of railways of a political and strategic character during the last ten to fifteen years. He is profoundly convinced that to develop her economic power Russia will still for a long time have to build several thousand versts of railways every year. The construction of railways which are of economic value need cause no apprehension. It is quite another question with railways that are purely of a political and strategic value, such as the Novoselitz branches of the south-western railways, the strategic lines in Poland and in West Russia, the Ussuri and Central Asiatic Railways, the southern branch of the Eastern Chinese Railway, and others. These railways will not for a long time pay even the interest on the capital laid out in construction, while some do not even cover their working expenses. Between 1893 and 1903, no less than 61,500,000 roubles have been granted for betterment of purely strategic railways, besides other expenditure incurred on purely military grounds." In the report of this secret session it is further stated that the "Council of State, having recapitulated M. de Witte's arguments and generally endorsed them, reiterated his warning against the steady increase of departmental expenditure. . . Bearing in mind the gravity of the situation disclosed by the deficit which the railway administration had shown since 1901, and the complexity of the causes producing this result, the Council of State desired the Finance Minister to investigate the question thoroughly, and as soon as possible, in concert with the Minister of Communications and the Imperial Controller."1

4. SPIRITS MONOPOLY

Government control of the liquor trade in Russia dates back to the first year of the seventeenth century, and ever since that time the income derived from the

1 Times, June 15th, 1903. "Das heutige Russland" von der Brüggen, pp. 40-43. "Das Hungernde Russland," Lehmann und Parvus, pp. 476-88. Das Finanzsystem Witte," Paul Rohrbach, pp. 24-33.

taxation of alcohol has formed an important part of the revenue of the State. Fiscal considerations have accordingly been paramount in all the different systems of control hitherto practised, but the desire to check drunkenness and to protect the health and economic well-being of the peasantry has also exercised a varying degree of influence. Since 1767 four systems have been pursued:

(1) From 1767-1819 the exclusive right of selling spirits was granted to private persons. This system was found to be very unfavourable in its fiscal results, as the revenue from spirits decreased year by year, and was most injurious to the people," the owners of the concessions doing their best to poison and corrupt the population for the greater benefit of their own pockets."

(2) In 1819 distilleries were monopolised by the Government, and the wholesale trade carried on in Government stores, the right of retail trade being granted only to a few private persons. Under this system the decrease of drunkenness was so marked that there was a serious falling off in the revenue from spirits. The system was therefore abandoned, partly for fiscal reasons and partly because of the great influence of some of the holders of the old concessions.

(3) From 1827-63 a reversion was made to the old system of leasing the retail sale of spirits to private persons, whose interest it was to push the sale of drink by all the means in their power. It has been stated that this system was at least successful as a means of collecting revenue, the average annual return during the last years of the farming system being £12,500,000 for a population of 41,000,000; but although the farmers paid this large sum for the right of selling spirits, their own profits were enormous, and it was plain that a rich source of revenue was being diverted into private hands.

(4) When the term of the farming contract expired, December 31st, 1862, the system was superseded by

one of excise. From 1863 to 1894 the production of spirits was free; distilleries of a certain size might be opened without limitation of number, provided that duty was paid on the instruments of production and on the amount produced. Distribution was also free when once the tax imposed had been paid. The trade in alcohol was declared to be on the same footing as any other trade, and spirits for consumption off the premises could be sold in all retail shops.

The Government, by affording facilities for obtaining spirits cheaply and easily, had hoped to promote a regular and moderate consumption. This expectation was disappointed; the peasantry continued to drink as before, not regularly but very heavily, and the spirits consumed were of bad quality and extremely injurious to health. The consumption of spirits in Russia proper during the first year of the excise system doubled, according to The Journal of Financial Statistics, while three times as many public-houses were opened, and the number of cases of open intoxication was six times as great as before. The gain to the revenue was by no means proportionate. The income derived from spirits in 1863 was £18,000,000, or only £1,000,000 more than the revenue obtained during the last years of the farming system, including that of Poland and the Caucasus. The very low original duty of 4 roubles per vedro1 was accordingly raised in 1864 to 5 roubles, and in succeeding years the duty was again repeatedly raised until it reached 10 roubles per vedro. The raising of the duty was accompanied by a decrease in consumption, and hence by a relative, though not absolute, falling off in the revenue. A further effort to regulate the drinking habits of the people was made in 1885, when a law was passed limiting the number of places for the sale of drink, prohibiting the sale of spirits by the glass or in uncorked bottles, except in restaurants where food was also served (traktirs), and requiring that distilleries

1 1 vedro=2.7056 gallons.

and wholesale warehouses should possess a licence varying in cost from £21 to £42.

The excise system nevertheless did not realise the chief expectation on which it was based; it did not destroy the evils connected with the public-houses, nor did it make the consumption of spirits more regular and steady. No improvement could be looked for from increased taxation, as the people were already taxed to the utmost, and were paying at least two and a-half times as much as their neighbours in Germany. In 1863 the excise income was 138,000,000 roubles, while in 1894 it reached 287,000,000 roubles. Thus in 1863 the excise duty represented 1 rouble 87 kopeks per inhabitant, while in 1894 it had increased to 2 roubles 47 kopeks.1

The initiation of the present system of Government monopoly was due to the Tsar Alexander III., who in 1885 called upon M. Bunge, then Minister of Finance, to draw up a plan for introducing a State liquor monopoly by way of experiment into certain provinces. Neither M. Bunge, however, nor his successor, M. Vishnigradski, felt able to interfere with the existing system, which was producing a very fair return to the revenue. It was left for M. de Witte to introduce a system which, besides increasing the revenue, should transfer an immense mass of interest and influence from the local authorities to the central administration.

The undoubted wish of the late Tsar to diminish the evils caused by excessive drinking was the main reason for the new measure given in official publications, where the objects aimed at were said to be the following: (1) The exclusion of private interests from the drink trade and the consequent transfer of publichouses to Government agents who receive a salary and are not personally interested in increasing sales

1 Russian Journal of Financial Statistics, 1900, pp. 33-47. Journal of the Royal Statistical Society, March 1901. "Das hungernde Russland," Lehmann und Parvus, pp. 469-74.

(2) the promotion of off-consumption; (3) an improvement in the quality of the spirits sold; (4) the promotion of temperance by means of temperance societies. In addition to arranging that drink`should be sold only by disinterested agents, the law enacts that drink shall not be supplied on credit. The business of distilling is left to private enterprise, but the amount to be produced is fixed by the Government, which undertakes to buy two-thirds of the quantity required at a fixed price determined by the Minister of Finance in accordance with the price of grain and potatoes, and the other expenses of production. The remaining third is bought by auction. The Government itself undertakes or supervises the rectification of spirits, which are then bottled, corked, and delivered to the shops. Retail trade is carried on in shops managed by the Government or by private persons specially entrusted with the sale of liquor. Shops which do not provide food are prohibited from selling any spirits for consumption on the premises. Bottles must be removed with the seals or labels intact from the place where they are sold. Country restaurants (traktirs) may sell spirits for on-consumption at a price fixed by the Government, and the same permission is accorded in towns to restaurants and railway buffets. The Government monopoly system was introduced as an experiment in 1894 in the four eastern governments of Perm, Ufa, Orenburg, and Samara, and gradually extended over the whole empire, until in 1902 even Siberia was included.1

It is impossible with the information at present at our disposal to discover whether drunkenness has or has not decreased since the law came into force. The official reports declare that it has decreased; but competent observers, such as Mr. J. Michell, H.M. Consul-General at St. Petersburg, M. Issaieff, and MM. Lehmann and Parvus, affirm that it has not, 1 "Russia: its Industries and Trade (Glasgow Exhibition)," chap. xviii. Russian Journal of Financial Statistics," 1900, pp. 47-62.