The economy and finance of the war, being a discussion of the real costs of the war and the way in which they should be met

Preface

The greater part of this little book is constructed from material used in two public lectures delivered in Cambridge under the titles ** The Economic Costs of the War " and " The Distribution of the Costs of the War/' Some of the topics treated in it are also discussed in articles which I contributed to the Contemporary Review for December 19 15 and April 1916; and a few passages from these articles are, with the kind permission of the Editor, reproduced verbatim. To obviate misunderstanding, it may be well to say that, while the general lines of analysis here set out would probably be accepted by most competent economists, I should not venture to claim an equal measure of assent for all the practical recommendations,

A. C. P.

March iQi6>

Contents

Section Page

1. Introductory g

a. The Money Costs of the War

Appendix

TABLE OF PRIVATE ECONOMIES

When a person has decided to effect economies in his personal consumption up to a certain amount, his choice of the particular items in which to economise should be determined by two sets of considerations : the comparative injury done to himself by spending less money on different things, and the comparative benefit conferred on the State by handing over to them money saved on different things. The personal side of the matter does not need discussion here. It is obvious that a man hurts himself more by economising on necessaries than on luxuries ; and that to cut down the provision of milk for infants, or of the educational opportunities for young children, is more injurious than to abandon beerdrinking and attendance at picture palaces. The other aspect of the matter is, however, less well understood, and it has, therefore, seemed worth while to construct a kind of table showing the comparative extent to which different sorts of private economies are also economies from the collective standpoint of the nation as a whole.

L Articles of Food and Drink

1. A sovereign saved in respect of any ordinary non-dutiable article of food or drink means a sovereign's worth, and sometimes a little more than a sovereign's worth, of goods gained for the nation. Economies in respect of articles imported from overseas, such as oranges and bananas, or articles the raw materials of whose manufacture are imported, such as beer, are somewhat more advantageous than economies in home-grown articles. But all economies in ordinary non-dutiable articles of food and drink are worth to the nation at least their full face value.

2. A sovereign saved on an ordinary article of food or drink, part of whose cost is made up, as in the case of sugar, tea, and alcohohc drinks, of customs or excise duties, has, for the nation, its full face value minus the amount of the duty.

II. Articles of Clothing

1, A sovereign saved on the purchase or repair of ordinary articles of clothing or of footgear means a sovereign's worth (or a little more) gained for the

9a THE ECONOMY AND

nation. The fact that reduced purchases of clothes now will necessitate increased purchases after the war does not affect the point.

2. There is some reason to think that a sovereign saved on purchases of woollen garments has more value for the nation than the same sum saved on cotton garments, because wool is used more largely than the other textiles in the manufacture of soldiers* kit.

3« A sovereign saved in respect of costumes made in England, the value of which principally depends on the exquisite finish of highly specialised women workers, has much less than full value to the nation, because those highly specialised workers could not render in any other sphere services nearly as valuable as those which they render in their present sphere.

4. A sovereign saved on the purchase of old lace, owned by somebody in this country and not capable of being replaced, has no value for the nation, because it releases no capital or labour.

III. Travel

I. A sovereign saved by refraining from journeys in trains has full value for the nation. The idea that it is ** patriotic '* to travel because the Government, in effect, gets the fares is a fallaqr; the running of trains is, in all circumstances ^ a real cost to the nation, because it uses up capital and labour.

2. A sovereign saved by travelling third class instead of first class has less than full value for the nation, because the real cost of carrying a first-class passenger differs much less from that of carrying a third-class passenger than the price of a first-class ticket differs from that of a third-class ticket.

3. A sovereign saved by refraining from journeys in motor cars and taxi-cabs has nearly full value for the nation, because it releases petrol and chauffeurs* labour. It has not quite full value unless the motor car or taxi - cab can itself be converted to war service.

IV. House and Estate

1. A sovereign saved in respect of the building, repair and painting of a house or a boat, or of the purchase, repair and upkeep of a motor car or motor bicycle, or of the purchase of furniture or fuel, has full value for the State.

2. So also has a sovereign saved by the dismissal of chauffeurs, ordinary men servants (except in respect of that part of the saving which consists in the man-servant tax), general labourers, and general women servants without specialised training but physically fit for industrial work.

3. A sovereign saved by the dismissal of servants, whose value is chiefly due to highly specialised qualities of little utility for war needs — a highly-skilled flower - gardener, an artist in cookery, an exceptionally competent nursery maid or governess, a court musician or a court jester — has much less than full value for the State,

4. A sovereign saved by economy in the use of water, gas and electric hghting has somewhat less than full value for the State, because, though the coal and labour utilised in producing these things can be employed for war purposes, the large and valuable plant which is mainly responsible for them cannot easily be so employed.

V. Recreation

1. A sovereign saved in respect of game preserving and shooting has full value for the State.

2. A sovereign saved by non-attendance at concerts, theatres and lectures has much less than full value for the State, because the musicians, actors and orators, who would be set free thereby,

FINANCE OF THE WAR gb

Sire highly-specialised persons, probably incapable of rendering to the Government a service nearly as valuable as that which they render to the public. In a smaller degree the same consideration holds good of economies in books and newspapers,

3. A sovereign saved by buying cheap seats instead of expensive seats at concerts, theatres and lectures has very little value for the State, because the real cost of providing the expensive seats exceeds that of providing the cheap ones by much less than the excess of the price charged.

4. A sovereign saved on totacco and cigars has full value for the State in respect of that part of the cost which is not due to the customs duty.

5. A sovereign saved by refraining from betting and gambling has practically no value for the State, because it releases practically no capital and labour.

VI. Salaries, Pensions and Charities

A sovereign saved by reducing the salaries or wages of employees whom we continue to employ, whether they be members of Parliament or housemaids, by cutting down pensions that we have been accustomed to provide, or by reducing our subscriptions to hospitals or charities, has no value whatever for the State. All that happens is that a sovereign is transferred to us from other people, and no real economy is directly effected either in goods c n services.

U V

:: |^«to immediate recall

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