LIVING ON CAPITAL.

New Zealand Times, Volume XXXIII, Issue 5314, 6 April 1878, Page 1 (Supplement)

LIVING ON CAPITAL.

At the meeting of the Statistical Society held the other day, under the presidency of Mr. Shaw Lefevre, M.P., a paper was read by Mr. Robert Giffen on “ Recent Accumulations of Capital in the United Kingdom.’ It appeared that the growth of those accumulations had been very rapid. The income-tax returns showed that the gross income assessed rose in Great Britain from £115,000,000 at the beginning of the century to £130,000,000 in 1815, £261,000,000 in 1843, and £262,000,000 in 1853 ; and then, in the United Kingdom, from £308,000,000 in 1855 to £396,000,000 in 1865, and 571,000,000 in 1875. If that portion of the income derived from capital had only progressed at the same rate, the annual increase of capital all through, and especially of recent years, must have been enormous. The increase in the income assessed between 1865 and 1875 amounted to £175,000,000, which was equal to 44 per cent, of the income assessed in 1865. Leaving out altogether the capital not yielding income, a - similar increase of capital, assuming the present amount to be what he had stated, would give us for 1865 a total capital of about £5,200.000,000, on'which the increase at 44 per cent, would be£2,228,000,000, or, in round figures, £2300,000,000 per annum. Mr. Giffen observed that if his estimate was moderate, and any cause would justify a higher figure for the present capital, then the increase between 1865 and 1875 would be even more than he had stated. A question which had been raised of late was whether the nation was now spending its capital. The figures in his paper might, be thought, be taken to prove that if the nation had begun to spend its capital instead of saving capital, the process was a very new one. As far as his researches carried him, the fact he had to deal with was that the rate of saving had been far greater of late than at any previous period during the present century; that the saving all through had been at an increasing rate. The figures would also show that the only fact alleged in proof that we were living on our capital was insufficient to make out the case. That allegation was that the excess of imports was now so great as to show that we were calling in our capital from abroad. There was incidental evidence as to the great amount of lending in former years, which entitled us to the receipt in each year of an an enormous income from foreign countries, so that the excess of imports would need to be much larger than it was to prove any material calling in of capital from abroad. Apart from this evidence, however, it must also be apparent that if the nation was calling in some fraction of its foreign investment it yas not therefore stopping its savings or diminishing its capital. The foreign investments, though they were very large in the years before 1875, were by no means the chief part of the national accumulations. Our main savings were at home. Before the nation could be 'said to be living on its capital, it must be shown that not only was capital being called in from abroad, but that more was so called in than was being simultaneously invested at home. He had not seen this point considered by any of those who had made the suggestion that the nation was living on its capital.