continuance of the one thing which we are out to discontinue, the control of capital by private individuals, we should make the whole range of capitalists pay for the compensation of the expropriated section. Thus the general level of the holding of private capital would be reduced, and no special hardship would be inflicted. on any set of capitalists.

Suppose it cost us 500 million pounds to buy out any given industry. We should pay the present holders this 500 million pounds, but simultaneously we should make a Capital Levy on all fortunes above a certain level, to the extent of 500 million pounds. The particular capitalists expropriated would, that is to say, get their compensation, minus a very handsome slice which would have been cut off from them in common with other holders of private capital. There would be, even nominally, something less than 500 million pounds' worth of stock in private hands in the particular industry, and over the whole field of capital there would be 500 million pounds' worth less held by private individuals, and the same amount more held by the State. To put it shortly-the National Debt would be decreased by 500 million pounds. Think what that would mean straightaway in the lightening of taxation!

'But no,' you will say, 'the 500 million pounds have not been taken off the National Debt, because they have been used to compensate the owners of the particular industry.' That is simply a verbal confusion: the Government has got, in return for the outlay of £500,000,000 two things-one, an industry worth £500,000,000; the other, £500,000,000 of capital raised from national wealth as a whole. Clearly, the Government is £500,000,000 to the good. Moreover, not the whole of the 500 million pounds

would have been granted to the owners of the particular industry in compensation. They would have borne their share of the levy-amounting, say, to 50 million pounds; and by the time nine other industries had also been nationalised, 500 millions would actually have been paid up and the National Debt would, even nominally, be decreased by this amount, to say nothing of the return on the industries which the Government would have acquired.

1

These figures are, of course, purely arbitrary, abstract and imaginary; they are used merely to show the method, and not to correspond to any existing industries. In actual fact, the Capital Levy 1 could quite easily be made to reduce the National Debt immediately by many times the 500 million pounds of which we have been speaking, without any dislocation of industry at all.

The history of the discussion and debate on a Capital Levy is very illuminating. The argument was pressed with so much insistence and convincingness by practically everybody who knew anything about economics at all that the Government had to pretend to compromise. It dared not be sensiblebecause of its capitalist supporters; it dared not, on the other hand, flatly refuse to consider any way of raising money—because, owing to its military adventures abroad and its bureaucratic extravagance at home, it was at its wits' end for money from any source; so it made a characteristic half step. It appointed a committee to examine, not the whole question of a Capital Levy, but the illogically separated question of the taxation of 'War Wealth.'

It was as clear as noonday from the start that you 1 For the detailed arguments for a Capital Levy, see F. W. Pethick Lawrence, The Capital Levy (George Allen and Unwin), new edition,

1920.

could not distinguish war wealth from other wealth for any practical purpose. You could, indeed, as the War Wealth Committee actually did, take the estimate of wealth before the war and after it; and you could, if you pleased, say that the difference was war wealth. But, obviously, the difference was not war wealth. Some of it was due to the war, and some of it was not. Some people were vastly richer because of the war, some were vastly poorer; but no one knew how much wealth was due to the war and how much only made during the war. Yet, unless that distinction which it was impossible to draw were drawn, there was no sense or morality whatever in confining the inquiry to the proposed taxation of war wealth. Why should individuals who had grown rich by the ordinary methods of capitalism during a certain five years pay more taxation than those who had grown rich by precisely the same methods during any other five years? The only conceivable reason was contained in the implication that there was something reprehensible in making money during the war. Nobody really thought that, though a great number of people pretended to think it; and the Committee broke down. on exactly that impossibility of its reference on which it was obvious from the first that it must break down. It is indeed hard to believe that the Government ever seriously intended the Committee to do anything else but break down; it cannot seriously have contemplated a levy on war wealth; for it must have seen that a levy on war wealth, if once imposed, would not stop there. As distinct from a general Capital Levy, it would have been so unreasonable and so unjust that the victims of it themselves would have insisted on an extension of the principle into a general levy. It would have been the beginning of the expropriation

of capital. It is therefore not surprising that Mr Chamberlain said in the House of Commons, June 7, 1920:

'The Government, after full consideration of the Report of the Select Committee and of the respective advantages and disadvantages of the suggested scheme for a levy on war wealth, have come to the conclusion that the dangers attendant on such a levy altogether outweigh any advantages which can be derived from it.'

And on June 8, 1920 :—

'I am not altogether surprised at the fears which were expressed, though I confess I was surprised at their depth and at their universality. They were fears amounting almost to a panic.'

And this 'panic' shows us the real reason why we need not spend too much time in considering which of the two just-discussed methods of expropriation or nationalisation is the more just or the more practicable. It does not make a scrap of difference by what method expropriation is begun. If it is begun at all, it will be resisted by the capitalists, exactly as Home Rule was resisted by the Tories. Any measure of apparent expropriation which leaves the capitalist in_control of capital has a reasonable chance of getting through Parliament; but any measure which really strikes at the heart of the capitalist system will be resisted by any and every means. If there is no constitutional method of resisting it, it will be resisted unconstitutionally. And that will precipitate revolution.

XXII

INFLATION AND THE REAL CAUSE OF HIGH PRICES

THE War Loans, in their essence, are simply a means of making the workers pay over and over again for a war for which they have already worked to produce the necessary materials. They thus illustrate to perfection the nature of capitalist finance. I wrote in the last year of the war :

'The main confusion on which the "experts" rely in their reduction of us to financial subservience is the confusion between governmental expenditure and national expenditure.

'This loan business is only a variant of the old device by which the capitalist has always contrived to live on his capital without diminishing it—to eat his cake and have it too. He lends the State £50,000, say, and is applauded as patriotic. The money is spent; it is turned into shells which are blown away. But the patriotic capitalist has not spent the money. He is not one penny the poorer. He has made no sacrifice of any sort. On the contrary, he has his £50,000 intact and more than intact-yielding him a high rate of interest, with the best security in the world.'

This brings us to the question of inflation as a cause of high prices. It is commonly said that goods cost more because there is more money in circulation. This is putting the cart before the horse. If I go