aggregate of $71,190,000,000; and it, too, almost doubled in ten years. Deposits held by the saving-banks of the Empire at the end of 1905 amounted to $3,018,000,000. The gain during the previous five years for the most part a period of sharp business depression - had been not less than $744,000,000. The new listings of home securities on the German exchanges from 1897 to 1906 aggregated $5,590,000,000; and of the $3,260,000,000 foreign securities listed in that time it is estimated that somewhat more than $1,000,000,000 was bought by Germans.

Returning once more to the American panic, one of its first effects here was to advance sharply the rates of foreign exchange. Even after the Reichsbank had raised its discount rate to 7 per cent, the price of London bills continued to rise. This was the result of the American pull for gold, New York usually getting German gold by way of London. Even after the rate of exchange on London was considerably above the "gold point,” — the price, namely, at which it becomes more profitable to send gold abroad than to pay with a bill of exchange, the great Berlin bankers refused to export it, under the impression that their selfrestraint would be gratefully remembered at the Reichsbank. The cry was forthwith raised at London that Germany no longer possessed a free gold market, a conclusion which did much toward intensifying the distrust abroad of the German financial position. The Reichsbank, however, which never imports or exports gold itself, but leaves such transactions to the great private banks, publicly disclaimed all responsibility for preventing the movement of gold.

The outward movement thereupon began, and during the month of November above $28,000,000 was sent to England alone. For the last quarter of the year the total exports reached $43,000,000, most of which found its way to New York. Yet Germany's contribution toward staying the American panic, curiously enough, is treated in most discussions of the sub

ject as a slight matter in comparison with the aid extended by the Bank of France. That aid was given in a more spectacular way, in a single transaction negotiated through the Bank of England; while gold went from Berlin as the result of many different transactions, and the names of the banks concerned were never mentioned. Hence the $16,000,000 from the Bank of France looked bigger, created a bigger sensation, than the $40,000,000 from Germany.

As the atmosphere clears up, after the blowing over of the American storm, it is seen that Germany has come through it comparatively unscathed. Notwithstanding the fact that that disturbance came at a time when Germany's investible capital seemed well-nigh exhausted, the German market has this year surprised experienced financiers of Berlin by the facility with which it has absorbed new issues. Thus the listings of government and other bonds on the Berlin Exchange during the first eight months of 1908 reached the large aggregate of $500,000,000. Almost the whole of this was subscribed and paid for by Germans. It is evident that the capital strength of the country has not been impaired by recent events.

At this moment the Empire is upon the eve of the most important financial event in its history. The Government has just laid before the Reichstag bills for raising annually $120,000,000 of new revenue -probably the largest scheme of taxation ever undertaken by any nation in a time of peace. Nothwithstanding the rapid economic development of Germany since the foundation of the Empire, the national finances have never been in a satisfactory position. Deficits have grown to such an extent of late years, and loans of such large volume have had to be raised to meet them, that the need of radical reform is now evident to everybody. The bad condition of the finances, furthermore, together with the impending fiscal legislation, has been one of the chief causes to create abroad that impression

of Germany's financial weakness to which reference has already been made. All Germans feel this to be so; accordingly one of the most frequent arguments put forth for financial reform is the political necessity to remove that impression, to make the world understand that Germany's armaments by land and water are, and will remain, amply backed up financially.

The financial policy of the government has certainly been the sorriest chapter in the history of the Empire. That policy amounts to an inglorious breakdown of that efficiency which foreigners have learned to admire in many other spheres of German life The newly-born Empire set out upon its career with the French war indemnity of $1,000,000,000 in its coffers; but this was exhausted by 1877. The fateful policy of covering deficits with borrowed money began in that year, and it has continued down to the current year. It will also go on for some years to come.

Since 1877 there has been only one year in which the national debt has not been increased. It now amounts, according to recent official statements, to $1,013,000,000, or a little more than the French indemnity. The debt has been doubled since 1895. For the past eight years, government publications again admit, expenditures have exceeded receipts by $471,000,000, or an average of $53,000,000 a year. The national debt has already cost the country in interest and administrative expenses about $380,000,000; and yet Germany could have kept out of debt altogether, as Prof. Schanz has recently shown, if the revenues had been increased by only about $12,000,000 yearly.

That a country with so much intelligence, character, and efficiency as Germany undoubtedly has, should go on piling up its national debt like this in a time of profound peace, is certainly a most astonishing phenomenon; and some explanation of it seems called for. If we ask a bankrupt why he failed, we shall

most likely learn that his income was not big enough; if we ask his friends, they will probably tell us that he spent his money extravagantly. In the case of Germany both explanations would apply, — the Empire has never had adequate and steady sources of revenue; and its expenditures, niggardly enough in many ordinary items, have been lavish in the extreme with the army and navy.

Several causes might be alleged for the insufficiency of the revenues. The bulk of these is collected in the form of customs duties and internal taxes upon various commodities. All these are indirect taxes, subject to varying yields in revenue as the prosperity of the country changes. Moreover, the internal taxes upon spirituous and malt liquors and tobacco are far lower than in most of the other great nations. The individual states have stoutly asserted their right to all forms of direct taxation; and the Empire, which might long ago have been helped out of its financial perplexities by a national property or income tax, has had to cast about for other sources of revenue. If Bismarck's proposal, that the Empire. nationalize the railways, had not been frustrated by the refusal of the South German states, the national treasury would now be in an enviable position, the net earnings of the various stateowned railways of the country having amounted in 1907 to $164,000,000.

Looking at the other side of Germany's balance-sheet, it appears evident that her financial embarrassment is due, in the first instance, to the rapid growth in army and navy expenses. During the past five years, ending with 1908, the national expenditures have been increased by $93,000,000, and the army and navy are responsible for not less than $73,000,000 of this amount. No country in Europe has poured out money upon its military equipment so lavishly as Germany. Comparing her with France and Italy, we get the following result: from 1893 to 1906 Germany increased army appropriations by 23, and those for the navy by 260 per

cent, while France in the same time made increases of 10.7 and 25.5, and Italy 14 and 30.7 per cent, respectively. In the midst of her financial embarrassments, however, Germany has provided for a still further enlargement of naval expenses. The naval bill passed by the Reichstag in its last session was calculated by the government to increase the ordinary naval budget to $95,000,000 by 1917, as compared with $55,000,000 for 1907; and this estimate does not include the plans for building and arming new ships.

Under these circumstances a further big increase of the national debt is a certainty. The government, in its report accompanying the finance bills just laid before the Reichstag, says that the new loans and extraordinary appropriations in sight will add another $238,000,000 to the national debt by 1913. Of this amount, $124,000,000 is for carrying out the ship-building programme, in addition to the increase of ordinary expenditures upon the navy mentioned above.

The new taxation is therefore obviously due to military expansion. The government's report, however, ignores this fact and seeks an explanation for the new taxes in other directions - for increasing the salaries and pensions of government officials, for pensions for widows and orphans, for making up the arrearages of the individual states in their contributions toward the support of the general government, for the amortization of the public debt, for making up the losses to be incurred by reducing the sugar tax and abolishing the tax on railway tickets.

The question has been asked with some doubt in the foreign press, whether Germany is able to raise the new revenue required. In answering it, attention must be called to one point at which Germany has an advantage over other countries. It is that the Empire and the states, particularly the latter, draw large revenues from other sources than taxation. While the aggregate cost of the Imperial and state debts is now about $180,000,000 a

year, the revenues from railways, forests, mines, and similar sources, amount to not less than $240,000,000. Another point to be remembered is that the Empire has at its disposal certain sources of revenue which have been hitherto rather neglected, as compared with the practice of other countries. Thus Germany collects but 67 cents per head of its population on brandy and alcohol, while England collects $2.77. The Imperial beer tax yields only 20 cents per head, that of England $1.16; the German tobacco taxes only 32 cents, while the English customs tax produces $1.65 per head. England collects about $93,000,000 from the estates of deceased persons; but the German Empire only touched this source of revenue two years ago with a tax on collateral heirs, which yields only a small sum.

On the other hand, it must be pointed out that taxes of other kinds are very high in Germany. The Secretary of the Treasury recently said in a magazine article that state and local income taxes in many Prussian towns and country districts were equivalent to from 12 to 15 per cent of incomes, not to mention other local, state, and Imperial taxes. The former Minister-President of Bavaria recently said that the richest tax-payers in many cities of that kingdom are paying, in all forms of taxation, from 15 to 16 per cent of their incomes. From trustworthy statistical studies it seems probable that many wage-earners, too, are paying out from 8 to 10 per cent of their earnings in taxes. From these facts it is evident that the new taxes will bear with great weight upon the people.

The government's financial scheme provides for raising this revenue in the following manner: from brandy and alcohol $24,000,000, from beer the same amount, from tobacco $18,000,000, from wines $5,000,000, from death-duties $22,000,000, from electricity and gas $12,000,000, from placards, posters, and newspaper advertisements $8,000,000, and the remainder by assessments upon the states.

It is proposed that the government monopolize the wholesale trade in brandy and alcohol, buying the product of the distilleries, refining, and selling it to retailers. This is a radical proposal, inasmuch as there are no industrial monopolies owned by the State in Germany. The estate tax contains one feature hardly less radical. It provides that in the settlement of the intestate estates of deceased persons the State shall become the next of inheritance after the nearer relatives. These latter are defined as being children, parents, grandparents, and brothers and sisters and their descendants. Where such relatives do not exist, the estate lapses to the State. Two years ago the Reichstag passed a law taxing the inheritances of collateral heirs, but the present bill taxes each estate as a whole, before any division is undertaken. Estates worth less than 20,000 marks ($4760) are exempt from the tax. Beginning with estates of that value as the nether limit, the tax is one-half of 1 per cent, and it reaches the maximum of 3 per cent with those worth $238,000. Persons able to do military duty, but who have been excused from it, will pay for this exemption with an additional 1 per cent tax on any legacies or inheritances falling to them.

Although the death duties just quoted are extremely moderate (the English rates range from 1 to 15 per cent), intense opposition to this bill has been manifested by the landed aristocracy. The Conservatives, the political party of the aristocracy, have declared these death duties to be a shock to their feeling of the unity of the family. Although the bill makes a large concession to their objection by permitting the estate tax upon landed property to be paid in twenty-year installments, it appears probable that the Conservatives will reject the measure. Their publicists are advocating, in lieu of the death-duties, a tax upon the dividends of joint-stock companies; but this proposition encounters the difficulty that the Prussian government is itself just now about to pass a law of that kind. VOL. 103 - NO. 1

Other features of the government's scheme have met with sharp opposition. The proposed taxes on electricity and gas, including the incandescent lamps used in burning them, meet with the strongest objections on the part of the industries concerned. The newspapers of all shades of political attachment are naturally united in opposing the tax upon advertisements.

That the German government should propose taxes like the two last mentioned is striking evidence of the embarrassing situation in which the Treasury finds itself. A tax upon electricity is a blow at one of the most vital moving forces of Germany's economic development. It will almost certainly be rejected by the Reichstag. In view of the conflicting interests of classes and parties, of industries and sections, it seems highly probable that others of these taxes will be rejected or much modified. Then substitutes must be found somewhere. But where?- that is the embarrassing question.

From all this it will be evident that Germany is learning that its ambitious, expansive Welt-politik is a heavy burden to carry. Many voices have already been demanding that expenses be reduced; yet nobody but the Socialists has suggested that the Empire might curb its naval plans and manage to exist with its present fleet. It was a wholesome sign, however, to hear all parties in the Reichstag protest against the Kaiser's remarkable view that the fleet might be needed for operations in the Pacific Ocean. It can only be hoped that all these tax-bills will lead the German people to examine anew the general political considerations which induced their statesmen to adopt the maxim that the future of the Fatherland lies upon the water. Many Germans, indeed, reject that maxim; but the Germans are politically meek. Also, they disperse their power through numerous petty parties, each, as a rule, representing some narrow special interest. On large, foreign questions it is in the main true that they submit to what the authorities in their wisdom think best to do.

THE SO-called corporate evils are the great problem of to-day. We know how great this problem is, how great the evils are, but few realize how far-reaching in effect may be the solution that is now pressing upon us. The corporation has become popularly, if not properly, the embodiment of modern industrial wickedness. To reform it every kind of panacea has been offered, running from the destruction of the corporation itself to the destruction of American individualism and democracy by a form of recognized corporate socialism. The destruction of the corporation is not, however, making much progress; it is not a real danger, nor a real possibility. The destruction of individual freedom and opportunity, of the fundamental principles of American life and government, is both threatened and imminent. How threatened may be read in the reports of any industrial monopoly; how imminent may be seen in the widespread demand for government recognition and regulation of these monopolies. Great as are the corporate evils themselves, they are not so great, nor so imminent, as the spirit of opportunism, of disguised socialism, leading the political leaders of to-day and demanding the abandonment forever of the simple independence of the individual; to increase his industrial dependence and make it political and permanent. This result is to be accomplished and socialism established, if at all, not directly, as a wise and voluntary measure, but indirectly, through the subversive nature of a corporation and as a last escape from the irresponsible oligarchy of corporate wealth. The corporation has subverted law and honesty between individuals; it can and will, if unrestrained, subvert the basic

ideal of American government, the happiness and welfare of unborn generations of American people.

To recognize and license the far-flung corporate monopolies that rule the business of the country, and to increase and centralize the powers of government to regulate them, means the beginning of the end of those sound principles of government which are our special heritage as a people, the principles on which the American colonies were founded, their independence as states established, and their union as a nation made possible and permanent; the principles by which we became and have remained a great and free people. These principles are not merely popular government; they rest below, and rise above, the political right of suffrage. They were, and are, solely and simply the liberty and equality of the individual. In our own experience as a people, and in the words of Rousseau in his Contrat Social, they are the practical ideal of progress: "liberty, because individual dependence is so much force taken from the body of the state; equality, because liberty cannot exist without it."

Under the title "Democracy," in the Encyclopædia Americana, it is said: "The principles of democracy are forcibly and clearly stated in the American Declaration of Independence, in the words of Thomas Jefferson, who has been called 'the apostle of democracy:' 'We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain inalienable rights, that among these are life, liberty, and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their