The Bill on the Compulsory Loan  
and Its Motivation

Cologne, 25 July. A notorious rogue from the blessed quarter of  
No. 56, 26 July 1848

Neue Rheinische Zeitung.

St. Giles in London appeared before the assizes. He was charged with having lightened the money-box of a notorious miser in the City by £2,000. “Gentlemen of the jury,” the accused began, “I shall not claim your patience for long. My defence is of a politico-economic nature and it will deal economically with words. I took £2,000 from Mr. Cripps. Nothing more certain than that. But I took from a private individual in order to give to the public. Where have the £2,000 gone? Did I, perhaps, egoistically keep them for myself? Search my pockets. If you find a penny, I’ll sell you my soul for a farthing. The £2,000 – you will find them again at the tailor’s, the shopkeeper’s, the restaurant, etc. What, then, did I do? I ‘set in circulation sums that were lying idle and could only be wrested from the grave of avarice by a compulsory loan’. I was an agent of circulation, and circulation is the first condition of national wealth. Gentlemen, you are Englishmen! You are economists! You will not condemn a benefactor of the nation.”

The economist of St. Giles sits in Van Diemen’s Land and has the opportunity of reflecting on the deluded ingratitude of his countrymen. But he has not lived in vain. His principles form the basis of Hansemann’s compulsory loan. “The admissibility of the compulsory loan,” says Hansemann in the statement of reasons for this measure, “rests on the certainly well-founded assumption that a large part of the ready money in the hands of private persons lies idle in smaller or larger sums and can only be set in circulation by a compulsory loan.”

If you consume a capital, you set it in circulation. If you do not set it in circulation, the state consumes it in order to set it in circulation.

A cotton manufacturer, for example, employs 100 workers. Every day he pays each of them 9 silver groschen. Thus 9 silver groschen, or 30 thalers, wander daily from his pocket into the pockets of the workers and out of the workers’ pockets into the pockets of the grocer, the house-owner, the shoemaker, the tailor, etc. This wandering of the 30 thalers is called their circulation. From the moment when the manufacturer can only sell his cotton goods at a loss, or cannot sell them at all, he stops producing, he stops employing the workers, and with the cessation of production the wandering of the 30 thalers ceases, circulation ceases. “We will institute circulation by force!” cries Hansemann. Why should the manufacturer leave his money lying idle? Why does he not let it circulate? When the weather is fine, many people circulate in the open air. Hansemann drives the people into the open, forces them to circulate, in order to produce fine weather. A great weather-maker!

The ministerial and commercial crisis robs the capital of bourgeois society of its interest. The state helps it back on to its feet by also taking the capital away.

The Jew Pinto, the famous stock-exchange gambler of the eighteenth century, recommends stock-exchange gambling in his book on “Circulation”. Stock-exchange gambling, he says, produces nothing, but it promotes circulation, the wandering of wealth from one pocket into another. Hansemann transforms the state treasury into a roulette table on which the property of the citizens circulates. Hansemann-Pinto!

In the “Statement of Reasons” for the “Compulsory Loan Bill” Hansemann then encounters a great difficulty. Why did the voluntary loan not bring in the necessary sums?

Is not the “unconditional confidence” which the present government enjoys well known? Is not the rapturous patriotism of the big bourgeoisie well known, which complains of nothing more than that a few agitators have the audacity not to share its devoted confidence? Are not the loyal addresses from all provinces well known? And “despite all this, and all this”, is Hansemann obliged to transform the poetic voluntary loan into the prosaic compulsory loan?

In the administrative district of Düsseldorf, for example, nobles contributed 4,000 thalers, officers 900 thalers, and where is there more confidence than among the nobles and officers in the administrative district of Düsseldorf? Not to speak at all of the contributions of the princes of the royal house.

Let us have the phenomenon explained by Hansemann.

“Voluntary contributions have so far come in only sparsely. This is probably attributable not so much to a lack of confidence in our conditions as to uncertainty as to the real needs of the state, people believing that they could wait and see whether and to what extent the money resources of the people would be drawn upon. On this circumstance is founded the hope that everyone will contribute voluntarily according to his means, as soon as the duty to contribute is presented to him as an unavoidable necessity.”

The state in extreme distress appeals to patriotism. It most courteously requests patriotism to lay 15 million thalers on the altar of the fatherland, and not even as a gift, but merely as a voluntary loan. People possess the highest confidence in the state, but they remain deaf to its cry of distress. They are unfortunately in such “uncertainty” about the “real needs of the state” that for the time being they decide, with the greatest torments of soul, to give the state nothing at all. They certainly have the highest confidence in the state authority, and the honourable state authority asserts that the state needs 15 millions. Precisely out of confidence they do not trust the assurance of the state authority, but rather regard its clamour for 15 millions as sheer playfulness. They know the story of that honest Pennsylvanian who never lent his friends a dollar. He possessed such confidence in their orderly way of life, he granted their business such credit, that to his dying hour he never gained the “certainty” that they found themselves in a “real need” for a dollar. In their urgent demands he saw only tests of his confidence, and the man’s confidence was unshakeable.

The Prussian state authority found the whole state inhabited by Pennsylvanians.

But Herr Hansemann explains this strange politico-economic phenomenon by yet another remarkable “circumstance”.

The people did not contribute voluntarily “because they believed they could wait and see whether and to what extent their money resources would be drawn upon”. In other words: Nobody paid voluntarily because everyone waited to see whether and to what extent he would be forced to pay. Cautious patriotism! Highly complicated confidence! And it is now on this “circumstance”, that behind the blue-eyed, sanguine voluntary loan there now stands the dark-gazing, hypochondriacal compulsory loan, that Herr Hansemann “founds the hope that everyone will contribute voluntarily according to his means”. At least the most obdurate doubter must have lost his uncertainty and gained the conviction that the state authority is really in earnest about its need for money; and the whole trouble lay, as we have seen, only in this painful uncertainty. If you do not give, you will be taken from, and the taking relieves you and us of all inconvenience. We hope, therefore, that your confidence will abandon its oversensitive manner and express itself in full-sounding thalers instead of hollow-sounding phrases. Est-ce clair?

As much, then, as Herr Hansemann founds “hopes” on this “circumstance”, the brooding disposition of his Pennsylvanians has nonetheless infected him, and he sees himself prompted to look around for even stronger stimulants to confidence. Confidence is certainly there, but it will not come out. It needs stimulants to drive it out of its latent condition.

“But in order to provide an even stronger spur to voluntary participation” (than the prospect of the compulsory loan), “§1 projects that the loan shall bear interest at 3⅓ per cent, and a term” (until the first of October) “has been left open, until which voluntary loans will still be accepted at 5 per cent.”

Herr Hansemann therefore puts a premium of 1⅔ per cent on the voluntary loan, and then patriotism will probably become liquid, the money-boxes will spring open, and the golden floods of confidence will stream into the state treasury.

Herr Hansemann finds it naturally “just” to pay the big people 1⅔ per cent more than the small, who only by force allow the indispensable to be taken from them. As a punishment for their less comfortable property circumstances, they will, moreover, have to bear the costs of appeal.

Thus the biblical saying is fulfilled: To him that hath shall be given. From him that hath not shall be taken.

(Conclusion follows.)

Neue Rheinische Zeitung.  
No. 60, 30 July 1848

Cologne, 29 July. (Conclusion.) Just as Peel once did for the corn laws, so Hansemann-Pinto has discovered a “sliding scale” for involuntary patriotism.

“With regard to the percentage rate for the liability to contribute,” says our Hansemann in his statement of reasons, “a progressive scale has been adopted, since the ability to procure money obviously increases in arithmetical ratio with the amount of property.”

With property, the ability to procure money increases. In other words: In proportion as one has more money at one’s disposal, one has more money at one’s disposal. Nothing could be more correct than that. But that the ability to procure money increases only in arithmetical ratio, however much the various amounts of property may increase in geometrical ratio – that is a discovery by Hansemann which must secure him greater fame with posterity than Malthus’s proposition that the means of subsistence grow only in arithmetical ratio while the population increases in geometrical ratio.

If, therefore, for example, various amounts of property are related to one another as:

1, 2, 4, 8, 16, 32, 64, 128, 256, 512,

then, according to the discovery of Herr Hansemann, the ability to procure money grows as:

1, 2, 3, 4, 5, 6, 7, 8, 9, 10.

Despite the apparent growth of the liability to contribute, therefore, according to our economist the ability to procure money diminishes in the same measure as property increases.

In a novella by Cervantes we find the greatest Spanish financier in the madhouse. The man had found out that the Spanish national debt would be extinguished as soon as “the Cortes approve the law that all the vassals of His Majesty from the age of forty to the age of sixty shall be obliged to fast on bread and water one day in every month, on a day to be selected and determined at their discretion. The expenditure, however, which would otherwise have been used up on that day on fruit, vegetables, meat dishes, fish, wines, eggs and pulses shall be assessed in money and delivered to His Majesty, without a farthing being omitted, on pain of perjury.”

Hansemann shortens the procedure. He has called upon all his Spaniards who possess an annual income of 400 thalers to find one day in the year when they can dispense with 20 thalers. He has called upon the small people, according to the sliding scale, to abstain from all consumption for about 40 days. If they do not find the 20 thalers between August and September, a bailiff will search for them in October according to the words: Seek, and ye shall find.

Let us follow further the “statement of reasons” which the Prussian Necker confides to us.

“Every income,” he instructs us, “from trades in the widest sense of the word, that is, without regard to whether trade tax is paid on it, as in the case of the income of doctors, lawyers, can only be taken into consideration after deduction of operating expenditure, including the interest to be paid on debts, since only in this way is the net income arrived at. For the same reason the trade operating capital had to be left out of account, insofar as the loan amount to be calculated on the basis of income amounts to more than that calculated on the basis of the operating capital.”

Nous marchons de surprise en surprise. The income can only be taken into consideration after deduction of the operating capital, for the compulsory loan can and must be nothing other than the extraordinary form of an income tax. And the operating costs belong as little to the income of the industrialist as the trunk and the root of a tree belong to its fruit. For this reason, therefore, because only income and not operating capital is to be taxed, it is precisely the operating capital that is taxed and not the income, if the first manner seems more profitable for the fiscal authorities. Herr Hansemann, then, is completely indifferent as to “in what way the net income is arrived at”. What he is looking for is “in what way the greatest income” for the fiscal authorities “is arrived at”.

Herr Hansemann, who attacks the operating capital itself, is like the savage who fells the tree in order to get possession of its fruit.

“If, therefore (Art. 9 of the bill), the loan participation to be measured according to the trade operating capital is higher than that according to ten times the amount of the income, the former method of assessment applies” and thus the “trade operating capital” itself is “drawn upon”.

So, as often as the fiscal authorities please, they can base their demands on property instead of income.

The people demands to inspect the mysterious Prussian state treasure. The Ministry of Deeds answers this tactless demand by reserving the right to cast a penetrating glance into all merchants’ books and to draw up an inventory of the property of all its subjects.

The constitutional era in Prussia thus begins by having the people’s property controlled by the state, instead of the state’s property by the people, in order thereby to open wide the door to the most shameless interference of the bureaucracy in bourgeois intercourse and private affairs. In Belgium, too, the state has had recourse to a compulsory loan, but it modestly keeps to the tax registers and mortgage books, to available public documents. The Ministry of Deeds, on the contrary, introduces the Spartan spirit from the Prussian army into Prussian political economy.

In his “statement of reasons” Hansemann does indeed seek to reassure the citizen by all sorts of gentle words and friendly suggestions.

“The distribution of the loan,” he whispers to him, “is based on self-assessment.” Everything “odious” is avoided. “Not even a summary statement of the individual parts of property is required.” “The district commission appointed to examine the self-assessments shall, by way of amicable suggestion, call upon the taxpayer to contribute suitably, and only if this method is without success shall it assess the amount. An appeal against this decision is allowed to a circuit commission, etc., etc.”

Self-assessment! Not even a summary statement of the individual parts of property! Amicable suggestion! Appeal!

Say, what more do you want?

Let us begin straightaway with the end, with the appeal.

Art. 16 determines: “Collection shall take place without regard to any appeal lodged, on the fixed dates, with reservation of repayment in so far as the appeal is found to be justified.”

So first the execution in spite of the appeal, and afterwards the justification in spite of the execution!

More still!

The “costs” caused by the appeal “shall be borne by the appellant if his appeal is wholly or partly rejected, and shall if necessary be collected by way of execution.” (Art. 19.) Anyone who knows the economic impossibility of an exact assessment of property sees at the first glance that the appeal can always be rejected in part, and the appellant therefore bears the damage every time. However the appeal may be constituted, a monetary penalty is its inseparable shadow. All respect for the appeal!

From the appeal, from the end, we go back to the beginning, the self-assessment.

Herr Hansemann does not seem to fear that his Spartans will over-assess themselves.

According to Art. 13, “the self-declaration of those liable to contribute forms the basis of the loan distribution.” The architectonics of Herr Hansemann is so constituted that from the foundation of his edifice one can by no means deduce its further outlines.

Or rather, the “self-declaration”, which in the form of a “declaration” is to be submitted “to the officials to be designated by the Minister of Finance or, on his instructions, by the circuit government” – this foundation is then given a deeper foundation. According to Art. 14, “one or more commissions shall convene to examine the declarations submitted, whose chairman, as well as the remaining members, to the number of at least 5, are to be appointed by the Minister of Finance or the authority commissioned by him”. The appointment by the Minister of Finance or by the authority commissioned by him thus forms the actual basis of the examination.

If the self-assessment deviates from the “judgement” of this district or town commission appointed by the Minister of Finance, the “self-assessor” is called upon to declare himself. (Art. 15.) He may then submit a declaration or not submit one; everything depends on whether it “satisfies” the commission appointed by the Minister of Finance. If it does not satisfy it, “the commission shall fix the contribution according to its own assessment and inform the person liable to contribute accordingly.”

First the person liable to contribute assesses himself and informs the official. Now the official assesses and informs the person liable to contribute. What has become of the “self-assessment”? The foundation has gone to the ground. But while the self-assessment only offered the occasion for a severe “examination” of the person liable, the outside assessment immediately changes into execution. Art. 6 namely decrees: “The proceedings of the district (town) commissions are to be submitted to the circuit government, which is thereupon immediately to draw up the registers of the loan amounts and send them to the relevant treasuries for collection – if necessary by way of execution – in accordance with the regulations applicable to taxes.”

We have already seen that where appeals are concerned, not everything is “rosy”. The path of appeal conceals still other thorns.

Firstly. The circuit commission which examines the appeals is formed by deputies who are elected by the electors, etc., elected under the law of 8 April 1848.

But the whole state divides before the compulsory loan into two hostile camps, the camp of the recalcitrant and the camp of the well-meaning, against whose paid or offered contribution no objections have been raised by the district commission. The deputies may be elected only from the well-meaning camp. (Art. 17.)

Secondly. The chairmanship is held by a commissioner to be appointed by the Minister of Finance, who may be assisted for the report by an official. (Art. 18.)

Thirdly. The circuit commission is empowered to order the special assessment of the property or income, and to this end to draw up assessments of value or to have merchants’ books inspected. If these means do not suffice, an affirmation in lieu of an oath may be demanded of the appellant.

Anyone, therefore, who does not unreservedly submit to the “assessments” of the officials appointed by the Minister of Finance must, as a punishment, perhaps lay open all his property circumstances to two bureaucrats and 15 competitors. Thorny path of appeal! Hansemann, then, merely mocks his public when he says in the statement of reasons:

“The distribution of the loan is based on self-assessment. But in order not to make this in any way odious, not even a summary statement of the individual parts of property is required.”

The punishment of the “perjury” of Cervantes’s projector is not even missing from the project of the Minister of Deeds.

Instead of tormenting himself with his sham reasons, our Hansemann would have done better to say, with the man in the comedy:

How do you expect me to pay old debts and make new debts if you don’t lend me money?

At this moment, however, when Prussia, in the service of its separate interests, is seeking to commit a betrayal of Germany and to rebel against the central authority, it is the duty of every patriot not to contribute a single farthing voluntarily to the compulsory loan. Only by a consistent cutting off of the means of subsistence can Prussia be forced to submit to Germany.