MONETARY DEFLATION 35 
just referred. The fall in prices will be very gradual, 
and though a less rate of profit will be made than if 
prices were stable, it will be on a larger quantity, 
and there can still be room for a fair return on 
capital and a fair reward for labour. This is the 
kind of deflation at which we ought to aim— 
a deflation which will be brought about by a 
larger supply of the commodities we all need, a 
greater surplus for foreign export, and a larger total 
of real wealth. This is the deflation which actually 
took place during the nineteenth century after the 
Napoleonic Wars. For over thirty years prices fell, 
not through an artificial limitation of credit and a 
restriction of business, but by an immense addition 
to output, which the great industrial inventions of 
that century rendered possible. 
Our financial policy then should be one which 
will stimulate production and trade. It is not con- 
tended that all the after-war troubles of the world 
can be cured by a change of policy or that the 
partial loss of our foreign markets can be made 
good by any financial expedients. The economic 
troubles and the loss of markets are conditions 
which must affect our trade, but the fact of their 
existence renders it the more imperative that our 
policy should not be such as further to weaken us. 
It is quite true that we cannot look for real com- 
mercial prosperity until the European market is 
restored. Our industrial organisation has been built 
up on the basis of an immense international trade. 
Our plant is designed for mass production, our 
commercial houses adapted for business on the 
largest scale. The only condition under which 47 
millions of people can live in these islands, not 
merely tolerably, but live at all, is that our output 
should be up to the highest level of our industrial