Now, this is merely an imaginary picture, and I need not ask whether such a measure of wisdom on the part of a Government is practically attainable, or whether such a measure of centralization might not carry consequences which would hamper progress in other directions. The picture serves merely to illustrate the principles of equitable distribution by which the State should be guided in dealing with property. It serves to define our conception of economic justice, and therewith the lines on which we should be guided in the adjustment of taxation and the reorganization of industry. I may illustrate its bearing by taking a couple of cases.
One important source of private wealth under modern conditions is speculation. Is this also a source of social wealth? Does it produce anything for society? Does it perform a function for which our ideal administration would think it necessary to pay? I buy some railway stock at 110. A year or two later I seize a favourable opportunity and sell it at 125. Is the increment earned or unearned? The answer in the single case is clear, but it may be said that my good fortune in this case may be balanced by ill luck in another. No doubt. But, to go no further, if on balance I make a fortune or an income by this method it would seem to be a fortune or an income not earned by productive service. To this it may be replied that the buyers and sellers of stocks are indirectly performing the function of adjusting demand and supply, and so regulating industry. So far as they are expert business men trained in the knowledge of a particular market this may be so. So far as they dabble in the market in the hope of profiting from a favourable turn, they appear rather as gamblers. I will not pretend to determine which of the two is the larger class. I would point out only that, on the face of the facts, the profits derived from this particular source appear to be rather of the nature of a tax which astute or fortunate individuals are able to levy on the producer than as the reward which they obtain for a definite contribution on their own part to production. There are two possible empirical tests of this view. One is that a form of collective organization should be devised which should diminish the importance of the speculative market. Our principle would suggest the propriety of an attempt in that direction whenever opportunity offers. Another would be the imposition of a special tax on incomes derived from this source, and experience would rapidly show whether any such tax would actually hamper the process of production and distribution at any stage. If not, it would justify itself. It would prove that the total profit now absorbed by individuals exceeds, at least by the amount of the tax, the remuneration necessary to maintain that particular economic function.
The other case I will take is that of inherited wealth. This is the main determining factor in the social and economic structure of our time. It is clear on our principle that it stands in quite a different position from that of wealth which is being created from day to day. It can be defended only on two grounds. One is prescriptive right, and the difficulty of disturbing the basis of the economic order. This provides an unanswerable argument against violent and hasty methods, but no argument at all against a gentle and slow-moving policy of economic reorganization. The other argument is that inherited wealth serves several indirect functions. The desire to provide for children and to found a family is a stimulus to effort. The existence of a leisured class affords possibilities for the free development of originality, and a supply of disinterested men and women for the service of the State. I would suggest once again that the only real test to which the value of these arguments can be submitted is the empirical test. On the face of the facts inherited wealth stands on a different footing from acquired wealth, and Liberal policy is on the right lines in beginning the discrimination of earned from unearned income. The distinction is misconceived only so far as income derived from capital or land may represent the savings of the individual and not his inheritance. The true distinction is between the inherited and the acquired, and while the taxation of acquired wealth may operate, so far as it goes, to diminish the profits, and so far to weaken the motive springs, of industry, it is by no means self-evident that any increase of taxation on inherited wealth would necessarily have that effect, or that it would vitally derange any other social function. It is, again, a matter on which only experience can decide, but if experience goes to show that we can impose a given tax on inherited wealth without diminishing the available supply of capital and without losing any service of value, the result would be net gain. The State could never be the sole producer, for in production the personal factor is vital, but there is no limit set by the necessities of things to the extension of its control of natural resources, on the one hand, and the accumulated heritage of the past, on the other.
If Liberal policy has committed itself not only to the discrimination of earned and unearned incomes but also to a supertax on large incomes from whatever source, the ground principle, again, I take to be a respectful
