The reader's guide to the Encyclopaedia Britannica

by Inc. Encyclopaedia Britannica

Tariff

Of perennial interest in the field of public finance is the question of tariff reform. This is true both in the United States and in the United Kingdom, but strangely enough “tariff reform” is used with absolutely opposite meanings in the two countries. Tariff reform in England is linked with Imperialism and means the introduction of higher tariffs for protection of colonial as well as British industries. In the United States the typical tariff reformer is usually an opponent of Imperialism (which, of course, does not mean the same thing in the two countries), and tariff reform here involves lowering duties, doing away with protection, and, in short, adopting approximately the very system now in vogue in the United Kingdom, and the very system that the followers of Joseph Chamberlain wish to replace with something not entirely unlike the American protective system as it has been since the Civil War. On this subject see the article Tariff (Vol. 26, p. 422), by the American economist, F. W. Taussig, professor at Harvard, the articles Protection (Vol. 22, p. 464), by E. J. James, president of the University of Illinois, and author of the History of American Tariff Legislation, and Free Trade (Vol. 11, p. 88), by the Venerable Dr. William Cunningham, Archdeacon of Ely, and author of The Growth of English Industry and Commerce; the biographies of Alexander Hamilton (Vol. 12, p. 880), and Henry Clay (Vol. 6, p. 470), for the foundation of American protection; and the articles on H. C. Carey (Vol. 5, p. 329), Friedrich List (Vol. 16, p. 776), and William McKinley (Vol. 17, p. 256) for the principal exponents, theoretical and practical, outside of Great Britain, of protection; the lives of Richard Cobden (Vol. 6, p. 607) and John Bright (Vol. 4, p. 567) and the article Corn-Laws (Vol. 7, p. 174) for the genesis of free trade in Great Britain; and the article on Joseph Chamberlain (in particular pp. 816–817 of Vol. 5) for English tariff reform in politics.

Banking Laws

Another topic in public finance of great interest at the present moment is the banking laws,—the interference of government with banking and similar business. Local regulations in regard to banking will be found in sections on legislation and finance in articles on each of the states of the Union. The article Oklahoma (Vol. 20, p. 57), for example, contains the following summary of the first radical state enactment—constitutional in this case,—providing bank guarantees:

The unique feature of the banking system (with amendments adopted by the second legislature becoming effective on the 11th of June, 1909) is a fund for the guaranty of deposits. The state banking board levies against the capital stock of each state bank and trust company, organized or existing, under the laws of the state to create a fund equal to 5% of average daily deposits other than the deposits of state funds properly secured. One-fifth of this fund is payable the first year and one-twentieth each year thereafter; 1% of the increase in average deposits is collected each year. Emergency assessments, not to exceed 2%, may be made whenever necessary to pay in full the depositors in an insolvent bank; if the guaranty fund is impaired to such a degree that it is not made up by the 2% emergency assessment, the state banking board issues certificates of indebtedness which draw 6% interest and which are paid out of the assessment. Any national bank may secure its depositors in this manner if it so desires. The bank guarantee law was held to be valid by the United States Supreme Court in 1908, after the attorney-general of the United States had decided that it was illegal.

More general treatment is to be found in the articles Banks and Banking (Vol. 3, p. 334), Savings Banks (Vol. 24, p. 243) and Trust Company (Vol. 27, p. 329); and see further the articles listed in the chapter in this Guide For Bankers and Financiers.

Insurance

Another sphere of private finance over which government restriction and regulation has been greatly extended during the last few years, is insurance. The entire subject of insurance is, moreover, of interest not merely to the citizen as a member of the body politic but to the individual as the head of a family and as an investor for his own protection in old age. To every one, therefore, the article Insurance (Vol. 14, p. 656) will be of the utmost value, by reason of its rare combination of interest and authority. For a full analysis of this article and of related topics see the chapter in this Guide For the Insurance Man.

Legislation and Courts

Much of the earlier part of the present chapter has been devoted to the rapid extension of governmental control, regulation and supervision through legislation. Interesting and novel though this is, it is far less important for an intelligent comprehension of government than is a careful study of the foundations and principles of legislation. Only the specialist will wish to pursue a complete course in political science, but every well-informed citizen of the United States should study the general powers and functions of national and state legislatures and courts. This material is given briefly, lucidly and critically by the Hon. James Bryce, late British Ambassador to the United States, former President of the British Board of Trade, and author of The American Commonwealth, in the section Constitution and Government, article United States (Vol. 27, pp. 646–658). Part of this section deals with the governments of the states, as to which there is also special information in the section on government of the article on each state. Regarding city governments similar sections will be found in the articles on the larger cities. For a full analysis and a list of articles see the chapter For Lawyers in this Guide. Constitutional restrictions of all delegated powers must be continually kept in mind in the study of the action of legislatures and courts, and of the questions that arise in regard to legislation or to court decisions. Although the legislature represents the people more or less directly—the lower house being commonly called the House of Representatives—and so has delegated to it from the people the power of making laws, still, in the Federal and state constitutions (except those of a very recent date) there is a system of checks on every delegated power. The result is that an act passed by Congress does not become law without the approval of the president, nor, in most states, a local statute without that of the governor, and—more important—is not a valid law if the highest Federal Court (or, if it be a state enactment, the highest state court) holds it contrary to the terms of the constitution. |The System of Checks| For a summary of the historical arguments for this system of checks see the section on the Constitution (Vol. 27, p. 686), in the article United States and such biographical articles as James Madison (Vol. 17, p. 284); Alexander Hamilton (Vol. 12, p. 880), and Gouverneur Morris (Vol. 18, p. 869). The working of this system in nation and state has been greatly affected by the distinction between the legislators’ mandate and that of the judge. Legislators have shorter terms of service than judges, and especially judges of the higher courts, and so may be said to be in much closer and more constant contact with the people; and the legislator is bound by what he thinks the people need and want,—something that is continually changing. On the other hand, the judge is bound by the written law, unchanged and unchangeable except by constitutional amendments or slightly varying interpretation of the constitution. The result has been dissatisfaction with the courts and with legislatures. The definite expression of this dissatisfaction is in constitutional amendments or in new constitutions, adopted in order that future action of the courts may more nearly accord with the present sentiment of the people. The story of the constitution of each state in the Union is told, with a summary of important constitutional changes, in the section on government of each article on a separate state. In his analysis of the state constitutions, Mr. Bryce says (Vol. 27, p. 647):