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Cameralistics and Financial Science

CAMERALISTICS AND FINANCIAL SCIENCE.' §8. It lies in the nature of things that the pre-scientific stages, preparatory to the development of a science, follow the inexorable law of growth which governs human thinking as well as the phe nomena of life generally, and so present results that look paltry when viewed from the standpoint of later, fuller development.

Grimm (Worterbuch, vol. iii. p. 1639) has been unable to find the word "Finanz" in German literature prior to the sixteenth century, and finds it constantly used in an evil sense, equivalent to cheating, deceit, etc. So used even by v. Seckendorf (Der Tentsche Fiirstenstaat, 1656). Only in the seventeenth century did this evil meaning of the word gradually disappear, and only in the eighteenth did the term come to be narrowed down to designate the revenues of the state,—as, e. g., in Justi. While in the vernacular even today (in Germany as well as abroad) the broader meaning of early times, though not with the evil connotation, is still retained. The etymological derivation (Diez; .Etymolog. Wirterbuch der romanischen Sprachen, 3. AWL 1869, vol. i. p. 180) is from finis, which in Low-Latin denotes end, peace, conclusion of any matter, and so payment ;—Old French fin; English fine=renespositio. Hence in Low Latin we have the derivative financia=prrestatio pecuniaria, money payment generally. Closely analogous to this etymology is that of pagers, payer from the Latin pace re= pacify=solvere (Diez, vol. i. p. 300). In English the signification of the word "finance" remains to this day, even in scientific usage, a very variable one. So, e. g., the widely-accepted Chambers' English Dictionary (edited by James Donald, 1872) defines "finance " : "revenue from fines or compulsory payments, public money, the science of public revenue." But even very lately (1886) a well-known English econo mist and statistician, Robert Giffen, uses the title "Essays in Finance" for a collection of papers which contain no financial matter whatever (in the sense understood by the Science of Finance), but which treat exclusively of such topics as Trade Depressions, Gold Imports, Bank Discount, Progress of the Laboring Classes, The Increase of Wages, and the like.

Human thought in its best estate, as knowledge of the world spontaneously sought for its own sake, comes within the horizon of mankind only at a relatively late date. And even when this point is attained, there are but a very few among any people to whom the consciousness of its presence penetrates. The great majority even of those who call themselves the cultured class ask what is the useful purpose of knowledge, and grow impa tient if the practical application is not forthcoming ; while any such tangible utility is hailed with unquestioning enthusiasm, as may be seen in the case of the natural sciences today.

During the early stages there is simply no mental effort put forth, save that which serves an immediate useful purpose, and the nearer we approach the beginnings of culture the more undisguised is this practicality of purpose. The thinking is but the employment of an untrained fancy on a scanty experience, but these deliverances of fancy bring out the homely practicality of its purpose in all the more glaring a light.

Such has also been the course of development of our science. And, more especially, such has been the case with respect to that portion of the science with which we are here occupied.

The last stage of this pre-scientific period of thinking is the outgrowth of a system of management which the supreme organ of practical life, the state, developed in order to carry out its purposes. It was the best intellects employed in this administra tive work that prepared the way for scientific thought.

The name which this system of thought goes by is the well known term, "Cameralistics" [Kameralzvissenschaft].

§9. Johann Heinrich Gottlob von Justi, the most important rep resentative of Cameralistic Science,' in his Staatswirthschaft (or Sys tentatische Abhandlung oiler Okonomischen and Kanteralwissenschaften, die zur Regierung eines Landes erfordert werden, 1755) speaks of Colbert as the greatest of finance ministers, probably, that has ever lived, and for the reason that, like the true-bred Cameralist that he was, he strove to improve the country and enrich it with commerce and manufactures, and so enable it to bear a heavier burden of taxes, he having actually increased the royal revenues threefold, as compared with what they were at the time when he entered on his ministry.' In all this Justi has simply reflected the ideas which domi nated the times in which he lived. The wealth of the people and the people itself (which for its part was part and parcel of the state') was treated of solely from the point of view of the state's revenues. The furthering of the people's well-being is but a means to the ends of the state. Proceeding on this ground Justi divides his work into two parts, the first of which treats of The Theory [Lehre] of the Maintenance and Augmentation of the Wealth [ Vermeigen] of the State ; the second, of The Theory of a Judicious Use of the Wealth of the State. The topics dis cussed in the first part are : State-Craft, The Science of Public and Commercial Regulations, together with "Economics" [Haushaltungskunst]; the second part deals with "Cameral, or Financial Science proper." Here we find Cameral Science in the narrow sense con trasted with the Cameralistic Sciences in the broader sense, and used as a synonym for Financial Science.

The subject matter treated of by this science is as follows : The first book, which occupies two-thirds of the whole work, treats of the procuring of means required for the expenses of the State ; the second book, of the expenditures of the State ; • the third book, of Administration, that is to say, of the organ ization and management of the cameral mechanism.

In his discussion of his main topic, the procuring of revenue, Justi rejects the traditional distinction, based on a legal distinc tion, between the exchequer [Fiscus] and the treasury [Aera rium]. The revenues of the exchequer, which included more particularly the crown lands and the royal prerogatives, were to be applied particularly to the maintenance of the sovereign's person and state ; the revenues of the treasury on the other hand were to serve for the public defense and to further the public welfare, the former being under the control of the exchequer, the second, as being the produce of contributions granted by the estates, being under the supervision of represent atives of the nation. This distinction, which, in Justi's time, "was in nearly all countries treated with little or no considera tion, has no substantial foundation in the nature of things, and is therefore of small consequence for the theory of the revenues of the state." All expenditure on the part of the state has but a single, common purpose, viz., the furtherance of the state's welfare ; and the personal maintenance of the sovereign falls under this head just as much as all other expenses.

The ordinary revenues of the state may, according to Justi, be treated of much more in accordance with their true nature if we classify them according to their source and their purpose. The sources of revenue are four. The first consists of estates belonging immediately to the sovereign or the state (crown lands, domains); the second source of revenue is dependent on rights and privileges pertaining to the crown or to the state's sovereignty and attaching to property held by the state. These rights had their chief ground and purpose in the furtherance of the public welfare, but they had at the same time an important secondary purpose in the revenues to which they gave rise.

These go by the name of Royalties [Regalia]. The third source is that of the contributions made by the subjects toward the great expenses of the government out of their private means (which at the same time are part of the aggregate wealth of the state). This contingent goes under the names of Contributions, Taxes and Imposts. The fourth source, finally, arises from cer tain prerogatives whose purpose is not so much the revenue derived from them, but which nevertheless incidentally yield a revenue.

As in his rejection of the formal, legal distinction between the exchequer and the treasury, so also in the great prominence he assigns to taxation as contrasted with domains and royalties, Justi stands forth as a leader of the new era. But also in point of theory he approaches closely to the true scientific standpoint of Financial Science, when he holds that the wealth of the state is mostly in private hands, and that this wealth would shortly be destroyed if its substance were applied to meet the expenses of the state ; that accordingly the "usufruct" of . this property, the "earnings" alone must be so employed ; and that, inasmuch as the subjects must also draw their livelihood from their earnings, only a part of the earnings can be appropri ated to the expenses of the state.

But if Justi has herein done his part toward supplying to the subject the systematic treatment which he felt the absence of (he expresses astonishment, in the introduction to his work, that philosophical minds had not previously concerned themselves with Cameralistics), his French contemporaries, the Physiocrats, took up the philosophical consideration of the matter with still more decided results.

§ to. The Physiocratic theory of taxation has this much in common with the Cameralists, that in the one case as in the other the needs of the state furnish the point of departure for their economic speculations. In the one case as in the other the idea of the state is struggling to assert itself and seeking the means needed for its administrative work. The

Cameralists find that the way to accomplish their purpose is to enrich the country in order that it may the more readily bear an increase of imposts. The Physiocrats, as a consequence of the reactionary movement against the increase of national imposts, deny the necessity of any such increase. But in this matter they are not always consistent. Turgot, for example, had quite extravagant notions of the state's duties in the matter of public instruction ; so that in this respect he is well abreast of the mod ern socialists. The Physiocrats recognize the need of the impost in each individual case and seek to so strengthen the national industry as to enable it, if not to bear an addition to its burdens, at least to afford the existing revenues without diminution. They therefore look upon the nation's industry with the eyes of a sovereign who, in the spirit of the shrewd manager of a private business undertaking, strives to get the highest and most per manent net product possible from the business, and seeks to reach this result by dealing as gently as may be with the productive agencies under his control, and more especially with his work men. Every sacrifice demanded of any one link in this chain of productive forces acts to the detriment of the aggregate pro ductive power. Hence a view of taxation, the aim of which is to avoid such disturbances of the process of production by placing the burden, by means of the "single tax" (imp& unique), directly on the surplus product of industry, on the net product. Plainly, according to this view, taxes which bear upon the personal necessities of the producers are obnoxious to the same criticism as holds against taxes that interfere with the process of produc tion by putting the burden on raw materials, machinery or means of communication. But since, according to this view, the pro cess of production includes among its elements the whole of the population engaged in industry in any way, save only the land lords, the tax policy based on this view reduces itself to an indiscriminate rejection of all " indirect " taxes ; and in order that some " direct " tax may be left, which, as the only permissible one, may afford the requisite funds for the commonwealth, the theory of a net product becomes indispensable.

It is of some importance for the purposes of this brief sur vey of the development of our science, to note how the philo sophical acumen which was brought to bear on this theory of a net product became a creative force in the hands of the callow Economic Science, with its rudimentary logic. Now for the first time the fundamental principles that cluster about the concept of " productivity " found expression ; the practical problems of a newly reconstituted policy of taxation hastened in this way the birth of a new science of finance and industry.

In its original form, according to the theory as held by the Physiocrats, the available net product of industry makes its appearance exclusively in the rent of private land owners. Accord ing to the theory in its improved form, as it stood after half a century of elaboration, it occurs in both rent and profits.

It took still another half century for the theory to work itself clear of the traditional point of view which took account of industry only as an elaborative process for the production of taxability ; that is to say, to dismiss the doctrine of the net pro duct definitively, after it had served the purposes of the science.

§I I. But while it is true that the practical problem which influenced the thinking of this first school imposed on political economy the point of view of taxation and for a long time held it to that point of view, there was after all a more potent factor to which this school owes its importance. This was the body of philosophical speculations from which this economic science was an offshoot, or rather into which it incorporated reflections on economic and financial matters. This other, higher factor that goes to the creation of a new science, besides the progress of practical knowledge,—the mother science out of which the affiliated science grows, played a pre-eminently impor tant part in the genesis of the first scientific system of political economy.

Now, from the fact that it was in this case Moral Philosophy that in this way assisted at the founding of the new science, it resulted that this new science also attained quite another field of vision than that of a well ordered tax policy. It is accordingly possible to trace back to this initial point that broader view, which took a century to find its way to a full and conscious acceptance, and which makes the structure and functions of economic society the main object of the inquiry, finance being but one of its sub divisions.

As is well known, it was not the French Political and Moral Philosophy alone that exerted such an epoch-making influence on science ; the nearly related English-Scotch Moral Philosophy exerted a like influence at the same or a slightly later point of time. Adam Smith's Inquiry into the Nature and Causes of the Wealth of Nations (1776) assigned to the Science of Finance the place in the system of Political Economy which it has held for a hundred years. And just as it is true of this work as a whole that the position it takes is distinctly more moderate and conservative than that of the Physiocrats and is more in accord with the facts of the time, so also is it true that its utter ances on the theory of finance are so far in consonance with the then existing state of things as to contain the essential feat ures of the theory as held by the different peoples of today.

The theoretic structure of the science in Germany owes its characteristic features to the fact that it combines the legacy of the Cameralists with the new theory. If we compare Justi's Science of Finance with Karl Heinrich Rau's Grundsiitzen der Finanzwissensehaft, published nearly eighty years later (1832), and if we then follow this latter work down into its last edition (1864-1865), we shall find that the heritage of the Cameralists has lasted on in a practically unchanged form over a period of one-hun dred-and-ten years. The leading principles of Adam Smith have found a place beside it, it is true, and they may even have come to be the guiding principles. But a process of approach on the part of the fundamental principles of Financial Science to facts of actual life, and therefore to the empiricism of Cameralistic Science has been going on, in part due to a gradual weakening of the radicalism of these principles themselves, in part to the fact that the cameralistic science itself had absorbed into its sub stance a good deal of the radicalism of the period of the enlight enment. So we find Justi, in the introduction to his Financial Science, declaring it a truism that the sovereign must not be per sonally interested in any sort of trade or business (vol. ii. p. 63); so also he pleads for a gratuitous administration of justice (vol. i. p. 118) and condemns fiscal royalties in the strict sense, and will allow only an incidental fiscal aim to attach to institutions calculated to serve the public welfare.

§ 12. When contrasted with the abstract dogmatism of the school of Smith, as represented in Germany by the Kantian, Lud wig Heinrich von Jakob (Staats-Finanzwissenschaft, 1821), the • influence of Cameralistic Science on the development of the theory in the nineteenth century appears of great value. And in this connection it may be noted as a significant fact that the men who have done such good service to the science have been prac tical financiers and have approached the subject from the stand point of the practical life of the time. So for example, Fried rich Nebenius, the Baden statesman, in his work on the public credit (1820 ; 2nd ed. 1829); likewise von Malchus, Finanz prasident of Wurtemberg (Handbuch der Finanzwissenschaft and Finanzverwaltung, 1830); likewise, and more distinctly, the Prus sian State Councillor, J. G. Hoffman (Die Lehre von den Steuern, ass Anleitung zu grundlichen Urtluilen fiber das Steuerwesen, mit besonderer Beziehung auf den preussischen Staat, 1840); and finally, the Austrian financier, Karl von Hock (Die offentlichen Abgaben and Schulden, 1863).

Thanks to this influence exerted by practical experience, a broad realism has come to displace the doctrines of the eighteenth century, as is notably shown in the case of J. G. Hoffmann.

Still it must be apparent that the development of the science is at best a paltry one so long as it oscillates between doctrinairism and empiricism in this fashion. The real element of progress is to be sought, on the one hand, in the broadening and deepening effect due to the philosophic basis afforded the youthful science of the last century ; on the other, in the fact that the material offered by financial and political life has been vitalized by the employment of an improved method of handling.

Here again I must content myself with referring to the gen eral part of this work, and to the bibliographical discussions contained in its introduction. I can at this point only discuss quite briefly the special features of the later literature of the science of finance.

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