Front Page Titles (by Subject) CHAPTER II: TWO CONTRADICTORY FISCAL SYSTEMS - The Comedy of Protection
The Online Library of Liberty
A project of Liberty Fund, Inc.
CHAPTER II: TWO CONTRADICTORY FISCAL SYSTEMS - Yves Guyot, The Comedy of Protection 
The Comedy of Protection, trans. M.A. Hamilton (London: Hodder and Stoughton, 1906).
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
The text is in the public domain.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
TWO CONTRADICTORY FISCAL SYSTEMS
I. Complaints of the agrarians—II. Bismarck fights against Socialism and helps it to expand—Milk-and-water Socialism v. Democratic Socialism—The Caprivi Treaties—Division of the population according to occupations—Back to the land. Taxes on food—III. North, East, and South Germany against Westphalia and the Rhenish provinces—Changed outlook—Posadowsky—Wheat and rye—Incidence of duties—IV. Small and large holdings—Calculation of incidence—Mr. Arnold White on reality and political institutions.
In 1894, when France raised the duty on corn to 2s. 10d., Germany lowered it to 1s. 11d. per cwt. The agrarians complained that they were being sacrificed to the manufacturers: they, the solid foundation of Europe in general and Prussia in particular. The aim of the Chancellor, Caprivi, was to open markets to German manufactures; the aim of the Emperor in introducing the 1902 tariff was to close Germany to agricultural competition. The 1902 tariff is an attempt to check the flow of the population to the industrial centres and keep it on the land.
When Bismarck tried to stamp out Socialism in 1879, he attempted to do it by imposing Customs duties which acted as a hothouse for industry, and spread Socialism far and wide; the logical completion of this delightfully illogical policy was the establishment of the Imperial Insurance Bureau as a soothing poultice in the form of bureaucratic Socialism, under whose application he imagined that the Social Democrats would melt away.
The result was that they polled three million votes at the 1904 election.
Caprivi, rightly judging that a protective policy which encourages production without providing for commercial expansion naturally leads to crises, pursued the Bismarckian policy in the commercial treaties of 1891, and with success, as the German census returns testify. In 1871 the rural population living in groups of less than 2,000 inhabitants was 64 per cent. and the urban population 36 per cent. of the whole; in 1898 they were equal. Now, whereas the urban population is more than 54 per cent., the rural has fallen to 46 per cent. The division into occupations was as follows, according to the 1896 census:—
The Emperor, whose speeches at Essen and Breslau in 1902 showed his hatred of the Socialists, saw that it was suicidal for a Government, such as he intended to maintain, to encourage the growth of an industrial population in Germany: reversing the political traditions of the last quarter of a century he aimed at an agrarian policy. But it is certain that taxes on food have never operated to send workmen from factories and mines back to the land; nor does any better success attend the policy of artificially retaining on the soil the labourers who are anxious to leave it, by means of taxes which make the town workers dependent on the agricultural interest. The 1902 tariff contained a minimum tariff for cereals which narrowed the field of possible treaties of commerce. The duty on rye and oats was raised to 2s. 6d. per cwt. (a rise of 43 per cent. on the first and 78 per cent. on the second); that on wheat to 2s. 10d. (a rise of 57 per cent.); that on brewing barley to 2s. (a rise of 100 per cent.); while the duty on other barley was 7d. The duty on beef was raised to 6s. per cwt., the average weight of an ox being reckoned in Germany as 12 cwt., of which 58 per cent. can be used as food. When Von Bülow laid the commercial treaties before the Reichstag on February 1, 1905, he took care, in order to curry favour with the agrarians, to announce a rise in the duty on bacon from 2s. 6d. to between 6s. and 7s. The trebling of the duty was greeted by violent protests from the Extreme Left. “You protest against the increase in Customs on foodstuffs? Follow the example of the Radical majority in the French Republic. They passed a duty of 2s. 10d. on wheat—higher than ours, that is. In 1903 they raised the duties on live stock to 8s. per cwt., making the tax on meat 14s., and raised the duties on pork to 6s. and 10s. What have you to complain of when they pay more than you will have to do?” Von Bülow was right. French fiscal policy was as incoherent as the German; but there is no logic in imitating some one else’s want of logic.
Naturally, the proposers of such an imposition make it quite small, which in itself condemns it. The preamble declared that the average duty on the German tariff was 9·4 per cent., that on the French 9·6 per cent., and the Italian 13·7 per cent. The new tariff represented an increase of 2·26 per cent., but M. Posadowski added that the commercial treaties would involve a farther rise of from 1 to 11/3 per cent., affecting 241 out of 946 items—a quarter of the whole. The tariff was strongly opposed by the Socialists, Liberals, the Liberal League, and the Southern Democrats, and of course the agrarians found it inadequate, since, if they wanted to prevent other people from eating, they are always greedy enough on their own account. Von Bülow, addressing the Reichstag, declared that he considered that it was of first-rate importance to preserve the agricultural population in the north, east, and south of Germany as the granary of Germany and the recruiting ground for the army. The Emperor allowed himself to dream that a few shillings on corn, rye, beef and bacon could alter the movements of the population.
There is a tendency in Germany for the centre of gravity to shift westwards. Lübeck still keeps some of the glory of the old days when it was head of the Hanseatic league, but it has now but 82,000 inhabitants. Two lines can be drawn across the map to indicate the maximum density of population: one from Aix-la-Chapelle to Breslau goes from the foot of the mountains to the centre of Germany, the other follows the Rhine Valley from the Swiss frontier to the mouth of the Rühr. Berlin has 1,888,000 inhabitants, Hamburg 705,000, Munich 500,000, Dresden 476,000, Leipsig 456,000, Breslau 422,000. Breslau is the only town east of Berlin with more than 400,000 inhabitants; of eight towns with more than 200,000, Stettin is the only eastern one. Berlin stands midway between the eastern and western frontiers of Germany, but the living forces are all to the west; the Emperor, regarding them with suspicion, tried to counteract them and prevent their expansion.
The agrarian policy of the Government was expounded by Posadowski, the Home Secretary, at a meeting of the Reichstag, on February 23, 1905, as intended to balance the impatient and “hysteria” of German public and political life by the agricultural interest which he called “the solid anchor of the ship of state”; the stable element of agriculture was to act as a counterpoise to the floating population of the towns which formed the unprecedentedly large Radical majority in the Reichstag. He admitted that such a policy, aimed against the representatives of trade and manufacture involved an increase in the cost of living; and though he did not say that the Government imagined that such a result would enlist support, he did, like Mr. Chamberlain at Glasgow, affirm categorically that it would raise wages.
Von Bülow’s argument against the Socialists from the example of France was really brilliant. “They tax wheat,” he said, “and yet wheat is a much more important item of diet in France than it is in Germany.” As a matter of fact, the German wheat crop in 1903 was only 70 million cwt., an allowance of 124 cwt. per 100 inhabitants, while in France it was 440 cwt. per 100. Germany imported 44 million cwt., or 62 per cent. of the total consumption, while the export was negligible in amount; and this made an allowance of little more than 1 cwt. per head. Adding a quarter to arrive at the ordinary ration of the French soldier, and allowing for the lower diet of women, children, and old people, the German allowance of bread is only 275 lb. instead of nearly 790 lb., the normal French allowance.
Wheat, which does not grow at all in the north, is a luxury in Germany. For a long time the staple food of Central Europe was oats, now it is rye in Germany, which can be grown on the poor land and bare hillsides which are not fit for wheat, but even of that there is not a sufficient supply. Germany imported 8,800,000 metric tons in 1902-3, and 3 millions tons in 1903-4.
Potatoes, difficult to transport, are used for distilling as well as for food; they are grown over 11/2 million acres, an area twice as large as that devoted to them in France. Germany is not self-sufficing. In 1903 the import of agricultural produce was 154 million cwt., worth £51,050,000, and in 1904, 146 million cwt., worth £50,900,000; while the export was only some 20 to 24 million cwt., worth £7,000,000 to £8,000,000; i.e., 14 per cent. of the imports. Mr. Noel said: “Germany’s herds have improved, for imports have declined.” As a matter of fact, there might be many other causes for a decline in the imports, which have, however, as a matter of fact, not declined: between 1892-1902 they increased from £950,000 to more than £3,650,000.
The incidence of Customs duties received some attention in Germany: from a comparison between corn prices in London and Berlin, Professor Conrad, of the latter university, established an excess of the Berlin prices as follows:—
The price of rye on arrival at Dantzig rose as follows when placed on the German market:—
Of course, in Germany, as in France, it is said that the consumer of bread does not feel the Customs dues on corn or flour: but Professor Hirschfeld, in a monograph on the prices paid for flour and rye-bread in Berlin between 1886-1895, and Dr. Paul Mombert, in a book called “The Annual Burden laid on the Workman by the Corn Taxes,” have proved that the price of the product depends on the price of its raw material. A tax on rye of 35s. per ton takes 4·5 per cent. from the income of a workman’s family of ten, and the figures prove that duties on food are a bounty on small families.
Of course, only the great landowners have an interest in Customs duties. The Vossische Zeitung asks how they can benefit the small owners who have no corn to sell. A small farmer produces 10 tons of rye and sells 1 ton; supposing that he gets the full profit of the duty of 2s. 6d. per cwt., the tariff gives him 50s., which, spread over his 10 tons, leaves him a profit of 3d. per cwt. The great owner producing 2,000 cwts. can sell 1,800 of them; Protection gives him £225, a profit on his total production of 2s. 3d. a cwt. Thus the small farmers cannot buy at a profit; they must buy at a loss.
The following table summarises the burden that would be imposed upon Germany by the rise in duties:—
That is, a total for the landed proprietors of £56,800,000, and for the State of £10,275,000. Subtracting about one-third to cover the farmers’ expenditure, and adding their gains from other forms of agricultural produce, one would not be far out in assessing the total at £40,000,000 for them, and more than £10,000,000 for the State—a total of about 50 millions, or an increase of 25 millions on existing burdens.
Much, indeed, would be gained if the Emperor, instead of running off on schemes for sanatoria, would allow his subjects wheat and rye enough to eat; if the Socialists of the chair of the type of Mr. Schmoller would turn their philanthropy from the service of Imperial paternalism to defending the great majority of the poor from his hunger tax. As a matter of fact the population, “protected” by Customs duties which make it the slaves of the rich, is in a condition which has been described by Mr. Arnold White, former United States Ambassador to Berlin: “The food of the poorer classes in Germany is wretched; in many of the great industrial centres human beings live like animals. The condition of the peasants in Prussia, Silesia, and Thuringia is fearful. This terrible misery is hidden by the humanitarian political institutions which deceive the superficial foreign inquirer, but they are the merest disguise for the all-directing state, and already falling into ruins.”
Such are the results of German Protection from the point of view of the food and “general well-being of the working classes.”