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Home -> Charles Francis Bastable -> Public Finance -> Chapter II

Public Finance - Chapter II

1. Preface

2. Chapter I

3. Chapter I a

4. Chapter II

5. Chapter II a

6. Chapter III

7. Chapter IV

8. Chapter V

9. Chapter VI

10. Chapter VII

11. Chapter VII a

12. Chapter VIII

13. Chapter VIII a

14. Book II Chapter I

15. Chapter II

16. Chapter II a

17. Chapter III

18. Chapter III a

19. Chapter III b

20. Chapter IV

21. Chapter V

22. Book III Chapter I

23. Book III Chapter I a

24. Chapter II

25. Chapter III

26. Chapter III a

27. Chapter III b

28. Chapter IV

29. Chapter V

30. Chapter V a

31. Chapter VI

32. Book IV Chapter I

33. Chapter II

34. Chapter III

35. Chapter IV

36. Chapter V

37. Chapter VI

38. Chapter VI a

39. Book V Chapter I

40. Chapter II

41. Chapter III

42. Chapter IV

43. Chapter IV a

44. Chapter V

45. Chapter Va

46. Chapter VI

47. Chapter VIa

48. Chapter VII

49. Chapter VIIa

50. Chapter VIII

51. Chapter VIIIa

The Cost Of Defence.

1. ADAM SMITH commences his examination of the
cost of defence by the statement that it ' is very different
in the different states of society/ and adds, as the result of
his inquiry, that it ' grows gradually more and more ex-
pensive as the society advances in civilization V A refer-
ence to the statistics of military and naval expenditure will
show that the tendency to increased outlay has continued
during the century that has elapsed since the above passage
was written 2 . There is, moreover, no sign of change in
this respect. It is as certain as any prediction in social
matters can be, that no reduction in the military budgets
of Europe will soon be made ; on the contrary, there is
every probability that this form of expenditure will go on
increasing in the future as it has done in the past.

The causes that have produced this, at first sight, un-
fortunate 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. (i) 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 civilization. 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 equip-
ment, 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 mediaeval 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 organizations show.
Even in the last quarter of a century the changes in war-
like implements and supplies have been such as, while
vastly increasing their cost, to render them very different
from the appliances previously existing.

2. The expenses of defence and agression have, it must
be noticed, to be divided into two distinct parts. The
former, which may be regarded as the normal and regular
part the peace establishment meets the preparation for
war. It is so well-recognised a feature of the modern
budget, that it passes without comment. The other part
of state outlay in this respect is that devoted to actual
warfare ; it is evidently irregular in amount and may so far
be called 'abnormal,' though it is almost certain to recur
at indefinite intervals l .

The cost of preparation for war consists in obtaining a
supply both of services and commodities, i.e. in the re-
cruiting and training of troops, the provision for pensions, and the selection and preparation of arms, ammunition, and
stores generally. Actual war causes expenditure on cam-
paigns and expeditions, and, further, in the replacement of
losses alike in men and stores, incurred during its con-
tinuance. In estimating the loss to society through the
persistence of the custom of war between nations, both the
above-mentioned elements have to be combined in order to
judge accurately of the real cost imposed.

3. Preparation for war, as it appears in the successive
stages of society, conforms to the general principle de-
clared by Adam Smith. In a savage or barbarous com-
munity the cost of warlike preparation is insignificant. The
ordinary course of life is of itself a training for times of
conflict; the hunter or shepherd is ready at the shortest
notice to transfer his exertions to a fresh and more exciting
employment. Such rude societies are (with some rare
exceptions) organized on a basis of militancy, all the adult
males being available as 'warriors.' Similar conditions
prevail with respect to commodities. Bows, spears, staves,
&c., are useful either in peace or war ; they are eminently
non-specialized capital, and more elaborate contrivances
are as yet unthought of. The introduction of agriculture
has a modifying effect, in so far as it tends to retard the
mobility of labour and commodities, but even in this stage
the same general features recur. The ordinary husband-
man easily becomes a soldier, and there is a recognised
interchange between swords and plough-shares. An in-
vasion is still carried out or opposed by a levee en masse,
and usually takes place in the * off-season ' of agricultural
work. The cost of preparation for such wars obviously
cannot be very heavy.

The introduction of manufactures, and the establishment
of urban life that accompanies it, puts an effectual check
to the ruder forms of belligerency. A State possessing the
varied elements of an industrial society even in a rudi-
mentary form cannot permit the suspension of the normal
economic processes during a period of hostilities, and it is

therefore compelled to make adequate arrangements in
time of peace in order to obviate the danger. The diffi-
culty is met by the introduction of standing armies whose
origin is thus easily explained. It, in fact, becomes neces-
sary to carry the gradually increasing division of employ-
ments into the military art, and to form at least the nucleus
of an army which can be readily increased in case of
need. The difficulty of suddenly shifting the artisan from
the workshop to the field of battle makes this imperative.
Improvements in weapons and systems of discipline furnish
additional reasons in favour of increased special training,
to be given either to the whole efficient population, or to
a selected portion of it, but in any case involving larger

The section of the Wealth of Nations devoted to this
topic regards the adoption of either of the alternatives just
mentioned as a cardinal point in the evolution of the
military system. The former method that of training
the whole effective population is described as the creation
of a militia, the latter as the formation of a standing army,
and a very strong judgment is pronounced in favour of the
latter expedient. Admitting fully the truth of some of
the views set forth on this point by Adam Smith it is
nevertheless desirable to remember that they by no means
exhaust the subject and the considerations relevant to it.
His appeal to history more particularly strikes the reader
as superficial. To support his contention that standing
armies are always superior to militias an idea evidently
derived from his belief in the advantages of increased
division of labour 1 he brings forward the examples of
the Macedonian army that overthrew the forces of the
Hellenic commonwealths and the Persian Empire; the
early successes of Hannibal and the ultimate triumph of
the Romans, and finally the fall of the Western Empire
before the barbarian invaders. The cases quoted, however,

fail to establish the doctrine asserted. It is surely contrary
to fact to speak of the army of imperial Rome as ' a
militia ' ; if ever there were a ' standing army ' it was one.
The whole discussion in short amounts simply to this :
that the better disciplined and trained force will generally
defeat its opponent, and that it ought to be called ' a
standing army.' The historical summary is accurate if
somewhat trite, but the interpretation results in a truism.

We have therefore to replace Adam Smith's account by
one more consonant with facts while preserving those parts
of his exposition that are substantially correct. It is
certainly beyond dispute that the course of development
tends to replace the rude levies described as * militias ' by
the better-trained forces known as ' standing armies.' In
addition to the instances given above, we may mention the
introduction of permanent armies in every European State,
so that the general tendency towards specialization is
clearly operative in this as in other cases. An opposing
tendency, however, comes into play. It is equally a prin-
ciple of evolution that all organized bodies tend to lose
their original plasticity; they become, as it were, crystallized
into a rigid form, and from this condition armies are not
exempted. But warfare is the struggle, for existence in
its intensest shape, and in that struggle, mobility and
power of adjustment are important advantages. The natural
result is that the most efficient military machine or orga-
nization of one period proves to be unsuitable for the
changed requirements of another and later one. The
history of war is, in fact, a series of illustrations of this
truth. As convincing and well-known examples we need
only note the Phalanx, the Legion, the man-at-arms of
mediaeval times, the army system of Frederick the Great,
and the French system of the present century. And it
may well happen that a future European war will afford a
further instance in the fate of the present German army.
The essential condition of military efficiency is constant
readjustment incessant striving towards improvement in
discipline, training, and equipment. Such efforts, necessary
as they are, demand continuous intellectual strain on the
part of the organizers, and heavy demands on the public

4. If, as we believe, Adam Smith failed to correctly
interpret the past, he certainly did not succeed in fore-
casting the future. Up to his time there had been a steady
movement towards the establishment and increase of per-
manent forces maintained at great cost. The effect pro-
duced on thoughtful persons by the growing European
armaments can be best understood by considering the views
of Montesquieu. In a remarkable chapter of the Spirit
of Laws 1 he describes the position and its dangers to the
future of Europe in the following terms :

' A new disease has spread through Europe ; it has
seized on our sovereigns and makes them maintain an
inordinate number of troops. It is intensified and of neces-
sity becomes infectious, for as soon as one State increases
its forces the others at once increase theirs, so that nothing
is gained by it except general ruin. Each monarch keeps
on foot as many armies as if his people were in danger of
extermination ; and this struggle of all against all is called
peace ! Thus is Europe ruined to such a degree that
private persons in the present position of the three richest
powers of that quarter of the globe would not have the
means of living. We are poor with the wealth and com-
merce of the whole world ; and soon by dint of having
soldiers we shall have nothing but soldiers and be like
the Tartars. For that we need only make effective the
new invention of militias established in most of Europe
and carry it to the same excess as we have the regular

This vigorous statement has been largely justified by
the actual course of events. The wars that resulted from
the French Revolution proved the power of national senti-
ment to raise and maintain enormous forces during a
period of protracted conflict, and the reform of the Prussian
army under Hardenberg's guidance after the disaster at
Jena, carried the tendency towards the enrolment of the
nation into periods of peace. The wars of the third
quarter of the present century, and especially the Austro-
Prussian war of 1866, and the Franco-German one of 1870-1,
have greatly increased the popularity of the national army
system which has been adopted by nearly all continental
States l , and has been approved by many English writers.
The change of opinion in recent years is perhaps most
instructively shown in a remarkable essay of Cairnes, where
the respective merits of the older French, the English, and
Prussian systems are estimated with a conclusion strongly
in favour of the ' national army V

We almost seem to have lost sight, for the moment, of
economic and financial considerations, but they really un-
derlie the whole military movement of modern times. The
increase of permanent forces had reached its limit before
the opening of the French Revolution when about one per
cent, of the population was available for actual service.
The prolonged conflicts which arose out of that event led
to the addition (as Montesquieu apprehended) of a militia.
The modern national army in its full force is the old
' standing army,' plus a levee en masse, the latter, it is true,
being suitably organized and equipped. This system,
though produced at first by a particular set of circum-
stances, was obviously necessitated by economic conditions.
Military power had to be increased, and as the state
revenues did not allow of increase in the permanent force,
the only alternative was that actually adopted, by which
the whole effective male population became a reserve, and
was yet enabled, in times of peace, to carry on its ordinary^
industrial pursuits. The question of cost is in the last resort decisive, and it
is by it that the merits of the several military systems must
be judged. One of the conditions to be included in our
measurement of cost is efficiency. National defence is too
important even from a purely economic standpoint to be
placed in jeopardy through narrow ideas of economy. An
ineffective and badly organized army is dear on any terms,
though on the other hand large outlay will not of itself
secure efficiency, and so far weakens the economic resources
of the nation. The problem is, indeed, as remarked
before *, one of extreme difficulty, and only allows of an
approximate solution. As regards the cost or sacrifice in-
volved in the various methods of defence, the national army
presents two great advantages: (i) it requires less direct
outlay, and (2) its real pressure is not so acutely felt. It
is plain that services obtained through legal compulsion
will be cheaper than those that are hired in the labour
market at the current rate. Moreover, when the duty of
military service is general and enforced without favouritism
the sacrifice entailed by it will probably be less felt than
if the large amount of additional funds needed under volun-
tary enlistment had to be levied through taxation. Grant-
ing, however, both these positions, it yet remains doubtful
whether the indirect losses may not be more than the gains
just mentioned. The real cost of an army formed on the
German type is hard to measure. Mere comparison of
army estimates will not establish its superiority over a
freely-enrolled force. Thus an able writer 2 compares the
English and German outlay for 1883-4. The former was
16,600,000 for 199,273 men, the latter 18,325,000 for
445,392 men, i. e. an army much more than twice that of
England was maintained by Germany at an increased cost
of only 10 per cent. This estimate is supported by addi-
tional calculations, which make the cost per soldier in
England 86, in Germany only 44, or little over half.
Such calculations err in the omission of several material
circumstances. The rates of wages and salaries in the two
countries are not on the same level. Under any system a
given number of German soldiers would cost less than an
equal number of English ones. Next, though the com-
pulsory service in the former country reduces considerably
the amount of direct outlay by the State, it inflicts a tax
on those compelled to serve, whose amount could be
measured only by what they would pay in order to escape
it. A third influencing condition is the indirect effect on
the productive powers of the country.

'The military service/ says a favourable critic of the
German army, * postpones to a relatively very late period
the productive use of the productive power of the country.
. . . The waste of skilled labour ... is enormous. The
future artisan or mechanic has not learned his business
when he enters the army, nor can he practise it until he
leaves the regiment. . . . Half the lifetime of the flower of
the population is thus unproductively spent. Even in the
case of unskilled labourers or peasants, who can go to work
from the day they leave barracks, a considerable loss is
sustained V

None of the foregoing considerations are taken into
account by Geffcken. It may, indeed, be argued that the
habits of discipline and order acquired during service should
be placed to the credit of the German system, but this
questionable item would not much affect the general
result, more especially when we add the probable loss of
originality and initiative, which is another result of dis-
cipline. The national army system further involves a
supervision of the movements of all the members of the
potential war force, and such regulation must in some
degree restrict the free flow of labour to suitable markets.

The difficulties in the way of any estimate of the financial
merits of different army systems, already evident enough,
are enhanced by the special circumstances with which each country has to deal, and which render the complete adoption
of a foreign system almost impossible. Thus' England has
to provide garrisons for many places very distant from her
own territory, and service of this kind in India or the Crown
Colonies could not be made compulsory. Separation of
the home and foreign (or Indian and Colonial) armies
appears a retrograde step *, and in any case the supposed
home force might, in time of pressure, be required for
service abroad. A great power, whose foreign possessions
are insignificant, has not this problem to face.

5. A partial solution of the difficulty of procuring
sufficient military force without compulsory service, and at
the same time keeping expenditure within due bounds is
presented in the English Volunteer system. By this
method the public spirit of the citizens leads them to give
a portion of their time to acquiring the rudiments of mili-
tary training and sufficient dexterity in the use of weapons.
Competent military opinion seems, however, to hold that a
considerable degree of organization is necessary in order to
make volunteer forces of any real service in time of war.
The endeavour to combine the strict discipline essential for
the soldier with the freedom naturally claimed by the
volunteer is not an easy one, though the object is eminently
desirable. Besides its great advantage in fostering the
national sentiment of the members, and impressing them
with the conception of their duties to the State, the volun-
teer corps would, by taking charge of the home fortresses,
probably allow the regular troops to be drawn off for foreign
service, and would also be a valuable source for re-

It may further be remarked that a very general enrolment
of the active population in such bodies, under proper disci-
pline, would be equivalent to the national army system, and
at the same time avoid the evil of compulsion. In this
as in other cases of volunteer assistance for public service,
the chief difficulty is to enable the two agencies to fit in to
each other without friction or waste.

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