The Duty to Lend

Press, Volume LXXIX, Issue 23949, 17 May 1943, Page 4

The Duty to Lend

In establishing a national war loan committee to assist in promoting an issue which, the Minister of Finance has said, will exceed any yet attempted, the Government has taken a second wise step. The first was to decide that small investors can and must be encouraged to play a much greater part in filling the loan than before, and to call on the national savings organisation to carry a special appeal to them. The campaign on the broad front and on the narrower one it includes was launched last week in an address to the national committee by the Deputy-Governor of the Reserve Bank, Mr E. C. Fussell; and if he set the course which is to be followed in publicising the loan, there is good reason to hope that the job will be done as never before, and will succeed as never before. Mr Fussell said what has often been emphasised in this column: The success or failure of the loan would depend on the decision of the people; and the public was entitled to a plain, frank explanation of the reasons for their decision and to be guided by their knowing the real truth about the country’s need of their help. “ The decision of the people ” will make or mar the loan, not the decision of financial institutions, local bodies with funds to invest, big trading concerns, and the well-to-do. Their aid is important—and the easiest to obtain. But it is not sufficient, even if its volume can be swelled to fill the loan. It reduces too little and too indirectly the “overflow money,” the excess of spending power, created by a rise in the money paid out and a fall in the supply of goods and services to be bought with it. The rise and the fall are both inevitable: the rise because everybody is at work, working harder and longer than

ever, and wages are high; the fall, I because more and more of the pro* I ducts are “ not for civil consumption but for enemy consumption.' 1 Houses are not furnished with Bren gun carriers; more bombs, fewer biscuits. Why does the excess matter? Because “ overflow money ” always competes for restricted supplies; it looks for luxuries and nonessentials and stimulates their production, which ought to be stopped or limited; it cheats or defeats price control, rationing, and every other device to distribute enough, but not more, to distribute fairly, and to distribute at a fair price. The question, why new credit should not be issued instead of raising loans, is answered there: it could only increase the overflow and increase its dangers. It would, as Mr Fussell said, “ set the price stabilis- “ ation organisation an impossible “ task.” A second question is harder: why not raise taxation instead of borrowing? Mr Fussell’s answer, which is quite consistent with the case for the highest possible taxation that is bearable and just, is admirably clear: “ Incomes “ alone do not measure ability to “ help. Some people’s income js “ large in relation to their cash. “ Some people’s cash holdings are “ large in relation to their incomes.” Taxation is graduated so as to obtain, from different income groups, the surrender of income in proportion to means; but it does not, and cannot, so accurately discriminate among individuals. One man, with a taxable income of £SOO, may have many obligations; another, with the same taxable income, will have fewer and easier ones. "Pub- “ lie loans,” as Sir Alfred Davidson said recently in Australia, "permit " the private individual to decide " what sacrifice he can make over “ and above his taxation.” Mr Fussell’s outline of loan policy and the reasons for it, as we have said, is one which can guide a plain, compelling publicity campaign. It must not be forgotten. It must not be submerged. Most of all, the appeal to the small investor must not be submerged by "big “ figures ” publicity. The 'small man’s place, duty, and achievement in the loan must be, not necessarily the biggest, but the most prominent.