WEALTH NOT MONEY

Otago Witness, Issue 3592, 16 January 1923, Page 9

WEALTH NOT MONEY

CREDIT THE REAL BASIS. CAPITAL LEVY DELUSION. WOULD DESTROY ITS OBJECT. The British Labour Party’s favourite project of confiscating wealth, by a capital levy or otherwise, is based on a delusion, or as I should prefer to call it, an economic superstition (writes Sir Sidney Low in the Sunday Pictorial). They think that wealth is money, and that it can be divided up by taking it away from “the rich” (including everybody who is worth £5000) and spreading -it among the wageearners. A millionaire is conceived as a person who has one million pounds sterling. Divide that million into one thousand equal portions, and there will be a thousand pounds apiece for a thousand deserving members ox the working classes! A rather fascinating dream, even if slightly immoral! The weak point—its immorality apart—is that it is only a dream. It is born of fictions and falsehoods, and has no relation to reality. The gold is fairy gold, which will turn into dead leaves and ashes when you try to touch it. The moment you enter upon a wholesale confiscation of “weal-th” it will melt away until it is not worth taking. A LEVY ON A MILLIONAIRE. Let us work it out in a typical case. Mr Z., who has made a fortune in finance or industry, is a millionaire. Let us suppose that a Communist government or a Soviet republic decides to appropriate Z’s million for the State or the “workers.” How much of that sum would they be able to realise ? Not more than a fraction. Z lives in Park Lane, and his house -figures in his schedule of assets for, say, £BO,OOO. It is worth that sum because there are other rich men who would also like to live in Park Lane, and are ready to pay heavily for the privilege. When the red commissaries have seized these mansions and converted them into workmen’s dwellings or municipal lodg-ing-houses, they would be worth no more than similar blocks in a by-street. Eighty thousand of Z’s fortune would be scaled down to as many hundreds at a stroke. Inside this fine house the confiscatory commission would find some valuable objects, such as pictures, handsome furniture, and Mrs Z's pearls and diamonds and Paris frocks. These, of course, would fetch some money if sold. Nobody could afford to buy them in Great Britain. So they would have to be sent abroad, to America or some other country where some rich people still remained. They would have to be duinjjed upon a glutted market, with heavy charges for transport, commission and ' agency. Under such conditions only the jewellery and precious stones —as the Russian Soviet has found —would be worth selling. NO “MONEY” TO BE FOUND. So far we have not got much out of Mr Z’s million. The Commissaries would not be satisfied with necklaces and unsaleable objects of art. “It’s your money we want,” they might murmur. They would look for Z’s money, and they would not find it. The bulk of Z’s property is not in cash or in jewels, plate, furniture and pictures. Most of it is in paper; that is to say, in stocks, bonds, share certificates, receipts for bank deposits or inscribed Government loans, and the like. These things are not money, nor, in themselves, are they wealth. They are_ simply credit notes. They are valuable just so long as the individuals or corporations issuing them are able, or deemed likely, to fulfil their contracts. Mr Z, perhaps, may hold £IOO,OOO of Government 5 per cent. .War Loan. What he really holds is a piece of paper on which the British Treasury has printed a pledge, on behalf of the British nation, to give him £SOOO every year till the loan is redeemed. It is, in fact, a promise to pay, and its entire Value depends on the general belief that the BritisE Government can and will keep its promises. Destroy the Government’s credit, as it Would be destroyed if the confiscation policy were adopted, and the promissory note would be about as valuable as Russian bonds, or even Russian roubles. So it would be with all other securities. Z has certificates representing his investments in railway companies or industrial concerns. Here, again, all he has really got is a promise on the part of the firm or company to pay him either a fixed rate of interest or, a share of their annual profits. CREDIT THE BASIS OF WEALTH. The market- value of the certificate is due partly to the general opinion as to the honesty and capacity of the borrowers, partly to the political and social stability of the country in which they carry on their business. Credit again; and only credit! Upset that, and nothing remains. What are the holders of Russian railway and industrial stocks receiving to-day ? Without going so far as a. Red Revolution or a Terror, it would be quite sufficient to enact legislation which would render it uncertain whether any- company, however prosperous and well managed, could have any profits to divide among its shareholders. In that case its scrip—its promises to pay — would become worthless; nobody would want to pay anything for them. So the commission might take all Z’s stocks and bonds and certificates, only to discover that they had converted them into rubbish. They will have become scraps of paper indeed, and might as well be used for pipe-lights. The basis of all wealth, in an industrial community, .is a profound trust in national and social security and good faith, a confident assumption that the State will stand by its own obligations and enable individuals and associations to execute theirs. ft is an intangible, impalpable thing, apt to vanish into air when rough hands are laid upon it. A law to confiscate property might certainly be passed; but by the time it came to be executed there would scarcely be enough real wealth left to pay the expenses of the process.