Chapter I. The Objects of Government Spending

OUR MONEY AND THE STATE CHAPTER I THE OBJECTS OF GOVERNMENTAL SPENDING WHY does the Government take our money? Be cause government costs· moneYJ and cannot be had without it. Taxation is the price that we pay for government and protection. Most of us do not want, or need, to be governed ourselves. Respect for law, or for the duties and customs that law embodies, is so engrained in us by centuries of tradition, that the presence of the policeman on his beat is a fact that never influences our conduct. But. if we do not need to be governed ourselves, we very much need other people to be governed and prevented from attacking us or our belongings. Protection of our persons and property J from home and foreign foes, is the first and most important business of government; and the chief reason that it can give if we ask it " Why should we pay taxes? 11 is this: " Because, if you don't, you will be in danger of losing everything that you have got."

Government does so much in these days besides its first elementary task of protecting us from one ~ 2 THE OBJECTS OF SPENDING [CHAP. another and from outward foes, that we are apt to forget that this is its original business. But as the point is very important, as we shall see later, it is well to get it fixed into our heads by reading the plain words in which it is set forth by John Locke. In Chapter I of his Essay concern"ing the True Original Extent and End. of Civil Government he says: II Political Power then I take to be a Right of making Laws with Penalties of Death, and conse quently all less Penalties, for the regulating and preserving of Property, and of emplaying the Force of the Community in the Execution of such Laws, and in the Defence of the Commonwealth from Foreign Injury, and all this only for the Publick Good." In Chapter VIII of the same Essay we find: II The only Way whereby anyone divests himself of his natural Liberty and puts on the Bonds of civil Society, is by agreeing with other men to join and unite into a Community, for their comfortable, safe, and peaceable living amongst one another, in a secure Enjoyment of their Properties, and a greater Security against any that are not of"it."

And in Chapter IX the matter is summed up thus: II The great and chief End therefore, of Mens uniting into Commonwealths and putting them selves under Government, is the Preservationof their Property." Locke did not leave thea bject of government on I] THE STATE'S CLAIM 3 this merely businesslike founda tion. He did not really mean that we only submit to being governed in order that we may grow rich and fat and enjoy our riches without fear of burglars or marauding foes. He says in another passage that the End of Government is the Good of Mankind. This is a more inspiring ideal, but we shall all acknowledge that it cannot be secured unless man's material wants are satisfied, and that as society is afpresent constitu ted, this cannot be done unless property is protected. Some day mankind will perhaps grow into a race of beings who will work for the pleasure of working, and not mind who takes and uses the stuff· that they make and grow. There are already many more of such people than old-fashioned economists admit. But in considering present-day problems, we have to take human nature as it is, and nations cannot at present increase their wealth, and so their power to secure the Good of Mankind, unless those who increase it are secured in ,the enjoyment of it.

Protection of the property of the citizens being thus the original, and still a very important, duty of the State, it follows that the State, in order to carry it out, can make any claims that it pleases on the services and property of the citizens. .The State, as Professor Bastable tells us, It is entitled to claim all the services and property of its subjects for the accomplishment of whatever aims it pre scribes to itself. When stated in. so rigid a form," he adds, H the proposition is likely to awaken dis4 THE OBJECTS OF SPENDING [CHAP. sent, and yet, from the strictly legal and administra tive point of view, it is a commonplace since the time of Austin." 1 (Austin was a great authority on law, who lived ~nd wrote in the first half of the nineteenth century.) It is true enough, as Professor Bastable suggests, tha~ the average British pater familias m~y be startled into an indignant denial qf the great law that the State has a right to take ?-ll his work~and ali his goods. But a few moments' though t would convince him that the proposition is quite sound in logic, since the State· cannot do its business if all the citizens are to be able to decide how much, or how little, they are to give, in work or in goods, to its support; and he would also comfort himself with the reflection that, how ever logical be this power of the State, it cannot be exercised beyond a certain point. On paper, the State may be able to. set us all to work for it, but it cannot make us wor}( hard or well unless we are willing to do so. On paper, the State may be able to take/all our property, but if it did, then it would not be worth anyone's while to get property. The citizens would cease to accumulate property, that is, to leave the world richer than they found it.

Either the State would have to accumulate on its own account, which it could only do if the citizens were willing to work for it, or it would find that it had come to a standstill. Professor Bastable's proposition, though abso lutely true as a principle, is thus modified by the 1 Public Finance, p. 42 • TAXPAYERS' STRIKE 5 very real power of the citizen to refuse to produce either the work or the property that the State has the power to take. This power 'of the overtaxed citizen to strike effectively against taxation is no fanciful suggestion of what might possibly happen. It has happened. Under the R'oman Empire taxa tion was enormously heavy, for the "'support of the Anny, the Imperial Court, and CI the great number of clerks made necessary by the bureaucratic form of government." It :\vas also extremely oppressive, since the senatorial class, the Army, Professors of Rhetoric, and the Clergy, were largely freed from it, and so the whole burden fell on the curials, that is, owners of tw~nty-five acres of land, or its equivalent.

CI When the curials were bankrupt and could no longer pay the taxes, they attempted in every way to escape from their class. Some of them succeeded in rising into the senatorial ranks; many of them deserted their lands and became slaves, or entered the Army or the Church. The Emperors, trying to prevent this, often seized the curial who had run away and compelled him to take up his old burden again." 1 This fact, of the taxpayers' power to strike, is very relevant to modern problems of finance, be cause it may come into play long before there is any question of the State's taking the whole of our goods. As soon as the pressure of taxation begins to be heavy, the danger has to be ever present in 1 A General History of Europs (350-1900), by Thatcher and Schwill, 1?P. 9-10, 6 THE OBJECTS OF SPENDING [CHAP. t4e mind of the Chancellor of the Exchequer, that he may, by his present exactions, be preventing the future growth of the country's wealth, and so making the task of his successors difficult, if not impossible. Taxation that is resented, beyond a certain point, will be evaded or avoided. The tax gatherer can only work to his own satisfaction if he carries the sense of the taxpayers with him.

Hence it is of the utmost importance, not only that our rulers should tax well, but that the citizens should understand about taxation, recognize it as good when it is good, and pay it cheerfully when it is equitable and well distributed. "All taxes are confiscation," said Mr. Joseph Hume in the House of Commons inI833. 1 In the original sense of the word confiscation, which meant " putting into the Treasury," this is clearly a plati tude. But as it nQ~ is generally taken to mean an arbitrary appropriation, these words sum up a fallacy about taxation which has to be exorcised and expelled before the fiscal arrangements of 'this or. any other nation can be comfortable either for the taxer or the taxed. In fact, taxation is, or ought to be, the process by which the State takes money from us, in proportion to our ability to pay, to spend on the defence of our property from home or foreign e~emies, on the defence of the national honour, if need be, on the increase of the material and other resources of the country, and on the public health.

-- If this be a true description of taxation, taxation 1 Seligmanp The Inoome Tax~ p. 12Z.

I] GOOD TAXATION PA'YS 7 is a process to which we must all submit gladly. All the objects for which the money so taken from us, with one exception, will literally pay us, if they are carried out. That exception is the defence of the national l:\onour, and he would be a craven skinflint who would grudge money well spent on that. Defence of our property clearly pays us. So does the increase of the country's resources, be cause it will make the burden of taxation lighter. If our particular income does not increase, but that of others does, and if taxation is taken in propor tion to our ability to pay, we shall have to pay less in proportion. Public health pays us because it lessens infectious and contagious disease, and ,so keeps down our doctors' bills. But if this description of taxation be untrue, it is our business to make it true, and this can only be done if everybody gives careful thought to the matter, so that if our rulers make mistakes, there shall be a strong body of well,.informed opinion to criticize and correct them; and also so that we may learn that it is not the object of every citizen to pay as little in taxes as possible, because if that spirit is abroad, the fiscal machinery of the country will never run smoothly and well; we have to learn to judge whether taxes are fair from the point of view of the nation as a whole, and when we recognize them as fair, to pay them gladly and readily. In time of war this readiness to pay is produced, sometimes, by patriotic enthusiasm. In the early days of the present war, taxpayers wrote 8 THE OBJECTS OF SPENDING [CHAP.

to the Chancellor of the Exchequer expressing the pleasure with which they paid income tax. If we could be sure that money taken in taxes was taken fairly, and used well for the national benefit~ that pleasure ought at all times to be present when we pay it. It has been said that a nation gets the Govern ment that it deserves, and Public Finance is certainly a department in which the pressure of enlightened public opinion can do much. But we shall never learn to get our Public Finance on a sound and businesslike basis until we understand our own domestic expendi ture better. When we recognize the responsibility that is attached to the use of our own money, we shall be able .to begin to see that our rulets make good use of the money of the nation. As long as there is a common tendency among the citizens to waste their incomes on frip peries and vulgarities in obedience to fashion and convention, and to invest their savings in wild-cat speculations in the hope of getting wealth without trouble, we need not expect the national finances to be as well husbanded as they might be. The sum of the national wisdom, in finance as in other things, may be a little greater than the aggregate wisdom of all the citizens, but cannot lead it by much.

Going back to our description of what taxation is, or ought to be, we see at once that even if every one were to agree to it as stated, there are several expressions in it about which agreement is not I] HERBERT SPENCER'S VIEW 9 likely to be reached as long as the present frame work of society stands. In the first place, the question of ability to pay is full of pitfalls and difficulties which will be discussed in a later chapter. First of all, we have to try to get something like a clear conclusion about the objects on which the State is entitled to spend our money, when it has taken it, and on this there has been, is, and always will be, a good deal of divergence of opinion. As stated above, and with reservations and restric tions to be noted later, I venture to think that, in these days, most taxpayers would give at least a hesitating and guarded consent to the scope of State expenditure. But there was a time when it would have been thought to be much too wide, and many people now will think it much too narrow.

The via media is a dull and unromantic path, but it has a certain safety. Herbert Spencer may be taken as an extreme example of those who would limit the spending of the State. To him it seemed that the State should spend nothing except on public justice and defence. He was the uncompromising apostle of personal freedom, and he believed that only through it could progress and development, of the individual and of the nation, best be achieved. He had an un conquerable objection to anything like discipline or government, so strong that, when a lad of thirteen, he walked home from Bath to· Derby rather than stay at school. He walked forty-eight miles in one day, forty-seven on the se;cond, and twenty-five on 2 10 THE OBJECTS OF SPENDING [CHAP. the third, without sleep, and with very little food.l In his youth he did not even admit that the Govern ment should spend money on external defence.

Either he believed that a mercenary army and navy, hired by private subscription, would suffice to keep out enemies, or else he took the extreme pacifist view that an unarmed nation need not fear attack. But, in his later years, he abandoned this view, and admitted national defence as a proper object of government expenditure. He still, however, thought that the Postal Service would have been much more cheaply and efficiently managed if it had been left to private enterprise, which is quite possibly true, though it is hardly likely that postal facilities would have been so well distributed. He U advanced the doctrine that, as we trust the grocer to furnish us with pounds of tea, and the baker to send us loaves of bread, so we might trust Heaton & Sons or some of the other enterprising firms of Birming ham to supply us with sovereigns and shillings at their own risk and profit." s He even contended that sanitation was not a proper object of collective activity, and records with obvious pleasure how the early effor:ts at drainage, being defective, some times produced disease. It need not be said that education was a matter which every citizen should, and could best, provide for himself or his children.

He is never tired of laughing at our belief in the power of the State to do anything. 1 Herbert Spencer, by Hugh Elliot. 2 Money and the Mechanism oj Exchange, Jevons 1 p. 64_ I] HERBERT SPENCER'S VIEW II U Conceiving [he says], the State-agency, as though it were something more than a cluster of men (a few clever, many ordinary, and some decidedly stupid), we ascribe to it marvellous powers of doing multitudinous things which men otherwise clus tered are unable to do. We petition it to procure for us in some way which we do not doubt it can find, benefits of all orders; and pray it with un faltering faith to secure us from every fresh evil. Time after time our hopes are balked. The good is not obtained, or something bad comes along with it; the evil is not cured, or some other evil as great or greater is produced.... This emotion which is excited by the forms of governmental power, and makes governmental power possible, is the root of a faith that springs up afresh however often cut down. To see how little the perennial confidence it generates is diminished by perennial disappoint ment, we need but remind ourselves of a few State performances in the chief State Departments." 1 He then proceeds to give several examples of administrative ineptitude, the most tragical and absurd, perhaps, of which was the fact that it took two centuries (I593 to 1795) for the Admiralty to adopt the use of lemon-juice as a protection for the crews of our warships against scurvy.

U And what [he asks] has been the effect of this amazing perversity of officialism? The mortality from scurvy during this long period had exceeded the mortality by battles, wrecks, and all casualties of sea-life put together! " 1 Study of Sociology, ch. vii. p. 160.

12 THE OBJECTS OF SPENDING [CHAP, Such an example of a waste of gallant lives by the imperviousness of the official mind to, new ideas goes a long way towards proving Spencer's conten tion that Governments, or some Governments, are not as capable as private individuals or companies of doing anything which can, on other grounds, be left to the latter. And we need not turn back over the pages of ancient history to find such examples of departmental fatuity. During this very war there have been plenty of them, though we may hope that loss of the lives of our fighters has not been thus criminally involved. But when all this is admitted, there are still several things to be said on the other side of the question. A nation in which governmental action has long been restricted and resented must not complain too loudly if the. Government', when it is suddenly told to do things, does them badly. In countries where a trained bureaucracy has long been encouraged to do much, its efforts are likely to compare better with those of private enterprise. The efficiency of the German governmental machine is probably much exag gerated ; but anyone who travelled on the German State-owned railways had no reason to complain of their comfort or of their punctuality. In those respects they> seemed to me, from a certainly very limited experience, to compare well with our own much-vaunted railway system, which, in some re spects, was unquestionably a disgrace to private enterprise. Anyone who travelled much on Sun days on the suburban lines of our leading railways I] THE OTHER SIDE 13 cannot have failed to maryel at the utter contempt for public convenience with which they conducted ~heir service. They stimulated the public desire to travel by cheap tickets-I am speaking, of course, of days before the war-but made no attempt to provide accommodation for it; a few slow trains, disgracefully unpunctual and more disgracefully overcrowded, were the only means afforded to jaded Londoners who sought for a few hours of fresh air on the day of rest. Why the public submitted to it was a mystery. If the railways had then been in the hands of the Governlnent there would have been a clamorous outcry against mismanagement by jacks-in-office. As it was companies-" with no body to be kicked, or soul to be damned "-that were at fault, there was never a murmur. In America, that other horne of individual enterprise, the unpunctualityof the railroads is often astonish ing. I once travelled-it is some years ago-from Pittsburg to New York on Christmas Eve. The locomotive was attacked by a malady called" hot box" and the train was four hours late. It was full of unfortunate holiday-makers who had connections to make in New York, so as to get home in time for the Christmas gathering, but they all seemed to accept it as something in the nature of things, and not a matter that called for protest or complaint.

We had better admit that in this half-baked world of ours, in which progress is only at the beginning of its journey, and man is only just beginning to learn the use of his powers over Nature, not many 2* 14 , THE OBJECTS OF SPENDING [CHAP. things are yet very well done either by Governments or by private enterprise, and the only way for them to get done better is by everyone of us trying to do his own little job just as well as ever he can. In some countries Governments do things better than anybody else. In others, it is otherwise. Here it is safe to say that Government has not yet distinguished itself as a practical worker . It has done great things in the war, but chiefly with the help of men who came in from outside; and whether the public's experience of governmental activity during the war will, or will not, encourage it to give Government more to do when the war is over, is a very open question.

Moreover, even jf Herbert Spencer's view of the ineptitude of governmental action were as com pletely proved as he believed, there are still some things which have to be done by a public authority, as even he would probably have admitted if he had lived to this day. His notion of private com panies competing for the business of draining our towns, and only cleansing those neighbourhoods in which they could get enough customers to make it worth their while, is now commonly recognized as a fantastic example of overdriving a principle. Huxley, in his great Essay on Administrative Nihilism, attacks the Spencerian position in the following well-known passage : tl Suppose, however, for the sake of argument, that we accept the proposition that the functions of the I] HUXLEY ON SPENCER I5 State may be properly summed up in the one great negative commandment, I Thou shalt not allow any man to interfere with the liberty of any other man ' -I am unable to see that the logical consequence is any such restriction of the power of Government as its supporters imply. If my next-door-neigh bour .chooses to have his drains in such a state as to create a poisonous atmosphere, which I breathe at the risk of typhus and diphtheria, he restricts my just freedom to live just as much as if he went about with a pistol, threatening my life; if he is to be allowed to let his children go unvaccinated, he might as well be allowed to leave strychnine lozenges about in the way of mine; and if he brings them up untaught and untrained to earn their living, he is doing his best to restrict my freedom, by increasing the burden of taxation for the support of gaols and workhouses, which I have to pay." 1 Since the days when these two giants threw mountains of arguments at one another, it need not be said that Huxley's view has prevailed, and more than prevailed. It has wiped out the Spen cerian doctrine, and it has been carried to lengths which Huxley himself might well consider absurd if he were still alive. The popular cry is now for the Government to do everything. An extraordinary example, as it happens, is chronicled in the paper of this day on which I am writing, SundaYI February 18th, 1917. To-day's Observerrecords howII at a meeting of the Southend Townsmen's Asso ciation it was suggested that the Minister of Labour 1 Critiques and Addresses 1 p. 10.

16 THE OBJECTS OF SPENDING (CHAP. should he asked to encourage the production of food by the closing of the churches on Sunday morning, and so enabling a greater amount of labour to be available. The suggestion had reference to the large number of Southend business men and clerks who are away frc)In home all the week, and have only Sunday mornings on which to look after their gardens." This astonishing paragraph was headed " Church goers' Neglected Gardens," and seems to indicate an' extraordinary state of mind prevalent in a suburb inhabited by people who may be taken as average specimens of the dwellers in Greater Lon don. Because people work all through the week, and can only dig in their gardens on Sundays, it is proposed, in order to enable them to do so, to get the Mini?ter of Labour to close tl;1e churches. In a land that calls itself free and is engaged i~ a great battle for freedom, it is really astounding that a body of Southend citizens should have seriously thought (1) that as long as the churches were open, their frequenters had no freedom of choice about staying in-their gardens and growing food, and (2) that it was the business of the Government to help them to do so by depriving all the other mem bers of the various congregations, who have all the week to dig in, of their freedom to seek ghostly consolation by attending divine worship.'It is easy to make too much of a wild example of this kind. Southend is not England, and prob ably the. Townsmen's .~ssociation is not Southend.

I] THE PREVALENT TENDENCY In war-time the babbling busybody gets a chance, in associations and on committees, such as h~ never enjoyed before. But it will hardly be denied that this is only an ,extreme example of a tendency that is rife. It is high time tha t we considered this tendency seriously and reckoned its possible effects, if it goes unchecked, on the Government's spending in the future. It need hardly be pointed out that the spread of governmental activity is bound to increase the cost of government, since everything that the Government does costs money, usually more than it would if it were done by private in dividuals or bodies managed thereby. It is very evident that the present tendency to leave every thing to Government is due partly to the war, because war on its present scale demands something like dictatorship, and when it is necessary for victory that the whole resources of a nation shall be made available for purposes of defence, individual freedom takes a very different place in the scale of importance. So far, there is good reason for this tendency. But it was also very rife before the war, and was even then showing signs of running to extremes. This was natural and inevitable, be cause it was only a reaction against the extreme laisserfaire or "leave-people-alone" policy, of which Herbert Spencer was perhaps the doughtiest champion.

This policy had been dominant in England in the early part of the nineteenth century. It was well summed up in the report of a Commission appointed 18 THE OBJECTS OF SPENDING [CHAP. by the House of Commons in 18IO, quoted in Mr. and Mrs. Webb's History of Trade Unionism, as follows: " No interference of the legislature with the free dom of trade, or with the perfect liberty of every individual to dispose of his time and of his labour in the way and on the terms which he may judge most conducive to his own interest, can take place without violating general principles of the first jm portance to the prosperity and happiness of the community." Such was the view that was maintained by the economists who followed Adam Smith .and carried much further than he did the revolt that he had led against the excessive interference by Govern ment with trade and with the freedom of individual contract, which had marked the history of the earlier centuries when, for example, justices of the peace fixed wages, or tried to. Supporters of the ex treme laisserfaire school based their doctrine on the assumption-so true in an ideal world composed of ideally educated people, so pathetically untrue as things are-that everybody is the best judge of his own interest, and that if everyone is left to pursue his own interest, the best interest· of the community as a whole will somehow be secured.

The practical result of the application of this doc trine, in a community in which employers had been taught that they served the common good by pursuing their own immediate interests, and the employed had often been taught nothing, was I] THE THONG AS PRODUCER 19 that children of five years were sent to work in factories., and in France, according to a report published in 1840 by Dr. Villerme, "the thong~ used for the punishment of children in the spinners' trade appears as an instrument of production." 1 The fact is, that very few of us ever know what is best to do for our interest. Most people go through life mechanically, and without thinking about it, choosing a· prdfessibn for some quite illogical reason, or being pitchforked into a position without at tempting to weigh it against other possibilities. l\ioreover, we are obliged to make up our minds about the matter, in most cases, long before we have got a mind to make up. As for the doctrine that each man by pursuing his own interest helps to secure the common good, its truth is pleasantly illustra ted by the millions nowadays earned by sellers of worthless medicines and printed trash, which rot the public stomach, bodily and mental.

If the economists of the nineteen th century had foreseen the activities and success of the advertisers of the twentieth, they might have modified their optimism. But there is no need to linger over the absurdities thought and written by the extremists of the laisserfaire school. Peace with their ashes, for they did a great work in clearing away a mass of rubbish. It was not their fault that thongs were laid in the name of liberty on the backs of bairns who ought 1 Quoted by Messrs. Gide and Rist, History 01 Economic Doc trine•.

20 THE OBJECTS OF SPENDING [CHAP, to have been playing hopscotch. Liberty is a goddess \vith many shapes, looking quite different to different 0 bservers. Abraham Lincoln 0 bserved thatIt with some, the word liberty may mean for each man to do as he pleases with himself and the pro duct of his labour; while with others, the same word may mean for some men to do as they please with other men, and the product of other men's labour .... The shepherd drives the wolf from the sheep's throat, for which the sheep thanks the shepherd as his liberator, while the wolf denounces him for the same act, as the destroyer of liberty, especially as the sheep was a bla,ck one." 1 It has already been noted that the extreme limits imposed on Government activity and consequently on governmental expetl.diture, by Herbert Spencer and the 'economists who followed Adam Smith, were an exaggeration of the doctrine laid .down by Adam Smith. He took a much more level-headed view of the matter. In his examination (in Chap ter I, Book V, of the Wealth of Nations) of the ex penses of the Sovereign or Commonwealth, he lays stress on his or its dutyU of erecting and maintaining those public institu tions, and those public works which, though they may be in the highest degree advan tageous to a great society, are, however, of such a nature, that the profit c'ould never repay the expenee· to any individual, or small number of individuals, and . 1 Speech at Baltimore, April 18th, 1864.

I] ADAM SMITH ON SPENDING 21 which it therefore cannot be expected that any individual, or small number of individuals, should erect or maintain." Thus, in effect, he gives a free hand to the State to spend money on anything that will be advan tageous to society, but will not yield a profit. With regard to education, Adam Smith arrives at -conclusions which were diametrically opposed to those of Herbert Spencer. He points out that in cases in which the state of the society does not placeIt the greater part of individuals in such situations as naturally form in them, without any attention of Government, almost all the abilities and virtues which that state requires,- or perhaps can admit of," then"some attention of Government is necessary in order to prevent the almost entire corruption and degeneracy of the great body of the people." He goes on to show that, owing to the division of labourH the man whose whole life is spent tn performing a few simple operations has no occasion to exert his understanding His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilized so ciety, this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless Government takes some pains to prevent it."

22 THE OBJECTS OF SPENDING [CHAP. A little later he shows that" the common people . .,. have little time to spare for education. The parents can scarce afford to maintain them even in infancy. As soon as they are able to work, they must apply themselves to some trade by which they can earn their subsistence. That trade too is generally so simple and uniform as to give little exercise to the understanding; while, at the same time, their labour is both so constant and so severe that it leaves them little leisure and less inclination to apply to, or even think of, any thing else.... For a very small expense the public c.an facilitate, can encourage, and can even impose upon almost the whole body of the people, the necessity of acquiring those most. essential parts of education.' , Here we have the Father of Economics, so often appealed to, by those who do not read him, as an out-and-out champion of laisser faire, advocating compulsory education, at the public expense, nearly one hundred years before it was introduced in England.

It is perhaps even more interesting in these war like days to note that Adam Smith thought that" even though the martial spirit of the people were of no use towards the defence of the society, yet to prevent that sort of mental mutilation, deformity and wretchedness, which cowardice necessarily involves in it, from spreading themselves through the great body of the people, would still deserve the most serious attention of Government; in the same manner as it would deserve its most serious I] ADAM SMITH ON SPENDING 23 attention to prevent a leprosy or any other loath some and offensive disease, though neither mortal nor dangerous, from spreading itself among them. . . . The same thing may be said of the gross ignor ance and stupidity which, in a civilised society, seems so frequently to benumb the understandings of all the inferior ranks of people. [Only the ct in ferior" ranks, Doctor?] The more they are in-· structed, the less liable they are to the delusions of enthusiasm and superstition which, among ignorant nations, frequently occasion the most dreadful disorders .... In free countries where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest in1portance that they should not be disposed to judge rashly or capriciously concerning it."

I have dwelt at some length on ancient con troversies concerning the limits of State action and consequently of State expenditure, because the question is a very burning one to-day, and if we see what our forbears thought about it, we may be helped to a right decision in our present difficulties. We have seen the extreme view that the State should do nothing but police and defence give way to a tendency-even among those who do not pro fess to be Socialists and to want the State to take over the whole business of production and distribu tion-to call on the State to interfere constantly in the private affairs of citizens; and looking back to the doctrine of Adam Smith, we find that he was in favour of State expenditure on education for 24 THE OBJEOTS OF SPENDING [CHAP. I those who could not afford it, on the cultivation of the martial spirit, on-checking disease, and on the enlightenment of those classes which, in his opinion, especially needed it. I think it may fairly be claimed tha t the formula adopted earlier in this chapter may be taken as representing a safe com promise between the extreme views: that is, that the State should spend our money on the defence of our property from home and foreign enemies, on the defence of the national honour, on the in crease of the material resources of the country, and on public health. At first sight, this formula would not appear to-include education, old-age pensions, or unemployment insurance. But it would be very easy to show that all these 0 bjects of expenditure help the increase of the rnaterial resources of the country, to which nothing can be more important than a well-taught community, and a working class with a feeling of ·security and a knowledge that the State cares for its interests, and is prepared to spend money on its welfare. In fact, all really effective measures of social reform are directly bene ficial to the whole community, on the coldest busi ness considerations. . Every man and woman who is not fit in mind and body to be self-supporting has to be supported, to a greater or less extent, by his or her neighbours; and so government spending that lesseps the number of the unfit, by better care for the minds and bodies of those wp.o are born into conditions which do not give them a fair . chance, is a sound investment.