The Wanganui Chronicle FRIDAY, OCTOBER 22, 1937. CAPITAL LEVY IN ITALY

Wanganui Chronicle, Volume 80, Issue 251, 22 October 1937, Page 6

The Wanganui Chronicle FRIDAY, OCTOBER 22, 1937. CAPITAL LEVY IN ITALY

decision o£ the Italian Government to impose a capital levy is the most obvious confession of failure which the Fascist Administration has as yet made. A capital levy is a form of State bankruptcy. A Government cannot create wealth, it can only appropriate it, and only income with safety. Income is that portion of excess which the community produces over running expenses. When the Government exceeds the income which it can draw off from its citizens by way of taxation it must either resort to loans, which are voluntary contributions from the community’s savings, or it must borrow overseas. If borrowing be not possible then it must, perforce, appropriate to itself the private capital of the citizens.

A bankrupt offers to his creditors a portion of their debt in settlement of the whole. A country, having no assets to deliver to its creditors, must reverse the process and demand some of its citizens’ capital. A capital levy, however, does not raise money in the sense of a voluntary loan, it simply takes capital from the private ownership of individuals and appropriates it to the use of the community as a whole. Seeing that capital is not spread equitably among the people, the burden of the capital levy falls most heavily on those who have very little of it. For instance, if a man has a million pounds in capital it will involve him in small personal inconvenience if he loses a tenth of that capital sum. On the other hand, a man who is saving against sickness and old age and has his abstentions from spending deposited in the Government Savings Bank, will find the loss of his savings to the extent of ten per cent, very discouraging indeed. The world has eeased to be composed of a few people who arc very rich and a large mass of people which is very poor. Since the beginning of the last century people have been able to accumulate savings, and the greater portion of existing wealth to-day belongs to people with comparatively small resources. A capital levy is not a method of “getting at the rich,” but of robbing the savers. The effect of a capital levy is obviously to make people poorer because a capital levy is not imposed until there is a vast hole in the capital resources of the country. In fine, the money has been spent before the levy is made. It is simply a writingoff of an existing debt. The operation of the capital levy upon certain well-known classes of savings is particularly hard. For instance, a man who hopes to improve the positions of his children 'by his own self-denial, may accumulate sufficient money to pay for their entering into the ranks of one of the trades or professions. The capital levy robs the man of his life’s plan and his children of the opportunity which their parent’s self-denial would have given to them. The life insurance policy is an effort to provide for the maintenance of the family in the event of the death of the breadwinner. A capital levy, in this instance, takes the bread from the widow and the orphan by the simple process of taking part of the assets of the life insurance office. The effect of the capital levy is, of course, immediate, in that it reduces the resources of the invidual owners of capital without providing them with compensation in any way. There are indirect effects, however, which should be remembered: one is that individual savers become disheartened and disturbed, believing that another capital levy is likely to be imposed, and consequently they endeavour to extract as much from life as they can ‘‘while the going is good.” It follows, then, that the full effect of a capital levy is not registered immediately, but continues for a long time, because the rate of savings being diminished, would prevent investment in capital goods, such as land drainage, the building of factories, and the installing of machinery and, consequently, the ability of the community to employ people and to raise the standard of living would be severely curtailed for a long time into the future. In Italy the population has never yet raised itself to a standard of capital ownership equal to that of either France or England, or even of pre-war Germany. A capital levy, therefore, will sit heavily on Italian shoulders. It is reported that the news of the capital levy was received with sullen resentment, and well it might, for the difficulties of applying it equitably arc immense. For instance, the owners of what are termed giltedged stocks, that is, stocks which are valued highly and on which the dividend or interest return is low in consequence, pay proportionately heavier in levy than do owners of stocks where profits are relatively higher. Those who have paid for security are, therefore, the most heavily penalised. Fascism has hitherto boasted that it gave to the State the benefits of Collectivism without destroying the valuable features of Capitalism. It has capitulated in so far as Capitalism is concerned. Italy has proved that Collectivism and Capitalism cannot run in double harness, a lesson of which New Zealand would do well to take notice.