S«^' .^'■ %> ^] m W ' 1 Lli l1' y K .. -f t'-" ■-.. •% ;^. r/!:. '-■ >? J\ -1« 'vf-Sffi ■ ^ -■>. ^,V LIBRARY OF THE University of California. Received -vX^»^^<^ , iSg} . Accession No.^S2^f6- Class No. «: t PROBLEMS OF TODAY. TUE NATIONAL REVENUES. CLEARLY AND IMPARTIALLY DISCUSSED. i 0- Ey Dr. Richard T. Ely, Political Econo- juist of tho Juliiit^ Uopkintt Univer:»ity. [Written for t^e Baltimore Sun.l ARTICLE I— INTROBUCTOUY. t>avo been asked by The Sun to write a Series of articles on various problems of tlio il:iy, some of them relating' to national life, others to Srato iiCfairs and still others to our own city. It gives me pleasure to comply Kivith this request, for I reco(rnizo in Thb Sun a journal of wi io lnfluence,of intearrity beyond q lestion and of raio impartiality as between the various classes of industrial society; a newspaper, in short, conspicuous for its de- voUon to the public weal and not for its sub- Sf?rviency to special private and selfish inter- esi5, 83 so often happens in these days. It is well that the reader should at once under- stand the character of this proposed series of articles, of which the present istheopaninff one. First, then. It; must be borne in mind that an exhaustive treatment of the subjects uisfussed cannot be expected; that such a troitment is not contemplated, for the topics are too lirse to admit of it even within the generous limits allowed ma by The Sun. I intend rather to elucidate certain elementary principles in the simplest lauffuaere at my command, and to make a few sugrgestions in regard to such questions as the na- ture of commerce, the balance of trade theory, the policy of protection, its connec- tion With monopoly and lis beariu>r on the welfare of labor, the treasury surplus, JetTer- sonian demncrac3', taxation in Sia^eand city and temperance reform. I shall not play-the part of an advocate and say certain things merely because they are calculated to pro- duce an effect or annoy an adherent of oppos- ing views; r it her, I shall endeavor to help my reiders to get at the truth about many vexed questions which are much obscured by parti- san controversy. Few statistics will be used, because statistics both as a science and an art j9 siill in an unsatisfactory condition, and the data it furnishes are larerelv unreliable; further, because "nothltur lies like figures"— in other words, it requires a trained mind to pass jtidurment on statistical arguments, and It is very easy, by a sort of hocus pocus, to make statistics prove whatever you please. Let us take as an example of fallacies in sta- tigti.s one which has carried great weigh with it. Irefertoiihe argument about our Increase in wealth end its connection with a protective tariff, in Mr. James G. Blaine's cel- ebraied letter in which he accepted the nomination to the presidency of the United States. Mr. Blaino states that the wealth of the United States in ISiJO amounted to !fU,00O.OO0,O(X»; that "after 1S60 the business of the country was encouraged and developed by a protective tariff," and that at the end of twenty years the valuation of our property had Increased to the enor- motts agtrr! r $44,000,000,000. An Enarlish- man, h ;\ nnui' diatoiy comeS forward ■with a s ju* to show that there has been an equally marvelous increa<?e In national wf^alth in his country since 1846, w^Jen free- trade principlos were introduced, and ho attribute s this prosperity to the policy of free trade. Bo ir areu- lunio CO i-..>v.^,>^io. V, j.iiu I was walking down Biltimnre street yesterday a merchant sold ten thousand dollars' worth of crooda. The( two f'V'^-^^ " "oened together, but was one the ca other? Manifestly you want some other proof than the fact that the two events wero contemporaneous. It is equally necessary to atk, bo'h In the case of Great Britain and the United States, what other forces besides tariff latvs were at work to in- creasL' the wealth of each nation, and merely to ask this qucsMon shows that these law9, whether wise or unwise, after all played only a min(;r r^ le. The opening up of new territories, the improved means of commu- nication and tiarisportation, the further application of steam to industry, a host of new inventions and discoveries, accompanied by a population rapidly growing in numbers and increasing In intiiiii^enceand skill— those evidently are the main causes of the aug- mented national wealth of the United States; a!;d Whether the doctrine of protection is true or false, the tariff, after all, was only one factor, and a minor one at that. But let U-? examine this statistical argument more at length. Forty-four billions! That is truly an enormous sum, but bow much of that have you, ray reader? Have you more than you want? How many of i:p, in fact, have enough to satisfy our rational wants? How many of us could advantas?eously exporui more than we have in food, clothintr, im- proved dwellinss, books, music, travel, whole- some recreation? Certainly most people in my circle of acquaintance; and the question may' well be raised whether what we have as a nation is desirably distributed, and whether certain alarming teridencles to concentration of wealth and monopoly in busine, s are whotly unconnected with our t'ariff legislation. Many more similar ques- tions are pertinent, but they will not be raised in this article, it is hoped that what has been said will suffice to show the neces- sity of caution in the acceptance of alleged statistical proof. Statistics are useful, and the formation of an International Statistical Insiit-uie to improve statistics, both as a science and prt. Is to be hailed with unquali- fied satisfaction, but the place o^f figures in a series of articles like this is limited. It is proposed rather to b.^se what is said on facts which can bo observed by everybody, and on principles of common sense and well- attested experience. The subject of national revenue is the first to occupy our atteution, because nearly all national problems involve' sooner or later questions of national finance. There are various Bouroes of revenue, as land, productive enterprises, loans and taxation, and some local and central govern- ments defray a large portion of their expend- itures by profits on certain lines of busi- ness entrusted to them. Berlin, for example, meets more titan eighteen per cent. of its expenses from the net iMvenues of its gas works, although gas is sold below fl a tho: sand; the profits on State railways in the various German States mora than cover the interest charges on their public debts, and one of these German States, Bavaria, pro- vides for over half her budget by returns oa I enterprises of cue kind and another. Bich- Mond, Virginia, and a few other American cities derive profits from gas works. Our federal government, however, is almost; ex- iclusively dependent upon taxes. But it must be remembered that taxes are of tw^ kln9l6. • direct and indirect, the former on pli-operty JTi. LRnd Income, the latter on comi iS. The jment are, how^^ST exclusively inJirect p taxes. We have then to ask this question— "What are the peculiar featured of indirect taxation in greneral, and what SDecial charac- terlsric3 pertain to indirect raxatioh in the United States? An attempt will be made to answer this question in the following: article. DIRECT AND INDIRECT TAXATION. How and "Where the Fedferal Bardensi Fall— By Professor Richard T. Ely, of Johns Ht^pkins Uuiversity. [Writtin for the Baltiraore Sun.l ' JARTICLE II. luuirect Ta5teah,^y^ tas;es on commodities; in other words, on ^^^^5, ^t ^^^ ^vear«n^ consume in other ways, OTS#^„n^ ^^..tu^nsls and implements used Inmabufacturtogfiroods for purposes of consumption. They are called indirect tnxes because theyare usually paid in the first instance by one person and shifted by him to anciiher. The importer of salt, sugar and coal pays taxes on these com- modities when they enter the territory of the United States, aids them to the price of his commodities, sells them to some one else, perhaps a wholesale dealer, who in turn dis- poses of them to a retailer, having added the tax and a profit on ihe money which he ad- vanced in payment of the tax. The retailer finally sells them to you and me, but by this time the tax has been turned over several times and hflS jrrown like a snowball rolling down hill. To the retailer tho tax has become «n indistiniruishable part of the price which he pays, and on which he must derive a profit from us, the consumers. Thus indirect taxes ft/»i up, and roll up every time one person shifts them up >u another, until finally the augmented burden rests up >n the phoulder of the taxpayer. An indirect taxisihus a tax which violates one of the celebrated four Canons Of tixation, for it taices from the pockets of the taxpay.er far more th in it puts in!o the nublio treasury. It is a wasteful kind of taxation. This is not mere theory. It is a fact of which any one can satisfy hlm- aeif by conversation with intellijjrent mer- chants who understand the operations in jD which they are enirae-ed. HTDIRECT TAXES VIOLATE THB PRINCIPLE OF EQUALITY. Another accepted canon of taxation is that Its amount should be measured in each case in proportion to ability or the revenue which Hibitizen of the oommnnwealth enjoys. This if what is called equality of taxation. Gov- ernment should exact equality ol sacrifices of us ail. An income tax honestly, assessed and honestly collected, meets the requiremcMts of this canon. How does the caso stand ijJth ittdireot taxation? This is taxation of consumption; but does consutiiption of taxed commodities vary with income? We Import I ealt and tix it nearly fifty per cent, of its I value. Docs the ricn man consume more salt litban the pocjr man? Do you increase the ^amoarit of salt in your soup with an improve- ment in your financial condition? It is eaid that, on the contrary* the amount of salt con- ■umed by the poor man isjrreater than that #on8umed by the rich mao, because the latier uses other o jndiments, while salt is often the I only seasonintr the former enjoys. We have ' I In a tax like this what is called a retrre^isive jj lax, a tax which increases as income de- _ '" ^-eascs— tb2 worst kind cf a tax and the most ' ijinjust. The tax on sugar is over seventy- ,ftve per cent, on value, and from it a lartre ^>art of our revenue is derived. It is similar In principle, although there is a difference in rates accord ing- to value of sugar, so that higher ^rrades pay mope, and it is true that people of laree means consume more than poor people. But the difference in rate and in quantities consumed by no means corre- sponds to differences In Incomes. It may be doubted whether a man with ten thousand a year consumes less than one with fifteen thou!=anvi, and he certainly does not consume an inferior qualty of sugar. 4^ man with two hundred thousand a year will not con- sume twenty times as much as one with two thousand a year, much less will he consume one hundred times as much. Here we still have the regres-ive tax. But take even taxes on silks imported, which yield fifteen millions a year, and aopear to be one of the fairest of Indirect taxes. The rate i« almost fifty per cent. Silk can hardly be called an article of superfluous luxury at the present time, and a lawyer who supports a family on three thousand a year is taxed out of all pro- portion higher than the plutocrat whose income is three hundred thousand dollars. It is needlees to continue illustrations. With the progress of democratic thought, the idea of progressive taxatic^a meets— rightly or wrongly, that need not be discussed here— with increasing favor, and some of the States where the principles of deiusicracy are carried farther than anywhere else in the world, the Swiss cantons, have recently in- troduced progressive taxes on property and on income, but our federal government relies wholly on a system^of reercssive taxatlonl One would think this in itself would be suffi- cient to check the ardor of protectionists who are at the same time workingmen: but this is by no means the whole story. Take up any treatise on taxation and read the argu- ments in favor of Indirect taxation, and what is ihe first thing to attract your atten- tion? it is that with the present calls upon civilized governments, and with the unwill- insfness of people to pay direct taxes, and the resistance which men of means offer to high direct taxes in proportion to income, it is practically impossible to maintain the modern gyvernraent without large contributions from people of limited njsource", and the only way to tax them is by indirect methods; in other words, mincrling taxes with prices paid, so that goods cannot be bought without paying taxes. It is. too, worthy of notice that the English system of Indirect taxation which we have inherited originated in the corrupt re^ trf Charles II, about two hundred years ago. Then the burden of government rested unon the land held by feudal tenure, but the Parliament of Charles II, "by a majority of two only, divested the Inndedgentry of all their feudal obligations to the crown without touching the'.r privi- leges, and as compensation to the State im- posed an excise duty upon,beer, spirits, wine, tobacco aud numerous other articles. * * * It marked the dawn of our modern system of indirect taxation; and the emancipation of the aristocracy from special burdens on land thus accomplished helped to alter the whole current of our later fiscal history." These are the words of an English writer on flna'.ice. H I ^s,-^ INUIKKUT TAXATION AND PAUPERISM There is a connection between indirect tax- ation and pAuporiam which Is worthy of nc- tice. All direct taxarion places a limit beyond which it will dqj eo. This Is too low In Maryland— at %ny rate lower than elsewhere— but • evert with us a man muat have at l.aist a hundrel dollars to be taxed. Indirect taxation does not discriminate between the last dollar of the poor widow and the dollar which is only one in an income of a million. It raises prices, reduces the value of incoiOe, and forces some who are already near the awful line of pauperism to cross it, and thA« puts to death hicrher aspirations in a class of citizens and lowers the level of civilization. But the ab- surdity of the thlnar is seen in this, that when the tax has destroyed the value of a man as an industrial factor in the community, what has been taken away is given baokin alms! INDIRECT TAXES OBSTRUCT TRADE. The cost of collection of indliect taxes is hiarh, and necessitates an army of spies and linformers. They thus interfere with liberty ' of movement and obstruct trade in a thousand ways. Thus, asaln, indirect taxes take out and keepout of the pockets of the people more thati they yield to the treasury of the State. INDIRECT TAXES CONGENIAL TO DESPOTISM AND ARISTOCRACY. Indirect taxes are imposed on people with- out creatine: so much discontent as direct taxes and without so close a scrutiny of the method in which the proceeds of taxation are expended, because the mass of men do not realize that they pay taxes every time they purcbaee dry jfoods or firroceriea. They are an underhanded kind of taxation. It is not. then, surprising that they are in the minds of many identified with despotism and aristocracy, while there is a firrowinjj opposi- tion to them on the part of enlisrhtened de- mocracy—an opposition which undoubtedly troes too far ^t times. In the Unite d' States itshould be rememered that while national revenues flow from Indirect taxes. State and local srovernments are almost entirely sup- ported by direct taxation. National revenues are about as largre aa the revenues of all the States and all the local political units put together, so that we pay about one-half of our total expenses of government by the proceeds of direct taxes and about one-lialf by the proceeds of indirect taxes. There would be great opoosition to an extensive system of direct federal taxes, because the face of the federal taxgatherer in our States is not a welcome sight. Of course he Is now everywhere, but he keeps out of sight of moat of us, and so we do not realize it. A jrood deal of this feeling against direct taxes has been properly called "puerile," and among a people suflGlciently jfDoral, patriotic and enliurhtened Indirect taxation mignt perhaps be abolished. We must, however, take people as we find them, and at present its total abolition is out of the question. Of course it is an undoubted ad- vantage to be able to pay one's taxes in small amounts from time to time, when one buys a few pounds of sucrar, a little tobacco or an article of clothing. Our Indirect federal taxes are of two kinds, tariff duties and in- ternal revenue taxes, the former laid oa i commoditi 's Irnnorif* i^ into the Country, the ' latter on cornmoditles pt^ilfliced^Wfcuin tlio country. Now there Is a peculiarity about the revenues which flow from taxes on im- ported commodities, and that is that those taxes are In the tJnited States not laid for the sake of revenue, but for quite another purpose. The aim of the tariff taxes is to render it n Ticult to bring commodities into the U. _ :?tati'8, and thus either to remove competition from those Americans engaged io ine production of commodities which some of us want to Import, or at any rate to serve as a breakwater, and to modify the power of coinnetitlon. The revenue which tnese taxo3 afford is merely an Inci- dental matter. The ptjrpnso of the next article will be to consider certain peculiar features in our flnanciai situation, caused by j thefnct that taxes are laid on cummodiiies for ottier than revenue purposes. PROBLEMS OF TODAY. SUKFLUS IN THE TKEASURi. THE INTERNAL REVENUS TAXES. Frot. Richard T. Ely, mf Johns Hopkina University, or Internal aad Tarifif Tax* ation — Their Comparative 31©rlt«. LWrilten for the Baltimore Sun. I ARTICLE III. The principles which should control public expenditures differ in marked manner from those which should g'ivern private eip^Mul- itures, and the failure tu recogtiize this fact explains many mistakes wnich have been made in Atnericat* flmtncial h sr-rr. It is not nei-essary in this place to eiabor te all the differences between private flnai.eio ing and public flMiiiicicTintr, bu' in any discu:«<ion of currdBt financial problems one should be clearly erraspcd. It is this: Private expend- itures sb'juld bd govcriied by revenues, while Id the case of a public body it should flr.-it bo determined what one wants to spend, ana then receipts should be made t« corr* spond to public needs. The private man brings his receipts up to the hiahest point; in othT wordt, tae endeavors te obtain as large a profit from his business as possible, or to derive as large an income from his occupation as cir- cumstances will permit. After he has foutid that his income i» $500, $1,000 or $5,000, as the case m«y be, he then— and if a prudent man not before— decides what he can spend. Unlike a private party, th« representatives of the people ought first to decide that it is necessary to spend certain sums of money for the public good, and then ask the people to provide the means, layine taxes to meet expenses; or, if part of expenses are de- frayed by profits on pihlic wiTk and other sources of revenue, laying taxes to meet the deficii ncy in reoeiots. This U a well- ested principle of pub:lc financiering. Strict adherence to this principle brings order and harmony ij^to public accounts, while Its violation oroduoes confusion and waste. It implies that taxes are laid for revenue purposes. Wheu we begin an examination of oui* fed- eral finances we are struck \ij the dispropor- ilou between the needs of government and (ho revenues for meeting these needs. Some- times the revenues are too la rare and some- times too small, and when it is noticed that they are apt to be plentiful when there Is oo^ilifiraitiveiy 8aj.<,;i call for expenaiturei?, and distresglnpiy safeSiil when our needs are , larcre and urgent. It ]a a not unnatural <5on- j elusion that there Js a radical defect incur I financial system. Such is the case, and the ' defect is the on© mentioned, that taxes are not laid for revenue purposes. When taxes are Imposed upon a people to defray the ex- peuaes of government, it will be flsoertained what those expenses properly are, and the rare of taxation wiil bo so adj ist«d as to raise enousfb monoT, neither more nor less. This is the plan pursued by the mayor and council of Baltimore, and the tax rate is designed lo vary, and to be $1 50, $1 60 or $1 70, accord inar to our actual needs. It can readily b« seen, howuver, that the mo- ment one losea sisht of the objoct ^f tax- ation, which is revenue, and iayj taxes for other purooses.it would be surorisinif if reve- nue should correspond vvith the need for reverjue. That there should be this corre- spondence implies not only that taxes should be laid with a view to the probable revenue from them, but that the system of taxation itself shoulci be a flexible one In at least some of Its essential prints, 8) that revenue may readily be lowered or raised without an acute disturbance of business relations. The Eog-- lisheovernraent finds flaxibility in its Income tax, which is raised or lowered from year lo year, according to estimated revenues from other sources and estimated expenditures. If it is required to raise larg-e sums for the pros- ecutiou«©f a war. the proper minister at onoo brings a bill into Parliament to raise the rate of the income tax. Gla Istonc oriffinally in- tended to defray all the expenses of the Crimc^aa war by taxation without loans, and Parliament, with that end in view, raised the income tax considerably. This involves no disturbance of busiuess relations, for it is not a tax on business or property, and It requires much only of those who have much to srive. Thus, entirely apart from the fact that this method makes the i^fluoutial classes feel their respoaslbility for th6 course of flrovernment, this English iHCorao tax, so far as it sroes, assures a condi- tion of sound public financierinsr. It is not meant in t&is place, and at this timp, te raise the question of the desirability of an income tax. Even the friends of an income tax are vprv properly inclined to regard it as better adoDtea to State than Federal purposes, but what is said illustrates my point, namely, that it is necessary to establish a system of taxation which in some of its parts at least shall be flexible. Now, ir is manifest thut our federal government never has had a system of taxation which answered the requirements of national finan- cierinsr. Our chief soutca of l-eveoue has been taxes on imported commodities. When are those likely to yield larsre returns? Mani- festly duriuar time of peace and prosperity. When are they likely to yield little? Mani- festly duriner periods of foreisro complications and wars. But it is durinjf periods of the first sort that we need litile, ansd durinjf periods of the second sort that we need mucb. Twa pe- riods la our history are specially instructive on this point, and these are the periods cov- ered by the war of 1812 and the lato civil war Mr. Gallatin was forced to rely upon loans durinff the first war and these could be placed o6lj under disadvantajreous conditioas for the public, becausa there was no adequate basis for them in pjiblio reveniv-a, for thos9 coBSisted of duties on i mpor ted^com mo 1 1 and tho war, which called for increasefj ex- penditures, diminished imports. Mr. Dallas, in 1814, said: "The plan of finance which was predicated upon the theory of defraying the extrp.ordinary expenses of the war by suo- cesalvo loans, had already became inopera- tive," and he ascribed the collapse "to the inadequacy of our system of taxation to form a foundation of public credit, and the absence from our system of the menus which are the best adapted to unticipste, collect and distribute the public rerenue." Mr. Dallas uses the followiner instructive words in his "Eeport ©n the Finances for 1815:" "It cer- tfiinly furnishes a lesson ©f practical policy that there existed no system by wdicli tbe internal resources of the country could be brought at once into action when the resources of its external commeroe became incompetent to answer tho exi- irercies of the time. The existence of such a system would probably have In- vijTorated the early movements of the war, might have preserved the public credit un- impaired, and would have rendered the pecuniary contributions of the people more equal as well as more effective. But owint? to the want of such a system, a sudden and almost exclusive resort to the public credit was necessarily adopted as the chief instru- ment of finance," It seems Si-arcely necessary to remind the readers of Thb Sun of the results of the fiuancial policy of the late war. Secretary Uhase. in his first report, in 1861, estimated revenues from customs duties at 557,000.000, and at the end of the first quarter found it necessary to reduce^the estimate to 132,000.- 000. There existed no system "by which the Internal resources of the country could atoncebebrouKht Into action," and before this machinery could be created and ren- dered efifective, the war was nearly finished. Tho result was a vast and demoralizius? public debt, on part of which it was necessary to pay tjrelve per cent, for money received, and return $100 in gold for $50 lent to eovern- ment; further, the creation in time of haste, confusion and dire need of, a tax system, which may be called a monstrosity. Our tax sj'stem now yields surplus revenue, and it is dilficult to reduce it because it is framed fer the benefit of private interests, and these resist its reduction. "The full real- ization of self-srovernment requires a delicate adjustment of tudfiretary machinery, but surplus revenue acts as a weight which throws that machinery out of balaixie." These words are from H. C. ^dams*s"Public Debts," as able a work on finance as has ever appeared from the pen of an American. Now it is not true that this surplus revenue could not be advantageously expanded. Thore are many uses U which it could be put which would be hiffhly heneficial. Pos- sibly some of them will bo raemioned here- ttfter. It is not pleasant to pay taxes, but it may ha doubted if the ordinary mun invests any money which yields so laicre a reti;rn as that which ho pays in taxes, provided always that it is expended hy honest and intelJiiifeut public officials. This is often not appreci- ated because there is to'> canoral a failure to recognize what is due to i?ood srovernment. (But the moment the macriiiu>ry of urovern- mentbesrins to move unsat sr.iciorily or ex- _y.bltJl&r38 of breaklnjr down, even tiie most \ oonflrmed tax dodders do not liesi'ate to utter crl9a of alarm and indifrnation. I'crhaps the anarcbistio aeitation has don« 8om« irood in callinp attention to the importance of good KOTernnient. Mayor Latrobo, It •ccurstorao In this connection, made an excellent polntin bis recent address before the West Baltimore Improvement Association. He admitted tha burden of taxation, but put tho question, "Does any one regret the issuintr of a ainifle loan made heretofore for public Improve- ments, such aa the Gunpowder water-works, the new City Hall, Druid Hill, Patterson and Hiversido Pjirks, the opeuina: of Cathedral and German streets?" This la true, and it is doubtless true hat the needs of the United States goyernraent m^iy la the future require enougrh more than now to con- sume all our present annual surplus, for Sec- retary Fairchild's report shows that the ordi- nary federal expoaditiircs increased over thirty millions from 1884 to 1887, yet it is also true that in a matter like this we ougrnt not to proceed faster than is warranted by the enlightenment of public opinion. This skould crystaiize about a measure ana dt - mand it before revenues ^or carrying it into effect are provided. To provide revenues be- fore it ii decided for what we need them is wuttinir the cart before the horse. The surplus revenue could be uaef uiiy expended.but there is every reason to fear that it will not be. Rather than inaugurate any public work de- iiSfned to benefit the entire public, but which is not as yet demanded by tho public, timid Congressmen are more likely to erant money to clamorous private interests, with the idea of wlnuinar their support. More- over, such a public measure as the appropria- Uoa of public money for the removal of illit- I^AWS TO KJ Git A 1 : t5>lSlEircE. ©roy— one of the dansrerf to the republic— cannot be discussed on its merits so long aa an enormous surplus exists. Its advocates are suspected of improper motives, very likely of trying: to ret rid of the publio money to bolster up war taxation, and It fails to rooelvte the fair, impartial discussion which it deserves. Let ao one take this as an pxpressioa «f apprwral for the so-called "IJlair Uill." it is simply uso«l as an Illustra- tion to sh w the difficulties which attend even the discussion of any nopuiar mea«»ure j»olonar as our present methods of financieriuff ooa- tlnue. Aa it in seen that durlpg on imports are not Batl^ifactory as an exclusive source of federal reve lUfs, and can only formniart of a system of federal taxation, the question arises, what have tho«e to offer as a sub- stitute who wish to ab Ush our pres- ent Internnl rfveniie taxes? Unless the revenue reformers k(*«p these various points in mind they are likely to be outwitted. i Tho ten per cent. taritT re luction of 1873 was repealed iu 1875 on account of deflolonoy of revenues, and if there is nothinfrto take the place of internal revenue taxes and they are abolished, ©very future fiscal emertroncy i will serve as aa effective pit a forablirher I tariff. If we desire once for all to broak with ont-hlffh and complicated tariff system \ to avoid flnanclerintr of such a nature as to pro- duca violent fluctuations in businesa affairs I and to brl'isr business down to a natural basis, we mui^t be prepared to maintain and estab- lish a sva'em of taxation cHpablo of meettnj? ' the varyinif demands on tho public treasury. ^The Nature and Purposes of Comnaerce \ Discust^ed by Prof. Ri«'hard T. Klj, of ' Johns Hopkins University. I'vVriLton for the Baltimore Sun.] ARTICLE IV. The design of our present tariff laws is to f re^ulnte comm* ree, and they are ba*^od on a i? certain theory re- peoting the nature and pur- pose Of commerce. This fuel should be fully grasped, for no on« is qualiflod to spoik on protection and free trade who ha^ not clear ideas in regard to the part which commerce plays in modern iadusirial llfe.Thofree-tradcr finds favor with tho mercantile community because he looks upon an extension of com- tnorcial relations with satisfactlon.and thinks that restrictions anri rearUaiions of commerce do more harm than good- Wh'^n an ancient French monarch calltsd an opulent merchant to him and desired hi^s adviue in reerard to measures suitable for the extension of com- merce, the merchant simply replied, "Lalssez faire," which, interpreted into plain English, means: "Lot U3 the mer- chants alone. We ask noihinsr more, ^To ask no assistaice. We only desire that you should not interfere with ug." It was then qu.te natural that an early American free-trader— Con d 7 Rasrnet— who, in 1839, published the once well-known "Free-Trade Advocate and Journal of Political Econ- omy," should take fis the motto of his peri- odical "Laissez nous faire." Tho protection- * ist, on :he other hand, looks with distrust up<)U foreitrn commerce, for he fancies that the interests of the home producer may thereby be eedamrered. He therefore advo- cates restrictions upon commerce that he raaydimloHh it;* aaasfnitude. Occasionally one is even found who wishes that a wall of fire surrounded the United Si ate*, so that nothing miiTht be import^ad. Coupled with the appre- hensions concerniutr the home producer one fr^queutly finds disparaging views ooncern- inif the real utility of commerce. These are partly traditional, and are found from the earliest times to the present. The ancient Persians held commeroo to be a school of lies. Cicero and the Roman philoaophars despised commerce, Cicero golr;fir 3> far as to say a merchant could never make anything unless 1 he lied in the moat atrocious manner. St. Chryaostom believed it scarcely po^ible that a man could be at the same time a Christiaa aad a merchant. I There can, I thinK, soaroely be a doubt that the itilluence of theay old views lingers ' on after commerce has changed materially its mature. Fv rraerly commerce originated in robbery, and it supplied chieflv articles of iyxurr. The Phc9 licians and Greeks were ; pirates before they were meifobaats, and piracy played an important role in the de- velopment of Engrlish commerce in the six- teenth century. Nomadic people first robbed caravans, and onlv at a later period became <j:uide8 and protectors of them, and thus as- sistaatet in the oreat ion of a legitimate oom- raerce. Piracy and robbery are no longer kids, but only enemies to commerce, whicli is uow found on the side of law and order. An error of a different sort is still unduly current. It is that commerce is not produc- tion. Benjamin Franklin said there are three ways for a nation to icquiro wealth: "The first J d by commerce, which is, generally. ' j cheatiuff. The third is by agrriculiure, the [ r ouJy bonf'«t way." Tbe late Horace Greeley ' i used to lameut ia bis Tribune the larffe num- ! j ber of raerchaats, and to hope that the time j would come when ninety-nine men out of a ' hundred would becomo real producers. The truth ie that the merchant is as truly a ' producer as the farmer. The farmer creates no new matter. No one can do that. He simply changes the position of things; puts thiciirs in fit places, and thus adds to their utility. He drops the corn In the hill— chanfires its place— puts it in the rlcht pi ce. He chaofiTos the .position of earth, putiingr it over the corn. The corn ia acted upon by natural forces. Certain eie- menta in the earth, air, water change their pdsItioBs, and form new combinations. The eorn er«w?, and what was useless becomes useful. The farmer has chftnared the posi- tion of thin?8 and created utility or a Quan- tity of value. That is all. No more than the morchant can ho add one particle to the quantity of matter In the earth. Now, under the direction ef the merchant, the position of thiBfrs is chanared. Goods are brouifbt from a place whepo tfaey are not needert, and v*^^her» f hey could hare no value, to a place where they «re needed. Thus the Merchant crt at»g pr»«l80ly what the farmer ereat/s: ttaraely, a qusuilty of utility or value. We nauy call it "pi a»e- value." Liice- wigfe the mercharat keeps tbin/zrs from a time when not want«d to a tioae when wanted, and increases their utility. Thus ha createi "tirae-valup." And it should be remem- berf'd in this c»«Hecti«n that ocmmeroe, with the aid of the improved means of com- raunicatinn and transportatlan, has become 80 effective in the creaiiou of time-values and place-values that famines are now un« known in the civilized world, whereas, even as late as th^ las' cwntury, dlstriots in France and Eng-land "iitfered the horrors of famine, while supei'fluity could be found within three hundrt'd uailes. It has beea stated that oooameroe pre- viouflv ministered t« luxury. Onlv articles of hif?h value in small bulk could, in early days, tiecomf the object of commerce, for it cost more to transport Siich commodities as the unassiPS consumed than they were worth. Proclous stone?, aruber, finely- woven fabrics, silk», spices, wine, oil— these are the articles with which early commerce was concerned. Perhaps HOthinjr can better illustrate the progress of commerce ia our centurv than those pa^^saares la Adam Smith's "Wealth of Nations." in which, in 1778, he assures tl^e EHsrlish farmers that they n«ed never fear the iasportation of Irish eatti© nnd Irish srrain, because tJiey were so bulky in proportion to values as to render so distant a trarisportation unprofitable. *'Evea ' the l9r«'^din£r counties of Great Rrltain are never likely to bo much affected by the free importatioa of Irish eattlo." And a little furrhoron Smith adds: "Even the free Im- portation of forelurn corn oould very little aff«ct the interests of the farmers of Qreat Britain. Corn is a much aiore bulky com- modity t"ha« hurcher's meat. ♦ ♦ • The small quantity of foreiern corn Imported even in tinjes af th« eroarest scaroiry may satisfy our farmers that they can hnva uothinifio fear from the freest importation." AJ every one knows, a hundred year!* later the impor- tation of corn asd beef from America, three thouaand miles away, has been a cause of alarm to the British farmer. Two conclusions follow aaturallv from this: One in that distance is Rot In itself the barrier acainst competition which It once was, jiconaequently does not afford the same de- jrrpe of proteotion to a eiven locality; the other is that restrictions upen commerce rio'v are a laattor of concern not merely or ch.ofly to the woaithy, aaoStS" was tho ca3«. put may be felt disastrously by the poorest in raiainif the prices of artlcl«>8 of dniiv con- si^mption for the masses. The question of freo trade and protwction thus assutBes a mae-ritude h.>retof .re unknown. The total forei4rn commerce of E'i«:land was estimated in 1350 a^t 2 shillint^s 10 p? nee per capita, ia 1614 at 16 shii infrs 6 pence per capita. In 1801 ^^ ! ^''"lol^^^'^iL''"'^' «"'^ 6 pence per capita, but iu 1880 at 16 pounds and 6 shillings pir ^_'')^fiV^rc&mUyiLln(ior the exports^of the Si'S .?.^%^eQi'° m^*^''i? ^''Of^ 53 0;J in 1801 to fii 9d m ism. ihe foreign commerce of Germany more than doubled from 1860 to loo J. Comme-ce has ffone hand in hand with tba increaainp national and international divis^'oo of labor which has mad© modern wealtti and tne wide diffusion of comfort possible la early stas-^s of industrial development, each family was sufflcisnt unto itself and enjoyed R rude kind of indopeadenoe, but existence was precarious. Daarth fMllswed plenty quickly, and tnere could be no itd^quate pro- vision for future coatimroHClea. But as eiviiization began to advance the div.sloa of labor WHS carried further and further, until at present time each one has some one occupatioB, perhaps manufacturlnir the sixtieth part of a shoe. Thou- sands minis^ter unto bis wants, and he [in turn ralnisfors unto thousands. To use a I scientific expression: Diflferentiation accom- panies social development. But the point of I Iniporranceforus nowis this: Thisdive-rslty of pursuits, upr.n which our Industrial oivis* zation rests, implies and requires tne exist- ence of active commerce. The principle Is for #'«ch individual to do what he can do best, and for tne peopia of «ach resrlor. to utilize their own reUtively greatest advantages. If Minnesota can beitarow wheat, and South Carolina cotton, and Virginia corn.lt is mani- ffcst that the total wealth of society, the prod- ucts for our consuiuDtioB, will be more abundant if each locality Is devoted to that pursuit f r which it U specially adapted. Precisely the same principle holds wirh re- gard to International commerce. If England is specially adapted for certain pursuits and we for oihetH, it must be clear that our mutual prosperity will be promoted by a di- versity or pursuits and an cichaotre of prod- ucts. Or are there special conditions ap- P icabletu a divisi h of labor batwem nations which hre not applicable as b.^tween the var- ious parts of the s me country? Some will say: if England sends us commodities, our labor and capital will be deprived of oppor- tunities for employmatit? But bow su? If England sends us commodities, laust we no! Sena comniodiiies abroad in payment? And wilt ntJt our labor and capital have morr abundant employment in the production oj cammodiries for which they are spcclalli adapted ihaa in tbeso for which they ar« not spaclally adapted? Thureura tboso, however, who think that It la a srot d thing for a nation to send abroad more than It imports, so that i( may have a favorable balance of trade. Ic is imagined that a nation grows wealthy by this means. It IS therefore necessary to examine th6 bal-. ance of trade theory. PROBLEMS Qf TODAY, '^ — 15ALANCE OP TUADE liiLUKV. POPULAR NOTIOxNS REDUCED TO SE:;. The vr ijority of the Wealthier Nations Il.i^e the Balance Acainst Them. [Written for the Caltimore Sun.l ARTICLE V. "ilo who attempts to draw any conclusion w)j;iitver as to a natloii's woalih or poverty froiu the more fact of a fa', oiablo or un- •;iV(>rablo balance of ti'ailo, has not «rr apod The first fundamental principla of political ccon-jmv." When I heard thei»e words uttered wi:h emohasishy one of the most careful livir jr s'ati^tioians, some yesrs ago, I must oo; f* s- that I was a little startled, aecustf)raed as i hAil bren to laudafions of favor ibl':? bal mces of trarle as indications of increasinar werilth- Yet 1 suppose nothing in the entire ranpre of econf.inic sciences is more beyond contro- versr. Everybody knows what la m?ant by a favorable b lance of tra^e. A trade betweon two cnunt?i"S is considered favorable for that one which exports a lareer quantity of sroodg than it imports, and unfavorable for the one which imports more than It expnrrs. Minilarly tbe entire forelsrn trade of a country l3 revrardod as favorable if all exports exceed in vulue Jill imports. Theiden is that there is In such cases a balance which most be paid io money, and that a nation, like an in- dividual, crows opulent by the accumulation of money. Let us examine these various ideas with some care. If our exports exceed in value our im- ports, what does it mean? It may siernify that a number of Europsans own property in the QniteJ States and that this surplus pays their interest, dividends and profits. We know, as a maiter of fact, that many Europeans do oavu much property in tho United States. Englishmen own va?t tracts of land in our country, many millions of acres, particularly in our West, and the absentee English landlord is become a promi- rent feature of American as well as of Irish life. Likewise irreat blocks of stocks and bonds issued by American corporations, as well as municipal, State and Federal bonds, ere held in Europe. Now is it not evident that after we have sent abroad enough koous to pay for gools sent us, wo must still send abroad an annual tril)ute in exports to satisfy the claims of foreigners upon our industryy This accounts for a portion of our so-called favorable balance of trade, but who will say that it is a cause for national self-gratula- tion. iiuta favorable balance of trade in the United States may also siarnify something else. It may me in that we are paying oflf the capital of the debts wo owe abroad. If the surplus is not Invge enough evon topay inte- ■ lest on European claims, we may bec'ano more deetdy involved in debt, the favor tMo fjalance of trade to the contrary nothwith- >iaudii)>r. Lot us recall our itistruoiive ex- perience durinc the late civil war. We were at that time makln/ heavy demands on Euro- pean industry on account of extraordinary ex- penditures at homo. Our Imports exceeded in Taluo our exporis. We wore, as a matter of faet,£rolnc in debtfor current expenses. Aftor the ;fln^ 'OipUi yii ijui iwiciKU JiiUUULUUUUd-^, SiUd OUT ■ exports exceeded in valuo our imports. - that time our favorable balance of trad< 6'> far as it eoi lid be accounted for by the pay- ment of del)r, was undoubtedly u good thing. ! A favorable balanco of trade mi^ht be par- tialiyexplainod by the acquisition of prop- fivty abroad by Americans. 1 do not say th>it such is a fac. 1 simply sav it is a possible ex- planation. If Americans are acquiring prop- erty abroad, it is manifestly necessary not only to send out of the country goods in suffi- cient quantity to pay for troods we import, but a surplus to pay for investments which, on this hypothesis, are being made in foreitrn countries. If the balance of trade is favorable, the dif- ference, (;r a part of it, is sometimes imported in bullion or money. A favorable balance of trade may, then, denote increasinir wealth, or it may denote poverty and economic dependence upon for- eifc'fi n itions. It may denote neither the one Tior the other, but simply sisrniry that a nation is noldina- itsown in international rela- tioM>-. Tne mere fact of a favorable balance «f trade in itself tells you absolutely netting about a country. It is, however, true that a malority of tbe wealthier nations of the earth have what we call an unfavorable bal- ance of trade. Letus compare the value of imports with that of exports in a few countries, selectinj? recent years almost at hap-hazard, and not taking yeari with a design of proviuif some- thing. The value of German imports for 1876 was J5,914.8 millions of marks,* that of exports 2,551.2 milli(;n3 of marks; for 1887 the flirutes are: Imports, 3,887.0 millions; exports, 2,775.3 mlllii;ns. Precious metals are included, but If they were excluded the proportions be- tween exports and imports would not be radicully chaiiReJ thereby. The imports into France in 1873 were valued at 4,576.4 millions francs,t the oxp ^rtsat 4,823.3 millions of francs. The figures for 1874 are: Imports, 4,422.5 miliions:; exports, 4,702.1 mil- lions; for 1875. imports, 4,41.8 millions; ex- ports, 4,807.0 millions; for 1876. imports, 4,9J8.8 millions; exports, 4,547.5. Precjous metals ore included in exports and imports, but as in the case of Gerujany.they are relatively so au^all, and are in this case so nealy equal, that I the proporuons between exports and imports are uot changed, Tho exports from France exceed in value the imports from 1873 to 1875, inclusive, but in 1876 the imports exceed in value exports. A possible explanation would be that France was sendintr commodities out of the countrv from 1873 to 1875 to pay for the expenses of the war with Germany, but that in 1876 trade had regained its normal condition. Hume tells us that over a hundred years the English nation was struck "with universal panic" because some one demonstrated that the balance of trade was so unfavorable as to leave them— that is, the Enjrlish people- without a shiliina- in money in five or six years. That ttemousiration was made 20 years before Hume wrote his essay on "The D<1- ance of Trade," but he records the fact that money was then more plentiful in England than evL-r before. The uafavonblo balance of tmde still continues in Enjriand, and is «omethinor enormous— the besi proof of Eng- , 4Silid*8Jinmenso weal;h, for this unfavorable | ' I '\\ \ ? iD..lance repitauuLs pay to EiiBlisbm*»n. "nrr Jaad io 1874— to take the statistics la one year only", which auswers our purposes aa well as a do^en, exclusive of precious metals— were valued at £331443,000: the exports, also ex- i elusive of pivcious met:tl,«, at £278,053,000. 1 Kich little Belifium also has a large uafa- •Vorable balance of trade. The imp rt-j into JBeleriura, exclusive of precious metals, were valued atl,448.5 millions oir francs; the exports from the uoumrv, also exclusive of precious metals, at 1,063 8 njiliions. Theseare wealthy countries, but the United States, with its favorable balance of trade. Is also prosperous. In the fiscal year 1877-8 our imports were vali.-ed at ?466.873,000, and our exports at 8733,812,0)0. But E;? > pi-poor, im- poverished E;^ypt-has the most maffuiflceut B*vcalltd ftirorablj balance of trrtd^ lo be found in the worldl I mean, of course, in proportion to its entire commerce. In 1874 the imports were valued at 5iJ7.06i,153 pias- ters, the exports at 1,343,347,266 piasters; the •estimate for 1876 was, imports, 561,946,693 pias- ters, exports 1.3;J3,3.'J3. 408 piasters. These illustrations, which mig-bt be multi- plied indetiniteiy, show how much sijfnifl- •cance is to be attached to a favorable balance <of trade in itself. However, it is only a wealthy nation which can huve a larg-e un- ffavorable balance of trade as a permanent thinpr. What does this mean? It means that .«uch a nation possesses stocks, bonds and various kinds of property in other countries, and that the people of those countries are -workiujf forit. Itissirailar to the case of a Tinan who is able to consume more than he a»im!.elf prod uees. It is a sign that others are working for biui. To value a foreisn com- merce in proportion to exports is to miscon- icelve the advantajfes of commerce. Com- merce is valuable for what it brinjfs us, uot :for what it tiikes from us. It will readily be un.ierstood, then, that lam not at>le without reservation to join in the gelf-K-rdtulations of those who delijfht in our largre balance of trade, and that I scarcely ihiuk this a stroug tariff artrument. Our tavorablb balance of traiie places us in the Baiue caiepTory as Ireland, India and E^ypt. *A mark is $0,233; for purposes of r^^uirh ^calculation, four maikii luiiy be refraraca as -equal in value n> oi.e dollar. tA fratic is a little more than $0.18; for Tou^h eomputatiou?, five :ranc3 maybe re- (KardeJ as Lquai to one dollar. Balance-of-Trade Theory-Furtlier Views on the Irade Problem by Prof, liiclmrd T. Ely, of JohnH Uopkins Uuiversity. LWriiten for the Baltimore Sun.I ARTICLE VI. There are several points connected with the balance-of-trade theory, as usually t^tated, about which it is esseutini ti:ac we should have clear ideas. They therefore require turther examination. jTirst, it follows naturally, from what has been said in the previous article, that a favor- iBible balance of trade does not siK-nify that ,*he precious metals are flowinjf into the oountry. In i'self it tells us nothing- about the/nternational movements or the preclms laeta/s. Gold and silver may be coming to ihecou^ntry while an unfavorable balance of trade exists. '; ,>in lc83 the amount of arold and silver .ii^tiOited into Et r'^'"'' exceeded in value the i s)reci^^; "^i<^ mg_. ed, althougrh durinsr "^ "" vj^ aifaip st wT-' EriarifjDd to an am ..... .,>,..,.■ ... ,...,.. otiehundrej and twenty millions of pounds sterlinj?-. ^ On the other hand, the precious metals ,may bel^ain? a country whiie a favorable balance of trade continues. The commerce of the United States for 1884 serves as an example. The balance of trale wa"* in our favor, but the value of precious metals exported exceeded the value of precious metals imported. Seeood. If a favorable balance of trade in- the CJnited States were always accompanied by an addition to our store of money, it would not necessarily be a catise for national self-^ratulation. People frill into the most obvious errors in this matter because they do not stop to inquire into the differences between those thiols which mike an indi- vidual prosperous and those which make a nation prosperou-s. A merchant gays: "If I increase my stock of money I become wealthier." This is true, but it doe? not fol- low necessarily that we would all ba mora pro3p3rou3jf the total amount of mone> In existence were doubled It would, on the other hand, be a misfortune to some people, and to multiply the araouot of money in ex- istence twetry times would proD^hly be a univrsal cal^tmlty, up-etiinff ail exi«tin^ in- dustrial and commercial relations. Thismust be made ekar. If the money in my pocket is iiicreased twentyfold it is a jfood thinsr for me, because my proportion of the money in the country is increfisiod. I cin buy more RTOOds. But if the amouMt of money in eve one's possession is multiplied by twenty, wi there not be a corrHsnondina- rise in price- If so, will I be bLMter off than I was beforer^ in one cas^-, I will, namely, if I owe sonae thing to some one; if I am in debt and my d(,*bt Is to be paid in monev. If, on the other hand, sums of money an« due me, thisiticrease in the circulating medium impoverishes me. We may look at thi^ matter— and it is of vital Importance in those dlscus-iions— from an- other standpoint. Why do we want money? MaiiifePtly for the thinjfs it will buy. But does the increase in the supply of money in Itsf-lf increase the quantities of useful things which we wish to b y? The Spaniards In the sixteenth and seven- teenth centuries made the mistake of overestimating the importance of gold and silver to a country, and instead of building up commerce and manufactures and imorov- ing their agriculture, seemed to think of little else than the devices by which the largest possible amount of the precious metals could be brought into the country, especially from their American possessions, and once In the country could be kept there. They n'^glecled the most itnportant sources of wealth, and to this day they have not re- covered from the disastrous consequences of their mistaken policy. I am far from saying that It makes no dif- ference whether we have much or little money. A large amount is require! to con- duct the business of the country and to ob- viate the inconveniences of barter. An in- : creasing amount is required for our growing, expanding industrial life. A fall in prices, owing to insufficient supply of the precious • metals, increases the value of financial obli- gations incurred in the past and enriches bondholders and other creditors at the expansjB of the rest of the community. I All th'« I recognize. I simply main- taia 1 of ooininerco by prwtejtive tarilli is required at the pre!?eat time on account of our money supply. There are other wnys and better ways of provlditifT for a sufficient quantity oif money. The international movetneut of the precious me-als is lanscly automatic. If the precious metals bt^trln to leave a oountry which is not cursed with an Irredeemable paper currency prices will fall, but the moment prices fall it becomes more proflt- able for foreiirnera to purchase our oora- modliies, and tnore is thus a tendency to check the flow of money from the countrr. This by no m^ans exhau.-?fs this larsro subject, but it is sulficiont for present purposes. Tblrl. 1 have to remark that as between countries commodities are exchanged for commodities, and that very little money passes from the one to the other. If Eng- land sends us commodities we do not, as a rule, send money abroad, but we pay for them In commodities. This is a matter so familiar to merchants who have dealings with ftjreifirn couuries that it may seem to them scarcely worth while to mention it. Yet a failure to comprehend this fact and its bearinirs is a chief cause of confusion of thouifbt in resrard to international trade. This third point is closely connected with the second. When money does beirin to leave a country It becomes more profitable to export commodities than formerly. Thus throug-h action on prices the natural rela- tions between exports and imports are main- tained. I send ifoods to Euifiand ani the Eniflishmari to whom they are sent becomes indebted to me. At the same time another Enjflishraan senJs goods of the same value to an American Imuortor. So we agree that this Importer in America shall pay me, and that the Eni^llsh exporter shall receive his pay from the Englishman who bought my goods. Thus no money leaves Eoeland and none leaves America. This all takes place through the medium of bills of exchange, drafts, occasionally postal money-orders, and the like, and the services of bankers and broKers are required, but the principle is the simple one just described. Illustrations will serve to render this still clearer. In the year 1884 in Eneland it re- quired an importation and exportation of only a little over foriy millions of pounds sterling to do a foreign business of over six hundred end twenty millions. It required in the same year in the United States an exportation and Importation of less than eighty-eiurht mil- lions of dollars to do a total foreign business in imports and exports valued at about four- teen hundred millions of dollars. Fourth. The balance-of-trade theory grew up at a time when it was imagined that there was a raoi'e serious diversity between the Interests of one nation Hud those of another than actually exists. It used to be supposed that what one nation irained another lost, and our proteciive tariffs can be traced back to that illusion. This must not be misunder- stood. This illusion i» not a sufficient ex- planation of protectionism now. It is not iu this connection even slated that somethincr may not be said for protectionism. It is simply aS3erted as a historical fact that protective tariffs can be traced back to this illusion. Somo^optiipists push the idea of hnrmonv 1 i^bf int- far. Uurortu- ' nately, ^^.^......v, ........ .^ .. jes not exist— unless, indeed, we view these interests from thehighis Christian stand noir.t. Butin the main, iu matters of trade, international intor- csu are harmonious, at least to this degr(3e, thai each ought to desire the prosperity of all the others. This Is so sniplo that it seems absurd to state it as a scientific prop isition; yet the fai^ re to act on this principle has been a fruitful cause of enmity between nations. Do we desire opulent or impover- ished customers? Which class does a mer- chant desire? Ttie case of a merchant's cus- tomerA is similar to that of the purchasers of a country's products. Nevertheless some peo- pletalk as if we had something to hope from the impoverishmeut of Europe by means of war or otherwisel What we would hereby train would be tem- porary and be more than counterbalanced by loss in the future. All this has been stated often enough, but one hundred years ago it was as something startling that Hume pro- claimed his desire for the prosparity of other jiaLions as consistent with his loyalty to England. These were his words: "Were our narrow and raaiiunmot politics to meet with success, we should reduce all our neii^h- boring nations to the same state of b1 )th and ikrnorance that prevails in Morocco and the coast of Barbary. But what would be the consequence? They could send us no cotnmoditJes; they could take none from us; our domestic commerce itself would lan- guish for want of emulation, example and instruction, and we ourselves should soon fall iuio the same abject condition to which we had reduced them. I shall therefore ven- ture to acknowle 'ge that not only as a man, but as a British subject, I pray for the flour- ishing commerce of Germany, Spain, and even France itself. 1 am at lea-t certain that Great Britain and *<11 those nations would flourlsn more did their sovereigns and rainistersalopt such enlarged and beaevoieot sentiments toward each other." The imlance-of-trade tl,ieory, then, as ordi- narily'presented must be rejected. It repre- sents it as the purpose of each nation to ex- port more than it imports in values, mani- festly impossible as a universal policy, to say Qotbiug uf the fact that it misrepresents tiie true end of coiuimorce, whlcn is import-, not ,exp >ns. The bypotnesis up^n which it is b sed is false, and the couciusiotis draun from it are misle'din?. ^ * ♦ ^ »> Thb Consumehs Pay It.— Hie Medlicott Comp.xny, of Windsor LocivS, Conn., manu- facture tlno wo den knit goods. According to the Springfii^dd llepuOlican, tnis company imports 70.U00 pounas ''f Australian v\ool o.'Ch year, and on this t'tey pju- u duty or 10 cents a pouiid, $7,000 a year. ilr. Charles E. Cliaffee, piinoipai stcckhol ler and prt si.ient of the >mpauv, and a staunch republican and strict protect! »nist, ^ays he buys this Australian wool because that particular quality cannot be nbtiiineJ here at any price. Wno pai>: the ^,000? The co:;sumer.-*, and nobody tlse. Ttus is only one case where t'le public nood detiia 'd-i u rovi.'^ioii and roduc-' tion of the ari&.—Boxfon T auscripf, rep. tt - il 'Uii i f PROBLEMS OF TODAY. TB^ TARIi>F AKD ITS HISTORY. A Bad SYSTEM'S INSIDIOUS ADVANCE. Li- I I I i« A Sketch of tb« Federal Taxf ng Systems by Prof. Kicbard T. Ely, of Johns Hop- kin* University. L Written for the Baltimore Sun.] ABTICLB VII. I infer from occasional remarks that some people who have been good enoueh ro read ray articles Imafirlne that I take a mora radi- cal position on the subject of free trade than that represented cither by The Sun or Mr. Gloveland's messag-e to Consrreas. This is not the case. I have no desire to attach American manufacturers, and I certainly am not prepared at present to advocate the with- drawal of all protective duties at once. On the comrary, I hold that this would be a g-rievous blunder and a positive wroatr. The subject of tariff legislation must be viewed historically in order to understand the merits of the present controversy between free-traders and protectionists in the United States. The men are few, indeed, who would claim that it Is rational to legis- lat3 on the tanlT as if we were sroinif to start from the beginning- and frame a new policy for a new land. Our present policy is an historical growth, and as such must be trea.cd. When one sees the jobbery and cor- ruption connected with tariff legislation, the hypocrisy it fosters, and perceives how cer- tain monopolies hide themselves behind it as a safe bulwark, one feels at times moved by righteous indignation to wish the whole thimr swept from the face of the earth. But more mature reflection tends to calm one. and show the impiacticability of any such radical measure. It is impossible to present a history|of the tariff legislation of the United States in those tirticles, for if it were attempted, to do that, and to do it thoroughij', now issues might arise in the country, and, indeed, in turn become matters of tae past before this series of papers could be brought to a close. A few main faeis should, however, be brought to mind, and a firm grasp kept on them in dis- cussions on the tariff. PTvjtectioniem, whatever proportions it may have since assumed or whatever appearance it may now present, entered our country with the meekness of a lamb. Everybody knows how it happened. It became neces- sary in 1789 to provide the young republic with revenues. Direct taxation "seems to have been rejected without serious consider- ation as not adapted to our federal irovern- ment. There was the usual prejudice against direct taxation, coupled with a jealousy of the States against what they would have dfemed interference in the affairs of their citizens. Now, as indirect taxes were the only alternative, it remaned to choose be- tween taxes on commodities produced at home. Internal revenue taxes, and taxes on imported articles, customs duties. Itte prejudice against internnl taxes seems to have been nearly as strong as against diredt taxes, and for somewhat the same reason. Taxation of commodities is in any shape a serious interference in the business affairs o f produ cers, but when com mod i ties . are tax^a ou entering the country in a few ; great ports it is Jess obvious. Today there are, doubtless, persons who fail to see the lact, and it is beyond all controversy that the taxation of three or four articles of domestic .< r^ wth or manufacture Is an almost incom- parably smaller measure of interference In private affairs than the taxation of four thousand and more imported articles. On the other hand, the tax paid by producers at home is more readily visible; the fact of the existence of the tax is palpable. It was there- fore decided to begin our revenue system with customs duties. The first tariff act; was passed in 1789. It was mainly for revenue, while protection was only incidental. Another motive which was prominent, if not predominant, is well de- scribed by Prof. Henry U. Adams in his mon- ograph on "Taxation in the United States, 1789-1816." It was the spirit of nationality whicb was so pronounced In the early fed- eralists^ It was hoped by means of a tariff on Im- ported commodities and by the use of domes- tic products to weld together the different States into a strong Union. It was this Fame animus which prompted public men to appear in homespun clotbing. The differ- ence between this plea for protection then and the plea we hear now is brought out by Prof. Adams in these words: "The argument then regarded as convincing was, 'The sure •way to establish nationality is to exclude for- eign products.* Now, on the other hand, we hear, 'The sure way to become rich is to ex- clude foreign products.' " But what was the rate of taxation iraoosed by the act of 1789, and what was the charac- ter of this taxation? First its comparatively simple character mun bo noted. There was a list of articles subject to s^peciflc duties. Taxes on quantities of commodicies, and not onvalues-iheslmplestkindof Importduties. Thop taxes were very moit-rate. Nails and EDikes, for example, were taxed one cent per pound, molossas 2>» cents per gallon, hoots 50 ceuts per pair, hemp 60 cents p^r 112 pounds, co'il 2 cents per bushel. There were three or four classes of duties, based on values, or ad valorem duties. One clafs paid ten percent., another seven and a-half per cent., a small cla^s fifteen per cent., while «1J unspecified imported goods were taxed 6 per cent. Th^re was a short free list. Including important commodities, such as wool, cotton, dyeing woods and dyeing drugs, copper in plates, and all furs. The signiOcance of these rates becomes manifest by coinparison with the table of ad valorem rates on dutiable mer- j^ chandise enteed during the fiscal year end- ' tng June SO. 1887. In this table we find that the rates vary from a little over 21 per cent, to 154 per cent. Revenue was Insufficient and rates were raised about two and one-half per cent, in 1790. The purpose was revenue, and not pro- tection. The truth is, there were scarcely nny manufactures to protect at that time except sbiphuildine. Agriculture at d com- merce were the chief pursuits. Revenue nas still Insufficient, and the tariff law of 1793 was p ssed, and this was supposed to carry out the intention of Alexander Hamil- ton as expressed in his celebrated report of the previous year on manufactures. The .average rate of duties thus became thirteen ■^g one-half per cent. » I I /nteinffSr revenue taxation #iir%¥r^?rdco^ i In 1791, and distillei spirits were taxed, pro- I ducincrtbe "whisky insurrection" in Western Pennsylvania, Opposition to this tax was manifested in several States, and the grounds -* '^npoaiiion were larffoly those which afirainst indirect taxation in (general. 1 1794 internal taxation was extended, and inus three new sources of revenue wer* in- cluded. The sale of liquors, the manufac- ture of snuff and auctions were taxed. Car- ; were also taxed about this time, and at o varying from $2 each ptr year to $15 each per year. Stamp duties on certain letrai papers wore aidei in 1797. Direct taxes on lands and houses wore added to the sources of revenue towards the close of the century. Then direct and indirect taxes aroused op- position and were one cause of the lall of the feder illsls. They were all abolished after Jefferson became President. Before that they had not been satisfactorily ad- ministered and had not become very pro- ictive — to do which reqaires several years r a new system of taxation. What was the consequence of this state of thiniyrs? Precisely wJiat might have been cx- -^cted. Import duties were raised in 1793, J.794 and 1797 because new demands were mado on the public treasury and revenues were in- BufiDoieot. After internal taxation had been swept away the movemenx became more rapid. Taxes on imports were raised in 1804, and although this, like previous acts, was re- garded as merely temporary, it is sijrtilflcant **that no important duty once imposed, ex- cept that upon salt, was ever relinquished." Well, duties on imports were raised contin- ually until disturbances with Eusrland called for such larpe expenditures that they were doubled in 1812, which, instead of producloK more revenue, lessoned exlstinpr revenue; for. In the arithmetic of taxation, two and two, in- oad of raaklojf four, often make only one. fter all, it was necessary agrain for the me party, which, in response to pop- lar claraor, had abolished internal rev- luo taxation, to reintroduce it, agsin jincr to the expense of buildinar up suitable machinery for administering the fcystem and waiting for It to begin to produce iartre returns. The worst aspect of such ' Bhifting policy is the disturbance of business, under which the weaker eleinents, "the small nou,"gotothe wall, thus producing a ten- enoy to monopoly and concentration of Tvealth. The lesson to be drawn from this is )us, and corroborates what has already 1 said. It is essential to publio welfare > a I a Ry stem of taxation adequate to meet ictuaLing, and on the whole increasing, de- lands on the public treasury should be main* lined. It is not stated at present what this should bo. Our internal revenue taxes may bo retained or something put in the place of them, but in either case the main fact re- mains. Our duties on imports will always bo fluctuating, will always tend to increase, and will always give opportunity for Jobbery and corrupti<m» fiiuiess chey are based on true, ratior.ai pi^ihciplo, and to baso them on rational rriooiple is impossible unless other [ f ruitt'At, eAutly prvftnagsd sources ef MT«auo 1 1 ex is I. The duties up to 1816 were for ravenuo vith inclucntai proteotion. but in that year i\ Clay sp'ke in favor of "a thorough and de i V oTJei protectlorPfo home manufactures by*^ amplo duties," and his ally, }lr. lugham, de- clared the revenue to be only an '^inciiental consideration." How did it happen that the old standpoint was completely reversed so that the principle of **preteotion, with Incl- dontal revenue," took the place or the prin- ciple '*reveuue,iritn incidental protection?" Tne event which K'd to this chanire in policy muit be describtfd in the article to follow. \ \ Furtber Connideratlr ^ of the Subject by Prof. Kichard T. l^iy, of Johns Hop- kins Uuiversity. [Written for the Baltimore Sun.l ARTICLE VIII. We have already ezamiued the first cause 'Which ie4 to the establishment of protec- tionism as **the Amf-rican sygtem." This OAUSe was a faulty federal revenue system, lacking the first principle of scientific finance. Which is flexibiUiy and elasticity, Wc have I seen further that this weakness inheres of necessity in any system of national revenues based almost exclusively on duties levied on imported eommoditie?, because these yield least in evory critical juncture. A deficit and debt result therefrom. The question, then, arises, How shall we increase revenues? But having provided only one source of revenue, we most naturally have recourse to that. But this is not all. Taxation moves along the lino of least resistance, Adam Smith tells us that in tlie days of fed- erQiism, government was so weak that only those were taxed who were powerless to resist taxation; namely, the common people. The clergy and nobility wero exempted, and privileged classes arose, as always haupens under weak governments. But in the case of taxes on imported commodities there is a line along which they can move without en- countering any opjwsition whatever. Let us express ourselves more accurately. There may be some opposition, but this is oppos tion on thepart of the unorganized masses —"the forgotten millions"— while there is an organized body of special interests urginST an increase of taxation along this line. Govern- ment is entreated to tax those things which home producers desire to sell, in order to limit competition. In whichever other way the legislative authority turns for revenue, powerful opposition is en- countered, while there is no outside pressure brought to bear to urge it to levy taxes of such a nature as to interfere as little as possible with the pursuits of the people, and to place as small a burden as pos- sible 00 the ordinary man. The forgotten millions are besinning to organize, and this is the chief significance of bodies like the Knights of Labor. By their very nature they are impelled to watch publio measures from the standpoint of the people at larare, and not from the standpoint of special private inter- ests. More will be said about this hereafter. However, the line of least resistance forth o movement of taxntion is manifest in a coun- try which relies for revenue mainly, if not exclusively, upon customs dutKs. Protec- tionism was the most natural outgrowth pos- sible of our system of taxation, and I dwell upon this because precisely at this time it is wBssential that we should understand those principles which underlie cur financial de- velopment and make It what it is. Otherwise f \ a repeiitioa ot past "errora is sometbinsr la- evi table. . A second cause, however, was powerful in I the establishment of protectionism in the \ United Slates, and it was this second cause which Jed in the first Instance to the substitu- tion of the princinle of "protection with in- cidental revenue," for the older principle, "revenue with incidental protection," and an eiamlnatlon of this cause Is of prime im- ^ portance in a study of our tariff historj'. I '■ refer to the hostilities between the United '' States and England— and, to a less extent, France— which finally culminated in "the war of 1812." Before these hostilities our ! chief pursuits were commerce and atrrlcul- ture, while manufactures were insiirnificant. There was more or less manufacturing indus- try, but it was pursued in small shops where j, the proprietor worked with his own bands, I assisted by two or three journeymen and one II or two apprentices. There wus, for ei- ' ample, always the village carpenter, and shoemaker and the blacksmith at the country cross-roads. But manufacturinsr on a large scale could scarcely be said to exist, and It was even in Europe only in the early stapes of its development, for the *MndU8trial revo- lution" had but recently besrun. Now, dur- ing the European wars, which centered first about revolutionary France and later about the person of the first Napoleon, our com- merce developsd with a rapidity which is I said to be without parallel in the world's his- I tory. It was unsafe to send goods In European vessels, as all European powers had their enemies, and ih© goods were con- sequently liable to capture. America was the great neutral power, and our commerce was for some time tolerated under more or less vexatious restrictions. While commerce was in this troubled period of the world's history pursued with diffi- culty, the relative disadvantage of our commerce was least. It was estimated that our advantage, as compared with the com- I merce of other countries, could be placed at I twenty or thirty per cent. While this condi- ' tionof things continued, we naturally ab- sorbed an ever-increasing share of interna- tional trade. It was equally natural that our capital and labor should bs attracted by the rewards of expanding commerce. The fol- lowing table will place vividly before the reader the result of the events described from 1789 to 1796. Year. American tonnage employed in for- eign trade. British tonnage employed in American trade. 1789 1792 1794 1796 127,329 414.679 525,649 675,(H6 94.110 206,f;65 37,058 19.669 The American tonnage entraged In foreign trade increased up to tiie year 1807, when it amounted to 848.306. A change was then forced upon American Industry. Thestruearle between Franco and England waxed fiercer and mutual hatred became more intense. Both determined that there should be no neutrals, and endeavored to force the United States to take sides with one or the other. A series of measures were inaugurated with this end in view. Thus Great Britain in 1806 declared a blockade of all those ports in Europe which belonged to powers allied to France, and Napoleon followed this action by his "Berlin decree," which forbade all vessels from entering any British har^ bor. England retaliated in 1807 with the "orders in council," aimed di- rectly at American vessels, and forbidding them to enter any European harbor outside of Great Britain and Sweden. Napoleon re- plied with hla "Milan decree," which ordered the capture and sale of all American vessels entering British harbor?. What was Amprica to do? There were various things which might have been done, but as to what actu- ally was done, I doubt If any American feels proud of this chapter in his country's history. Low taxes seemed to be valued above every- thing else, and no provision was made by Congress for maintaining our dignity and our rights as a nation. The ponny-wise-and- pound-foolish policy was pursued, with re- sults even more than usually disastrous. Our Congress decided to withdraw the assistance which our commerce offered to the nations of Europe, hoping thus to bring them to terms. It was a kit;d of governmental "boycott," which, boomerang-like, reacted most severely on ourselves. The embargo act of 1807 for- bade the depirture of any American vessel for a foreign port, and this was followed by the non-inieroourse act of 1809, which pro- hibited commerce with France and England, but not with other powers. This act expired in 1810, but was revived against Great Britain, which continued its hostile actions until the outbreak of the war of 1812. This war was the most complete kind of prtitectivjn, for commerce with England was by us declared unlawful, and our ports were blockaded by Englandl Our commerce was crippled, and as early as 18U8 a marked change in xhc character of our industrial llfowasvisible.The capital and labor which formerly had obtained employment in international trade was diverted to manufac- tures. "A commercial war," eavs Professor Henry C. Adsms, "ia always propitious for the establishment of new industries), and la the present case Ithere was developed an in- tense desire to maintain by law, after the cessation of hostilities, those conditions which secured to Industries control over the home market. Then for the first time was it that protection as an Independent industrial system forced its way into the history of the United States." The exports from the country during the years 1808 to 1814 declined from a little over one hundred and eight millions of dollars to less tnan seven millions, and revenues from customs and tonnage from a little over twenty-seven millions to less than five mil- lions. "Establishments for the manufacture of cotton sroods, woolen clothes, iron, glass, pot- tery and other articles sprang up with a mushroom growth." These are words used by Professor Taussig, from one of whose works on the tariff 1 take the following statistics showing the growth of the cotton industry during the war period. There were but four cotton factories in this country in 1803, when new machinery and new methods began to be introduced. In 1805 the number of spin.Ues was 4,500; in 1807, 8,000; in 1809, 31,000; in 1810, 87,000, and in 1815, 130,000. When the war with England was brought to a close our commerce had been in consid- erable part destroyed. Capital and labor had been diverted to manufactures, but these had been established under aonormal conditions. They had now to face the oompetltiou of Europe, and in particular of Eo«iond, whose stores of oommodities, lonir pent up by war, besan to flow oyer the world, and in quanti- tlea In exceaa of the power to pvirchast) them on the part of oon8ijaiers. The manufactur- ers cried out for protection to their "iufant industries" agralnst the old-established indus- tries of Europe, and tlieir cry was beard. A D .Esible jvlternatlvo course of action must be discussed in the followingr article. PROBLEMS OF TODAY. PROTECTIONISM KEYIEWED. ITS PAST AND PRESENT FEATURES. Continued Dlscnssion of the Subject by Professor Richard T. Ely. [Written for the Baltimore Sun.l ARTICLB IX. j The industrial situation In the United States at the close of the war of 1813 was a tryinsr one, presentin? problems which re- quired for their successful solution states- ronnship of a hlRh order. Now, statesman- ship of a hisrh order does not mean merely the ability to lead men, but the ability to lead them in a direction which subsequent events pro%'e to be the right direction. It Is, how- eVer, possible ooly for those to forecast with a reasonable desrree of probability future events in the life of a nation who have a profound knowledge of the causes at work which are shaping national destiny and makinf? it what it is. We are now speakinsr of industrial development, and the science which treats of this is political econ- omy, one of the most diflBcult sciences to master in its various ramifications. We see, then, how much is required in a man to give such character to his political activity that it shall wear permanently the mark of statesmanship. There must be leadership with all the rare and admirable qualities which that implies, and this must be accom- panied by action based on a profound insiprht into the nature of social and economic forces at work both ib the nation and in the world at larfire. Great as were the men of the first half of Ibis century. In the llRht of present events It must be acbnowledjred that anythiner which can fairly be called statesmanship was rare Indeed amoni? them. The year 1816 witnessed the firm establish- ment of the protectionist theory as "the Ameilban system." Protection tomRnufaoturinfir Industries had not oome of our deliberate and carefully- formed purpose. First, as we have seea, the thought of our leaders, with Hamilton at their head, was this: We must have revenue, and If, in raisiiiar this revenue, we tax Imported commoditips of a kind produced at homo, and make importers pay from five to fifteon per cent, on the bulk of Imports, our home industries will receive, merely as an incidental matter, a slight protection, and it is well that iboy should be thus favored. This was a mistake, for. srrantinR the prin- i ciple, a way was opyned for its subsequent f KfJWth, The principles which uistinKuisn i between a tariff for revenue only and a tariff [lor proteotion are radical, and it Is not easy ' to combine the two. Perhaps it is not too much to say that any attempt to do so amounts to a victory of the principle of pro- tection. When the first tariff bill was under discus- sion In Congress, Mr. Clymer, of Pennsyl- vania, appears to hare been gifted with an Insltfht comparatively rare, for he wished the bill separated into two parts. The one part was to be a revenue bill, and was to be shaped with reference to revenue principles solely. , Other matters, such as protection to infant industries, were to be considered by them- selves, and on their own merits. This was entirely rational, and if protectionism is de- •irable, this Is the proper scientiflo method for affording it. The question now Involved is not protectionism or free trade; but, if protectionism is desirable, bow shall we es- tablish it. The disadvantac-es of taxes on Imported com- modities are many. One of the chief of them is that it compels us to move about blindly In the dark without power to estimate fully the consequences of our own acts. We pay taxes to encourage manufactures, but the extent of the burden we carry no man knows, because we are operating in violation of that canon of taxation which prescribes that taxes should take out and keep out of the pockets of the people as little as possible over and above what flows into the public treasury. "We pay a tax which goes to the government and is returned to us In the inestimable benefits which good government confers, but we pay another tax in increased prices of commodities, and we cannot ascertain the precise amount of this burden. It contains fiome of the worst evils of indirect taxation ■which have been already described. It is covert, it takes from us in sly pick-pocket fashion, and we never know the cause of our diminished fortuoesi The ordinary man simply feels that something is wrong, but he cannot tell what it is. The Sun, in its Friday's article on 'The Cost of It," gave an estimate to the effect that ■we pay to government only one- fourth of the total burden. In other words, if this estimate la acouratie, for every dollar we pay into the federal treasury we pay three more in higher prices than would otherwise be necessary to home producers, and instead of an apparent burden of $217,286,893, we are bearing an actual burden of $880,000,000. The second false step waff made In the es- tablishment of an inadequate system of federal finance already sufficiently elabo- rated in these articles. It Is only necessary to remind the readers of Thk Sun of the fact that Its nature was such as to compel a recourse to customs duties for the increasing demands of government. The manufacfurers of 1818 wanted protec- tion, and pleaded for their Infant industries, and this argument told, for the protection afforded them was originally limited to a short period. The duty on cotton and woolen eroods was, for example, raised to twenty- flve per cent., but this was to hold only until 1819, when It was to be reduced to twenty per cent., which was about the averasre rate ■ ^^under the act of 1816. Calhoun defended Ithlft protective measure on the srround that Infant Industries requliia f Bl'^'^iRatenbg' caro lOf -irovernment. It is - Contended, how- [bver, by free-traders that real In- fant Industries never pet any protection, but In the tumultuous clamor of special pri- vate interests only toe powerful can hope to receive Brovernment aid. There is much in our history which, so far as it btops, tends to eubstantiate this view. Every one knows that instead of gradually lowerincr the duties levied for the sake of infant industries as they proarressed toward adolescence and ma- turity the protective duties were raised. The more they sroti the more they wanted, and the twenty per cent, duty of 1816 would be scorned in 18881 Yet we must not lose sight of the facts of the case. What was to be done? Two false gtexw taken by Conerress have bden men- tioned, but more powerful was the war of 1813, with tho precedinsr events which led to It. This war period was in Itself the stronsrest kind of protection, and manufacturers grew up under this protection, which came not by our action, but In spite of ourselves. Should these manufactures be allowed to perish their capital to be destroyed, in part at least, and should the labor which they afforded employment be cast adrift? Contrress replied: No! Protectionists say: "Yes, your free- trade theory will be all riorht when you have established perpetual peace Detween nations, but;that Utopia has not yet been attained, and until human institutions are radically chanfired war will from time to time Inter- fere with the plans pf you free-traders and disturb that international division of labor upon which you predicate their beneficence. Yes. When you can guarantee perpetual peace we will become free-traders: in the meantime we will adhere to protection. Free trade is cosmopolitan and visionary. Pro- tection Is national and practicall" This is about the way Frederick List arprues in his National System of Political Economy, and he strikes me as the ablest of the protectionists. The proposition of Mr. Clymer shows us a poa><ibIe alternative to the Bourse actually loUuwed by Congress. It would have been entirely practicable to have separated the question of reyenues from that of protection. We could have afforded pro- tection by bounties to home manufacturers, and have encourajred them by awards of largo prizes of one, two, three, or even four hundred thousand doUar^^ for improved in- dustrial processes and for superiority of product. This is a plan which could be more easily carrier! out than our tariff system, and If protection i3 desired, the more carefully it is examined the more it must commend itself to the impartial student. Forelcrn producers would not be excluded, but the bounty could be made to equal the disabilities of a state of infancy. We would pay it with open eyes, and would know precisely what our Infants cost us, and could balance this burden over aarsinst the advantages which ihey confer upon us. We could watch the progress of manufactures from the state of infancy through youth to full maturity, and make bounty at every period proportional to its own weaknesses as compared with the strength of foreieners, and we could do this with fuU consciousness of what we were about. Or we might exempt all manufacturing es- tablishments like federal bonds from all tax- ation, national, State and local. As all for- eign manufacturers are staggering under a heavy load of taxation, thig would be an im- mense help to home producers. We could •in this case also ascertain tho exact amount of our burden. We might assess all manu- facturers so exempted from taxation every year, and by calculating what they would pay If not exempted we wouH know how much assistance we were giving. Prices would not be raised by this sort of protec- tion to infant Industries. These devices are mentioned as possible and practicable alternatives. It is not In- tended to recommend them, nor is it desired to condemn In this place and at this time. Still another possible alternative in 1816 was to let the mauufaoturers shift for them- selves like othe^lpeople, and adapt them- selves to changed conditions as best they might. More will be said about this plan hereafter. TARIFF AND FAVORITISM. Prof. RIchd. T. Ely Tells How Favorites FlonriKhed Under Tariff Legislatiou. rWritten for the Baltimore Sun.l ARTICLE X. In my last article I stated that tbe proposi- tion of Mr. Clymer favoring a separation of revenue measures from other political schemes showed that there was a possible al- ternative to the course actually followed by Conerefig in the firm establishment of protec- tionism in 1816. There were, in fact, several alternatives, and two of them have been described. One was the bounty system and the other the plan of special exemption from all taxation, either of which, it was argued, was preferable as a scheme of protection when looked at in the light of reason. It still remains to be considered whether it would not have been better to have refused any interference in behalf of manufacturers and to have allowed them to adjust them- selves to new conditions as best they mlKht, as other people are forced to do, and thus to have established with respect to manufactur- ers In general the policy of non-interference. This is a matter of present Interest because the question of general policy Is coming up again and is certainly to be raised repeatedly in the near future. First, It must be rer niarked that a liberal policy with respect to trade and non-intervention In general has been Injured by those extremists who claim too much. Doctrinaires say government should do as little as possible, and that is the best government which governs the least. Yet when we see the English laboring classes elevated by factory legislation protecting the laboring .classes by restricting the labor of women and children and prohibiting **pluck-me stores" and payment in kind, and thus the theories of radical socialists like Carl Marx discredited, for they say that the workingmen have nothing to hope from the present state: when we witness somewhat similar beneficial effects in Mas- sachusetts and New York, and when we reflect on the inestimable benefits of our free public school system even when reviewed ex- clusively from the standpoint of material wealth; when wo Icarn that, doctrinaires to the contrary notwithstanding, municipalities are to increasingextent supplying themselves with gas without the Intervention of corpo- I wjations, and that with the most satisfactory' | results— when we contemplHte all I these things we are too inclined to reject the entire policy of non-intervention and favor irovern- ment Interference everywhere. It is neces- BAry !o discriminate. One law KOverns those Dursuita which are monopolies, another those which are always subject to the steady, con- stant pressure of competition, while yet a third principle prevails with reference to labor, and in sreneral it may be said of pur- suits which are stronprly , competitive that competition lain the main a sufficient resru- lator, and that so far as they are con- cerned that government is best which Ifoverns least. "DurinjTthe present century," says adis- criminatlnsr writer, "two Kreat discoveries have been made in the science of firovern- ment. The one Is the Immense advantage of aboUahlng restrictions upon trade; the other is the absolute necessity of imposinjf restric- tions upon labor." He Avould have expressed his meaniner more clearly if he had said "upon labor In behalf of labor," for he had In view ret? ulations increasing- real freedom. W hlle, then, only an extremist will support the proposition of non-intervention as of universal application, the impartial student of American affairs can hardly fail to see his inclination strengthen in favor of lettinj? commerce and manufactures take their own I course without legislative interference, the more minutely he examines our present con- dition and its historical antecedents, for he will find that the best laid plans for fostering infant industries and building up a barrier between American labor and the so-called "pauper labor" of Europe come to naueht. It is scarcely possible to carry them out, and in the end the hard-workinar, thrifty indus- trial class of employers and employes alike are hampered In their efforts to gain a liveli- hood, while enormous trusts and syndicates are formed, crushing as with an iron hand the independent manufacturer, and grinding down American labor by bringinjr into Com- I)etitioa with It Ignorant and lawless Eu- ropean hordes, which have been brought into the country free of all duty. The infant industry theory finds its cl»8sl- cal statement In these words in John &tuart 1 Mill's treatise on political economy: "The expenses of production being always greatest ai first, it may happen that the home pro- duction, though really the most advan- tageous, may not become so until after a cer- tain duration of pecuniary loss, which it is not to be expected that private speculators should incur in order that their successors may be benefited by their ruin. I have, therefore, conceded that In a new country a temporary protecting duty may sometimes be economically defensible; on condition, however, that It be strictly limited in point of time, and provisions bo made that during the latter part of Its existence it be on a gradually decreasing scale. Such temporary provision la of the same character as a patent, and should be governed by similar conditions." This is precisely what during the first half of our national existence we proposed to do, and, as has been, stated tariff laws were up to a lew years limited, and laws have actually beet passed contemplating a gradual reduc- I tion of tariff duties, with the Intention of thus entering upon a permanent free-tra period. But our history has been of suc^ character as to lead one to doubt the practica- bility of the infant Irfdustry theory. A tariff law passed for two years is extended and duties raisoi before we scarcely enter our national existence, and the fate which thus overiooK Hamilton's "temporary" inorense of duties has been repeated again and again. It is true that a rational system of federal flnan- cierinfiT might have helped matters somewhat, but even if we should be led to adopt better financial methods have we reason to hope that exi)erience in the near future will be different? The theory of our institu- tions is that municipal councillors, State legislators and Federal Congressmen meet to discuss the public welfare calmly and Impartially, and to pass such laws as they may regard beneficial to the people. The truth Is the initiative in legislation in general does not come from the legislator, but from the pressure of some powerful external special Interest. Go to an ordinary legisla- ture or city council with a measure and you will be asked who is back of it, who wants it passed, and what is the consideration? If you simply come with the general welfare at heart, and have no great organization with votes at your back, your reception "will be a cold one. Now so long as this is so, how can it be expected that governmental aid will be withdrawn Just in proportion as those who receive it grow strong? That is the theory, but on the contrary the pressure for aid in- creases as strength increases. Can one in- stance in all the history of the Ameri- can tariff be adduced where protection was offered to aid In the establissh- ment of an industry not already In existence? I think not one, yet this is what the theory calls for. The idea is that after canvassing the situation. Congressmen say: "Our natu- ral resources are such that we ought to have a beet-root sugar industry, for example. Yet not a trace of such industvy exists on account of the enormous difficulties in the way of its establishment. Let us, therefore, tax im- ported sucrar togivd our would-be produoars a chance." The actual practice is this: Representa- tives of powerful establishments go to Wash- ington and say: "We have large paper mills in the Connecticut valley or elsewhere, and we wish to bo protected against foreign competition.'* It will readily be seen how akin this is to the monopolistic spirit, for monopoly means simply absence of competi- tion. Several things are proved by this "brief sketch which any one snecially Interested will find more amply demonstrated in Taus- sig's "Protection to Young Industries." One is that protective tariffs did not give us our manufactures. They came into existence wlihout It. The question of free trade versus protection Is not at all a que-^tion of manu- factures or ^o manufactures. Nor Is it a question of a deversifled or homogeneous Industrial life. We see, further, that protective duties onc9 esta blished tend to Increase, and that a ireat- ny?iitof the tariff in accordance with scien- tific principles is at least very dlflaoult, if not iroposaiblo. A recent careful writer says that tho theory of protection is not altogether ■II i . 1 I— I- -jfe.- -.11. erroneous could it be applied, Tt)ut tie noma that no modern parliament or congress can be trusted to apply it, and on that account be r^ects protectionism in practical politics. Why is it that the more protection one has the more one wants? The reason is this: Manufacturers may be divided into several classes with respect to profits. There are those advantageously situated and skillful and enerifetic— ffreat industrial leaders These men require no special help, and they belong to the first class. There are those ; whose profits are a little smaller on account of inferior natural advantages or inferior mental qualifications. These are manufac- turers ot the second class. So proflts descend until In every pursuit you find those '*on the rajrtred edge" who but just live, who barely *'keep their heads above water," as we say. Prices are high enough to enable these man- I ufacturers of the lowest grade to live, and the profitableness of another business la j measured by the differences between Its 1 cost of production and the cost ol production ! In those establishments which Just keep 1 ^live, so the lower the scale of IneflBcienoy, t the higher the profits of the favorably Bitu«_ ated. Let these lines rfeprw^sent tl^e jorlous frradea of manufactures in the'dtflteTl'States: Profits of class 1 will be measured by the distance between 1 and 6. Now, if you wipe out 6, it must be by lower prices, and thus will the abnormally high profits of class 1 fall. Now, under a system of free trade, the operations of those advantageously situated will be extended and those working In- efficiently will be compelled to exert them- selves and produce better and cheaper goods or to change their occupation. :The question, then, at issue is this: Shall we have only manufacturers of a high degree of efficiency, or shall we also raise up and keep in exist- ence an Inferior class of men? Manufac- tures we are certain to have, for we are more advantageously situated than other countries with respect to some branches of industry, and there is probably scarcely any line of manufactures which could not be pursued in some favored spot by some one. Now it must be manifest that the more efficient the labor and caoital of the country the more we will all have to enjoy and the greater our opportunities for leisure. What is produced now is not sufficient by any means to satisfy all rational wants of all men. Much more must be produced for that purpose, and if what is produced is often not consumed, owing to the absence of purchas- ing power on the part of the masses, this Is another matter, and the difficulty cannot be remedied by protective tariffs. The extension of aid to manuracturers In 1816 accustomed us to look upon it as our duty to tax ourselves for the benefit of cer- tain pursuits, whereas, if they are natural to the country and desirable, they e\n be profit- ably established without help. The pauper KPirit has been nourished and it appears to have worked like free soup-houaes on the ipoor. Some business men, instead of bending all their energies to the production of cheap and good commodities, are always plotting to [ get something from the public purse. Thus j towns are induced to bid against one another for railroad facilities, and our federal govern- ment has been pursuaded to part with the heritage of the people *'to encourage" rail- road building, whereas it would seem desir- able, if we, the people, i>ay for the roads, that we should own them. When channres in productive processes In- jure skilled workingmen we say they must suffer quietly and be content, because the general public gains. If a type-setting machine should render the skill of type- setters superfluous, it would produce Im- mense sufferinsr, but we would not subsidize them from the public treasury, or levy a tax for their benefit of one hundred and fifty per cent on those using the machine. Working- | men, on the contrary, are severely rebuked when they resist improvements. When the elevated railroads in New York Injured property owners, the claim for dam- ages was resisted on account of the public good. So, at the close of the late war, thousands upon thousands of farmers were well-nigh ruined, and many of them completely so, by the contraction of the cur- rency, which lowered the price of their farms and raised the value of all existing mort- gages until often the mortgage equaled the value of the farms. Yet farmers were not indemnified on account of their less. Is it not, then, better to exclude favoritism in legislation, and to let each industry stand on its own bottom? PKOBLEMS OF TODAY. PROTECTIONISM AND LABOR. MONEY-MAKING AND WAGE-EARNING. Pi-of. Richard T. Ely Shows How a High TarifT Governiiieut Worka Against the Workiugiuau. [Written for the Baltimore Sun.l ARTICLE XI. As time went on the plea that protection should be afforded to the "infant industries" of the United States grew ridiculous, and its advocates , began to cast about for an argu- ment which would meet with some other reply than a sarcastic smile. Manifestly the period of Infancy must end some time, and the infant industry argument is based pre- cisely on the hyp )thesis that protection is merely a temporary need. The infant industry plea Is not often heard now, and may be regarded as decidedly antiquated. iLet occasionally echoes of the old war cry of the protectionists are still heard. Although they are so feeble as scarcely to deserve notice, it may be well to devote just a word to them. First, oue hundred years of protection ought to have developed our industry beyond the stage of infancy if protection ever can do it. Second, the arguments which make for pro- tection to industries in a younir and enter- prising but poor country, and which, indeed, in such cases. If intelligently applied may Justify it, no longer holds in the *i United States. 1*; neeael. It l8 said, because the puiHurs, tinhoujrh nat- urally remunerative, cannot become so for eeveral years, and men want Immediate re- turns. This is true in a now country, but It ia rot true with us. We have many men in the United States whose pursoa are as long: as those which can be found anywhere, and whose minds are as shrewd as those of for- eign cipilalists. If it is a mere question of who is able to hold out longrest in a comDeti- tive contest, American capitalists need no ftssiatHnce. They are quite competent to look out for themselves. Nor is it true that immediate returns are desired. Almost un- limited monly can be obtained In the United States for enterprises which promise even after years to yield larcre returns. Let us ex- amine a few evidences of this fact: Why is it that lonjr-tirae loans are more valuable than short-time loans? It micrht be i supposed that if a federal, state or municipal trovernment owes me some money I would want it at once, and sayr'the sooner I am paid the bettor." But the contrary is the case. I say, "the later the date of payment the better pleased I shall be." It is because capital is ; so abundant that people are jflad to part with its use for a lon^ term of years if they can be Buaranteed a small annual payment. liook at the readiness with which people advance money for canal schemes and other flrreat im- provements in the hope that they will after years become profitable. A few concrete Instances will help to make this plain. In conversation with a jfreat capitalist, he men- tioned to me In connection with a certain scheme: *'l told H. that if ho wanted to do a noodtninjr for himself and the country that was a good opportunity. I told him that he must expect to lose money for ten years, but that then he would beerin to make money." A company in New York— and it practi- cally, I am told, consists of one man— has been.preparintr a great dictionary of the Eng- lish' language for publication for years. It has spent thousands of dollars, and I am inclined to think even hundreds of thousands, already, and has not received one dollar la return, because the work has not yet seen the lieht. Nevertheless, it continues to spend money by the thousand, and seems perfectly 8^jti«fled in the prospect of a lai'ge future profit. When I was traveling in the North once I met a gentleman from Virginia who was managing a larure farm there, owned partly by himself and partly by two capitalists. The iirrangemont was that he should manage the Virgifjia farm, receive a certain cash sum every year, spend whatever ho might deem desirable in improvements, and then divide the surplus. It so happened, however, that this gentleman also owned a farm in New York State, where he had formerly lived, and to which he was anx- ious to return. Now, as It bad been agreed In case of dissatisfaction thai the dis- satisfied Darty must buy the other out at an appraised valuation, ho decided to spend so much in Improvements every year that there ghould be no surplus to divide. This he did year after year, yet the two capitalists, who occasionally visited the farm, always ox- pressed perfect satisfaction with the man- angement, AS a matter of fact, tney did not care for any revenue, but were content to see rthelr property grow in value.These are merely I typical cases. The truth is, if at the present \ time the natural Conditions are such as to make any branch of industry profitable, there ' are men keen enough to see it, shrewd j enough to bold their own against competi- ' tion from abroad, and rich enough to await its development until it yields revenue. We, as a nation, are rich and powerful, and ble«sed with natural opportunities such as no other country enjoys; and however it may be elsewhere, as, for example. In Jaran, the infant Industry theory Is an absurdity in the year 1883 in the United States. Nevertheless, appetite grew with what It fed upon, and the call was for increasing protection. How justify It? As I said, pro- tectionists began to oast about for another Bpeclal plea, and they found it, and from about 1840 up to the present we have heard a new war cry.namely, protection of American labor against "the pauper labor of Europe." It does not seem diflQoult to account for this new plea, A political labor party arose about the year 1835, and soon acquired some ' influence. George Henry Evans, whose name , may be remembered by some of the readers of The sun, was one of its leaders, and ■ among its organs may be moniioned the Workingman'a Advocate, the Dally Sentinel and Young America, Its platform contained twelve demands, among which were the fol- 1 lowing: "The right of man to the soil; *vote your- self a farm.' "Down with the monopolies, especially the United States Bank. "Freedom of public lands. "Homesteads made inalienable. "A lien of the laborer upon his own work for his wasies. "Abolition of imprisonment for debt." A "workingman's convention" met at Syra- cure, in New York State, in 1830 and nomi- nated a candidate for Governor, who received but a few votes. In New York city, how- ever, they were more successful, for, joining forces with the whigs, they elected a few members of t|ie Legislature. These men finally entered the locofoco party and were captivated by "Old Hickory." whose nomi- nation and election they attributed to their Influence. The democratic party, under Andrew Jackson's leadership, re-echoed some of the war cries of the workingmen's party, and seemed finally to have side-tracked this early labor movement and to have brought It safely into the fold of democracy. Plainly the laboring classes were begin- ning to acquire a consciousness of their own existence as a distinct class in Industrial society, and wily politicians thought Ii time to throw the worklngman a^ sop. Hence, about 1840 we find the watch'word "Protec- I tion to American labor against cheap f orelcrn labor" taking the place of the former rally- ' ing cry, "Protection to our Infant indus- ' tries." No doubt for party purposes it was an immense Improvement. It proceeied upon the hypothesis that the American em- ployer must pay more than his European competitor for labor, and that difference must be made up to him by a tax on foreign com- petitors; some. Indeed, with a nice air of accu- racy claiming It as a scientific principle that duties should be precisely such In every instance as to equal the differonce^in cost of labor. It is assumed that If duties lau, American labor must also fall in price, and, like European labor, become pauper labor. One manifest 8up?riorlty in this new plea ia that it does not advocate duties as something temporary, but as some- thinff to endure as lonpr as American labor Is **dear" and foreiprn labor Is "cheap." Another is the benevolence wrapped ud in it: and not merely benevolence. It is benevo- lence of a superior and unique sorti Benevo- lence often means sacrifice on iho part of him who exercises It, as when I wear an old coat that I may help educate the orphan child of an old friend. Not so the benevo- lence of the protective tariff, for it is war- ranted never to take a penny from ihe pockets of its most devoted adherents. They may live in palaces, eat the choicest outs of roast beef, drink champasrne, and be merry while their bank aocouuts swelll Have they not done their part? Are they not the repre- sentatives of protection to American labor? But is American labor, after all, protected? Let us at once oro to the Heart of thincrs. If I have anythinur to sell, it ia conceivable that I I may be helped in two ways by government. To say that I wan t to sell a thio? means simply that I want to Ret Bomethinjf else for it. 1 sell that I may buy. Money simply comes in as a medium, A farmer sells corn for money, and with that money buys shoes. Corn is really excbattfired for shoes, and money is used as a medium merely to facilitate ex- chance. Now, if government in some way can increase the suupiy of those things which I wish to buy, I may be benefited. More will be offered me for what ;i have to sell. On the other hand. If government can diminish the supply of the article I want to sell, I can get more for it, and I am benefited. How stanosthe case witn the wae"e receiver? What has he to sell? The commodity labor, and nothlnor else. With that commodity (labor) he must purchase all other things. Now what is government doing for him? Is (tovernmeut rendering labor scarce and com- modities plentiful? On the contrary, no duty is put on labor. Labor comes in free. Not only thai; our protectionists are helping to increase the supply of labor and to keep its price down. Do not federal consuls encourage emigration from Europe to Amer- ica? Do not States and Territories send agents abroad to aid and abet foreifin labor in its purpose to fill up the supply of labor in our own market? Do not the protectionist employers themselves keep iheir aarents in every part of Europe to help swell the throng of those coming to our shores, and, in case of demand for higher wages, to take the place of the discontented? Strangel Yet it is all truel Every word of It, and" the orjrans of the protectionists gloat over the increasing supply of labor in our markets. The commodity which the laborer has to sell is not protected. All that government does is to help increase its supply and thus reduce its price. But then it must be that government ia trying to increase the supply of those things which workingmen want in exchange for their commodity, laborl God forbid! It is taxing them and rendering them scarce! It looks as if government were working against labor, doesn't It? A funny world, isn't it? THE BEARINGS OF IMMIGRATION. Continued Discussion of the Subject by Prof. Kicliard T. EJy, of Jolms IIupkin« Uuiversity. I Written for the Baltimore Sun.] ARTICLB Xir. Our last article showed that while labor was not protected by tariff laws, the commodi- ties which labor received in exchange for its part in production were taxed and rendered dear. We saw that in consequence of this fact government had worked acainst labor in two ways, for it had on the one band en- couraged the importation of labor free from all charge, and on the other it had discour- affed the importation of those things which labor requires for the maintenance of life. The reader should keep a firm grasp on these facts in all discussion on the bearings of a protective tariff on labor. It is easy to see what would have been done by sincere and intelligent advocates of governmental protection to home labor. I do not now raise the questioa as to the desirabilty of such protection. I simply propose to answer this question: A'^suraing that it is the duty of the federal government to aid labor by taxes, how should these taxes be laid? lit isj proposed to help labor to secure hiarh wages, and it is therefore neces- sary to raise the price it commands by dimin- ishing the supply. What can be simpler than the solution of the problem? Tax the commodity labor by taxing every for- eigner landing on our shores, and encoffr- age» on the other hand, a pentlful Importa- tion of goods. This would necessarily alter the relation between supply of labor and demand for labor, and supply of com- modities and demand for commodities in the interest of labor. Now, how high a tax should the siocert^ advocate of protection f*»vor on each able-bodied emigrant from foreijrn lands upon his entrance into an American port? We must find out the value of a woraiiigman, viewed simply as a pro- ducer—not as a husband or father or citizen, but simply as one who produces things which have vilue in the world's markets. Now, calculations of this kind have actually been maae, and f 1,000 may be taken as a low valua- tion. Taxes on imported commodities are e4 high as one hundred and fifty per cent., an<t a tariff devised in the interest of labor ought to put the highest tax on those who supply the commodity labor. We may say then that a tax on each foreicrn able-bodied emitrraiitof $1,500 is not excessive as com- pared with other taxes on imnorts. Females might be taxed $1,000 and children $500. If tbis would not give a certain advantatre to home labor, then two and two do not make four. It is to be noticed further in this connec- tion that distanee in itsolt is not tne protec- tion to labor which it once was, for the trans- portation of emiwrrants is so cheap now that the employer practically has a free world- wide market iu wtiich to procure the com- modity labor. THUS the saying Is literally true, the laborer sells his commodity in a free market and buys in a protected market. It may be well to say a word more about restrictions on immigration, for tbis is now a live question, and my opinion has recently been asked. I cannot at present favor re- strictions on immigratlim of the kind above described, although they are simply the logical conclusions from principles which, it is claimed, we are now trying to app y in the interest of labor, it seems to me there are other and better ways for advancing ;tho ^interesis of labor, foremost among wiilch is a thoiiumi, B>»irmtviiv iirtiiiiuif of eacb boy i and Riri boru on American soil for the actual duties of life. These duties are both public.) atiii private, and prcparatioQ for them must Include training: duslifned to fit one to become a worthy member of a family, a worthy oitizen aud a useful member ' of industrial society. Iq other words, each child oui?bt to be so train e<l as to Xo honorably its future duties with 1 . i, to the family, the State, and, further- . more, to render au honest equivalent for ' those economic (tooda which are needed to support life in decency and comfort, or, 'still more simply expressed, to eret a livinsr. This preparation falls iu part to the church, and with her functions we are not now concerned. LarRely, aud to an iucreasinjf extent. It must fall to the school, because old-fashioned methods, especially as seen In the apprentice- ship system, are becominer antiquated. They are burdensome alike to employer and em- pl( ye, for the former is often as much op- posed to them, and frequently more opposed to them than the latter. Probably General Francis A. Walker, the head of the most successful Massachusetts Institute of TechnoioKry, is as well qualified to speak on this subject as any man, and of appreniioeahip he savs this: *'As it exists to- day it is an advantasre to neither party. The apprentice can only learn a narrow specialty, so narrow, as a rule, that its only value to him is the meacrre pittance which he can earn from day to day, but at the sacrifice of any further educational advantaeres." The schools, then, need both extension and im- provement, and that in several directions. Ono is in respect to practical ethics, for alontf this line our schools have , been lamentably deficient. Practical ethics are required to prepare for a worthy life in the family and in the State, Second, practi- cal traininer for the business of lifo in the in- dustrial sphere is a necessity. We need in- dustrial traininjr in cenerai, as has so often been set forth in The Sun, and, in particular, we need more professional schools, usinj? tnat expression in its broadest sense. At one time it was thought by many that special schools were not required for lawyers, preachers and physicians, but now the mistake of this has been demonstrated by actual experience. Well, the mechanic needs special schools as well as the lawyer or preacher. Our Klrls ousrht to learn how to cook and sew, ana our boys to handle tools aai keep accounts in schools. Third, the present branches of study should bo better lauRht, and this requires a hiarher Krade of teacners. The profession of teacher should be elevated iu rank and its rewards increased. What has this to do with the tariff? Every- thing, because we are discussinar protection to labor, aud I am pointing out in what true protection as distintruished from spurious protection consists. Protection to labor con- sists In renderintr it hisrhly qualified. Do I need protection from inferiors? On the contrary, it is the superior man who may drive me to the wail. So if American labor by suitable tralnintf of youth is rendered more highly qualified than foreitrn labor, it will find itself belter protected than by any tariff walls vvhich human Ingenuity can in the year 1888 erect about the Uuited States. Labor may rightfully demand mat laws should be passed to keep out a low and de- grade i c ass of emijjrants, who tend to lower our civilization urid to throw upon us the burden of their support as paupers or crim- inals; and here aerain we come to an actual burden which rests upon our entire Industry weltrhing down employer and employe alikeV Protection from the scum and offsouurinff of fciuropeand Asia may ri«rhtfi)lly be demanded by all. Dr.Edward W. Derals,aformer8tudent of mine, has made some recommendations Which seem to mo worthy of commendation. 1! • visestBt the pissporr system be intro^ <j •iASUfeS'ecJLiv^.jaetlQod of oontrollinp luimiwruliun, aua tuuL only those be allowed to enter our country who can bring a pass- port duly signed by an American consul. i\o passport, however, shall be granted to those Hssistcd to emigrate by any charity or- ganization or governmental agency, Trans- portation to America costs so liiile that iocal Europeai autliorities find it cheaper to unload tiieir poor and degraded upon us ih.m to keep them at home. Already our burden for public aims is heavy, for it is estimated that one lu a hundred re- ceives charity in the United States even at this early period in our history, and the pro- portions of the burden will be realized by those who reflect that even the great Ger- man army iuclu'iee less than one in a hun- dred of the population. 1 would say that the passport ought not only lo set forth mat tne ono to whom it is giveu is not aided in emi- gration by charity, hut that he has not been a recipieut of public charity for the preced- ing twelve mootus. No passport should be given to those as- sisted by the agents of any land-grant rail- roads In the Uuiitd States, or, in fact, by the agents of any corporation. Pas-ports should be granted to those over sixteeu only in case they can read and write. Tnese restrictions are the most important which occur to me. Any aitempt to limit immigratiofi so as to exclude those who bold dangerous opiniont is a sugtrestion at once so absurd and impractioaule tnat I hope no one who reads The bUN will require a demonstra- tion of its folly. The poorer quality of a large proportion of European emigrants is seen in the sections of country from which they emigrate. For- merly German immigrants came to us from the Khine and the piO!«perou8, eolightefied country in the west of Germany. Now they come from the eastern parts and Polisn frontiers, the mosc degraded part of the "Fatherland." Similarly, it is said that the poorest parts of Irelat^d are now sending us their surplus population, and that the Irish now coming to America are inferior to the earlier Irisn emigrants. If it IS salii mat this sort of protection to home industry is an injustice to European countries, it can bo repli; d that it is not im- probable that we shall be able to do most tor the advancement of human civilization in America if wo uo not load ourselves down with a to ) heavy weight. America has her part to play in tne world's history, and if this IS to be a beneficent pcirt it is essentinl that we should amply protect our own people and allow our in&titutions to develop naturally from within, withiut violent a^isaulc from alieu influences. O i the other hand tnere are many questions which European govern- ments musi sooner or later settle for them- selves, aud I am not sure mat we benefit humanity by receiving the worst elements they send us, anu thus enaulinsr tutm to pro- long the exidteuce of aucieui abuses. FHOBLEMS OF TODAY. PKOTECTIONISM AMD LABOR. AMERICAN LABOR NEEDS NO SUBSIDY. Superior EAciency of American TVork- inemen— Further Views by Prof. Kicli- ard T. Ely. [Written for the Baltimore Sun.l ARTICLE XIII. 1 think It was a French jcin? "who asked his wise men to explain why it was that if you should put a large fish into a pail filled with waier, the water would not run over. This puzzled thera all preatly, until some one sutr- gested that it was not a fact that the water would not run over. The king:, indeed, had not stated that it was a fact. I am reminded of this Btory when I hear some of the current discussions on the tarifif. It is said, for example, that the American manufacturer must receire hiizrher prices be- cause labor costs him more than it costs his European corapatitor, and that these higrher prices must be secured throutrh the action of a protective tariff. But is it a fact that labor costs the American manufacturer more? I doubt it. Wasres may on the whole be hijf her. although even here, on account ot unsteady employment, the difference is not so jrreat as many imagine: but waijes and the cost of labor are two quite different things. The cost of labor depends upon two things— first, wages paid; second, the efficiency of labor. Will the practical man, who pays $2 a day to his em- ployes engaged in some manufacturing en- terprise in iMassachusetts, at once remove his business to Georgia if told that employes can in the South be procured in abundance for $150 a day? By no means. He would be a fool to do it. He will first ascertain many other things about business, and he will in- stitute a diligent inquiry into the relative efficiency of Northern and Southern labor. He will say: *'The vital question with me is not how much I pay a day, but how much will it cost me to get a given piece of work done." Now when we thus compare labor cost in Europe and America it appears that in a large portion of the industrial field the American jnamifacturer has a decided advantage over his fo7'eign competitor, for it costs him less to get a giver^iece of work done. The American re- ceives higher wages, but does so much more work in a day than the European that his services are cheaper and more desirable. Is not this plain? Suppose I employ two men, A and B. A receives $3 a day and B $4 a day, but B accomplishes three times as much in a day as A. Who is the cheap laborer? Here, as so often happens, the current saying, "the best is the cheapest," holds true. An Amer- ican bricklayer receives more per day than a Dutch bricklayer, but he receives less per brick laid. The same holds with regard to wages per day and wages per piece in certain grades of spinning, and one who is familiar with the details of manufacturing in Europe and America can give examples in abundance. Mr. Schoen- hof has looked carefully into this matter and made a report to the Department of State, which was noticed in The Sun in its issue for December 31, 1886. It appears that hia the manufacture of silK In Sia English miilYthe average earnings of the employes were $3 25 a week, while they were f 5 50 a week in an American mill with which Mr. Schoenhof was acquainted. Nevertheless, the American operatives did so much more work that the results were cheaper in our country. A factory near Frankfort-on-the- Main in Germany pays 21 cents per pair for making the uppers for ladies' high top button gaiters, while the price paid labor for the same services in Lynn, Mass., is only 11 cents. A pair of boots can be manufactured in Lynn and laid in boxes for 33 cents, which is far below the German cost, although the Ger- man laborer receives $3 38 per week, on the averatre, and the American $9 00 per week. It is not true, by any means, in all indus- tries in this country, that the cost of labor is less, but it seems probable that, on the whole, we are quite capable of holding our own in this reaped. As a rule, high-priced labor is cheap laoor, and labor for which little is paid is worth little. I have often been Impressed with this fact in observing the effectiveness of servants in those parts of the North with which I am acquaisted as compared with the effectiveness of Virginia servants. 3; A house servant may be procured readily in the small towns in Virginia for $5 a month, whereas in a New York village you would be very likely compelled to pay $10 a month. Nev- ertheless the Northern servant accom- plishes about three times as much, and is in reality the one to furnish the cheap labor. A "social protective tariff" has been more or less discussed by political economists in recent years. A "social pro- tective tariff" means simply a tariff designed to compensate the manufacturers for in- creased labor-cost in a country where labor- ers receive high pay for few hours and en- joy other exceptional advantages. Some- thing can be said on theoretical grounds in favor of this proposition, but the difficulty in nppiyingjtis found to be the fact that it is the laborers with long hours, low pay and few privileges who seem most to require protection. England is the country most dreaded in international competition, but nowhere in Europe are wages so high and the number of hours' woric per week so small. Tho Enelish workman has, in some re- spects, at least the advantage over the American. He works only flftr-six hours a week, and his labor organizations are so strong that they can afford him better protection than American organizations. Labor organizations in England have, in fact, passed through that stage of existence in which American organiaations still find themselves, and are no longer obliged to struggle for the right to exist. They are ac- cepted as a settled fact. Arbitration is more successful in England than with us, and fac- tory legislation is more highly developed. *'Pluck-me" stores were prohibited in Eng- land in 1833, whereas a Pennsylvania judge— and Pennisylvania is a State where the Amer- ican system of protection is strongest— in the year of grace 1887 actually declared the law prohibiting payment in kind unconstitu- tional, and that on the ground that American workmen must be protected in their freedom of GontractI rhe father of one of my colleagues is an English manufacturer of cotton, whose employes, to the number of twenty, I be-_^ Jieve, ca me to America to seek their for- tunes, and they all, without a sIorIg excep- tion, returned to Enariand convinced that they fared better whore they were. This is not meant to depreciate the advantapea of our country, for on account of our still un- developed resources there are openings here, and particularly for the Rifted, which can be found nowhoro In Europe. It does prove, however, that our superiority for the work- man is not a clear case, and the country we most dread in internatioual competition is tho one whore, with the exception of our (jwn, wages are highest, and where workmen aotualJy toil fewer hours per week than thoy do in our own. Some of the countries with the lowest waces in the world;aro not at all felt in internaiional competition. After all, it seems a strangre thinfr to con- tend that a country with superior advantaKea cannot compete with one with inferior natu- ral gifts. It is like claimintr that a man who raises one hundred bushels of corn per acre •will be driven out of the market by one who raises only fifty. Yet this is actually what some claim. What is the reason why wages are hierh in tho United States? It is simply because nature has lavished hersrifta as never before upon an intelligent, enterprisingr and industrious x)eople. Labor and capital, when jfovernmentdoes not force them into unnat- ural channels, yield a larger return than in Europe. If you invest a capital of, say, $1,000, and an amount of labor equal to 1,000 days' work In America, you will receive a greater product, more bushels of pota- toes or wheat, or pairs of shoes, than in a country like Germany. There is consequently more to be divided amonsr all those who take part in production than in the fatherland, and of this greater plenty labor receives a ghara in hieher watres. There is nothing so veils the real nature of trads as the use of money as a medium of exchange, and if one imagines transactions to take place without the intervention of money, it helps wonder- fully to clear up many things. A farmer and two laborers, let us say, produce, with a uriven investment of labor and capital, one thousand bushels of potatoes, whereas a Ger- man peasant, with his two hired laborers, produces only six hundred bushels. Mani- fesily, there is less to divide between labor and capital in Germany, and profit and wages are both small. Now, there are those who want to tell us that men working under supe- rior conditions cannot hold their own against those working under inferior conditions. Is any one disposed to dispute the fact that our conditions are more favorable for the creation of wealth? A little travel and care- ful observation in foreign lands must be suf- ficient, I should say, to convince any fair- minded person that our natural facilities are ■uperior. Barren hillsides are cultivated in Germany which would in America be neg- lected. Why is this so. If not because the American farmer can do better than to ex- pend his labor and capital on barren hill- Bides? Take railroad building. Tho grand opportunities for investmenta in railroad oouatruction have in Europo already been seized, and new investors aro obliged to be content with small returns on insignlQcant branch lirea. Go into an English or German town, ana you will find capitalists and laborers eager for opportunities which Americans would despise. Why? Simply because the grand opportunities in old coun- tries are very few. This may be hooked at from a still different standpoint. Will it be disputed that the total wealth created in the United States is largo in proportion to our capital and our population? If not, then the entire point Is conceded. The tariff laws cre- ate no new wealth, and our larger wealth creation can only be traced to our better advantages. I desire« as soon as possible, to tell the readers of The Sun what I think ought to be done at tho present time with respect to the tariff, but I must beg them to be patient, be- cause so much ground must be cleared of undoubted fallacies before it is possible to take a rational view of the protective tariff, and when the word fallacies is used reference Is had to things which no inan can believe when ho once turns them over in his mind and carefully analyzes them. These fallacies, in fact, frequently amount to absurdities, and all the absurdities illy no means proceed fiojnjthe protectionists. However, I desire now to call attention to the fact that England and Germany could not ruin all our industries, even if their ad- vantages were In everything superior to ours. Many will say if foreign countries can pro- duce more than we with a triven amount of labor and sapitaL, they will drive us out of the world's market, and even capture our home markets. But how is this possible? Will they supply us with commodities and take no return for them? If that were true, the backward nations of the world would indeed have an easy time of it, for other more highly developed nations would supply them with commodities for nothing on account of their in- feriority. If, however, somethinor is taken in return, then the production of that some- thing will furnish opportunities for labor and capital. Perhaps, it will be said, they will take their pay in money. If they do this, the precious metals begin to leave us, prices will fall in our country and rise else- where, and it will thus become profitable to buy our commodities, which would Bgain turn the stream of precious metals back to us- The truth is simple. It is relative advan- tatres, and not absolute advantages, which determine the course of international trade- If Englaiid can with ten days' labor produce either one hundred bushels of wheat or two hundred yards of woolen cloth, and with the same labor we can pro- duce seventy-five bushels of wheat or one hundred yards of woolen cloth, England will not on account of hersuperiority furnish us with both wheat and cloth. She will fur- nish us with that commodity in which her advantage is greatest, and we will send her that in which our inferiority is lea8t;',in other words, we will exchange our wheat for Eng- lish woolen cloth. Both England and America will gain thereby. Each will do that for which nature has best fitted her. This is the way exchanges naturally take place between nations. One mar be superior to others in well nigh every branch of production, but each one will seek to find thoso pursuits in which it has greatest advantaees. The wealth of the world will thereby be increased. Had England accepted our offer of reciprocal free trade in 1783, and free trade had always obtained, we would have had manufactures, but it is doubtless true that a larger portion of our labor and If capital would ha , ^ i^^elT devoted to~a2Ticul-' ' ture, and farmiQfir would be a more flourish- i infi: pursuit, for it i« in asrricuiture that our f relative advantages over European countries are most conspicuous. While not prepared to join without qualification Jefferson's laudation of asrricultural pursuits and his condemnation of mauufactures, 1 cannot but think we would fare quite as well if our chanfire from an agricultural people to a man- ufacturing- people were not proceedinsr with such a hot-bed rapidity, and if our cities grrew in size wifh a more regular and less feverish haste. Has not, indeed, this unpre- cedented increase in the population of cities been one of the chief causes whioti have made them so corrupt and depraved that they are regarded as a menace to our civil- ization? THE GOVJ^RNMENT TELEGRAPH. Political Ecoiaoinies in the Civil Service and the Federal Tariff System Dis- cussed hy Prof. Richard T.Ely, of Johns Hopkins Uaiversity. [Written for the Baltimore Sun.l ARTICLE XIV. It was seriously proposed a few years aero to introduce the study of political economy into the public schools of Belifium, and there can be no doubt that in a country ruled by popular vote it is of the first importance that the people should receive some trainioff In early life in the elements of that science which is concerned with the fundamental conditions of national prosperity. A very little knowledse of practical economics would make, us a happier and a still more prosperous people, and it is not necessary for one believincrthis to hold exajftrerated notions rejfai'dinpr the achievements of political economists. Political economy, if it were more generally understood, could not pre- vent all strikes and lockouts, but even a sliprht knowiedere of the nature of industrial society would do away with many of the senseless controversies between labor and capital which are so crreat a loss to us all. Political economy is not in a position to give an absolute and unqualified answer to the question. Shall we have a government telegraph service in the United States at the present time, or a private service? Famili- arity, however, with such discussions on the part of the people would make much that we hear on the subject Impossible, and force the advocates of various measures to confine themselves to valid arguments, and thus to help us to arrive at a rational decision. A presentation of the claims of the Western Union Teletrraph at Washington last week has attracted a great deal of attention, and yet this presentation Involved an error which to one who knows something about the prin- ciples of the telegraph service is as palpa- ble as the assertion that throe times six are nineteen Is to one who knows the multiplication table. Nowhere else, it was maintained, can a message be sent so far for so little money. But what has distance to do with proper telegraph charges? Why should more be charged for sending a message a lon» distance than for sending one a short distance? Does any one imagine now tthat , anything is carried? There Is a slight diflfer- pnce in cost between messages sent for a long | distance and a short distance, especially if it is necessary to retelegraph the message, and the greater length of lines involves a small additional investment of capital. Neverthe- less, the difference is a minor matter, and, with the exception of Russia and Turkey, every country in Europe dis- regards it, and has one charge for all domestic telegrams recrardless of distance. It is like the case of the pcstoflQce. Rowland Hill introduced his celebrated re- form, the penny postage system, by analyzing the expenditures for carrying letters and presenting the results of his investigations to the public. It costs something for the postoflBce to receive letters, cancel the stamps, sort them and send them on the way. It costs something at the other end of the route to sort and deliver the letters. Here are two elements of the total cost, and the third is actual transportation, and this Hill showed was on each letter so insignificant that it could advantageously be neglected altogether. Thus cost was seen to be nearly Identical for all letters, and the better in- terests of all were promoted and adminis- tration simplified by one uniform charge. Similarly, we have one uniform charge in most countries for telegrams, and this is 12 cents for 12 words in England; in Germany, 17 cents for 10 words; in Belgeum, 9 cents for 10 words. Germany's charge is the highest, I believe, in Western Europe. Now, what about long-distence teleerams? No European country outside of Russia has any long distances like ours, and when a tele- gram is sent three or four thousand miles in Europe it becomes an international telegram, and charges on international telegrams are based on different principles, and are, very properly, higher than for domestic telegrams. The receipts on international telegrams must be divided between two, or more countries, and are higher on that account, as well as for other reasons, on the same principle that it usually costs more to send a parcel a given distance when it passes through the hands of two express companies than if it is carried the whole distance by one. It was further asserted that the telegraph service was a loss to England. It was not mentioned that this is due to two simple facts: One is that England paid an exorbi- tant price for her telegraph, and that the in- terest on this outlay is reckoned among ex- penditures, and the other that there had been a recent reduction of fifty per cent, in charges, and, like postoflRce reductions in charges. The first effect of such a measure is sure to be a loss, although in a few years a profit results therefrom. Neither was it men- tioned that other countries derive a profit from their telegraph service. All these are a few simple elementary facts, and yet, through ignorance of these, a people may be easily deceived. The Sun Tuesday mentioned a matt«r in this connection which is worthy of serious consideration, and that is, the in- creased patronage. The Sun did not commit itself, but simply called attention to the mat- ter. Other newspapers have, however, sponen of it as an insuperable obstacle in the way of a government telegraph. Yet familiArity with economic discussions ought to show one that there is another aspect to the case. Our fed- eral civil service is bound to increase, and there are those among my readers who will ,' f lire to see it double its present dimensions. This is inevitable, because the expansion of the country must brinarTwlth it increased fed- eral business, unless. Indeed, all government business, army and postofflce included, is handed over to nrivate corporations! Now, it strikes me that the real damrer la this: that our civil-service force will gradually and im- oerceptibly grow until we have 100,000 more federal employes than at present. That is pre- cisely similar to what has happened before. A danger which oreeps upon us unawares is a serious one. Should, however,|our federal employes be increased by 18,000 at once, that ^TOuld force upon the attention of the people the principles of sound administration, and the danger of an abuse of political power for partisan ends. The result could hardly fail to be most salutary. Although this is a somewhat longer digres- sion than 1 intended, I do not regret it, for > there are certain aspects of the tariff ques- tion which can be profitably treated in con- nection with other problems of the day, and they will be so treated in this and some of the succeeding articles. The whole topic of the desirability of a wide diffusion of economic knowledge was suggested by the receipt of a protectionist campaign document while I was writing my last article. This was ad- dressed "To the Laboring Men of the United States," and is so full of popular fallacies that it requires a somewhat lengthy treat- ment. It is one of the things which are only possible because in industrial affairs people have not yet got so far as the multipli- cation ' table, and do not know that three times six are eighteen— not nineteen. It is not the question of free trade or protection, but the question of valid arguments, and national action must proceed from such argu- ments. Again, it seems necessary to protest that no one contemplates any action which will overthrow manufactures that have grown up under a protective tariff. There are rea sons w hy that should not be done, and why all the industrial interests of a country would suffer If that were done. These will be presented In due time. Now wo are con- cerned with the campaigil document which lies before me. "The receipts of the government," it is stated, "are mors than necessary to pay the expenses, consequently they must be re- duced by the enactment of new tariff laws. The democrats propose to lessen the receipts by reducing the tariff, and this will flood the country with foreign goods made by the pauper labor of Europe, and must necessarily take that much labor from our American workiugmen. The republicans propose to reduce receipts by abolishing the internal revenue tax laws and raising the tarifi^on foreign goods to such a point as to prevent them coming into our country, and thereby give to our workiugmen the right and priv- ilege of making goods to supply our home marKets. Every article brought Into this country that took ten days* labor to make it takes just ten days' labor from our people; this fact is too plain to be contradicted. The free-tradd capitalist wants tho tariff reduced because his money will then buy more of the products of labor. In other words, he says to you: *I want the privilege of buying wherever I can buy the cheapest, and with free trade you must work for the same wages now paid the pauper labor of Europe, or I will buy European goods.' With a tariff that will protect our American iiidustrles there will be such a de- mand for labor that legally organized labor can demand of their employers fair and just wak'Gs; but with a low tariff you render it impoaaible for your employers to pay you good wages, because they must sell their products in competition with the products made by tho low wages in Europe. In the first nine months of 1887 there were about 1.500,000 tons of foreign iron brought to this country. Now, if this iron had been mule here it would havo given out $33,000,000 of wages to our own workmen, and that would havo employed during that time 80,000 men. This is but one article of manufacture, and so it is with a multitude of other articles now coming into this country, but which your votes can keep out. This country should make laws to protect our own workmen, and not the workmen of Eng- land and Europe." This opens up a groat question, the ramifi- cations of which affect our daily life in a thousand ways. I moan the relation which exists between spending money and giving employment to labor. This will be consid- ered in our next article. PROBLEMS OF TODAY. THE SEEN AND THE UNSEEN. THE OPPORTUNITIES FOR INDUSTRY. The Industrial Problem Further Dis- cussed by Prof. Richard T. ICly, of Johns Hopkins University, [Written for the Baltimore Sun.l ARTICLE XV. Shallow as he was, Frederic Bastiat un- doubtedly said many good things, and is en- titled to ourferatitude for having cleared up, as no once else, some of the first nrinciples of economics. Perhaps one of his happiest efforts was his exposition of the difference in industrial society between that which Is seen and that which is not seen. A worthy shopkeeper, Jacques Bonhomme, is enraged because his careless son breaks a pane of glass, while the spectators who gather about the scene offer the father this consolation: "It is an ill wind that blows nobody good. Everybody must live, and what would be- come of the glaziers if panes of glass were never broken." vv ho among myreaders has not heard similar expressions of opinion? And how many of them are there who do not feel that there is a certain justice in the view of tho indifferent' but good-natured rsoectators? I remember a report which reached me three years aero that u warehouse in Baltimore was destroyed by flre. I was in a small company at tho time, and a young woman, of at leest average intelligence, made the remark, *'It is time the old building did burn down and give workincrmen a chance to get employment- It has been standing the last fifty years." Some time previously a good friend of mine, a lady of considerable means and a devout member of one of our leading churches, told mo that she considered it the duty of the wealthy to spend money on dress in order to glvo employment to labor. A clergyman— J whom I esteem— was recently reported in ball on religious grounds, but admirtinp: that after all It was a i?ood thinfr for dressmakers and other employes who were ent^aped on the elaborate toilets, as well as for the mer- chants, who sold thousauds.of dollars' worth of poods. At the close of my last article I made a quotation from a hi^h-tariff campaicrn docu- ment to tne efTect that 1,500.000 tons of iron brought to this country from Europe oueht to have been produced at home, as la that case $33,000,000 would havo been spsnt for wases in our country and 80,000 men would have received employment for nine months. Let us examine these various opinions with some care, for they are all closely related. Certain phenomena are seen injeach instaoce. The glazier receives six francs for putting in a new pane of glass, and he is happy because he has an opportunity to earn some money. The warehouse burns down and bricklayers, carpenters and masons are employed for several months in putting up a new buildiuff. The wealthy iady spends !5200 for asiritrle dress, and the merchant who sells the material and the dressmaker are both pleased, precisely as those are delisrhted who minister to the wants of the belles at the Charity Ball. The hi)?h-tariff people shut out foreign products and point to our busy workmen eneraered in manufacturinpr those thing's which, but for the tariff, would be im- ported. All these things are seen and ob- served of all men. but there are other phe- nomena of equal importance which pass unnoticed. Jacques Bonhomme, the shop- keener, was just on the point of orderingr a new pair of shoes for his wife, for which he expected to pay six franca. These shoes be is now unable to order on account of his loss, and the shoemaker misses his op- portunity to earn six francs. This is that which is not seen, but it is beyond all contro- versy that no additional employment has been Briven to labor because the Ciireless son broke the pane of glass. The shopkeeper's wife is, however, put to the shame and morti- fication of wearinc: old and patched shoes; and from all this we see that society is poorer OQ account of the broken pane of glass. There is a smaller quantity of commodities to be enjoyed by the various members of the community than there would be otherwise, and suffering ensues. So it will likewise be discovered that loss and waste in the other cases are simply loss and waste, and no amount of sophistry can ma&e them any- thing else. We see the men putting up a new building on the site of the old, but that which is not seen is a decreased expenditure somewhere else, and yet there is scarcely a doubt about this. Possibly the insurance company which sustains the loss decides on that account not to construct a new building for its own use as it had intended, and thereby the demand for labor is diminished. It is more probable i that it is obliged to refuse a loan which some {builder desired for the purnose of carrying forward improvements. Or, the company may be obliged to lower dividends, and on account of diminished means people buy fewer bats, shoes, coats and oiher things which they need My good friend who spends 8200 on a single dress sees em- ployment given. She does not per- _ceive tpat, if she had given ._ twenty xea!i' quite as much work would have been (riven to sewing women. Extravagance nnds no justification whatever on the plea that it gives employment to labor. A possession of money sunply means that a person has con- trol over a certain amount of labor and can- ital, which may be directed in any channel one pleases. I may so use my money that labor and capital shall minister to my wants and to my pleasure, or so that labor and cap- ital shall minister to the wants and pleasures of others. When I do the one I show that I love myself; when I do the other I show *^nnJ;n^°^® ^^ neighbor. One man snends $200,000 on a private house; another S300 000 on a public library building. Labor is em- ployed in either case, but in the one an individual derives a selfish advantae-e there- from, and in the other the advantage is gen- erously conferred on the public. 1 know a school in which poor ignorant people are trained to useful occupations at the same time that the mind is instructed. The sum of $1,500 endows a permanent scholarship and keeps one person here for all time. That $1,500 furnishes directly as much labor as the same money spent in a feast, and indirectly it furnishes a thousand times as many oppor- tunities for employment, because craduates go forth from this school skilled, intelli- gent and honest laborers, increase the wealth of the country and holn to orsranize industry on a solid basis. I have known $1,500 to send one hundred boys from the slums of New York city to the West, where most of them— not all of them.but the great majority— b?came hon- est, respRctable, hard-working, citizens, who all their lives long furnish opoortunities for labor in the commodities which they pur- chase. When the boys were taken West the »1,5U0 gave employment to labor on railroads and hotel's and boardins-houses, just as much employment as the same monevst)eut on charity ball costumes would have* given and thereafter it furnishes a thou -lani times as much employment. The faithful, c-mscien- tious person, who will take the trouble, finds enriiess opportunities to spend m-in'^'y-oas to help others, to lift them un and prepare them for useful careers, and needs n«'ver spend money on self to give emplovment to labor. My friend mny he risht in spending »300 on a dress. She must answer for that to her own conscience; but she spands it, if she understands the consequf^nces of her own acts, simply because she wants a beautiful dress, and considers it in this instance justi- fiable 10 prefer her own happiness to that of others. No. V let us return to the tariff. We see 1,500,000 tons of iron enter the country Tnat is seen. We fail to notice that in payment for this thirty million bushels of wheat leave the country, and that the farmers find a market for their produce which would other- wise be closed. Our business men are talk- iue- about foreiirn markets, but is any one insane erjough to think that we can sell to foreicrners unless we import from them? And what would be the object in such procoed- inars— in always sending goods away from the country and never receiving any? The thing which is not seen is that If we stop iraporiinir we must stop ex- Doriing, and that if we stop exporting ""-- deorive our own home labor of employ tn and transfer employment which Amer la'or might have to the socalled na; labor of Europe. Ought it to be necessary to dwell on this in Baltimore? Would wo not have a flourishinsr trade with South America In our own city did not th' tnri<? r-.',,ir.- it i f V .' All ,. ut; ttiftt li' cause w.:» cari- " 'C inn It from South America we cannot export them? For how canshipplnfj thrive u:ile8s it has cargofs both ways? And a-* we cannot export to South AnierlCB. are wp not depriviuic Americau labor of employ- ment? Is mere any ono who would like to see us ahs^THin from all dealink's wi: h iorei*rn c<mn- trlos? If It is R-ood for us to krt-p all our money at home, why is it not sroo'i for one einple State to abaiain from all dealings with otherStates? And if jfood for a Srp.te, why not for a city? Let us build a hiu-h wail about Baltimore, and shoot the man dead who comes In or crocs out. That would keep our money at home. But whv should not each famiir be sufficient unto i.self, and ke^p all its money at home? I am a practical farmer. Is it not foolish for me to send money avTay from home for butter, etrars, poiatofi?, chickens, haras and '"he like? I could raise them if I desired. Why not do this? Be- cause luy time is worth more for other pur- poses. Ir is only in a state of complete bar- barism that each person is sufficient unto himself and avoids exchanges with his neigh- bors. JNow If it is prcifltable for an indi- vidual to find out those tbines for which nature has adapted him, why is it not ailvantaireous for the people of a city or Slate or a nation to find out those things in the production of which the Aimijfhty has given tnem facilities, and to exchaukre surplus products with the surplus Df. -ducts of other cities. States and nations? Surely it is thus that the most abundant op- portunities will be offered to labor to find employment; not merely that, but tne lare-cst possible returns for its services will thus be scoured. THRIFT AN1> liXTKAVAGANCE. Importance of General Information on Practical Afiairs Discussed by Prof. Kichard T. Ely, of Johns Hopkins University. [Written for the Baltimore Sun.l ARTICLE XVI. "A faulty political economy is the fruitful parent of ciime." This is one of the wisest of I he many wise sayings of Dr. Thomas Arnold. Everybody acts upon some theory of political economy, for it is impossible for ■I rational man to olay his part in industrial society without having some reason for his actions. A man who acts without reason for his actions we call either an insane man or a fool. But as soon as a man puts his ^^eaaon for an indusjtrial action into words he explains the economic theory which under- lies the action. Everybody must in the nature of thing-s be more or less of a politi- cal economist, and consequently more or less of a theorist, for to act without theory and without reason are one and the same thlncr. Of course, the reason priven for an action may be valid or it may in- voive all sorts of fallacies; equally, of course, the theory of industrial action in a ptven concrete case put forward by a business man may or may not be sound, but the moment he beu-ins an arjfument he be- comes a theorist. Economic theory treats simply of the principles which irovern action, and In its last analysi.^ is based upon ex- perience. An esteemed contemporary of The Sun, published within a thousand miles of the City Hall, has of late bad much to say about free- trade theorists and professors of political economy, who are teaching their classes free-trade doctrines. I propose to make no special comment on these various squibs, which are both amusinsr and enter- talningr, but it may bo well to say a word '|»abouc the claims of poiuicai economists m general, and about the basis on which they^ rest, few these are involved sooner or later in all economic discussions. Political economy is concerned with the facts of industrial life which it attempts to arraog-e. classify and explain. This involves a treatment of past industrial life, the forces which have been at work and which have made it what it is today, finally, an examination of those forces now at work and which are shapinpr the future. But why. It can be asked, should political economists presume to instruct business men about the facts of Industrial life when business men are all the time eueaaed in industrial life and make it what it is? Let us see. You con- verse with a business maa in Pittsburir, Penn- sylvania, about those aspects of business which concern the public, and he will very likely crive you a theory which he will claim is impretrnable because it is based on facts with which ne is thorou;?hly familiar. No political economist can con- vince him, he will tell you, that his theory is not sound, for ho knows that it is. Very well. Now, pro to New York and converse with a busincs? man, and he may dogmatically lay down exactly the opposite theory, of which he Is quite as positive, be- cause, as he says, bo knows the facts. This may suergest an explanation of the functions of the political economist, and when even in the same city you find business men of differ- ent occupations holdinj? the most contradic- tory opinions, it becomes evident that it would be desirable to have a class of men with a largrer acquaintance with facts to stand between these jarrine: factions. This is precisely what political economists attempt to do. A thouprhtful business man must often feel that he is in the position of a man in a dense forest, who, as the proverb has it, can only see the individual trees and not the forest at- all. A political economist is rather in the position of a man on an elevation who' overlooks the entire forest and erets a better general view than one in the midst of it, and can better tell him how to escape from the forest. But this also suffgests something" else. Tlie more minute and detailed knowledge of the man in the forest itself ia of Importance. Should he, without reflection, follow the directions of the man on the hilltop he might find himself hopelessly stuck in a quasrmire which could not be seen from a distance. Both the gen- eral and the special knowledsre are required, and political economists who fall to accord due respect to the special informa- tion of the man of affairs fall into most grievous error. Mayor Latrobe acted with a full appreciation of this fact, as it seems to me, when during his last term he selected the members of the recent city tax commission, for he chose a repro- senlative of business, a representative of the law and a representative of the science which deals with taxation. Industrial society, or. If a more popular term Is desired, the business world, is a thing which grows like a piant or an animal, and careful observation, coupled with accurate inductive and deduct- ive reasoning, enables us to discover tho laws of its growth. Its health and its disease. No ' organism Is, however, more complex, and political economy is still in its infancy, and j while worthy of attention, its teachings must undoubtodly be accepted with more or less caution. Political economists, it is true, differ in important particulars, but I suppose these differences are ^ot more radical than those oC physicians, or in fact than those of many ^ber scientific men, while it may be said that Jhose respects in which there is substantial harmony amonsr them are still more important th&n. their dif- ferences. Now, when, as is the case in the general view taken of commerce, there is soraethins: approaching substantial^nanimity amoncr economists. It is not unreasonable to claim that this view deserves at least as much attention as it receives. When a polit- ical economist seta forth his opinions it should be remembered that these are not merely his individual opinions, but opinions formed in the liffht of a science, which, if it is still in its infancy, has nevertheless been pursued for one hundred years, and has re- ceived contributions from some of the bright- est minds of modern times. Nor, when it is considered that the science which deals with human beings, livlntr In society and consti- tutinff a livintr ortranism, is the most com- plex and difficult of all sciences, can it be claimed that its progress has not on the whole been encouraging, while It is probable that this progress is at the present time more rapid and more hopeful than it has ever been before. It is further noteworthy that politi- cal economists have not been "mere theo- rists," if by that is meant men who have had no practical experience outside of their own specialty. I have, on the contrary, been struck by the fact, in reading the bioirraphies of political economists, that they were as a rule good business men, some of them win- ning great distinction in pursuits which are ordinarily called "practical." There is Ri- cardo, for example, who on the English stock exchan£« outstripped all his competitorij and won so laree a fortune at an early age that he was able thereafter to devote himself exclusively to intellectual pursuits. Few men have done more for economic science, though, stranjre as it may seem, this practical business man was the most purely abstract and theoretical— usine that word in an ordi- nary sense— of all political economists, and did barm in leading political economists away from a careful observation of actual experience. Then in England we may also mention Henry Fawcett, professor of polit- ical economy in the University of Cambridge, probably the best postmaster-general Bnar- land ever had. Kobert Owen, ex- tremist and radical though he was, made, it seems to me, some impor- tant contributions to economic science, and he was for a long time regarded as the most successful cotton Jmanufacturer in Great Britain. He was often spoken of as a "cotton prince," just as we eall certain n)en railway kincrs. One of the most excellent works on banking was written by J. W. Gil- bart, formerly director and general manager of the London and Westminster Banic, and of the great banking houses of London. "Lombard Street, a Description of the Money Market," is one of the standard works in economic literature, and it was written by "Walter Bagehot, a practical financier, as was "The Theory of Foreitrn Exchanges," the author of which is the Rlarht Hon. George J. Goschen. When we turn to Germany we can find scarcely one economist of note. } I think, who has i! en some prao- t tical part in the gnvertmuut of his country, or of some of its local political units, and that, go far as I have learned, with uniformly beneficial results. Political economy has until verr recently been in a backward posi- tion in our own country, but it is now rap- idly takin? a better position as a practical science. One of the American contributions to economic science is the work, "United States Notes," by Hon. John Jay Knox, whose reports as comptroller of the currency are among the best tbini'S writren on our bankinir system. As oresident of "The Bank of the Republic," in New York, it will be ad- mitted that Mr. Knox is now doine the worK of a "oractical" man. Our national banking system itself, one of the best which the world has ever seen, is to no inconsiderable extent due to Dr. McVickar, formerly professor of political economy in Columbia College. Gen. Francis A. Walker is today one of the most distioeruisned political economists, and as he has, in addition to other service**, brousrht th(' Massachusetts Institute of Technology into the front rank of such institutions, he ought to receive the respect of the com- munity as a practical man, for I will venture to say that to rnanaire successfully a trreat institution of learning requires as profound a knowledge of men and affairs as it does to build up a creat commercial or manufnctiir- ine es'Hhl'Shment. Dr. .Tame-, of the Univi^r- 8ity of Pennsylvania, has written the best treati'je in tue Eiikrl;sh lan^uasrt^ on "The Re- lation of the Modern Municipality to the Gas Supply," and by his opposition to the sale of the municipal gas works of Philadel- phia has saved that city millions of dollars, which strikes me as an extremely practical thii)»r to do. The best treatise on public debts in any language is the work of Dr. H'^nry C. Adams, pri fessor of political econ- omy in the University of Michican, and to write an exct llent work on so practical a topic is certainly practical. The truth of the matter ls,political economy is a body of knowledge as yet hicomplete and imperfect, still of vm^t importance, which has been built up by the labors of those on the one hand who were primarily business men and secondarily political economists, and on the oiher hand by those wno were primarily political ec 'nomisis and secondarily Ousine^s men. While it may be true that- political economists have often failed to give due weight to the special detailed knotvledtre of those who are exclusively men of affairs, it is equally true that we have suffered serious loss— a loss amountiiie to hundreds of mil- lions—because business men have so often failed to master general economic principles. Business needs political economy, and polit- ical ecoeomy should dilijrentiy appropriato the teachings of business. Dr. Arnold said— to rt- cum to my text— "A faulty political economy is the fruitful par- ent of crime." More might have been added, f</r it is not only the fruitful parent of crime; it is the most fruitful parent of foily and consequent misery. The last article in this series dwelt upon the importance of phe- nomena not readily s^^en. It seems that a few points are not yet clear. It is said "it is after all batter to spend one's money in ex- travagance than to hoard it up." Money "iioarded up" and "locked up" is something about which we hear every day. What is meant by these expressions? Who hoards up money? No one in these days— at any rate very tew. Money is put in banks. Does any one of my read'.rs imasrine it stays there? By no means. It is used in business and i!?ives employment to labor. Take our savings huiiks. In one of them there are denosits of:>over sixteen mil- lions of dollars. la this monoy hoarded up? Bv no means; it is all used. Tou Fee money ^ employed In building In Baltimore, and you say it is a srood thinjf, for it makes business and drives employment to labor. Where did that money corau from? If any r* ' f this ariiele will tallcxTith practical i and practical bank-^rs, I think he will soon be convinced that that is precisely the money which is in popular parlance hoarded up or locked up. One of the first thinc«i which oueht to be tauyht In schools is that what is saved is spent. To srtve money does not mean to ■- It simply means to spend money \vay that soraethincr is left to show for it. Take two mechanics, each receivlncr hiffh wajres. say f4 a day. Ono spends his money in having- '"a srood time." People like him; they smile upon him— while his money lasts, but no Jofj^er— and eay ho "keeps ! in circ-ulation." The other mechanic iUl, Pelf-tienyiner, fruural. "He hoards hi^ money." but he builds him a home. So it is set'u when one groi s below the surface of thmes that the money saved has after all been spent, and just as much employment has been piven to labor. At the end of ten jeHTs your "trood fellow" is verylik<dyim- roverisNud and broken down, and the thrifty mechanic has shown himself after all the better roan, the better father, the better cit- izen. I know of nothiuK- rcoro pernicious in its consequences than these shallow judtanents which we hear about spendiiiflr money and •keepine it in circulation." It is the faulty political economy which makes the man more popular who spends ten thousand dollar? on a feast than his neicrhbor who "saves" ten thousand and builds six homes for workiugfmen'a families. It was this faulty piditical economy which made the third Napoleon, the curse of his country and of his treneratioG, so popular in his excravaarance, while the frugal court of the Prussian mon- arch was settinjf his pecjple an example of industry and thrift which are now makinc them both wealthy and mie:bty, dreaded by Entrland In the mdusirial field as much as by France in the military Held. It was this fHulty political economy which led the same esteemed contemporary to which I have already referred to suargest that a crreat and prinditie: monopoly was not so bad a thing after all, because its head men spent their moncv "ruvally." nsszaer PROBLEMS OF TODAY. THE DANGER OF MONOPOLIES. IN FELLOWSHIP WITH SOOULISTS. The "Trust" Unoousciously a Kevolution- ary Sentient, as Shown by Prof. Rich- ard T. Ely, of Johns Uupkius University. LWrittun for the Baltimore Sun.] ARTICLE XTII. I have dwelt upon the importance of polit- ical economy, and have endeavored to show that political economists are practical men. I may add that political •conomy, as it Is pur- sued today, is a most intereatiufir study. •■Every bet^irming: is difficult," aays the prov- erb, and this holds with reference to politi- cal economy: bit when ono once conquers the difflcultios of the besrlnning, no Intelloc- ,tual pursuit can be more fa^joinutlngr than i that which is concerned with an examination into the nature, the doveiopmout and the de- •Irablo constitution of industrial 8ool«ty. It Inay bo doubted, however, whather any one of ihe many topics with which It deals is of more absorbing intereit than monopolie:", ■while it scarcely admits of controversy that no economic topic is less understood. It is uL'cceaary in a aiaousaion of monopo- 1. i to divide them Into classes, for the priu- icipleg which hold for one class will b» found [In: ' ble to another, and any effort to hi . monopolies together, and to treat them "all alike will produce confusion, both ' In theory and praciioe. Monopolies are now /j disouased daily in the press in thaJr oonnec/ tion with the tariff, and trusts, und syndi- cates, but it cannot be snld that the; discua- Blt)n produces a Kreat amount of light. Itis, however, accompanied by prowlr/g: indii?- nation as the evils of certain monopolies ai more and more k»anly felt, but tkis indlg:- tiation is as likely to produce harm as cood, UnlesB it can be directed iat6 propar chan- nels. While it may b« claimed that the indig-nation is rlirhteous, it is indeed a bold man who would be willing: to say that it Is enlishtened.i Monopolies with rrsprot to ownership and {management may ba divided into two classes, [public and privaif. The postofRoe is a pub- lie monopoly and Is a national blesslnsf. The telet^raph is a private monopoly, and the fact |that it is so is n<;ihlnir less than a national |C.'ilamity. Private monopolies ar® odioug. jThey are contrary to the spirit of the oora- jmon law and of American institutions, and wherever or whenever they exist, are a per- petual source of annoyance and irritation. Public monopolies, on the other hand, are productive of vast benefits when confined to their own proper sphere. Modern civilization I would srive place to anarchy should all public monopolies be abolished. The army and tjavy and police are public monopolies, and when we see e-reat corporationii,a3 in Peansylvania, lemploying- orivaie armies of their own, mer- cenary troops eneaaroU of a citizen of another State, thinkintr people look upon It with alarm as incipient anarchy of the m- st malie- nant type. We must, then, draw a sbaip line In all our discussions between public aad pri- vate monopolies. 13 ut monopolies may be divided infto two different cUsses from another standpoint. Certain pursuits are monopolies on account Of their own inl)er«»nt qualities. Thwe we call natural monopolies. Legislation neither i makes them monopolies nor oan it Tjrevent them from becomiijg: monopilles. All tkat legislation can do is to recognize the fact that they are and must rem'.in monopolies, and to act upon it. There are other pursuits Which aro made monopolies by leci'latlon, at)d these we call artificial naonopolies. Patents throw around thos© eng^atred In the manufacture of certain articles a barrier which shuts out eompetition. The production of a new American book ia an artificial monopoly, rendered sueh by a copr- rip-ht. Legislation could, if it ware tboutrht desirable, abolish both patents and copyrlsrht's, and thus do away wita thoee monopolies which they create. Swltzerlan* is an exaraple of a country which does Hot rrant Dateats, and thus does not create by means of patents artificial monopolies. Tariffs, which shut out foreign oompetition, sometime* enable home producers to form »i|rantlc combinations which crush in a e^rasp of relentlMS cruelty every attempt at compatitien wlthia our own borders. These combinations could rarely embrace the entire elrllizod world were every feature of protectionism re- moved from our tariff letrialatloa. These pursuits are, therefore, also artificial monop- olies, and they are daily incre.tsinsr in num- ber to the consternation of tbe public. Per- haps 1 outrht to make an exception when I say that tke increase of monopolies of tiie lartiflcittl sort Is viewed with alarm by the public. Socialists view it with satisfacaou, ;because they believe that competition in jlndustry Is an evil which oucht to toake way jfor complete and perfect monopolr In every fpursuit. Socialists see in trusts and syodi- catps nothing but the renaorseless maroh of inouopnly, whicG Vbjay aayio luut:. ptwaiotea will never cease until ooaoo«trfttlO!v of 'busi- ness become* eompjet*. Th« last stasre In this evolution, sccording to tbeir doctrine, is the transfer of monopolized business to public control and the conse- quent inauaruiation of the 8oci»ligtic state. The capiralista en^asred in thase com- blnatious are hailed by 80ol»li»tlo writers as fellow-social is I?, and the socialistic ten- dency in trusts and other artificial monopo- lies admit of no doubt. When ■»»• come to a discussion of artificial monopolies we, in fact, touch the only really daajrero us social- ism in the United States. Those who spend enerpy in figrhtins' the socialism of thtj doc- trianaires who write books and deliver lec- tures are, in my opinion, simply Don Quix- otes attacking: windmills. "The tramo isn't wort the candle," and that is tiB« reasou why— if a personal eipianatioa is in order— I have never spent muGb tlm« in criticism of the socialists, I hava believed there were certain truths in the teachiDKTS of scientifio socialism which it is well enough to notice, but the prospect of professed socialists evar raininc an ascendency in America baa seemed to noe BO remote a continsfsncy tbat I have never thonjjht it worth the while to spoil pen and paper and waste ink in exposing their errors. The results of years of study, reflectioa and Investigation have convinced me that the only danRcrous socialism in America is monopoly controlled bv private greed. This is sufficiently important to justify us in piviusr some attention to the views of one of the most rational socialists, who sees the approaching: triumph of bis faith in the "trust." I refer to Lawrence Gronlund, who, in his now work, *'Ca Ira, or Dantoa in the Preoch Revolu- tion," speaks of the socialistic tendency of business in America lu these words: "Of the movements by individuals, the most sitf- niflcant is that toward production on a large tcale. By •production' should also bo under- stood transportation and commercw, for they Edd value to tne product, just as well as doas the labor of tl3e oparattves on raw materials. All that is necessary here is to note this ten- dency, for all admit that production every- where—the most trivial as well as the most important— is bolnsr concentrated in the hands of richer and richer employers, of larg-er and larjjer corporations. "But there is one feature of this con- centration tbat deserves special mention because it is novel, and as yet It seems confined to the United States, where the capitalist system Is more unfettered tdan anywhere else. It is what is called ihe Trust. This is monopoly In its most concentrated form. Suppose the presidents of all the in- corporated companies In a >?lven branch of industry in the whole country assembled, and one of their number in whom they all have perfect trust- hence the name— selectei to perform »he function of abtoluii manaarer, with power to detereiine, autocratically, how much each company is to produce, and ooa- sequentiy its share in the proceeds, aiad rou have the 'trust.' It differs from a 'pool' In this, that none of the parties can withdraw. The individuality which the law con- fers on each company by the act of incorporation is merred in the *trust,' over which the Si ate hKS not the least control; in- deed, the whole arrangement is kept as per- fect a secret, as far as the nubile is concerned. as possible. ***** It is easy to see, that, whtn ths'SO 'trusts' become arenerai, and that is only a qusstion of very short time, they will rovolutlonizo our present sys- tem, for they mean the destruction of cotii- petition, which taea will ds utilized simpiy to crush their weaker rivals. Some of our newspapers, on jrettinar wind of these 'trusts.' have become alarmvd, seeinr iu them terrible future dancers to the State, and that, indeed, they would be; they would institute a new slavery, the most formidabio slavery tbat ever existed, If evolution would stop there But it will not. That la whv fM- «,^J^ '^ lis at the bottom. an\^c^^ioJ'o^eThVSnl' . talistsontrafi-ed in it are unconaoinn-?,, ♦?'" ■ .greatest revolutionists m 'the w^d'^^' '^^ coi?RTob^"ori^.^;jrn?f/a't!iT; "^^ » mode ofproouctim int^futun"'^ facucal CUSSion of monopo!l«8 No nVnhW ^# f ^**" cause ^an7^^ coZt^^l,'^Sf''Tol^o^^^^^^ protect orumi. mn»t dea^rvlnj of at?int^on We Will Dt>irln the discusaioL Vf minonZ' by a treatmpRt of naturoi mr^W^i^V "^^^ cause that will help to cWr th« fl^^ m*'.^^ render tho cfcaracterijties of ^artiflcSkl man, but was itiven to man ready m«?ip ^7^ was a gift of nature, or, if J^S Seitn If God. 5ut go much w^s fflven, and no more ?akeawav°fril*it"i*° ^"'^ •'^^ ?oTanTor more attention than it ^ VeilivfuJ i Vl5 Kladlv rak« iirw tVt. re<3aiviiktf. I would caref ullv t*y.^ it^^ QU«sttion and discuss it i^areruuy, were it not so «r»p» n nii««f ir>r, t* equafe Irh^yVr^ZriuS^ efforts-fnad- are encourasine It <? tn hi h.^i"^'^^'*"'''^ further step wlfle taken anStharthl^^' ^ be tlfeVnT/tmie Je'n^^kT o1"fhr ^^^ Sfv7bee"nT;ne°^o?'t>'*^l- ^^^orfunat'e 'al u/lv feltn^iS'S*' *^ "•*^"''*^ monopoly. Tbe u^ feature^ his^^jiutioajfihjspro^^^^ conflscaiion of the rent of land, but the view which Cardinal Gibbons-if current reports may be trusted— takes or Ills comptcraniated measure seems to me most sensible. I do not believe it ^T, ; ^JJ^ appear to the American people a JUHt thinp- to take the property of land- owners without compensation. I do not be- lieve that the moral sen^^e of the American P«^f, . will ever rolorate any serious steps looifin? to the confiscation of thisspsciea of property. To me-whatever false accusatioa mf:y have been brought arainu; me to the coi trary notwitbstandintf— it has ever ap- peared a cruel and unjust thintr to do, and tuus 1 hav« al,vavg t.iufht. However, it seems to me - as to Cardinal Gibbons evi- aently— a waste of breath to refute the errors or Henry George. Ttiey are not a living' issue. It is, however, worth our while dill- Siiiuly to read a book like "Proeress and ii'overty," and to jjather from it the useful lessons which It undoubtedly teaches. With , this I leave the land question for the present and pa«S over t o othor natural monopolies. "LU TJ »F COMPETITION. 1 . Not Always a Desirable Thins— I'rof. Bichard T. iilly Uiscourses Upon the Subject of Natural Monopolies. rWrltten for tho }J .itiinore Sun.l ARTICLE XVIII. i •ooftheiiJ ■ iifindifiruRtion with \sj ...uuopolies Hi. -. v'dU by tbo pul)Uc aecumulaies daily. Mr. Rnyoer, who so ably n • : > ' ta a Maryland constliuenoy, Has tLVUfiuc u bill into Conpreb's for tlie r,iprea- Bioii of trusts and other coriJorat* oomblna-. tloas, wbile an iavestitration into this subject liaa actually beeti oiUered. A sitnilar bill has been brought forward in the Lacislature of New York, and in Illinois proceodiutrfl a£rair-St the Cbicato Gas Tru^t hare been insiituted. Can any question be mora thorousrhly allro than lUi»? Ami Is it not worth wbU© to care- fully consider the subject of monopolies in all its ramiilca'.ions in ordrr that we may kaow how to deal with it practically? The truta it that wo have coaie to % critical period In our ecojiomic doyelopmont, and aerent opportunity !<< offered our various leg- i " bcdia.< to do something: of permanent 1 for th« peoDi'^ When a learned judffe, well-known iu Baltimorf, heard some tiiueaiTO that I Intended to write a series of artlules on corporations, he «t;nt ms tbli n ve: "Lf.y on and spare not." The timo 1 :iie when lecrislators and Confrre«smen , mav "lay on and spare not," and f«el sure that the paople will support th(»m. I dislike tt) mention tb© name of Cnrdinal Gibbona airaio, bec«uie I wish to k«ep this i«ori©i of articlPS as free from pcr«onalitt«B as oOMible, but I cannot refrain from mention of his able paper on the Kuiahts of Lshor, which, it -Tastome, is a documentor historical im- ^-rcance, and that on this account: He said in that; loiter that the time had come in the world's history when the church ghouid •eej£ an alliance with the masses, and should abandon special efforis to conciliate the mighty m war, the powerful in trade, tho great ones of tbia earth, because In the future tne control of the destinies of the world I esttd with the people. It seeraa to me that tnere never was so auspicious a ti;re for a irreat popular ieadov as now. Such a one, cutting loiso from the influence of cotpnrato combinations and all special In- leiwats, could become a veritable Moses for tho American people and win Immnrtal fame. But wno has the moral character, couplod With the qualities of leadership, on the one hand, and. on the other, the sirf=n»rth of in- tellect rtqui'-iie for a correct /ipprehonsion of our social, ludu*trlal and political situa- tion? It is too much to be feared that this opportunity will be allowed to slip by, aiid throuifh failure to dlscrlial- Dato between various classes et moeopulied and to treat eacti by itself absolutely noth- ing of periiianeut utility will be acooni- piished. The (Erranjrers in our Western States gained complete control of several Le/flsla- tures and endeavored to restrain corporations from domiuailou in the future. Wut wfeat did they aououiplisb? Something undoubt- edly. Yet it may be questioned whether cor- porate domination was ever te marked in oar West as it is today, ana everyone knews that a considerable poriios of what was done has since been undone. It strikes lae that the farmers have been worited in the conflict. Now, what is the reason that they bare teeen driven from their vantare-rrouud and routed? Simply becauss liK^y did not under- stand tno mature of tue aubjtctd with wnieh they were dealiusr. When we hear speeches on menopoUes I DOW, and read articles ou oombinatiwHS, euo tiioufht is found to be cletrly hrouffecfer- ward, and onlv one. It is thia: Conapetiuou |/» our Balva .^ a tke life ef trade; combiia lous preveat ooaapetlilon, cone^qneutly they are injurious antf skeuld be abolijhed. St.ftt«d in tbia reneral foria, the propoBJtion is not true. Compeiltion is net always a tood thing; compotltioa decs not ; always lower prices; on tbe contrary. It fre- quently raises prices; competitiou is not always a possltjiiity; competition has pro- duced marvelous results in those pursuits which are adaptod to oom petition, and this unwarranted conclusion is <rawn froas ilie fact that competition everywhere and at all tinios la a ifood thing. The practical daaiper which confronts us is this— that in attempt- inif to force the application of the principles of competition t« those puriuit* whioti arc not adapted to competitlOB we will mle« our present opportunity and do more harra thau Kood. There are certain businesses which are In their very nature— by reason, 1 meaaof their own inherent qualities— monopoliefl. These we call natural monopolies, and any en- deavor to regulate natural and artiflcial monopolies by the same law is predestined to failure in the future, as it always has failed in the past. Had, indeed, the problen of natural monopolies been solved lu the past, there would be few artificial monopolies, and these oould be manatred without difficulty. Natural monopolios are the basis of all aao- nopoiies of modern times. The fact that certain businesses are natural monopolies has been so amply shown both hy actual experience and by aa elaboration of economic principles that 1 can scaroely re- gard it as anythiuir elM than an evidence of iprnorance for any one to deny it; yet our habits of thougrht are so governed by princi- ples of competition that it is difficult to make this Clear to those not accustomed to eco- nomic discussions. I beg- my readers, there- fore, to be patient while t attempt to explain veirv carefully, and at as much length as tais series of articles will warrant, the doctrine of natural monopolies. It will be most convenient to begin by an enumeraiiott of those businesses which are natural monopolies. They are gas-iupply, street-car service, highways and streets, electric lighting, all rail »v ays, canals, bridges, lighthouses, ferries, docks, harbors, aatural navigations, postal service, teleirraBtas and telephones. This, doubtless, does wot include all natural monopolies, but wiiti the excep- tion of land, which will not be discussed, it embraces all the more ircportr.nt aatural monopolies existiujr at the present tlnte. It is cliimed that the regulatio . of these nat- ural monopolies must be different from the rrpulailoa of commerce, agrriculture aad manufactures, beoauee the underlying principles of these pursuits are peculiar. Now, it must not be supposed tiiat competi- tion is never felt by those who are intercated in natural monopolies. On the contrary, they at; times feel the keenest kind of competi- tion. A pursuit is a natural monop- oly when It is excluded from the steady, constant pressure of competition. Whan natural monopolies are enraged in in- duatrial contests these contusti can after all scarcely be called competition, and popular instinoi feels this, for It finds Involuntary ex- pression in language. We speak ef struggles between natural nnonopolles as war. *'A war bab broicen out between the gas companies," or between the trunk line railways, people say, and It is war in it« characterlstloa. It is destructive, and has, ike war, a termination of hostilities In view. Comnetition, oa ih* other hand, never teptninatRS. It is not a fierce and destructive onslaurhc, byta steady pressure which tends te stimulate eaterprlse and to bring about fair donling. Compare a firm like Hamiit)a E.ister & Co. with the Consolidated Gas Company. The oae is subject to assaults from lime tetlme which always termiaate, and muat a? surely tersu- uate as ttjmorrow's sun must rlse.while Itoen f ^ ri scarcely eoteiTrito th". riCncrdl^ffBfflan pryh- abiiities ihftt the other can .ver termIn»tJ it i. hoped that the difference is ollar I? ii la faJiacies of those who claim that firorernm«nt br«ad Th'-f if a'^^/.^^^r" *^« fl<»ur lutS .ur«aa. idi« is a favorite arramt^nt witb inouopolis.s, and is thus .ratad^u a relent edlcorml in a journal published ic a nejJh borioer city: "Tbera ig no m*re Reason why the fiwvernment should onaratp tha tli. p.ph than run ihefluur aills-fe.* fa faor for ereiTbody uses flour, whil. It Is diuK It even three per cent. Of th. people u»« the ; telegraph " it would b« hard ta pack more buit IS a natural monopoly, ttie other not Vnri mh^.r^^^M^^.''?, ^°^ ^« "^^ applicable "Jo tSe other. Secondly, charjres for tb« ug* of « natural monopoly are part of the expsngeg of business, and, like indirect taxc^ ar« .hffted . While certain pursuits are liable to b* In- i^of ? by war tb«y are not and cannot be aub- ject to the steady pressure of competition These pursuiu fire uatural nionopo fta w« w.II be helped to understand why tSer Tre natural mouopoll&s if some of tkeir peculi.ri tifea are deacribad, and I will quote from a re cent cArefuI writer, and then pasR on to a further consideration of certain puzzlinJ fils- connected with natural £onopo- W' ^}^^'^ they supply is necessary. or Lfi'Sfu^nT"^ """'"""•'^ '•""'^ "°'= , "3. Thf article or conven lence they aunniT 18 used at the place where, and In cSSSoc^ ion wi* the planter mflchinery by Xch It 18 supplied. ^ w"ica ^ "K't?'^^^*'°^® °^conveuieuoe can in gen- eral be? JaPK.ly, if not indefinitely, Dcrefsed Japft^/ ^'''^°''^^°'^'' ^^'^'^-^^ ^^ Plaut^ and r^v^V^®*'^**"*^ *"^ harmonious arranffoment which can only be obtained by ualty,arepa?a. mouac considf rations." ^iJ,aiop«ra- PROBLEMS OF TODAY. COMPETITION OUT OF PLACE. NATURAL MONOPOLIES DEFY RIVALRY. Prof. Richard T. Ely»» Tiews on Mon- opoly and Competition Continued. [Written for the Baltimore Sun. I ARTICLBJ XIX. The qualities of natural monopolies enu- merated in the previous article are sufflcient to show one versed in the principles of indus- trial society vrhy those pursuits to which these qualities pertain must be monopolies. They can hardly be regarded as entirely sat- Isffictoryto one to whom economic discus- Bions are not familiar. It is said that Ajrassiz could draw a picture of an animal if he but saw a sinfrle bone which had once been part of its frame, because natural laws which he had grasped showed him that the peculiarl- Ties of the bone which he saw necessarily deterramed the structure of the animal which fte did not see. It is not enoush, however, for us not versed In natural science to feee a bone; we want a comnlete drawing cf the animal. It is similar with resrard to economic institutions, onlv that there is this important difference: Political economy ja not so far advanced as natural science, and the political economist has not so marked an advantag-d m hia specialty over the ordinary man. The reason why some pursuits are monopo- lies may be stated in a somtiwhat different "wav. Why do men enter, business? To make money. This is the' dominant motive, and thi s Ke eps the w_prld jroinc. I do not mean , that men are not anima!!e(i hy other luutive"* nor would I have it thoug-bt that even all commercial transactions can be explained by the pursuit of sain. I simply state that this ^°r't*^ X sufficient for our present purposes, and that, ordinarily, if a m' n in business is permanently— not temporarily, but steadily, year after year— losintr monfy, it ig a sien that his activity i« wasteful, Involv- intr a loss to the community as well as to himself. Havine fixed this fact in mind that the dominant motive in business Is pain, it follows naturally that those business methods which yield mt)8t pain are bound to prevail and to drive from the field of competition lesg profitable busi- ness methods. We have in these two simple facts an e;tplanation of natural monopoly. Business of the kind mentioned can be most advantae-eoutHly pursued under the form of monopoly. The services or thing-s which they supply ciin be produced not merely for a smaller eipeoditure of laborer capital, but for a far smaller expenditure. There is, con- Bequently, always an increase in Rain for those men intere^tPd in natural monopolies who can brinar about a combination, and this increase in gain is a c .nstant, never- ceasinff attraction, tendinj? to brinar rivals together. It is a steady force lixe the attrac- tion of )!?ravitation, and it will act in spite of all legrislative enactment. Ic transcends in power ;any State locrislature and even the federal Congress. But I po further than this. Prom the standpoint of political economy, which desires a cheap and abvm dant produc- tRn of {roods and services, the monopolistic method of production for those pursuits which are natural monopolies is nnt merely Bomething- inevitable; it is somethinpr desir- able, for attempts at competition waste the national resources and tend to bring about commercial crises and stagnation In business. We want monopoly In pas supply, water sup- ply and the like; the only question is what kind of a monopoly? Perhnps the tendency to monopoly will be made clearer by an illustration. Let us sup- pose two pas cnmpanies are competing, and each has a capital of $1,000,000. The total capital eneaK-ed in the pas business is $2,000,000. If the two consolidate, the amount of capital already invested will not be mate- rially lessened, but expen-^es will be reduced. Instead of two central offices there vriil pe one, and the dupl cation of mains will be avoided for the future. Fewer collectors will be needed, fewer men to distribute bills, fewer men to put In meters, and the in- creased output of pas willnotbeatrendea with a proportionate increase of cost. If it costs a certain sum to manufacture ten million cubic feet of eas. It will not cost twice as much to manufacture twenty millions. This article can "br< largely. If not Indefi- nitely, Increased without proportionate in- crease in plant and capital." There is. then, always a very considerable advantage in com- bination. It may be asked, then, whv are there so many attempts at competition? The answer is very simple. The number of enterprises in ffas supply which attempt legitimate com- petition is extremely small, and can only be made by those who do not understand the business. Most npparent attempts at compe- tition are simply raids on a company which has a good business, and the end in view is a division of the business and a participation In the spoils. A test is easy. When a new pas company is formed in the interest of the 'dear people" in order to give them, as it Is usually said, the benefits of competition, let the confluent citi- zen take the managers at their word and ask them to make a contract to supply gas at the current low rate for a number of years, and be will find that they will refuse. Rates go down and a bitter strugirle ensues, but it is not competition. It is a flght for mastery. Trhe only question at Issue is: Under what terms shall we combine or in what manner shall territory be divided? This has no h w timore, for oHf case i^ oui .Hit' oi inuusauud, althouffb I brljeve It rarely takes so long: to come to an airreemeDt. xseverthole^s here, ag eh^-where, it is only a matter of tinio. and ahuuld la the future a thousand new oompanies be established the result would be oomblnatioo. for L*n iT'.L f'^^wEn "'^ It about, and no one can help it. While we have the testimony of reascn we are not rostricted to that, for we have the testimony of experience. It is prob- ably within bounds to say that over three thdusand vt-ry likely ten thousand, attempts S,..d'i'"?n'^*'?[?ic'" ^f «"PPly *>»»^« been made In this and other countrios, and the cpnlizea world has yet to shwi 5-»/ ./'**'', w^"*'"''^* ^f Permanent, svccess^ Sj^lccmpeiition m gassuppfy-axid this natural Slr^^ip^'^for ''''' ^f ^'-^"t from others, but Is selected for speoial noneideration because it Js more easily understood on account Of the restricted scope of action of a flintrle pas company. It must not be supposed that the amount of capital required for an undertaki- jr is an essential Tacior in determlnina: whether it shall be a natur .1 monopoly or not, for this is variable, and it often happens that a business alu ays •ubjoctto competition has a larger capital than one which has the field all to itself A bank may, often does, have a laricer caoital thana^as conipany; so may a dry Voods es- tablishment. Profe89-)r Henry 'CAdam^ In his moriouraph on the ^'Relation' of vffirkte to Indiistnal Action." divides business into three classes, namely: (1,) those of diminish- Inpr returns; (2,) those of constant returns. (3 ) those of ir.creasine: returns. An undertakin'ff IS a business of diminishin«r returns whert af- ter a certain point, soon reached, an additional investment of labor and eapitkl is not at- tended with proportional returns. Asrricu^ ture 18 the best illustration. After ^farmer puts a certain amount of labor and capitaloD a field or corn he says, it does not pay to in- vest more. If corn ouK-ht to be hoed three times. It may be of some use to hoe it four times, but the additior.al return will not be large enoutfh to make It pay. The fourti? hoe nff yields far less than the third, the fifth far less than the fourth and so on. Similarly f/r!f ''* 'T" of suitable size has been brought undeT cultivation by one farmer, be will find i»^ff ^n.l^f:\^ operations, buy more land and S*!! ™ore labor and capital into agriculture ■will not pay. Consequently for one man to attempt to pet a monopoly inn?"" A f?^ '' ^1 absurdity. It cannot hi J?f^f; o J^r ^ S^J'^ia point has been reached returns fall off, and a man oDeratinjr on a Bmaller scale has an advantac-e. Commerce and manufactures are businesses of constant returns. After a business has attained a normal size additional investments will be accompanieJ at best with constant returns and the manager will have no advantajre over others by reason of an excessive amount of capital. It IB Rurprisinar how far a Rifted »v*i^®,^^"l° !" °"^ ^ays can profitably £f. n^.j?'l ^"Sineas, but everyone reaches his limit, and, except in case of artificial barriers, Hue protective tariffs, merchants and manufacturers, like farmers, alwayi feel the pressure of competition. En- terprises which fall under the third class are quite different. The lareer the busi- ness the greater the relative profit, and so there is always an Inducement for an en- largement of the field of operations i,,^."^ ^^'k '^ """^ *"* , ^\^"" i' *8 stated that a business becomes relatively more profitable in proportion as the amount of capital in- vested Increases, it is already granted that larjfe concerns have the power to cr ush small ones, for if business is more profitable it is because production Is cheaper, and if ihe biir mail produces cheaper ho will crush the little man. tr^'ll^?^'i'^"^*?•®^P' competition are then totally inapplicable to natural monopolies. Competition is impossible, and att. mpted corapetit on wastes capital and ultimately raises prices. The temporarily low prices during industrial wars arc i.,..,orv. Let Ub come bacit to the convenient illustration of 4ras supply, a practical man demonstrated before an association of gis manufactSers recently that ^ras could be made unS sSld fo? a handsome profit at flfiy ct-nt^ a thousand This denjonstrath.n was pAuted i T a joSnai devoted to the ga. i:iterest,and I am Sot awa?e that among themselves gas men have denied It. Yet there are few American cities vrhere It can profitably be made today ?h^„.''^'^?°*^ comi^aiiies f.)r less than twice I that, and even one dollar a thousand is con- sidered cheap tras. Why? Simply because destructive gas wars have waSed propeS:y increased the fixed charges which gas cim- wi«*""^**'^,®*'*? ^"'^ rolled up tneir capital- jlzatlon out of all re.<son. Nu honest man denv^tS?r rVn^i"^ ^^^"^ '^^ business wfl? aeny this. Gen. John Newton sai>l rec-ntly that CTHS In New York city could profltab v and the high price heattriouted to the wastes ^\.in^.°'S^^""'"',*^ ^'^'^^ '° ^he duplication of S-n^f" ^^^v,'^^^*! J^'^ companies: Further proof of this statement U seen in the fact that cities which supply their own gas and exclude competitiDh can do so for lesfthan a fni"^;, «on-, Joseph Chamberlain when tL H,*d'^? n**°^^ ^l*" ^^ ??y colleagues tha? the city of Birmingham, England, purchased the gas works at his instig ition when he was mayor, and that the results wore most for- tunate. Another ooilengue of mme who hna lived in Manchester, tell, me That h7 never paid over sixty-four cents a thousand and TGtthis price yields a handsome profit and has enabled the city to carry forward im- provements without burden to the taxpay- ers. Some towns in Scotland supply gas for less than fifty cents, and I have even heard of a tweniy-flve-cent rate, though for that I TVil! not vouch. •oT^^^Jl"^^ «fv'*^ ?-° official statement of the ras works In Wheeling, West Viririnia- Citv bought the works in 1S71 for $100,000 *Thev w?feT«fiSfn"'"''^'? 1^87 were J39,000, from Which $6,000 must be deducted for payment ©fcitydebi, and $:il,009 ror "repairs, etc '' leaving $12,000 ner. Rates $1 60 later $120 is Ism. ^ °'°''- ^''^ number Of iXbifinfs ♦.•2y« 2"*^' *° ^^^^ ^^^ for arty cents In Bal- timore. Now, cnean gas i? a great help to m&nufaoturers, and especially to those doing businf-ss on a small scale. Thus a correct policy In regard to this natural monopoly helps to keep com petl lion alive by preventing ifll unnatural and artificial monopolies, olher ■ futore'a^ l^V* ^^^^^°^ ^^^^ ^^ reserved for a -' FRANCHI SES SHOU LD BE SOLD. Gas Works and Street Hallways Discussed by Prof. Kichard T. tly, of Johns Hop- kins University. (Written for the Baltimore Sun.l ARTICLE XX. Since my last article in this series appeared a reader of Thb Son who has lived in Belfast, Ireland, for suino lime has had the kindness to send me a letter about the experience of I the people of that city with the gas supply and as It 18 nearly typical I will quote some I extracts from the letter: "I have had eomo J * BeK°^lbmi?^mf '"P^^^ ^"' the-t5wn-^ miiaar. Anout fiitepn years azo the town works mc''o7?h!^^''"" ^" Puchase the ^s tv.« »!; ^"mf *^° company then supplying the town. The purchase monev was b r- Sr^.onn^n'S '^^ government. At The time the council took over the works the gas company were charging something like 5 shillings ($120) per 1.000 feet. Under the management of the gas committee l!.^ ^u"^^^^"^} on the purchase money and the requirements of the sinking fund for Uie payment of the debt have not only been met, but the committee have b'^en able to make gradual reductions in the price to' cus- tomers. The price, 1 believe, is now t^vo shiiJinjrs and nine pence (66 cents) per 1 000 feet, and the profits would justify a trreater reduction, but I understand the committee ig strentrtheniusr its position and oontinually ImprovlnK Plant and machinery. When it is considered that Belfast has to import all ita coal from Entrland and Scotland, it can readily be seen that tras should be supplied at fiZ^l^J^^^^ ^^^^^ *" ^o^ftia conveniently situated to coal mines. Two years ago the Belfast eas committee held an exhibition of gas srovea and t?as-hearing: apoliances, &c.. and the exhibition has induced many to use the ^as for motive power and cookin^r, etc. ' • ♦ Under the English towns improvement act town commis^^ioners can Obtain compulsory powers to purchase pas i companieji, &c., if considered for the benefit of the public. It would be a great blessing if such powers were conferred upon town authorities in this country." j There are several things which may be done m view of the fact that the gas supply 18 a natural monopoly, and one thing which clear y should not be done. It should never pe attempted to introduce or compel compe- tition between rival companies, for the re- sult IS only evil. Not one particle of good SmiH?.n''"^«/° the public by attempted com- petition. Streets are torn up and pavements hptiPh I?" properly relaid. This injures the health of citizeus, for nothing is better calcu- Uted to promote malaria-as many of us in Baltimore know to our sorrow— and it wastes our property. If It is urged that money il spent, I reply that such a plea for competi- l^i^i?''°° wl^ t".^®"^ ^^"°™ Ignorance or dema- gogism. What is spent is wasted, and if not so spent it would nave been employed in some otner enterprise, very likely a legiti- mate enterprise which would have really beneflto i the people. *wiijr One 9f the things which may be done recognize the fact that an existing pany nas a monopoly, and to make it a monopoly in return for concessions. 1 nrn^no««t !" a.^o^them city recently. It was ! proposed to allow a rival company the privi- r^f A 5 "^ Citizens with gas, and the members awLv w,Vh'Th'i^^T"^°''V^ '^*^^*' »^ fl^^t carried w^o^^^ '^ ^^^ *^®* of competition, andlto nnnM.^'' -n'™-^* ™>^" *^o *" the direction o! a popular Illusion is shown by the statement w«? « c^^^^^K- ^^^* competition in Itself was a good thine-, even if tt accomplished notbing. A gifted young lawyer,however,who had read James on gas supply, went before trie council, aud» with every member against hitn at the start, was able to convince them ?J„o ♦!, * '^^^^ "^^^ companies. The result u!t^i^\. ^}^^ existing company agreed to 1 mit Its price at once, and in a certain con- tingency to lower it in the future. The proper method for the city authorities to fol- tSrTnfli?^^^® °*^® °^ *i^«8 supply, pro- ^mrl n'f^°°' l"'"^^*' «^^« itself, is very simple, ihe franchise should be sold at pub- il.^"'^i"°'.'^^5^'y advertised, for fitieen J^^+t^J^^^u ^^ should expire, the city reserv- J!r thf ^^"^' ^' repurchase at the expiration rr«hm,iH kL°^ i^^ »° appraised valuation. It should be made very clear that plant and other property Of the corporation should be purcbasea only at their value at the time, aimIhlHt'.''?;!^H '"^ '^'''' condition and thei^ SnV Si i^^? '^® Durpose of the undertaking, but without any addition f;.r compulsory^ purchase, good-will or future profited' This method, or, in fact, any method of private ownership leads to entanglement of public and private intere8ts,which is demoral- izing for n9thing promotes corruption like 13 more wholesome than simplicity in admin- istration. It 16 desirable tosepaniic by as sharp fn^i°^ "^ possible pu blic and private undertak- ing, and this end can best be accomplished by pwoership of gas works by municipalities. It la on this account^ that 1 recommend in my is to cnm- iegal This \ report as tax commissioner that ~tBe Mary- land Legislature refuse hereafter to grant any charter to any private corporation to supply gas or water within the borders of our Srute. A constitutional amendment pre- venting the Legislature from granting any such charter would be desirable. Noth- ing could be more calculated to prevent cor- ruption and purify government, for nothing has so corrupted and debased our political life as private corporations in control of natural monopolies. We have got so used to municipal corruption that it seems to us as someihing inevitable, but such is not the case. I have lived for years in cities in which the breath of suspicion never touched the municipal government, where corruption and methods of avoiding it were not at all ques- tions of the day, and when the Hon. Joseph Chamberlain aadressed the students of Johns Hopkins University he claimed for mu- nicipal administration in Eotrlaud that it was above reproach. It is idle for us to say "we must wait until we become morally better." I believe we are as moral a people today as the English or the Germans. Our terrible corruption in cities dates from the rise of private corporations in control of natural monopolies, and when we abolish them we do away with the chief cause of corruption. "But we must take natural monopolies out of politics." It never has been done, and it is an impossible thing to do— absolutely im- possible. No gas works, no water works, no street-car lines, no steam railways, are so thoroughly in politics as those in the United States. Who is so innocent as to think our great railway corporations "out of politics?" If any one Is so simple I advise him to spend a few weeks in tne present winter in Wash- ington or Annapolis and kei-p his eyes amd ears open. When I was in Berlin some years faifo 1 made a report on Prussian railroads, under the direction of the American minis- ter, Hon. Andrew D. White, for the Depart- ment of State at Washington. Every facility was afforded me for my Investigation, and my inquiry into the political effect of Stat J ownership, which obtains in Ger- many, was most careful. Since that time I have followed the development of the Prussian policy with some cure, and it cannot be charged that I have been influ- enced by the government view, for my favorite German newspaper— the only one which I take— is bitterly hostile to the exist- ing government. I make bold to say that to- day our American railroads are incomparably more "in politics" than the German railroads. Not only this, those German railroads which have been bought by the state, I believe, are less "in politics" than they were when they were private property. Why this must be so will be considered hereafter. But the reader must not jump to the conclusion that I am going to advocate complete public ownership and management of all natural monopolies at the present time in the United States. I am going to do nothing of the kind. However, I unhesi- tatingly advocate such ownership and man-, agement for gas works, and I challenge any one to instance a single American city— or, for that matter,any city, wheresoever situated —which has gone over to pnblic ownership and wnich regrets it; which, indeed, has not found that a corrupt political influence was thereby removed and political life purified The most unfortunate city in the world with its public gas works has been Phila- delphia, but when it was proposed to sell the gas works, and when a ring bad "fixed" the | council, as well as many of the newspapers, there was such an outbreak of popular in- dignation, with hints of the penitentiary, that the council was terrified into doing its duty. Street railroads are one of the most im- portant natural monopolies, and a tendency for public ownership and manatrement is beginning to become manifest. In the United States, however, there is but one 33 PL V a ^ is the ODo whicb is operated In connection with the Brooklyn bridfirc. Althouah it is said to be the best luauasred streot railroad in the country, I am not prepared to advocate public ownerablp in lialtioiore at present. What we want is the New Orloaos system, and that is what 1 have recommended in my report on taxation. It i3 sale of franchise, with reserved ritfht to purctiase all the property, that is, land, buildings, horses, cars— in short, all the plant— Ht an ap- praised valuation at the expiration of a sfiort period, s^y fifteen years. In this, as in every case of natural monopoly, it should be made perfectly clear that no compensation ouerht to be srranted for compulsory pur- chase*, tfood-will or expectation of future profits. This yields a large revenue to the city and leaves the people free at the expira- tion of each period to adopt any system of street railroad service which they see fit. It works very well in New Orleans, where in 1886 nearly one-eighth of all municipal ex- penditures was defrayed by the sale of a sin- gle franchise for twenty-five years— the max- imum period for which one should ^ver be granted. When the first franchise was prranted in Baltimore, in 1859, the mayor of the city ap- pears to have been a man of rare integrity, for through him the right to acquire the street railroads, at the expiration of each period of fifteen years, was reserved to the city, and in 1889 the city again comes into possession of a most valuable privilciare. A franchise which now yields nine per cent, of gross revenues could be sold probably for twenty-five per cent. In New York city a franchise has been sold for forty per cent, of gross revenues, and in Buffalo, N. Y., half the size of Baltimore, thirty-five per cent. Was offered for one. What I should like to see, however, is the introduction of another system, which is hinted at in one of our acts of incorporation, namely, a reduction of fares. There is not a shadow of a doubt that passengers could be carried in Baltimore for three cents— more than is charged in Berlin, where the compa- nies must keep the streets paved from curb to curb, must provide each passenger with a seat, must in laying tracks have some respect for the rights of owners of vehicles, and do a thousand and one things which an Ameri- can corporation does not dream of, to say nothing about that fact that in 1911 their entire property reverts to the city without compensation. The report of the tax commission — and in this re- spect there was unanimity of opinion, for the other members agreed to mv report — speaks of rendering proper methods of deal- ing with natural monopolies compulsory upon Legislatures and municipalities. The people must do this, for their representa- tives in our days of "government by special interests" love corporations better than they do the people. It was for a long time sup- posed that the people bad no rights which anybody was bound to respect, and you could eveu find professing Christians— men who claim that they love tiieir neighbors as themselves— bartering away for a mesa of pottage the rights of the public, women and children, and even unborn generations. Were Christ on earth I expect He would call them liars and hypocrites. However, imprisonment of New York city aldermen in Sing Sing, and the conviction of Jacob Sharp, evf-n If it proved a fiasco in the end, has helped to clarify somewhat the ideas o( men with regard to trie rights of the pub- lic. What ifl now needed is in every city a public property defense league to watch the Interests of the public, and to hunt down and snnd to the penitentiary those who forget that public offi.e is a piiblio trust. PROBLEMS OF TOUAY. ABOUT POLICE FROTECTION. WATER- WORKS AND ELECTRIC LIGHTS. Monopolies for Cities to Possess Ois- cusned by Professor Richard T, Ely, of Johns Hopkins University. fWritteu for the Baltimore Sun.l ARTICLE XXI. Reports of proceedings in the Legislature at Annapolis compel me to mention a matter which would naturally be treated In a later paper. A bill has already passed the Senate providing for the employment of special policemen by corporations and firms. It U very questionable to entrust even to this ex- tent functions of government to private parties. It is a return to the anarchistic, dis- organized state of society when the old barons had their retainers and engaged in warfare to suit their special pleasure. It was generally supposed that we had left this barbarism, but there is an unfortunate tendency tore- turn to It in the United States. It is well to notice some thoughtful remarks on occur- rences of the year 1886, which appeared in two newspapers. The Missouri Republican, in its issue for January 1, 1887, says: "The past year will be forever memorable as the year la which private armies of mercenary soldiers betran to be established in this coun- ^j,y^ « « * « j^ jjgg ^jeeti fondly supposed that Dublio law was strong enough to do right and maintain right between the citizens over whom the Commonwealth has jurisdiction. That, it now seems, waa an error. When a difference occurs between a great pork-pucker and his employes it is not to the State that either party has resort; and to check appre- hended resistenoe the pork-packer finds it easier and perhaps cheaper to call out a regi- ment of hired soldiers who have been armed and trained for the service of the hlKhest bidtler." The New York Nation, in lis issue for January 37, 1887, says: "It cannot be too soon or too well understood that,a3 an armed organ- ization offering itself for hire for purposes of defense in various parts of the CTuion, Pink- erton's men are, we must all admit, the jrrcaiest disgrace that has befallen the United States. ♦ ♦ * ♦ Its appearance in an other civilized country would fill today every man in it with shame and astonishment," More may be said: It would be impossible elsewhere. It is not clear what is the inten- tion of those who are behind this bill, but it would seem that it opens the door to all sorts of abuses. We In Maryland are quite capable of maintaining the peace without the assist- ance of imported cutthroats and assassins from the slums of other cities, and the least concession that can be demanded to public decency Is the Ohio law, which forbids the employment of n on-rcsi- dents aa special policetnon or deputy sheriffs. In Ohio no one outside of tho county may be sworn in as deputy, and In Baliiraore no one not a resident of the city should be employed as a special police- man. This is the minimum concession. The proper waj^. It would seem, to regulate the matter would bo to have all policemen ap- pointed by public authorit5%and allow, under certain circumstances, the employment of I w i^uiicemeu oy private parties wiTling- to pay therefor. It is lo be uoticea that after sad experience other States are passinff laW3 to forbid the employment of non-residents as deputy sheriffs or special policemen; and by a little forethouKrbt ia this matter we can prevent bloodshed and bitternesi belvveen^ classes such as we see elsewhere. It is to be hoped that working-men and all who have the welfare of our State and city at heart will be- stir themselves in this matter before it is too late. Tiiig is one of those cases whore em- ployment of homo labor Is the only safe policy. The next natural monopoly to be consid- ered is water eupply, and comparatively little need be said abo:t this, for the principles whjch control it are precisely like those uov- ernintr the sras supply, save that the reasons for public undert ikinffs are still stronger. It is more easily mana^ea, and the importance offreneral use of water In larpo quantities cannot bo overestimated. One of our special blessings in Baltimore is our abundant sup- ply, and it is questionable whether any Bpecial charge should be made for its use Certain It is that the advantage of our public service over any private service must be measured by millions of dollars. I have made epicial iavesiifration of water supply in sev- eral towns, and I have yet to find one Instance in which municipal self-help did not work better than tho beneficent patri- otism of private corporations. I have looked into the experience of a whole Bfroup of towns In New York State, and they oil tell one story. I have iK-fore me as I write complete and trustworthy returns of two or three of these, procured with some labor by the exertions of friends. The exper ience of Randolph, in Cattaraugus county, N. Y., tells the story for all. A private company wanted to put in water-work s, and the lowest bid ^?>oVi, ^^""^ "^^^^^ ^'^ ifiducecJ to make was ?^8,000, and that was under condition that the town should subscribe for stock. The charge for water was to be $10 for a household, with e.vra faucets, closets, &c.. in proportion. Ixanuoloh finally built its own works for a total cost of $20,299 88, and with o char^fe of %i for each household, instead of $10, is mak- ing a profit. Everybody I9 delighted with the experiment. Gowanda, in the same oountv, has had a similar experience, as havo Fredonia and Dunkirk, in Chautauqua county, while the neierhboring- city of James- town tried tho private corporation plan to Its sorrow. The fi-entlemaa who sent me the ac- count of the Randolph experiment writes mo: As to J;ime9iown I have hoard nothing but complaints." As I write, a gentleman who .has eqtered my office tells me about the still moro unfortunate experience of the people .of (xalesburir, Illinois, with private water- '^orivs. They have been so annoyed by fall- tre of the company to fulQll its promises, aid by poroetual litigation, that they would ow gladly purchase the works, which :ive been Idle for two years. The plan ( privato companies is to o-et the owns to subscribe for a sufficient "^"^ of hydrants at a sufficient sum -■ to pay nearly the oatire intere st on : outlay, and all the other revenues ii clear profit. A trcntleman who Is 'leyforoneof the larjfe companies en- v' 'f^^ suppiyjner towns with water-works 'Id me that his skill had been taxed In aa- * 'hem to pump wat^r enaugb Iqto and to it ^ tiicu-stocii. It had been wate: asfHin, and it wag still necessai to conceal the enormous profits"' VVhen we take up electric lights, we shall ^''r^I'ZIxT^'''' '° abandon tho principle of local eeir-uovernment and municipal self- help. No organization is doing so much to throw light on these questions as the Amor? can Economic Association, and no organiza- tion IS more deserving of the hearty sunnort of every patriotic American. One Jf it^ mSs? useful publications will be a monS^rap? on municipal public works, which is now i press, and from which lam able to c-iveafew f .cts in advance. The Part on eleS- dc IhrhtT ang is contributed by Charles ^Sore Sn editor of the Detroit'^Even i^' News and^^s most interesting. Bay City Mioh nnt in I Plant in October, 1886. arrd7upp fe'i' lights fo^ i42 each per year, whereas it had been paying a private c< mpany fluO per year. ^"^'"*f Levvistown, Maine, owns its plant" sav? Mr. Moore, "and by the use of water pnwj? SLVt^'^nr''«n'^in ''''^^ "" ^^ °*^"^s per lamp per night, or lol 10 per year. The plant for 100 t'^J^A^^ ^'ost 114,500; the cost of Construction was i4oO per running mile. The price paid ■S22fi'K°°'''*°^''^» ^^'^°^ ^5 t« 65 cents for hghis burning only till midniirht. Now, at a night?'' "^^"^^^ ^^"^^^ ^^^ ^^^^^ ^^"^^ »i^ Madison, Ind., also appears to have cb- taini^d crood results irom public works. Jrl^unJ't^^^^^^ ^.^y »r« these facts not fnJi J''^^^ known? One reason is that so ,f.f' J.-'^L^"''"^^,^ newspapers are completely )?iHL/"'''^^*"^'*°i *'' corporations, for other cities are not so fortunate as we are in Bnlti- Sl^hH%™°^i^''^'"^u^°'/^°'^*^ of a failure of pubhc works is heralded abroad to the four corners of ! ho earth, while examples of suc- crss are not discussed. Who talks about our ?^}^\'^^^^ ^'^^ '"'*^^' ^^ich was built for less than the appropriation, or the fine federal Duildiug put UD in Madison. Wis., for $12,0u0? Ihese examples are not isolated. Careful inquiry will reveal an astonishing number, vvnen, however, extravagance and compara- }\ll ^I'lure characterize a public enterprise, like the Capiiol at Albany, we never hear the ladt of it-as if private enterprise were not frequently a failure! The truth is. private enterprise generally, in its own sphere, agriculture, commerce, manufac- tures, goes far ahead of public enterprise, but in Its own sphere public enterprise will in the loofct run tro far ahead of private undertakings. ^vLen wetake up railroaiis wo again turn Irom municioai problems to State aud fed- eral problems, and woemer upon a discus- sion which, while it is equally interesting, is moreuimuultof ompreiu-nsioii, for the ope- rations of this natural monopoly are vast and lar-reaching. Not only aro the principles somewhat hard to understand, but the cor- rect practice among us is not at once diseern- ibte, for it must be granted that federal ownership and management of radroads is a thmtr so far off that ii does not enter into praciical politics today. 1 will, however, try to make a few principles clear, and to lay down certain practical rules which should govern us in our dealings with railroads in Day following article. X i^- COMri.TlTlUIH Ui' KAlIiKOADS. ]Satural Monopolies Further Considered by Prof. Kiciiard T. Ely, of Johns Hop- kins University. tWriiteu for the Baltimore Sun.l ARTICLE XXII. Some years since I was passlnsr a sum me in a village In Western New Tork, Fredonia by . The only railroad which the Fre- (ion _juld then use in jjfoiDg to Buffalo, about forty miles distant, was the Lake Shore and Michi' iihern, and tho rates, three cents mu ., e felt to bo excessive for so old and thickly settled a country. There ■was— as there still is— a Drovision in the char- tor of tho old Lake Shore Road that fares should bo reduced as soon as dividends reached a certain point, which, of course, ihey never have reached and never will reach. How the people like to bo hum- bucraredl But at this time a purallel railroad, the "Nickel Plate." from Buffal o to C hicago, was in process of construction, and the Fre- donians wereenthusiastio over the prospect of cheap tickets to Buffalo. I well remember the exclamation of a lady on the street cars, "Now we are going to have cheap tickets to Buffalo," and I can see as if it had happened' but yesterday the attorney for the "Nickel Plate," to whom she was sneak- ing, as he beaited assent from his benevolent c»untenance. Any one who Unew anything about the economies of railroads, who had grasped even a few elementary facts about natural monopolies, could have told the people that they were doomed to disappoint- ment in their hope of permanent relief from the competition of a parallel road; but the illusion had taken such a strong hold on them that remonstrance was worse than useless. I felt tempted to call in question their predic- tions, but it is not pleasant to be called a crank or "mere theorist," so I held my peace and awaited developments. The road was buiil and has now become the property, to all intents and purposes, of tho Lake Shorel Fares were never reduced. Single tickets to Buffalo are just what they have been for years, and round-trip tickets have been raised five cents. What earthly gooi> has been accomnlished by this parallel road? Doubtless speculators and constructive com- panies put money in their packets, but the people are poorer on account of the enormous waste of national resources. The fixed charges of the Lake Shore have been in- creasied, its capital invested has been aug- mented, and a reduction, upon which the Legislature could once have insisted, would probably now bankrupt the road. Another bubble hurst about the same time and in the same State. I refer to the West Shore Koad, which parallels the New York Central and Hudson Uiver Railway. What was not that going to accomplish? As a matter of fact a railroad war did breakout, and passenger ticicets fell to one-half tho former rates for a short time. This was war— not competition- and tho West Shore was beaten, badly beaten, and lensed Its lines for 499 years to tho Now York Central. Be- fore this happened, however, passinger faros had been restored to their old rates, and a reduction, which would once have been prac- ticable. Is now out of the question. It is estimated that the money wasted by < amounts to two hundred millions of dollars. Let tho reader reflect for a moment on what this moans. It will be admittea that, taking city and country together, comfortable homes can bo constructed for an average of $1,000 each. Two hundred thousand houses oould bo constructed for the sum wasted, and two hundred thousand houses means homes for one million peoplel I suppose It; is a very moderate estimate to place the amount wasted in the construction of useless rail- roads at a thousand millions, which, on the basis of our previous calculations, would construct homes for five millions of people. Butthi^ is probably altogether too Small an estimate of even tho direct waste ro- sulting.from the application of a faulty polit- ical economy to praciical life. When the in- direct losses are added, the result is something astounding, tor the expense of a needless number of trains and of what would other- wise be an excessively large permanent force of employes must be added. Of course, nothing much better than guesswork is pos- sible, but I believe that the total loss would be suflScient to provide a greater portion of the people of the iJnited States with homes. These is something almost pathetic in the amazement and disapp lintment of the gen- eral public when the Nickel Plate and West Shore were absorbed, and tho same thing %vas seen in Baltimore last fall when the gas com- panies agreed to consolidate and the Bilti- more and Ohio telegraph lines were acquired by the Western Union. Attempts to prevent such consolidation had been made by legisla- tion. A purchase of the West Shore would have been illegal, but a lease for 499 years was not. The Baltimore and Ohio was required to give bonds in Phila- delphia, to be forfeited in case of failure to compete. All this was as childish as the anger of the public on account of these various consolidations. Competition is foreign to the nature of natural monopolies, and all the laws of Congress and of State Legislatures to force competition upon them will be as fruitless in the future as they have been in the past. As well legislate that the water of all rivers shall flow up instead of downl The ana-er of the public on account of these consolidations has always reminded me of the opposition of artisans and mechan- ics to the introduction of new machinery. Resistance is fruitless, and the only sensible course is to recognize the inevitable and malte the most of it; and much can be made of it by the exercise of a little common sense. Mr. Vanderbilt in ac- quiring the West Shore was as truly effecting an improvement In the processes of produc- tion as tho one who introduces improved machinery In manufactures, for he made It thereby possible to perform certain services for the public with a smaller expenditure of labor and capital than would otherwise bo possible. Tho re are certain phenomena conne cted with railroads in the United States which a t • flrst aro likely to puzzle one who has ju3t be- gun to doubt the efBcacy of competition in the field of natural monooolles. These are, for the most pare, intimately associated with tho fact thtit our railroad development is still incoraploto, and the consequencoa of various policies are, therofore, not so clearly discernible as in an older country. Probably Enjrland is the best country for an American to study who desires to see the legitimate effects of competition, for Enjfland started out with our theory of private competition, and under its influence two natural monopo- lies— the telearraph and the railroad— w'ere fully developed. I say developed, because little remains to be done in either direction. A few minor extensions may be made, and a few branch roads constructed, but the general features are complete. First, just one word about the teletrraph policy of England. Eupland tried to force competition, and this was the result. Her telei?raph system %ost her nearly as much as all the other teleerraph systems of Europe put tosreiher, for the e«tioiated cost of the Eupr- lish telegraph Is 273.000.000 of frsftics, and of all the other telegraphs of Europe put to- cher only 2&5,ua),000 of francs. Probably ..t' best work on EnwLsh railroads is that by Prof. Gustav Cohn, and in this it is shown that the ultimate effects of competition in every case haye been higher charires. It is said that rates have fallen in the United States. This is true: bur has the cause been competition? Competition has un- doubted! v brou^tit about a reduction in some cases sooner than it would otherwise have happened, but as the country developed .ji and became thickly populated it was natural I forra'esto fall. Tbo principles which con- trol monopoly charares are simple. A man who ha?a complete monopoly will fix prices at that point which will yield largest net retun 9, and up to a certain point he will steadily reduce charges, as he thereby in- creases business and trains a larger total not revenue. The most striking instance is given by the history o£ the postofljoe throughout the civilized world. A re- duction of ov'T fifty per cent, in charges hae ultimately lucrea>od net revenues. Another Illustration is Riven by the Stand- ard Oil monopoly. Newspaper organs of monopoly tell us to admire thu mni^nanlmity of the Standard Oil people, who have reduced prices. This is a false statement. Prices liave fallen in spite of their most strenuous efforts to keep them up, and this a?aln illus- (i-ates the importance of political economy as //study for common schools. It is possible to ihay such absurd things In regard to the price 'of oil simply on account of the dense popu- lar ignorance about those forces which make PBicos what they are. The production of oil has increased enormously, and those amontr my readers who are acquainted with theStand- ard Oil men will probably have heard them lament this. Now if they raised prices or maintained them, they wouM be obliged to keep their oil and waste it. They have alwaysheldback vaatquantitiesof oil to main- tain prici 8, and rumors reach us of a deter- mined effort to diminish productioi}; but nevertheless it has been necesj^ary to lower prices time and time again to work off the quantity on hand. Prices must be lowered in order to increase demand for the commodity. Apply this to railroads. They have enor- mons fixed charges which are entirely inde- pendent of the business they do, and the greater their business the more active use they make of their capital. In proportion as a road is not used to its utmost capacity, its capral is idle. Now,to helpbuild up the coun- try and supply themselves with business, it has been necessary for our railroads to re- duce charges, otherwise they could not get the business which they needed. A portion of their business would simply not exist were it not for lower charges than those of earlier days. This tendency to lower pticas stops in tit! case of private monopolies at precisely that point where increased business Is not at- tended with increased net profits. One point to be observed is.tljis: Legislatures have a control over rates? and could in many cases l.uver them materially, had not the wastes petition ^^xpenses of the ruil- roaus. st3cond,it m ust Be remembered that th"e number of even nominally competitive points is and ever must remain sma;l. Accordmjf to the chief of the bureau of aiatisiics, there were January 1, 1887,3:3.694 railroad stations in the United States, and of these only 3 778 were junction points, and many of these junction points, t. e., places having more than one road, were on railroads which had no terminus in common. More important is the real competition of natural water routes, Which sometimes exists, though there is a determined effort to crush it out. Last summer, at Chautauqua. I wit- nessed a typical instance. The Chautauqua Lake Railroad bought every line of steamers on the lake. Artificial waterways, namely, canals, are also important where the people of a State have had the good sense to retain and improve them. This has happened In New 1 ork fctate, which now proposes to spend a million on the Erie canal. This Erie canal has helped to make Now York the powerful Empire State she is, and its maintenance wus due to the democratic statesman, Horatio Seymour. A few years ago New York was bound hand and foot like Maryland by a senseless, iron- clad constitution, which threatened to hand her over to the clutches of the corporations, but Horatio Seymour aroused the people, '^"t the State constitution amended and, abolishing tolls, made the Erie canal a/ree waterway. A further consideration of rail- roads will lead us back to the subject of federal financiering, after we have touched 1 upon several other Important topica. The Pendins Problem in Maryland DIs cussed by Prof. Richard T. Ely, of JohnA Hopkins University. LWrltten for the Baltimore Sun.l ARTICLK XXIII. I suppose nothing is more thoroughly a problem of today with us in Maryland than the fate of the Chesapeake and Ohio canal. The subject has been muoh discussed, but the discussion has not been of a nature to inspire the patriot with enthusiasm for the future of his country. There has been suoh an absence of any clearly defined purpose, of any manifestation of enlightened views in regard to the various means of communica- tion and transportation and their relations to one another, such an utter lack of large and generous statesmanship, that one is reminded of the expression "peanut politics" rather than of the activity of those two democratic leaders, Horatio Seymour and the earlier and still greater DeWitt Clinton, whose names stand out so prominently in the history of canals in the United States. There are a few points in regard to canals in general which should be carefully considered before action Is taken. It is commonly said that the day of canals la past. Thi3 is only a little less rai ional than to gay that the day of the ordinary highways Is past, because we have the steam railroad. Each means of communication has its own use, and the office of each is not to displace the others, but to supplement the others. It was a misfortune for us that we began to neglectour public roads when the era of rapid railroad construction began, and in this one respect at least It would have been a blessing for the United States had the age of railroads been somewhat delayed. A distinguished American, who has recently passed some time in Baltimore, said that our public roads In the United States wore the poorest which existed in any civilized country, so far as he had observed, and he has traveled extensively. The loss which this entails upon 1 tJieasrioultural community and theTsottima- i nity at lareo l3 onormous. It reqnirps more ? horse power to pull a iriven load a jriven dls- ( tance, and the waste resulilnor from the wear , and tear of ivaffons and vehicles every year must amount to many millions of dollars. It was estimated some years afro that improved - - mentsin Berlin would save owners of s on nn avoraffe for each horse consid- erabiv over $25. There are over ten millions of horses In the United States, and if to be quite within bounds we place the annual Bavin? which would result from flrst-class roads throujrhout the country at $10 per horse, it would amount to over one hundred millions of dollars, which is interest on two billions. This is probably moderate, for in cities like Baltimore flrst- class streets In which onlv proper street-oar rails were allowed would save easily $35 per horse, and the farmers will bear me out, I am confldenr, when I say that in this part of the United States, at least, «15 per horse is a very low estimate for the annual saving which would result from excellent roads. The Bavinj? to vehicles and to harness must he added to the saving of horseflesh, and when It 18 remembered that with erood roads one horse would often suffice where two are now necessary, and always two where three are nowrequired, it will be admitted that fSO a horse is not an extravagant estimate for the i country. However, contentintr ourselves I with the low estimate of one hundred mil- ^ lions per annum, which is equal to f interest ou two billions of dollars, it will be seen how serious our loss in neglecting adequate provision for highways. The great French reformer. Tur- got, who did so much for the province of which he was governor, elevating it from the condition of one of the poorest to one of the wealthiest provinces in France, turned his attention first of all to the ordinary public roads, and demonstrated by just such calcu- lations the advantacre of first-class highways. There can be no doubt that the excellent roads he constructed were one important {cause of the prosperity of Limoges. - ' Now, as we have neglected public roads, so we are also overlooking the importance of canals, and the result is in many ways more serious, for we can go to work the moment we will and Improve our roads, but the value of vast expenditures is forever lost by a falao policy with respect to canals. England allowed her canals to fall into the hands of the railroad corporations, and It is now as live a question there to know how to get them "out of the clutches of the corporations" and restore them to their proper uses, as with us to know how to take certain great work^ "out of politics," all of which proves that 1 there is no "royaUroad" to good admlnistra- Itlon, and least of all by reducing govern- ment to insignificance. However, Ii seems Ifonerally to bo agreed in England that the conclusion that the era of canaU had gone was over-hasty, and Eocrland proposes , row to spend millions on canals. France finds Its its canals still useful, and they art) able to carry largo classes of freight for two- thirds what it coats by rail. Germany, al- ( thouffh the various German States own the railroad, contemplates extensive Improve- meutft^ln canals. Why? B oauso what wo want in our nationni industrial life is lo ac- complish our ends with the smallest expendi- ture of labor and capital, and this purpose is attained by giving the canals a place in the various means of communication and trans- portation. American States offer ua valuable testimony from experience as well as these foreign countries. It is instructive even now to go back to the construction of the Erie canal- finished In J82o— and examine the circum- stances under which the undertaking was brought to a successful termination. Politicians are of two classes— those who subserve special interests, and thi^ renew day by day their life of deception, fraud and perjury, for In their oath of ofilcetbey have called Almighty God to witness that they will not do that very thing— and those whoso acts substrintiate their professions of dev.o-^ tion to general and public interests. It is rather discouraging that under the influende of a high protective tariff and corporations imanaifing natural monopolies, politicians of the former class have gained such an ascendency that all our various governments have become so depraved that the term "government by spe- cial interests" la applicable to them. DeWitt Clinton, however, was a man who was always askine himself. What can I do to promote the general welfare, and he ac- quired a habit of looking at measures from that lar^e and patriotic standpoint. Thus it was that he pushed through his canal project against great opposition. And what was the nature of this opposition? Such as always attends public improvements. It •was a "visionary" scheme, as a public under- taking it could not succeed, and the like, nnd it was called "Clinton's Bi? Ditch." How- ever, it was finished, and if our politicians could be induced to give somo attention to DaWitt Clinton's life and writings, it would be most fortunate. This Erie canal has probably done more for New York State and city than any other one public enterprise, and today it is a powerful factot in determining freight rates all over the Union. It was in 1883 that the canal was imperiled by an iron-clad State constitution, and then it was that Horatio Seymour came to the rescue and brought about changes making it a free water-way. Asainst what senseless opposition did he not have to con- tend also? Perhaps not so much » senseless ODposition, however, for these vei j' railroads which claim that the day of canals Is past some way seemed to be very anxious to kill this useless Institution, as they called it. The question naturally arises, li" canals are of no use why do railroads dread them and goto the expense of buying them and filling them up? Why not let them die a natural death? But all the corporations in the world could not govern the people were it not for their i own apathy, indifference, narrowness, selflsh- I ness and apparent desire to be saddled, ^ bridled and ridden. Our fate rests with our- selves. There was an attempt to array the j people of one part of the State against an- lother. Especially did opposition manifest Itself in those counties not adjacent to the canal, and the railroad organs suddenly dis- played an unwonted affection for the poor farmers wh^ —o—. to be 'taxed to support. a caiml in whioH they had'n^Ihteresta; Hora- tio Seymour demonstrated rhat the canal had so increased ttio taxable baeia of the State that the tax rate was lower than would oth- erwise bo possible. All had thus trained, and no one lost a penny. Ho also rebuked the petty spirit which could imagine that the intereeta of all parts of the State wero not harmonious. "The spirit which prompts opposition to the amendment," said Seymour, '-is best expressed by words which import that if tbe counties which desire free cana'iS, wish to have them made so. let tbem ,pay the cost. If this f eelimr Is made mani- fest, to what end will it lead? It will," he said in return, if such counties wish to have their schools supported, 'let them pay the costs;' If ihey desire that their members of the Lefirislature or their judiciary should receive their salaries let them pay the costsi This will throw upon such coun- ties a great sum of taxation, many times more in amount than tbeir share ot makinpr free canals. I deplore a result which would go 80 far to impair the honor and in- teresti of New York. I should regret the defeat of the amendment, because if it is adopted it will lessen taxation upon all sec- tions and pursuits. Canals are the routes most needed by our farmers and mechanics. Every dollar of tax or tolls lilted off of their commerce adds to the value of their pro- ducts and lessons the charges they have to pay to get them to market." _ Hon. O. B. Potter, of Nevy_ York, "who_ Is now IntereltlnBr himsel f In favor or the nsIF lion-dollar appropriation for the Improve- ment of the Erie canal, said in an argument before the joint committee of the Senate and Assembly in February 2. 1886. "However im- portant and beneficial the railways, now or hereafter, they.will never supersede the ne- cessity for or the usefulness of these canals," and speaking of projects for, canals in other States he said: "There is not one of them that will not repay the State in which it is located, and of the; wealth of {which, when done. It forms a part mar.yfold." With what truth it is said that canals pan do nothing is seen in the fact that the canals alone brought to New York city last May, June and July (to the 23i) over two millions more bushels of grain than the total amount received ai:. Boston, Baltimore and Philadel- phia. Horatio Seymour, Jr., in a pamphlet entitled "The Canal Age," and dated March 33, 1886, undertakes to show that railroads cannot transport so cheaply as canals, A few facts must be borne in mind. One ts the day for canals owned by private corpor- ations has passed, and that for two reasons. The first Is that the gain of canals is of a pub- lic nature, rather than individual. There always have been public works which would not remunerate an individual, and yet are of the greatest advantage to the people at large. The streets of a city like Baltimore are an example. Should we try to derive a direct revenue from our streets we would ruin the city and grass would grow on Baltimore and Charles streets. These undertakings, which are only indirectly remunerative, are often most profit able. The second is that private parties sellout to the railroads, and all agree- ments and contracts to do otherwise are not worth the paper on which they are written. Should the C. and O. be retained alFhope ot" direct profit ought to be abandoned. It haS been suggested that the canal be extended to Baltimore. Whether this is wise or not I do not know. It would require the opinion of those better acquainted with the cost of oonstruc- tloa and with the advantages of cheap com- munication to Washington and then by canal to the coal regions to decide. However, the advantage to the State in the canal can only be of an indirect nature in extending its busi- ness and in reducing the prices of commodities to consumers. It must be expected to keep it up at an annual outlay, as other public enter- prises are maintained.This was what NewYork deliberately resolved to do. Inamass-meetinar in Cooper Union, in New York city, it was was said, "We have a'oew school of narrow- ness that wants to choke the canals because they do not earn enough to support them- selves, but they earn enoueh to support or help support the millions of people that live in this State." It is noteworthy thHt Pennsylvanians regret their short- sighted policy in selling their canals. The Philadelphia Record said last year on this subject:" While other States were disposing of their public works and artiflclal waterways. New York retained possession of the Erie Canal. * ♦ Every wage-worker and small consumer, East and West, is a crainer by It. * * * The State of Pennsylvania transferred its public works to a railroad corporation thirty-eight years ai?o, and today nearly all thy canals in the Stat? are useless. The Pennsylvania Rail- road applies to the Legislature every session to abandon an additional section of the canal system, which it obtained under a pledge to maintain forever." It is to be noticed further that It seems to be awepted that the more extensive a canal system is the greater its relative advantacres. A email strip of canal by itself may be worth little, but when part of a larger system it may be invaluable. Further, it is the opinion of those best qualified to speak, that no fed- eral assistance for the Erie canal is desired, j because that would Involve federal Interfer- ence. The Union for the Improvement of Canal?! In New York Is strongly opposed to federal aid. Finally, nothing can be gAned by a tempo- rary and uncertain policy with reference to canals. It is proposed to give the Chesapeake and Ohio a trial for two years still! Can anything more futile be imagined? It cannot be utilized until people know what to expect. Who will build new boats and encrage In canal business while this uncertainty lasts? The experience of Ohio is Instructive. As soon as it was decided. to retain the canals as the property of the State basiness began to improve. The Ohio board of public works reported a gain of over $30,000 in the income from canals for 1886, and that was attributed to the hope that the canals were not to "be abandoned or allowed to fall into decay and disuse." The Governor of Ohio says: "They constitute a valuable public property. The State should not dispose of any part of | them." The "two-year trial" scheme is predestined j to failure, and the canal mightas well be sold at once. If that Is not already clear, it I.s to be hoped that the quotation f r«m Horatio Sey- / mour about the* Erfe ^ ... ...„ w fit bo auflacieot* "This hostile and monacin? atti- tude of our State toward canals and boatmen prevents the bulldiner of vessels and their use. It has lessened the receipts for tolls, fur men will not ea(ras?o In a business where they are liable to be ruined by an accident or by the design* of rich competitors. These will find it profltable to carry for losinnr rates foroneyear If tboy can destroy forever the boatmen or the canals which keeodown their own rates for carryinpr the products of our own people. When they have destroyed their competition they can ever after put up their own chars-es to suit their own interest." THE FUTURE OF BALTIMORE. The Forces Productive of Municipal Greatness Discussed by Prof. Riclxard T. Ely, of Johns Hopkins University. rWritton for the Baltimore Sun.l ARTICLE XXIV. The articles which have appeared in The Sun on openings in Baltimore for business men have very naturally attracted a good deal of attention and awakened a spirit of hopefulness and enterprise. Who can set any limit to the possible future develop- ments of our favored city? President Oilman, in his address before the Johns Hopkins University on the 23d Instant, showed what had been done in a very short time to elevate Baltimore in all those things which go to make up a hisrh civilization, and hinted at a possible future growth of the city in remind- ing the audience that London, with all Its millions of people, was at the beginning of the century but a little larger than Baltimore at the present time. It has always been a favorite theory of mine that in Baltimore there are opportunities for the unfolding of a fuller and richer civilization than tne new world has yet seen;not only that.but that there are opportunities here which exist nowhere else. This opinion has not been carelessly formed, but is the result of careful reflection upon the nature of the various elements which are working together to promote the advancement of Baltimore. Baltimore is situ- ated on the border line between North and South, and here are brought together the peculiar excellences of each section, and here they will blond together indistinguish- ably In our municipal life. The charm of Southern social life, the high social culture which distinguishes the South, will be sup- plemented by the Indomitable push and energy of the hardy sons of New England. Music, paintinc", literature, fand learning in ail Its various branches, are progressing favorably, while the economic basis of a high modern civilization is found In an expand- ing Industrial life, as seen in our growing commerce and enlargini; manufactures. One thing to be borne in mind In refleotions upon our future is that modern cities are to an unprecedented extent artificial products, the work of men's genius and energy. For- merly nature decided wh^re a great city could grow up, and a hitfh civilization was possible only on the seacoast or on the banks of great river?. Now man has subjugated nature to such an extent that bo is, comparatively speaking, independent of her whim and caprice. If natural water-ways fail, ho may construct artificial wator-ways,and even with- out the aid of navigation at all a city may spring up In the heart ofacbntioentT Beirlin, nearly the size of New York, is in the centre of a great open plain on the continent of Europe, and may bo regarded as a work of art. Only by canals can navigable rivers be reached, while the modern iron highway, the railroad, still more an artificial product, is a far more important element in developing Berlin, which has become an important rail- road centre. It is the will of man which has made Berlin more important than the sea- ports Bremen and Hamburg. Perhaps a better illustration can be foutid in two small cities in Western ivow York- Dunkirk and Jamestown. Dunkirk is a port on Lake Erie, and is advantageously situated in a fruitful plain, extending along the shores of the lake. Jamestown, on tho other hand, is O'j the top of the Chautauqua hills, and its onlv naviirable body of water is Chautauqua lake, scarcely more than a great pond. The next most important place on the lake is Mayvilie, a village with perhaps ten or fif- teen hundred inhabitants. Who would sup- pose that Jamestown would leave Dunkirk, its rival, and otice its superior, far in the rear in the race for supremacy in Chautauqua county? Yet such has been the case, and Jamestown will probably soon be twice the size of Dunkirk. Now, more or less acquainted with both cities, I am unable to find any other explanation for this than tho greater energy and en- terprise of the people of Jamestown. James- town is, in other words, an artificial product. Two of the chief disadvantaijes of Jamestown which the people see— tor they have tried to correct them, and have been defeated by con- stitutional quibbles— are their dependence on private gas and water companies, for in these respects they allowed things to take their own course, and did not keep in their own hands control of two of the essential elements of progress. The application is suflScieDtly obvious. Na- ture has blessed us and done more for us than for some other great cities. These advan- tatres are not to be despised, but they cannot be relied upon. It rests with us to say what the future shall be. If we, the people of Bal- timc^re, WILL it, we can make Baltimore as big as London. Not only that; we can make Baltimore a happier, bettor and more truly civilized city than London today with all its squalor and misery. When the question Is asked. How shall we outstrip our rivals In true trroatness? it will be at once seen that all the previous papers In this series have a bearing on tho answer. It is now proposed to stop and apply some of the principles which have already been de- veloped. Those humnn forces which produce na- tional or municipal greatness may be divided into two classes. The first are individual; the second may be crtlled social. The indi- vidual forces are so obvious and have been 80 often elaborated in an age characterized by excessive individualism that it is not worih while to dwojl long on them. The Importance to each citizen and to the community of in- dividual temperance, thrift, intelligence and energy cannot be overestimated. Nothing can be done without Individual excel- lence. A mistake Is otily made when it is •supposed that individual superiority alone Is suflQclent. The Individual by himself is powerless. Wealth is only h^ possible in 4 oommunit,, „ud m this community no (one livo3 for' himself alone. Can art flourish where hut one loves art? On the contrary, the artist must be stimulated by a public which appreciates and encouraues art, and, other things belntr equal, the more widely diffused the love and knowleaee of arc among- the people the higher the excellence wnich artists will at- tain. What hope is there Tor architecture among a people who prefer the cheap and R-audy to the eternal beauty of sublime and simple creations? What hope for music amonar those who turn away from the great -^ masters to applaud the rattlinir waitz of a fifth-class composer? What hope for litera- ture where there are none to prefer Gaorse Elior, Thackeray and Dickens to Ouida, Miss Braddon and Huj?h Conway? Ic "Is readily admitted by all who know what they are talking: about that iu all these pursuits the social atmosphere is of vital Importance. It is likewise in business. What does the-^ enerp-y of a merchant amount to if there are none who have the means to purchase his commodities? Can he develop a commerce by himself alone and unaided? But how shall would-be customers provide themselves with means for lar^e purchases without energy on their part? The energy of the merchant must then be supplemented by the energy of his fellows if he would develop any com- merce. Thus is he dependent on others. "None of us llveth to himself." Take a manufacturer, let us say, for ex- ample, of shoes. It will do him no R-ood to produce shoes unless others havs valuable things to fifive in exchansre. The manufac- turer desires a vast market, but this is im- possible unless the masses are ambitious and industrious. They must have wants, and energy must accompany these wants. A laboring populace poor and indolent and con- tented with little Will make few purchases, for they will not have valuable tbintfs to offer in exohanee. Thus the manufacturer can only hope to thrive in a prosperous commu- nity. The larger the earnings of the artisan and mechanic the more can he extend his business with advantage. But his dependence does not cease here. The quality of the labor whlcn ho employs is a chief factor in success. Labor of hand and brain Is the most important element in pro- duction, and a highly qualifled and moral population Is an indispensable condition of permanent national and municipal prosperity. The more closely a community follows Christian principles and its members concern themselves with the welfare of others, the more generally will its prosoerity be diffused and the more rapid will be its ad- vance in wealth. "Am I my brother's keeper?" If in any nation at any time there Is a general inclination to answer that ques- tion in the negative, that nation has already entered upon a course which leads to anarchy and barbarism. There are, however, some more special and particular applications of these principles to the problems of municipal life. There are certain fundamental conditions of our future prosperity which no Individual as such can supply, but which must be provided by us In our orsanic capacity as a city and as an im- portant part of a commonwealth, or not at all. These will be considered In a following article. PEOBLEMS OF TODAl. THE FUTURE OF BALTIMORE. BAD TAXES BLIGHT A CITY'S GROWTH. Frof. Ely Urees That Business Ought Not to toe Taxed. [Written for the Baltimore Sun.l ARTICLE XXV. Taxes are levied to enable our State and city srovernments to perform their various important functions, and the burden which they imiwse upon us is by no means a light one. The total State and city tax rate for the residents of Baltimore is $1 18M on the $100 of property. This does not appear to be so hitrh a rate of taxation as it really is. Taxes are paid out of Income, and the important question is to know what ratio exists between taxation of property and its income. When we reduce our rate of $1 78,^ 'O a percentacre on income it will be found that it is often equivalent to an income lax varying from 15 to 40 percent., a tax rate almost unknown iu European countries. Taxes are one of the chief elements in de- terminlncr price in nearly all branches of busi- ness which are not mooopoiie-:, to which totally different principles apply. The pro- Qortion of expenditure which is caused by taxation is larger than is generally realized, oven by business men, for they do not stop to reflect upon the effect of taxes on commodi- ties, and other taxes, which are shifted from the shoulders of the one who originally pays them to the shoulders of somebo'ly else. We have, then. In taxes one of those fundamental conditions of industrial life which are beyond the control of the individual as such. Inconsiderate people who know nothing about the nature of business talk as if it made little difference how taxes were laid. To them the problem appears very simple. Tl jre is so much money to be raised, and let us, say they, collect it indiscriminately in proDortion to the actual selling value of their property. Inasmuch as there is just so much money and no more to be paid to the public treasury, it seems to them to make very little difference how it gets there, pro- vided each one bears what is assumed to be his fair share. This is why our antiquated system of taxation is still maintained in Maryland. We live in an age of sharp competition— always excludinjj the growing number of monopolies— and the addition of a small burden to the loa J already carried by a man ensrajred in this competitive strugtrle may bear him down completely, while the les- sening of his load may enable him to go ahead and outstrip others. A small percent- aire on the expenses of business may make all the difference to the business community between prosperity and ruin. Now, nothing can be further from the truth than the state- ment that it makes no difference how the taxes are laid, since they must be laid some way. A man who acts upon that principle is like a man who should apply the principles and methods of blacksmithing to watch- makinar. The machinery of taxation ought to be adjusted to the actual life of modern jcojmmunitiysjvlth the utmost delicacy by H d both 083 and the principles of taxation. This ia another reason why active members of the community should (Jive careful att Mition to economic Paud social problems. Their success in so far as it depends upon such a matter as taxation ia conditional upon what others do. as well as upon what they themselvea do, aometimes even more than upon what they themselves do; and Jf I were called qpon to name the most serious mistake ot American business men, I should say It was the failure to jflve sufficient attention to the social forces which produce prosperity. There are certain things which can neither leave us nor come to us. City lots will serve as an example. It is manifest that taxes upon city lots will not injure business. There is a certain amount of land accessible, neither more nor less, and no taxation will alter this circumstance. City lots in New York are not compeiinjf with oily lots In Baltimore. More than this is true. If city lots are taxed on all that ihey are worth— up to the last dollar of their sellin? value, as they should be by our law as It stands— Instead of discoura^ini? enterprise it will encourage it; for it will make it harder for speculators to withhold the land from those who wish to improve it. Let us ta^e shinplog as an illustration of a business which may come to us or which may leave us. Elsewhere, shlppinjf Is either not taxed at all or is taxed only on earninKs, and shippintr conducted by foreigners is often positively subsidized. Shipping may either leave this port or other ports, and it ■will be determined by relative advantages. Can, then, anything more absurd be imasrined than to tax a dwindling shipping at a high rate, as it is now actually proposed to do in the Maryland Legislature? Will our ship- ping be improved If ships and other vessels are taxed on their full selling value? Can it be doubted that if a burden is laid upon ship-^ ping the business of our port will continue to decline? If so, who will derive the benefit from the attempt to apply a cast-Iron system of taxation? Oiher taxpayers will lose, be- cause they will derive no relief from an un- successful attempt to lay taxes, and they will be poorer on account of the loss of busi- ness which mieht have been theirs. A larere part of our manufacturing and mercantile business is of a similar nature, and It can be completely prostrated by a bad policy of taxation on our part. Retail mer- chants and dealers in manufactured articles will not come to Baltimore If they can do much better elsewhere, and they will be able to do better elsewhere if the necessary ex- penses of business are heavier here than in other places. It is consequently to our interest to render these necessary expenses of active business hs smnll as possible, tor in that way prices will bo lowered and business attracted. We render these expenses smaller when we place a light burden of taxation on business. Who loses thereby? No one, because in- creased competition lowers prices and all consumers get the advantage of cheaper prices. The problem is to extend the busi- ness of Baltimore: and to extend this busi- ness Implies lower prices. This is sufficiently simple. As business extends, the demand for _4 real estate increases, and real estaio owners i If certainly do nut lose. The differ- Hence between real estate and business, i"wiih respect to taste s, may be brought } out by - ...- - , which seems paradoxi- cal until one has reflected upon it. If all taxa- tion should be removed today in Baltimore from real estate and placed on active busi- ness, particularly on commerce and manu- factures, it would cause a sudden and unpre- cedented fall in real estate. Business would be crippled and so many would leave Balti- more that owners of houses and lots would almost be glad to give them away. Should all taxes be removed from actlce business and ,pl8iced on real estate, on the other hand, it is I doubtful whether it would produce any per- imanent depreciation of real estate. The measure might Indeed so improve business as to bring about higher prices for real estate, and Increased activity in building. The ex- perience of New Tork city goes to confirm this, for there business, althoujrh legally subject to taxation. Is practically well-nigh exempt, and real estate nowhere sells for so high a price. It Is to be noticed, further, that there is a deliberate, systematic attempt on the part of New York to draw business away from Baliimoreby lower taxes. The mayor of New York practically re- fuses to trv to enforce the laws as he finds them— for there they have the same anti- quated laws which we have here— and urges their rei)eal on the ground that they are the outcome of impracticable theories and ham- per business. He ursres the repeal of all ex- isting taxes on busitiess, in order to swell the commerce of New York, It is such consid- erations as these which led a writer on taxa- tion to frame a practical rule which he wished to "have cut into the stone at the Capitol (in large letters and have them gilded) in the Senate chamber, the hall of the House of Kepresentatlves, and in the Governor's office." The rule reads as follows: *'Never tax anything that tvovld b4 of value to your State^ that could and would run away, or that could and would come to you." While this rule may be too sweeping, it is worthy of careful consideration. The more one reflects upon the nature and the con- •equencea of taxation, the more profoundly one is impreseed with its far-reaching impor- tance. Taxation may create monopolies, or it may prevent them; it may diffuse wealth, or it may concentrate it; it mar promote liberty and equality of rights, or it may tend to the establishment of tyranny and despotism; It may be used to brlnar ab )Ut reforms in indus- trial society, or it may tie so laid as to aggre- gate existing grievances and foster dissension and claiS-hate; taxation may be so contrived by the skillful hand as to give free scone to every opportunity for the creation of wealth and the advancement of all true' Interests of the clty,or It may be s^i shaped by Ignoramuses as to place a dead 'velght on Baltimore la the race for municipal supremacy on the Atlantic coast. The single business man, as an individual, is helpless in this matter. It rests with us, oiti»t«i8 ot Baltimore and Maryland, to estab- lish tho«e social conditions wolch will allow every man the fullest and freest opportunity to do his best to m. ke Baltimore what we wish Baltimore to become. Shall wo wait until all our neighboring cities move in this matter, and lay behind with our abominable and barbarous system of business licenses and personal property taxes, or shall we be the first to strike out boldly in the establish- I mentof a_railonal system of taxation, a :d J thus have the advantaire over others of a start In I he race? It ia a cheerinar sign that our husiness men have moved in this matter, and passed resolutions petltloniDe the Leg-isf lature to submit a constitutioDal amendment; to the people makipg possible a new system of taxation. The move liaa been maae none too soon, and it should be followed up by vicorous action. Other social forces which produce munici- P'l greatness must be reserved for future contideration. S£IX FRANCHISES AT AUCTION. Pay the Taxes— to Discuss tbe Make the Monopolies Prof. Kly Continues Future of Baltimore. I Written for the Baltimore Sun.l ARTICLE XXVI. The importance of a ritrht placing of taxes has been considered. The amount of taxes raised Is obviously an essential element in determining the future of a city. Our munici- pal taxes have become truly exorbitant. Much as we talk about them, few realize it. In my last article it was sugarested that the burden misht perhaps be better appreciated if our proporty tax were translated into a tax on I the income which property yields. Compara- tive statistics help us also to understand how great the load of taxation in American cities. Consider this fact, which I discovernd a few years ago in comparing the budgets of New York and Herlin. The interest on the debt of C^ow York was then nearly sufficient to defray all the expenses of Berlin, nearly as larjre a city and one more dis^dvaatugeou=ly situated with respect to sanitation and keep- ing the etreeTs clean. Berlin is governed, it mar be remarked, by those who make it their business to understand tbe principles of municipal administration; that is, so-called theonstsi It is said to be the best governed city in the world, and so may not be a fair example; but this entire article could be filled up with statistics to show bow undue a bur- denwe are susiaining in taxation in Ameri- can cities. It is the commonest thing In the world for worthy citizens to write to their daily papers exhorting the city fathers to keep down ex- penses and reduce tbe tax rate, and the newspapers from rime to time come out with head lines like this, **lletrenohment a Neces- sity.*' Yet what good does It do? Expendi- tures continue to swell in our cities relatively faster than in our Stat 'a or at Washington. While State expenditures double, municipal expenditures Increase fourfold or more. Ohio may serve as an illustration. The ex- penses of the State increased about forty-six times in sixty yeras, and the local expenses one hundred times. T have yet to find one exception to this treneral rule that municipal expenditures increase faster than any other; perhaps I should say local expenditures, for I mean to include villages and other local political units as well as great cities. It is well to say "reduce taxes," but it is said to no purnose unless It can be shown HOW taxes are to be reduced. Let us clear the (rround— not by theorizing, but by exam- , intng a few facts which can be established beyond controversy. It is a general supposition that the increase . .i. VUM S. ^M . I I " l|li m | l l| In the burden of taxa^ ^o^. io3 13 aui to corruption. This is doubtless a partial ex- planation, but very incomplete and imper- fect. There are two European countries at least where municipal admi'jlstration Is above reproach In respect to integrity of officials, and these are England and Germany, whereas it may be said trenerally that in Europe mu- nicipal corruption is hardly one of the prob- lems of the day. Nevertheless, it is true that the expenditures of Euronean cities have in- creased in recent years with greater relative rapidity than those of American cities. This has been satisfactorily demonstrated by Dr. Simon N. Patten, of Illinois, In a monograph on the finances of American States and cities. This must not be misunderstood. The statement is not that the expenditures are as large as ours, but that the rate of increase for ten or fifteen years at least has been more rapid. This also is diflferent from saying that the rate of taxation has increased correspondingly, for there are many other possible sources of revenue than taxes. Dr. Patten has also shown some other interesting facts bearing on this problem. One is that democracy is not the cause of increased expenditures, as superficial observers so often suppose. Eu- ropean cities generally have at least some restrictions on the rlarht of suflfrage, yet their expenditures have Increased more rap- idly than our own. But there are American facts of still more striking character. It is said that universal suffrage eives a vote to those who have no economic Interests at stake in the community, and that they con- sequently vote away other people's money with reckless prodicality. Dr. Patten has shown, however, that In small Northern towns, where the vast majority of voters are taxpayers, the tax rates have increased more rapidly than in the large cities; further, he has given evidence to show that real estate speculators, by urging on untimely improve- ments, like sewers running into the coun- try—as recently happened in Buffalo— have done more to raise taxes than tbe ignorant voter. The object of the real estate specu- lators Is, of course, to keep a boom alive. Now. these are no fanciful theories; they are hard facts. What do they show? They show at least this: The general public has not gone deep enousrh in its attempts to explain the growing burden of taxation. The true causes for the growth of munioi- pal expenditures are after all not difficult to discover. The functions of the local political unit have been Increasing more rapidly than those of either State governments or our fed- eral governmnet. We hear a great deal about centralization. The truth is that, relatively speakinsr, we live in an age of decentraliza- tion. Our local political units are gaining in importance fa8ter than our sovereign States or our sovereign federal government. I do not say that there is no tendency in our central governments to extend their functions. I say merely that relatively they do not hold their own in importance. Sanitation and public schools are two great items in the budgets of cities. Light and water are two more, and in all these respects what satisfied us once is no longer tolerable. Publicparks. cost hundreds of thousands and even millions in cities* New York city, for Mb example, oroDOsea to spend one million dol- lars a year to provide small parks In the most crowded purtlous of the metropolis, a meas- ure demanded on sanitary no less than humanitarian flrrounds. Public libraries are maintained byaprowlnar number of cities, and the expense of maintainlnsr these is not In- sl^nifloant. Boston spent over $160,001) on her public library in a singlo year recently. Public baths are among iho hundred and one other Items which misrht be mentlone<3. Go through the tyhole list of thinifS for ^hich the modern oiiy spends money and it will be found that many items are quite new, while the ex- penditures forne rly ail have Increased enor- mously. We have now discovered the chief cause of Increased municipal expenditures. Extravai?aniJe and dishoneaty have after all been minor causes, and their Importance has been unduly magnified. Many an American municipality Is manasred without fraud, and in only a few firreat cities has the dishonesty been what the people have imagined. It has been bad enousrh, it is true, and it is a burnintr shame and disgrace to us that there hns been so much municipal corruption in America. Nevertheless, that is not the chief cause of large expenditures of public money. It is further safe to say that we have not got to the end of the era of increasing local expenditures. When one reflects upon cer- tain current phenomena, one must be rather inclined to thinfc at times that we have scarcely more than entered upon it. The public demands on the municipal adminis- tration grow steadily year by year. Better pavements, improved sewerage, more small I)ark3 and manual training in schools are among the pressing needs of the hour, and a demand for other public expenditures is just hecinning to be heard. Play grounds for children and opoortunitieg of physical cul- ture, that the rising generation may grow up strong and healthy, are among the things which people want. The housing of the poor is a matter over which English cities are exiendintr their care, and who is wise enough to say that the common welfare may not yet compel American ciaes to move in this di- rection? It is needless to continue the enu- meration. The growth of municipal expendi- ture is B part of the srrowth of civilization, and is likely to continue for an indefinite period. We cannot stop it without lagging behind in the march of proeress. Whining and complaining do no good. To write arti- cles containing nothing but the ceaseless re- frain, "reduce tuxes," is folly. Yes, we must reduce taxes, but how? There Is a very simple way, and the Ameri- can city which first enters upon it and keeps to it persistently and systematically is going to have a tremendous advantage over its com- potitors. It la the fuU and complete utilization of alt natural monopolies for the benefit of the public. This is the way, and the only way. to reduce taxes. If our business men will turn their serious attention to this, and endeavor to force rleht action upon our municipal councillors aid our leglslatora, they will see a most gratifying reduction in their tax bills, una will witness a new and unparalleled period of prosperity in Baltimore. It is, I believe, perfectly practicable to reduce the tax rate to one dollar on the hundred of property in ourcjty, and that is quite enough. I The principle which should guide us is very 1 simple, and will readily occur to those who have read the previous articles in this series. It 18 to exact from tvery natural monopoly using public property full compensation. What does rull compensation mean? It means this: Making Just as good terms for the public as a private man oould make for himself. Let us imagine for the moment that a private man owned absolutely the streets of Balti- more. How would he manage the street-car business? He would give no favors to any- body. He would either operate the street Ciirs himself or lease the privilege to the one who would give the most, and never under anv circumstances — I take it for granted that the man is saue;— would he give a perpetual lease. Short, terminable leases are the kind private men give, and thus keep complete control of their own property. Yet witness the carelessness and indifference of our busi- ness men and the general public about this matter. Every one of us has an interest, and the Interest of a single family is very consid- erable, but no one seems to concern himself about his own Share in the public property. Take the case of street-car fares. A certain public policy would ultimately lead to the establishment of three-cent fares, which would easily be worth forty dollars a year to a family of five persons living a little dis- tance from the centre of Baltimore. Forty dollars a year is interest on one thousand dol- lars. Now, if the head of an ordinary family heard that there was a chance for him to come into an inheritance of a thousand dol- lars how eater would he he! How actively would he follow up all his legal claimsl Yet he scarcely will turn on his heel to influence the Lesisla'uro in the matter of some most astounding street-car bills now before that body. On the contrary, when you begin talk- ing with him on this matter he will make such petty and trivial objections to a sound policy— in successful operation elsewhere— that one is tempted to believe that three men out of four lose their common sense when they begin talking about public measures. Our merchants may be said to have a still greater interest in this matter. If fares are reduced, the surplus Income of every man and woman in Baliimoro will thereby be in- creased and their sales will grow in amount. On the other hand, if franchises are sold at auction taxes may be reduced, and thfere they will gain. Who in our Lecrislatures sug- gests proper restrictions on franchises for natural monopolies? Is it not time for our business men to move in this matter? New York city has already moved, and will obtain Increased revenues from franchises in the future, there is nason to believe, for under Mayor Hewitt a halt has been called in the prodipal waste of public resources, and his last message to the council of New York abounds in suggestions analogous to those in this article. Will Baltimore be the last to move? WJll Baltimore business men delay aotioh until opportunity to save what public property yet riiroalns Is lost? The same principle holds good with regard to railroads operated by steam. Let them pay for every piece of public property its full value to the last cent. To exact less is to rob "the forgotten millions." North street, pub- Uc property, is occupied by a railroad. How mucti annual compensation does the city receive therefor? It ought to be worth many thousands of dollars a year rent to use a street in a great city. If it were ray prop- erty I sbould demand for It what it was wortb. Why should the city do less? Or is It not time to stop taidns a^ay the property of the many and glviaer it to the few? Gas supply and electric lights are of the same nature, save that the city ought to make provision as soon as possible to acquire works of its own. Yet we hear a good deal of foolish talk about competition in electric lighting stilll Experience will teach us bet- ter. But why wait until we have paid the dear tuition which experience charges be- fore we act? The correct meljhod in such cases is simple enough. Existing companies should bo bought out If they will sell at a reasonable price; otherwise they sbould be brought to terms by a vigorous municipal competition. No legal monopoly should ever be] granted a , private oorjKjration, for that is worth a great deal of mont;y. As a legal monopoly can only be conferred by public authority, the public ought to derive the ad- vantage therefrom, and what this advantage is, previous papers have shown. I will again only remind tbe readers of The Sun that Berlin now defrays eighteen per cent, of lis expenditure from tbe pronts on gas works with gas at less than one dollar a thousand. Since I wrote%]y article on gas supply the American consul at Leeds has told me that the people of that city are well supplied lor forty-four cents a thousand. The next article will didcuss a few remain- ing social forces which have a bearing on tbe future of Baltimore. PKOBLEMS OF TODAY. THE YALUB OF PUBLIC SPIRIT. WE MUST REGAIN SQUANDERED RIGHTS. The Future of Baltimore Discussed Fur- ther by Prof. Richard T. Ely, of Johns Hopkins Dniversity. I Written for the Baltimore Sun. I ARTICLE XXVII. A recent trip to New York city and to Vas- sar College, near Poughkeeosie, gave me an opportunity to observe certain phenomena of importance to a student of municipal life, and also to examine with care the three re- cent messages of Mayor Hewitt to the board I of aldermen of New York on the future of ' that city. The manufacture of gas at Vassar College Interested me. The gas is of a superior quality, as good as it has ever been my lot to burn. Less than t«renty thousand feet are manufactured a day, and the coal must b« catted two or three miles from the Hudson river. I was told that it was worth sixty ceiits a ton to cart the coal to this college. Yet even on tbis small scale and under these disadvantageous circumstances, it costs the college only eighty cents a thousand to man- ufacture its gas, •^■tjUe the people in the neighboring city of l^oawbkeepsie pay S3 50 for an Inferior quality ov yas. As sras is manufactured on a large scale >.i tfte city, which comprises over twenty thousand lu- habitants, and as coaV ia mor e read ily ac- cessible, it can be seen that the people of Pougbkeepsle ought lo have cheaper ga? whereas they pay over three times as much as Vassar College. Possibly mayors of American cities have written abler messages than those of Mayor Hewitt, but it has never been my good for- tune to read one of them. The rigorous defense of the public welfare and apprecia- tion of the true nature of the needs of New York city revealed by these messages re- mind one of the patriotism of a man lite DeWirt Clinton. It seems to me that Mayor Hewitt ranks facile princeps among all mayors of American cities for the past twenty years or more. An Important question for all our States and cities is to know how to recover public rights which have been thoughtlessly allowed to pass into private hands, and to safeguard such public property as still exists after the reckless prodigality with which Legislatures and municipal councils have squandered other people's money during the past genera- tion. The 6dn has already published edito- rials on constitutional changes which are needed to accomplish this desirable end, and the recommendations made in these edito- rials are in keeping with the teachlntrs of po- litical science. The chief of them ia to pro- vide by constitutional amendment that any corporation which seeks or accepts any new legislation thereby places itself under tbe reserved rights of the people to control all grants of privileges to corporations. Thus the effect of the unfortunate Dartmouth CoUesre decision Is to a certain extent ob- viated, and artificial persons are rendered subject to the law more nearly like natural persons. The recommendations of Mayor Hewitt contain similar provisions for muni- cipal franchises. He would make natural monopolies pay for every new privilege, and thus gather up the fragments of public prop- erty that nothing further may be lost. The time appears to have come for a substitution of cable or electric traction, for horses on street railways. This Is desirable on many accounts, and is recommended by the mayor. But he adds the following remarks \ to bis approval of tbe change: ^'Inasmuch as this change will be profitable, however, to tbe railway companies, a portion of the sav- ing should be secured to the city treasury. I recommend that a careful investigation be made as to tbe amount of this saving, in order that the necessary consent of the common council may be given upon conditions which shall be fair to both parties, tbe franchise will depend, of upon the volume of the business, and there- fore the ea:ne percentage o: the receipts could hardly be exacted in every case. But tbe companies should oompeusate the publio for the use of the streets upon an equitatle basis of division, and the Legislature shot Id carefully guard the rights of the oiiyand tbe interests of the taxpayers in any legislation authorizing tbe use of cable traction." Suggestions in regard to rapid transit aro made which are of value to us in Baliimore in shaping our future, and particularly in view of the proposition to utilize Jones's Pall for rapid transit. It is recommended by Mayor Hewitt that the city provide rapid transit, which it can do cheaper than private parties, for it can borrow money j^t three per Tbe value of course, lararely A Qk/' ceDt., while private individuals caust pay five. It is here suirsrc^sted tbat the rapid transit roads be leased for thirtf-flve years for Ave p«r cent, of their cost. Tl^d oity would not two per cent., which in thJrty-flve years would redeem the principal, and thus the road would become public property without jthe expenditure of a, O'-nt in ta.Tation. This is anulofiroua to principles which have, without di^Qoulty, been applied in other coumries, and seems to be favored by men most competent to speak on this subject , I In New Yorlt» althoujrh some evidently ihiak I that tbe city should manag'e the entire en terprise without the intervention of a co poration. The lucoess of the Brooklya Bridge Street-Car Line, operated by puWio authority, has been cited a^ a proof of Jhe superiority of public management. / Public spirit should be cultivated by as in Baltimore if we would make our future What we would like it to be. Pubiio spiri^ leads people to reflect on the publio welfare, and to consider measures from the stand- poiatof the (greatest jjood to the greatest cumber. A correct course of action is an inevitable result; public risrhts and public property are watched with Jeal- ous care, public enemies are exposed, and expensive errors in municipal measures are avoided. New York city now finds it neces- Bary to sro to an enormous expeuse in tearinir down buildlnjfs in the crowded parts of the city to provide small parks as breatbintr places for the poor people. It would have practicable to have reserved frequent open squares years a?o, and it would not hare cost the hundredth part of what it now does to construct these little parka. It was well known by those who thouRrht about iuch matters that they would be needed, but there was not publio spirit enoutrh to induce action. Open squares are needed In Balti- more in various sections now destitute* of them, and to acquire them today will involve a far smaller burden than to wait until popu- lation is denser in these sections. Alittle forethought and public spirit are the only requisites. New York now finds it advan- tajfeous to acquire water front. Thif involves an enormous outlay. How muoA easier it would have been to reserve aF the water- front at the besrinnlnarl Lack o^ public spirit led again to an expensive mlg^ke. There are various ways /n which publio spirit can be measured. Th/amountof publio enterprise is a good test/ The provinces of Quebec and Ontario, /h Canada, may be profliably compared/ The Canadians in Quebec have so littl/public spirit that it is impossible to main«tin good roads by public authority, conseq/ootly highways are banded over to private Q/rporatlon8,who collect high tolls and thu^' obstruct business by what amounts to a svstem of indirect taxation. Publio spiritls more active in Toronto, and there are t^^ if any toll roads In thut province. This difference In publio spirit Is a chief cause of difference In wealth. One of my earliest recol- lections— I can only just remember it- was a toll road in New York 8tate, but for many years I have not seen one in New York or Massachusetts. One of the first con- ditions of prosperity is the freest exchange of services and commodities, and In a very wealthy community toll roads will hardly be found. This is but one Illustration. Where publio. spirit is in a low ooiidiiion public au- thori(y id unable to perform its proper func- tions, and they are with loss handed over to private Individuals. Huxley's article on '*The Struggle for Ex- istence" in the Nineteenth Century is valuable reading for those interested In the future of Baltimore. Huxley shows that hishly quail- fled labor, both as respects physical develop- ment arid training of hand and head,are to be the first condi'ioos of success in the future Btrucgle for national and municipal pre-emi- Itenoe. On this ground he favors the restric- tion of child labor and generous provision for technical education. Huxley regards a u Ignorant person as a "burden upon, and, so far, an infringer of the liberty of his fel- lows." So profoundly, indeed, is he im- pressed with the necessity for education as a condition of survival that ho places a tax for education in the same category as '*a war tax levied for purposes of defense." It was, }n fact, when Eoirland saw her industrial supremacy threatened by the better edu- cated German that she began to act viiror- ously In this matter, just as France, when She saw her military power overthrown by •*the schoolmaster at Sedan," began to intro- duce universal and compulsory education. Would we in Baltimore hold our own with oitiea like Boston, New York, Chicago and St. JLouls doing so much more than we for edu- oatlon, we must bestir ourselves. Similarly Huxley shows that a temporary Buccess gained by starvation wages and child labor is Illusory because in lowering the efficiency of man, the chief factor in pro- duction, power to bold|one's own in the strug- irle for existence 18 lost "A population," says Huxley, ''whose labor is Insufficiently remunerated muse become physically and morally unhealthy, and socially unstable, mod though it may succeed for a while in in- dustrial competition by reason of the cheap- ness of its produce, it must lathe end fall, through hideous misery and degradation, to ; Utter ruin." Huxley emphaaiaea the (act J that he speaks as a naturalist, and as such his pre-eminent ability will not be questioned. It is incomprehpnslblehow aman can appre- ciate the advantages to a country of improved breeds of horses and cattle and at the same time fail to see that a strong, viuorous and Intelligent population is a thousand tlmeg more important in the race for wealth. What we want to do in Baltimore is to de- velop our strong points. A city is like an in- dividual. Formerly every man did every thing, taught school, preached, practiced medloino, made shoesi, built houses, and I know not what else besides. Now the condi- tion of success for States and cities, as well as men and women, is to find out their strong points and to do some things better than any- body eUe. It is often asked what makes Baltimore grow? Where do the people come from to oc- cupy all these new houses? One reason for our growth is that Baltimore is a delightful city to live In, and also, comparatively speaking, a cheap one. People come here in vast num- bers on these two account?, for there is in modern society a largo class of people who are so situated that they can easily change their residences. A little inquiry will probably oouvince any one of the impor- tance of these two facts. These are strong :: points, and they oufirht to be-,deyelopea pru- dentlV but visorously. Public improve- ments should g-o forward as fast as the municipal flnances will warrant; public prop- erty should be fully utilized for the benefit of the public; cheap water, cheap lijrht and chetrp ifansDortation should be provided. Tbe cheaper the&o indispensable elements of life, the more will people toe attracted to Baltimore. The indispensable conditions of life are also elements in the cost of business, and to reduce them eives us a superior ad- vantagre in the struKsle for existence. As to waarea, the real question is not how much are watres in money, but what will money wages buy? Baltimore has in this an advantage over a place like New York. The Johns Hopkins University, for txample, has thus an ad vautajre over Columbia College in New York city. Other things being equal, Baltimore can, for the same salary, get a better man than New York. For my part, having lived in both cities, I should prefer a salary of $3,000 in Baltimore to one of 14,000 in New Tork. The cheaper the cost of livinar, the better the clasa of employes business men can get for a given rate of wages. This was why the manufacturers in England worked so hard to get the duties off imported food products forty years ago, and the cheaper cost of living made possible the Industrial expansion of England. The educational advantauea of Balti- more are a cause of increased popu- lation of considerable moment. It is probable that the Johns Hopkins University alone will lead to an expenditure of a million dollars a year by prof t-ssors, stu- dents and families who are by it brought to Baltimore, and the present expenditures con- nected in the one way and another with this institution are sufficient to support a small town. The Hopkins Hospital will similarly help Baltimore, as will the new Maryland Col- lege for Women. The Peabody Institute, the Pratt Library, and even a private gallery like that of Mr. Walters, do their shar» to bring money and people to Baltimore, and thus to keep the city alive. Yet it has actually been proposed to cripple all these Institutions- save the Pratt Library, which ranks as a pub- lic institution— by taxation! CHABT£BS MUST BB LIMITBD. Government 0-wner»hip of Bailvrays — Prof. Bly, of Jubng JUopkius University, Discusses tbe Corporation Probleui. LVVritten for the Baltimore Sun.l ARTICLB XXVni. The severe storm which we have experi- enced this week In Baltimore has as:ain em- phasized the importance of electrical sub- ways. The fact that there can never be any real competition in the matter of these sub- ways Is eo self-evident that no attempt has, so far as I know, been made to apply the principles of competition to them. There is a choice between two courses of action only, namely, rellanoa upon a private monopoly and a public undertaking. New York city is tryfng a private monopoly, and valuable les- sons may be derived from the experience of that city. The private company was strongly resisted by the companies which it was pro- posed to force to bury their wires, and tiually the people were startled one morning to see in thelr_new82apers the InteUIgettce that Jay Gould, of the Western Union Telegraph Company, against which the law author- izing the subways was e8i>ecially directed, had acquired a controUiug interest in the subway company. Something like this may always be expected to happen. It is similar to what railronds have always done with privat« competing canals. Again, it is seen that one private company is not strong enough to coerce powerful electrical corpora- tions of one kind and another, while a private monopoly encounters an obstacle in the odium which always attaches lo private moaopolies. Mayor Hewitt speaks of this system as "certainly very objectionable." It | would be supposed that the experience of ' New York would b3 suffioient to convince any one that it is the function of a dty to pro- vide electrical subways. These can readily be made to yield an income if constructed on the plan outlined in tbe last article for rapid triinsit. Money can be borrowed at three per cent, or a trifle over that, and then a rental can be collected from the various electrical companies which |vill yield more than the percentage paid by the city on borrowed money. It would seem that very moderate rentals ought to yield ttjn per cent, on the investment in a city like Baltimore, and this would soon pay off the principal of the debt. Municipal problems must now be left in order to devote the remaining papers in this series to other subjects. Railroads have already been discussed In one paper in this series, but certain aspects of the problems oonuecteiJ wiih railroads were then reserved for future consideration. Probably among German statesmen of re- cent years no one has had a hitrher apprecia- tion of America than Edward Lasker, and probably no one has entertained general views more In harmony with prevailing sen- timent in this country. It will be remem- bered that Congress passed resolutions of sympathy on occasion of his death, which Bis- marck was requested to transmit to the Ger- man Parliament, and that the great German statesman refused to comply with the request to assist in honoring his bitter political oppo- nent. Lasker had relatives in America, and shortly before his death visited our country, and in various ways seems to have acquired some familiarity with our Institutions. I met I Lasker lo 1880 In Berlin at a reception given by the American minister, and talked with , him about the railroad problem, then nearlng ! its solution in Prussia by the purchase of the private roads. Lasker had couducted a re- markable parliamentary investigation into the affairs of the private railroads in 1873, and expused their moral rottenness so thoroughly that public opinion began to react in favor of state railroads. It was natural, then, that he should bo found on the side of the govern- ment in the proposed acqulsiilon of the rail- roads, although on other occasions so bitter an opponent of the government. T was, how- ever, specially struck by his remark about American ruilroads. He 8aid,'*Youio America must sooner or later acquire your railroads and place them under public mauagemeut. Tt . will come as a necessity, for natural forces are at work which will compel you to take this course." This would have been a less sur- prising statement from other members of the Parliament, but coming from him, it deserves careful atteutionjL^Js Lt. true that forces ar* ^ iTat work whicb will brioff abouc public owd- ersbip and tnaDaKemeDt of railroads in th« U (J tted Stales? Who can read the future? (Jertaioly it svemed as improbable tea years affo that a mayor of New yoric ciiy Bbould advocate raunicipai ownerdhip of a eystem of rapid transit as it now does th^t a Presi- dent of the United States should ever oast bis inHueuce in favor of a federal railroad Isysiem. It must be taid, too, that the proper railroad system for Germany was still an open question ten years airo, whereas now it is no lonirer a problem of the day. It is settled, and the settleraeot is indorsed by an overwhelming majority of the German people of all shades of political opinion. One of luy professors while a student in the Uni- versity of Halle questioned, in 1877, seriously, the expediency of state railroad3,and brought asramst them precisely those anruments which we hear today in America; but actual experience has made him even an enthusi- astic adherent of the Prussian system, wnile another recent and competent writer says the suitability of srovernment for railroad manajremeni is no longer open to question, since it has been settled by the test of actual experience. These facts deserve careful consideration, and while the correct course for us in the United States is by no means clear, it seems like a wise thins: so to regulate our policy as to enable us to give that shape to our railroad system in the future which will best answer the demands of the situation. Those who have read the previous articles on natural monopolies will at once be able to state what should be done at present. It is a very simple thintr to limit charters and to provide for the acquisition of railroad property at their expiration at an appraised valuation. It forces no new railroad system upon a people, but simply leaves a country free in the future to determine upon a suitable policy without well-nigh insurmountable obstacles of vested interests. This is the old Jeffer- Bonian principle. It leaves each generation to manage its own affairs in its own way. We have been j^iving perpetual charters and grants, and have thus squandered tn« rlghta of those who are to come after us. He has read history to little purpose who cannot foresee trouble in perpetual grants. The Almighty has set a limit to human life, and evidently did not intend that the dead should by acts, which profesa to be forever binding, rule the living by hampering them in their freedom of movement. Efforts to do so are not likely to be successful, but they are likely to produce endless harm. What has been trained by perpetual grants of charters? Nothing, while It is easy to see how many existing evils would have been obviated by limited charters. All French and Austrian charters for railroads expire before- 1950, and no one yet has ever shown that this limitation has worked harm to the public, while it is certain that these two countries will then come into an enor- mous possession. France expects the rail- roads to pay the present vast public debt. ^ Limitation of charters may prevent much I stook-wfttering and issues of enormous quan- ll titles of bonds, but It has never been found T to check entwrprise. Suppose we had limited I charters, and, as a consequence, the Vander- I bilts and Goulds had been able to make only tenortwelv;. ....ilions of dollars from Tail- I road enterprise instead of three or four hun- dred millions, would they not still have been j willing to go on with their rail- roading? How oould they have done better? The pica that suoh vast fortunes are necessary for railroad construction is dis- proved by the fact that excellent railroads have been built without the assistance of men of enormous wealth. The excellent railroad system of Wurtcmberg was con- structed under the supervision of a man who received some 13,000 a year for his services, and seems to have been quite contented. Much that has been done cannot readily be undone, but there Is no reason why future charters should not be limited and means provided for the acquisition of the railroads which they authorize, should it be thouirht desirable. The Western Maryland Kailroad deflires to lease a part of the Cm sapcake and Ohio canal, and perhaps under the circum- stances nothing better could be done than to band the part of the canal in question over to this corporation; but can any one give any reason why the lease should read for 99 years, "renewable forever?" Is it not enough if we bind three generations? Great teachers like Bluntsohli and John Stuart Mill said we had no rlfrht to bind more than one. If it is provided that the State shall at the expira- tion of 99 years have power to acquire the property at an appraised valuation, all inter- ests are satisfactorily protected. One diflBculty in tne way of reforms of this character is that a class of men among us have become accustomed to bulldoze the public. So in many iStates railroads would threaten to go around towns unless they con- tributed for their construction. It is largely through such means that our local political units have contributed some two hundred millions of dollars for the constuction of private railroads. This has been prevented by constitutional amendments to many State constitutions, which forbid any public con- tributions to private corporations. This has not been found to prevent railroad building but it has forced private parties to use private money, and then left them free to select natural routes. If our federal constitution prevented any charter for any purpose whatsoever from being granted for over fifty years, and compelled the reservation of right to repurchase, and of other rights in behaif of the general pub- lic, it would be a reform worth talking about. The English Parliament has gone oven further than this with respect to certain classes of charters, rendering it impossible to grant for over twenty-one years. The federal government ought to embrace every opportunity to acquire railroad prop- erty—to be leased. perhap», for the present. What proprlf'ty was ther* in the construction of the Feciflc railroads at the public expense and then turning them over to private par- ties? Would not the people have been better served If irovernment had kept the riarht of property la thoin and leased the roads for a limited period, under stringent conditions, to the highest bidder? The course for Congress to pursue at the present time in regard to these roads is suffi- ciently clear, and if pursued would be the first step towards reform. It is to foreclose the mortfl-aces, acquire .the property and lease It for twenty years. Should the federal ffov- ernmentfiruard properly all public property and all public riffbts, ii would find itself in the possesglon of very considerable annual revenues from other sources than forms of taxation which involve restrictions on the free movements of commerce and Industry. A federal tax which is needed is one which will yield a steady revenue, and a revenua which can be increased if need be. A tax on the jrross revenues of all railroads engagred in Interstate commerce mltrht uot be an unde- sirable form of taxation, an4 mi^ht remove the possibility of a recurrence of past finan- cial embarrassments. PROBLEMS OF TeDAY. THE INNOCENT SHAREHOLDER. THE PROPERTY RIGHTS OP THE PUBLIC. Prof. Ely Points Out How the People are Forgotten When the Corporations are Concerned. [Written for the Baltimore Sun.1 ARTICLE XXIX. ^ We hear much in these days of the inno- cent purchaser of railroad shares and other property with which fraud has been con- nected. The innocent shareholder has been made to cover a multitude of sins in the dis- cussions on the Pacific Railroad In the United State Senate, and this same character ; fieured largely in the arguments on the I Jacob Sharp Broadway franchise before the Court of Appeals in New York State. It must bo acknowledeed that the innocent stockholder, especially in the person of the widow and orphan, has done excellent serv- ice in the past, and Is likely to become more prominent in the future. The Court of Appeals rer.'dered a decision in the Broad- way street-car case which must strike the economist aa a little startling:, and which I mil venture to assert will come to be recojf- cized as bad law inside of twenty years. The charter was revoked, but the franchise and all the rig-hta of this corporation, after it had met with log-al death, p issed over to the directors of the railroad, to be used for the benefit of the various claimants, and of course claims for all it was worth had been established at the earliest possible moment. The people grot the law— the shell of the nut — but the thieves arot the property— the meat of the nut. History will surely have some- thing to say about this lepal hair-splittinsr. Suppose thf? public has rights like private in- dividuals, what must necessarily result there- from? Those who receive prooerty stolen from the public, must bs treated like any other innocent receivers of stolen coocls. We may feel very sorry for them, but we take the property away nevertheless, and restore it to the ricrhtful owner. But let us consider the case of the innocent shareholder a little more carofuUy- A recovery of public property miRhi work hardship in some cases, but is the Innocent shareholder the only person to be considered? By no means— the millions comprised in the term "the sreneral public" are aeain for- Rotten. A very few persona mi»ht have suf- fered If the property which Jacob Sharp stole had been restored to its riphtful owners, the public, but over a million people suffer In New Yorfc on account of this theft, and some- of them are widows and orphans and day- laborers. No one will for a moment deny— provided he knows anythinj? about the facts at all— that passengers can be carried at a large profit on Broadway in New York city for three cents each. The franchise could have been sold for a small percentage of gross receipts on condition that passengers should be carried for three cents. This would have been a slight relief to the taxpayer and a very great one to all poor people. Many a poor widow and orphan and thousands of worK- ingmen trudge the streets of New York wearily for miles today who might ride if fares were three cems. Every day of tho year sorrow and hardship are inflicted upon thousands of innocent and worthy people because they were forgotten, while a few other innocent people, receivers of stolen goods, were remembered. I submit that this is an iniquity. Those who bad money enough to buy shares and bondswere not the mosthelp- less class in the community. It is easy enough for one who thinks the rights of the many equal to the rights of tho few to say what ought to be done. It is to defend public prop- erly just as private property is defended. This is the way to root out the anarchists, and the only way to make a permanent impression on them. Not an abolition of property rights is wanted, but an extension of property ritrhts and vigorous measures to defend the rights, of the property of the many as well aa of tho few. Property is sacred, and when all prop- erty, that of the public as well as at the in- dividual, that which resides in one's own person, one's strength— the labor power and the health, bodily vigor and mind of the workingman — ire properly guarded, attacks on private property need never be dreaded. So long as public thieves can crawl behind the intoceut stockholder and place the widow and orphan between themselves and public wrath, public property has no ade- quate defense, and can have none, because those who get it at once begin to dispose of it. If, however, we as a people begin to show a higher appreciation of our own rights and treat our enemies wi h less gentle consideration, people will hesitate about purchasing property fradulently ac- quired, and this will produce a wholesome habit on the part of purchasers of stocks and bonds of making 'inquiry about methods whereby alleged rights were secured. The proper method for protecting really innocent purchasers of stocks and bonds is easy enough. It is to provide civil as well as criminal remedies against the thieves. It is not diflicult to give those who suffer at the hands of a man like Jacob Sharn ample civil remedies whereby they can recover damages. It is a thing which has already been done in other places, and for which precedent in somewhat similar cases can probably be found in the legislation of every American State. I think the Et)giiBh law of corpora- tions already provides ample remedies for a case li^e that of Jacob Sharp, and I am very sure that the German law— the latest and most admirable law for private corporations— is all that coula be desired in this respect. As for the rest, people will soon become disgusted with the "widow and or- pdan" plea, for U ia made to do duty so often ; by scoundrels. It haa been said we should nhtpayofC tbe public debt of the United States because the widow and orphan might suffer, and a irood deal of pathc^a haa been evolved on their account, Henry C. Adams, however, tikes up tbe public debt and ana- lyzes It in bis work "Public Debts." He shows that out of $(564,000,000 of retflsterod bonds $410,000,000 are held in sums of $50,000 and over, and he expresses the not unnatural conclusion, "It seems a Utile lualcrous to urjje the mainienanoe of a federal debt as a measure of charity to dependent persons." Over seven y-three thousand persons held rcRlsterod bonds, but of these about 1,500 hold two-thirds of the total amount. It Is not enough for corporations to come before the public wlih statements of the number of holders of stock and their wide distribution. We want to know more than that. We want an analysis of the wealth of the corporation in question, and if ihe information is to be of value, we must be told just what percentaRe of stock is owned In small amounts, what in moderate quantities, and what percentage in large blocks. Should one ol our States or our federal go\%rnment begin from ihis time forth a vigorous defease of public prop- erty and public rights, a few persona of undoubted innocence and integrity would suffer at first, but only at first, for people would soon be more circum- spect than heretofore in purchases of stocks and bonds; and as for the few real sufferers. we could well afford to indemnify them out of the public purse. As this would be bad policy on many accounts, it would be better to raise money needed for this purpose by private and voluntary offerings. When it happens that members of the dependent classes, lik« widows and orphans, are injured by a recovery of public property which haa been stolen,! am willing to put my name down o nasubscripiion list for their relief for a gen- erous sum, and to use all the Influence I have in inducing others to do likewise. ABTIFICIAI. MONOPOI^IES. The Standard Oil Company as an Illas- tration DiscusBed by Prof. Kly. [Written for the Baltimore Sun.] ABTICLK XXX. The man of one idea is in some respects a useful man, for he sees a portion of the truth, and the inten.-ity of his conviction in regard to its importance leads him to become an apostle on its behalf. Tariff reformers who find an explanation of all the evils with which America is inflicted m pnjtoctionism are doubtless blind to the re^ signiflcance of innumerable classes of phenomena, but they are often oil this account the more ardent in the propagation of the truth which they do see Doubtless fanatics are needle 1 to help on in tho world's work. Neverthele-ss, one- sided advocacy of true principles has its dis- advantages, for an exposure of tne exaggera- tions into which men are thereby drawn leads many to overlook tho kernel of truth about which so much error has k'athered. 6r, to use a different figure, those who perceive the vast amount of chaff which incloses the wheat are too often inclined to reject th« chaff and the wheat alike rather than to take j tbe trouble to separatethe two. ^ Much nonsense Is wri .oout the tariff \ and monopoly, and the Chicago gas trust has even been connected with protectionism, with v\hich in reality it has about as much connec- tion as the rainfall of Baltimore with the length of the riv- ' •. It seems to me de- sirable for us to !_.._. -lear notions about the actual workings of a protective tariff, and the consequences which li> renlity may be attributed to it. I think that we will thus, on the whole, contribute vastly more to true and permanent progress than by a blind advocacy of we know not what. It has been attempted In previous articles to show that certain pursuits* are In their own inherent nature monopolies. These have been enumerated and described. They have become of vast Importance during tho pist fifty years, but, nevertheless, thoy in- clude only the minor part of our industrial life. The great majority of men are engaged in pursuits which are n )t natural tnonopolies, and if these men contrive to make of them business monopolies, it shows at once that f etjinehing is wrong. Commerce, agriculture, \ mining and manufacture arc only In rare an<i exceptional cases natural monopolies. Yet we eee a great many monopolies which may be placed in one of these classes. They are all artificial monopolies, and consequently are evils which should be suppressed. They violate the fundamental prlncioles of oux ex- isting social and economic order, and are, as has been already stated, socialistic and revo- lutionary. There are two causes of artificial monop- olies. The first is legislation in beha'f of men engaged in a pursuit not a natural monopoly. The second is the connection of a pursuit not a natural monopoly with one which is a natural monopoly, so that the two become, to a certain extent, one. I lay it down as a general proposition that arti- ficial monopolies are buslue8?e8 which have become monopolies only by an alliance with a business which Is a natural monopoly. What legislation, as seen in a protective tariff, does is simply to aid this alliance, to render It easier to form it, and to make it more Im- pregnable when formed. He who tbinKS that tariff reform alone would remove monopolies and trusts has not grasped the A B C of political economy. I ask the readers of Thk Sun to remember this. I believe that political economy is suffi- ciently advanced to enable me to predict this with almost a"* great certainty as an astrono- mer can predict a coming eclipse, and I am willing to take up(tn myself whatever risks to my reputation as a scientific man are In- volved in this prediction. A reform in the field of natural monopolies must accompany tariff reform in order to uproot artificial monopolies. Tho transfei of bagsrage from houses and/ hotels to railroad stations and from railroaa stations to houses and hotels is not a natural m- v. but it is a business ■■' in every one . uur great cities has b. a partial monopoly. How did tho business beconio an artificial monopoly? How has competition been well-nigh cruphod? Uucause in eacn gieat city one or two companies form alli- ances with railroad companies and obtain ex- clusive privileges on the trains and in the stations, tho railroad companies obtaining some quia pro guc^the railroad com- / I padies or 'some of their officials, for^ I think it is not so often the stockholder who receives the benefit as vari- ous oflacials who are let in on the around floor. Thus it was that in 1879 the Erie Rail- road was found covered with barnacles, but on the whole there has been an improvement in this respect in recent years. But this la merely said "by the way." As railroads are natural monopolies, those dependent upon them are often made monop- olies by their action. The Standard Oil Company serves as an- other fllustration. That obtained a monopoly throufirh an alliance witn the railroads of the country, and this srave it special freight rates which DO one else could secure.. The report of the special committee appointed to in- vestigate the railroads in New York in 1879 showed that the Standard Oil Company had received in rebates ten millions of dollars in eighteen months. It was impossible for competitors to stand up B{rainst such fritrht- f ul odds. Quite recently a railroad in Ohio was found to have given the Standard Oil Company an advantage of three hundred and fifty per cent, over George Rice, of Macks- bur^ and Marietta, their chief competitor in that part of Ohio. Itwas this alliancewith a nat- ural monopoly, and, his alone, which enabled the Standard Oil Company to secure a mo- nopoly. The competitors of this concern have not retired before its superior business ability, but before its cheaper freight rates. It is by pursuing a shrewd policy in this respect that Mr. Rice has been able to main- tain an existence as an oil refiner. Wher- ever f relgat rates are too much against him he retires from the field and seeks another market where he can contend on an equal footing. The competitors of the Standard Oil Company have never complained of the j superior skill or superior business ability of the Standard Oil men, but of the favoritism which has been shown them by the railroads; and how close the alliance is can be seen In freight classifications and changes therein in order to secure special favors for the monop- oly, and by hook and crook to make competi- tors ani impossibility. The curious will find the story well told under the title of "A Commercial Crime," in "Hudson's Railways and the Repiblic." The production of coal furnishes another Illustration. This ought not to be a monopoly, but as to anthracite coal it has become such by its connection with railrc^ad compnnies. A group of men intereste i in mines control the roads, and are thus able to dictate to other operators and rule ihem with a rod of iron, which renders the trades-union tyranny, of which we hear so much, insignificant in comparison. Men living in Mary- land know full well that they are not at liberty to pay their men what they will to mine coal where they will, and in quantities which suit their own convenience. They must do what they are told to doorsuffer financial ruin. A pursuit nor a natural mo- nopoly has become an artflclal monopoly through an alliance with a business on which it depended, and which is in its own nature a monopoly. It is on this account that the constitution of Pennsylvania renders it ille- gal for a railroad to engage in any other lines of business than those connected with transp irtation. It is an entirely _gorrect poli ■ ' > demand ,^th at railroads shall be held riaidly tc their own proper functions, and that they shall serve all alike in order to avoid artificial monono- lies. This was also the purpose of the Inter- state commerce law. The aim is correct, but there is no reason to think that the purpose of the Pennsylvania constitution or the inter- state commerce law will be accomplished by present methods. The State constitutional provision and the federal law are of value as establishing a principle, but that alone is their chief sigiiiflcance. ^v There may be rare and exceptional cases in which the taritf alone will enable men to secure a motiopoly, but the approved method is to get control of the home market by alli- ances with natural monopolies, and then to keep foreign competition out by a high-tariff wall. The tSiUEP handJjT_hand. _ PROBLEMS OF TODAY. tne THE PROTECTED IN POLITICS. GOVERNMENT BY SPECIAL INTERESTS, How a Protective Tariff Corrupts Politics Discussed by Prof. Richard T. Bly. [Written for the Baltimore Sun.l ARTICLK XXXI. Government is cieated to promote the gen- eral welfare, anl when it is u-el to advance special interests which are nor at the same time fireneral interest^, it is perverted from itsorii^inal purpose. Our federal, Stae an ' local governments ar" now com rolled by men who hold their offices in trust for pow- erful private partes, and they view public measures, not from the standpoint of the general puiilic, but from the standpoint of thost^ in whose employ they are. This has b:>en previously mentioned in this (series of Mrtiolfes and reed not be enlarged upon, for it is Buflicleiitly obvious to those who "have eyes to see." O.ie proof of this is . the way in which leirislativo favors are exchano-ed. A pr mises to support ti's bill if B in turn will vow for some meas- u e which interests A. This occurs daily, and would of course be an impossibility if A and B both voted simply for measures which they reirarded as d^sizned to benefit the public. Another evidence of the influ- ence of private interests i^ seen in the ques- tion so often asked by legislators of the powerful when they visit the lei-islativc ^jalls. "Well, what can I do for you today?" The power held as a trust f. r the people is in return for some bribe, direc or indinct, placed at the disposal of a private person. The lobbies which exist everywhere are a further proof. These are maiotalned to in- struct legislators in regard to private iptei- ests and to make it worth while for them to help forward some scheme for pl'indering the people. Again and again have citizens found it an absolute impossi- bility t> secure any attention for measures designed simply to benefit the general public. Leirigl itures and lity councils will not even take time to give them superficial attentii)n. Consequently the practical man does not go in a siraightf.irwarJ ma mer to anyone of our legislative bo lies and say: "I have de- vised plans for public iaiprovements which will be of great benefit to our city, and I desire to explain them to you." On the d n- trary, he goes t>i some one who has influence and brings hi-^ plans forward in this indirect manner. Jt jook a scandal ]\jfj^ the Jacob X' i >haTv c&ae to iovov a bill throuff^ the New York L'trisiature readerinjr the sale of street-car franchnes compulsory, and when in ihe Leirislaiure It was sug- gested that charters be limited as to ientrih of time as In Louisana, the Influence of boodle was too atronsr. I sar this b cause I hold that there was no laoK of kn )wlo (fe tiS to correct me hods of dealincr with the problem. It Is simply Impossiblb to find any tfiounds for unH'Tiited street-oar franchl-es, and had public interests been d cislve the frunchisea would have bee i limitod in time. We have the fact of srovernmo t by special interests knowa to all men. Now what is the cause? The more carefully I examine the facta of the case, and the more I reflect upon the nature of the pn.blem, the more inclined I feel to apree with those who find a chief cause in the protective tariff. The moment a tax is placed on imported troods that moment those enfirae- d In its production at home have an interest In the control of leffisiation to suit their private ends. It is unavoidable. The tempation to do wrong: is absolutely in- sepirabi.- from protectionism. Thosa who are protected form an association and keep nsrents at Washintrton, whose business it is on the one hand to raise the tariff, on the other to prevent a reduction in the tax on imported commodities. Special private interests are thus created by legislation, and these make free use of money. A^sesments are levied on producers of taxed commodities to support a lobby at "Wasblngion, and in cenaii branches of pro- ductions manufacturers have come to look uix)n these assessments as a mere matter of course. The money goes to Wasbinp-ton, and no account is ever rendered of the mode in which it is expenied. Legislaiors get in the habit of looking for remuneration of some kind for the performatice of their legislative functions, ad the most unscrupulous use pflBce for what it will bring. There are two ways in which money qaii be made by legisla- tors. They can receive money for their aid in gettitisr throusrh bills in which pri- vate parties arQ interested, and they can bring forward unjust bills designed to Injure private parties purpose y to be bought off. Proper bills, designed to guard the public intQrests, are also fre- quently brouKbt forward, and then a shrewd lejrisiator can ob ain credit with the public for his service at the same time that he re- ceives boodle for secretly killing his own bill. There is every reason to believe tnat such things happen at Albany, but of course not in connection with the tariff. The cor- ruption of State Legis aiures and municipal councils is the work of those in possession of natural monopolies. The natural monopo- lies must be Qontr lied, because it has been demonstrated by actual experience that it is impossible to turn over irunsportation. lltfht, vater and the like to private corporations without regulation. Now the moment regu- lation begins a diversity of interest between the public and private parties is created, and a wide door Is opened for corruption. It is easier to see this in a small town. Let UB, therefore, acrain take the case of water- works in two place-i already mentioned. Fredonla, New York, has public works. No corporation exists to o Trupt tho village irtstees; no p )werful private Interests ad-» 1 vers© to those of the general public exist, I The only source of corruption iif the civil service, and the appointment of one or two officials has never been found to De appreci- ably demoralizing. Let U8 leave Fredonla and go to Jamestown in New York, where a private water company exists. This corr- pany has from the start been engaired in litl» jration with tne city. N »w can «nv one fail to see bow ihia at once introduces a corrupt and debasing: influence in muaicipAl politics? What has taken place in Jamestown I will no- attempt to say; but the usual course Is for the private corporation first to get control of the pres9« or a portion of It. then to send men to the council to decide all disputed quustions be- . tween the corporation and the city I » favof of the former, also to effect a repeal of any reserved public rights. The corporHtionp have a tremendous advantage because they are utterly unscrupulous. Parties are to them merely tools. "In republican districts ' I am a republican, in democratic districts I | am adem< cr.t." is the assertion of a notori- ous railr aa president. I might name a Western city in which there is reason to believe tnat the street-ear corp rations elect every municipil oounoilor, whether a demo ■ orator republican, because in all the wards j they control both parties. When I used to live in New York city I was in a posltio i to know that nothing was so effectual in se- curing employment on the street-car lines as "a political pull," and there is reason to sup- pose that the same condition of things ex- ists today. The street-car conductors and (fivers were practically in the employ of politicians, and were a worse cause of de- fBoralizationibanthepamenumbr of munic- ipal employes, as there was not the ; same opportunity for exposure and improvement In methods of appointments. 3oth cans '8 of corruption and eovernment by sped 1 interests are something insepara- ble trom present policy. What should be done with respot to natural monopolies has alreaiy been explained tt sufBcient lendfth. It may be well to add a word ahout tariff reform. Did free trade already exist, there is reason to believe that it would be a «ood thln»f for the country. We have superior advantages over other countries, and the strontro-it is not the one to suffer in competition. Fanners and workingmon arc the last ones to stain by protection, and I have no doubt thai both would gain were trade as free between Europe and America as between our States. However, the fact of the tariff exists, and the fact is of vast imp lit nee. Our industries have grown up unier it for over seventy years, and have itecome moro or less adjusted to an artiflolal s'aie of thintrs. Good f ith requires that wo should in dealinflr with manu- facturers bear this fact in romd, and move carefully in readjusting trade relations. This is not saying that we should jlo nothing, but simply that rash. hasty movement shoul i be avoided. No one has received any pleage that tariff aws would not be changed, yei it seems only fair that those who have reli d upon a traditional policy should have a little time in which to adjust themselves to a new state of tilings. W hile it is true that the fears entertained in many quarters in re«:ard lo the effects nf l?V.'''T^ tariff reform are ^reatfyeluef jerated, there can be no doubt that immel diat^ free tride would ruia a D-no,i ^ mauufacturers. Now ou/iidustS' ifTh's one m? V'^'"*'"' ^"'^ y°" cannot .Jure uuuy. ihia i3 -j^eji established. Iidustriai facttir^'^^^'"^^"'- ^° injuryto Z?^i f jcturers may mvolve bank., tbese In turn Farmers have nothing whfltpv#:.r ♦« h^ rr-STr^ """• *'"■»' " "'vlZrlt tariff reform free raw raaterials will be likPirl benefit the general Public and to ^roaui. no iDdu8.nal Shock. Free raw material should be accompanied by corre.podiX lower dunes or even by duties a little more tr«n ' proportionately lower. Whenever aTar fcle '8 place>i on the free list it is a clear Ziu and oiie temptation to_^oyernment by spediui te^ests i8 remoVid. A steady? pSterft^ effort should bo made to tax as few thinps as possible, as thus interference with tr.de and temptation to corruptlo:. will be re- i duced. A fruitful gource of fraud and injustice as b.tween various p^rts is caqsed Dy difficultipi attendinir valuations. It is desirable to simplify administration bv sub- stituting: in every praciicable case ppeciflc ror ad valorem duties. For the re^t, the bill revlslm? the tariff prepared by the majority or the ways and means committre, while not all that could be desi-ed. seems to be a move- in the rifirht direction, and one which de8> rves tho earnest support of tho^e who are chiefly coucerDed at out the ireneral welfare. 14 DAY USE RETURN TO DESK FROM WHICH BORROWED LOAN DEPT. This book is due ofl the last date stamped below, or on the date to which renewed. Renewed books are subject to immediate recall. LD 21A-50m-4,'59 (A1724sl0)476B General Library . Uaiversity of California Berkeley / -iNl-t / / i\^-a^^ffe.