First let us consider how much of the needed surplus can be created by increased production. It obviously involves enormously greater output on the part of labour each working hour, the introduction of very greatly improved organization and of time- and labour-saving appliances, which, apart from the new spirit it would demand in industry, would entail a drain upon capital resources for their provision, that, at this present time of scarcity, could not be met, and a general alteration in price levels. Our difficulty to-day is to attain even to our pre-war standard of efficient and effective output. We are living to-day largely upon our capital and not upon income. But, assuming that debtor nations can go some way towards paying their war-time indebtedness by increased production, they plainly cannot go anything like the full length; they must fall back, if pressed, on a reduction of their standard of living which would be primarily effected by a reduction in industrial wages. Then mark the effect upon creditor nations. If wages in a debtor nation are reduced, and costs of production are correspondingly brought down without any equivalent diminution in the efficiency of labour, that debtor nation is in a position, and, if put under pressure to pay its war-debts, is compelled to put its manufactured commodities into foreign markets at prices considerably lower than its creditor nation with a higher standard of living can afford to do. This unfair competition applies not merely to creditor nations, but to all nations trading in the same competitive foreign markets. But, then, follow the matter one stage farther: if the other nations, under the stress of this competition, bring down their costs of production to the same level, the debtor nation loses its preferential position in the foreign markets and ceases to be in a position to pay its war indebtedness.