THE DREAD OF A PROFIT.
(To THE EDITOR OF THE " SPECTATOR.") SLR,--I have perused with interest your articles and related correspondence, and venture to submit the following considera- tions :-
Profit critics apparently overlook the fact that, in respect to
businesses created before the war, dividends are paid in present-day (depreciated) currency, although the capital earning same was invested. in pre-war times. Unless such capital- is appreciated by a revaluation of assets and -a financial recon- struction of the firms concerned, the fall in money values must be taken into account. If this is done, the figures will, in many instances, prove that post-war profits are not greats#• but less. than earned prior to 1914. E.g., Messrs. Coats (for whom I hold no brief) earned in 1913 approximately £3,000,000, and in 1919 approximately £5,000,000. The pound of 1913 is to-day worth ahout Sc., so Messrs. Coats are in reality making about
11,000,000 less profit per annum than in pre-war times. - It appears to me that if workmen's wages are permitted to rise (as numerically expressed) to counterbalance the lowered spending value of money, invested pre-war savings should also be allowed a similar adjustment. I am aware that my conten- tion is not adMitted in respect to the operations of the Excess Profits Tax, although, in common justice, every firm paying a 5 per cent. dividend in 1913 ought to-clay to be allowed to earn 12l per cent. before the duty becomes chargeable.
Recent calls for new capital do not necessarily indicate
prosperity (actual or prospective) on the part of the trading companies concerned, although this reason is usually given in a prospectus as an indueeinent to subscribers. They are the outcome of changed values . expressed by wages payments of approximately 125 per cent. over the pre-war rates paid for a similar volume of output, and therefore necessitating approxi- mately 125.Per Cent. more capital to secure a continuance of the business on a pre-war basis. " In other words, a workman earning 40s. per week in 1913 now earns 90e. per week, and the capital at the disposal of his employer must be increased in like ratio to pay him for his work before a return (by sale) is obtained.
Capital has to exist before wages can be paid, and to destroy capital by reducing or eliminating profit is to destroy labour, unless, of course, the latter is pr•epar•ed to give its services and await wages until the ultimate payment for those services is obtained. To those who know the working man's psychology this is unthinkable.
Many workmen to-day aspire to become capitalists, and in this aspiration the country may find its economic salvation. A workman cannot become a capitalist in the full sense of his ambition by simply storing paper currency. He must invest it at interest, and this he cannot do unless the earning capacity of capital is maintained.
My endeavour is to show that in criticizing profits (which are the stimulus of industry) we must think not solely in numerals, but take into account real values, of which money is only the
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