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it is inferred that the ground landlord has already borne his fair share of burden. Now, when it is urged with respect to an actual house that a specified tax levied on the occupier would reduce the ground rent at its creation by so much, it is forgotten that the house would not be what it is if the specified tax had existed at the time of the building. For the amount of building on a site is not a fixed quantity, but is determined by the
margin of building,” which varies with an ad valorem tax on the price or gross rent of the premises. There has been committed the fallacy which the mathematical economist discerns to be the treatment of a dependent like an independent variable ; and even the man in the street recognises when it assumes the gross form of attempting to eat your cake and have it. You cannot eat into the profits of the capitalist by an impost which reduces the marginal demand of the occupier, and at the same time have everything as it was before the impost, to be used as an argument against the taxation of ground rents. On the other hand, the advocates of taxing ground rents have also been bewildered by the inappropriate conception of demarcating a part of the tax levied on the occupier as “the portion which is a tax on ground-rent.”3 The usual vices of socialist speculation, the confounding of short periods with long periods, of quasi rents with true rents, are aggravated by this misconception. Under its influence the proposition that a tax on ground value does not hurt the occupier is applied beyond its legitimate limits—not true in the long run, as will be argued in the sequel, of a rate to be levied from year to year, during the currency of the ground lease, in proportion to an ever-growing ground value, upon owners who will have contributed efforts and sacrifices to the production of a house.
The reasons which have been given in the last few paragraphs for not producing a larger array of confirmatory citations from the answers of the experts are applicable with slight change to the discussion of rates, which follows next.
F. Y. EDGEWORTH.
(To be continued.) greater than x (above, p. 184, note 2). There is not the slightest presumption that the loss to the ground landlord in consequence of the imposition of the rates is £20. The loss is y - x, unknown quantity minus unknown quantity. The same symbols may be usefully employed to expose the dogma of McCulloch, which is classed with that of these witnesses by a parity of misconception, not an identity of misstatement. SOME ECONOMIC ASPECTS OF THE WAR.
1 It is true that the advocates have often in view the competition between different localities; but, as will be seen when we come to rates, the demand for house accommodation in that case is not so different from the simpler case here under consideration, but that the argument in the text is applicable.
2 Above, p. 184. 3 J. S. Mill, loc. cit.
The war in South Africa appears to furnish a good opportunity for studying some of those questions which arise in connection with such disturbances of the economic equilibrium. It stops far short of being one of those great disturbances which sometimes occur, such as the war between North and South in the United States, thirty-five to forty years ago, or such as the war between France and Germany in 1870, when millions of people were involved on both sides, and there was in consequence great stoppage and diversion of industry, continued in the case of the war between North and South for nearly four years. On the other hand, the war is not one of those little wars which are incident to the existence of the British Empire, being unavoidable on the doctrine of chances with an Empire so widely extended as our own, and on so small a scale with reference to the resources of the Empire generally that they pass almost unnoticed in the economic life of the nation. Without being a war of the first kind, involving a great and obvious disturbance of the whole industry of the people, the present war is still on a large enough scale to produce some visible and palpable effects which are the result of war, and it can by no means be spoken of as war with limited liability.
The war then may be looked at from several points of view in its economic relations. First, and not the least important, the circumstances of South Africa itself have to be considered. The war may not be a first-rate affair economically, as far as the British Empire is concerned, but yet it may be of transcendant importance in that respect for the communities of South Africa who are directly involved. Second, the precise effects, as far as the United Kingdom and the Empire are concerned, have to be studied. What is, in fact, the interruption to trade, and what are the temporary and permanent losses sustained ? In connection with this, what is the tendency of the war on account of political and other changes that may result in relation to the industry of the country? Third, special consideration has to be given to the finance of the war, and the illustrations supplied by it as to the method of raising loans and new taxes in similar emergencies.
Taking these problems in their order, we have to begin by noticing the extent of the disturbance of industry in South Africa itself. The war has perhaps brought about, as far as the local communities are concerned, a more extensive stoppage of industry in proportion to the whole business done than almost any war on record. The chief industry of the Transvaal was that of gold mining. The gross produce of this industry when the war actually broke out amounted to £20,000,000 sterling per annum, many times the gross produce of all the other industries of the country. This big industry sustained a large community in Johannesburg and on the Rand, comprising a white population of about 60,000 and a black population whose numbers I find difficult to estimate, but probably of at least equal magnitude. The industry again, besides supporting all this population, supplied the means for the expenditure of the Transvaal Government itself, besides large dividends for shareholders, not merely in South Africa and in London, but all over the world. All at once, four-fifths, if not five-sixths, of this industry have been put an end to for the time. Half the white community by which it was carried on have been displaced, and obliged to leave as fugitives the country where they were settled, and to subsist, many of them, upon charity in Natal and the Cape Colony. In proportion to the area affected, then, there could not be a greater disturbance. The war has spelt temporary ruin to many thousands of people, including the most advanced and civilised portion of the population of the Transvaal. There has also been some destruction of capital which will have to be renewed after the war, but not representing any large sum in comparison with the annual product of the industry.
This disturbance, perhaps, has not been an inevitable incident of the war. It was quite possible for the Transvaal Government to permit the Uitlander to live and work in peace, although war was going on. As a matter of fact, however, contrary to their own interest, the governing classes of the Transvaal have not permitted the industry to go on, because they have expelled the only people by whom it could in fact be managed. In any case there would have been some disturbance through the fear of the Uitlander, who distrusted the Transvaal Government in time of peace, and was naturally ten times more apprehensive when war approached, but the Uitlander has not in fact been left to his own fears. He has been forcibly deprived of the means of living by the act of the Government of the Transvaal.
In other respects, in the Transvaal itself, and elsewhere throughout South Africa, there has been no great stoppage of industry. At Kimberley, where the great diamond mining industry is carried on, even the siege did not altogether stop the industry itself, while the usual employment throughout the region, that of pastoral farming, is not one of a kind which war seriously interrupts. The farms lose something by the absence of the farmers themselves who have been called away to the field to fight, but not a great deal in proportion. To these interruptions must be added the interruption of coal mining in Natal and the Cape Colony, and the interruption to business generally in those parts of Cape Colony, Natal, and the Orange Free State which have been the actual theatre of the war. None of these interruptions, however, can be considered of great importance in themselves. The coal mining of Natal and Cape Colony, everything reckoned, has occupied a few hundreds of people only, and the districts of Cape Colony and Natal, as well as the Orange Free State, which have been the seat of war, are very sparsely populated. The losses sustained in these ways are not to be compared with the suspension of so much of the chief industry in the Transvaal itself, which has to be reckoned as the one great economic loss of the war, as far as South Africa is concerned.
Indirectly, some of these stoppages may have been important. The interruption of coal mining, for instance, may have helped to aggravate the coal famine. But it would take us too far here to follow out such indirect consequences. We are speaking now from the point of view of the communities directly affected by
On the other hand, large numbers of the communities of South Africa have probably gained a great deal directly and indirectly through the war. Viewed economically from the standpoint of the people of South Africa, the conduct of the war has in fact been equivalent to the establishment of a new industry in the region, providing a good market for the produce of the country and giving large employment to labour, and all this being done by means of new money coming into the country from abroad. There is no doubt waste' and loss somewhere in
connection with the war, but the waste and loss do not fall upon the people of South Africa generally. The losers have been the people of Johannesburg and the Rand, who have been driven from their homes and prevented from carrying on their usual industry; but the farmers and towns-people of Cape Colony and Natal generally, and the farmers and towns-people of that portion of the Orange Free State occupied by our troops, are all clearly gainers pro tanto by the war expenditure. Farmers everywhere throughout those districts have a better market for their produce, and every local industry is stimulated. ,
This result is no new thing in war experience. At the points where opposing armies are in actual contact, the circumstances are inconvenient and injurious to the people in the neighbourhood; but in those other districts forming the base of operations it is not a bad thing for a country to be the seat of war where the troops concerned come from a distance and bring with them a great deal of money to be expended in the country. The position in the Transvaal is not quite the same. In this case there is no introduction of money from abroad to be spent in the country. The people here must be using up their capital
. and resources generally. But they are probably not much worse off for the present than they were in time of peace, excepting so far as they are affected by the diminution of their share of the income from the gold mines. The male white population is mostly fighting in the army; but even if they had been at home they would not have been adding much to the product of the industry of the country, which goes on very much independently of them-at any rate for a time.
Thus, the war is very far from having been an unmixed loss in an economic sense to the communities of South Africa. The temporary interruption of the gold mining industry of the Transvaal and the minor interruptions of industry elsewhere are made up for very largely to the local communities by the new industry of carrying on the war itself, bringing with it in Cape Colony and Natal a large expenditure by what is really an immigration from abroad. The loss and waste of the war have thus not fallen upon the communities of South Africa as they have fallen elsewhere.
We come secondly then to the question of the precise effects of the war as far as the United Kingdom and the Empire are concerned. And the point here is, that while a considerable interruption to trade has to be taken note of, an interruption