Chapter LXIII: Section CCV

DISTRIBUTION OF THE NATIONAL INCOME.--HEALTHY DISTRIBUTION.

Hence a harmony of the large, medium and small incomes may be considered the indispensable condition of the economic prosperity of a people.[205-1] This prosperity is best secured when the medium-class income prevails, when no citizen is so rich that he can buy the others, and no one so poor that he might be compelled to sell himself. (_J. J. Rousseau._)[205-2] Where there is not a numerous class of citizens who have time enough to serve the state even gratis, as jurymen, overseers of the poor, municipal officers, representatives of the people etc. (compare § 63), and property enough to be independent of the whims and caprices of others, and to maintain themselves and the state in times of need, even the most excellent of constitutions must remain a dead letter. Nor should there be an entire absence of large fortunes, and even of inherited large fortunes. The changes of ministry which accompany constitutional government are fully possible only when the choice of men who would not lose their social position by a cessation of their salaries as public functionaries is not altogether too limited.[205-3] Thus the transaction of the most important political business, especially that which relates to foreign affairs, requires a peculiar elasticity of mind, and a capacity for routine on the grandest scale, which with very rare exceptions, can be acquired only by habituation to them from childhood, and which are lost as soon as the care for food is felt. The bird's-eye-view of those who are born "great" does not, by any means, embrace the whole truth of human things, but it does a very important side of it. Among this class, as a rule, it is easiest to find great party leaders, while leaders who have to be paid by their party, generally become in the long run, mere party tools.[205-4] It is true that it requires great intellectual and moral power to resist the temptations which a brilliant hereditary condition presents; temptations especially to idleness, to pride and debauchery. For ordinary men, it is a moral and, in the end, an economic blessing, that they have to eat their bread in the sweat of their brow,[205-5] and that they can grow rich only by long-continued frugality.[205-6] However, the distribution of the national income, and every change in that same distribution, constitute one of the most important but at the same time one of the most obscure departments of statistics.[205-7] When inequality increases because the lower classes absolutely decline, there is no use in talking any longer about the prosperity of the nation.[205-8] It is different, of course, when only the higher classes become, relatively speaking, higher yet. But even this latter kind of inequality may operate disastrously, inasmuch as it nourishes the most dangerous tendency of democracy, that of envy towards those who are better off.

[Footnote 205-1: _Verri_ Meditazioni, VI.]

[Footnote 205-2: _Aristotle's_ view that, in a good state,
the middle class should preponderate. (Polit. IV, 6, Sch.)
_Sismondi_ says: _la richesse se réalise en jouissances;
mais la jouissance de l'homme riche ne s'accroît pas avec
ses richesses_. (Etudes sur l'Economie politique, 1837, I,
15.)]

[Footnote 205-3: If state offices were to be filled by
doctors or lawyers who live by their practice, after a time,
only those could be had who had no large practice to
sacrifice, that is, beginners or obscuranti.]

[Footnote 205-4: Per contra, see _Bazard_, Doctrine de Saint
Simon, 323. But _Sismondi_ is certainly right: _nous ne
croyons point, que les hommes qui doivent servir à
l'humanité de flambeau naissent le plus souvent au sein de
la classe riche; mais elle seule les apprécie et a le loisir
de jouir de leurs travaux_. (Etudes, I, 174.)]

[Footnote 205-5: To appreciate the demoralizing effects of
an income obtained without labor and without trouble on men
of small culture, we need only witness the bourgeoisie at
great watering places, pilgrimage places, seats of courts
and university cities supported largely by students.
Similarly at Mecca, Medina, Meschhed, Rome, etc. (_Ritter_,
Erdkunde VIII, 295 seq. IX, 32), and even in Palestine,
during the crusades, when the miserable Pullanes counted on
the tribute of the pilgrims. (_Wilken_, VII, 369, according
to _Jacob de Vitriaco_.)]

[Footnote 205-6: A man with $100,000 a year has a much less
incentive to make savings than 100 men with $1,000 each per
annum, for the reason that his economic wants are already
all richly satisfied, and he can have little hope of
improving it by saving. (_von Mangoldt_, V. W. L., 141.)]
[Footnote 205-7: _Harrington's_ fundamental thought
(1611-1677, Works, 1700) is, that the nature of the
constitution of a state depends on the distribution of the
ownership of its land. "Balance of property!" Where, for
instance, one person owns all the land or the larger portion
of it, we have a despotism; where the distribution is more
equal, a democracy, etc. All real revolutions are based upon
a displacement of the centre of gravity of property, since
in the long run, superstructure and foundation can not be
out of harmony with each other. For this reason, agrarian
laws are the principal means to prevent revolutions.
(_Roscher_, Gesch. der English. Volkswirthschaftslehre, 53
ff.) _Montesquieu_ also pays special attention to the
political consequences of the distribution of wealth. Thus,
for instance, in monarchies, the creation of large fortunes
should be promoted by the right of primogeniture; in
aristocracies, on the other hand, the great wealth of a few
nobles is as detrimental as that of extreme poverty. (Esprit
des Lois, V, 8, 9.)]

[Footnote 205-8: The common assertion of the socialists,
that the inequality of property is frightfully on the
increase, is as far from being proved as is the opposite one
of _Hildebrand_, Nat. Oek. der Gegenwart und Zukunft, I, 245
ff. According to _Macaulay_, Hist. of England, ch. 3, there
were, in England, in 1685, only about three (ducal) families
with an annual income of about £20,000 a year. The average
income of a lord amounted to £3,000; of a baronet, to £900;
of a member of the house of commons, to scarcely £800; and a
lawyer with £1,000 per annum was considered a very important
personage. At the same time, there were 160,000 families of
free peasants, that is more than 1/7 of the whole
population, whose average income amounted to from £60 to
£70. For the year 1821, _Marshall_, Digest of all Accounts,
etc., II, 1833, assumes, that there were 4,000 families with
over £5,000 yearly income; 52,000 families with from £1,500
to £5,000; 386,000 families with from £200 to £1,000;
2,500,000 families with less than £200. Compare, _per
contra_, the Edinburg Review, 1835. The income tax
statistics of 1847 show that 22 persons had an income of at
least £50,000 a year; 376 persons, from £10,000 to £50,000;
788, from £5,000 to £10,000; 400, from £4,000 to £5,000;
703, from £3,000 to £4,000; 1,483, from £2,000 to £3,000;
5,234, from £1,000 to £2,000; 13,287, from £500 to £1,000;
91,101, from £150 to £500.

If we compare these numbers with the corresponding ones of
the income tax of 1812, the numbers of those who returned an
income of £150 to £500 increased 196 per cent.; of those
with an income of from £500 to £1,000, 148 per cent.; of
from £1,000 to £2,000, 148 per cent.; of from £2,000 to
£5,000, 118 per cent.; of from £5,000 and more, 189 per
cent.; while the population in general had increased by
about 60 per cent. Compare Athenæum, August, 1850; Edinburgh
Rev., April, 1857. Between 1848 and 1857, the development
was less favorable, so that the incomes of from £150 to £500
subject to taxation, increased only 7 per cent.; those from
£500 to £1,000 about 9.56 per cent.; those from £10,000 to
£50,000, by 42.4, and those over £50,000, 142.1 per cent.
Between 1858 and 1864, the incomes derived from industry and
commerce, subject to taxation below £200, had increased
about 19.4 per cent.; those over £10,000, 59 per cent.;
while the aggregate amount of all taxed incomes in this
category increased 19 per cent. (Stat. Journal, 1865, 546.)
According to _Baxter_, The National Income of the United
Kingdom, 1868, there are now 8,500 persons with a yearly
income of £5,000 and more, who draw in the aggregate 15.6
per cent. of the national British income, and on the average
nearly £15,000 each. There are, further, 48,800 persons with
a yearly income of from £1,000 to £5,000; 178,300 with from
£300 to £1,000; 1,026,400 with from £100 to £300; and
1,497,000 with less than £100 a year from their property. In
addition to this, 10,961,000 workmen on wages, with an
aggregate income of £324,600,000. Compare §§ 172, 230.

In France, the number of so-called _électeurs_, who paid
direct taxes to at least the amount of 200 francs was, in
1831, 166,583, and increased uninterruptedly until 1845,
when it was 238,251, while the population had increased only
8.5 per cent.

In Prussia, the revenue from class-taxation up to 1840,
increased, unfortunately, in a smaller proportion than the
population: hence the lowest classes must have increased
relatively more than the others. (_Hoffmann_, Lehre von den
Steuern, 176 ff.) Between 1852 and 1873, according to the
statistical returns from class-taxation and of the
classified income tax, the growth of large incomes in the
provinces of old Prussia, seems to have been much more rapid
than that of the smaller ones. Thus, for every 100
taxpayers, with an income of from 400 to 1,000 thalers,
there was an increase to 175.5; of from 1,000 to 1,600
thalers, for every previous 100, 210.2; from 1,600 to 3,200
thalers, 232.3; of from 3,200 to 6,000, 253.9; of from 6,000
to 12,000 thalers, 324.8; of from 12,000 to 24,000, 470.6;
of from 24,000 to 52,000 thalers, 576.3; of from 52,000 to
100,000 thalers, 568.4; of from 100,000 to 200,000 thalers,
533.3; of over 200,000, 2,200. Hence, probably, a greater
growth towards the top, than the general increase in the
population will account for.

This concentration of property took place most noticeably in
Berlin, where for instance, between 1853 and 1875 the
incomes of from 1,000 to 1,600 thalers increased 212.2 per
cent.; those from 24,000 to 52,000, 994.1 per cent. There
are now in the whole state 2.24 per cent. of the population
(including those dependent on them) subject to the income
tax; that is, estimated as having a yearly income of 1,000
thalers. Of the remaining 97.76 per cent., more than a
quarter, and probably more than one-half, are as a class
free from taxation, because their income is presumably less
than 140 thalers (6,049,699 against 532,367, exempt for
other reasons and 4,850,791 belonging to classes subject to
taxation: these three numbers probably not including
dependents). Among the payers of an income tax, there are
79,464 with an average income of 1,237 thalers per annum;
41,366 with 2,171 thalers; 12,305 with 4,279 thalers; 4,030
with 8,383 thalers; 1,655 with 16,527 thalers; 513 with
32,428 thalers; 163 with 65,595 thalers; 39 with 137,692
thalers; 21 with 427,142 thalers; and one with 1,700,000
thalers per annum. (Preuss. statist. Ztschr., 1875, 116,
132, 142, 145, 149.) As the reverse of this picture, we may
take the fact that, in 1870, of 1,047,974 cases of
guardianship, there were only 208,614 in which there was any
property to be looked after. (Justiz-Minist-Blatt, 1872, No.
6.)

The figures from Bremen are very favorable. The incomes
subject to taxation amounted, in 1847, to 71.6 thalers per
capita; in 1869, to 131.2. The incomes subject to taxation
in class No. 1, that is from 250 to 399 thalers, increased
78 per cent.; in class No. 2, 400 to 499 thalers, 45 per
cent.; in class No. 3, 500 thalers and more, by 57 per cent.
The average income of the third class amounted, in 1847-50,
to 1,952 thalers; 1866-69, to 2,439 thalers. In 1848, there
were, of estates of over 3,000 thalers subject to taxation,
only 38 to every 1,000 inhabitants; in 1866, 49. (Jahrb. f.
amtl. Statistik Bremens, 1871, Heft 2, p. 185 seq.)]