But a strong and flourishing nation has no need of such leading strings.[236-5] Where an excrescence has to be extirpated, the people can use the knife themselves. I need call attention only to the temperance societies of modern times (Boston, 1803), which spite of all their exaggeration[236-6] may have a very beneficial effect on the morally weak by the solemn nature of the pledge, and the control their members mutually exercise over one another. It is estimated that, of all who enter them, in the British Empire, at least 50 per cent. remain true to the pledge. In Ireland the government had endeavored for a long time to preserve the country from the ravages of alcohol by the imposition of the highest taxes and the severest penalties for smuggling. Every workman in an illegal distillery was transported for seven years, and every town in which such a one was found was subjected to a heavy fine.

But all in vain. Only numberless acts of violence were now added to beastly drunkenness. On the other hand, the temperance societies of the country decreased the consumption of brandy between 1838 and 1842, from 12,296,000 gallons to 5,290,000 gallons. The excise on brandy decreased 750,000; but many other taxable articles yielded so much larger a revenue, that the aggregate government income there increased about 91,000.[236-7] [236-8] The Puritanical laws which some of the United States of North America have pa.s.sed prohibiting all sales of spirituous liquors except for ecclesiastical, medical or chemical purposes, have been found impossible of enforcement.[236-9] [236-10]

[Footnote 236-1: Commendable laws relating to luxury in Florence in the beginning of the 15th century. The outlay for dress, for the table, for servants and equipages was limited; but, on the other hand, it was entirely unrestricted for churches, palaces, libraries, and works of art. The consequences of this legislation are felt even in our day. (_Sismondi_, Gesch. der Ital. Freistaaten im M. A., VIII, 261. Compare _Machiavelli_, Istor. Fior., VII, a., 1472.)]

[Footnote 236-2: Thus Nerva (_Xiphilin._, exc. Dionis, LXVIII, 2); Hadrian (_Spartian V. Hadrian_, 22); Antoninus Pius (Capitol, 12); Marcus Aurelius (Capitol, 27); Pertinax (Capitol, 9); Severus Alexander (_Lamprid_, 4); Aurelian (_Lamprid_, 49); Tacitus (_Vopisc_, 10 seq).]

[Footnote 236-3: Extracted from the remarkable speech made by the personally frugal Tiberius (_Sueton._, Tib., 34) against sumptuary laws: _Tacit._, Annal., III, 52 ff.

Compare, however, IV, 63.]

[Footnote 236-4: _Tacit._, Ann., III, 55: but the differences in fortune had, at the same time, become less glaring. Henry IV. also dressed very simply for example's sake, as did also Sully, and ridiculed those _qui portaient leurs moulins et leur bois de haute-futaie sur leurs dos_.

(_Perefixe_, Histoire du Roi Henry le grand, 208.)]

[Footnote 236-5: The gross luxuries of drunkenness and gluttony are a direct consequence of universal grossness, and disappear of themselves when higher wants and means of satisfying them are introduced. (_v. Buch_, Reise durch Norwegen und Lappland, 1810, I, 166; II, 112 ff.)]

[Footnote 236-6: While, formerly, they cared only to abstain from spirits, the so-called "total abstinence" has prevailed since 1832. Most teetotallers compare moderate drinking to moderate lying or moderate stealing; they even declare the moderate drinker worse than the drunkard, because his example is more apt to lead others astray, and he is harder to convert. (But, Psalm, 104, 15!) The coat of arms of the English temperance societies is a hand holding a hammer in the act of breaking a bottle. (Temperance poetry!)]

[Footnote 236-7: _McCulloch_, On Taxation, 342 ff. Speech of _O'Connell_ in the House of Commons, 27 May 1842. The more serious crimes decreased 1840-44, as compared with the average number during the five previous years by 28, and the most grievous by 50 per cent. (_Rau_, Lehrbuch, II, -- 331.) Recently, the first enthusiasm awakened by Father Matthew has somewhat declined, and the consumption of brandy therefore increased. Yet, in the whole United Kingdom in 1853, only 30,164,000 gallons were taxed; in 1835, 31,400,000; although the population had in the meantime increased from 10 to 11 per cent. In 1834, there were in the United States 7,000 temperance societies with a membership of 1,250,000. The members of these societies are sometimes paid higher wages in factories; and ships which allow no alcohol on board are insured at a premium of five per cent.

less. (_Baird_, History of the Temperance Societies in the United States, 1837.)]

[Footnote 236-8: In the princedom of Osnabruck, the number of distilleries was noticeably diminished under the influence of the temperance societies; but the consumption of beer was rapidly increased twenty-fold. (Hannoverisches Magazin, 1843, 51. _Bottcher_, Gesch. der M. V. in der Norddeutschen Bundestaaten, 1841.)]

[Footnote 236-9: Even in 1838, Ma.s.sachusetts had begun to restrict the sale at retail. The agitation for the suppression of the liquor shops begins in 1841. According to the Maine law of 1851, a government officer alone had the right to sell liquor, and only for the purposes mentioned in the text. The manufacture or importation of liquor for private use was left free to all. A severe system of house-searching, imprisonment and inquisitorial proceedings in order to enforce the law. Similarly in Vermont, Rhode Island, Ma.s.sachusetts and Michigan. (Edinburg Rev., July, 1854.) There are, however, numberless instances related in which the law has been violated unpunished since 1856, and still more since 1872. See _R. Russell_, North America, its Agriculture and Climate, and Edinburg Rev., April, 1873, 404.]

[Footnote 236-10: From the foregoing, it is intelligible why most modern writers, even those otherwise opposed to luxury, are not favorably inclined towards sumptuary laws. "It is the highest impertinence and presumption in kings and ministers, to pretend to watch over the economy of private people and to restrain their expense, either by sumptuary laws or by prohibiting the importation of foreign luxuries.

They are themselves always, and without any exception (?) the greatest spendthrifts in the society. If their own extravagance does not ruin the state, that of their subjects never will." (_Adam Smith_, I, ch. 3.) Compare _Rau_, Lehrbuch II, -- 358 ff. _R. Mohl_, Polizeiwissenschaft, II, 434 ff.

_Montesquieu's_ opinion that in monarchies luxury is necessary to preserve the difference of cla.s.s but that in republics it is a cause of decline, is very peculiar. In the latter, therefore, luxury should be restricted in every way: agrarian laws should modify the too great difference in property and sumptuary laws restrain the too glaring manifestations of extravagance. (Esprit des Lois, VII, 4.) As an auxiliary to the history of sumptuary laws, compare _Boxmann_, De Legibus Romanorum sumptuarias, 1816. _Sempere y Guarinos,_ Historia del Luxo y de las Leyes sumtuarias de Espana, II, 1788; _Vertot_, Sur l'Establiss.e.m.e.nt des Lois somptuaires parmi les Francais, in the Memoires de l'Academie des Inscr., VI, 737 seq, besides the sections on the subject in _Delamarre_, Traite de la Police, 1772 ff.; _Penning_, De Luxu et Legibus sumtuariis, 1826.

(_Holland._)]

CHAPTER III.

INSURANCE IN GENERAL.

SECTION CCx.x.xVII.

INSURANCE IN GENERAL.

The idea of societies for mutual a.s.sistance intended to divide the loss caused by destructive accidents which one person would not be able to recover from among a great many is very ancient. The insurance of their members against causes of impoverishment was one of the princ.i.p.al elements[237-1] of the strength of the medieval communities (_Gemeinden und Korperschaften._) If we compare these insurance inst.i.tutions of the middle ages with those of the present, we discover the well-known difference between a _corporation_ and an _a.s.sociation_. There the members stand to one another in the relation of _persons_ who, therefore, seek to guaranty their entire life in the one combination; here, they appear only as the representatives of limited portions of capital confronted with a definite risk, the average of which may be accurately determined. Hence, the former are of small extent, mostly local; the latter may extend over whole continents, and even over the whole earth. The former have uniformly equal members; the latter embrace men of the most different cla.s.ses. While the former, therefore, simply govern themselves, often only on the occasion of their festive gatherings, the latter need a precise charter, an artificial tariff and a board of officers.

As the absolute monarchical police-state const.i.tutes, generally, the bridge between the middle ages and modern times, so too the transition from the medieval to the modern system of insurance has been frequently introduced by state insurance.[237-2] [237-3] This was very natural at a time when the guilds of the middle ages had lost their importance, and private industry was not ripe enough to supply the void left by them.

The government of a country, far in advance intellectually of the majority of its subjects, may, by force, induce them to partic.i.p.ate in the beneficent effects of insurance, and immediately provide inst.i.tutions extensive enough to guaranty real safety. While it may be called a rule that mature private industry satisfies wants more rapidly, in greater variety, and more cheaply than state industry; in the case of insurance against accidents, especially of insurance against fire, there are many peculiarities found which would make the entire cessation of the immediate action of the state in this sphere, or its limitation simply to a legislative and police supervision of insurance, seem a misfortune. A dwelling is one of the most universal and urgent of wants, and indeed a governing one in all the rest of the arrangements of life.

If it be destroyed, it is especially difficult to find a subst.i.tute for it, or to restore it. And to the poorest cla.s.s of those who need insurance, private insurance will, perhaps, be never properly accessible.[237-4] If German fire insurance and the German system of fire prevention be so superior to the English and North American, etc., one of the princ.i.p.al causes is that German governmental inst.i.tutions so powerfully partic.i.p.ate in it.[237-5]

[Footnote 237-1: The Icelandic _repps_ consisting as a rule of 20 citizens subject to taxation, who mutually insured one another against the death of cattle (to the extent of at least one-fourth the value), and against damage from fire.

After every fire three chambers of each house were replaced; so also the loss of clothing and of the means of subsistence, but not other goods or articles of display.

(_Dahlmann_, Danisch Gesch., II, 281 ff.) Scandinavian parish-duty, (_Gemeindepflicht),_ of a.s.sistance in case of damage by fire: _Wilda_, Gesch. des deutschen Strafrechts, I, 142. Similarly Capitul. a. 779 in _Pertz_, Leges, I, 37.

This matter plays an important part in the guilds out of which a large portion of the ancient cities were evolved: compare _Wilda_, Gildenwesen in M. Alter. 123.]

[Footnote 237-2: Proposed national fire insurance (_Landesbrandversicherung_) in which for the time being several villages should form a company, the surplus of which was to go to the aerarian, and the deficit to be made up by the same: _Georg Obrecht_, Funf unterschiedliche Secreta, Strasburg, 1617, No. 3. A similar proposition made on financial grounds in 1609, and rejected in Oldenburg.

(_Beckmann_, Beitr. zur Gesch. der Erfind, I, 219 ff.) The idea sometimes suggested in our day, of making the system of insurance a government prerogative, arises as much from the pa.s.sion for centralization as from socialistic tendencies.

Compare the Belgian Bulletin de la Commission de Statist.

IV, 210, and _Oberlander_, Die Feuerversicherungsanstalten vor der Standeversammlung des k. Sachsen, 1857.]

[Footnote 237-3: Maritime insurance is much older than insurance against risks on land; the Dutch inst.i.tutions of Charles V.'s time seem to have existed long before.

(Richesse de Hollande, I, 81 ff.) On Flemish, Portuguese and Italian maritime insurance in the 14th century, see _Sartorius_, Gesch. der Hanse, I, 215; _Schafer_, Portug.

Gesch. II, 103 ff., and _F. Bald. Pegolotti_, Tratato della Mercatura in Della decima, etc., della Moneta e della Mercatura dei Fiorentini, 1765. The cla.s.s engaged in maritime commerce are indeed especially and early rich in capital, speculative and calculating.]

[Footnote 237-4: In Berlin, in 1871, the movable property of 30.4 per cent. of all dwellings was insured; but with this great difference, that of the smallest (without any heatable rooms) only 5.3 per cent. were insured; while of dwellings having 5-7 heatable rooms, 84 per cent. had taken this precaution. (_Schwabe_, Volkszahlung von 1871, 169) But it should not be forgotten that private insurance, especially when speculative, is not in favor of having much to do with persons of small means, while public inst.i.tutions are, for the most part, obliged to reject no proposition for insurance in their own line, except when coming from a few manufacturing quarters especially exposed to fire.]

[Footnote 237-5: Outside of Germany, public fire insurance is to be still found only in German Austria, in Denmark, Switzerland and Scandinavia. The Germans had, in 1871, an insurance-sum of 5,908,760,000 thalers, while the mutual private insurance companies had about 1,435,000,000 (of which, at most, 200,000,000 to 300,000,000 were on immovable property), and joint-stock insurance companies, after deducting re-insurance (_Ruckversicherung_), about 7,000,000,000. (Mittheilungen der off. F. V. Anstalten, 1874, 84 ff.) Between 1865 and 1870, it was estimated that the per capita insurance of the population was: in Saxony, 407 thalers; in Wurtemberg, 410; in Baden, 365; in Prussia, 332; in Switzerland, 425. On the other hand, in the much wealthier British Empire, only 325 per capita; in North America, 215. (loc. cit., 92.) Even in the case of joint-stock insurance companies, the average receipts of premiums (1867-70) were, in Germany, 2 per 1,000 of the insurance-sums; in the United Kingdom, 4.06 per 1,000; in the United States, 10.77; and the damage respectively 1.25, 2.28, 5.92 per 1,000 of the insurance-sum. (loc. cit., 93.)]

SECTION CCx.x.xVII (_a_).

INSURANCE IN GENERAL.--MUTUAL AND SPECULATIVE INSt.i.tUTIONS.

All insurance inst.i.tutions fall into two cla.s.ses:

A. Mutual insurance companies, in which the insured are also as a society the insurers, and share the aggregate damage, of a year, for instance, among themselves.

B. Speculative inst.i.tutions, in which a party, generally a joint-stock company, in consideration of a certain definite compensation (premium agreed upon and paid in advance), a.s.sumes the risk.[237a-1]

So far as security is concerned, no absolute preference can be accorded to either of these cla.s.ses. Mutual insurance companies require to extend their business very largely[237a-2] to be able to meet great damage. And even where the liability of the members is unlimited, care must be taken to distinguish between the legally and the actually possible.[237a-3]

The joint capital of a well organized[237a-4] premium-a.s.sociation affords, in this respect sufficient security from the first, but the ratio between its security-fund and the amount of its a.s.sumed liabilities becomes less favorable as the business is extended, in case the fund itself is not enlarged.[237a-5] Mutual insurance may accomplish something a.n.a.logous to that accomplished by a joint-stock fund by collecting a reserve of yearly dues in advance, thus modifying the burdensome vacillation of the amount payable each year.[237a-6]

Experience, however, teaches, that the strongest form of mutual insurance, that supported either by munic.i.p.alities or by the state, has been able to meet extraordinary damage from fire much better than premium-inst.i.tutions, which are too quickly left in the lurch by the stockholders when the damage is greater than the amount of the stock subscribed. So also loss from fire caused by war or riots is for the most part and on principle, excluded by speculative insurance inst.i.tutions.[237a-7]

In point of cheapness to the insured, mutual insurance seems to have the advantage, since it contemplates no profit.[237a-8] From a national-economical point of view, also, it is very much of a question, whether the active compet.i.tion of premium inst.i.tutions, in a sphere which affords little room for industry proper, is more of a spur to make them "puff up" their claims (_Reclamen_) or to the simplification of their administration.[237a-9] However, premium-inst.i.tutions are more easily capable of extending the circle of their business;[237a-10] which of itself decreases the general expenses and strengthens their insuring power. Premium-insurance supposes a greater development of capitalistic speculation than does mutual insurance. But, even in the highest stages of civilization, the compet.i.tion of some mutual insurance companies is desirable to protect the insured from a too high rate of profit to the insurers.[237a-11] [237a-12] And since the principle of mutual insurance has so little attraction for capitalists in a time like that in which we live that it can be maintained perhaps only by the support of the state or of munic.i.p.alities, we may consider the desirableness of the state's continuing to partic.i.p.ate in some way in the matter of insurance as established.

[Footnote 237a-1: We might, however, improperly add another cla.s.s, that of self-insurance, which lies in the proper distribution of a large capital over a great many points.

When, for instance, a large state insures its buildings, this seems a superfluous outlay of public money for the benefit of private a.s.sociations. Or does England insure its ships? On this account, in Prussia, the insurance of post-offices which Frederick William favored, has recently been done away with. (_Stephan_, Gesch. der Preuss. Post, 195, 803.)]

[Footnote 237a-2: According to _Bruggemann_ (D. Allg. Ztg., 1849, No., 75 ff.), 100 million thalers of an insurance-sum.

Actual American legislation prescribes in the case of mutual insurance a minimum number of members of from 200 to 400, a minimum amount of annual premiums of from $25,000 to $200,000, of cash payments on the annual premium of from 10 to 40 per cent. of cash-paid yearly premiums, $5,000 to $40,000; and a maximum amount of premium notes made by a member of $500. (Compare Mittheilungen, 26 ff.)]

[Footnote 237a-3: Hence several mutual companies limit themselves to a maximum liability. Thus, for instance, the Gotha Fire Insurance Company requires from each member a bond that in case of necessity, four times the amount of the presumptive contribution paid in advance shall be paid after; in Altona, six times the yearly premium is the maximum.]

[Footnote 237a-4: In France, every premium-insurance-company has to be approved by the government (Cod. de Comm., art 37), and the approval is not given until 1/5 of the joint-stock capital has been deposited. (_Block_, Dictionn.

de l'administration, Fr. 153.) Many recent American laws require that the shares of insurance companies should be registered with the name of the owner.]

[Footnote 237a-5: The Aix-Munich Fire Insurance a.s.sociation raised its joint-stock capital after the Hamburg fire from 1 to 3 million thalers.]

[Footnote 237a-6: Usually so that the regular yearly contribution is higher than the average damage and cost of administration; this excess is then returned in the form of a dividend, either immediately at the close of the yearly account, or which is still safer, after several years. In the Stuttgart private insurance company, the reserve must amount to one per cent. of the amount insured, before the premium-surplus is returned. The Gotha fire insurance company, between 1821 and 1842, paid back an average of 46 per cent.; and even in 1842, after the Hamburg conflagration, there was an after-payment of only 98 per cent. necessary. This collection in advance of a fund for extraordinary losses is more secure than borrowing in case of need, and paying back in good years. Thus, the Baden Landes-Brandka.s.se had a debt in 1837 of 800,000 florins.

(_Rau_, in the Archiv., III, 320 ff.) In a mutual insurance company, where entrance and exit are free, this would be scarcely possible.]