Public Finance

Bastable, Charles F.
(1855-1945)
BIO
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Editor/Trans.
First Pub. Date
1892
Publisher/Editor
London: Macmillan and Co., Limited
Pub. Date
1917
Comments
3rd edition

PUBLIC FINANCE

Finance is not mere arithmetic; finance is a great policy. Without sound finance no sound government is possible; without sound government no sound finance is possible.
—Wilson.

PREFACE TO THE THIRD EDITION

P.1

In preparing this edition (which has been seriously delayed owing to pressure of other work) it has been my aim, while preserving the general character of the book, to give due place to the various recent contributions to financial theory and to the latest developments of fiscal policy in the leading countries of the world.

P.2

Thus, the discussions on the classification of public expenditure, the theory of minimum sacrifice as the principle for distribution of the public burdens, the controversies as to the division of taxation between countries with a common revenue system, as well as those on the rue principles of local taxation, have been noticed. So have the latest theories on the ever-recurring question of incidence. But though we must gladly recognise the increased interest that the revival of economic inquiry has attracted to the more abstract side of financial theory, it is yet essential to remember that the new matter is small in proportion to the body of pre-existing doctrine. There has been no fundamental change, but only that expansion which is characteristic of all scientific study. Hence the space allotted to the topics mentioned above has been rigidly restricted and their relation to the general system made as obvious as possible.

P.3

The movements of financial policy have been similarly treated. The new French inheritance taxes, the reform of direct taxation in Austria, the temporary duties in the United States for the purposes of the Spanish war, as well as the improvements which the same event has produced in Spanish finance, all these have found their natural place in the descriptive and historical notices of the several taxes. The most remarkable, and to English readers the most serious, of these practical developments has been the alteration in the direction of English financial policy brought about by the occasion of the South African war, but really due to a deeper cause, viz. the desire to secure what is described as a broader basis for taxation. Under the influence of this idea, urged by an influential section of public opinion and obtaining additional support from the protectionist party, the customs tariff has been first extended in the form of a revenue duty on sugar, accompanied by a return to the primitive policy of an export duty on coal, and followed by a trivial, but so far protective, tax on corn. These measures, when considered, as they should be, in connexion with the legislation on matters of economic policy of the past seven years, indicate a disposition on the part of the predominant political party to depart from the financial principles which have prevailed since 1860. This attempt, whatever be its fate, is one of great interest to the scientific student of finance. The success that has attended the financial measures of Peel and Gladstone, and the remarkable contrast between the position of Great Britain and that of other European states in respect to economic and financial conditions, suggest the belief that experiments such as the coal and corn duties are undesirable, while any great extension of the policy would be hazardous in the extreme.

P.4

But whether the general basis of the established English revenue system be retained or abandoned, it is beyond doubt that the growth of expenditure presents a grave problem for the future. In spite of warnings from responsible members of both parties, there has been an automatic increase in outlay that necessarily involves a heavier tax burden. No readjustment of taxes can give an escape from this result. The income of the citizen may, indeed, be attached directly, or by a series of indirect charges. The adoption of the latter method will not, however, reduce the amount of pressure; in some respects it will decidedly aggravate it. Prudent selection of the forms of taxation may afford some relief, just as mistaken choice will add to the loss, but speaking broadly, Ricardo's emphatic statement holds good that "the great evil of taxation is to be found not so much in any selection of its objects as in the general amount of its effects taken collectively" (Works, p. 88). It may be reasonably held that the future progress of Great Britain and of the British Empire will depend largely on the course that financial policy takes.

Of almost equal importance is the problem—or series of problems—presented by local finance. Expenditure and debt are both on the advance in the municipalities of the United Kingdom, and, if unchecked, will compel the adoption of new kinds of taxation or an appropriation of fresh fields of industry for municipal enterprise. In this case also there is need for that care and prudence which takes remote as well as immediate results into account and makes adequate allowance for risk. A full exhibition of national and local expenditure along with the corresponding debt figures does not produce a reassuring effect, especially when we consider the new claims that are from time to time arising. Firm financial administration and a wise economy of the public resources seem to be urgently needed in order to preserve the high reputation that British policy has won for itself. The great difficulty that has to be overcome is not the weakness of ministers, but negligence and want of knowledge on the part of the mass of the community. A better informed and more reasonable public opinion is an essential pre-requisite of financial as of all other reforms in the modern State.

C. F. BASTABLE.
Trinity College, Dublin
January 31st, 1903

FROM PREFACE TO THE SECOND EDITION

P.5

Though no substantial change has been made in any point of doctrine or arrangement, the facts and figures have been thoroughly revised and brought up to date. Many important financial measures have been adopted during the last three years, and have required some notice. It is indeed, neither possible nor desirable, in a work primarily devoted to the statement of principles, to include all the transitory phases of legislative action; but the alterations recently carried out in the United Kingdom and Prussia are instructive examples of the direction of modern financial policy.... They have accordingly been described in their proper connection, and in consequence of the scientific and practical interest of the subject a chapter dealing with "death duties" has been added. A more theoretical addition is the new chapter on the "maxims of taxation," which replaces the historical appendix in the first edition.

P.6

It is satisfactory to note that there has been a distinct revival of interest in respect to financial questions, as shown by the recent contributions to the literature of the subject, the more important of which have been duly referred to. It may without rashness be conjectured that the chief points of controversy in the immediate future will refer to local rather than to imperial finance, a statement which is applicable to France and the United States as well as our own country. The due adjustment of the two complementary systems of central and local finance will call for the efforts of skilled statesmanship guided by sound principles.

P.7

The criticisms and suggestions made by numerous reviewers and correspondents have been carefully considered, and, I hope, properly used. Among published criticisms I feel specially indebted to those by Professors Cohn, Seligman, and Farnam. Of those made privately I would particularly mention the valuable remarks by Professor Foxwell, Mr. E. Cannan, and Mr. C. S. Devas.

C. F. BASTABLE.

FROM PREFACE TO THE FIRST EDITION

P.8

The subject of Public Finance, as distinct from that of Political Economy, has not of late years attracted much attention in Great Britain. The very excellence of English financial institutions and management has contributed to this result by making the need of theoretic study as a basis for practical reforms less pressing. Though our financial literature is not quite so poor as some critics imagine, it must be allowed to be deficient in works dealing with the subject as a whole. Since the well-known book of McCulloch—first published in 1845 and now out of print—there has been no manual available for the student.

P.9

Such a want is specially felt in the work of teaching. A lecturer who desires to deal with financial questions has no text-book—like those at the service of his French, German, and Italian colleagues—to use as the groundwork of his instruction, and is therefore compelled to make constant reference to foreign treatises not readily accessible to, or easily read by, his class.

P.10

In the present work I have sought to temporarily supply this need by going over the whole field of Public Finance and presenting the results in a systematic form, so that a student may at least obtain a general knowledge of the leading facts and present position of this branch of political science. The selection of topics and the space assigned to each have been determined under the influence of this guiding idea.

P.11

In dealing with financial statistics—which have been kept within the narrowest possible limits—I have in most cases rounded the figures in order to fasten attention on the really important facts expressed by them. For the same reason in the conversion of foreign money into English I have been satisfied with the approximate equation of £1 = $5 = 25 francs or lire = 20 marks. The fluctuations of the rupee, the Austrian florin, and the rouble have generally made their conversion undesirable, but I have sometimes taken them at their exchange value. Finally, I should explain that the references are, unless where otherwise stated, to the volume and page of the particular author.

C. F. BASTABLE.

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