Ill

THE RETURN TO GOLD

2 73

incentive to produce may be a very small pro-portion of the total value of the product. Buttake this away from him and the whole pro-cess stops. This, unluckily, is just what hashappened. The fall of prices relatively to costs,together with the psychological effect of hightaxation, has destroyed the necessary incentiveto production. This is at the root of our dis-organisation. It may be unwise, therefore, tofrighten the business man or torment himfurther. A forward policy is liable to do this.For reasoning by a false analogy from what isprudent for an individual who finds himself indanger of living beyond his means, he is usually,when his nerves are frayed, a supporter, thoughto his own ultimate disadvantage, of nationalcontraction.

And there is a further reason for nervousness.We are suffering from international instability.Notoriously the competitive power of our ex-port trades is diminished by our high standardof life. At the same time the lack of profits inhome business inclines the investor to place hismoney abroad, whilst high taxation exercises asinister influence in the same direction. Aboveall, the reluctance of other creditor countries tolend (which is the root-cause of this slump)places too heavy a financial burden on London. These, again, are apparent arguments against aforward policy; for greater activity at home dueto increased employment will increase ourexcess of imports, and Government borrowingmay (in their present mood) frighten investors.