CLASSIFICATION OF PUBLIC EXPENDITURES. Formerly economists classified public expendi tures as necessary and roluntary. This classifica tion, based upon a definite theory of the functions of the State—a subject beyond the province of finance—obviously fails to meet the requirements of modern financial theory. A fairly satisfactory classification is that of Prof. Henry C. Adams, who classes public expenditure as protective, com mercial, and developmental. The first class in cludes the preservation of internal peace and the defense of the nation against foreign aggression. In the second class are placed expenditures en tailed by the performance of a number of func tions in which the State takes the place of the private capitalist, as in the management of enter prises such as the post-office, telegraphs, and railways. In the third group, developmental ex penditures. are included those which the State undertakes to promote its own interests, or those of its inhabitants, such as expenditures for edu cation and other outlays which are designed to improve general conditions among the people. It is not to be understood that the boundaries of these groups can he sharply drawn. Legislative expenses, for example, fall under all these heads. Such a (bassi tient ion has its value in pointing out that, besides the expenditures for protection which are essential to existence, there are others equally natural and equally unavoidable which are inci dent to growth and progress. The precise form which the latter take depends on local neeessi ties and historical antecedents.
(;aowrii Pyisme Flxet:Nitirtat;s. Whatever may he the theoretieal justification of expendi tures.however they ma y be a pprupriately grouped, finance must take cognizance of the fact that in volume expenditures are growing at n rapid rate.
So far as these figures go they show steady advance. though it is by no means uniformly rapid, for the various countries. The significance of this advance in national expenditure can be fully understood only by a detailed study of each of the countries involved. The first con sideration is the relation of expenditure to popu lation. For the United States this is shown by the following table, taken from the Report of the Secretary of the Treasury: (Net expenditure, i. e. all national expendi tures except payment of the national debt. In the nomenclature of the Treasury report 'net ex penditure' includes 'net ordinary expenditure' and interest on the public debt.) These figures show a marked difference between the period which preceded the Civil War and that which followed ; they also illustrate the dis turbing influence of war on the national finances. Both the earlier and the later period manifest a general tendency toward an advanee of expendi ture slightly more rapid than that of popula tion. In sortie States, however, as, for example, threat Britain. per capita expenditures have re mained nearly stationary. The most that can he said is that in recent years national expenditures have outrun the population considerably in the United States, but only slightly in Great Britain and France.
But the vital point is whether expenditure has outstripped wealth. Owing to the extreme un certainty of all calculations of national wealth, this is a point which cannot be determined with absolute accuracy. They appear, however, to have kept pace with national wealth in France, but to have fallen slightly behind in the United States, and considerably behind in Great Britain.
Respecting local expenditure our information is less explicit. Figures cannot be presented for as many countries. In the United States we have census figures on this point up to 1890, but no investigation into local expenditure was made in the census of 1900. In 1870 local expenditures were 47 per cent. of all public expenditures, and in 1890 they had reached Cl per cent. In Great Britain the share of local expeirditure rose from 34 per cent. in 1870 to 44 per cent. in 1890, while in France it rose from 21 per cent. in 1870 to 30 per vent. in 1890. This increase in local ex penditu•es is to be accounted for chiefly by the fact that the rapidly increasing developmental expenditures fall in great part upon the local governments. To estimate their true significance for the general welfare and for the financial out look of a nation, the expenditures should he weighed as well as measured. In general, the growth of military expenditure is to be deplored. Yet even this has its compensations, since the army, especially in some of the more eastern parts of Europe, contributes by its training in discipline to industrial efficiency. On the other band, the increase of the' developmental expendi tures must, if wisely directed, be a clear national gain. The facts can only be surmised front the general statements of public expenditure which arc classified statistically by administrative de partments rather than by classes of expenditure. \\'e may cite a few facts for the national ex penditure of the United States, tabulated from the Treasury statements: ling front 1870 to 1895. In this rise of 100.8 million dollars, pensions had the largest share, leaving hut 47.7 million dollars to he distributed among the other items tuned. nod military and naval expenditures were praetieally unchanged in the two years compared, while 1114. increase fell in some degree to the Indians, but in larger measure to the miscellaneous expendi ture of the Government. This growth in miseel bittern's expenditure is largely fur developmental functions. 111 times of [leave a considerable part of the military expenditures, namely, t he improve ment of rivers and harbors, belongs to the same class. The influence of war expenditures is shown in the comparison of IS95 with 11)01, when we find military and naval expenditures Valli prising 12.1.5 million dollars in an aggregate In crease of 152.4 million dollars, the remainder falling again to the miscellaneous expenditure.