way of bringing about this reduction in buying power on the part of
the ordinary citizen which has been shown to be necessary for the
purposes of war finance? Clearly the best way of doing it is by
taxation equitably imposed. When the State taxes, it says in effect
to the citizens, "Your country needs certain goods and services, you
therefore will have to go without those goods and services, and the
simplest way to make you do this is to take away your money and so
ration your buying power. Whatever is needed for the Army and Navy
will be taken away from you by taxation, and the result of this will
be that, instead of your indulging in comforts and luxuries, to the
extent of the war's needs the Government will use your money for
paying for what is needed for the Army and Navy."

If such a policy had been carried out the cost of the war to the
community would have been enormously cheapened. There need have been
no general rise in prices because there would have been no increase
in demand for goods and services. Anything that the Government
spent would have been counter-balanced by decreased spending by the
individual; any work that the Government needed for the war would have
been counter-balanced by a reduction in demand for work on the part
of individual citizens. There would have been no multiplication of
currency owing to enormous credits raised by the Government; there
would have been merely a transfer of buying power from individuals to
the State. The process would have been gradual, there need have been
no acute dislocation, but as the cost of the war increased, that is to
say, as the Government needed more and more goods and services for its
prosecution, the community would gradually have shed one after another
the extravagances on which it spent so many hundreds of millions in
days before the war. As it shed these extravagances the labour
and energy needed to produce them would have been automatically