272 REPORTS ON THE STATE OF SCIENCE, ETC. 
the more effective methods of borrowing, e.g. continuous borrowing stimulated 
by advertisement, which were put into force later. 
Mr. Gibson yeplies: ‘ Theoretically Yes, practically No.’ In the 
absence of a General Service Act the Government had to allay discontent and 
to encourage increased production by increasing purchasing power. ‘ Work- 
people wanted higher wages.’ Dr. Dalton comments: ‘They wanted higher 
money wages, when prices rose. I doubt if, had there been no inflation, they 
would have pressed for higher real wages.’ 
Mr. Gibson also controverts Dr. Dalton’s replies. Admitting that heavier 
taxation would have curtailed consumption, he does not think that an extra 
25 per cent. could ‘have been equitably distributed over all classes without 
causing further demands for increases of wages and the breaking up of a large 
number of the homes of the fixed-income class.’ 
Dr. Dalton answers : ‘I entirely disagree. If prices rise 100 per cent., that 
is equivalent to an additional income-tax of 10s. in the pound on the “fixed 
income class.’’ Inflation hit them hardest of all.’ 
Mr. Gibson continues: ‘Under scarcity conditions, during the War, pro- 
ducers, manufacturers, and traders were in a position to pass on increased 
taxation to the consumer.’ He denies also that higher interest rates would have 
attracted any considerable further amount of loans towards the end of the 
War. Why this was so he explains at some length as follows: ‘ Before the 
War the aggregate of credit balances at banks was fairly evenly divided * 
between deposit accounts and current accounts (balances due to manufacturers, 
traders, and other business concerns). At the end of 1919 the relative propor- 
tions had changed to 1-2, or in some banks 1-3. This change was due to 
Government disbursements mainly finding their way to manufacturing and 
trading accounts. Only bank officials were in the position to note the great 
change in the distribution of credit. When manufacturers were urged to 
subscribe large sums, they replied that, on account of the rise in prices and 
increase of wages, they required considerably more liquid capital than in 
pre-war times.4 Also that they were nursing their liquid capital for the 
expected world-wide trade boom after peace was declared.’ 
QueEstion 4.—fow is the taxable capacity of a nation ascertained? Has it 
been reached and passed, as Mr. McKenna suggests, in the case of Great 
Britain? 
Opinions on this question are bound to vary. Mr. Robertson gives our 
collective view when he deprecates ‘any language which suggests that the 
taxable capacity of the nation is an absolute amount.’ Evidently there must 
be some limit, though one cannot do more than suggest symptoms which point 
to the conclusion that the taxable limit is being approached. Much depends 
upon the purpose for which the Government imposes taxation, and upon whether 
the money taken by the tax-collector is spent inside or outside the country. 
Sir Edward Brabrook thinks that taxable capacity ‘cannot be ascertained.’ 
Mr. Robertson replies: ‘Almost any taxation has some deterrent effect on 
enterprise and the accumulation of capital; the question at any time is whether 
this deterrent effect is justified by the importance of the objects—national 
defence, fulfilment of obligation, or improvement of the quality of the popula- 
tion—to which that part of the nation’s income which is spent communally is 
devoted. This is a question which, from its nature, admits of no precise 
statistical answer.’ 
Mr. Shaw thinks that it cannot be ascertained ‘without reference to a 
minimum standard of subsistence for the population, and a distinction between 
productive and destructive activity. There is no limit for productive activities — 
except the limit of the citizen’s capacity for production. The State may take — 
all he produces if it supports him.’ 
* Mr. Lavington says that these were usually taken to be in the proportions — 
of 1 to 2. Mr. Gibson replies that the proportions vary in different banks 
according to the meaning given to the words ‘ deposit account,’ that his remarks — 
apply to provincial banks and not to bank accounts in London. 
4Dr. Dalton comments: ‘But if there had been heavier taxation and less — 
inflation, money wages and prices would have been lower.’ 
