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

Public Finance - Chapter II a

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

6. The navies of the various powers do not present as
much difficulty, for they are far less costly so far as the
supply of their personal service is concerned, and that
supply is taken from a special class already trained to a
life of hardship, and accustomed to constant supervision
and control, though here, too, the question of obtaining the
necessary force without undue outlay is a serious one.

7. The best and most economical mode of supplying
equipment and material for both military and naval forces
has been for some time recognised as a grave problem.
The extraordinary rapidity of inventions soon makes the
most costly and best-devised appliances antiquated. It
seems a hopeless task to provide all new agencies of attack
and defence, owing to their great expense and their certain
replacement by later improvements, so that it might appear
that the wisest course was to await the outbreak of war,
and then procure the best existing weapons. Unfortunately
such a course is not practicable. Ships and ordnance can-
not be speedily produced and distributed. The stock, the
' fixed capital ' of destruction as it may be called, like that
of productive industry, takes time to create, and in warfare
delay is fatal. A steadily progressive course seems the
most advisable in this respect, even from the purely financial
point of view, as the pressure is more evenly distributed,
and by adopting this policy there is, on the whole, the best
chance of security.

Against the undoubted evil of the great increase of outlay
on armaments, it is satisfactory to be able to point to some
compensation, or at least alleviation. One result is to
favour the wealthier, and therefore the most industrious
nations. A rich State can obtain the best ships, rifles and
cannon, and so gains the same advantage over its poorer
rivals that civilized peoples generally gained over bar-
barians by the invention of firearms. Then, as Mr. Giffen
and Cohn have suggested, the increased cost of warlike
equipment is accompanied by an immense expansion of
industrial production ; if the burden be heavier the bearer is
stronger, and is not so much oppressed as we might at first
suppose ; and finally, though this is problematical, the skill
developed in aiding the work of destruction is also of ser-
vice for industry 1 . The best method of procuring arms
and supplies is also a doubtful matter. The usual alterna-
tives are : purchase in the open market, or state manu-
facture, and in the former case the contracts may be given
privately or by public tender ; but the advisability of state
manufacture may be reserved for a more suitable place 2 .

8. The cost of actual war presents problems very similar
to those already considered. The national army, when in the
field, is a very expensive agency. f An army composed of
such materials as the Prussian, cannot be employed in war
without immense loss and suffering both to the soldiers and
the whole nation 3 .' The ordinary standing army, on the
other hand, is often unfavourably criticised as being com-
posed of the refuse of the population 4 . Were this true it
would be rather an advantage in the event of war, except
in so far as it detracted from military efficiency. In any
case it is difficult to measure the cost incurred in War
apart from the direct outlay and the loss of men and
material in the conflict. There is, besides, the disturbance in
the economic system which is a necessary result, and which
may injuriously affect, not merely the national well-being,
but the state revenues. Such consequences are hard to
foresee, and vary widely in different nations. With regard
to England, for example, the outbreak of war would
materially injure her shipping trade, which forms so im-
portant a part of her industry ; the diminished profits in
that trade, and the innumerable dependent and connected occupations would soon be shown in the reduced income-
tax returns under Schedule D, and would so far affect the
state receipts at a time of extra pressure. It is needless
to add that the revenue would almost certainly be acted on
by other results of war, and not beneficially. A continental
State would suffer perhaps in a different way. Some of
its territory might be occupied by the enemy, and its con-
tributions suspended, or under the most favourable circum-
stances the productive powers of the community would be
reduced by the withdrawal of so many men from their
usual employments, with the natural result of diminishing
the yield from taxation 1 . All such elements form part of
the financial considerations appropriate to the subject.

To make the estimate a fair one, it is further desirable
to take into account the possible advantages so forcibly
stated by Wagner 2 and others. They are: the ennobling
effect of warfare on men, and even its value as an economic
discipline ; its tendency to bring about a better grouping
of nations (as in the recent cases of Germany and Italy) ;
and finally the fact that successful warfare may allow of
the cost being placed on the vanquished. It might be
added that some periods of war have been seasons of high
profits, as was the case in England during the French wars
of 1793-1815. But after all these supposed gains are not
a set-off against the certain losses. There is no evidence
that war promotes higher social or economic training 3 .
Under given conditions, capitalists may gain by it, but
only at the expense of other classes. The power of
placing all the expense on the conquered party is not
a diminution but simply a shifting of the burden, as
happened in the Franco-German war of 1870-1 4 . And
the redistribution is not always purely beneficial to the
winning side, while it intensifies the suffering of the defeated

9. In conclusion it may be said that war and prepara- I
tion for war are by far the heaviest charges on the resources
of modern States l . An enormous sacrifice of labour-power
and of commodities is inevitably caused by its persistence as
a usage among modern nations. The uncertainty and inde-
finiteness of the requirements of States for this end is a per-
turbing element in financial arrangements. War has been the
principal cause of the great state indebtedness so general in
Europe, and of the severe pressure of taxation. It is conse-
quently beyond reasonable doubt that peaceful methods of
settling disputes, or limitations of the present rigour of bel-
ligerent rights 2 , are not merely social, moral, or even eco-
nomic reforms : they are further of the greatest financial im-
portance. Arrangements for disarmament, if possible, would
belong to the same class. But while strongly insisting on
the great advantages that are certain to result from the
maintenance of peace, and the reduction of military and
naval expenditure, it is quite as essential to assert that so
long as present conditions last, a well-organized and effective
system of defence is a necessary part of state expenditure,
and one that amply repays its cost by the security that it
affords for the political independence as well as the economic
interests of the nation. To maintain a due balance between
the excessive demands of alarmists and military officials,
and the undue reductions in outlay sought by the advo-
cates of economy, is one of the difficult tasks of the states-
man. In endeavouring to attain to the due mean, many
specially financial considerations have to be noticed.
Among these are : the relation of state to national revenues ;
the risks to which unsuccessful war would expose the
country ; and the comparative urgency of the other claims
on the State. The application of the amount judged
necessary is also difficult to determine. It has to be dis-
tributed between services (Personalbedarf] and commodi-
ties (Reatbedarf), so as to secure the maximum advantage,
but this latter question lies, strictly speaking, outside the
limit of Finance, and belongs to military administration.

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