rs and the labour
it employs. This is by no means the case." It is a lamentable proof of
the backward state of the economic education of this country that it
should be necessary for well-financed and prosperous concerns to take
steps to make it quite clear to the public that they are not earning
more than they appear to be. In a well-educated community it would
be perceived at once that it is the well-financed and prosperous
companies which improve production in the interests of their
shareholders, their workmen, and the public; that the price which the
public pays for a commodity is ultimately the price at which the worst
financed and worst managed companies can just manage to keep alive;
that the higher profits earned by the better companies are not wrung
out of the pockets of the community, or their workmen, but are the
result of good management and good finance; and that the more the good
companies are encouraged to go ahead and drive the bad ones out of
existence, the better will the community be served, and the better
will be the chance of the workmen to get good wages. These platitudes
are of course, only true in a state of free competition. If there is
anything like monopoly the public and the workers are fully justified
in being suspicious and examining the source from which high dividends
are produced.

Such being the reason why this outburst of capitalisation of reserves
first began--since in these days all capitalists and those who have to
manage capital feel that they are working under criticism, which is
not only jealous and suspicious (as it should be), but is also too
often both ignorant and prejudiced--it is interesting to note that
the movement which was so started has been stimulated by its very
exhilarating effect on the market in the shares of the companies
concerned. Why this should be so it is difficult at first sight to
say. What happens is merely this--that a company, let us suppose, for
the sake of simplicity, with a capital consisting wholly of 3,000,000
Ordinary shares, has accumulated out of past profits, or out of
premiums on new issues of shares, a reserve fund of L1,000,000. Its
net profit has lately averaged L400,000, and it has, year by year,
distributed L300,000 in the shape of a 10 per cent. dividend to
its shareholders, and put L100,000 into its reserve fund, which is
represented on the other side of the balance-sheet by buildings
and plant and a certain amount of first-class invest