War-Time Financial Problems

XIX
TIGHTENING THE FETTERS OF FINANCE
The New Meaning of Licence—The Question of Capital Issues—Text of the
Treasury Regulations—Their Scope and Effect—The Position of the Stock
Exchange—Wider Issues at Stake—Should Capital be set Free?—The
Arguments for and against—Perils of an Excessive Caution—The New
Committee and its Terms of Reference—The Absurdity of prohibiting
Share-splitting—The Storm in the House of Commons—Disappearance of the
Retrospective Clause—A Sample of Bureaucratic Stupidity

XX
MONEY OR GOODS?
"Boundless Wealth"—Money and the Volume of Trade—The Quantity
Theory—The Gold Standard—How is the Volume of Paper to be
regulated?—Mr Kitson's Ideal

INDEX

I

THE OUTLOOK FOR CAPITAL

September, 1917

The Creation of Capital—The Inducement—War and Capital

One of the questions that are now most keenly agitating the minds of the investing public and of financiers who cater for its wants, and also of employers and organisers of industry who are trying to see their way into after-the-war conditions, is that of the supply of capital. On this subject there are two contradictory theories: one considers that owing to the destruction of capital during the war, capital will be for many years at a famine price; the other, that owing to the exhaustion of all the warring powers, that is, of the greater part of the civilised world, the spirit of enterprise will be almost dead, the demand for capital will be extremely limited, and consequently the supply of it on offer will go begging to find a user. It seems likely that, as usual, the truth lies somewhere between these two extreme views; but we shall best answer the question if we first get a clear idea of what we mean by capital.

On the subject of the definition of capital, economists differ with all the consistency that they only show in differing. One of the earliest descriptions of capital was given by Turgot, who thought that capital meant "valeurs accumulées." In this wide sense the word covers all goods which have value, that is, can be exchanged into other goods. From this point of view, the schoolboy who invests sixpence in marbles is a capitalist, because he has bought an asset which is not immediately consumed, but can, later on, if his fancy urges him, be exchanged into white mice or any other object of his desire. On the other hand, the schoolfellow who at the same time spends sixpence on cherries and eats them has put his money into immediate consumption, his asset is digested, and he has no capital in any sense of the word.