II

INFLATION AND DEFLATION

I 2 I

schemes must diminish fro tanto the supply ofcapital available for ordinary industry. If thisis true, a policy of national development willnot really increase employment. It will merelysubstitute employment on State schemes forordinary employment. Either that, or (so theargument often runs) it must mean Inflation.There is, therefore, little or nothing that theGovernment can usefully do. The case ishopeless, and we must just drift along.

This was the contention of the Chancellor ofthe Exchequer in his Budget speech. “It is theorthodox Treasury dogma, steadfastly held,” hetold the House of Commons, “that whatevermight be the political or social advantages, verylittle additional employment and no permanentadditional employment can, in fact, and as ageneral rule, be created by State borrowing andState expenditure.” Some State expenditure,he concluded, is inevitable, and even wise andright for its own sake, but not as a cure forunemployment.

In relation to the actual facts of to-day, thisargument is, we believe, quite without founda-tion.

In the first place, there is nothing in theargument which limits its applicability to State-promoted undertakings. If it is valid at all, itmust apply equally to a new works started byMorris, or Courtaulds, to any new businessenterprise entailing capital expenditure. If itwere announced that some of our leading cap-tains of industry had decided to launch out