Changes in the supply of capital for industry in Britain

Abstract

The article examines the “revolutionary changes” that have occurred in the sources from which English manufacturing industry obtains its capital on the basis of the official paper “National Income and Expenditure, 1946-1951” and other recent publications. In a statistically documented analysis, the author points out the basic factors that have deeply affected industrial financing: the drying-up of the main traditional source for capital formation, i.e. retained profits, as a consequence of “extremely high taxation accompanied by a system of price controls which has been dictated more by political factors than by economic needs”; the consequent necessity for industry to have recourse to external sources; the shrinkage of direct individual savings; the importance acquired by insurance companies and pension funds which tend to follow a rather conservative investment policy. Finally, the author briefly discusses the problems arising form these shifts and their far-reaching implications. In his opinion they are socially and politically undesirable as they hamper a progressive outlook for market economy and private enterprise.

JEL: E51, L60