WAR EXPENSES

Lyttelton Times, Volume CXVII, Issue 17099, 23 February 1916, Page 6

WAR EXPENSES

i If is assuredly' an amazing fact that, ! aiter eighteen months 01 war the ['creditVol Britain should be virtually I as sound as ever it was and that 111 I spite of the vast expenditure of taxai tion revenue and loan money "business las usual' might still, but for the appeals of cautious public men in favour I of economy, bo the current motto of j the country. There is a certain mysJ tery about such huge financial operations as those carried out by the Iro- • perial Government, not so much because the actual processes are obscure : as because the magnitude of the figures • is bewildering. . It conveys little, to j the average mind to be. told that the j cost of the war will shortly exceed I two thousand millions of money. At j first blush that amount would appear i to be a definite or prospective reduction of the capital wealth of the country, but while it may be difficult, and indeed it is exceedingly difficult, 10 .('arrive at the actual reduction of the national wealth through the war it is certain that the diminution is far snort, of the total sum expended by tue State. There are certain classes of capital that cannot bo extinguished or dissipated in the ordinary way of spending, though ' they' may be diminished in value by use abuse. Land and buildings do not evaporate. They are "'fixed" wealth, cbrnparatively speaking, needing only a modest Expenditure annually against depreciation. Mines may be -worked out, ships may be sunk, machinery wears out or is scrapped or converted to new uses at a loss, and in these respects the national wealth is liable to reductionThen foreign securities held in Britain may bo sold—a process of some little importance at present—and debts are incurred for the purchase of goods abroad, 'and here, again, there is a notable reduction of , the national wealth, -uiere is, again, a diminution due to the consumption of stocks of goods in excess of new production, probably a considerable, item during time of war. But when all these items | are aggregated they fall far short of the nominal " cost" of the war to Britain and consequently the exhaustion of the national financial resources is much slower than the vast figures of the Budgets might lead one to suppose. It is true that the borrowings of the State create liabilities that must be discharged after the war. hut except where the money is raised abroad the borrowing does not diminish the national wealth, and if need he the State can continue to raise internal loans without serious embarrassment, so long as the interest charges do not exceed an amount that can reasonably be. raised by taxation. This is not the whole story, of course, because the amount borrowed by the State in the course of a year or rather paid out by the State does not merely represent a transfer from one pocket. to another. It is a transfer of credit that must have wealth behind it. To an extent it is met by the normal savings of the people-—possibly five hundred millions a year—and to an extent it.is covered by the increased moneyvalue of the country's output, and there remains a considerable balance that must be met by fresh economies. The point that we desire to emphasise, however, is ttfat huge as the cost of prosecuting the. war undoubtedly is, the rate of exhaustion of the national resources is by no means to be found bv the mere adding of credit votes granted by Parliament. That the national resources are being diminished, however, is obvious, and that is why the urgent appeals are being published for rigid private economy. The importation of luxuries, for example, diminishes the possible savings of the people and to the same extent involves

a reduction of the national wealth. We have taken liberties, perhaps nnwarrantedly large, with the argument in order to present it in a popular form, but our hope is that this explanation of the position will help the reader to a hetter understanding of the problem of war finance and of Britain's ability to bear the tremendous burden.