828 REPORT—1899. 
economy and good management of the Government revenue because he pays 
annually his due share of it, we have in the Single Tax a method by which the 
Government acquires an estate of its own by confiscating the property of one class. 
4, The State as Investor. By Epwin Cannan, IA. 
If an indebted individual has more capital than he is able to use in his particu- 
lar business, the general rule is that his best investment is repayment of his debts. 
The same rule applies to a state. So till within recent years it was never doubted 
that the proper investment of the National Sinking Fund and the Post Office 
Savings Bank deposits was in the redemption, or (what comes to the same thing) 
the purchase of Government obligations. But under the conversion scheme of 
1888, consols became irredeemable till 1923, and there is now no portion of the 
funded debt which can be redeemed before 1905. The effect of this, combined 
with the fallin the market rate of interest, which began not long after 1888, and con- 
tinued till last year, has been to keep consols and other portions of the funded debt 
at prices considerably above par. When a stock is temporarily irredeemable and 
meanwhile above par, the general rule that repayment of debt is the best invest- 
ment of surplus capital need not be applicable. Whether it is the best or not 
depends on the magnitude of the premium. 
Supposing the premium to be high enough to drive the State to other invest- 
ments, we have in the obligations of local authorities an excellent security entirely 
under the control of the State. It has been objected that municipal and county 
stocks could not be bought by the million without raising the price to a prohibi- 
tive height, and this is true. But no such objection applies to lending new capital 
when it is required, This has already been done to the extent of forty millions, 
and it might be done to a much larger extent if the minimum rate of interest were 
slightly reduced and the scale under which hicher rates are charged for loans of 
longer duration were altogether abolished. The scale is defended on the ground 
that it is desirable to discourage loans for long periods. But as a matter of fact it 
is not desirable to discourage loans properly authorised for long periods, and the 
scale does not discourage them. 
5. The Mercantile System. By Professor G. J. Stokes. 
The policy of Free-trade receives no support from the analogy either of the 
individual or of the family. At first sight the collective national expenditure seems 
more in need of systematic guidance than individual expenditure. 
The principles of the Mercantile System may be considered in relation to (1) the 
end in view; (2) the means employed. 
The end in view was the accumulation of money or of the precious metals. 
Mill’s criticisms on the doctrine that the wealth of a country consists in money ° 
err in two respects, in the sense in which he regards money as a part of wealth 
and in that in which he regards other articles of wealth as distinguishable from 
money. Mill really shares the error of the Mercantile doctrines. The Mercantile 
doctrine was relatively justified in its aim of creating a reserve of purchasing power 
inacountry. The means employed were attention to the balance of trade. The 
real citadel of the Free-trade argument consists in the effect on prices of an 
artificial enlargement of the currency. In consequence of this the Mercantile 
System defeated itself in seeking to control the balance of trade. If, however, 
we substitute the policy of accumulating Immaterial Imports for that of the Mer- 
cantile System, the arguments in favour of Protection acquire a new significance. 
In so far as the interest on foreign securities is not accumulated, it is desirable that it 
should be paid in certain kinds of products. The financial needs of the state fix 
a lower limit for the accumulation of immaterial imports, The larger the area em- 
braced under our political and financial polity the better is it for the nation and 
for mankind, 
