m more easily if
we leave out the question of money altogether and think of it in units
of energy. When a nation goes to war it means to say that it has to
apply so many units of energy to the business of fighting, and to
provide the fighters with all that they need. If at the beginning
of the war its utmost capacity of output was, to mention merely a
fanciful figure, a thousand million units of energy, and if it was
clear that the fighting forces of the country would need for their
proper maintenance five hundred million units of energy, then it is
clear that the nation's ordinary consumption of goods and services
would have to be reduced to the extent of five hundred millions of
units of energy, which would have to be applied to the war, that is,
assuming that its possible output remained the same.
In other words, the spending power of the citizens of the country
had to be reduced so that the industrial energy that used to go into
meeting their wants might be made available for the purposes of
fighting forces. Now what was the straightest, simplest and cleanest
way of bringing about this reduction in buying power on the part of
the ordinary citizen which has been shown to be necessary for the
purposes of war finance? Clearly the best way of doing it is by
taxation equitably imposed. When the State taxes, it says in effect
to the citizens, "Your country needs certain goods and services, you
therefore will have to go without those goods and services, and the
simplest way to make you do this is to take away your money and so
ration your buying power. Whatever is needed for the Army and Navy
will be taken away from you by taxation, and the result of this will
be that, instead of your indulging in comforts and luxuries, to the
extent of the war's needs the Government will use your money for
paying for what is needed for the Army and Navy."
If such a policy had been carried out the cost of the war to the
community would have been enormously cheapened. There need have been
no general rise in prices because there would have been no increase
in demand for goods and services. Anything that the Government
spent would have been counter-balanced by decreased spending by the
individual; any work that the Government needed for the war would have
been counter-balanced by a reduction in demand for work on the part
of individual citizens. There would have been no multiplication of
currency owing to enormous credits raised by the Go
|