income. In 1917-8 the gross income brought under the review of the Commissioners of Inland Revenue was 1,800,000,000l. as compared with 1,167,000,000l. in 1913-4. If the national income declines heavily, the yield of the Income Tax must fall with it, at a period when it is most necessary that it should be increased. The rate of the tax in the £ would therefore have to be advanced far beyond its present oppressive level; and other taxation would have to be imposed. But, of course, there is a limit beyond which the Income Tax would cease to yield any increase of revenue. It is, therefore, of the first importance that the national income should be maintained at its present high level, and that this should be done by increased production and not by raising wages and the cost of living.

There appears to be general agreement as to the necessity for increased production; but, broadly speaking, there are two schools of thought as to the manner in which this can be most effectively brought about. The first school suggests that the proper way to meet the situation is to reduce wages, restrict credit and the amount of paper money in circulation, and impress upon the minds of the people the belief that the country is on the road to ruin. It is maintained that, until this is done, the workers will not realise the need of increased production. I believe this course to be impracticable. We cannot go back to pre-war conditions; and, if we are foolish enough to attempt it, we are in danger of losing the benefit of the great economic lessons of the war, as well as of creating for ourselves a period of very bad trade and therefore fresh Labour and economic troubles of a gravity far exceeding those which exist now.

The second school of thought considers that the decrease in production which has been observable since the Armistice is merely a passing phase, that it reflects the natural reaction from the war effort, and that this tendency to take a holiday is observable throughout the belligerent countries. It is pointed out that the British people are already showing that they have not forsaken the habit of industry, that production is increasing, as shown by the growth of the coal output and the expansion of exports; and the belief is widely held that, if the workers only have confidence that they will obtain a

reasonable share of the increase of profits, they will respond willingly to the need for a larger output.

The aspiration of Labour for a better standard of living is a natural one; and it can be satisfied if we learn and apply the economic lessons of the war. Wars have always exercised a great influence upon output and inventions, and consequently upon economic development. The Napoleonic wars greatly stimulated the industrial development of England. The extraordinary development of labour-saving inventions in the United States had its origin largely in the lessons which were brought home to the American people in the course of the Civil War. An immense impulse was given to the economic expansion of this country by the FrancoGerman War. The smaller wars of the ensuing 44 years were accompanied by a remarkable increase in the productive power of the world, as evidenced by the growth of international trade. We do not yet know all the discoveries and the labour-saving devices that the Great War has created, but I am convinced that, if we fully utilise our power of production, it has increased during the war by at least 50 per cent.

This result cannot possibly be achieved by a policy of nationalisation, because nationalisation does not, in the nature of things, result in economic production. The capitalistic system has survived ordeal by war. It has proved itself the only one under which production is stimulated on an economic basis, and it has shown that it is capable of infinite modifications. It is quite feasible, under the capitalistic system, to satisfy the reasonable demands of labour for a share of the benefits of increased production, and a voice in the direction and control of industry. A constructive policy which would meet the reasonable demands of labour should provide inter alia:(1) For the maintenance of wages at a general level of 100 per cent. increase on pre-war rates. (2) For a great increase of production, which will result in a fall in prices, so that the margin between the workers' wages and the cost of living will be increased. The worker will thus benefit by the increase of production.

(3) That wages must not be increased beyond the present level, otherwise commodity prices will

rise and the surplus between the wages and the cost of living will disappear. It is in the true interests of the workers themselves that wages should not be advanced, so that the purchasing power of money may be allowed to increase.

If we adopt, as I believe we can and should, the policy outlined above, the economic outlook is extremely favourable. The story of the splendid economic effort of the British Empire in the Great War has yet to be written. We have been the main instrument in the destruction of the great menace to the peace of the world during the past 45 years. The German Navy is at the bottom of the sea; and British sea-power has been established upon a more unchallengeable basis than it has ever occupied before. We have extended and consolidated the Empire, and we have done these things without materially impairing our economic strength. These achievements cannot fail to be reflected ultimately in the strength of British credit.

We are leading the world in the path of economic reconstruction. We have demobilised about 3,500,000 soldiers and munition workers and reabsorbed most of them into industry. We have adopted a policy of direct taxation of unparalleled severity, and we have already practically established an equilibrium between our normal post-war revenue and expenditure.

We have refitted and shall quickly re-establish our Mercantile Marine in its old position of supremacy in the carrying trade of the world. We are rapidly reestablishing our position in international trade and finance. We shall very soon have completed the adjustment of our financial machinery to the new economic conditions, and we are about to resume the economic leadership of the world which America has already shown herself incapable of taking up. The world is hungering for our manufactures; and, if our people continue to display, as I believe they will, those qualities of fair play, industry and enterprise, which have characterised them in the past, the British Empire cannot fail to experience a measure of trade activity and prosperity such as it has never known in the past.

EDGAR CRAMMOND.

END OF THE TWO HUNDRED AND THIRTY-SECOND VOLUME.

PRINTED BY WILLIAM CLOWES AND SONS, LIMITED,

LONDON AND BECOLES, ENGLAND.