economy of the present day is a phenomenon so generally known, the satisfying of it, never final but advancing in the strength of each achievement, is so imperatively necessary, that no apology is necessary for the appearance presented by the budget of recent years under such beads as increase of official salaries, improvements in education, science and art. For instance, the sums required by the department of Education and Health amounted in 1876 to 49 million marks, in 1897 to 125 million marks.

No one during this period has had any reproach to bring against the Prussian Government of a craze for the claims of education or of science. Contrariwise, every one who has gone into the matter at all knows the amount of friction and opposition every new demand has to encounter both in the department itself, in the treasury, and in the committees of the House of Representatives. They are familiar with what success these obstructions have delayed the satisfying of pressing demands. And, though it cannot be denied that during the last decades great things have been wrought for educational institutions, a whole pile of wants still tarries for the ministering care of the State. For while many a stately structure-school, university building, law courts and the like-has been erected, there still floats before the imagination of every one some crazy surviving edifice, long superannuated by the requirements of the present, but compelled to do service, judicial, educational or other, for lack of forthcoming funds. The nucleus of the State administration itself, and the ministerial buildings in Berlin, are an epitome of this state of things.

III.

Let it then be admitted that the growth of public requirements, which the railway surplus revenue has gone to meet, is a fact not to ie argued away; further, that it is an empty self-delusion to suppose it possible to stem the advance of that growth in the future. There then arises this other question :-What better methods for raising the public income, so as to supersede the railway surplus, have been or are available?

In replying to this question a distinction should carefully be made between that which is theoretically and that which is practically better, in other words between measures of financial reform attainable only in the future and such as are feasible at the present day. And it seems to me that, on the highest historical and scientific grounds,-on the basis of a comparative study of the causes of fiscal evolution in differtnt states, and of the extent to which it has been governed by conceptions of justice, social progress and productiveness of taxation,-it seems to me beyond doubt that the direction which may without rashness be pursued in the future is a progressive development of the present Prussian taxation on income, assets and inheritance. A progresNo. 33.-VOL. IX.

H

sive development by means of which, to the civic conscience of the future citizen, an income tax of 6 per cent. will be as tolerable as the present one of half that amount, a tax on assets of 3 in the thousand no heavier than seems to-day, or a death duty equivalent to what is borne elsewhere and recently in England, as no more intolerable than what is imposed, or rather is not yet imposed, in Prussia.

That an increase in the existing Prussian taxation would be intolerable, that a greater burden would repress the development of wellbeing, and cripple the satisfying of all those wants which every individual citizen seeks to satisfy in his domestic economy,—all such assertions are confuted by the fact that equivalent and even greater contributions are already forthcoming, just because they are necessary, the only difference being that they are paid in the more convenient, less obvious, less oppressive form (at least to objective wants) of surplus railway profits.

On the other hand, if it were possible at the present day to effect those developments in Prussian taxation, if an additional 200 million marks could be directly raised in this way, no one certainly would so rejoice at it as the State administration of the railways. It would be only too glad to renounce the ambition of being the benefactor of State administration in general. With the liveliest sensation of relief it would feel the removal of the iron hand of the finance minister from its surplus returns, and the advent of liberty to live for itself and its objects of communication and transport, to undertake reform in its rates, reduction of its rates, to increase its services by additional plantrolling stock, new lines, new train-services, &c. Its only limitations would be the securing interest on its invested capital. Even these limits might be exceeded, if the moneyed classes were resolved to be plucky in paying taxes on income, assets and inheritance, so as to compensate for the falling off in net profits in railways. An inversion, this, of our present financial and transport policy, by which taxation would make good the deficit in railway returns, instead of railway surplus returns being impressed into the service of an underfed treasury.

IV.

The real state of things wears a different countenance. The bare mention of the possibility of such an increase in the direct taxation being carried out in the housekeeping of the Prussian Government reacts at present everywhere, unless it be where the fresh air of scientific habits of thought has some free play, as though some infernal machine from the arsenal of the wildest innovations were about

to be exploded. No responsible statesman would dare to breathe such words, such figures. No one would dream of propounding any measures tending in such a direction.

How, indeed, could anybody be desirous of rousing again and so soon

the vexation, hardly yet overcome, that accompanied the turmoil over the Prussian fiscal reforms of 1891-93 at the prospects of new burdens? Was it not after all the chess move of the finance minister, naturally cautious and with no fancy for unattainable ideals, first to introduce the whole scheme of fiscal reform with the declaration that the object of it was a juster incidence of the existing income tax, and not an increase in the revenue; then, that the fiscal burdens were already so high that no addition was admissible? Thus even at that time, to effect any reform at all, it was necessary to soothe the people's representatives with a lie. How remote then must be the day when a plan of reform can be laid before that body which must be ushered in with the frank declaration:-We want to get an additional 200,000,000 by way of taxation!

And what impediments had to be got over by every item of that bill of reform ! The new methods of assessment, that is to say, the chief subject of reform, were mutilated in their essential features. Not only were the assessment boards robbed of essential functions, on which the bill laid great emphasis, but the effort of the Government to introduce, for the greater convenience of the income-tax assessment, a death duty in the case of the nearest of kin, was from the outset rendered a fiasco by a disreputable unanimity in public opinion. And if now for the last few years Miquel's fiscal reform has come, in spite of everything, to be regarded as a positive success, it is precisely to this that the finance minister must attribute the sincerest factor in his unpopularity. How slight must be the temptation to strive after success along these lines!

But is this the only experience of its kind which may serve as a criterion for the prospects of subsequent attempts at fiscal reform? What has been our experience of Imperial Finance the last quarter of a century?

Much is said to-day of a satisfactory equilibrium between income and expenditure in the Imperial Exchequer. Those who are responsible for the conduct of the Imperial Government are content to effect their transactions in the Imperial Diet without raising those difficulties in connexion with new fiscal demands which have ere now so often proved fateful. The man who can see a little deeper, who knows the history of Imperial Finance, who inquires into the building up of its constitution, is well aware that this content is wholly ephemeral. He knows too that the apparent equilibrium of the moment is a will-o'-thewisp. A will-o'-the-wisp in the first instance because the collective Imperial debts have served year by year, and must yet serve to fill up the chronic deficit in the Imperial taxes, while the fictitious. name of extraordinary and occasional expenditure is bestowed on that which is ordinary and regularly recurring expenditure. A will-o'-thewisp in the second instance, because it will not be possible to cry halt to the irresistibly increasing wants of the empire by simply closing our eyes to their inevitableness, instead of demanding that

those wants should be satisfied by means of such financial organisation as is founded on that necessity.

To plan a system of Imperial taxation according to this view is in itself a simple matter. Long years of experience have taught us what hindrances such a system would encounter in reality, that is to say, in the civic sense of duty all over the empire finding expression in the choice of Imperial delegates. He too had to learn it, whose iron. energies suffered in precisely this field the most palpable overthrow.

An item of the kind of financial reform in question was the Imperial tobacco monopoly, which was well adapted to bring funds to the increasing Imperial requirements on a lasting, productive, elastic scale. An item, I say, and not of course the whole, if the whole be looked upon from the standpoint of a lengthy, protracted evolution, and not from that of the moment. Had it been accepted in the Diet, it would, after the score of years that have since almost elapsed, have become a habitual and integral part of our system of taxation and we would all long since have become inured to it.

It was the wide-spread anxiety about this transitional process of inuring that caused even the efforts of the most powerful man in the German Empire to carry through this reform to break down. Other plans cognate to it came likewise to grief. Hence the actual development of the Imperial Revenue has drifted on in petty, fragmentary motions, attempts, successes and failures-a pattern of the actual difficulties intervening between the ideal of a systematic procedure of covered liabilities and the real opinions of those whose duty it is to effect that covering.

Hence Dr. von Stephan, ex-Postmaster General, was thoroughly right when, in his speeches on the 20th and 28th of January, 1897, (his last appearance in the German Diet), he took his stand on those fiscal principles governing his department which had been too long suffered to lie dormant. But then he must needs make an amazing attack on the representatives of the working classes, who were agitating for a progressive reduction in telephone rates.

"If this reduction were effected," he replied, "it would cause a diminution of receipts amounting to 6 or 6 million marks. Are you going to make that good by taxation? Do so, and then see what sort of answer you will get It is said that the Postmaster

General is not strong enough to oppose the Secretary of the Treasury. But this is a question of circumstances and not of strength. As long as our finances are what they are, there can be no question of altering our charges."

That which was here said concerning a relatively small matter in the conflict between the Imperial administration and parties directly interested, or parties said to be directly interested, holds good for the whole of this great question. It rests on the responsibility attaching to the covering of public liabilities, to the consciousness that for every rent torn in the latter, it must be shown how the gap

may be filled up as well and even better, to the valuation of the lights and shadows in all the methods employed in that financial covering.

Taxes direct and indirect, railway surplus, postal surplus, &c., each and all have their special advantages and disadvantages. It is very possible to conceive something less imperfect than the present necessitous condition in which the Prussian railway surplus revenues are forced to act as compensations for taxes which cannot be endured. But a far more serious matter than the relatively imperfect form of covering liabilities is that of the incapacity of covering the liabilities at all except by public debts.

Measured by this scale the depth of the shadows of this subservience in railway surplus profits to state liability becomes appreciably softened. And besides they are, in themselves, as I have often tried to show, a not insupportable method, if, as has been the case in Prussia for the last 10 to 15 years, they are the result of tariffs warranted in the most obvious manner by the expansion in our traffic, our production and our whole national economy.

They are an indirect form of taxation, relatively just because they are raised, for by far the most part, by the propertied classes, by those eminently capable of paying, and relatively practical, because at the present there appears to be no other form by which anything like the same amount of income may be acquired with such approximately consummate facility.

The first task of those interested parties who demand the reservation of the railway surplus (in the shape of reduction of rates, &c.) should be to point out better and juster form of taxation.

Considering the erudition of their advocates in every kind of text-book, and the ingenuity displayed by the latter in discovering what makes for their advantage, they ought to make this problem the subject of their deliberations. The solution of it would call for the gratitude of all parties, and certainly not least for that of the Prussian State-Railway Administration.

GÖTTINGEN, October 22, 1898.

GUSTAV COHN. Translated by C. A. FOLEY

THE NORWEGIAN SYSTEM OF REGULATING THE DRINK TRAFFIC. By A. TH. KIAER, of the Norwegian Statistical Bureau.

I. Introduction.

OUR system is certainly far from being a perfect one, and drunkenness still brings about much wretchedness in our country, but it may safely be said that, on the whole, the state of things in this respect has much improved during a long period of energetic and continuous work against the evil of intoxication.