It is of some interest to observe that the difficulties which our world socialist commonwealth would encounter if it attempted to dispense with the rate of interest, would not necessarily include that of obtaining a supply of capital.  It might, indeed, not find it easy to determine the proportions in which it should allocate its productive resources between immediate and distant ends.  Our present system cannot be said to have evolved satisfactory principles for the solution of this question; and the socialist commonwealth would have to work out its own solution.  But when it directed that labor and materials should be devoted to purposes of long-period utility, there would be an automatic collective saving, of which no one would be conscious as an individual sacrifice.  Even at the present time, our capital is not supplied entirely by the savings of individuals, but to an extent, which though quite incalculable is yet certainly considerable, by involuntary saving of an essentially similar type to the above.

Sec.9. Involuntary Saving.  When a municipality embarks on a municipal tramways scheme or any other industrial enterprise, and pays off by means of a sinking-fund the capital which it borrows in the first instance, the proceeding amounts, as the defenders of municipal trading have rightly claimed, to a compulsory and unconscious saving on the part of the citizens.  Their consumption has been postponed willy-nilly as the result of the increased rates or the high charges which they have had to pay; and, when the subscribers to the original loan have been paid off, the capital of the community is enhanced to the extent of that loan.  Central governments might similarly increase the supply of capital by devoting annual revenue to capital purposes; though their actual record, as it happens, is mainly of a different kind.  But what is chiefly a possibility in the case of Governments has actually been carried out on an enormous scale by other institutions.  The development of the joint-stock company system has introduced a new factor into the problem of the supply of capital, which is of immense though but dimly perceived importance.  The directors of a company are technically no more than the servants of the shareholders.  It is the profit of the shareholders that it is the directors’ duty to promote with a single mind, and the whole capital of the concern, including its reserves both open and concealed, is the shareholders’ exclusive property.  But realities have a way of differing from forms, and just as in political affairs it is common to regard the State as a very different thing to the people who compose it, as a sublime entity with a separate existence of its own, so directors are apt to distinguish between the company and the shareholders.  It is the company to which they owe allegiance.  To pay away in dividends to shareholders money which they could employ in extending the business or strengthening the position of the company appears to some directors