of society come especially or exclusively into question. Here expenditures should be rather covered by a just system of taxes-including taxes based on the principle of taxation according to benefit-than by the use of the general revenue. This implies the regulation of the post, telegraph, and railway tariffs, judicial charges, school fees, etc.

Taxation to be so adjusted that, besides fulfilling its primary function, that of providing the revenue needed to cover public requirements, it may, as well as possible, fulfill a not less important indirect purpose, which is twofold: (1) Regulative interference with the distribution of the income and wealth of private persons, so far as that distribution is the product of free economic intercourse, as by the medium of prices, wages, interest, and rent, with a view to counteracting the harshness, injustice and excessive privileges caused by the distribution obtaining in this intercourse; (2) and at the same time regulative interference, supported necessarily by further administrative measures, and eventually by compulsion (as in the domain of industrial insurance) in private consumption. This latter can be done by making the lower classes provide-by means of direct and indirect taxes, especially indirect (excise), which in this connection are often very suitable-the revenue necessary for administrative purposes calculated to benefit them, this being affected by diverting income which they may be applying to improper, perhaps injurious, or at the least, less necessary and wholesome purposes (e. g., drink) to purposes more beneficial to society, the class, or the individual."

Not only is every principle upon which such a step as compulsory industrial insurance could be based stated in the foregoing quotation but it stands in direct and unbroken line with the economic traditions of the Prussian monarchy.

It is to be further noted in commenting upon the quotation given above from Wagner, that his plan of governmental regulation affecting both the rich and the poor, provided for the taxing of both the rich and the poor in an equitable manner so as to correct the evils to which each class is inclined.

For example, under item (1), his plan of taxation which provided for the taxation of "income and wealth" his theory was that "so far as income resulted from economic intercourse, taxes should be levied with a view to counteracting the harshness, injustice and excessive privileges caused by the distribution obtaining in this intercourse."

But note also in like manner under item (2) of his plan of taxation that he would tax the poor by indirect taxation in such a manner as would correct their improvident tendencies, characteristic of them, and he includes compulsory industrial insurance among his regulative plans of interference.

The great significance of these theories of Wagner is the following: The Industrial Insurance which has been developed in Germany along the above lines is based upon the theory not that the employer is to make a contribution to the employé but that the funds necessary to be raised to carry out the German plan of industrial insurance shall be raised so that both the employer class and employé class shall contribute to the funds to the extent that each class is presumed to be equitably benefited in the establishment of a new economic return.

§ 28. German system described.-Professor Charles R. Henderson' describes the German system as follows: "It is sometimes asserted that the German system of workingmen's insurance is nothing better than a dis

7 Industrial Insurance in the United States, 2nd ed., p. 7.

guised form of poor relief, a kind of gift from above paid by the government at the expense of taxpayers to prevent rebellion of the 'lower classes.' The classic message of the emperors gives a more just interpretation of the purpose of the 'social policy' of the nation. The demand is made on the basis of the duty to the people and the common welfare, because health, security and freedom from dependence are not a mere class interest but belong of right to all. Those who risk the greatest danger to life and limb should not be left to carry the entire cost of that hazard.

Insurance is not poor relief but common justice, a method of fairly distributing the extraordinary costs of civilization. Since such insurance never has been made general and never can be made general by any voluntary scheme, the government, the agent of the common intelligence, conscience and will, intervenes far enough to enforce obligation, to regulate the method and to insure the rights of all concerned. Thus in the United States. the government, under the right of eminent domain, takes landed property for a consideration and gives it to railroads for right of way or as subsidy; and in turn prescribes the terms on which a railway corporation can enjoy these special privileges. Thus also the federal government grants privileges to certain banks and controls the method of their administration. In Germany the government seeks in its insurance laws to encourage and stimulate the interest of both the employers and employés in the system. The entire system is based on the principles of mutual benefit, self-government and local initiative. Both employers and employés have a right to participate in the administration and judicial application of the law, as both share equitably in the cost. It is not state insurance, but insurance on the 8 Ante, § 16.

basis of mutuality and self-government, under the regulation of law. It is precisely in this administration that the workingmen feel themselves to be free agents and intelligent participants in the affairs of their country. There is no taint of charity from first to last; each man pays his share of the cost, has a voice in the control and can set up a legal claim when he needs his benefits. All this removes the insurance system by the diameter of the moral world from poor relief and private charity.

The German system does not make other forms of protection superfluous, since it simply provides for the necessities of existence; it does not remove the motive for forming trade unions and fraternal societies, nor for investing in extra insurance in life insurance companies, nor for savings. All these organizations of thrift flourish in Germany." And again he says:"

"It is sometimes asserted-in advance of proof-that accident, sickness, and old age insurance is a burden upon the capital, industry, and commerce of a nation. As Germany is the country which annually does more than other nations in this direction it seems not unfair to mention the fact that the years of trial of her system of insurance have been precisely the years in which that nation has forged to the front rank in the world of manufactures and commerce. The nation has grown rich and the workingmen have improved their condition so that they are not anxious to emigrate as formerly. On all these points we have several recent publications which reveal the situation with a wealth of statistical evidence."

In another authoritative work10 occurs the following comment on this scheme of industrial insurance:

"It may be briefly described as follows: In carrying

9 Henderson Industrial Insurance, p. 6.

10 Frankel & Dawson on Workmen's Insurance in Europe, p. 9. (Prepared under Russell Sage Foundation.)

on any given industry for the benefit of those who will enjoy the products or the services supplied thereby, there will be, on the whole, taking into account all the various establishments engaged in those industries, a more or less stable aggregate amount of loss and damage occasioned by industrial accidents. While each particular accident, considered by itself, might appear to have been preventable if an extraordinary degree of caution had been exercised, it will also appear, when the losses are spread over the entire industry, and especially when the experience of many years is combined, that there is a more or less steady ratio between the financial loss and the financial value of the entire product, indicating that accidents are governed by laws of probability and are to a certain degree inevitable.

In other words, this loss or damage, as much as loss or damage by destruction of material, by wear and tear of machinery, etc., is a part of the cost of the commodity in the production of which the workingman was employed at the time the accident took place.

It follows that the workingman, or his family in the event of his death, should be compensated in a reasonable amount for the consequences of an industrial accident; not in order that some one shall be mulcted, on the ground that he was at fault, but in order that this portion of the cost of the product or services shall not be transferred from the employer and the ultimate consumer to the workingman and his family, crushing them in many cases, and eventually shifting the burden to the community in the most undesirable form of charity." Further along11 the authors say:

"As stated above, the new statutes provide for indemnification of workingmen for the consequences of industrial accidents on the principle that their cost 11 Henderson Industrial Insurance, p. 18.