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Full text of "War-time financial problems"

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* Thus the problem which a statesman who had
thought out the economics of war beforehand would
have recognised as the keystone of his policy, would
have been that of diverting the activities of the
country from providing itself with comforts and
amusements to turning out goods required for war,
and of doing so with the least possible friction, the
least possible alteration in the economic equilibrium
of the country, and, above all, with the least possible
cost to the national finances. We arrive at the true
aspect of this problem 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
the fighting forces. Now what was the straightestv