THE ability of the public to buy goods depends upon (a) the quantity and rate of flow of purchasing power into the publics pockets ;  (b) the prices at which goods are offered.  Over these conditions the general public have no direct control.  Purchasing power (i.e., legal tender and bank credit) is controlled by the Government and the bankers, but since in all countries Governments defer to their bankers, the banking fraternity do actually exercise supreme control.

The volume of legal tender which Governments allow to be created bears no fixed or coherent relation whatever to the public needs for purchasing goods.  At no time, so far as I am aware, has there ever been any attempt on the part of any State to ascertain the ratio between the public purchases over a given period and the currency requirements, nor to provide for them.  In the United States there have been statements published from time to time regarding the volume of currency required per head of the population to maintain business prosperity.  These have been mere guesses.  In pre-war times, the volume of our legal currency was determined (a) by the accidental discoveries of gold mining ;  (b) by the currency needs and speculations of foreign countries and financiers ;  (c) by the bank rate.


Peel’s Bank Charter Act placed it within the power of any foreign trade rival to bring our industrial system almost to a complete standstill by the mere act of withdrawing gold from our free gold market.  By causing a rise in the bank rate, gold exporters were able to penalize our industries and augment our costs of production.  Such a system, which left us a prey to foreign trade aggression, could only receive the support of those who believe that our industries are and ought to be wholly dependent upon our foreign trade.  To all such people periodic trade depression and unemployment is bound to be regarded as natural and unavoidable.

With the industrial development of foreign countries, which is proceeding at such an enormous pace and is tending to reduce the demand for British goods abroad, what is to be our future ?  When there are no more neutral or fresh markets to conquer, when all our foreign industrial rivals, after providing for their own markets, are seeking others for their surplus goods, what then ?  Must our people starve or emigrate because the foreigners will not buy our goods ?  Our governing officials actually see no other alternative.  Hence the Prime Minister’s suggestion to ship our unemployed to the Colonies !  Hence his feverish anxiety to effect a trade agreement with Russia !  For this reason also our Government “ experts,” whilst advising the curtailment of purchasing power to the British public, are recommending the grant of credit loans to our late enemies !  If these “experts” are to be believed, we are confronted with the extraordinary paradox of being able to produce unlimited goods which we are unable to use or distribute !  And hence our workers must starve whilst goods lie rotting !  It is a case of “ water, water everywhere, but not a drop to drink !”

Again, the fixing of prices, although of the utmost importance to the public, is the result of conditions on which they have little or no influence.  Costs of production necessarily form the lower price level, whilst the higher is determined by the effective demand for goods.  Between these two extremes prices oscillate.  Yet since effective demand depends upon the amount of currency available, it will be seen that the control of currency means control not only of prices, but of trade, industry, employment—in short, it means the control of our national existence !  This control, as I have said previously, has been given, through our banking and currency laws, to those controlling our financial institutions.  It is because of this that for the past quarter of a century I have been calling the attention of the public, and of the members of the industrial word in particular, both here and abroad, to the terribly dangerous and rapidly increasing power which the monetary laws of all nations have placed in the hands of any few irresponsible individuals who may happen to secure control of the world’s banks and credit institutions.


Less than a century ago the problem of producing goods in sufficient quantities to meet the world’s demands was all-important.  Inventions and economic methods of production were eagerly sought ;  the hours of labour were necessarily long.  The industrialists, the manufacturers, were the leading citizens and were rapidly superseding the great landowners as the controllers of economic power.  The past 35 or 40 years have witnessed another revolution.  No longer are we menaced with a shortage of goods !  The world is threatened with a surfeit of manufactures !

An American efficiency expert stated not long since that, taking the productive facilities of the United States as a whole, including skilled and ordinary labour, machinery, tools, &c., the quantity of goods produced in a given time did not represent more than 5 per cent. of their industrial efficiency !  This means that with a slightly increased effort America might readily treble and quadruple her present output !  And with a very determined effort this output could be increased tenfold !  The cry is now not so much for production as for consumption.  The man of the moment is not the producer, but the buyer.  The present “ Lord of Creation ” is not the creator of goods ;  but the creator and controller of credit – the man who has the power to say who may and who may not receive financial accommodation, to whom even kings and statesmen bow the knee in acknowledgment of his supremacy in the world’s affairs.

Now the chief characteristic of our modern industrial system is this, that it depends for its operation largely upon the purchasing power given to employees, owners, and investors in the process of production.  Wages, salaries, and dividends comprise the methods by which the bulk of the money and credit available for buying goods reaches the public, and these can only be paid whilst production continues.  Stop production and the ability to purchase and, therefore, to consume is destroyed—except by some system of Government doles—notwithstanding that the country is full of goods deteriorating rapidly.

It is true that we have another field for disposing of our products, viz., foreign markets, and as will be shown later, owing to the insufficient amount of purchasing power given by our industrial system to those engaged in production, and the prices at which goods are offered to the public, our own markets are unable to absorb more than a fraction of British-made goods, and we are therefore compelled to depend upon our Colonial and foreign buyers.  This does not mean that our own people are unable to consume more British-made goods if they had enough money to buy more.  On the contrary, if wages, salaries, and dividends, for example, could be doubled or even trebled, without raising the level of prices, our mills and factories might continue running year after year without our having to be quite so much at the mercy of foreign buyers as we are at present.  Further, through opening our ports to the free entrance of competitive goods “ made in Germany ” and elsewhere, we naturally reduce the effective demand for our own products, which also tends to foster unemployment.


Now the ideal economic condition of any industrial nation is to be self-contained—i.e., to be able to produce every necessity and as many of the luxuries of life as possible sufficient for supporting the population.  The United States is probably the best example of a self-contained nation.  The British Empire, federated and controlled on similar lines, could also provide its inhabitants with equally enviable conditions.  Foreign trade would then become an altogether secondary consideration.  The United States could provide an abundance of goods of almost every description for every one of its inhabitants, provided it utilized its productive resources to a sufficient degree of efficiency, and also introduced a credit system which would enable every one to purchase his share of the goods produced.

To a somewhat less extent, Great Britain has also the facilities for producing sufficient of all the necessaries of life to maintain her population in a state of comfort and well-being at a far higher general level than has ever yet been attained.  The achievement of this depends upon the introduction of a proper system of distribution.  Can this be accomplished under our present economic system ?  The answer is “ Not without some very considerable changes and modifications.”  Indeed, the solution of our problem requires the abandonment of some of our most securely entrenched ideas and theories.  In fact, the problem of unemployment is insoluble by any process which would receive the sanction of any orthodox economist.


The hope of the world lies in the direction of innovation, heterodoxy.  That is why the “experts” selected from the professional classes by the Government as its advisers since the war, are proving such a source of danger to the nation.  Nearly every measure adopted by the Government during the past two years with reference to foreign trade, finance and taxation, has been injurious to our industries and has resulted in the present trade crisis and general unemployment.  Yet it was such heterodox schemes as paper currency, food and material rationing, and other compulsory measures that saved us and our Allies and brought us through to victory.

The reader who is really interested with the writer in finding an answer to the problem must therefore not be surprised if the conclusions lead through a somewhat different route from what he expected.

Let us suppose that in all our industries engaged in producing goods required by our island population the volume of money distributed annually in the shape of wages, salaries, and dividends is at least equivalent to the total value of all the goods produced at the prices offered.  So that an equation is formed as follows :—Wages + salaries + dividends = x goods x y prices.  This would mean that if the British public so desired, they could buy all the goods they produce.  Suppose further, that the production of all these goods kept all able­bodied persons in the country who wanted work employed at a remuneration sufficient to enable them to live in decency and comfort.  Suppose, for the sake of argument, that we are an entirely self­contained nation, producing every article we need for use and consumption.  So long as all these prime factors, land, labour, and capital, were available and maintained their normal efficiency we should then have a perfectly automatic system of production and distribution, reproduction and redistribution, which might continue indefinitely.  The growth of the population would necessarily have to be accompanied by a proportional increase both in production and in the currency required for distributing the products.  Involuntary idleness would be unnecessary.  In short, poverty and unemployment as we now know them would be practically abolished.

Suppose, however, that after a year or two of such satisfactory running an inventor or an efficiency expert introduced an improvement by which production was greatly accelerated.  What would be the result ?  Products of all kinds would naturally increase in volume and the markets would be soon overstocked.  If no change was made in prices nor in the volume of purchasing power distributed, nor in the hours of labour, there would soon be so large an accumulation of unsold goods that to avoid unemployment they would have to be shipped abroad or destroyed !  In short, every improvement which tends to facilitate production must be accompanied by a fall in prices or an increase in the volume of purchasing power, otherwise its tendency must be to increase unemployment.