. Such a country would be in precisely the condition of the housewife who failed to provide food and clothes for her husband and children. She may dress beautifully, the house may be nicely painted outside, yet she fails as a housewife if her domestic economy is bad. The Meaning of Economics The first demand of the community is for necessities ; luxuries are a secondary matter. In a primitive state of society, where science is undeveloped and labour is imperfectly organised, absolute necessities are the only things produced. Then, as the inventiveness of mankind develops, and the introduction of mechanical aid and effective co-operation of labour follows, the community's power to produce the goods required increases rapidly. Thus more and more goods are produced by less and less labour, until the community finds it has labour to spare. Its labour is rapidly growing in value to the community as its potentiality to produce increases. It is the business of national economy to decide how the community shall exert its labour, in the most productive and economical fashion. Society's control and direction of her productive powers and her supervision over the distribution of things produced are vitally important matters. As her productive powers are used or misused, husbanded or The New Economics squandered, so will she, as a corporate whole, be either well provided for or miserably poor. The consideration of the production of things required and their proper distribution among those who need them is the subject matter of Economics. CHAPTER ONE WEALTH AND MONEY FOR purposes of economic exposition, philosophic conceptions and theories as to how, and why, humanity tends to come together and form huge social aggregates need not concern us. We shall merely accept the accomplished fact of organised society and regard it from the economic standpoint. The wealth of any given society is its capacity to produce and distribute among its members such commodities as its members require. The two sources of potential wealth are those which lie latent in Nature (exclusive of man), and those which lie latent in man himself. Both these two factors are necessary for the production of economic wealth. 6 The New Economics In Nature lies a huge potential wealth awaiting development and cultivation from the powers of man. Now the wealth of any given society, regarded from the point of view of man- power, grows with increase of population and with the increased knowledge, skill, organisa- tion, and discovery of that society. With each increase in the number of workers, with every addition to their knowledge and skill, the human industrial machine, of hand and brain, can produce more from the natural medium upon which this particular society expends its efforts. And this wealth grows with the progress of science, with the growth of inherited culture and the improved organisation of society's resources. Thus the brains of the scientist, the muscles of the labourer, the wheels of the machine, and the wires of the telegraph are all potential wealth. When exercised in the right direction they can all add to society's capacity to produce and distribute, among Wealth and Money its members, such commodities as its members require. It is important to note that these things are potential wealth only they will not result in real wealth for society unless they are employed in the production and distribution of the real needs of society. So, if the brains of the scientist produce poison-gas, the muscles of the labourer thrust with a bayonet, the wheels of the machine turn out shells, and the wires of the telegraph carry messages of death, then, however necessary they may be at the time, society, as a whole, will not be the wealthier for these efforts. Again, if the brains of the scientist are concentrated on some obscure point in numismatics, if the muscles of the labourer are exercised in football, if the wheels of the machine produce brown-paper " boots," and the wires of the telegraph convey race-course information, then, however pleasurable these things may seem at the time, society, as a 8 The New Economics whole, will not be much wealthier for these efforts. It cannot be emphasised too much that, as society's productive powers are used or mis- used, husbanded, or squandered, so will it, as a corporate whole, be well provided for or miserably poor. The production of wealth in any society progresses from the production of the barest necessities to the production of the most elaborate conveniences and the most delightful luxuries. In a primitive state of society little more than the barest necessities are produced, and these few commodities are exchanged and distributed by the simple process of barter. As society becomes more complex and more highly organised a great many more com- modities are produced, the need for a more rapid method of distribution and exchange arises, the old system of barter is found cumbersome and inadequate, and money is introduced. Money is an important part of Wealth and Money the industrial machine; it is an instrument created by society to facilitate the exchange and distribution of the goods that society has produced. In a highly-organised civilisation, and stable state of society, money will assume value in proportion to the quantity of goods it will command. Money, therefore, may be regarded as a liquid symbol a moveable token of actual, concrete goods goods that perhaps are not liquid or easily move- able themselves. Thus, money, carried in the waistcoat pocket, may represent and command huge machines which a hundred men could not move, and so money greatly facilitates exchange by becoming the recog- nised token of tangible commodities. Money, of itself, has no value. To talk of the " intrinsic value " of money is to employ a meaningless phrase. Money has no value except as it will exchange for actual, concrete goods. The exchange value of money rests entirely on the belief which society, as a 10 The New Economics whole, has in the power of this money, to command other goods. In other words, it rests on credit that is, on society's ability to produce. Later on we shall deal more thoroughly with the question of credit. At present let us get this question of the " value " of money quite clear, for it is an im- portant one, upon which many things hang. Money has been made out of a variety of materials, gold, silver, copper, nickel, paper, porcelain, salt, shells, etc., etc. still, in itself, as money, it has no intrinsic value. For example, gold has a value from a point of view of utility, ornament, etc. Sovereigns could be melted down and made into plate, jewellery, artificial teeth, or fountain pen nibs, and if this were done they would then have value as plate, jewellery, etc., but not as money, The value that money has, as money, is purely arbitrary a value which society could give to many things by restrict- ing their circulation and declaring these things legal tender. Wealth and Money 11 This value, then, depends upon what these units of exchange can effectively demand in goods required. You do not get value for money until you exchange it for something, and the value you get then is a personal value resting ultimately upon a perception of your mind. Suppose three men have each ten pounds. One buys a violin, another a suit of clothes, the third a bottle of wine, all three may be perfectly satisfied that they have " value " for their money yet all three might be dis- satisfied if they received one of the other purchases for their ten pounds. This will be so even supposing the market " value " of the violin, the suit of clothes, and the bottle of wine is ten pounds per item. This shows us the difference between absolute value what might be termed philosophic value and economic value. Economics have nothing to do with the former value, but in order to avoid confusion of thought it is well to note the difference. 12 The New Economics If society decides to use a metal like gold for its currency, and fixes a certain arbitrary value upon pieces of gold at a certain weight, then of course all the gold outside the currency immediately acquires equal value. The gold then made into plate, jewellery, artificial teeth, and fountain pen nibs can now be melted down, converted into sovereigns, and command goods in the market as legal tender. Should society abolish stamped golden coinage as their currency, and intro- duce stamped paper exclusively, then the value of gold would return to its more real value in ratio to the utility and pleasure it afforded people, that is the value which rests on people's opinion of a thing, which is an aspect of the mind. Whatever society manufactures its money out of, and whatever it declares legal tender, the total spending power in a country, at any given time, can only command such goods as that society is producing and distributing in the market at this time. Wealth and Money 13 The criterion, therefore, by which we measure a country's currency should be its capacity to produce goods. Anything which tends to hinder its production of goods renders its money less valuable in an equal degree and vice versa. We see this when we consider money paid to labour in the form of wages and salaries. This money represents an acknowledgment of debt from the employer to the employee, or, to take a wider view, from the community to the individual. It is recognised that the individual, by the performance of some work, has taken some share in society's com- mon task of production and distribution. His salary or wages represents his share in the additional wealth of society that his labour has facilitated. Let us suppose he is paid five pounds. A moment's thought will show that this five pounds has no " intrinsic value," and will not become real wealth until he exchanges it for such in the shape of com- modities. Now it is also obvious that he can 14 The New Economics only buy with his five pounds what is in the market to be bought that his five pounds will represent much or little as the market is well or badly stocked with goods. Here we see at once how society's production affects the individual and also how a country, regarded as a collection of individuals, must be considered rich or poor, according to how her production is employed well or badly. A country that produces, in her markets, an abundance of the commodities that her popu- lation desires, and also distributes these commodities with justice and facility, is wealthy a country that fails to do this is poor. The question of foreign exchange does not, of course, affect the truth of this statement. As society gets more complex and more highly organised countries grow more and more inter-dependent. They begin to barter and trade with one another, exchanging with their neighbours those goods which they produce easily and economically for those goods which their neighbours can Wealth and Money 15 produce more easily and economically than they could themselves. National economy always remains a question of how to provide the community with an abundance of the things they require by the most efficient and economical means. This is only done by controlling the society's means of production and directing it with the least possible waste. To recapitulate, society's wealth lies in the latent productive forces of nature and in the latent productive forces of man exerted on this natural medium. Society's wealth is its production of the things it requires from the natural potential wealth. This wealth grows according as society's control and direction of its powers of pro- duction and distribution is directed more and more efficiently. It diminishes where society's powers of production are mis- directed and wasted. So society's real tangible wealth is that which it has been 16 The New Economics able to produce (directly or by exchange) and distribute among its members. Money is the medium of exchange the circulating mechanism of industrial society, by means of which commodities are exchanged and distributed. Money has no intrinsic value, but only an exchange value. The value of money to the individual depends upon its effective demand or the goods it can purchase in the market at any given time. CHAPTER TWO LABOUR AND CAPITAL LABOUR is a source of potential wealth lying latent in man as distinct from the potential wealth which lies latent in nature man's environment. Labour, or man's energies, muscular and mental, must be exerted on the natural medium which forms his environment before economic wealth is produced. Nature produces, spontaneously, the mul- titudinous needs of man, but seldom, if ever, in precisely the form that man requires these things in. Suppose a tropical island, upon which a prolific nature produces fruit, vegetables, and berries that man needs for his food; still, man's labour must be exerted for the procur- B 18 The New Economics ing of this fruit, etc., and often more labour is needed to prepare it for consumption. So even the most primitive needs of man require the exertion of labour for their ful- filment. In a highly organised civilisation the needs of man become more and more elaborate and complex as his labour becomes more cultivated and capable. It is characteristic of man that his desires are generally ahead of his actual achievement, and the progress of civilisation, considered economically, is largely one of satisfying the ever-growing needs and requirements of the community. A labourer, then, is one who aids in the production of economic wealth. He may do this either by the exercise of his mental or his physical capacities. The scientist, who discovers a new force in nature, and turns it to man's use; the clerk, whose book- keeping is a necessary part of some industrial organisation ; the driver of a motor lorry which carries goods from one place to Labour and Capital 19 another all these are labourers, inasmuch as they facilitate production or distribution, which is an essential part of our industrial organisation. The old economists were careful to differ- entiate between what they called productive and unproductive labour. In a highly organised state of society it becomes a very difficult matter to decide whose labour does facilitate production, and whose does not. There are men who are obviously producers of wealth ; there are men who bring the com- modity produced to the market where it is needed. There are men whose labour en- hances the value of goods produced value, that is, in utility or in the pleasure the goods will give us. There are men who facilitate the distribution of goods, and men who serve the producers, and therefore make them more productive. In fact, in a highly complex and efficiently organised state of society, many will facilitate the increase of production by most diverse and 20 The New Economics indirect methods. Much ingenuity might be expended in making distinctions which would only produce a poor result for our efforts. We will content ourselves with saying that the most productive labour is that labour which is exerted in a manner most likely to facilitate production at any given time. As labour is exerted more and more efficiently, society grows wealthy; it grows rich in many possessions, and most of these possessions are termed capital. Nearly all capital is the direct production gf labour, but there are exceptions, as land, air and water. We will deal with these exceptions first. Now we said in our first chapter, " society's two sources of potential wealth are those which lie latent in nature (exclu- sive of man), and those which lie latent in man himself. Both these two factors are necessary for the production of economic wealth. In nature, lies a huge potential wealth awaiting development and cultiva- Labour and Capital 21 tion from the powers of man." Now it is an essential characteristic of capital that it should be a factor in production and distri- bution, just as labour is. So, then, that land, air and water which become a factor in production become automatically capital. The land cultivated by the farmer is his capital; the air, or its component parts, utilised by the chemist becomes his capital ; the water, fresh or salt, cultivated by the professional fisherman becomes his capital. All these natural elements, as they are utilised for production, are capital; when they are not so utilised they are wealth, but not capital. Here it becomes necessary to draw a dis- tinction between wealth and capital. All capital is wealth, but all wealth is not capital. The land land laid out as a pleasure garden, with beautiful trees, flowers, and shady lawns may justly be regarded by its owner as wealth for the pleasure and delight it may give him; it is not capital 22 The New Economics unless he diverts it from a pleasure garden to something else, say, a kitchen garden or a " show place," in which he charges for entrance. In the same way the air, good or bad, which society breathes may be regarded as wealth yery real wealth since without it we should be dead; but it is not capital. Similarly, a pond in a public park which is retained only for the beauty it adds to the scenery, may legitimately be looked upon as public wealth; it is not public capital. Here we see the distinction between economic wealth and wealth in the broadest sense of the word. Much of society's very real wealth is purely a matter of pleasure, beauty, and delight. In an economic survey we are only con- cerned with economic wealth things that play a direct part in production and distri- bution ; we are only concerned with the other wealth of pleasure and beauty inasmuch as it may be changed to economic wealth. To Labour and Capital 23 take the above examples, the pleasure garden might be capitalised, i.e., turned into a source of economic wealth by its owner. The air we breath may be capitalised by the chemist making it compressed air and using it as an instrument of production. The pond in the public park may be capitalised by putting boats on it and hiring the boats out. We see, therefore, that this wealth of beauty and pleasure has often a capital value, and may, in fact, be turned into capital. As we have pointed out in the previous chapter, the ultimate value of all wealth to the individual rests on a perception of the mind that is, what the individual thinks of it. A picture will be wealth to a private owner according to what he thinks of it; if he thinks much of it, it may afford him infinite delight and pleasure. If he set up a picture shop and wishes to capitalise his picture, its value in exchange will depend upon what others think of it, and what they can be induced to give for it. 24 The New Economics The science of economics is not concerned with questions of beauty and pleasure, but only of utility, though, as we have seen, beauty and pleasure sometimes obtrude. We see, then, that land, air, and water are capital when they play some part in the economic life of the community, and become a means of production and distribution. When this is so, land, air, and water become the economic tool of man, and in this phrase we define all capital whatsoever. Capital is the economic tool of man; that wealth which man utilises to facilitate production and distribution of economic wealth whether such wealth be the product of man or the spontaneous offering of nature. In the progress of civilisation, the exer- tion of labour precedes the accumulation of capital. Capital, then, is the product of labour, and a certain development of the organised resources of society will be neces- sary before capital can be accumulated in Labour and Capital 25 abundance. The accumulation of capital in the form of more and more efficient tools, machinery, etc., will greatly increase society's potentiality to produce and distribute the things it needs. Society's wealth, actual and potential, increases, then, with her accumu- lation of capital. The improvement in society's tools of production and distribution acts in a similar manner to society's improved methods of labour that is, more is pro- duced by less work. Money, of course, is a part of capital, since, as we have already seen, it is one of the great tools of distribution. To recapitulate, labour is a source of potential wealth, lying latent in man, which must be exerted upon the natural medium which forms man's environment before economic wealth is produced. A labourer is one who aids in the produc- tion of economic wealth, either by the exercise of his mental or physical capacities. Capital is the economic tool of man, play- 26 The New Economics ing its part in the production of economic wealth. Land, air or water can only be con- sidered capital when they become factors in production and are utilised as the economic tool of man. CHAPTER THREE PRODUCTION AND DEVELOPMENT WE have seen that there are two main factors in the production of the needs of mankind Labour and Capital ; and that in the term Capital we include land and water when these natural elements are utilised by man as his economic tool for the production of economic wealth. The end of production is to supply the needs of the community. Production is not an end in itself, neither is consumption ; both are merely necessities of existence. That is to say, speaking generally, production and consumption are not undertaken merely for the joy and pleasure they impart, but simply because they are necessary functions of life. 28 The New Economics Broadly speaking, there are two classes of commodities produced by the united forces of man and nature ; these are ultimate consumable commodities (those which supply a comparatively immediate need), and capital goods (those which supply a more distant need, such as machines, tools, etc., all of which take their part in further production). In a primitive state of society, man's production will consist chiefly of ultimate consumable commodities that is, the im- mediate necessities of life and it will take a great part of his crude, unorganised labour to produce even such bare necessities. But in a highly organised, cultured, and skilful society, the necessities of life will be pro- duced by a tithe of the labour, leaving the remainder free to produce capital goods, like machinery and tools. With the growth of culture and knowledge, and the perfecting of machinery as man gains more and more mastery over the forces of nature -so the community's production becomes more and Production and Development 29 more economic. For, as we have already seen, society's economic aim is the produc- tion and distribution of commodities required, by the minimum amount of effort and the least possible waste. We see, then, that there are two classes of commodities produced, viz., ultimate consumable commodities and capital goods. The production of the first class is termed output; the production of the second class is called development. And we see that, as society becomes highly organised, a decreasing amount of its labour becomes necessary for output (immediate consumable commodities), and an increasing amount of its labour will be turned to development ( capital goods). In fact, as society becomes more cultured, organised and highly skilled, it will produce more and more commodities by less and less human effort. Capital goods, in the form of machinery, tools, and capitalised natural forces (land, water, solar energy, etc.), will gradually take the place of 30 The New Economics man-power, leaving man free to develop his personal powers as he sees fit. In a highly organised state of society the process of development will be just as necessary and important as the process of output, and with the progress of civilisation, and increase of population, more and more producers will be devoting their energies to development, and less and less to output. The end of production is to supply the needs of the community. This is the only kind of production which the science of Economics has to consider, and a commodity is not produced, from the view-point of Economics, until it is brought to market, that is, brought to its potential consumer. We see, then, that supply is the end of production, and that consumption will react in an important manner upon the process of production. We shall see later that bring- ing goods to market entails price fixing, which plays an important part in distribution. CHAPTER FOUR DEMAND AND DISTRIBUTION THE distribution of the economic wealth that society has produced in the form of ultimate consumable commodities depends upon the effective demand, that is, purchas- ing power (money, cheques, etc.), brought to market to buy goods. In speaking of the demand for goods in Economics, we must bear in mind the fact that the word '" demand " has two meanings. A starving man feels a " demand " for food ; but from the economic view-point his natural demand only becomes " effective demand " when he has the money to exchange for food, We have seen in a previous chapter that money is the circulating and distributing medium for the goods that society has produced. It 32 The New Economics follows, therefore, that as society increases her production of goods she should increase her production of purchasing power, in order to distribute these goods among the com- munity. Should society's production of goods be diminished, the amount of pur- chasing power should be diminished too, as less circulating medium is required the fewer goods there are to circulate, and vice versa. In fact, a certain ratio should be kept between the flow of goods into the market and the flow of purchasing power into the market if the price of goods is to be kept stable. Under the present economic system, prices are fixed according to the ratio between purchasing power and goods in the market at any given time. Suppose you could increase the number of goods brought to market, and simultaneously keep the amount of purchasing power in the market fixed, then the quantity of goods would be increased in proportion to money money consequently Demand and Distribution 33 would become dearer, and the distribution of the goods produced would become difficult. If the purchasing power were not increased in ratio, this situation would mean a forced reduction of prices, resulting in loss to those who were obliged to sell goods at less than it cost to produce them. Again, if you greatly increase the amount of purchasing power in circulation, without increasing the production of goods in ratio, then the amount of money will have increased in proportion to goods money consequently becomes cheaper, and the distribution of goods produced again becomes difficult. If the production of goods is not increased accordingly, this situation will mean an increase of' prices, resulting in loss to those who have received money as a reward for services, and find that this money will buy little or less than it did when they contracted for their services. We see, then, that the distribution of the wealth society has produced in the shape of 34 The New Economics consumable commodities depends upon the effectiye demand for those commodities in the market. We see that " effective demand " is purchasing power brought to market against goods brought to market, and that if distribution is to function smoothly, a certain fixed ratio must be maintained between the amount of purchasing power and the quantity of goods brought to market at different periods. If there is not a fixed ratio maintained between the flow of purchasing power and the flow of goods to market, then distribu- tion is checked, because distribution, as society is constructed at present, depends upon effective demand. Obviously, then, it is no good society pro- ducing what it cannot distribute, or what there is no effective demand for. This applies as much to production for foreign markets as to distribution in the home market. In fact, production is checked automatically when distribution is checked. Demand and Distribution 35 A word may be said here about the essentially modern power of advertisement, since it is a force which has a great influence over demand and distribution. The whole object of advertising is to effect sales, and it does it by stimulating a demand for goods. Advertising and salesmanship have become highly important factors in our industrial organisation. Now it is not, of course, in the power of the advertiser or salesmen to increase the amount of purchasing power in circulation, but he can influence the use of it and often direct it into the channel he desires. He may create a demand for commodities never desired before; he may extend the field of demand for goods already desired, and induce people to expend their purchasing power in a way that is new to them. By these means he often gives a direction to the community's effective demand, and con- sequently influences production which always attempts to supply an existing demand. 36 The New Economics We see, then, the important part that effective demand plays in production, and how prices control effective demand; so the fixing of prices may control production, demand, and distribution. We see also that it is no use society pro- ducing, either what it does not need, or what it cannot distribute. To do so is to waste its resources and energies, which is uneconomic. To recapitulate, there are two kinds of " demand " natural and effective. Effec- tive demand depends upon purchasing power. Under our present economic system, prices are fixed according to the ratio between purchasing power and consumable commodities, brought to market at any given time. Steady distribution depends upon the uniformity of flow between goods and pur- chasing power brought to market at any given time. Demand and Distribution 37 If distribution is checked, production is checked. For society to produce what it does not need, or cannot distribute, is uneconomic. CHAPTER FIVE WORK AND WAGES WORK is a necessary function of man and society. Its necessity lies in the need for the production of commodities whereby society is enabled to exist. That great section of the community which works at various functions aiding in the progress of development and output does so from the economic necessity of existence. The amount of such work which is done for pleasure is negligible, and can be 'safely disregarded. The pleasure that the worker may obtain from his work, though important philosophically, does not enter into the sphere of economics, except as such pleasure may affect the productive powers of the worker. Considering the matter purely from the economic view-point, we can say that Work and Wages 39 society works because it must, and not because of the enjoyment that comes from work. Work is a means to an end, and not an end in itself. The end of work is production. In a primitive state of society the com- munity will produce very little more than it consumes. Very few commodities will be accumulated, and consequently there will be little leisure among the members of that society for any cultivation of the arts and sciences. The progress of civilisation, con- sidered economically, is an ever-increasing capacity to produce more than is consumed. Wealth can only be accumulated in ratio to the increase of production over consump- tion, and it is only the accumulation of such wealth which can obtain, for a section of the community, the leisure necessary for a cultivation of the arts and sciences. The progress of science and the arts, considered economically, is one of constantly increasing means of production by a con- 40 The New Economics stantly decreasing amount of human effort. Machine work more and more takes the place of man work, and produces constantly more and more. This will mean that the bare necessities of life can be produced by very little human labour, and in a very short space of time. Consequently more and more men can be put on to producing economic tools, such as machines, etc., and it will take a constantly decreasing amount of man labour to produce the consumable commodities necessary to support them whilst they are engaged on such work. The economic progress of mankind, there- fore, is one of increased productive capacity, with a diminishing amount of human effort, and consequently the possibility of increased leisure amongst members of the community. Wages are drawn from the product of the society, and are paid to the labourer in recognition of the share he has taken in production, either output or development. In a highly organised state of society, as Work and Wages 41 we have seen, the greater part of labour will be engaged in development and the production of capital goods rather than in output, or the production of immediately consumable commodities. If we are to enjoy a high standard of living and of material comfort, the work of development will be as necessary as the work given to output. It will be necessary to build ships, make roads, and construct machinery, as well as to produce meat, bread, and vegetables. Here we come to the question of necessities and luxuries, and to what extent productive capacity is to be extended to the latter. It is. a question that every separate society must decide for itself. The luxuries of a primitive age become the sheer necessities of a more civilised era. Suffice it to say that when you have passed the bounds of decent necessities the production of further commodities (luxuries) can only be obtained at the cost of society's productive power and leisure. It may be pointed out that if a society with- 42 The New Economics draws a great deal of its labour for the production of luxuries, and diminishes too much that part of its labour engaged in production of necessities, the market will be over-stocked with luxuries, and under-stocked with necessities to the loss of all who bring purchasing power to market. Necessities immediate consumable commodities will rise in price, and the first to suffer will be those possessing the least purchasing power. Wages are drawn from the wealth ensuing from the exercise of society's productive powers. It follows, therefore, that as society's capacity to produce increases, so society's capacity to distribute wages increases, and vice versa. There is no doubt that as machine power increases, gradually eliminating the need for manual labour, a new conception of work and wages will have to be arrived at. Society will be able to produce more and more commodities, with less and less demand for labour. The necessity to distribute the Work and Wages 43 commodities that society produces is vital; otherwise, as we have shown, when distribu- tion is checked, production is checked. In order to distribute the commodities it produces, society will have to replace the wage by the dividend. Whether a man can " get employment " or not, he must have a living. If a machine can produce thousands of bottles a day, and no labour is needed to tend that machine, society is the wealthier by so many bottles a day. So far from any section of the com- munity being penalised by the introduction of labour-saving machinery, the community as a whole should have a share of the increased wealth of society. Only in a just apportioning of society's wealth among its members can the machinery of distribution be made to function smoothly, and only when the machinery of distribu- tion functions smoothly will the machinery of production operate economically and successfully. CHAPTER SIX CREDIT AND BANKING CREDIT is based on faith or belief, as the 4 word " credo " I believe signifies. The credit of an individual or a nation is good if their promise to carry out the requirements of their creditor is believed. Their credit will be bad if such promise is disbelieved. Two factors enter into the consideration of any promise to pay, viz., willingness and ability. From the economic point of view, ability is the more important element, since, in an organised and civilised community, pay- ment of just debts can be enforced where the ability to pay is present, but cannot be enforced where the ability is absent, however much willingness to pay may exist. Where a country's ability and willingness to produce commodities is high, her credit Credit and Banking 45 among her neighbours will be high, and vice versa. Real credit, then, is based on a country's capacity to produce economic wealth, that is, tangible, concrete commodities. Anything which enhances this capacity enhances her credit; anything which diminishes this capacity diminishes her credit. Financial credit is the reflection of real credit. Just as money-wealth is backed by the wealth of real tangible goods, so a country's credit rests on her capacity to pro- duce goods, and will be great or small, according to that ability. If there were a universal gold currency, there would be a constant tendency for this gold to flow into the country whose capacity to produce goods was greatest. Financial credit follows real credit. Financial credit is controlled, at present, by the banking business, and it is obvious that the present-day financial system which gives the control of credit to the banking 46 The New Economics corporations gives them also an immense economic power. It gives them the power of issuing credit where and when they please, and, incidentally, of price-fixing. Bearing in mind that financial credit must reflect real credit, and that purchasing power must increase in the same ratio as capacity to produce consumable products, it will be our task to examine whether the present system of credit issue fulfils its function, and if not, where precisely it fails. In the process, it will be seen that although bank- ing in England has grown and expanded side by side with the factory system, it has made no attempt to adapt itself to the conditions peculiar to large-scale production ; it has chosen rather to keep a tight rein over credit-issue than to serve those economic laws which alone can keep a society healthy and progressive. In its attachment to the gold basis, which forces it to restrict or expand credit without considering the needs of industry or of the community, it bears Credit and Banking 47 the marks of its primitive origin. Banking originated in usury. The principle of banking dates from Roman times ; that is to say, the Roman " banks " accepted money from their clients in return for a " credit " against which cheques might be drawn very much as they are to-day. In England, banking began in the seventeenth century with the rise of the goldsmith bankers. Merchants lodged their money with the goldsmiths for purposes of safety, and the money-lenders became, with great profit to themselves ; money-borrowers. " Gold- smith bankers paid ten or twelve per cent on deposit, and used the cash as the basis of loans at twenty or thirty per cent." (Powell, " Evolution of the Money Market.") There are still people under the illusion that the money lent by banks does not exceed the amount they have previously borrowed. " Deposit " is a misleading term, for though money in small quantities is cer- tainly deposited with bankers, the major part 48 The New Economics of the " deposits " shown in the bankers' balance sheet are a liability created contem- poraneously with the loan they offset ; having created a loan, they will show it on the credit side of their ledgers as an " asset," and on the debit side as a liability (" deposit "). It is important to realise that this loan is not, and could not possibly be, issued against cash in the banker's tills, but is issued against the real credit of the community, the power of the community to produce goods to the money value of the loan. A loan or advance is a creation by a private bank of a debt against the community; in effect, some section of the community are set to work to manufacture a particular class of commodities, and the debt cannot be cancelled until these goods are sold. Deposit banks, in the strict sense of the terms that is, banks which are limited to re-issue only the amount of the moneys deposited with them hay.e never existed in this country, and in other countries only for short periods, and for a specific pur- Credit and Banking 49 pose unconnected with the growth of trade ; perhaps, in the strict sense of the term, they are not banks at all. Banking in its earlier stages was based on the discovery that it is possible to create loans to several times the amount of the moneys actually lodged ; the number of loans that a banker could make being limited only by his obligation to repay his depositors their cash on demand, and in normal times such demands were seldom made. This raising of loans on a cash basis may be compared to a kind of Box and Cox board- ing-house arrangement. Suppose a landlady who has only the one room to let, finds four boarders each wanting the room for six hours at different times of the day ; she can let her room four times over, and charge rent for one room four times. This arrangement might work satisfactorily without any of the boarders being aware of the trick played on them, until a time came when all four wanted the room at once, and it was discovered that the land- 50 The New Economics lady was charging full rent for the room four times over. This homely illustration may serve to show how cash is related to loan credit, the cash reserve corresponding to the one room, and the loans or credit-issues to the landlady's lettings of the room. Of course, this corresponds only to the actual cash basis or gold basis on which modern banking has been reared. If banks are permitted to issue notes or cheques, there is, of course, no limit to the inflation of the currency which may ensue. Prior to the rise of the big joint-stock banks. Eng- lish banks relied for the creation of their loans and deposits mainly on issues of notes which were made legal tender for payment of debts ; and being based, as we have shown, on the credit of the community, the belief in society's ability to produce goods to the value of the notes issued, the notes could be accepted as willingly as legal tender, and, when brought to market, serve all the pur- poses of money. The goldsmith bankers and Credit and Banking 51 the various London and country banks were note-issuing banks. The Bank of England was established (1694) as a note-issuing bank, loaning its subscribed capital to the Govern- ment, and receiving in return the legal right to create note-credit to the amount of the debt. But note-issuing ceased to be an all- important element in banking with the rise of the joint-stock banks, which developed the system of cheque currency with which we are familiar to-day. The bank of England is now mainly the bankers' bank. Note-issue is now a subsidiary function, its main function being that of creditor to the big banking com- panies who have credits in its books, and unite with it to form a complete private bank- ing monopoly, having absolute control over all forms of credit-issue. The joint-stock banks, instead of issuing notes against the bullion in their vaults and against securities, manufacture credit in their books. The quantity and class of goods to be produced, and their distribution when com- 52 The New Economics pleted, the community as a whole has no power of deciding ; in this, as in all other matters, it is completely in the hands of the banking interests. The results of this on the two prime needs of production and dis- tribution well be discussed later. CHAPTER SEVEN A STANDARD OF VALUE CREDIT is the life-blood of society, and our banking monopolists are in the unique position of being able to retard or accelerate the heart's action at will. Their power is derived mainly from the illusion of the " cash basis " of credit. This illusion, that a " sound " currency must be " fixed firmly on a cash basis," was fostered by the Bank Charter Act of 1844, which, beyond 14 millions against securities, regulated the amount of note- issue by the quantity of gold in the bank vaults. Why credit should be artificially limited by the amount we happen to possess of some particular, not very useful, metal, without 54 The New Economics relevance to the needs of industry, was not considered by those who framed the Act; it can only be explained as as an enactment of one of those solemn farces that make actual history so much funnier than the imaginary one of A' Beckett. The Act was, of course, evaded or avoided (as Gilbart, I think, points out), because borrowers did not, as a rule, ask the bank for notes, but for a credit in its books. * There is an increase in securities on one side of its balance sheets; an increase in deposits on the other. ... All that has happened is that the Bank of England has lent * money ' to some more borrowers, and, being banker to the other banks, has been able to do so by making a book entry, in- stead of money being taken away in coin or notes." Note-issuing, as was pointed out in our previous chapter, had ceased to be the most important part of banking by the discovery of cheque currency. A Standard of Value 55 Gold currency ceased in 1914 with the issue of incontrovertible Treasury notes ; but the gold fetish remains, as Major Douglas points out, in an unregulated paper currency. Not that the banking interests have ceased to throw hints of a return to " sound currency " as they call it! Gold is their monopoly and raison d'etre. And the cash basis of credit, if it has no real existence, has at least a firm foundation in the popular mind. It is an easy task to instil into the mind of plain John Citizen, devoid of any knowledge of the principles of economics and the methods of high finance (so close a friend to high prices and high taxation), that all his troubles are due to " inflation," " depreciation " and " Government borrowing," and it would not be difficult (with the help of the Press) to set him clamouring for a return to " sound currency," as he is, at the moment of writ- ing, clamouring for a decrease of purchasing power. John Citizen will associate high prices with 56 The New Economics a paper currency because they are coinci- dent, and will not inquire more deeply into hidden causes. The fact that all his troubles are due, not to a paper currency any more than to a gold currency, but to an unregulated currency, is not likely to be hinted at. It suits those who have a monopoly of its issue to treat the abstract idea of money as if it were a loanable commodity. And it is not only the plain man that has been found willing to acquiesce. Mill has this illumi- nating definition of money, " The introduc- tion of money does not interfere with the operation of any of the laws of value. . . . The reasons which make the temporary or market value of things depend on the demand and supply, and their average and permanent values upon their cost of production, are as applicable to a money system as to a system of barter. Things which by barter would exchange for one another will, if sold for money, sell for an equal amount of it, and A Standard of Value 57 so will exchange for one another still, though the process of exchanging them will consist of two operations instead of one. The rela- tions of commodities to one another remain unaltered by money; the only new relation introduced is their relation to money itself how much, or how little, money they will ex- change for ; in other words, how the exchange value of money itself is regulated." Then the light deserts him, and he con- tinues : " And this is not a question of any difficulty when the illusion is dispelled which caused money to be looked upon as a peculiar thing, not governed by the same laws as other things. Money is a commodity, and its value is determined like that of other com- modities, temporarily by demand and supply ; permanently and on the average, by cost of production." From this confusion comments C. B. Phipson, " Mill was never able to free him- self, and it has left inextricably entangled subsequent reasoning upon the three impor- 58 The New Economics tant subjects of money, currency and price. The idea of money has been so long and intimately associated in civilised countries with the form under which it has most com- monly presented itself, viz., with certain definite quantities of gold and silver issued by the ruling authorities in the shape of coins, and bearing their image and super- scription, that not alone in the minds of the people, but in those of thoughtful reasoners, like Mill and other political economists, this association has been so powerful as to have resulted in a complete deception." A circulating medium, in whatever form, is only a means of facilitating exchange of goods. It is well to remind ourselves, when studying the complicated processes of modern finance, that the science of social economics is concerned with one problem, and one problem only. It is the business of society, in its economic aspect, to " deliver the goods," with the least possible friction and waste of energy. A Standard of Value 59 Production and distribution these are the two sides to what is in reality this one pro- cess. We have succeeded only in evolving a machinery incapable of distributing effectively the goods it produces, and it is with this neglected factor of distribution that economics must concern itself. It was with this problem in mind that in some primitive society was introduced the division of labour, and the consequent barter and exchange of one commodity for another. Money facilitates the exchange, but the exchange value of any particular class of commodity must be reckoned in terms of some other commodity. Price merely equates these values. If I sell a quarter of wheat for two pounds, and I can buy a pair of boots for one pound, then the value of the wheat to me is two pairs, of boots; the two pounds have no value in themselves, and the transaction is not com- plete until the tokens I have obtained from the sale of the wheat have been translated 60 The New Economics into whatever may be my immediate or ultimate need. Money is not an intrinsic standard of value. To speak of gold as a " sound currency " because it provides a " fixed standard of value " is to speak in terms that have lost the meaning men have assigned to them. We could speak of a fixed standard of value only if the standard remained constant when compared with every other class of commodity; but this is clearly impossible when the exchange values of all commodities, including gold, are constantly fluctuating. If I save my two pounds, I may find, to my chagrin, that at some future time it will buy me only one pair of boots, and this would be true whether the -pounds were paper or gold. Value is comparative. As the velocity of an object has meaning only in comparison with the velocity of some other object with which it is compared, so the value of a commodity for purposes of A Standard of Value 61 exchange, though expressed for convenience in monetary units, must be reckoned finally in terms of some other commodity. The gold basis on which modern banking is reared has been the point of attack of a number of economists, from Proudhon to Kitson. Financial credit is issued against the real credit of the nation, its ability to produce, and could not possibly be backed by gold in the bank vaults (before the war the amount of unsecured paper issue was about twenty thousand millions sterling, against some sixty or seventy million pounds' worth of bullion). Yet the issue of credit was regulated carefully and with due regard to the quantity of gold. A drain on these reserves, either for currency within the country, consequent upon an expansion of credit, or because of an export of bullion, was duly followed by a contraction of credit, generally by raising the bank rate on advances and bills for discount. Whenever this occurred, firms of whole- 62 The New Economics sale and retail trade would be found with large stocks of goods on their hands, and faced with a falling market, and if the credit stringency were very acute such firms might become bankrupt. The bankruptcy of a large firm would cause a panic ; banks would call in their loans, and the city would enjoy one of those periodical crises which form its principal contribution to history. The banking corporations have never, it must be confessed, concerned themselves very much about the needs of industry, but we must set it to their credit, or otherwise, that they have always shown great concern about this metal of our superstition. It is guarded closely, lest anyone should wish to run away with it. We cannot but admit that, in theory, it works very well. We have an expansion of credit, and prices rise; there is a drain on the banks' supply of cash for currency cir- culation ; and, the high prices attracting foreign exporters, imports increase, whilst A Standard of Value 63 exports diminish, with the result that there is a still further drain of gold abroad to meet the excess of imports over exports, and the cash reserve is further depleted. The bank rate is raised and credit restricted, with the interesting results we have seen. But we need not despair ; we have entrusted our lives to high finance, and high finance will not betray us. At a certain point in the interesting drama which we may designate starvation-point or specie-point the good fairy will whisper to foreign specu- lators the attractions offered by our high bank rate, and gold will return to us. Meanwhile, credit having been contracted and prices lowered, this country has become a poor market for imports, but exports have been accelerated; so in exchange for our excess of exports over imports more gold returns to us. The main thing, as you will see, is that the gold returns to us! And if we cannot promise a happy ending, at least we can have the play all over again. 64 The New Economics This is the true history of the gold basis, so beloved of modern economists, with a few notable exceptions; they have, in general, been so concerned with the means as to lose sight of the end. They have become wrapped up in the medium, and forgotten the spirit. Only thus can be explained their fidelity to the idol they have manufactured out of beaten gold, and to which they offer up their prayers periodically in book form. A standard of value, declare these midget philosophers, must be something that is rare (like gold), but not too rare (like radium). Well, we suggest a little common sense % albeit with little hope that it will be adopted. CHAPTER EIGHT FOREIGN EXCHANGE IT is a common error to argue that if we " stabilise the exchanges " our internal problems will solve themselves. A nation which lives for export will attach a false value to its exchange rates with other countries. ' The root of the fallacy (that a balance of exports over imports is a favourable balance) lies in the idea that the main object of our industries is to make goods for export, that we live by foreign trade, and that our foreign trade is more important than our production for home consumption. The prime object of a nation's industry is to feed, clothe and house her own population, who are the, chief producers of all her manufac- tures, and are entitled to consume the major 66 The New Economics part of them. The nation's exports are only its surplus, which it exchanges for those foreign products which it cannot produce itself." (Todd, " Mechanism of Exchange.") Even the most orthodox of economists, we imagine, will agree that this is a desideratum ; yet the man in the street, at least, is firmly of the opinion that a nation's prosperity is gauged by the extent of its foreign trade. It has become an idee fixe, for which he is not only willing, but eager, to barter his liberty, health, happiness, life, and anything else he possesses ! There are subjects on which the body social is no longer sane, and we must tread carefully if we are to free the national mind from hallucinations which long companionship has made so very dear to it. If a nation, by a rational distribution of purchasing power amongst its own popula- tion were able to absorb the major part of its products, its foreign trade, to take the example of a manufacturing country like Foreign Exchange 67 England, would consist of the exchange of its surplus manufactures for raw materials and foodstuffs. Its manufactures could be sold at any price necessary to obtain these. Its exports must ultimately be paid for by either goods or services, unless an inter- national coinage, such as gold, is used. Thus, in essence, the process would be simply export of a country's surplus products and the creation of a credit in the importing country, in terms of its own currency, to be cancelled when the exporting country exchanges this credit for goods at their market value. Methods of exchange often appear to be designed to prevent rather than facilitate trade, and it is essential that the student should disabuse his mind of the idea that modern finance is a sort of mystical world- religion, with the exchange rates as its ritual. The aim of an international money-trust will be to keep absolute control of all forms of credit-issue, and this it will be able to do 68 The New Economics owing to its very profitable position as a buyer and seller of debts. A. We have defined price as the ratio of exchange. This, of course, is true whether the transaction takes place within one credit area or not ; that is to say, the market value of an article is its exchange value in terms of some other article ; and the fact that they are expressed in different currencies does not affect the question. In the case of small transactions within a single credit area, the debt may be said to be discharged when the seller receives cur- rency notes in exchange for his goods, or the buyer transfers his claim against the bank for currency notes to the account of the seller. But for larger transactions, even within a single credit area, payment is not always forthcoming immediately. This is especially so in the case of orders by whole- sale or retail dealers who are not in a position to pay until they have disposed of their stock. In this case the buyer will furnish what is in Foreign Exchange 69 effect an I.O.U., either in the form of a promissory note, or by accepting an order to pay, or bill of exchange, drawn against him. The bill of exchange may be drawn not against the buyer, but against some accepting house of good financial standing that is willing to allow its credit to be used, and cheques and bank drafts are similarly bills of exchange drawn against a bank. For- merly bills were discounted either by bill- brokers or by branches of foreign banks, but latterly the joint-stock banks have entered the market. The point is immaterial, since the bill-brokers work on loans from the bank, and are at the mercy of the banking com- panies, who can regulate the credit at the disposal of the market, and consequently the traffic in bills, by raising or lowering the rate of interest on advances. The banking companies have now branches or correspondents in every country, and methods of remittance have somewhat altered in recent times. The most historical form of 70 The New Economics indebtedness is the bill of exchange, and though other more rapid forms of remittance, such as cable transfers, are now in use, they can hardly be said to have superseded the bill of exchange, which is the basis of all exchange operations. Description of the various methods of remittance, therefore, is hardly relevant to our purpose, but in case the reader is unacquainted with the terms employed we will briefly enumerate them. These are mainly: Drafts, drawn by a bank on another bank, including telegraphic transfers ; bills of exchange, drawn by merchants on bankers, against a bank credit ; and the ordinary trade bill, or bill of exchange, drawn by the exporter against the importer, and usually discounted at a bank, that is, sold to the bank. Bills may be payable at sight or after long or short periods; this involves the factor of interest, and consequently the price at which the bill will be discounted. The finance bill, or accommodation bill, is a bill Foreign Exchange 71 drawn solely to raise money, and does not represent an actual transaction ; it is drawn usually on some accepting house for the purpose of being sold to a bank. The script of international loans is another form of remittance, but mostly used by bankers themselves in settling the balance of indebtedness. Sombart has an interesting note on the development by the Jews of the principle of negotiability in commercial instruments. The Jewish law knows only impersonal debt, and has no term for personal obligation, so debts are bought and sold in the money market very much as the proletariat sell their labour power at its market value. The merchant in all his transactions is completely in the power of the international money-trust, which determines always the price at which goods or debts shall be bought and sold. CHAPTER NINE RATES OF EXCHANGE THE bill of exchange, according to Mr Hartley Withers, " is one of those inventions that seem to be good for everybody, and to make everybody better off." We are not sure whether the catch here is in " seem " or " everybody " that is, everybody in the banking world, to which the bill of exchange has certainly been a very safe and profitable investment. The banking business, as we have shown, consists in the buying, selling, and creating of debts at a profit. The simplest form of acknowledgment of debt is the trade bill, drawn, let us say, by an exporter in London on an importer in Paris, and sold by the exporter to his London bank. Bills payable Rates of Exchange 73 in Paris will thus accumulate in London and become a means of remittance when mer- chants in London wish to pay for goods they have imported from Paris. In actual practice, the London banks will keep a credit with their foreign corres- pondents, and periodically remit bills to maintain it. To the importer who is seeking a means of remittance, they will sell a bank draft or a telegraphic transfer on the country from which he is importing; that is to say, they will manufacture a bill on their foreign correspondents. The banker's " purchases of exchange build up his foreign balance, and his sales of exchange tear it down again. He makes the two balance or cancel one another in the long run, and makes his profits out of a difference between his buying and selling rates " (Whitaker), To cover his drawings on his foreign correspondent, the banker will sometimes send " bills which he, in his turn, has purchased from various sellers on his own 74 The New Economics market. In New York, he may have bought bills drawn on London during the interval between the departure of one mail and another, and perhaps on the very mail day the banker expects to remit the bills to London for encashment a client is forced to buy a draft from him. The banker will sell this draft, usually at a fair profit, and it is not unusual for the customer to send it to London in settlement of some debt or other by the same steamer which carries the batch of bills previously purchased by the banker. . . . The profit on such an operation is apparent " (Spalding). Rates of exchange depend mainly on two interdependent factors the general level of prices of foreign trade commodities in the different countries, and the balance of indebtedness between them. There is, of course, no regulation of import and export trade; a country may be importing more than it is exporting. To judge of this, we must take into account not only the visible Rates of Exchange 75 exports of merchandise, but also such invisible exports as income from shipping, income from investments abroad, and income from banking and insurance, which, in the case of a country like England, investing heavily abroad, may be as much as ^500 millions, in the year. (" Board of Trade Journal " estimate for 1920. In the ten years prior to the war, according to Sir George Paish's figures, our capital export was ^1,500 millions, out of a total capital accumulation at home and abroad of between /,2,ooo and ,4,000 millions.) Assuming, however, an actual net excess of imports, visible and invisible, over exports, the country may still peg its exchange rate at par by means of a foreign loan. This was one of the methods adopted by this country during the war to prevent the New York exchange from becoming unfavourable. Loans act as an export (of securities) on the country which borrows, the securities being " articles of commerce 76 The New Economics which act upon the exchanges at the time of importation, and which, when they come to be re-exported (and not till then), will affect the exchanges in a contrary direction " (Goschen). If no such loan is contracted, and the country continues to import more than she exports, the exchange rates will move against her, varying with the price the banker or exchange dealer is charging for the means of remittance, and depending upon whether his supply of credit is plenti- ful or scarce. In this respect, the price at which drafts on other countries are being sold, or the rate of exchange, will depend on the amount of credit available and the amount of money brought to market against it. It will be clear that although the price of drafts can be expressed in this way, as a ratio of the amount of money on the market to the volume of drafts available, it is not a complete explanation, since the amount of Rates of Exchange 77 credit available and the amount of money to meet it are themselves dependent on other factors. All that we can really say is that if the exchange dealer finds money flowing in freely he will raise the price of his drafts as high as he can without checking the inflow of money. Theoretically, a banker with a short supply of credits on other countries could charge any price he wished. Actually, in most cases, if he charged too high a price for his drafts, it would pay the importer to remit goods instead. We have been assuming throughout that we are dealing with post-war conditions, that there is a prohibition on the export of bullion, and gold can no longer be remitted in payment. Before the war, in those countries, like England, which laid no restrictions on the free export of bullion, the price of foreign exchange could never rise above the price at which it would pay importers to remit gold in payment. The 78 The New Economics actual operations need not here concern us. The effect on trade of this continual inflow and outflow of gold we have dealt with in a previous chapter. For a country to depreciate its currency has the effect of turning the exchange rates against it; by this, we mean that its cur- rency is worth less within the country, and therefore abroad. If we have clearly under- stood that price is merely the ratio of exchange between one class of goods and another, there will be no mystery attached to this statement. If we are considering the price to us of some articles made in U.S.A., we must take into account the rate of exchange. If, in spite of the rate of exchange, they are cheaper than they would be in our own country, imports from U.S.A. will increase until the demand for means of remittance causes the price of drafts to rise, and imports are checked. We instance two countries only for the sake of simplicity, but, of course, an excess Rates of Exchange 79 of exports to one country may be balanced by an excess of imports from another. International finance has made of the world a single exchange market. No con- sideration of economy will prevent a country from competing with another in its own markets. On the other hand, it does not follow that the price of its goods abroad is the price ruling at home. Combines may prefer to dump abroad at less than cost rather than spoil the home market, or lose the export market. Again, it is quite possible to have two widely different prices ruling, a low price at home and a high price abroad: we will endeavour to make this clear in a later chapter. CHAPTER TEN THE CONTROL OF CREDIT THE Joint Stock Banks, with the Bank of England and the Clearing Houses, form a complete private monopoly of credit-issue. We print below a combined balance sheet of the Joint Stock Banks, exclusive of the central Bank of England, compiled by the " Statist." LIABILITIES. 1913 1920 mil. mil. Capital paid up 71*2 92*8 Reserve Funds 46*6 71*3 Notes in Circulation . . . . i6'o 54*3 Acceptances 63*5 H2'5 Deposit and Current Accounts . . 1,0707 2,549*3 Profit Balance 6*1 8*9 Total ...... 1,274*0 2,889-1 The Control of Credit 81 ASSETS. 1913 1920 mil. mil, Cash in Hand and at Bank of England 152*3 44'7 Money at Call and Short Notice . 145'" J 53'i Investments 210*9 552'7 Bills discounted . . . . . 168*4 4*5*9 Advances 505*8 i,i82'8 Liabilities of Customers for Acceptances 63*5 112*5 Bank Premises, etc 27*5 31*4 Total i,274;o 2,889*^ We cannot look for the basis of this gigantic super-structure of credit in less than one 100 millions of paid-up capital. Indeed, McLeod, speaking of the rise of the Joint Stock Banks, pointed out that at least half of the " paid-up capital " was " nothing more than the bank's own credit turned into capital. If a bank wishes to increase its capital and its customers wish to subscribe, they may give the banks a cheque on their account exactly the same as paying the bank in its own notes. It is the release of a debt and that debt released becomes an increase of capital. This is the F 82 The New Economics way in which the capital of all Joint Stock Banks is increased." The term " Deposits," as we have already said, is misleading, since they do not and could not represent an actual deposit of money, but mean merely a right to demand money. Where, then, is this " money " ? We turn to the assets side of the balance sheet, and find that, except for two items, viz., " cash in hand and at the Bank of England " and " bank premises," the assets consist of the liabilities of those who have received the loans. But even the comparatively small item, " cash in hand and at Bank of England JJ does not for the most part represent actual " cash " but a credit created at the Bank of England. So there remains only the currency notes in the bank tills to meet the demands of industry. We cannot, however, regard treasury notes as cash deposits, since they are not in the first instance deposited with the banks The Control of Credit 83 by the public, but only reach the public through the banks in response to the banks' report to the Treasury through the Bank of England of their needs in respect of this small change of credit. In actual fact, large payments are made by cheque, and as Mr Hartley Withers very happily expresses it, " the loans of one bank make the deposits of another, and its deposits consist largely of other banks' loans. Banking credits provided by the banks for one set of customers in the shape of loans and discounts, come back to it from another in the shape of deposits created by the loans and discounts. A bank on a small cash basis creates, by discounting and loans, the right to draw cheques, confident in the expectation that the cheques drawn by one customer will be paid into it by another; or that, on the rare occasions on which the right to draw is used by withdrawals of actual coin or notes, the coin or notes will find their way back to it, being deposited with it by those who receive them." 84 The New Economics The banker, whether he is underwriting shares, discounting bills of exchange or making short-term loans to his clients for the provision of working expenses, is creating debts against the community, and the debt cannot be cancelled till the goods have been completed and sold to the consumer. But since the banks themselves are the only source of the means of payment, the payment of one debt cannot result without the creation of another, so that society is continually in the debt of these " money-lenders " who have no money to lend. CHAPTER ELEVEN COMMERCIAL PROSPERITY THE banks, having complete control of credit-issue, can encourage or depress trade at will ; to check a further expansion ot credit, they may refuse to renew loans, though in most cases a rise in the bank rate of interest at which they make loans or discount bills will have the desired effect. The Bank of England rate is normally higher than the market rate, because the tributary banks regard a loan from the Bank of England as " cash " on which they may rear a credit many times the amount of the loan. The market rate in this connection is the rate at which the brokers discount bills and the banks make loans to their customers, The New Economics other than brokers or discount houses. The Bank of England, of course, discounts bills for its own customers at market rate in normal times. Since the bill-brokers work on loans from the banks their market rate of discount varies with the rise and fall of the Bank of England rate. If a rise in the bank rate is not sufficient to check credit, the Bank of England will enter the market as a borrower, and the brokers are obliged to raise their rate of discount if they do not wish to re-borrow the money at the Bank of England rate, a higher rate than the market rate at which they have lent it. A rise in the bank rate may not have any immediate effect if there are large stocks of goods on the market and credit is not in demand but it will act as a warning to merchants of credit curtailment. So long as credit-issue is unregulated, it is inevitable that a boom in trade should be followed by a depression in trade, accom- Commercial Prosperity 87 panied by heavy losses to manufacturers and traders and widespread unemployment. An expansion of credit is a private permission to industry to fulfil its function of producing goods not, it may be remarked, of satisfying the needs of the community, for the large armies of the proletariat who should represent by their magnitude the chief market for necessities have little or no effective demand in the shape of actual purchasing power to make known their little wants, and must perforce remain patient, if dissatisfied, while the goods they have toiled to procure are carefully packed for export. An expansion of credit does, however, mean that the industrial machine is set going again. Thousands of men who have been living on unemployment relief find them- selves at work with money in their pockets, and, after the fashion of men, proceed to spend it. Shopkeepers, finding demand increase, 88 The New Economics raise their prices, but not enough to check the demand, and extend their orders with wholesale dealers or manufacturers ; whilst manufacturers, in response to the stimulated demand, also raise their prices. The apparent prosperity invites a still further expansion of credit, employment is increased, and consequently purchasing power, and there is a continuous rise in price. It does not follow, of course, that wages and salaries are increased, since there is always concerted action on the part of the employing section of the community to keep wages and salaries below actual subsistence level. The workmen, to keep their wages up to subsistence level in the teeth of rising prices, strike for higher wages ; so that costs are further increased and prices rise higher still. It is obvious that this rapid rise in price cannot continue indefinitely. A time must come when supply oversteps effective demand; warehouses as in the present Commercial Prosperity 89 depression of trade, following the recent trade-boom will be crammed with goods which the public desperately need but are unable to purchase. Bankers, fearing insolvency, will call in their loans and restrict further issues by raising their rate of interest. Wholesale and retail dealers are dependent on bank-loans to cover their temporary indebtedness before the sale of the goods to the consumer. Since their percentage profit is comparatively small, and they are dependent on a large turn-over, a rise in the bank-rate is a matter for alarm. It portends, moreover, a falling off in demand, and they may have on hand large stocks of merchan- dise for which they are still in debt to the bank, and which they will be obliged to sell on a falling market at lower prices. Their orders for fresh supplies are not likely to be considerable; and the manu- facturers, finding orders are diminishing, prepare for a period of trade depression. Prices drop, and as the workmen struck for 90 The New Economics higher wages to meet higher prices, the employers now declare a lock-out to bring wages back to their former level. Thousands are thrown out of work, and industries are closed down or run on half- time ; and until the banks take measures to expand credit by lowering the bank rate, the decrease in purchasing power will be continuous, since every decrease in pur- chasing power means a decrease in effective demand and further unemployment or lower wages. In a period of very acute depression even the lowering of the bank rate may not suffice to move the wheels of industry, which a restricted home market has rendered utterly dependent on export trade. The export markets may be already glutted with goods in excess of effective demand. It only remains to issue purchasing power abroad at the public expense by means of an export credit, as was recently mooted, to reach the limit of absurdity. CHAPTER TWELVE THE MISMANAGEMENT OF INDUSTRY IF there is an insufficient and unequal distribution of purchasing-power within a country, and yet this restricted purchasing- power is dependent, in respect of the bulk of the population, on employment of some sort or another, it follows that the nation's energies will be turned to the manufacture of capital goods, goods for export and luxuries to meet the demand of the well- to-do. If all charges are debited to the consumer in the cost of the goods, there will be no incitement to economy in working; and a further waste will be involved in the endeavour to create a demand for the goods 92 The New Economics at home or discover a market abroad. Those that control the actual processes of production will be subordinate to those whose business it is to attend to the profit- making aspects and fluctuations of the market. The expense of effort will be enormous. It has been estimated that about ten per cent of the energy at present employed would be sufficient to keep the entire population in comfort. " It is well known," says Mr Thorstein Veblen, " that there are many lines of industry in which the cost of marketing the goods equals the cost of making and transporting them." And, according to the same writer elsewhere, " in many lines sales- cost is ten or twenty times production cost, and not less than one hundred times the necessary cost of distribution." The complete control of industry by a small group of financiers whose interest lies wholly in the commercial and profit-making side, and who are often quite ignorant of the The Mismanagement of Industry 93 technical and managerial side of the industry, prevents industry from serving the real needs of the community and renders it wasteful and inefficient. " When war broke out many leading U.S. business men offered their services at a dollar a year. They found that the Government had taken over financial opera- tions; that there was no selling to be done, and that the problem quickly reduced itself to one of production in which many of them had no experience." (H. L. Gantt.) The reckless mismanagement of the U.S. coal industry, as described by Mr W. N. Polakov, may be cited as typical of our modern business methods. ' Twentieth century technology has outgrown the eighteenth century system of vested rights." The Geological Survey figures quoted show a waste in management of fifty per cent; 500 million tons of coal being wasted annually by abandoning partially exploited mines, leaving large quantities inside mines unre- 94 The New Economics claimed, wastage of coal-dust or inferior coal, and neglecting to utilise bye-products. These and other exposures of our mis- managed industries are indictments of the economic system rather than of the operators. The mine owners, for example, cannot be blamed for not mining coal at a cost of four dollars per ton to sell at the price of two dollars. " It is more profitable to them to throw away the life and prosperity of our grandchildren than incur expenses for reclamation of waste." With our present system all overhead charges are distributed over the output, however small the output may be. The expense of upkeep of plant extensions, though their capital value has already been extracted from the consumer in the price of the product, are charged to the consumer when supply outstrips effective demand and the plant is idle. This, including interest on the money value of the machine, insurance, taxes, depreciation, and rent, may be as The Mismanagement of Industry 95 much as one-third the total value of the machine. Mr H. L. Gantt, in his " Organising for Work," gives an example of a unit of product in which the cost is made up of labour, ten cents ; material, eight cents ; and overhead charges, twelve cents ; the factory running at one-third of its capacity. How, asked Mr Gantt, would the twelve cents be paid if the article was bought? " The obvious answer was that it would have to be distributed over the product still being made, and would thereby increase its cost. In such a case it would probably be found that some other article was costing more than it could be bought for; and, if the same policy were pursued, and the second article should be bought, this would cause the remaining product to bear a still higher expense rate. If this policy were pursued to its logical conclusion, the manufacturer would be buying everything before long, and be obliged to give up manufacturing entirely." 96 The New Economics The overhead charges may be whatever the promoting company think the industry will carry. It is a common error even in intelligent circles to imagine that our immense capital aggregations have been built up on the savings of the population. The error, perhaps, need not be wondered at, since it has been insidiously cultivated by the small group that controls industry through finance, and by its agents in the popular press. It naturally suits the banker-financier to spread the belief that capital development is the work of generations of thrifty little house- holders. It unites all those who have saved a few hundreds or thousands against the many millions of the completely dispossessed, and enables the real controllers of our destinies to milk indiscriminately, entre- preneurs, middle-men, proletariat, investors, and consumers generally. It is true that, prior to the development of mass production, businesses were to a large extent sustained by the small savings of The Mismanagement of Industry 97 thrifty individuals; in those days a banker was a man who knew intimately all his clients' affairs and " lent money against a three months' commercial bill," and the small employer had not given place to the limited liability company. It was found, by a few enterprising company-promoters, in the early days of industrial development, that large-scale production minimised costs ; and that by pooling their capital, they could crush out the small owner, and obtaining entire control of some industry sell their goods at what price they pleased. Since those days, the history of capitalist enterprise has been a record of the growth of combines, trusts, and price- rings, in whose grip the investing public and the consumer are alike helpless. The capital of a company will be calculated on its estimated earning capacity, and the manager told he must meet the charges or this capitalisation. The shares are in most cases " under G The New Economics written " by the banking company, investment trust, or other concern financing the venture : that is, they are guaranteed, financial credit being created against the real credit of the community. A portion of the shares will be taken up by the public later ; but large blocks of shares are retained by the promoters the expenses, directors' fees and heavy under- writing commission, amounting perhaps to more than ten per cent on the issue, being sheared from the lamb-like investing public. In the case of a doubtful venture that is not expected to cover the charges on its capitalisation, these shares will be unloaded on the public later at an enhanced price, after being duly boomed in the finance columns of the press. In many successful businesses, on the other hand, the initial costs of the enterprise are covered by the issue to the public of debenture stock or preference shares carrying a small fixed rate of interest, while the The Mismanagement of Industry 99 ordinary shares carrying the profits are retained by those running the concern. Since all costs are debited to the consumer in the price of the article, such small profits as may accrue to John Citizen as investor are rapidly filched from him as consumer. CHAPTER THIRTEEN MALTHUS AND OTHER NIGHT FEARS IT is curious that truth, in the realm of economics at least, must always blush unseen ; Gresham's Law, that counterfeit money drives out good money could more truthfully be applied to the kingdom of ideas, for false speculations certainly flourish like weeds. We cling stupidly to ideas that have long since out-lived their validity. According to the laisser faire doctrines of the early economists, a small army of manufacturers competing honestly and strenuously for the demand of a pampered public could be relied upon to keep price low, and the Government could confine its attention to " pure politics " with a clear conscience. But economic power precedes political power, and alas ! the Malthus and other Night Fears 101 politics are no longer pure, and the conscience has grown muddy. The army of small manufacturers no longer exists except in the heated imagination of our eminent politicians, and the financial combines and price-rings that control our industrial destinies can be relied upon to keep both supply and demand in short supply, and arrange that instead of supply competing very strenuously for demand, demand shall compete just as strenuously for a short supply. Our financial rulers are concerned only to get back from the public the moneys they have issued, with the least possible friction and delay, and the public is always willing to oblige. After all, it must live, and if it can live without thinking, so much the worse. The chief enemies of the human race were always ignorance and superstition. So, having wealth, we refuse to enjoy it, burden ourselves with unemployment and high taxation, and stifle our reason with " Germany Can and Must Pay." 102 The New Economics Germany could and would pay very easily, but it could hardly be expected to occur to us that a gift of goods, unless it were met with a distribution of money-tokens, would merely compete with our own supply and augment our other heritage of unemployment. The arrangement by which we add to the cost of our importations from Germany, and thus pay Germany's indemnity, is, though a somewhat roundabout way of doing it, eminently satisfactory under the circum- stances, since by no possible arrangement, however ingenious, could Germany pay us an indemnity while we maintain our present economic system. By that system we refuse to distribute goods at home, and deny our own people the means of livelihood because we are unable to employ them in manufacturing for export. It will say a great deal for human insanity if such a system persists until it crushes us in its downfall. Germany, without having escaped the Malthus and other Night Fears 103 mania of manufacturing for export, succeeded in puzzling our foreign exchange experts, and incidentally in capturing our trade, by the simple and obvious process of reducing price by a creation of credit. In all sanity, increased capacity to produce must be reflected in an expansion of credit. The crash can only come if the country expands her credit beyond the limits of her capacity to produce. If a country lowers its prices for the home consumer as its capacity to produce increases, making up the differ- ence between price and cost by a creation of credit, it will be able to sell abroad at any price sufficient to undercut its competitors. In Germany's case the benefit accrued to the exporting manufacturer; the fight for export markets still continued though the " unemployment problem " was shelved for a time. Nevertheless, though prices in Germany are high, they are only a fraction of the export price ; and her raw materials are bought, not with the depreci- 104 The New Economics ated mark, but with the credit obtained for the goods she exports. As the mark de- preciates in terms of our currency, Ger- many pays more in terms of marks for her raw material, but obtains more from us in terms of marks for her finished products. The manufacture of credit corresponding to capacity for production is really much simpler than the manufacture of explosives; and if applied in time, so as to benefit the home consumer and not merely the exporting manufacturer, would prevent the coming war. As for our own War Debt, it is impossible to deny that a small part of it was contributed from savings: so small as to be negligible. The interest which is ground out of us by taxation is for the most part the interest on the public credit which the banks have monopolised, loaning it to the Government at interest, or to the Government by way of " overdrafts " to their customers. Any reduction in taxation entailing further Malthus and other Night Fears 105 Government borrowing will further increase our debt to the banks for the use of our own credit. We might have entitled this section a chapter on truisms, though they are not so familiar to the general public as the fallacies they should replace. Another strange theory that has taken complete possession of the mind of the man in the street is that we are a poorer nation than we were before the war. As a matter of fact, according to Mr Edgar Crammond, Managing Director of the British Shareholders' Trust, our productive capacity is at least fifty per cent above pre-war standard; while, in response to an inquiry, some firms reported they had four times as much plant as they had prior to the war. Driven from this position, the average newspaper reader will, if he has read his newspaper properly, fall back on the theory that population is pressing on the means of subsistence. How population can be press- ing on the means of subsistence, with 106 The New Economics several millions unemployed, and wheat being burnt because it cannot be distributed except at a financial loss, only a Neo-Malthusian could inform us, and that not very coherently. We are, it is true, dependent largely for our foodstuffs on supplies from abroad, more particularly as regards wheat and dairy produce. The United Kingdom is peculiar in this respect, although the reason is not that population is pressing on the means of subsistence, but that British agriculture has declined, while " newer countries are able to send, at low prices for ocean transport, enormous supplies of wheat, at prices with which we could not compete " (E. A. Pratt). It is quite true that the population, mainly owing to extreme poverty, has increased considerably in the last half-century. It has increased by about fifty per cent. Our imports of wheat in 1850 amounted to twenty million hundredweights, in 1870 to forty-five million hundredweights, but in 1913 to one hundred million hundredweights. Three Malthus and other Night Fears 107 million acres of land under crops in 1880 went out of cultivation in the next twenty or thirty years. We forget what Mr Gladstone said in 1863, but our memory goes back to 1919, when Mr Lloyd George said something equally pertinent, pointing the decline of British agriculture. On every hundred acres, he said, Britain feeds less than fifty people, Germany over seventy, Germany producing double our supply of milk, corn, and so on. Denmark, with a very poor soil, has, since 1871, more than doubled her production of corn and doubled her supply of cattle. The same might be said of most European countries prior to the war; France being, as Kropotkin pointed out, almost self- supporting, and Belgium, with a much denser population than Great Britain, almost so, and exporting large quantities. " Our yield per acre, in spite of the richness of our land, was four pounds compared with 108 The New Economics Belgium's twenty pounds " (F. E. Green). Ninety per cent of our timber imports could be grown at home, some nine million acres being available without material encroach- ment on agricultural land. Kropotkin reminded us that there are thirty-three million acres of cultivable land in Great Britain, and that some seventeen million acres are waste. In spite of our efforts during the war, when our supplies from abroad were in danger of being cut off, the figures are still true to-day. " If popu- lation came to be doubled, it would only be necessary to cultivate the soil as it is cultivated in the best farms of the country, Lombardy and Flanders, and utilise some meadows which at present lie fallow." It is admittedly very unhealthy to be as dependent as we are on supplies from abroad. The area under grass is out of all proportion to its yield in meat and dairy produce. Apart from the fatting pastures, " the bulk of the grass land in the country could, at best, Malthus and other Night Fears 109 only be described as useful, and with skilled management and a due expenditure upon labour would pay the farmer just as well under the plough, while it would yield for the nation more than twice as much food in the shape of meat or milk, or ten times as much in the form of grain " (A. D. Hall). The same writer estimates that another 3,340,000 acres under wheat would at an average yield of four quarters per acre, raise the home production from about twenty per cent to nearly sixty per cent of our total consumption. It is quite arguable that we could be completely self-supporting, though whether it would be policy to be so is another matter. Our greatest concern is with the long-lived heresy that, whilst admitting there is no limit to the bounty of the earth, population increases more rapidly than the means of subsistence. In trying to understand the longevity of Malthus's fantastic speculations that popula- tion increases in geometrical ratio and food 110 The New Economics only in arithmetical ratio, neither of which have any foundation whatever in fact, it should always be remembered that they were put forward, not on scientific grounds, but with the deliberate aim of preventing the emancipation of the workers. Population and food supply do not increase in any precise ratio. Food supply is governed purely by methods of cultivation ; and statistical and biological evidence sup- ports the view that far from fertility being a cause of poverty, the poverty of a people results (as remarked by Doubleday, whose work has been recently brought to light by Mr C. E. Pell, in his " Law of Births and Deaths ") in a corresponding effort being " made by Nature for its preservation and continuance by an increase of fertility, and this especially takes place whenever such danger arises from a diminution of proper nourishment or food." Fertility varies with profession and mode of living, and diminishes as we ascend Malthas and other Night Fears 111 the social scale ; and famines, wars, and pestilence, that were put forward by Malthus as Nature's checks on population, are in fact, products of a faulty economic system, which breeds poverty and disease, and so encour- ages the high birth-rate, while a high death- rate is its own check and not Nature's. On the evidence of Dr Halford Ross, Medical Officer for the Suez Canal Zone, when during the years 1901 to 1910, health measures reduced the death-rate from fever, the birth-rate fell too. The Malthusian of 1 5th July, 1921, quoted the " Encyclopaedia Britannica " to show that from 1723 to 1846 the population of Japan remained almost stationary, while during the period 1897 to 1907 it received an increment of n-6 per cent, whereas the food-producing area increased by only 4-4 per cent. " It is impossible to believe," commented Mr A. E. Randall in The New Age, " that the Japanese used contraceptive measures during the ' barbarous ' period, 112 The New Economics 1723-1846, and ceased to use them after the coup d'etat of 1867, when contact with the outer world was enormously extended. We are confronted with a biological fact ; fertility varies under the influence of environment." " The end of the world is a more imminent event than its over-population," remarks Dr Halliday Sutherland, whose book, " Birth Control," is a resume of the arguments against Malthus. Not birth-regulation, but price-regulation is the proper study of mankind at the present moment. CHAPTER FOURTEEN THE FIGHT FOR EXPORT MARKETS THE economic problem that confronts this generation is the problem of over-production, or under-consumption. It may seem strange that society should suffer from an actual plenitude of goods, and it is still stranger when we consider that millions of the population live in the direst poverty while the goods they are unable to purchase rot in the warehouses. The truth is that modern scientific machine- production has outgrown our mediaeval financial system, based on the idea of " money-lending." The financial group do all in their power to maintain the super- stition that money is a commodity which may be loaned out at interest, and is strictly limited in quantity. H 114 The New Economics Because in a more primitive era some material such as gold was chosen as the means of exchange, our modern " money- lenders " still pretend that they have " money " of this sort to lend, and hope by this means to disguise the fact that they are exploiting the public credit. To have money in one's pocket signifies that society is in one's debt to that amount, and the debt is discharged when the money is spent. Similarly, when the banks issue credit to their clients by manufacturing an " overdraft," what they do in effect is to create a debt against the community for the amount of the loan. The real credit of the community, its capacity to produce goods, has been pledged to that amount. We have now to deal with the actual process by which purchasing power is issued, and show why it is insufficient to buy the product of industry. We know by unhappy experience that if nominal purchasing power is increased prices The Fight for Export Markets 115 rise, and this leads us to the conclusion, which is in fact a true one, that the general level of prices depends at present on the amount of money in circulation, using money in its widest sense of " purchasing power." This is roughly what is known as the Quantity Theory of Money. " It cannot be shown," as Professor Irving Fisher says, " that there is any tendency for an increase in the quantity of money to decrease its velocity of circulation. Some persons who have never investigated the subject imagine that if money were suddenly doubled in quantity, prices need not rise, but that the public would, for some unaccountable reason, carry double the former quantity of money while expending precisely the same amounts ; in other words, that the velocity of circulation of money would decrease." ' This conclusion cannot be avoided by supposing that most of the money is not spent in trade, but deposited in banks. The bankers whose deposits are thus suddenly 116 The New Economics swollen will now be the ones who will strive to get rid of the surplus cash. No banker wishes to have idle reserves, and each will make the increase in reserves the basis for an increase of business, including an increase of deposits." It is, we need hardly say, neither scientific nor reasonable, and it is certainly not economical, for every increase in the nominal income of the population to cancel itself out almost immediately by raising prices propor- tionately. Under any rational system, each increase in the potential productivity of the industrial machine, whether by plant extension or the introduction of fresh labour-saving devices, would be accompanied either by an increase in the spending power of the population sufficient, at least, to meet the possible increased output of consumable products, or, assuming the output of consumable products to be already sufficient, by some method of shortening the working day of those The Fight for Export Markets 117 employed in production without decreasing their purchasing power. Whereas, at present, the effect of the introduction of any new labour-saving process will be either to throw a number of men out of work altogether or to divert their energies from the manufacture of ultimate consumable goods to constructional work or plant extension, thus increasing the supply of money without, at the same time, increasing the supply of consumable goods, and consequently raising prices all round. So that society is actually poorer, in purchasing power or ability to consume, for every increase in its potential wealth or ability to produce. However rich a country may be in natural resources, machine-power and labour-power, its resources can never be fully utilised, and the standard of living of its population as a whole can never be improved while price is allowed to fluctuate according to the amount of money on the market. Any attempt to 118 The New Economics augment the national income will tend merely to raise prices and lower the value of the monetary-unit. The wage-earning section, including small salaried workers, comprising the bulk of the population, being kept permanently at the lowest possible level of subsistence, the home market for most manufactured articles can hardly be said to exist. The professional and business classes and higher salaried workers will be able to supplement their income from investment. Consequently, much of the nation's energy will be turned to the manufacture of luxury goods for the well-to-do ; thus further increasing the price of necessities, since the purchasing power issued as wages in their manufacture and distribution does not enter the market against the luxury goods themselves, but against the necessities of life. Beyond expenditure on luxury goods, the incomes of the well-to-do portion of the community will be spent on capital invest- The Fight for Export Market 119 ment that is to say, on the construction of fixed capital, which will further increase the price of necessities by turning the nation's energies to the manufacture of goods which do not enter the market as consumable products, and thereby increasing the propor- tion of money to consumable goods. The nation's energies will be turned more and more to the manufacture of capital goods, tending more and more to diminish the home market for consumable goods, since all capital costs are debited to the consumer in the price of the ultimate article. The price of the goods bears a steadily gathering burden of capital charges, and the supply to the home consumer is correspondingly diminished. The home market for ultimate goods being restricted, it also follows that the exports of this country will be paid for mainly by the raw materials for still further export of manufactured articles. There is thus an ever-increasing rivalry 120 The New Economics between the various manufacturing nations for the strange privilege of dumping their goods abroad, and a continuous lowering of the value of manufactured articles in terms of foodstuffs. Each new invention that should mean that the nation responsible benefits either by increased consumption or by added leisure means merely that that country is enabled to dump more goods abroad than its neighbours. And so it goes on. One of the results of this is an ever- increasing dependence on abroad for food- stuffs by the countries engaged in this strange rivalry, since all their energies must be turned to production for export to compete with their neighbours. The newer countries, not to be outdone, and aided by an export of capital goods from the older countries, now evince a strong desire to enter this peculiar contest; and we have the spectacle, at which the gods must laugh, of all the nations of the world competing for an ever-diminishing supply of foodstuffs. The Fight for Export Market 121 Perhaps we should not use the phrase " ever-diminishing." Heaven preserve us, we shall have the Malthusians after us! We mean, of course, that the supply is diminish- ing because nations are turning their energies away from agriculture to the mere fight for export markets. But since the market for manufactures in those countries not yet regarded as manufac- turing consists of a limited effective demand, and since that demand, limited as it is, is rapidly being met by the countries themselves now entering the manufacturing arena, countries manufacturing for export must compete with each other for a rapidly diminishing export market. Such a struggle for export markets can have only one end, a world-war, when the peoples of this earth will writhe dutifully in the agonies of mustard-gas, because they are unable to distribute the product of industry. CHAPTER FIFTEEN HOW PRICES ARE FIXED THE conclusions reached in our last chapter are those of Mr C. H. Douglas in his work: " Credit, Power, and Democracy," and it is with Mr Douglas's analysis that we are now more directly concerned. No one who has followed us thus far in our argument can have failed to realise that the problem with which our civilisation is faced is simply and solely a defect of pur- chasing power, though it is almost in the nature of anti-climax to admit it! We have the machines, we have the men, but the money which would purchase the necessities of life we are unable to distribute. This insufficiency of purchasing power rests on two factors. In the first place, How Prices are Fixed 123 machine-production is rapidly displacing human labour the machines are doing our work for us ; yet the mass of the population being, by our " economic " system, dependent for their livelihood solely on having some sort of work no matter how inherently useless, they could not exist at all unless work was made for them. Thus they are set to labour on construc- tional work, building machines which could flood the earth with goods we are utterly unable to distribute. In the periods of " trade-depression," which follow on periods of " trade-expansion " and mean merely that we have exported till the markets of the world are glutted with goods for which there is no effective demand millions are thrown out of employment which represents their only means of livelihood. On the other hand, if work is found for them, at the public expense, to enable them to live, there is an issue of purchasing power which does not simultaneously increase the 124 The New Economics supply of consumable goods, and conse- quently the prices of goods on the market are raised, and the rest of the community has its purchasing power diminished; and since higher prices mean higher costs, the " trade depression " becomes more acute, and still more men are thrown on the public purse. This in itself is a sufficient condemnation of a system, that it can only benefit one section of the community at the expense of the rest. The other factor in defect of purchasing power is obviously the factor of price. Those who have never studied the subject are often heard declaring stoutly, " that we cannot interfere with the law of supply and demand." No greater nonsense has ever been planted by a popular press in the minds of a great people. Prices at present vary quite arbitrarily according to the amount of money on the market ; but this means that every attempt to increase purchasing power for one section of How Prices are Fixed 125 the community would, under this system, merely result in higher prices, and conse- quently decreased purchasing power for the community as a whole. There is, with our present system of price fixing, no escape from this dilemma. Under this strange system, purchasing power can only safely be issued if the amount of consumable goods on the market are simultaneously and proportionately increased. But this is clearly impossible ; even when the purchasing power is issued as wages and dividends during the manufacture of immedi- ate consumable articles, a considerable period must elapse before the goods are offered for sale. Still less, then, in the issue of wages, salaries or dividends on account of the erection of manufacturing plant, can we expect any reserve of purchasing power when the plant is finally used in the production of ultimate articles. We wish to make this clear beyond any possibility of doubt. Suppose a community 126 The New Economics wishes to build plant that will turn out goods with less expenditure of labour than formerly, thus enabling the community to increase its production and consumption of goods. Now it is obvious that money will be issued in wages and dividends during the construction of the plant, and that this represents a nominal increase of purchasing power. It is also surely obvious that this purchasing power must remain in reserve until the product is actually completed and on the market, if the community is to enjoy the fruit of its labour. Now remark what happens under our own system. The money is certainly issued as wages, salaries, dividends, but far from remaining as a reserve of purchasing power against the ultimate goods when made, it merely serves to raise the price for everybody (including those with fixed incomes, the bulk of the population) of the cost of living goods at that time on the market. So that when the ultimate goods on account of which the How Prices are Fixed 127 plant extension was undertaken are eventually made and offered for sale, there is no " effective " demand unless fresh construc- tional work is undertaken, which still further increases our powers of production and still further decreases our power of purchasing the product. To enable the industrial machine to function we must maintain an effective reserve of purchasing power. To do this we must arrange (i) that each displacement of human labour by machines does not result in a decrease of purchasing power, and (2) that purchasing power is increased when our powers of production are increased ; and this, it follows, can only be achieved by arranging that price shall no longer be the ratio of money to goods, but the ratio of consumption to production enabling our power of pur- chasing the product to be increased instead of decreased with each advance in our powers of production. Before stating this more precisely let us be 128 The New Economics quite clear as to present methods of price- fixing. It ought not to surprise the reader to learn that price is an all-important factor in the destinies of nations, since it is only by a correct regulation of price that a community can enjoy the product of its labours. At present, prices vary according to the amount of money on the market; that is to say, with the expansion or contraction of credit, irrespective of the needs of the community. An expansion of credit, if it is not accompanied by a simultaneous increase in the supply of consumable goods, must infallibly raise prices. To say that prices are " controlled by the law of supply and demand " is a delightfully vague phrase, carefully calculated to convey the impression that suppliers are competing for a fixed demand. Logically, supply need only be limited by the needs of the com- munity, and demand should be the expression of its needs. If goods and purchasing power How Prices are Fixed 129 are both kept in short supply, the " law of supply and demand " will still operate very nicely: a very limited demand will still compete for a very limited supply. Prices cannot, at present, fall below " cost " which in itself is considerable, mounting with fresh expenditure on capital account and including all waste and capital depreciation. Actually, of course, prices are very much in excess of the " cost," although a big percentage of the surplus profits may still be debited as " cost." They may be utilised for plant extension, as was largely done during the war, or counted off against depreciation of existing plant, which plant has in all probability been more than paid for by the consumer in the price of the product. There is no inducement for suppliers to distribute more goods at home than will suffice to absorb rapidly the small reserve of purchasing power still in the hands of the public. The bulk of the goods produced 130 The New Economics will be shipped abroad in return for raw material for further export. The manufac- turer-merchants have no inducement to distribute them in this country ; it matters little to them,' who consumes them so long as they obtain payment. They are never particularly far-sighted or versed in the rudiments of economics, so that when export markets are exhausted and works must close down, it does not occur to them that the economic system is at fault, that a simple distribution of purchasing power at home would set machines working at full pressure to turn out goods to meet the demand, solve all their trade difficulties, and render the community, including themselves, contented and prosperous. Nothing is embedded more deeply in the national unconsciousness than that one section of the community can only benefit at the expense of another. CHAPTER SIXTEEN THE NEW ECONOMICS WE have emphasised the fact that there is no reserve of purchasing power, because it is the keystone of our present system and the explanation of its breakdown. Money is returned to the banks through the medium of prices practically as rapidly as it is issued. An expansion of credit, in the form of a loan for industrial development, though it appears as purchasing power in wages, salaries and dividends, serves merely to raise prices, so that the amount of the loan is returned to the banks almost immediately through suppliers of the cost of living goods. Yet the amount of the loan, though it has already been extracted from the pocket of the consumer in the form of higher prices, will be again charged to him in the cost of 132 The New Economics the goods against which the loan was made, and over and over again in future output of the industry for purposes of capital expan- sion. The consumer is thus continually in the debt of the bank; since even the small pro- portion of the output that can be marketed at all in this country can only be paid for by the issue of purchasing power to the public, in the form of wages, salaries and dividends, by means of a fresh loan the amount of which loan must be charged again to the consumer in the price of the goods (not yet made) for which it was issued; to repay which a still further loan will be necessary, and so on. To maintain the system at all, it is essential, since there is hardly any home market for consumable goods, to turn our energies to capital expansion. The money that is retrieved from the consumer as capital or overhead charges can only be utilised in the purchase of fresh capital The New Economics 133 goods; so that the community in its prices must bear the burden of enormous capital charges, constantly expanding and spread over a relatively small output. Potential capacity to produce is increased out of all proportion to the effective demand that is being issued in wages, salaries and dividends. Any attempt to raise the standard of living for the poorer sections of the community merely lowers the value of the monetary unit and results in an increase of price all round. The standard of living of the small privileged section of the com- munity may be judged by varying codes. Up to a certain amount their incomes will be charitably spent in providing work for those who cannot live without it; and above that amount, it will still be so spent, for money " saved " (as Mr R. G. Hawtrey remarks) is, of course, spent it is spent on the construction of fixed capital that is never likely to be utilised this side of the Styx. Just as a man in debt hopes to extricate 134 The New Economics himself by applying to a money-lender and only plunges himself still more hopelessly into debt; so an initial defect of purchasing power inherent in the economic system increases with time, till with works closing down and several millions of the population subsisting on small unemployment doles, breaking point is reached and revolution can only be averted by a greater calamity still : the national energies unable to turn to use- ful production are diverted skilfully to the manufacture of weapons of destruction, and the manhood of the country set out to destroy some neighbouring people in the same unhappy predicament. The remedy for our economic ills, by increasing purchasing power and enabling the community to absorb the product of its labour, is so simple, so easy of application, and follows so obviously from the diagnosis of the disease, that only the darkness of the public mind on all matters outside its daily routine has prevented it from being adopted. The New Economics 135 The proposals have been worked out in some detail by Mr Douglas and Mr A. R. Orage (Editor of The New Age) in " Credit Power and Democracy/' The scheme there outlined was put forward with special application to the mining industry, but is of course appliable to any industry. It has been our endeavour to guide the reader step by step through the maze of our present system, till he is in a position to understand these proposals and appreciate their significance. Only unfamiliarity with the principles they formulate can render them difficult. In essence, they are simple compared with the complexities of our present financial mechanism. If we have made these principles familiar to the reader^ our task is accomplished, and we need only refer briefly to the proposals themselves. The actual details the reader will learn best from Mr Orage's lucid 136 The New Economics exposition in " Credit Power and Democ- racy." No remedy for our economic ills can hope to be effective that does not involve both consumer control of credit and the establish- ment of the Just Price. Financial credit is based on the real credit of an industry, its estimated earning capacity, so that at present we pay interest to banking companies for the use of our own credit. Banking is a very profitable business, if you happen to be one of the :< Big Five." All that you require, having admission to the Clearing House, is a plenti- ful supply of ink, ledgers and bank clerks; and whatever may happen to trade in general, your balance sheet and the building business will bear witness that you thrive. It is suggested that a Producers' Bank be formed in connection with an industry, on the basis of the real credit of that industry. The shareholders of the Bank would consist of all those engaged in the industry, and The New Economics 137 would be entitled to vote at a shareholders' meeting. The Bank as such would pay no dividend, but all future expenditure on capital account would be financed jointly by the owners and the Producers' Bank, in the ratio which the total dividends bear to the total wages and salaries; capital already invested in the industry being entitled to a fixed return of say six per cent. In the case of reductions in the cost of working, one half such reduction would be dealt with in the National Credit Account, the remainder being credited equally to the company owning the plant and the Producers' Bank. The scheme, it will be remarked, can be applied instantaneously ; nothing more elaborate being required than the affiliation of the Producers' Bank with the Clearing House. The average miner's wage has now fallen to the starvation level of two pounds a week, and the " unemployment problem " (as we choose to consider it) has become so impera- 138 The New Economics tive that even the provision of work for our unemployed in the loan of capital to Communist Russia cannot avert for long the inevitable catastrophe. We have no sympathy with senti- mentalism, and no doubt it would be senti- mental to permit our own people to purchase the product of their labour if it could be avoided. In cold fact, it cannot; assuming it is not the business of industry to satisfy the needs of the population but merely to flourish in an abstract isolated sort of way as a proof of patriotism, surely it is obvious that it cannot flourish unless there is a market, and that there cannot be a market unless the means of payment is distributed. Regarding the other factor in the distri- bution of purchasing power, that of price, the reader should arrive at this from a con- sideration of our previous analysis. It is clear that price can no longer fluctuate according to the amount of money on the market, if we are to reap the benefit of The New Economics 139 cheaper production; since at present (as we have shown) we are in fact poorer for every increase in our potential wealth or capacity to produce. As production, or capacity to produce, increases relatively to consump- tion, price must drop; and as consumption increases relatively to production, price must rise, since we are now living up to our income. Price, therefore, must be that proportion of cost that the (cost) value of all classes of commodities bears to the (money) value of total production, consumption including capital depreciation and export, and pro- duction including imports and of course capital appreciation. The deficit would be made up to the manufacturer, as it is now, by a creation of credit with this difference, that it would no longer appear in the price of the product; we do not consume the plant, though at present we do in fact pay for it, in the price of the product and in higher prices of cost 140 The New Economics of living goods, several times over. This creation of credit would mean an actual increase of purchasing power, since we are richer to the extent of the capital develop- ment or increased productive power that it represents. The foregoing applies, of course, only to the home market; goods for export could be sold at any price necessary to undercut our competitors. It has long been a crying need that companies should publish their costing accounts. Under our present costing system, all charges on capital account, including cost of upkeep of plant and an allowance for depreciation and waste, are debited to the consumer. These " over- head charges " are calculated in various ways, usually as a percentage on the direct labour cost for some specified period. The machines may be in perfect working order, jret written off in the company's accounts as valueless, while charges for depreciation will The New Economics 141 continue to be debited to the consumer long after the original cost of the plant has been recovered. All that is proposed is a different and more rational system of costing ; no more elaborate than the present system in fact, incompar- ably less so, enabling industry to function with perhaps one tenth of the labour at present expended and with much greater efficiency. Also, no section of the com- munity would suffer. On the contrary, all would gain by lower prices and a revived demand. It will be remarked that price is and should be a sort of trade barometer; and that, whereas at present, trade prosperity is marked by a rise in price and consequent depression, price regulated by the above ratio would be lower with a boom in pro- duction and " trade prosperity " could con- tinue up to the limits of our powers of consumption. These proposals, it must be emphasised, 142 The New Economics are not to be confused with a state regulation of price ; the manufacturer or retailer could offer his wares at any price he chose, though he would gain nothing by raising his price, unless he sold above cost, since the credit received (representing the difference between his selling price and the cost of the article) would be correspondingly reduced. To bene- fit by additional profit, he must therefore sell above cost, bear the entire cost, include all charges in his selling price, and find a market for his goods at the higher price. Prices, at present, it has been estimated, are roughly four times what they would be under a more rational system of costing. Nor are these proposals to be confused with what is loosely called, in our flabby modernist terminology, " socialism " or " collectivism " state control of industry. The purpose of industry is to satisfy the needs of the com- munity; this, at present, it is prevented from doing, owing to the barbarous private monopoly of the public credit and irrational The New Economics 143 costing system. The administration of in- dustry must always be in the hands of those best qualified to direct it, in managerial or technical capacity ; but the decision as to the class of goods to be produced should obviously rest with the consumer. The bureaucratic administration of industry has nothing in its favour to recommend it. Possibly, in the staple industries, the new industrial bank would form the nucleus of a guild; or it may be, consumer control of credit would give fresh life to private enter- prise, in fields where private enterprise is best able to serve the community. What is clear, beyond any shadow of doubt, is that no form of industrial organisation can co-exist with our present system of financial monopoly and irresponsible price - fixing. Private enterprise is now little more than a name for the corrupt to conjure with ; the financial ring is well-nigh impenetrable. The flowering of our civilisation or its complete extinction will be decided within 144 The New Economics the next few years. It may be doubted whether, in the history of our planet, so momentous a decision has ever been brought to the bar of a public so little capable of judgment. It seems almost as though the magnificent effort made during the recent war has left the nation spiritually, mentally and physically exhausted, in which semi-comatose condition it will be whirled into the next war and the next world ! a war that will have in it nothing of the inevitable, except that a people that can neither think nor act must be prepared to suffer. The old order has broken down; whether it will give place to the new or involve us in its breakdown, it rests with the present generation to decide; and it has only a few years at the most to make up its mind, before night is upon us. The alternative, setting aside the possibility of an entire collapse of the credit-system, on the lines of the Russian debacle, is a world- The New Economics 145 war infinitely more terrible than the last, and which will in all probability spell the end of western civilisation. Sometime, somewhere, if humanity is to survive, these proposals will be adopted ; the problem of the Just Price is the final pro- blem posed by the historical Sphinx, and the nations that cannot solve it must perish. K BOOKS ON ECONOMICS Major C. H. DOUGLAS Economic Democracy. By Major C. H. DOUGLAS. Second and Revised Edition. Cr. 8vo. cloth. 6s. net. Credit Power and Democracy, with a Draft Scheme for the Mining Industry. By Major C. H. DOUGLAS. With a Commentary on the included Scheme by A. R. ORAGE. Second and Revised Edition. Cr. 8vo. cloth. 7s. 6d. net. The Control and Distribution of Production. By Major C. H. DOUGLAS. Cr. 8vo. 7s. 6d. net. The Douglas Theory: a Reply to Mr J. A. Hobson. By Major C. H. DOUGLAS. Sewed. 6d. net. W. ALLEN YOUNQ Dividends for All, Being an Explanation of the Douglas Scheme for Solving the Industrial Crisis, by Rescuing the Nation from the Financial Morass and Setting it on the Road to Prosperity. By W. ALLEN YOUNG. Cr. 8vo. sewed. 6d. net. N. D. S. It's Like This ... By N. D. S. Dealing with the Douglas New-Age Scheme. Sewed. 6d. HILDBRIC COUSENS A New Policy for Labour. An Essay on the Relevance of Credit Power. By HILDERIC COUSENS. Cr. 8vo. 5s. net. A book designed to be a topical introduction to the ideas, economic and social, of Major C. H. Douglas. ARTHUR KITSON Unemployment : the Cause and a Remedy. By ARTHUR KITSON. Cr. 8vo. 5s. net. M. B. RECKITP and C. E. BECHHOFFER The Meaning of National Guilds. By MAURICE B. RECKITT and C. E. BECHHOFFER. Second and Revised Edition, with a Preface and a New Chapter on Current Problems. Demy 8vo 8s. 6d. net. Q. R. STIRLING TAYLOR Guild Politics: a Practical Programme for the Labour Party and the Go-operators. By G. R. STIRLING TAYLOR, Barrister- at-Law. Cr. 8vo. Boards, 3s. 6d. net; cloth, 6s. net. LONDON: CECIL PALMER, BLOOMSBURY STREET, W.C.i OTHER LITERATURE FOR STUDY ARTHUR KITSON A Fraudulent Standard. The Money Problem. R. Q. HAWTREY Currency and Credit. The New Age. Weekly 7d. 38 CURSITOR STREET, E.C.4 Public Welfare. Monthly 3d. 20 RECTORY ROAD, BARNES YB 60770 517632 UNIVERSITY OF CALIFORNIA LIBRARY