The crisis of the Tax State
Enlarged version of a lecture Schumpeter gave before the Wiener Soziologische Gesellschaft. Published in 1918 under the title Die Krise der Steuerstaates as issue number 4 of Zeiqragen azu dem Gebiet der Soziologie. An English translation, by Wolfgang F. Stolper and Richard A. Musgrave, appeared (1954) in InternationalEconomic Papers(n.4).
Many people assert, and indeed in some circles it has become axiomatic, that the fiscal problems left in the wake of the war cannot be solved within the framework of our pre-war economic order. This order was a mixture of highly contradictory elements. Only by heroic abstraction could it be called an economy of free competition; yet whatever drive and success it had weredue to such elements of free competition as remained in spite of everything-in spite even of those attempts at state tutelage which, though reinforced by the war, were by no means created by it. Will this economic order collapse under the weight of the war burden or, indeed, must it collapse? Or will the state have to alter it so much as to make it something entirely new? The answer tends not torest on dispassionate analysis. As usual, everyone endeavours to proclaim the fulfilment of his own wishes to be a necessary consequence of the war. Some foresee that "high capitalism," having culminated in the war, must now collapse; others look forward to more perfect economic freedom than before, while yet others expect an "administered economy" fashioned by our "intellectuals." This is bound tohappen because the state-so says the bourgeois smugly-or because the free economy-so says the intellectual enthusiastically-have failed. Neither of them, though possibly the socialist a little more than the other, attempts to justify his judgment in a manner which bears even a faint resemblance to scientific habits of thought. This discussion, unpleasant like almost every expression of today'sculture or lack thereof, goes to prove that there remains free competition at least in slogans: the cheapest wins. In no other field of knowledge would such a performance be possible. Only in economic matters does everyone consider himself called upon to speak as i n expert; every Tom, Dick, and Harry feels entitled ingenuously to recite age-old fallacies and naively to declare his own mostsubjective economic or ideological interest to be the last word of wisdom. In these pages, however, we shall only touch upon this question. Whoever expects an exhaustive discussion of it should lay down this pamphlet. For our main concern is with other matters. If the initial assertion is true then we face a crisis of much greater scope than is indicated by the catchword which has provided us with ourtitle. If the tax state were to fail and another form of providing for the wants of the community ensued, this would, on the one hand, mean much more than that a new fiscal system replaces the prewar one. Rather, what we call the modern state would itself change its nature; the economy would have to be driven by new motors along new paths; the social structure could not remain what it is; the approachto life and its cultural contents, the spiritual outlook of individuals- everything would have to change. On the other hand, it should be pretty clear that a continuous failure of the tax state could never be the fortuitous result of any disturbance, however big-as if, for example, an otherwise perfectly healthy tax state had suddenly become impossible owing to the world war and its aftermath.Even the simplest considerations show that, at most, the war could have brought to light a much more basic inadequacy of the particular society whose fiscal expression the tax state is; that, at most, it could have been the occasion which laid bare the structural weaknesses of our society and thus precipitated a collapse which was inevitable for deeper reasons. Here we come to the sociologically...