state?' And at first sight such a policy seems to belong to the days before Adam Smith. Nevertheless the fact remains that state monopolies exist, and exist, as we shall see, with the approval and support of the most orthodox economists and financiers, and it is this circumstance that invests the subject with real and practical interest.

Before examining the principal monopolies that illustrate the operation of the system, we may premise that state monopoly may take one of three forms, or may combine two or all of those forms in a single object, i.e. it may control (a) the production; (b) the manufacture; and (c) the sale of an article, or it may abandon one or two of these steps in bringing the article to the consumer to private industry.

SALT. The first commodity whose financial position under monopoly we have to consider is salt. Alike in classical and mediæval times, it was an object of special and watchful care on the part of the financier, whose attentions were not usually regarded with satisfaction by the community. Mommsen, indeed, maintains that the Roman monopoly in Republican times was in the interest of the consumer, and this is supported by similar facts in the administration of the corn supplies; but it only holds good of Roman citizens. The provincials, and under the later Empire the whole population, felt the action of monopoly in the raised price of the commodity. The Gabelle in France, which gave a state monopoly of sale, was always used for the purpose of revenue, and no form of imposition excited greater hostility, but it is probable that this was largely due to the complex and vexatious regulations under which it was raised.1 There was no one general system in application; on the contrary, there were six distinct modes of treatment for different parts of France. In some, not only was the sale a state monopoly, but each householder was compelled to provide himself with an amount of salt proportioned to his family, so that the tax became in practice a capitation or poll tax. In other districts (those of the petite Gabelle) the purchase of salt was not compulsory, while in a third group consisting of the provinces that had revolted against the salt tax in 1548, the duties were trifling, the greater part having been redeemed by the payment of a capital sum (hence their name pays redimés). And finally, some provinces, as e.g. Brittany, were altogether exempt from the tax, a privilege that was also given to many places within the other provinces. To complete the evils of

1 'Un cri universel s'élève pour ainsi dire contre cet impôt" is the expression of Necker.

the system the duties were farmed out, a policy specially favoured under the monarchy; and this, combined with the heavy penalties inflicted for contravention of the law, sufficiently explains the intense dislike to the tax, quite apart from the element of monopoly. The inequality of distribution in the charge was of itself a crying evil. Thus the price of salt varied from sixty-two livres per quintal in the most heavily-taxed districts to eight or nine livres per quintal in the exempted ones; in the intermediate provinces it stood at thirty-three and a half livres per quintal. We have no difficulty in understanding that the Constituent Assembly was unable to continue the charge in the face of the disturbed condition of the country, and acting on the advice of Du Pont de Nemours replaced it by an addition to direct taxation. Under the Empire, however (in 1806), salt became again a subject of taxation, but without monopoly, and it remains so still.1

A somewhat similar policy was pursued in Prussia. First came the general rule requiring the consumption by each person of a definite quantity of salt (salz-conscription), and when this was removed in 1816, the state monopoly of sale was the form in which revenue was collected, until after the formation of the North German Confederation (1867) it was changed into an ordinary tax. In Russia also the earlier monopoly has been abandoned in favour of a duty. The Austrian taxation of salt has passed through the same earlier stages as that of Prussia, but it has not as yet abandoned the form of monopoly, probably because most of the sources of production are in the hands of the state, and because it is necessary for financial reasons to tax the product heavily. Italy is the only other large European country that maintains the salt monopoly. It inherited it from the smaller Italian states, who had applied the method with different degrees of rigour. The existing government has made the charge uniform for all Italy (Sicily and Sardinia being altogether exempt), and placed it at a very high point-over double that in France-with the result of bringing in a considerable yield-63 million lire for 1889-90, i.e. about £2,500,000.2

Outside Europe the only country that we need notice is India, and here we find that part of the salt tax, which constitutes

1 For the history of the Gabelle, see Clamageran, Histoire de l'Impôt en France, especially vol. i. pp. 354, et seq. ; vol. ii. pp. 141, et seq.; Stourm, Les Finances de l'Ancien Régime, chap. xii.

2 For the earlier Prussian and Austrian salt monoplies, see Wagner, Finanzwissenschaft, vol. iii. p. 103 and p. 119. For the Italian system, Alessio Saggio sul Sistema Tributario, vol. ii. pp. 298-9. Greece, Roumania, and Servia also have monopolies of salt.

one of the main sources of Indian revenue, is raised through monopoly.

The system under which the duty is levied,' says Sir J. Strachey, ' varies in different provinces. In Madras the duty is mostly collected under a monopoly by which all salt is manufactured on behalf of the Government, and sold at a price which gives a profit equivalent to the duty. In Bombay the duty is chiefly levied as an excise. In Lower Bengal it is levied chiefly in the form of a sea customs import duty. In the Punjab the duty is included in the selling price of the rock salt, which is dug and removed from the mines and sold by the Government. For the rest of the upper provinces, until 1879, the duty was collected when the salt imported from Rajputana crossed the British frontier. It is now levied at the places of production, where it is prepared by evaporation from the brine by a Government establishment.'1

Indian administrators have had to face the same problems that harassed the Ancien Régime in France. Different forms of taxation, different rates of charge, producing all sorts of inequalities and injustice, existed in both cases. Happily by a bold system of equalisation Lord Lytton's administration succeeded in placing the charge on a uniform basis; but it may be remarked that the monopoly has been retained.

Before passing to the other articles on our list, we may remark that the question of monopoly is in this case very likely to be mixed up with other and different considerations. To Englishmen, who have become accustomed to the full application of the principle that neither necessaries nor raw materials should be taxed, it appears to be the height of unwisdom to tax an article that combines both these attributes. For over sixty years salt has been free from duty in England, to the great comfort of the consumers and with much advantage to the important chemical industries. Other countries are not so fortunately placed. To procure the requisite funds heavy taxation is needed, and this has reduced them to a choice of evils. When the luxuries of the great mass of the people are few and ill-suited for taxation, some necessaries must be made the subject of charge, and in many countries no easier source can be found than an article of such steady and gradual consumption. Again, in some countries, as in Italy, salt is not largely used for industrial purposes, and where it is, exemption from duty can be granted to denaturalised' salt, and this is actually done in most European countries. But for our present purpose it is most important to insist on the fact that if salt be, as Continental and Indian experience seems to show, one of the 1 Strachey, Finances of India, pp. 216—17.

least unsuitable objects of taxation where necessaries have to be taxed, then the choice lies between monopoly and other technical methods of taxation; and where financial exigencies make it necessary that the rate shall be very high, it would appear that monopoly is on the whole the most economical. It is true that France, Germany, and Russia have abandoned that mode, but they have only done so because they have been able to materially reduce the duty; with such rates as exist in Italy and India an ordinary excise duty would be at once costly and inefficient. In the case of the latter country the ownership of the salt mines, where they exist, by the state naturally gives the monopoly of production.

TOBACCO. We have now to consider a very different case from that just discussed. The introduction of tobacco into Europe seems to have excited the interest, if not the moral indignation, of other rulers than our own James I. It was very soon made an object of taxation. Richelieu, in 1629, established a duty of 30 sols per pound; in 1664 the duty was lowered, and French colonial tobacco (hitherto exempt) was also made chargeable at a lower rate. Colbert introduced the monopoly system in 1674 and further legislated for it in 1681; it included importation, production, manufacture, and sale. In accordance with practice it was farmed out, and thus continued till 1719, when the monopoly of sale was replaced by a fixed duty; but in 1721 it was re-established with a prohibition of home cultivation of tobacco, and placed in the hands of the East India Company till 1730. At that date it passed to the Farmers-General, who retained it up to the Revolution. After considerable discussion and hesitation the Constituent Assembly resolved to abolish the monopoly and to impose an import duty on raw tobacco, prohibiting all of foreign manufacture. This course, though in conformity with the doctrine that the land of France should be free in all its extent,' seriously affected the revenue, and a series of more or less effectual attempts was made to tax so promising a commodity, until finally, in 1810, Napoleon I., whose regard for liberty was not as warm as that of the Constituent Assembly, reintroduced the monopoly. In spite of occasional protests the system has been continued ever since, and received the full approval of an important commission presided over by Baron Dupin, which fully investigated its working in 1835. Its productiveness, which is after all one of the main elements to be taken into account in judging a particular tax, is best shown by the following table:

GROSS AND NET YIELD OF FRENCH TOBACCO MONOPOLY AT INTERVALS OF TEN YEARS.

We here discover a steady improvement in the net yield, which increases from less then £1,700,000 in 1820 to more then £3,500,000 in 1850, and reaches £11,400,000 in 1880. The mechanism of the monopoly is in its main outlines simple enough. Tobacco can be grown only for sale to the state, or for exportation. It can only be grown in certain departments, (fourteen in number, and experimentally in six others). The area of cultivation, the price of the product, and the proportion between the amount of home-grown and imported tobacco is fixed from time to time. The manufacture is carried on at nineteen state factories, whence the finished product passes to the various depôts that supply the retail dealers, who receive as profit a prescribed amount consisting of the difference between the rated wholesale and retail prices. The latter varies according to the district, being lower in the parts most exposed to the danger of contraband trade.2

The Austrian tobacco monopoly starts from 1670, when it was farmed out, and was gradually extended over the various provinces of the Empire. Unlike the contemporaneous French system, the growth of tobacco was permitted on the condition of obtaining a licence. By the end of the eighteenth century the product was three million florins. In 1851 the monopoly was extended to Hungary, where it did not, as was feared, retard the cultivation. The net yield of the monopoly in 1855 was about

1 1870 is unsuitable for comparison as a war year.

2 For French taxation of tobacco, see Clamageran, vol. ii. p. 654; Stourm, chap. xiv.; Leroy-Beaulieu, Science des Finances (3rd ed.), vol. i. pp. 699-706; Vignes, Traité des Impôts, vol. i. pp. 174, et seq.