192 PUBLIC FINANCE 



First, the increasing economic significance of the laboring class, 

 with the corresponding growth in the importance of popular con- 

 sumption. It is not meant by this to imply any depreciation of the 

 role played by capital. On the contrary, it is a platitude to say that 

 this is preeminently the capitalistic age. What it is intended to 

 emphasize is that precisely because of the growth of modern economic 

 well-being, the great mass of the community, represented by the 

 laborers, are acquiring an increased consuming capacity and that 

 their demand is the very tap-root of modern progress. The recog- 

 nition of this fact has brought about vast changes in modern tax 

 systems. 



In the second place we have to note the coming to the fore of the 

 corporation as the typical form of modern business enterprise. The 

 evolution from the individual to the early partnership, from the 

 partnership to the joint-stock company, from the joint-stock company 

 to the corporation, and from the corporation to the trust is one of 

 the most instructive lessons in institutional development. Finance 

 has not to study it, but to accept it. Tax systems framed upon the 

 assumptions of the older conditions, where corporate activity was 

 the exception rather than the rule, are manifestly inadequate and 

 belated. 



The third change consists in the growing importance of the pro- 

 blem of franchises. This is not the same as the corporate problem, 

 although often confused with it. A franchise may assume many 

 forms. It may be a patent or copyright in the hands of an individual; 

 it may be the privilege of inheriting property, whether that privilege 

 be granted to a single person or a group; it may be a right accorded 

 to corporations to utilize opportunities which originally belonged to 

 the community, and which are for sufficient reasons given away. 

 Such privileges and franchises have indeed existed from of old, but 

 the complexity of modern society and the immense increase of 

 public wealth have vastly enhanced both their extent and their 

 significance. How to analyze them, how to measure them, and how 

 to fit the result into the system of public revenue is becoming one of 

 the most subtle and difficult problems, which will, no doubt, long 

 perplex the trained student as well as the legislator. 



The fourth change is the economic revolution affecting the dis- 

 tribution of governmental authority as between the general and the 

 local government. The cause of this change, as is well known, is 

 not only the forging to the front of the interests of peace rather than 

 of war, but above all, the agglomeration of modern population into 

 urban centers. With the segregation of wealth and property into 

 great local masses, there is coming the need of administering to the 

 wants of such complex aggregates. Accordingly, while the last 

 century has shown a great increase of national expenditure and 



