Public Finance

Bastable, Charles F.
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London: Macmillan and Co., Limited
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§ 1. The oldest form of public property undoubtedly consists of the territory on which the society is situated. There is a great body of evidence to show that communal holding of land is far more persistent and enduring than other kinds of common enjoyment. The witness of history is moreover supported by all the probabilities of the case. Until agriculture has extended and improved with the growth of population, a large part of the tribal land must lie waste or be only used for pasture. It remains under the control of the community or, at a later time, of the chief. Public land is increased by the action of war; the land of the vanquished becomes the property of the conquerors and goes to swell their public domain. But a counter-process is found steadily operating in the allotment to individuals of parts of the domain. The Roman ager publicus dwindled in extent under this influence, and the territory of the Provinces—in technical law the property of the Commonwealth*40—was 'possessed' by individuals with the substantial rights of ownership. A public domain was notwithstanding retained, and some of the local revenue was derived from the letting of land, though it was largely supplemented by other sources. The earlier Middle Ages regarded the royal domain as the basis of public income. The feudal King was the greatest landholder, and was expected to discharge the necessary public duties by aid of the revenue that he obtained from that source. The same opposing forces that were operative in earlier times continued to affect the royal lands. They were reduced by lavish grants to royal favourites, and increased by resumptions and forfeitures. The position of the domain depended very much on the strength or weakness of the individual monarch, improving in extent during vigorous reigns and shrinking considerably in feeble ones.


The later history of the domain varied in detail in each European country, but one very general result is found in the transformation of what had been the King's estate into public property. In the few cases where royal or princely estates have remained in the possession of the reigning family, they are nevertheless, in substance, public, inasmuch as they supply the ruler's official income, and by rewarding his services relieve the treasury from an equivalent charge.*41


§ 2. The disintegrating forces that tended to break up the great state domains, as well as the other parts of mediæval finance, did not everywhere act with the same intensity. Owing to peculiarities of situation and in some degree to differences of policy, the proportion of state domain is at present hardly the same in any two countries. England is remarkable for the almost complete alienation of its Crown lands, the revenue derived from that source being one of the most insignificant in the budget of receipts.*42 'It was in the fifteenth century that,' according to Thorold Rogers, 'the great impoverishment of the Crown estate began,' and though increased by the dissolution of the monasteries by Henry VIII, it was again reduced by his successors until it reached its present position at the commencement of the eighteenth century.*43 In France also a series of losses has reduced the public lands held by the central government to a very small amount, with the exception of forests, of which it possesses 1,070,477 hectares (about 2,650,000 acres). There is, however, a remarkable difference as compared with England in the large quantity of land held by the Communes or local units. These bodies in 1877 had 2,058,707 hectares (or, in round numbers, 5,000,000 acres) of forests and 2,258,310 hectares (or 5,600,000 acres) of other land, most of it being of very poor quality. The productiveness, however, as distinguished from the extent of this property, is not considerable; in 1877 the receipt from communal property, including other items than land, was only 51,702,694 francs, or little over £2,000,000, showing less than £40,000 increase since 1862. These figures need some further correction, since a large amount of communal land has been sold, and in some cases timber has been freely cut down. Thus in 1877 over 24½ million francs were obtained from those extraordinary resources that had for the earlier year 1862 yielded over 34 million francs. It accordingly appears that a sum of about £3,000,000 was the contribution from immovable property for 1877 towards a total communal expenditure of about £27,000,000.*44 It is plain that neither England nor France can hope for much financial advantage from public lands either general or local. The policy, or at all events the desire, of alienation has been too strong, as the speedy disposal of the confiscated estates of the clergy and the emigrant noblesse shows in regard to France.*45 Nor are the cases of Italy and Spain substantially different. The heavy expenditure that the accomplishment of Italian unity necessitated was partly met by sale of the state lands, and at a later time by confiscation and sale of the possessions of the ecclesiastical bodies so numerous in that country. By 1886 over £33,000,000 had been realised through those sales, and by far the greater part of the lands had been disposed of.


The countries of Eastern Europe are differently situated. Germany, Austria, and Russia all possess large public estates—a circumstance that may be fully explained by the later growth of constitutional government in the former, and its absence as yet in the last-named. A State that cannot rely on taxation as a resource at need must provide other financial support, and taxation is productive only on the condition of general willingness to contribute. States, therefore, in which royal power has not been completely displaced by popular government will probably retain a larger amount of public land. The position of Prussia illustrates this proposition. The budget estimate for 1902-3 gives a gross receipt of 106,854,000 marks, and after allowing for the working expenses of over 46,653,0000 marks, there is a net revenue of about 60,000,000 marks, or £3,000,000. The Bavarian domains are, in proportion, larger and more valuable than those of Prussia. The biennial budget estimated the yield for each of the years 1898 and 1899 at 38,800,000 marks. Würtemberg, Baden, and Saxony also have large domains, chiefly forests.


Austria and Hungary have each state lands and forests, the estimated revenue in the former country from that source being over 5,000,000 florins, and in the latter 2,500,000 florins.*46 Russia is a more remarkable case: it illustrates the statement that the less the development of the society the greater is the proportion of public land. At the time of the great reform usually known as the emancipation of the serfs an amount, estimated at from two-fifths to one-half of the land of Russia, was held by the State. About eighty years earlier 10,500,000 serfs were found on the state lands, and in 1861 this number had increased to 23,000,000. The measures of emancipation—so far as the state domain was concerned—consisted in a readjustment of the dues that were payable, which henceforth, in many cases, assumed the form of taxation, either imperial or local Economic inquiries are said to show that rent has been evolved from taxation, but it is equally true that in many cases taxation has passed into rent, or rent-charge. In some parts of Russia the state charges on the former imperial serfs are higher than an economic rent, in others they are lower, and in the latter case they may be looked on either as a reserved property or as a land tax. It appears in this way that the income of the State as landowner may approach very closely to the tax revenue that is imposed on land, and that the line of separation can only be fixed with reference to all the circumstances of each particular case. In addition to this wider form of state domain, the Russian government received, in the year 1900, over 76,500,000 roubles from lands and forests, though the expenditure on the same objects (40,600,000 roubles) has to be deducted to arrive at the net gain.*47


The Indian land tenures present the same features even more forcibly. Under all the varying forms of assessment the principle that the State is ultimate owner has not been, in practice, completely lost sight of, except in the settlement of Bengal. Nothing appears more equitable than that this head proprietor should receive a share of the increasing value of the soil. On the other hand, the machinery of assessment and collection is compulsory; it is nearer akin to the process of the tax-collector than of the landlord, and the difficulty recurs of saying whether the receipts are taxes or rent. The best solution of this question is arrived at when we see that in strictness they belong to neither class.*48 They differ most markedly from the rent, either customary or competitive, of a modern landowner, and more nearly resemble the dues of the feudal lord. They are just as distinct from the ordinary tax, and are not governed by the canons to which it ought to conform; at the utmost they might be assimilated with the taxes on special advantages or monopolies, of which class the possession of land is one example. Where the state dues are frequently revised in accordance with the movement of land values the approximation to rent is very close; where they are changed in order to suit the needs of the State, they are practically taxation;*49 but where, as is most common, they are fixed for long periods, or in perpetuity, they are really charges that may be capitalised at the market rate of interest. The Indian Land Tax, with its great net return of nearly £20,000,000, has, at different times and in different provinces, shown each of the three features, but on the whole the rent-charge element has preponderated over the others. The lengthening of the period of settlement, and the disposition to keep the assessment under the value, have both tended to this end.


§ 3. European colonies, and more particularly the English settlements in North America and Australasia, contrast remarkably with the preceding cases. The most prominent economic features in a new country are abundance of land with scarcity both of labour and capital; land is consequently the cheapest of commodities, so much so, that it is freely offered in full ownership as an inducement to fresh settlers. The progress of cultivation soon changes this state of things. The more fertile land is taken up, and acquires value from the growth of population. At first sight it seems that the State might derive important resources from a reserved charge on its land, or, by adopting the simple expedient of leasing it out, instead of giving it away, would obtain a share of the increase in its value. The Wakefield system, though not designed for financial ends, sought to secure a higher capital return for land that was sold, at the same time applying the funds so derived for the promotion of immigration; in fact, increasing both colonial receipts and expenditure. The advantages of free access to land are, however, so great in a new country, the effect on economic development of a speedy growth of population is so considerable and so easily perceived, that no effectual method of limiting the occupation of the soil in full ownership has been continued. The United States, the various English colonies, and the South American republics have all found that nothing is such a stimulus to immigration as full liberty of acquiring vacant land. For this reason the revenues of those States from land are, comparatively speaking, small, and for obtaining the necessary funds recourse must be had to other forms, principally indirect taxation. As examples it appears that in 1889 the United States obtained over £1,600,000 by the sale of public lands, but against this the expenses on the same account have to be set off, and the result seems to be that on the whole there is a loss on the state lands: they really are an item of expenditure, not of receipts.*50 For the financial year 1892-3 the Canadian land receipts were a little over £65,000, though it is hoped that in future years the return will be greater. In the same year the Australasian colonies received £4,150,000.*51 Thus neither in new nor in old countries are state lands one of the main supports of the financial system. It requires an extraordinary combination of circumstances, as in the case of India, to create an exception to this general rule.


§ 4. The apparent advantages of a large state revenue from land and the peculiar nature of the income received from the use of superior natural agents have suggested the advisability of dispossessing all private owners and reverting to the primitive system of public ownership. Whether levied under the name of rent or of the single tax, this plan of imposition involves the confiscation of all existing rights in land. Its bearings, when regarded as a form of taxation, belong to the theory of that part of our subject, but we may at present notice it in so far as it advocates an extension of state property. And here there is an evident distinction to be made. In one form of the proposal, existing owners are to be compensated, when it simply amounts to an extension of the state domains by purchase. In the other and more drastic form no compensation is to be allowed. Owners of land, no matter how acquired, are to be compelled to surrender their incomes from this source to the State. It is not necessary to characterise the morality of this scheme, but its financial attractiveness, at first sight great, is much diminished on closer examination. The disturbance of economic relations and the general feeling of insecurity that the adoption of such a measure would produce, even on the assumption that it could be carried into effect without a revolution, would go far to reduce the productiveness of land to the State, and to lower the incomes of other classes of the society in whose interest the measure is advocated. In another way, too, the gain would be reduced. The large amount of general and local taxation at present raised from land, as also the necessary expenditure for keeping it in proper condition, must be deducted before the net advantage to the Exchequer can be known. Besides, all the difficulties attendant on state management of land would exist in at least equal strength if it were acquired without paying its fair value.*52


§ 5. From these far-reaching and unsafe theoretical plans we may now turn to the actual questions connected with the public ownership of land. They are divided into two groups, the first of which considers the advisability of the State retaining its domains, and the second, taking the retention as desirable, investigates the best methods of administration. As the former comprises the already noticed question of land nationalisation with full compensation, we shall find it convenient to commence with it.


At the opening of scientific economic inquiry the treatment of state lands was a subject for discussion. German writers, e.g. Justi, favoured their retention as being a better source of income than taxation, but the tendency of the new doctrines of the Physiocrats and Adam Smith was in the opposite direction. Taxation in the form of a direct charge on the net revenue of land was regarded by the former as the proper support of the State, and the latter has unequivocally pronounced in favour of the alienation of the public domain. 'The revenue which in any civilised monarchy the crown derives from the crown lands, though it appears to cost nothing to individuals, in reality costs more to the society than perhaps any other equal revenue which the Crown enjoys. It would in all cases be for the interest of the society to replace this revenue to the crown by some other equal revenue, and to divide the lands among the people, which could not well be done better perhaps than by exposing them to public sale.'*53


The reasons given in favour of this policy are clear and simple. Firstly, the lands held by the State are managed so badly that the revenue of the society would be increased by their alienation, since the produce obtained from them would be larger. The price obtained by the government would go to discharge liabilities, and therefore the amount of receipts, if not larger, would certainly not be less; and finally, the improvement of the alienated lands, under the management of private individuals, would, by adding to the source from which taxes are drawn, make their yield greater. The case as so presented is a strong one, and, in the main, convincing. Nevertheless, the German writers on finance have regarded this view of Adam Smith's as one-sided and exaggerated. His condemnation of state property is, it is said, too absolute, and various arguments in favour of the retention of state domains have been put forward. Thus the advantage of such property as a security for public loans is suggested as a reason for its retention; also its use as supplying model estates on which improvements may be introduced as a means of instruction to agriculturists. The political gain to the Crown from possessing an independent source of in come and the prospect of the value and return of land increasing through the progress of society, are given as further reasons in favour of retention. Most of these pleas are unfounded: if public lands are a security for loans, their sale would prevent the need of borrowing. The royal income is just as secure when settled on the civil list; no matter what be its form, a revolution will disturb it. The value of model estates is a distinct and separate question, and belongs rather to expenditure than to revenue, so that the only valid argument remaining is that derived from the growth of rent or unearned increment. The question, however, remains, whether this very growth is not in great measure due to the incentive that private ownership of land gives, and which is removed by state appropriation. Still it must be admitted that, more especially in the case of land suited by position for building sites, there is a decided advantage in reserving the constant increments of rent for public use; and that any equitable mode of accomplishing this end would be deserving of approval. The retention of state or crown lands is of itself by no means sufficient for the purpose. Even in Germany or Russia the proportion of public land really at the full disposal of the State is only a fraction of the whole, and the part of it that is situated within urban districts is much smaller, so that it appears that under actual conditions the difficult question of unearned increment in connexion with ground rents must be solved, if solved at all, by special taxation. The contention of Adam Smith therefore holds good, that in general, from a purely financial point of view, the sale of lands in order to clear off debt or meet extraordinary expenditure is expedient. Underlying the discussion in the Wealth of Nations there are, it should be noticed, some assumed conditions that did really correspond to the facts in Adam Smith's time. These are (1) the existence of debt on the part of the State. While it is financially wise to dispose of property yielding small returns in order to discharge obligations paying a high rate of interest, it is not equally clear that alienation of property to meet current expenditure is justifiable. Expenditure of the normal kind should be met by equally normal receipts, and the sale of land is not of this nature.*54 Unfortunately, the case of complete freedom from debt is rather conceivable than actually existent, as every country has public debts to a larger amount than the sale of its domains would meet. (2) The expediency of selling the state domain also depends on the available market. In most European States in the eighteenth century there was no difficulty in finding an open market for the amount of land held by the sovereigns. But under other circumstances it would be hopeless to expect that large masses of land could be sold at their proper value, owing to want of capital and enterprise on the part of individuals. Such is plainly the position of India in those cases where the land tax is really a rent.*55 In addition to the political and social evils there would almost certainly be a financial loss from forced sales. The same statement would hold good for all new countries where the sale of land depends on the demand of fresh settlers, and where the amount disposable in any one year is limited.


The evident conclusion seems to be that the function of the State as owner of agricultural land is sure to decline in importance with the advance of society. The proportion that the quasi-private income of the State bears to tax revenue becomes smaller in the course of time; and as the industrial domain has in certain directions a tendency to expand, the falling off in the yield from rent must be very decided. Though this will be the probable final result, it is also true that for a long period the management of state lands will be of practical interest in some countries, and will always remain as a problem of financial science. If the State, through its central or local organs, is the owner of landed property, it is desirable that property so held should be wisely managed.


§ 6. The methods of administering state lands may be reduced to the same classes as those existing in the case of a large private owner. As in the latter instance the estate may be worked by the proprietor or let out to tenants, so may public property be either directly under state administration or be leased to private individuals. The former system is probably the earliest. The capitulary of Charlemagne, entitled de villis, contains a set of regulations for the management of his manors, and in Germany several parallels are to be found,*56 but the same influences that caused land-owners to abandon farming by bailiffs affected the royal estates. A direct financial gain was procured by letting the land to tenants. To work effectively a large area of land requires a good deal of capital applied with intelligence, under diligent supervision. All these conditions were wanting in public or royal management, and therefore the economic advantages of the tenancy system were too great to be disregarded. The method of direct state administration as a financial policy has no supporters.*57


The dealings of the State with agricultural tenants ought, it is plain, to be modelled on the system of a prudent landlord. There is no possible reason why the treatment of state domains should differ from that applied by private owners to the management of their properties. In two respects, indeed, the nature of the public power has peculiarities that affect its dealings with land. It is of longer duration than the individual owner, and it has necessarily to act through agents. A result of the former is the possibility of longer agreements and a more continuous policy in the system adopted: the latter makes the use of definite rules desirable, in order to prevent corrupt action on the part of officials. Even as regards these special features there is not much difference between state properties and those of the largest class of English owners where the method of estate management is handed on unchanged for generations, and most of the administrative work has to be done by paid representatives.*58


The earliest agricultural tenants are probably to be found in the serfs who cultivated the soil and paid rents in labour, or produce, or both. The advance in personal liberty freed these cultivators from many of the more degrading incidents of their tenure, and by degrees they became established as free tenants paying money rents. In another way a class of larger tenants was created. Officials in charge of land were bound to account for a certain return, the surplus, if any, going to them; and this function of collecting dues, with the obligation of giving a fixed quota to the sovereign, became in many cases tenancy passing later on into ownership.


The application of what are called 'commercial principles' to the letting of land is of comparatively recent introduction, but it is only at this stage that the idea of conscious choice between different systems, hitherto followed through the blind influence of custom, comes prominently forward. Three forms of tenure are possible, viz. (1) tenancy from year to year, or in popular language 'at will,' (2) leases for years, and (3) heritable, extending to perpetual, leases. The first form has been almost universally condemned, though under the fair and impartial guidance of a public department it would be free from some of its most objectionable aspects. The undue increase of rent and the discouragement to improvements characteristic of the tenure would neither of them be likely to happen under state management. Leases for years are, however, free from even the chance of such evils, and it is perhaps wise to adopt this system, as otherwise the example of the public estates might be put forward to justify the conduct of private owners in adhering to yearly tenancies. The exact number of years to be given in the state leases can hardly be decided on general principles. The term should be long enough to give full room for the application of the tenant's industry and capital, while in the interest of the public it should not exceed the time during which a large increase in the natural value of the land takes place Provided that full allowance is made for the tenant's improvements, thirty years seems a fair period, and sufficient to eliminate the effects of casual disturbances.


Older than leases for years is the system of hereditary lease (Erbpacht) that has from early times been connected with public property. The emphyteusis—the form that it takes in Roman Law—was originally developed on the estates of municipalities, and in the Middle Ages ecclesiastical bodies were foremost in granting similar tenures.*59 The advantages to a corporation of obtaining a settled rent without the trouble of supervision and calls for expenditure are greater than in the case of a single owner who hopes to gain extra rent by his attention and outlay, and, when combined with fines for change of possession, the revenue obtained is generally satisfactory. Nevertheless the hereditary lease is in reality a step towards alienation. The tenant holding by this tenure is part owner, and in course of time tends to take the position of full owner subject to a rent charge;*60 more especially is this true when the fines, as usually happens, are redeemed by a fixed payment. The head landlord,—i.e., with regard to public lands the State—is substantially a creditor entitled to certain remedies if his obligation is not paid. What seems the most prudent policy, alike on financial and social grounds, with respect to state management of property, is to follow the system adopted by the best individual landowners, and the forms between which choice will generally lie are the lease for a sufficient term of years and the hereditary lease; the former is financially the wiser, but special circumstances may make the emphyteusis—to use the old title—more convenient, in which latter case the land revenue is practically converted into a fixed charge. Leases for lives are open to the objection that they are uncertain; but by judicious regulations as to renewals, much of the evil of insecurity can be avoided.


The modes of letting vacant farms, the duty of supplying buildings and permanent improvements, and the form in which rent is to be received, have all been carefully discussed in the older financial treatises. Most of these questions belong to practical administration, and are, moreover, not of great interest in modern times. Certain plain rules, may, however, be stated. The claims of successors to the late tenant should not be overlooked; it is better for the tenure to be continued without break, and therefore the question of new letting ought rarely to occur. When it does, the best mode of disposal will depend on the circumstances of the particular district; with capitalist farmers letting to the highest bidder is admissible, and it excludes all chance of unfairness. But where, as notably was the case in Ireland, there is exaggerated competition for land, the amount of rent payable over a series of years by a solvent tenant should not be exceeded. In such cases a sale of the interest, subject to a fixed rent, seems the best course. The supply of suitable buildings and the institution of permanent improvements must, under a system of short leases, be carried out by the State, but the modern plan of advancing public funds for improvements could be easily applied, the interest on loans being added to the rent and paid at the same time. Hereditary leaseholds may be safely left to the tenant, as he gains all the benefit of improvements. The form of rent ought clearly to be, as far as possible, in money. Special conditions may make payment in kind more convenient, but this mode of receiving rent should be only temporary, and all reasonable efforts be tried to introduce the more definite system of money payments. Even where for practical convenience the rent is a fixed part of the total produce, the actual payment had best be in money, the various articles being estimated at their money value.*61


§ 7. We are now in a position to deal more fully with the expediency of extending the state lands. In their extremest form plans of this kind aim at the acquisition by purchase of all private landed property. More moderate proposals seek to increase these possessions in a smaller degree. Any plan of the kind, even when limited in the most careful manner, is open to overwhelming objections. It amounts to the creation of a new public department engaged in countless dealings with what is the most intricate and complicated form of property; arrangements as to valuation, the renewal of leases, allowances for improvements, abatements for unexpected losses, the maintenance and audit of innumerable accounts would all fall to the lot of the department. It would, on the supposition of purchase, have to pay interest on a large amount of debt. There would be little hope of a favourable financial result under such conditions. In short, we may say that if land-nationalisation without purchase is palpably unjust, land nationalisation with purchase is as evidently inexpedient. The same arguments apply to smaller acquisitions of land. They have little chance of being remunerative, while they so far contract the supply of a much desired commodity, and they necessitate a class of administrative duties of exceptional difficulty. If the alienation of state lands should only be carried out with due care and deliberation, the acquisition of new estates can only be justified on non-financial grounds. Practical politics clearly conform to this rule of prudence. State lands are often alienated and seldom acquired, and in these latter cases there is generally some social or political reason as the actuating cause. We may look on the slow decline of the state domain as one of the permanent facts of financial development.


§ 8. So far we have confined our attention to the case of cultivated land—of 'farms' as Carey would say—where the ordinary economic motives operate with considerable force. The State, it would seem, had best avoid entangling its interests with the difficult questions of land tenure, and can hardly expect any financial advantage from retaining its ownership of land. It does not follow that with regard to other closely allied forms of extractive industry it may not be expedient to retain, or even extend, public ownership. The principal example is afforded by forests, and in their case the wisdom of alienation is far less clearly established. Individual self-interest is not in the same general agreement with public advantage as in the case of ordinary agriculture. The creation of a forest is a work of time and technical skill which can hardly bring in recompense to the originators, and existing forests are a ready resource for the embarrassed owner. Moreover, forestry is only applicable to large tracts of land, and is most profitably carried on where the soil is of little use for other purposes. The estate of the large owner is, as we saw, not very differently managed from the state domain, and therefore some of the usual arguments against public ownership lose their weight. There is, besides, the important effect of suitable plantation on climatic conditions, and in some countries the need of wood as the only available fuel. There is here a striking example of failure in that harmony of individual and general interest which was so enthusiastically set forth by Bastiat and became a 'watchword' of what was supposed to be 'Political Economy.' The case against not simply state ownership, but even direct state management is accordingly deprived of its foundation; while the promotion of his own interest had best be left to the individual, the interest of the community cannot always be safely entrusted to his hands. The real questions at issue are to be decided by estimates as to (1) the influence of other than purely self-regarding motives on the proprietors, (2) the amount of general interest that is jeopardised by the possible action of individuals, and (3) the probability that public management will secure the desired results. In reference to the first, it has been universally remarked that large proprietors are in many cases willing to give up a portion of present wealth for the future advantage and beautifying of their estates, while peasant proprietors show no such disposition, but, on the contrary, seek immediate gain by the removal of valuable timber.*62 The inattention of the State to forests in England compared with Continental countries is partly explicable on this ground. English proprietors have done at their own cost what foreign countries have to secure at the public expense. Another reason is to be added. The supply of fuel in England is not dependent in the smallest degree on the cultivation of timber, and the recent developments of naval architecture have destroyed the importance of forests as a source of shipbuilding material, the object to which the Woods and Forests Department principally attended. Considerations of climate are besides of less weight in the case of islands subject to the equalising influence of the sea. We can thus easily understand the peculiar attitude of England and the reasons for the very different policy of the Indian Government, where the circumstances are in all essential points reversed. The chance of success in state administration of forests depends on the application of the best scientific and technical ability to the work, which can only be attained by effective organisation. Among examples we may mention the Indian Forests Department and the Prussian administration. The benefit of a sound method of dealing with this part of the public domain is not mainly financial, though good management may make it yield a surplus. But, as appeared in dealing with expenditure,*63 it is quite possible that the general revenue of the State may have to contribute for the maintenance of the requisite plantings, in which case the policy has to be judged as a matter of expenditure.


§ 9. The necessities of practice have led States to a recognition of the special advantages of directly controlling forests. In all nations they form the largest part of the public land; the figures for France have already been given, and the same general features mark the position in other countries. The broad result is that about one-third of the forests of Germany is held by the States; about one-sixth by communes and quasi-public bodies; very little over half remaining in private ownership. In Austria one-fourth belongs to public bodies, and in Norway one-eighth.


The excess of forests over other state land is easily explained when we call to mind that they are the last remnants of the old common property. To a primitive community land with timber is of little service. When, at a later time, wood rises in value the one aim is to clear the soil as speedily as possible, and land still under trees is waste. The fact that planting often succeeds best on poor soil tends to confine it to land of this kind, since more fertile land is turned to other and better uses. The recent movement towards reafforesting is for the same economic reason directed towards inferior land, and it is only by adopting this policy that new forests can be made even tolerably remunerative. There is almost a consensus of competent opinion in favour of state action for the purpose of increasing the area under trees, and directly administering those areas by a skilled and well-organised staff.*64


Most European countries have a considerable area of uncultivated land which would be particularly suitable for planting, and a well-considered system of purchase by the State, perhaps accompanied and facilitated by the sale of the other parts of public landed property, is likely to be advantageous. The financial results cannot be of much importance. Prudence and judgment may, however, save a good deal of unnecessary expenditure and combine the two ends of public economy—utility and saving of effort.


§ 10. The division of control over landed property between the central and local governments can hardly be arranged on general principles. Historical conditions and the special features of each case are the principal factors in the settlement. Management by a central department is open to the dangers of laxity in administration along with pedantry in the application of inflexible rules. Public estates so placed have all the defects attributed to the absentee proprietor. Local bodies have a different but not less serious drawback, viz., the danger of jobbery and intrigue in the administration of what ought to be applied to the best advantage of the community. This evil is of varying magnitude according to the size of the body. Among the larger German States, as, e.g., Würtemberg or Baden, it disappears completely. In a small French or Swiss Commune it is at its maximum. The dealings with public or quasi-public property by small corporate bodies need to be carefully controlled and regulated, and this necessity has been recognised. Thus the French Communes are unable to sell or grant a lease of their lands for more than eighteen years without the sanction of the Préfet in the council of the Préfecture.*65 The property of British corporations has in former times suffered from the want of such control, as has also that of the Swiss communes. When local government is applied to a sufficiently large area, and public spirit is operative, landed property is generally better managed than it would be by a central department. The concessions to tenants are more liberal, but, except where the land is within an urban district, its sale is probably advisable if there is a local debt sufficient to absorb the purchase money: where this is not so, there is the danger of the price, which is really capital, being treated as current revenue. The retention of building sites by corporations is, where practicable, the happiest solution of the vexed problem of taxation of ground rents, and their alienation should not, unless in the exceptional cases of extraordinary pressure or special encouragement to small proprietors, be sanctioned.


The above considerations are in some degree modified with regard to forests. So far as the inhabitants of rural districts obtain fuel from the communal possessions there is no reason to object to local management. But in modern times the need of husbanding and developing the national forests has become too important an end to be surrendered to the care of persons whose views are from the nature of the case certain to be limited to a particular district and to present advantage. The result has been a very general centralisation of management in this respect. France, Italy, Switzerland, and the United States have all dealt with the matter as one for the central government. The Swiss cantons, so jealous of their autonomy, have not refused to surrender the control of forests to the Federal government. All the conditions that we noticed in a former chapter as tending in favour of central management are in operation here. General interest, need of trained intelligence, and of unity of control make it expedient to continue the policy of centralisation.

Notes for this chapter

Cp. the statement 'Provincialia prædia usucapionem non recipiunt.' Caius, Institutes, ii 46.
The distinction between the property of the ruler as a private person and that which accompanies his office is now of little interest. It was emphasised in the Roman Empire—res privatæ opposed to res fiscales—(Humbert, i. 187 sq.), and was of much importance in Germany in the case of mediatised princes, who naturally tried to stretch the private element as far as possible. In practice the same end is reached by different means in modern States, as in the cases of Baden and Würtemberg, noted by Roscher, § 9.
The net receipts in the year 1900-1 were £500,000, or less than one-half per cent. of the total receipts. The revenues of the duchies of Lancaster and Cornwall should in strictness be added with a corresponding item of expenditure for the sovereign's support. Bk. i. ch. 6, § 5.
Economic Interpretation of History, 417 sq.
Say, Dictionnaire des Finances, s. v. 'Budget Communal.'
The most careful estimates place the amount of immovables disposed of during the revolutionary period at £220,000,000, i.e. £120,000,000 for Church and Crown lands, £100,000,000 for those of the émigrés. Stourm, ii. 461.
The estimate for the Austrian domains and forests for 1891 was less than 500,000 florins (net revenue).
For the position of the state serfs, see Wallace, Russia, 105, 473, 553.
'It is also fruitless to discuss exactly what the Oriental institution of a Land Revenue is, whether a "land tax," or rent, or what.... Practically the discussion is a profitless war of words, and we may be content to speak of the "Land Revenue" as a thing per se.' Baden Powell, Land Revenue in British India, 49.
'It seems to me that the distinction between a tax and a rent is merely a matter of amount; and that if a land tax is so high as to absorb the rent it becomes in fact rent.' Campbell in Cobden Club Essays (1st series), 130-1. Cp. Marshall, Principles (3rd ed.), 727 n.
'Except for the period 1830 to 1840 the lands have been a drain upon our finances. At the end of the financial year 1882-3 the government was out of pocket.... in the sum of more than $126,000,000.' Hart, Essays on American Government, 241.
The precise figures are—

United States land sales, 1888-9 $8,038,651.79
Canada land revenue, 1891-2 $365,117
Australasian colonies, 1891-2 £4,149,896

The proportion of land revenue to the total receipts in each of the last-mentioned colonies was as follows:—

Western Australia 14.46 per cent.
New South Wales 21.08 " "
Queensland 19.56 " "
South Australia 9.14 " "
Tasmania 8.08 " "
New Zealand 7.97 " "
Victoria 6.72 " "
Average 13.82 " "

The idea of state ownership of land, based on an application of the economic theory of rent, first appeared in James Mill's Elements. He was probably led to it by his study of India. J. S. Mill, in the later years of his life, maintained a like opinion, which in later years has been urged with much enthusiasm by Henry George, and in Australia by Mr. Syme.
Wealth of Nations, 347. Cp. the opinion of Burke, 'A landed estate is certainly the very worst which the Crown can possess. All minute and dispersed possessions, ... which require a continued personal attendance, are of a nature more proper for private management than public administration.' Speech on Economical Reform (1780), Works, ii. 79.
The Australasian colonies, incorrectly as it seems, have placed sales of land among current receipts; a partial exception is found in Victoria, where a small sum is carried to the Railway Construction Account, Victorian Year-Book (1887-8), i. 140.
The sale of fee-simple estates to European settlers is emphatically one of those exceptions that prove the rule.
Roscher, § 11.
Not even Wagner, cp. i. 540-1.
An interesting description of estate management is given in Escott's England, ch. 3. The following passage bears out the view in the text: 'The Crown and the Ecclesiastical Commissioners are at the present moment the most extensive land proprietors in England, having the management of properties with a rental of upwards of £400,000, situated in all parts of the United Kingdom. These are administered upon practically the same principles which obtain in the cases of the large landed nobility,' 37. See also the evidence given to the Royal Commission on 'Agricultural Depression,' i. 1-19, 115-121.
For the origin of the Emphyteusis, see Gaius, Institutes, iii. 145; cp. the Aforamento in Portugal described by Laveleye, Cobden Club Essays (1st series), 241.
Thus the Emphyteuta had for his remedy the ulitis actio in rem closely analogous to the Vindicatio or owner's remedy.
The transition to money payments is a mark of advance. This took place in England in the 12th century. See the Dialogue of the Exchequer, Book i, in ch. 7, Stubbs, Select Charters, 193-4.
'Presque partout le paysan n'aime pas la forêt, dans le Midi il n'aime pas l'arbre; il n'a qu'une faible idée d'utilité indirecte des choses. Les grandes et les moyennes propriétés, les parcs, auxquels s'attaque la frivolité démocratique, rendent à ce point de vue de réels services à la communauté.'—Leroy-Beaulieu, État Moderne, 124. The cutting of trees by peasant purchasers in Ireland is a good illustration of this general tendency.
Supra, Bk. i. ch. 6, § 3.
Leroy-Beaulieu, i. 46-66, 91-2; Wagner, i. 571 sq.; Roscher, §§ 16, 17.
Say, Dictionnaire des Finances, s. v. 'Communes,' 1120; see also s. v. 'Alienation,' 117-8.

Book II, Chapter III

End of Notes

15 of 46

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