The question of how to meet emergencies which may overtake a nation or any of its minor political units has always assumed an importance of some magnitude. Emergencies have frequently arisen when there has been an immediate demand for funds in excess of those provided in the regular budget. Modern fiscal systems can be much more definitely organized than could those of earlier generations. Preparation can now be made beforehand for many events which previously came unexpectedly, and which entailed increased expenditure. The preventive measures, also, which governmental units have undertaken, have done much to eliminate unexpected and unprepared-for events.
Famine and pestilence formerly were common examples of emergencies with which states were compelled to cope, yet they are seldom given a second thought by the officials of modern civilized countries. The regular expenditure of funds to eliminate the cause of such occurrences is considered a better method of meeting the situation. The expense entailed in exterminating the mosquito, for example, is considered preferable to an expenditure to cope with an epidemic of yellow fever. Likewise the expenditures in experiment stations and colleges, where systems of increased and stabilized production are devised and disseminated, are considered much wiser than the attempt to take care of hundreds and thousands of famine sufferers.
While states have done much to eliminate the necessity of emergency expenditures, they will never succeed in making the elimination complete. Forces of nature are still to be reckoned with, and emergencies which arise therefrom can never be foreseen nor prevented. Earthquakes and volcanic eruptions will likely continue to occur and leave in their wake suffering and loss, the alleviation of which will often call for the aid of governments. Tornadoes, cyclones, fires, and floods will also continue to occur - with similar results, so that officials can never hope to be entirely free from some unexpected expenditures.
The importance of the funds which have been used and are still needed for the classes of emergencies just indicated, sinks into utter insignificance when the costs of war are taken into consideration. Whatever may be the future status of war, nations in the past have not succeeded in eliminating this greatest of all emergencies, but have been compelled, continually, to face it as a possibility if not a probability. The attempt to make provision through the maintenance of a war chest, and its impracticability, have been indicated in a previous chapter. The enormous cost of modern warfare, where expenditures of a single day exceed the outlay of a total conflict of a century ago, with the enormous burden which is imposed upon a nation's citizenship, makes a study of this class of expenditure of vital importance. The principles of war finance present, in a magnified form, the principles underlying all emergency financiering. In this chapter, then, consideration will be made of some of the underlying principles which should be taken into account in raising funds to prosecute a war, as well as the systems which different countries have employed.