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|Public Finance; Bastable, Charles F.|
9 paragraphs found.
The causes that have produced this, at first sight, unfortunate state of things must, it is clear, be deep-seated and persistent, and accordingly, when we scrutinise more closely the operating forces, it appears that the increased cost of warfare, and of the preparations which it involves, is closely connected with some of the normal features of social development. It is principally the result of two general tendencies, viz. (1) the increased division of labour which necessarily accompanies the advance of society, and (2) the development of those inventions that are such a striking characteristic of modern civilisation. The former makes it absolutely essential to set a specially trained section of the population apart for military service, to the sacrifice of their assistance in the ordinary work of production, while they usually receive a higher reward than a similar body of labourers would be able to command in the market. The pay of the British Army is a good illustration of this fact, and it is the most suitable instance to take, as enlistment in it is purely voluntary. The rapid progress of scientific discovery increases the cost of warlike material and equipment, since the constituents of this part of 'consumers' capital,' as it may be called, become much more elaborate and have to be more frequently replaced. If we compare the stock of weapons of a savage tribe with the equipment of a mediæval army, and either of them with the war material now necessary for a single 'army corps' of any European State, we cannot fail to recognise the increase in complexity and in cost which the later organisations show. Even in the last quarter of a century the changes in warlike implements and supplies have been such as, while vastly increasing their cost, to render them very different from the appliances previously existing.
§ 7. The best and most economical mode of supplying equipment and material for both military and naval forces has been for some time recognised as a grave problem. The extraordinary rapidity of inventions soon makes the most costly and best devised appliances antiquated. It seems a hopeless task to provide all new agencies of attack and defence, owing to their great expense and their certain replacement by later improvements, so that it might appear that the wisest course was to await the outbreak of war, and then procure the best existing weapons. Unfortunately such a course is not practicable. Ships and ordnance cannot be speedily produced and distributed. The stock, the 'fixed capital' of destruction as it may be called, like that of productive industry, takes time to create, and in warfare delay is fatal. A steadily progressive policy seems the most advisable in this respect, even from the purely financial point of view, as the pressure is more evenly distributed, and by adopting it there is, on the whole, the best chance of security.
§ 6. Under the same head the cost of museums, libraries, picture galleries, and institutions for promoting science and art generally should be placed. They come in to supplement the more directly educational agencies, and are often quite as effective in promoting the ends aimed at. The modern development in this domain is remarkable (especially in England and the United States). Central and local authorities have both made considerable efforts in the direction of meeting the wants of the population for opportunities of acquiring information and culture. Few large towns are without appliances that were unknown a century ago, or confined to national capitals. We have to add this expenditure to the cost of schools and colleges before we can say what is the total sacrifice incurred by a nation in its public capacity for the object of culture.
§ 7. Taking up in order the different forms of public expenditure, we find it easy to understand the reasons for making the military and naval forces a national charge Security is the greatest general interest of a society; the appliances and organisation necessary for successful defence tax severely the highest powers of human intelligence; and unity of management is of great advantage in warfare. Consequently the cost of war and preparation for it always comes from the national budget. Germany and Switzerland still preserve some traces of the older independence of their component parts, but the German forces are in fact completely under imperial control, and their cost is defrayed from imperial funds.
One of the most decisive marks of union between hitherto independent States is the formation of a common army.
In dealing with education, it is at once obvious that elementary teaching has a closer relation to separate localities, resembling, in this respect, poor-relief. Particular circumstances so far affect it that there is reason for making it, at least in part, a local charge; but it is also a general interest affecting the well-being of the whole society, and requiring for its proper working a great amount of trained intelligence, which can be best supplied by the central government. The higher grades of education do not admit of the same degree of localisation. Universities in especial bear a distinctly national character, and are therefore, so far as they receive public aid, rightly a national charge. Other appliances for instruction and the promotion of culture are provided both from general and local sources, though it is hard to determine what should be the exact position of each in the matter.
The extension of this 'unproductive' public domain is one of the remarkable features of the present century. The movement, usually described under the title of 'State Socialism,' has made public authorities owners of museums, picture-galleries, libraries, baths, gardens, and the other appliances of a civilised society. No materials are at present available for forming an adequate conception of the extent of the movement, but of its reality and importance there can be no question. It is not limited to any particular country, and it is as prominent in local as in central government. Though commonly placed under the head of 'State Socialism,' it is really 'communistic' rather than 'socialistic,' since it implies the gratuitous supply of certain advantages that may be wholly unearned by the receivers. The classes that benefit directly are not those who contribute, even in labour, to the work of society. The public domain, applied to either state or general use, also influences the financial position by the outlay that is needed to keep it in efficient working. The existence of numerous public buildings, of large areas of land devoted to the service of the community, of works directly supplying state needs, might give a very considerable sum of assets to be entered in the national ledger if an inventory of state property were taken.
It must, however, be remembered that the State is in mercantile phraseology 'a going concern.' Its property cannot be realised without suspending the processes of political life, and so long as these continue further expenditure is unavoidable. This part of public property resembles the mansion, demesne, carriages, plate, and furniture of a rich man, which are only productive of wealth on the breaking-up of his establishment, and otherwise involve him in additional outlay.
Each is, in the language of modern economists, the 'consumers' capital' of the proprietor, affording utility but not revenue in the narrower sense of the word.
To show that this way of explaining taxation is incorrect is not difficult. The assertion that taxes are purely a return for services rendered is plainly untrue. We shall see that there is no possibility of measuring precisely the most important of the benefits rendered by the State. Security against aggression is, literally speaking, an 'incalculable' good. Social order cannot be sold by retail like tea or sugar, and so is it with the other state functions, even the purely economic ones. Indeed, it would be very near the truth to say that the difficulty of applying the normal method of purchase makes a given form of activity suitable for state management; if defence and justice could be readily bought and paid for, we might trust to private enterprise for a sufficient supply. Wherever the benefit to the individual can be even approximately estimated there is a strong presumption in favour of levying the cost incurred from him and converting the tax into a 'fee.' Special reasons may make it desirable that this charge should be compulsory. The citizen may be so negligent of his true interest as to omit obtaining the best appliances for the purposes of health or education, but even in such cases there is also a general interest which furnishes the principal ground for the intervention of the State.
It is in great part owing to a recognition of these complications that the method of monopoly has been so much employed. To place the manufacture of an article in the hands of the State is a strong measure, to be justified only by very cogent reasons; but where the need of revenue is great, this sacrifice of a particular business to secure complete freedom for the others may be desirable. It cannot be disposed of by an appeal to the principle of noninterference as a rule peremptorily binding on the State. The real point to be aimed at is to secure the needed revenue with the smallest amount of restriction, a result sometimes best attained through monopoly. This, among other considerations, has led to the proposals for a state monopoly of alcohol, which have been brought forward both in Germany and France, but which have not proved acceptable in either country. The reasons advanced in favour of such a measure are weakened by the great extent of the industry and the elaborate appliances needed for its proper working. That a state department could with financial profit undertake the production or sale of spirits is not likely, though it was confidently believed that this result could have been reached in Germany.
A rigid excise system appears to be, on the whole, better both for the industry and the State. The progress of invention is certainly retarded by the routine that state management sets up, and therefore, where it is desirable to secure the continual development of new processes, production should be left to private initiative, and as far as possible released from surveillance. But whatever be the form adopted, intoxicating drinks and tobacco must in the immediate future be the principal resource—so far as indirect taxation is concerned.
The technical operations connected with the levying of duties deserve some notice. Modern appliances have made it far easier to gauge the exact product in most taxed industries; the strength of spirits or the sweetness of sugar can be ascertained with great precision by the use of special instruments, and in other cases similar aids are more or less available. As a means of checking fraud and stopping that 'leakage' and waste that has been so prevalent in the earlier attempts at taxation, they may be regarded as valuable contributions to finance. In another way the progress of invention has hampered the administration of both the excise and customs. For every product substitutes are now devised which cannot easily be brought under control. The application of a duty to a particular article involves the inclusion of perhaps forty or fifty different items with a carefully calculated scale of rates in order to avoid unfair preference or encouragement to evasion. This is, indeed, one great barrier to an extension of the excise system. The best-devised duty from a purely economic point of view may fail in consequence of technical obstacles. In fact, the application of taxation is always dependent on a careful observance of these special circumstances. All the details of a duty are important in this connexion. Thus, the rate to be imposed must be regulated with reference to the intensity of the demand for the article, the gradations of the several qualities, and the effective power of testing that exists. The reasons for the repeal of the English paper and sugar duties were partly founded on the difficulties of discrimination: the adjustment of the American spirit duties, in order to meet the risks of illicit distilling and secure the highest return, has been shown by Mr. Wells to rest on similar grounds. The treatment of the several forms of spirits and beer in Germany has been largely conditioned by consideration of the effects produced by different methods of levying duties on the development of the industries and on the receipts of the State.