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

Public Finance - Chapter IV

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

Administrative Supervision. Poor-relief.

1. THE modern State has in some respects added, if
not exactly to the classes of objects under its care, at least
to the complexity of the tasks connected with those
classes. It is still possible to stretch Adam Smith's
description of state functions so as to include the subjects
of the present chapter, but the extension, though con-
forming to the letter, hardly agrees with the spirit of that
well-known statement. In this instance we have a good
example of the way in which public tasks are conditioned
by the circumstances of time and place, and of the im-
possibility of using an inflexible formula to guide the
course of social action. The expansion of administrative
supervision in the last fifty years has placed a fresh series of
duties on public authorities. A century ago there was
little of the kind in England, and the older French and
German systems of regulation we.e in a state of decay.
The French Revolution of 1789 was believed to have
removed these checks on individual liberty, and to have
secured by its influence their ultimate abolition in other
continental States. The passage from the Ancieu Regime
was regarded as definitely accomplished.

Such expectations have proved unfounded ; old methods
of control and supervision have indeed for the most part
disappeared 1 and no one advocates their re-establishment. In their place we have a newer body of arrange-
ments for the regulation of various parts of social life.
Under an elaborate system of legislation a large official
body has been created for the purpose of regulating the
free movement of the ordinary citizen. There are inspectors
of mines, factories, shipping, railways, tramways, hackney-
carriages, &c. The soundness and purity of articles of
food are tested by public agents. Many trades are placed
under special rules, and local authorities are entrusted
with wide discretionary powers in their dealings with the
habits and occupations of the communities under their
charge l . The foregoing account, applicable in all points
to the United Kingdom, holds true generally of all modern
States ; there may be differences in detail ; the power
which exercises supervision may be local in one country,
and central in an other, nevertheless, the broad fact remains
that both in Europe and America the department of
' administration ' is increasing in extent 2 . Opinions
may and do differ widely as to the merits of this move-
ment 3 , but on the point most pertinent for our present
inquiry there can be no dispute, viz. the increase of ex-
penditure that necessarily results from it. The budget of
every civilized society is swollen by the charges needed
for the salaries of agents engaged in the work of inspection
and regulation, while the total cost can only be ascertained
by combining the general and local outlay.

2. Some of the causes of the great increase in adminis-
trative outlay have been noticed when dealing with ' police.'
They, however, deserve a more precise statement : (i) The
great growth of centres of population makes organization and control more necessary, e. g. to employ a body of
police to regulate the traffic in a country road would be
absurd ; in the Strand or Regent Street it is indispensable.
The inspection of dwellings in order to prevent over-
crowding is another prominent instance. (2) The moral
sense of the community stands at a higher point now than
it ever previously did, and as a consequence the public
power is invoked to remove any evil that shocks public
opinion. The legislation as to unseaworthy ships affords
an illustration. (3) The democratic movement makes
interference with the owners of capital or property gener-
ally, as also with large dealers in commodities, acceptable
to the holders of political power. (4) The establishment
of bodies of officials is carried on so gradually that the
total expense entailed by the system is never realized ;
the special gain hoped for in each case is, on the contrary,
distinctly conceived. (5) Finally, the influence of the pre-
valent political and economic theories should be added.
Most cases of actual state regulation would come under
the exceptions to laissez faire as discussed by J. S. Mill
and Dr. Sidgwick, they also have been powerfully advo-
cated both in Germany and America On theoretical
grounds. It is therefore not unreasonable to assume that
this tendency of speculative thought has in some degree
influenced the conduct of statesmen 1 .

3. The difficult question remains. How far is this
outlay financially justifiable? It may at once be conceded
that many of the ends sought are eminently praiseworthy,
and that no supposed principle of abstract right ought to
hinder the adoption of measures of general utility. The
final test must be expediency, but expediency in its broadest
sense. It is only possible here to indicate some of the
general considerations applicable to the problem, and which
have to be used as guides in each particular case, (i) The
pressure of taxation, and the probable sacrifice that its increase for a proposed new end would cause or the advan-
tage that would result from its remission. (2) The possibility
of voluntary agencies undertaking the work now carried out
by the compulsory power of the State. Thus it should be
a matter for deliberation how far Trade Unions could insist
on sanitary provisions in factories, and associations of con-
sumers guard against adulteration and fraud generally.
The danger of weakening the spirit of association by
hasty state intervention is not to be overlooked ; all the
more that it is inobtrusive and cannot be readily weighed.
(3) The extent to which administrative action is really
effectual in meeting evils, though of extreme importance, is
not easily determined. Sweeping general propositions, to
the effect ' that individuals do things better than the
State,' or that 'the State does things better than indi-
viduals,' will not carry us far, but the inertness of human
nature when relieved from the stimulus of direct self-
interest, and the danger of official corruption, both suggest
a presumption against state interference, a presumption it
is true of very different force according to the case in which
it is used. The solution of the problem belongs to the
statesman, who will not form a less sound judgment by
taking general principles into account.

It seems perfectly certain that administrative expendi-
ture will continue to increase more rapidly than the cost of
justice or police. These latter move with population ;
the cost of inspection and regulation grows much faster ;
it is, too, more divided and not so definitely ascertainable,
and may therefore be regarded in common with military
and naval expenditure as presenting the principal difficulty
for the Finance of the future. Growing expenditure implies
increased revenue or additional debt consolidation loans, and either means
extra pressure on the subjects of the State. The duty of
seeing that all outlay is productive of compensating ad-
vantage to the community is more than ever imperative.

4. The relief of indigence is now in most countries one
of the charges on the public revenue, and has even become at times as in England under the old poor-law a heavy
burden ; it has not however been assigned a prominent
place in the estimates of outlay given by financial theorists.
The reasons of this comparative neglect are not hard to
find, for (i) it has generally been a local charge and has
not found its way into the national budgets, which used
to occupy most attention, and (2) the question of state
relief of pauperism has been one of the contested questions
of economic policy It is probable that Adam Smith, who
does not mention poor-relief in his examination of public
expenses, disapproved of any form of compulsory aid to
distress, and his followers would in most cases take the same
view 1 . But though we can thus explain the omission of
poor-relief we cannot accept the reasons as sufficient.
From the point of view of Public Finance it is immaterial
whether the State acts through general or local authorities,
e.g. in England before the Act of 1877, prisons were main-
tained by the counties, since the passing of that measure
they are under the Prisons Commission, but in either case
they involved a public charge. In regard to the second
point Finance is engaged in dealing with facts, and there-
fore the existence of state aid to those in distress is a
valid reason for examining the subject. We may at the
same time admit that the question of expediency in this
respect is a most difficult one, involving as it does reference
to a number of political and economic considerations.

The problem presents itself in the following way. In all
modern societies there are persons who, by reason of physi-
cal or moral causes, are unable to or at least as a matter
of fact do not provide themselves with the means of sub-
sistence. The question then arises what is to be done with
this class ? Ancient societies relieved themselves from the
difficulty by the rude expedients of infanticide and slavery.
The Middle Ages met it by the inculcation of private
charity by the Church, and by the monastic institutions. In modern times the insufficiency and irregularity of private
relief has led to state intervention. The break-up of the
mediaeval system and the resulting economic disturbances
made it an urgent matter of public policy to deal with dis-
tress. The greater power of the principal European mon-
archies also furnished the means in the shape of legislative
action, prescribing and limiting the conditions of relief.
The growth and expansion of the system of public relief is
of itself an argument in favour of its expediency as meeting
an evil common to all communities that have reached a
certain stage of development l .

This simple and obvious ground for the policy has been
supported by several arguments of a more theoretical
character, (i) Thus it has been urged that the State is
' bound ' to relieve distress. The methods in use in ancient
times for the suppression of indigence are happily impos-
sible : private chanty is not sufficiently regular, the State
cannot with safety so far outrage the sentiments of its
citizens as to allow even the poorest to perish by starvation,
it therefore has an imperative duty to discharge in the relief
of actual destitution. (2) Another contention appeals
to justice rather than sentiment. If the relief of dis-
tress were left to voluntary exertions it would in fact
amount to an extra tax imposed on the charitable, who
would have to pay more than their due share ; the niggardly
escaping the payment of anything whatsoever towards
what ought to be a common task. (3) In addition to justice
amongst taxpayers, the plea of justice to the indigent may
be advanced ; it may be said that the real cause of destitu-
tion is the appropriation of the agents of production by
private persons, and that consequently those in distress
may fairly claim at least that minimum of subsistence
probably attainable in a state of nature, or to vary the argument slightly the holders of property may justly be
called on to pay the amount required for the relief of actual
want in return for the benefits that they obtain from the
present social organization, i. e. they are asked a ' ransom '
for their possessions \ (4) To these somewhat abstract
arguments, a more direct and practical one may be added.
Under the present penal system 2 criminals are supported
in a way that secures them a tolerable and healthy exist-
ence : now to deny to the pauper what is thus guaranteed
to the criminal amounts to an inducement to crime.

The force of these several arguments, and the fact of the
almost universal existence of public relief, would appear to
leave no room for doubt on the subject, but we find to our
surprise that a formidable list of arguments may be brought
forward on the other side. The opponents of poor-relief
contend (i) that to give support to the non-worker is
essentially ' communistic ' and that any such system has
' communism ' as its logical result ; (2) that aid to distress
tends to act on population ; that therefore an increasing
number of applicants for assistance would present them-
selves, until at last the whole revenue of the community
would be absorbed in their support ; (3) that the state
method of relief demoralizes the recipients, while (4) it in-
terferes with the beneficial action of private charity and
injuriously affects the moral sentiments both of givers and
receivers. The more extreme foes of relief, public or
.private, would add (5) that all relief (and therefore public
relief) discourages providence and saving. Almsgiving is
as Professor Newcomb puts it ' a demand for beggars V
The industrial and economic virtues are, it is said,
weakened by every attempt at distributing aid. Finally
(6) evidence has been adduced to show that poor relief
lowers wages, since it allows the lowest sections of the
population to work for less than the amount needed for subsistence by the amount of relief that they get from the
public authorities 1 .

5. To strike a true balance between the opposed argu-
ments that have been just stated is indeed difficult, but for
financial discussion it is possible to arrive at a satisfactory
result. In the present position of most modern societies a
methodised system of public relief is indispensable, and
therefore forms a legitimate part of public outlay ; nor
is it hard to fix approximately the standard of relief. If
the treatment of the pauper should be better than that of
the criminal, it should on the contrary be worse than the
standard of living of the poorest self-supporting labourer, and
unhappily the limits as thus determined are very narrow.
For financial as well as for social and moral reasons all
relief should be given in the form prescribed by the State,
i. e. generally c indoor maintenance.' Assistance from public
funds is not ' charity,' from which it should be clearly and dis-
tinctly separated, and in no way can this be better accom-
plished than by confining the action of the public agents
engaged in relief to a definite sphere. It may be further
said that in the administration of poor-relief the reforma-
tion of the habits of those who are indigent should be
aimed at. What the habitual criminal is in the prison the
hereditary pauper is in the poor-house. Expedients calcu-
lated to improve the morale of the destitute would power-
fully affect the productive power of the nation.

The relations of private charity to the system of legal aid
are of extreme importance. The absence of any connexion
between the two classes of agency is a blot in most poor-
law arrangements. We can hardly doubt that the contribu-
tions of private persons properly utilized would go very far
towards meeting the necessary outlay on those in distress,
with the double advantage of economizing the public funds
for other objects, and preventing the evils that result from
the existing abuses of almsgiving. Discrimination as to
the causes of distress and consequently the amount of relief can be properly applied only through the operation of
private beneficence.

6. In addition to the direct method of assisting actual
distress the State has been often called on to meet the
difficulty indirectly, either by a system of public works or
by compulsory insurance on the part of the workers. The
assertion of the * right to obtain work ' supplied by the
State is distinctly of French origin 1 . It has never ob-
tained full recognition in practice, as the difficulties it
would cause are evidently insuperable. The provision of
work, the mode of supervision, the rate of pay, and the
disposal of the products, are each and all so many obstacles
in the way of its adoption. The economic effect on the whole
working class would moreover be surely evil ; the expendi-
ture would be indefinite and not capable of easy control.
' Compulsory insurance,' as advocated in England and in
some degree carried out in Germany, presents greater
advantages, and seems a more hopeful idea, but it, too, is
open to the grave financial objections that the collection of
the insurance charges is likely to be ineffective in a country
where labour is allowed full freedom of movement, while
it involves the State in serious financial operations, and at
the same time weakens the action of voluntary effort.
The English friendly societies insure a large number of
the more provident artisans, and have been favourably
contrasted with the foreign state insurance bodies by Mr.
Goschen 2 . A strict administration of public relief en-
courages the habit of insurance or other provision against
distress, and the development of such methods of self-help
makes it easier for the State to adhere to the rigid policy of relieving nothing except absolute indigence.

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