§ 5. Industrial revenues of governments. The costs of government at any stage are met in varying degrees in one of three ways: (1) from industrial sources, (2) by borrowing and thus creating a public debt, (3) from taxation.

Receipts from industrial sources in the broad sense include all rents from wealth owned, interest on loans made, and proceeds of sales from enterprises conducted, by the government. In feudal times, these were mostly obtained in the form of rents from the private domains of kings and nobles. In many early and medieval states these sources of receipts were adequate to the need of government; then they decreased in many countries, both relatively and absolutely, because of the sale of publicly owned wealth (lands and mines), and with the recent extension of the functions of government have again increased very rapidly. Now industrial revenues come not only from the rents of forests, mines, docks, lands, and buildings, but from profits in the operation of industrial enterprises, such as waterworks, railways, mines, and factories, and from interest on funds deposited in banks or otherwise invested. At present the industrial revenues of the aggregate governments of the United States (national, state, and municipal) amount to about a fifth of all revenue receipts. Since the middle of the nineteenth century the number and variety of the industrial enterprises undertaken by governments has been steadily increasing, and this increase has been most marked in the cities. The change in this respect in the United States, great as it has been, has proceeded more slowly than in the European countries.

In 1913 the receipts of this nature (earnings of departments and of public service enterprises) were nearly $500,000,000. The larger part of this sum comes to the national government ($288,000,000), mostly from the post-office department. Most of the remainder comes to the minor divisions ($176,000,000), and but little to the states. The total "earnings" (this means here receipts, not profits) of public service enterprises in incorporated places were $120,000,000. Revenues obtained by the sale of goods are prices, such as water rates, or (if paid for the performance by an official for a service to legalize an act, as recording deeds, issuing licenses, etc.) are fees (frequently constituting the income, in lieu of salary, of the official, but sometimes paid into the public treasury).

§ 6. Governmental receipts from loans. The funds to invest in these commercial undertakings are originally obtained in nearly all cases from public loans. Almost every unit or division of government may become a borrower to provide for its citizens at once certain needed advantages and improvements when the funds are not at hand and immediate taxation is deemed too heavy a burden.

The indebtedness (less funds available for payment of debt) of the aggregate governments of the United States in 1913 was:

The debts of the states and the minor divisions slowly and steadily increased after this date, and that of the nation leaped up in 1918 to $11,000,000,000 and in 1919 (at the maximum) to $25,000,000,000.

Nearly all public debt other than national has been created for the purpose of peaceful social and industrial development. The debts of the American states have partly been made necessary to meet deficits in current expenses, but largely to construct canals, to erect public buildings, and of late to purchase forest-lands and to build roads. The minor divisions are counties, cities, villages, boroughs, towns, townships, and special districts for schools, drainage, irrigation, levees, fire protection, poor relief, roads, and various other purposes. Every one of them has more or less legal power to incur debts and to levy taxes for the purpose of paying the interest and of repaying the principal. The purposes for which the debts are incurred by specially organized districts are mainly indicated in the names (e. g., drainage, irrigation), while the regular political divisons of counties, cities, villages, towns, townships, incur debts for many objects, such as streets, sewage disposal, water supply, electric-light or gas plants, schoolhouses, libraries, and other public buildings. Large expenditures for these purposes are necessary because the local governments are undertaking new functions, and either existing equipment (such as waterworks systems and street railways) must be bought from private companies or new ones must be built. They are necessary further because the rapid growth of population calls for an immediate "capital investment," the payment of which may be, through borrowing, more easily spread over a series of years (e. g., in the extension of streets and paving and in the provision of schoolhouses for the children).

The larger part of nearly every national debt has been incurred for war or preparation for war. The total debts of the national governments of the world just before the outbreak of the Great "War in 1914 were estimated at about $44,000,000,000.1 The total at the close of the war is estimated to be near $300,000,000,000.2 This amount has been, and will be, very largely increased in the later figures for the war period and for the after-war period, while almost everywhere expenses continue to exceed revenues. It is impossible to appraise at all definitely the ultimate fiscal burden of these debts in the present disordered condition of the monetary systems and in the precarious state of the finances in many of the countries. Russia, under the Bolshevik regime, has blankly repudiated its debt of $25,000,-000,000 but doubtless will reacknowledge parts of it ultimately as a condition to the establishment of its national credit. Numerous states are near the verge of bankruptcy and it is now impossible to predict what adjustments they may be forced to make with their creditors. The debts of some leading solvent countries, as estimated in 1920, are

1 These figures include the debts of the separate states in the federal unions of Australia and the German Empire, and the separate debt3 of European colonial governments, but not those of the states of the United States, and in no case including the debts of minor divisions the total figures of which are not to be had.

2 As computed by the statistician of the National City Bank, from figures at various dates from 1916 to 1920. the total was $279,000,000, 000.