respect than the following figures which speak for themselves and do not, therefore, require any detailed comment.

Briefly stated, towards the end of 1886, that is, fifteen years after the huge war indemnity was paid by France to Germany, the sum owed by the Empire was, comparatively speaking, a quite insignificant one, amounting in all to about £24,000,000; after the lapse of a similar period of years, namely, in 1901, the national debt had risen to about £98,000,000. Again, five years later (1905-06), it reached no less a sum than £177,150,000. Since then, that is, within the last two or three years, other loans representing just 36 million pounds sterling in British money have been raised by the Government, so that at the present. moment the Imperial debt alone-quite apart, of course, from the large sums owed by individual States and the different municipalities of the Fatherland-exceeds by several hundred thousand pounds the enormous figure of £213,000,000. And, further, basing their calculations upon the necessary provisions made in the course of the last Session by the Reichstag for future expenditure on military, naval, colonial and other matters, it is being computed by some financial authorities in the Fatherland. that before another three or four years have elapsed, say, by the end of 1912, the national debt will have been increased by an additional £100,000,000, which is equivalent to an increase of about £1 11s. 81d. per head of the population. Now, if we take the important and weighty factor into consideration, namely, that, even in so far as matters stand at present, the degree of interest paid annually on loans thus contracted by the Imperial Government is not far short of £8,000,000, and if we add to this the annual remittances in the way of interest by the various other States-that is, taking them as a whole-which amount, on an average, to a sum of from £18,000,000 to £20,000,000, it can easily be gathered how it is that no other question is receiving quite so much anxious and concentrated attention in Germany at the present time as that of the reform of the Imperial system of finance.

As a matter of fact, the unsatisfactory state of the Imperial finances could not, in any conceivable circumstances, fail to have a more or less deleterious effect upon the general financial position of the country as a whole. One of the most notable of these effects is the permanently high Bank Rate. As the Government do not obtain sufficient revenue from taxation to meet the necessary expenditure, they are obliged to draw upon the Imperial Bank through the issuing of bonds against discount. Hence it follows that very large sums of money which, in ordinary circumstances, would be available for the furtherance

of commercial or industrial enterprises, are utilised by the Government for Government purposes. It is true, of course, that this capital eventually finds its way back into general circulation, but the process is very much slower than if it had been used for private purposes, and, moreover, is much less remunerative. In other words, the money is not used in the way which is most beneficial to general prosperity. Enterprise is restricted, and, further, financiers and the promoters of commerce and trade have to pay a higher rate of interest on such capital as they are able to obtain.

Few, if any, trades offer a better index to the financial state of the country than the building industry. For, when the latter is in a state of general prosperity, it must have a collateral effect upon all other commercial enterprises, and vice versâ. A financial crisis and consequent stringency invariably produce an almost immediate suspension of many building operations. But, however that may be, the mere fact that the Bank Rate is higher than ordinarily, which means that money is tight, is sufficient to account for the stagnation and exceptional unemployment which prevail in the German building trade at the present time. And as this trade is, so, in large measure, is the trade of the Empire as a whole.

Speaking generally, therefore, in estimating the financial status of a nation, many points of minor importance, though they may in themselves be somewhat irrelevant, have to be taken into consideration, even if for no other reason than that they help to throw a good light upon the general situation. A proposal which is at present being keenly discussed in financial circles in Germany is a case in point, for it emphasises, in the clearest way, in how thoroughly unsatisfactory a condition the German Imperial finances really are. The proposal is that the famous national "War Chest" of coined gold be placed at the disposal of the Imperial Bank, in order to enable the latter to reduce its rate of discount. This, of course, is a mere suggestion, but as a straw shows the way the tide is flowing, so also does the mere fact that such a suggestion had been made show the financial embarrassment in which Germany finds herself. It is highly improbable that this proposal will be adopted, for, on the one hand, the relief that would be obtained could only be temporary, and, on the other, Germany's preparedness for war would necessarily be weakened. The "War Chest" has been put aside for the purpose of making immediate mobilisation absolutely assured when circumstances demand. The difficulty must, accordingly, be overcome in some less dangerous way.

But Germany has, until recently, enjoyed, and for a long

period, extraordinary prosperity, her economic development being greater than that of any other country in Europe. This is well known. How comes it, then, that there has been such great difficulty in obtaining revenue for Government purposes? This is a most pertinent question, though one which cannot well be answered satisfactorily. The fact, as we have already observed, that there is, from the Imperial point of view, among the people such distinct lack of patriotism, political foresight, and moral responsibility, as it were, has certainly a great deal to do with the present highly deplorable state of affairs. But it is also clear that, notwithstanding tremendous and profitable industrial and commercial activity, the burdens placed upon the taxpayers have long been quite as much as could be borne, and such as, if added to, whilst conditions remain as they have just been described in this connection, will be heavier than can be carried.

Nor is this to be wondered at if we consider at the same time, that is, in so far as military and naval matters alone are concerned, the enormous annual increase of expenditure during the last decade. This is best illustrated by the following table, which contains the official figures that were published the other day.

EXPENDITURE ON ARMY AND NAVY IN GERMANY.

We see, then, that in ten years the annual expenditure has increased by more than £20,000,000, or upwards of fifty per cent. Meanwhile, the population has increased between fourteen and sixteen per cent. only.

It is interesting to compare these figures with those of the United Kingdom, exclusive of the years during which the South African War raised the expenditure to an abnormal height. The following will suffice :

EXPENDITURE ON ARMY AND NAVY IN THE UNITED KINGDOM.

A period of ten years has brought what may be termed a normal increase of about £12,000,000, or twenty-seven per cent. Germany's increase of expenditure in this respect exceeds, therefore, that of Great Britain by almost twenty-five per cent., and amounts now, per head of population, to 19'03 shillings as against 14:44 shillings in 1898.

The sources, too, from which the Empire obtains so far its annual revenue afford many points of considerable interest. However, as it is impossible within the space at my disposal to enter upon a full analysis of this particular subject, I must confine myself to a consideration of some of the more essential details concerning this important question. Put briefly, therefore, the Imperial revenues now amount annually to about £122,000,000. They are derived from various sources, including loans which, as has already been shown, have within recent years swelled the national debt to an enormous extent. No less a sum than 818,750,000 marks are being obtained from import duties, customs and excise duties, whilst the annual financial contributions made by the different German States to the Imperial Exchequer in the form of what is generally known as "Matrikularbeiträge" or "Matrikularumlagen" have now reached a record figure, namely, £29,525,000. The increase of indirect taxation as adopted some two years ago, 1906, by the late Imperial Minister of Finance, Baron von Stengel, yielded a sum of about £10,000,000. As much as £26,000,000 came from the postal, telegraph and telephone services, whilst the balance had in the main to be made up through raising of new loans, although the proceeds from stamp duties and those from a few other sources of revenue have been of no little assistance in this direction.

The question as to how the Imperial finances will ultimately be reformed cannot as yet be definitely answered. But judging from the result of the deliberations of the Federal Council that was especially summoned for the purpose of considering the best means of raising the money required, which was held in Berlin under the presidency of Prince Buelow, the Imperial Chancellor, as recently as towards the end of September last, it would appear to be not improbable that one step that will be taken a fact to which due reference has been made above-is the acquirement of some monopolies by the State.

It is true that, from the historic point of view, when Bismarck first introduced a Bill drafted on lines familiar to those that are embodied in the present Government's financial scheme, the opposition offered to it, both by the House and public opinion in general, was of so strong a character that even the late Iron Chancellor's conspicuous talents of oratory and persuasion proved

of no avail in furthering this particular kind of economic and financial reform. However, since that time-now some twentyfive years ago-great and considerable changes have taken place in the economic condition of the Empire, and, as a matter of fact, the way to this end has been smoothed by the present amalgamation of businesses into great "combines," to use an expressive: Americanism. These trusts are already virtually monopolies, though in private hands, and the taking over of them by the State does not present any insuperable difficulty. But before entering into details concerning this important matter, it would be well if we considered another suggested means of raising annually by direct taxation an appreciable sum of money, namely, the taxation of dividends of large corporations. The principal reason advanced by the advocates of this measure is that whilst in the smaller businesses and also in agriculture the owner himself must almost of necessity take an active part in the management, if he would realise a profit, the shareholders in the great companies are the recipients of unearned increment. It is, as it were, their capital that works for them; they themselves-unless they are directors, and in that case they receive handsome fees for what they dotake no part in the conduct of affairs. It is true, of course, that in a private business the proprietor does not always share in the routine work, but his initiative, his guidance, and his direct personal interest often make him a harder worker than the majority of his servants. The difference between such an owner of capital and the shareholder in a public company is very great, and it is held that when it comes to a matter of taxation the latter must be discriminated against.

The proposal, then, is that the public companies be taxed and the private businesses left alone. But, in order that the shareholders be not too hardly dealt with, dividends not above a certain point, say, ten per cent., will remain untaxed, a graduated tax being levied on anything over that point. The minimum tax suggested is ten per cent., the maximum thirty per cent., and the method of collecting it by way of issuing Government stamps. One of the arguments in justification of such a tax-the original suggestion of which can, it should be added, directly be traced to the Agrarian Party-is that the Imperial expenditure is devoted largely to the Army and the Navy, that is, to Imperial defence. The strength of the German defensive forces has enormously increased the national power and prestige, and made it possible for manufacturers and merchants to undertake great and remunerative enterprises at home and abroad with every reasonable guarantee of protection and security. Consequently, the trusts should be called upon to make some special contributions to the