284 REPORTS ON THE STATE OF SCIENCE, ETC. 
been caused by such a levy would have been as great as the shock which private 
credit has now sustained, and which might have been avoided had a capital 
levy been imposed ; for in this event the inflation of 1920 would have probably 
been avoided, and it is this inflation which is latgely responsible for the 
present condition. However, in view of the present state of private credit it 
would be disastrous at this time to superimpose on the present shock such 
further shock as might be caused by a capital levy.’ 
Mr. Gibson maintains that ‘No country is nationally bankrupt until it 
cannot pay, within a reasonable time, the interest on its external debt by 
exports or other form of settlement. In 1914 we had 4,000,000,000/. invested 
abroad. Since that year we have sold about 1,000,000,000/. of these investments 
and created an external debt of 1,000,000,0007. in round figures. We have 
therefore a net balance abroad of about 2,000,000,000/., not taking into account 
any indemnity payments yet to be received from former enemy States or loans 
to Allies. Last year we had a net trade balance in our favour, taking invisible 
exports into account, and a net favourable balance is lkely to be maintained 
in future years. I see no present necessity for a forced loan. A capital 
levy directed solely against War-fortunes I support if practicable. It would 
accelerate the economic recovery of the country and tend to lower costs of 
production, after a small temporary disturbance to credit. Preferably it should 
take the form for several years of payment of 5 or 6 per cent. interest on 
amount assessed.’ 
Sir J. C. Stamp replies; ‘It is a nice balance. It all depends upon the 
prevailing psychology in financial circles at the time when it is introduced, 
It is not enough to prove that mathematically or actuarially the effect should 
not follow. It is what people imagine that will rule the issue, and not what 
they ought to think.’ 
Dr. Dalton also does not take seriously ‘the dangers of national insolvency.’ 
He adds: ‘ But I favour a capital levy sufficiently productive of revenue to 
wipe out at least half the National Debt within the next few years. I am in 
general agreement with Prof. Pigou’s argument on this subject, and I regard 
such a levy as specially desirable if a policy of deflation is adopted, as I think it 
should be. Unless the business world is successfully bamboozled into unreason- 
able panic, I believe that no appreciable shock to private credit need result 
from such a levy. (For a detailed scheme, with which I am in general agree- 
ment, though the proposed minimum exemption from the levy—5,000/.—is, 
perhaps, rather too high, see the Second Interim Report of the Joint Labour 
Committee on Taxation and the ‘Cost of Living.) I am opposed to a forced 
loan. It appears to me to combine nearly all the disadvantages, and none of 
the advantages of taxation and a voluntary loan.’ 
Mr. Robertson replies : ‘ A capital levy would have great advantages : (@) in 
paying off a considerable amount of debt before the value of the pound sterling 
greatly increases; (6) by affording a smaller deterrent than a higher recurrent 
income tax to future enterprise and saving, since even if levied by instalments 
it would be assessed on present capital values; (c) in eliminating the standing 
menace of undue expansion of the currency caused by the continuous maturing 
of Treasury Bills; (d) in its social and political effects. I am not convinced 
that if payment were allowed to be made in selected securities (with perhaps 
preferential treatment of War loans), and to be spread over a number of years, 
the effect need be very damaging to private credit; but I do not feel that 1 
have the requisite practical experience to speak with confidence on this point.’ 
On the other side, Mr. Shaw writes: ‘A capital levy is utter nonsense 
economically ; it is the delusion of ‘‘ the practical business man,’’ who thinks 
that because he can sell an income of 5/. a year for 100/. down, the whole 
income of the world could be sold for twenty times its figure. ‘There is nothing 
to be got out of capital by way of taxation except the income it produces. 
As to a forced loan, why not a forced gift? All taxation of the interest on a 
loan to the State is repudiation. The War Debt is already repudiated to the 
extent of 11s. in the pound in the case of the very rich. How far the repudiation 
should go, and what form it should take, are matters of expediency.’ | 
Mr. Lawrence, answering Questions 9 (iv.) and (10). together, replies : 
‘Yes. Capital levy, complete revision of peacd treaties, free trade, litita- 
tiotis of paper currency, and thany other steps, Had deflation bobn Bdittied 
