TKANSACTIONS OF SECTION F. 593 



A further point has been well made by Mr. A. H. Gibson : ' When consider- 

 ing the matter of the effect on credit of great public borrowing for the purpose 

 of war it lias always to be borne in mind that tlie total amount expended is not 

 altogether lost to the nation. Part of it is transferred in the form of profii 

 to manufacturers and others engaged on war materials, and part of it is 

 represented by ammunition and otlier Government stores, which the community 

 has produced by working more strenuously, e.g., by overtime and with more 

 energy than it would have expended in peace times. But that part which is 

 represented by ammunition and other Government stores, the energy to produce 

 which has been di\erted irom productive industry, is, of course, irretrievably 

 lost to the nation, as is likewise that part expended abroad on the purchase of 

 ammunition and other stores required for the prosecution of war.' 



(ii) Effect of the Eegulations as to the Issue of Neio Capital. 

 In times of prosperity, applications for new capital are freely made and 

 freely responded to, in general with the effect of somewhat depreciating the 

 existing capital. Probably with a view to conserving the lending power of the 

 country in the national interest, a temporary regulation has been made by 

 which the Treasury is responsible for the sanctioning of any application for new 

 capital before it can be made on the market. The grounds upon which the 

 Treasury will base their action in this matter have not, so far as we know, been 

 made public, but it is presumed that they imply some inquiry as to whether 

 the public advantage would be served by the proposed issue. The Treasury 

 may and do repudiate the idea that their allowance means approval, but the 

 public will certainly infer that it does, and will give credit to the issue 

 accordingly. 



(iii) Extent to which Capital is withdrawn from Enterprise. 

 The free supply of capital towards industrial and other enterprises is inter- 

 fered with by the condition of war and the public borrowing which is the 

 necessary consequence in the following ways : 



(1) The withdrawal from the resources of capitalists of the sums they subscribe 



to the public loans. 



(2) In the depreciation of securities, which renders realisation difficult without 



loss. 



(3) In the withdrawal from the labour market of workmen of the military age. 



(4) In the contraction of the opportunities for investment with neutral countries! 



(5) In the impossibility of investment with enemy countries. 



(6) In the lack of enterprise and the feeling of uncertainty which prevail 



during warfare. 



(7) In the anticipation of difficult times to come when the War is over. 



Dr. C. K. Hobson has traced the effect of Government borrowing upon our 

 investments in foreign countries. It is no longer possible, he says, to furnish 

 the large streams of capital which normally flow into industries at home and 

 abroad. It is more than doubtful whether Great Britain is maintaining its 

 accumulated capital intact, and whether the wear and tear of plant, buildings, 

 &c.,_in this country are being fully replaced. It is unfortunately clear that 

 British holdings of foreign securities are being reduced. The appearance of 

 the second War Loan was the signal for an outburst of selling, mainly of 

 American securities. Hitherto the United States has owed us money. At the 

 outbreak of war, according to the Secretary of the Treasury, American business- 

 men and bankers w-ere indebted to London in the sum of approximately 

 90,000,000/. maturing by January 1, 1915. A large part of this amount was 

 undoubtedly repaid, in the form of gold placed to the credit of the Bank of 

 England in Ottawa, and in the form of food-stuffs, merchandise, and war 

 equipment sent to Great Britain. 



(iv) Effect of Borrowing in Great Britain hy Allied Governments. 



This takes two forms, (1) a direct subsidy by the British Government to its 



Allies, (2) the subscription in London of a loan to an Ally. We do not know 



to what extent assistance of the first class has been rendered, or whether it has 



been mainly in money or in kind ; but it is obvious that our Allies have had to 



1915. y Q 



