LITMIR.BIZ

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the consent of bank depositors; so that if all the wealth of the world were nominally possessed by some one man in a little office he could stop the war by saying simply, "I will lend you no more money."

      Now, as a matter of fact, money is a power only in so far as people believe in it and Governments sustain it. If a State is sufficiently strong and well organised, its control over the money power is unlimited. If it can rule its people, and if it has the necessary resources of men and material within its borders, it can go on in a state of war so long as these things last, with almost any flimsy sort of substitute for money that it chooses to print. It can enrol and use the men, and seize and work the material. It can take over the land and cultivate it and distribute its products. The little man in the office is only a power because the State chooses to recognise his claim. So long as he is convenient he seems to be a power. So soon as the State is intelligent enough and strong enough it can do without him. It can take what it wants, and tell him to go and hang himself. That is the melancholy ultimate of the usurer. That is the quintessence of "finance." All credit is State-made, and what the State has made the State can alter or destroy.

      The owner and the creditor have never had any other power to give or withhold credit than the credit that was given to them. They exist by sufferance or superstition and not of necessity.

      It is the habit of overlooking this little flaw in the imperatives of ownership that enables people to say that this war cannot go on beyond such and such a date--the end of 1916 is much in favour just now--because we cannot pay for it. It would be about as reasonable to expect a battle to end because a landlord had ordered the soldiers off his estate. So long as there are men to fight and stuff to fight with the war can go on. There is bankruptcy, but the bankruptcy of States is not like the bankruptcy of individuals. There is no such thing among States as an undischarged bankrupt who is forbidden to carry on. A State may keep on going bankrupt indefinitely and still carry on. It will be the next step in our prophetic exercise to examine the differences between State bankruptcy and the bankruptcy of a subject of the State.

      The belligerent Powers are approaching a phase when they will no longer be paying anything like twenty shillings in the pound. In a very definite sense they are not paying twenty shillings in the pound now. That is not going to stop the war, but it involves a string of consequences and possibilities of the utmost importance to our problem of what is coming when the war is over.

      The exhaustion that will bring this war to its end at last is a process of destruction of men and material. The process of bankruptcy that is also going on is nothing of the sort. Bankruptcy destroys no concrete thing; it merely writes off a debt; it destroys a financial but not an economic reality. It is, in itself, a mental, not a physical fact. "A" owes "B" a debt; he goes bankrupt and pays a dividend, a fraction of his debt, and gets his discharge. "B's" feelings, as we novelists used to say, are "better imagined than described"; he does his best to satisfy himself that "A" can pay no more, and then "A" and "B" both go about their business again.

      In England, if "A" is a sufficiently poor man not to be formidable, and has gone bankrupt on a small scale, he gets squeezed ferociously to extract the last farthing from him; he may find himself in jail and his home utterly smashed up. If he is a richer man, and has failed on a larger scale, our law is more sympathetic, and he gets off much more easily. Often his creditors find it advisable to arrange with him so that he will still carry on with his bankrupt concern. They find it is better to allow him to carry on than to smash him up.

      There are countless men in the world living very comfortably indeed, and running businesses that were once their own property for their creditors. There are still more who have written off princely debts and do not seem to be a "ha'p'orth the worse." And their creditors have found a balm in time and philosophy. Bankruptcy is only painful and destructive to small people and helpless people; but then for them everything is painful and destructive; it can be a very light matter to big people; it may be almost painless to a State.

      If England went bankrupt in the completest way to-morrow, and repudiated all its debts both as a nation and as a community of individuals, if it declared, if I may use a self-contradictory phrase, a permanent moratorium, there would be not an acre of ploughed land in the country, not a yard of cloth or a loaf of bread the less for that. There would be nothing material destroyed within the State. There would be no immediate convulsion. Use and wont would carry most people on some days before they even began to doubt whether So-and-so could pay his way, and whether there would be wages at the end of the week.

      But people who lived upon rent or investments or pensions would presently be very busy thinking how they were going to get food when the butcher and baker insisted upon cash. It would be only with comparative slowness that the bulk of men would realise that a fabric of confidence and confident assumptions had vanished; that cheques and bank notes and token money and every sort of bond and scrip were worthless, that employers had nothing to pay with, shopkeepers no means of procuring stock, that metallic money was disappearing, and that a paralysis had come upon the community.

      Such an establishment as a workhouse or an old-fashioned monastery, living upon the produce of its own farming and supplying all its own labour, would be least embarrassed amidst the general perplexity. For it would not be upon a credit basis, but a socialistic basis, a basis of direct reality, and its need for payments would be incidental. And land-owning peasants growing their own food would carry on, and small cultivating occupiers, who could easily fall back on barter for anything needed.

      The mass of the population in such a country as England would, however, soon be standing about in hopeless perplexity and on the verge of frantic panic--although there was just as much food to be eaten, just as many houses to live in, and just as much work needing to be done. Suddenly the pots would be empty, and famine would be in the land, although the farms and butchers' shops were still well stocked. The general community would be like an automobile when the magneto fails. Everything would be there and in order, except for the spark of credit which keeps the engine working.

      That is how quite a lot of people seem to imagine national bankruptcy: as a catastrophic jolt. It is a quite impossible nightmare of cessation. The reality is the completest contrast. All the belligerent countries of the world are at the present moment quietly, steadily and progressively going bankrupt, and the mass of people are not even aware of this process of insolvency.

      An individual when he goes bankrupt is measured by the monetary standard of the country he is in; he pays five or ten or fifteen or so many shillings in the pound. A community in debt does something which is in effect the same, but in appearance rather different. It still pays a pound, but the purchasing power of the pound has diminished. This is what is happening all over the world to-day; there is a rise in prices. This is automatic national bankruptcy; unplanned, though perhaps not unforeseen. It is not a deliberate State act, but a consequence of the interruption of communications, the diversion of productive energy, the increased demand for many necessities by the Government and the general waste under war conditions.

      At the beginning of this war England had a certain national debt; it has paid off none of that original debt; it has added to it tremendously; so far as money and bankers' records go it still owes and intends to pay that original debt; but if you translate the language of £.s.d. into realities, you will find that in loaves or iron or copper or hours of toil, or indeed in any reality except gold, it owes now, so far as that original debt goes, far less than it did at the outset. As the war goes on and the rise in prices continues, the subsequent borrowings and contracts are undergoing a similar bankrupt reduction. The attempt of the landlord of small weekly and annual properties to adjust himself to the new conditions by raising rents is being checked by legislation in Great Britain, and has been completely checked in France. The attempts of labour to readjust wages have been partially successful in spite of the eloquent protests of those great exponents of plain living, economy, abstinence, and honest, modest, underpaid toil, Messrs. Asquith, McKenna, and Runciman. It is doubtful if the rise in wages is keeping pace with the rise in prices. So far as it fails to do so the load is on the usual pack animal, the poor man.

      The rest of the loss falls chiefly upon the creditor class, the people with fixed incomes and fixed salaries, the landlords, who have let at long leases, the people with pensions, endowed institutions, the Church, insurance companies,

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