Economic literature of the past decade suggests, and most economists would surely agree, that there are two fundamental economic problems: unemployment and monopoly. Together, enforced idleness of resources and maldistribution of resources due to monopolization of all kinds are responsible for whatever gap exists between actual and potential national real income. They account for a good deal of the inequity of income distribution as well. Economic policy has as its chief concern the elimination of monopoly without loss of efficiency, and the elimination of unemployment without inflation or misuse of resources.

The post-war period will present these two basic problems in aggravated form. Exigencies of war have led to increased concentration of industry, which could easily crystallize into enhanced monopoly power. With half our national income now generated by war expenditures, the task of maintaining full employment while shifting production from things that win wars to things that promote welfare will be of unprecedented magnitude. At the same time, vast new holdings of cash and other liquid resources, combined with the backlog of demand for both consumers' and producers' goods that will have accumulated, will constitute a grave threat of inflation. The balance of the economy, which must be maintained by what Professor Lerner has aptly called “functional finance,” will be delicate indeed.

This article suggests an approach to post-war tax policy designed to meet these problems. While the setting is Canadian, the analytical tools and even the policies proposed would be applicable to the British or American scenes with minor modifications.