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Private Economy and Public Economy


§ 48. The purpose and scheme of this book require that the discussion must no more here than elsewhere be allowed to lose itself in a multiplicity of details. All we can expect to do will be to describe the main lines of the historical development by which the public economy and administration has come into existence, and demonstrate the necessity of what has resulted ; this will enable us to enter into the spirit of the resulting institutions and to understand how they have come to be what they are.

Early writers on the Science of Finance' distinguish the revenues of the state into those earned by the government and those levied by the government. The former are subdivided into the revenues from "purely private business" carried on by the government, domains, and receipts from government monop olies (regalia); the latter are divided into imports which are levied in case of particular transactions taking place between government and citizens (Fees), and imposts which are levied on the body of citizens simply on the ground of their obliga tion as citizens and without any special return service on the part of the government (Taxes).

Later writers on the Science of Finance have reduced this scheme to a gradation in conformity with historical develop ment, in such manner that the course of development of the last few centuries—whereby the modern concept of the state as a public institution has grown out of the earlier legal concept of the state as a matter of private right and privilege—shall be reflected in the course of the progress of fiscal administration from its earlier status of personal income to its modern status of national revenue. As a matter of fact, such a gradational advance from manorial revenues to taxes is traceable. We may notice how in the first place the business enterprise of the state came to assert a privilege above private enterprises of a related character in virtue of the prerogative attaching to the affairs of the commonwealth. Then, before attaining to taxation as the means of revenue proper to the fully developed fiscal administra tion, there intervened a transitional stage of fees, which, indeed, are of a nature akin to the tax, but which still retain some feat ures of the system of industrial income in their dependence on the relation between special service and special payments.

The unsatisfactory feature about this conception of the mat ter lies in its attempting to compass at one and the same time a presentation of the history of finance and an exposition of the modern methods of finance. This advance from the status of private economy to that of public economy may correctly describe the actual line of development in the course of the centu ries ; but the attempt to make the modern system of finance intelligible as a structure whose foundations are of the character of private industrial enterprise, while its upper stories are of the nature of public business, contradicts the requirements of that logic which conceives of the modern public economy in a manner analogous to that in which we are accustomed to conceive of the modern state as seen from the standpoint of public law.

Precisely as in the case of public law certain fundamental concepts—sovereignty, citizenship, etc.—constitute the premises out of whiCh, in logical sequence, there follows the essential character of the modern state, so likewise must the fundamental principles of the modern public economy be sought, not in the gradation and stratification of the historical development of pub lic wants, but in the logical relation of parts to a whole.

§ 49. The designation itself, which is in vogue even in the most recent works on finance, betrays the absurdity to which we have called attention. How is it admissible, we may well ask, to speak of a Privaterwerb on the part of the government of the modern state? The following objections present themselves. In the first place there is the obvious reflection that in the modern state the concept "private" has a meaning only as opposed to "the state," and that it must accordingly be only in a special meaning of the word that anything which the state acquires can be called a "pri vate income." What the government today acquires it acquires not only not as a private person, but not even from the motives or with the which determine a private person in his pursuit of gain. For the difference of purpose and of point of view here indicated constitutes the characteristic fact of govern mental action, and an appreciation of this disparity results in an analysis which immediately excludes the portions of government activity in question from the domain of finance. Domains and royalties are facts belonging in the financial history of the form ative period of the public economy. In the fully developed eco nomy of the modern state these institutions can continue to exist only on condition that some other basis be assigned for their retention than the fact that they yield a revenue. They must be

viewed and justified from the point of view of public expediency : a point of view which differs radically from that which character izes private economy.

In the second place, it is precisely the latest developments of socio-political and socialistic views that invert the whole stand point of this so-called " private enterprise." So that the mode of looking at things which gives rise to this concept of a " private enterprise " on part of the state is completely turned around in the discussion between the advocates of private ownership and the friends of collective ownership. For if it is really to be the mission of the present and the future—to a greater or less extent —to widen the sphere of state ownership, then we are directly confronted with the fact that what has lately, simply in virtue of the incompatibility of its name with the requirements of the modern state, been figuring as a relic of the past, comes forward as the essential characteristic of the new social and economic order.

From this we have the following consequences. A syste matic discussion of the public economy must either take for its point of departure public ownership and public enterprise as the basis of the satisfaction of the public demands : in this case the concept of " private enterprise " disappears altogether, not only as applied to the government, but also within its proper sphere as a means of livelihood for the body of citizens, since it rests on private ownership and private industry. Or conversely, the discussion of the public economy must start from the private property and private industry of the citizens—as happens at present ; in which case the public economy comes to rest on the receipts which the private productive industry, of the individual citizens will afford it.

50. It is necessary to call to mind at this point that in the economy of the modern state private property is the fundamental fact on which—more or less consciously—the whole structure of the relations of the body of citizens is based.

This by no means excludes the possibility of a mass of public property being held in public ownership, whether it be as a sur vival of the past or due to the new era and its tendencies.

But even in the face of the undeniable fact that such public property exists in our modern states and communities ; even though it is in fact, from a variety of . causes, on the increase ; just on this account it is necessary to avoid an ambiguity which could only serve to obscure the relation subsisting between pub lic ownership and the decisive, fundamental fact of private own ership.

There are only two starting points possible. Either we must start from the basis of common ownership, or from that of private ownership. If the state is the common owner, and if the social economy is accordingly the public economy of the state in the sense of Rodbertus's ideal, then it follows as regards the fiscal system that the whole economy of the state proceeds on a rad ically different basis. The immediate consequence is that there no longer exists any contrast of the sort we have been accustomed to accept as a matter of course as subsisting between the revenues of the public economy and those of private life. For the collec tive revenue will in this case come to occupy the central position, and private individuals will draw their incomes from it as officers and operatives in the employ of the state establishment. They, the officers and employees, who are in this case the aggregate body of citizens, then draw their incomes from the state, instead of, as is the case under the existing system, the state drawing its income from the incomes of the citizens.

That is the alternative. Contrary to what is once in a while insisted on in these later times, this contrast is not sublated by the presence of state establishments for the management of pub lic industries, such as are distinctly on the increase in the modern state. These facts rather confirm our claim, in that this manage ment is obliged to appeal for a justification of its methods to social facts which owe their existence to the institution of private property. The stratification of society, which rests on private property and private industry, furnishes the basis on which the fiscal management of public instruction, public means of com munication, etc., proceeds. Indeed, many of the comprehensive state establishments are really nothing but a contrivance for col lecting from private industries the contributions wanted for state purposes, as e. g., the fiscal monopolies.

modern, government, ownership, citizens and finance