, 1877-11-25

by IN actual increase in the cost of produc-
ton as effectually as if hard tax had been
imposed upon tho earnings OF companies
It cites the following Illustrations:
An eminent English lawyer stated the otacr oA'
at the Social Science Congress, With Inc concat-
renee OF Lord CLIFFORD, Scotch Jnaee' tn't .to
whole law OF frauds must be altered II co"i'an'ea
were to be protected, But this is only O poss'on
of the evil Mr.. G1rrES has shown, in his aplc
essay on Stock Exchange Securities, the seriously
injurious effect on the prices OF sound, eSceieht
securities which is produced by the detection OF
t'bogus " companies. IA shrinSasc OF Fa''es
all round occurs wnen the public become aware u
the nature OF such enterprises as the LISBON isau'
way Companies. The effect is exactly inc same as
If tho Chancellor OF the Exchcquer were 10 'esy
tux OF 10 or Is pcr cent on tho caplla1 Oh VI eol
panics whose shares arc quoted. AouSa's
speaking. we may say that none OF tho fourta-rate
States Ut the world can borrow except on TERMS
which arc virtually prohbitivc, on account
OF their detected dishonesty. The disclosures
brought to light before the Foreign Loans eon'-
mittce, aud the sharp experience Win respect ~
Spain aud Turkey. not to mention many olhes
States which have practiced 1.-THE confidence
trick" have destroyed the power OF tut smaller
States to borrow.
The student engaged in ana1yzing frauds
from the moral point Of view will easily see
where this tax comes in, and how and why
it is paid, if he will study the subject from
the politico-economical point. He will find
that on account Of commercial crimes honest
business men are subjected to an additional
expense for bolts, bars, locks, end guards.
They pay an extra expense for policemen and
detectives. They pay IN extra expense on
accounto of incendiary fires. They pay two men
for doing one mans work, and II third man for
watching the other two. They pay enor-
mously for the veritication of accounts. In
stock associations, they pay manager for
superintendent, Directors for looking after
the managers, Committee Boards for looking
after the Directors, accountants Tor looking
after the Boards, experts for looking alter
theaccountauts, and sometimes detectives fer
looking after the experts, while the detectives
generally look after themselves. When the
concern goes to smash, Receiver looks after
the fragments, md somebody looks after the
Receiver The tax is also paid in additional
rates Of interest, and whoever negotiates
loan pays a direct i,npost to the credit Of
freud, or, more strictly speaking, to the &c
count of risk. Why is it that the Government
can borrow at per cent interest when the
ordinary ratio is s per cost? Simply because
there is no fraud-tax levied The people
have confidence in the Government. If they
had the same faith in the individual, money
might be had ut the snmo rate. As it is,
they pay per cent interest and I per cent
fraud-tax. The gross amount OF this te1 it is
impossible to estimate, but it is NIL the time
increasing, because fraud is all the time in
crensing. HERBERT SPENCER, ono of tine
most comprehensive of observers, says that,
"whilo the great and direct frauds have
been diminishing, tho small and i'll
direct frauds have been increasing
alike in variety md number" While
lie is undoubtedly correct as to the
small frauds, it may well be questioned
whether he is not incorrect rs to the larger
ones. Certainly, in this country, huge frauds
in breach Of trust and criminal nlismannga-
ment have never been more plentiful than
they are Just now. In fact. it is doubtful
whether the smaller frauds can increase
without nt the same time Increasing the
larger ones, and rice rersG. 1t looks very
much rs if both classes were on the steady
increase, ond to snch IN extent that the tax
is neariy prohibitive on certain forms Of in
dustry and is showing others into inevitable
bankruptcy. If a person or company nre
strong enough to pay for the risk necessi-
tated by this tax, they can go on, but there
are very few who can do it. The student of
frauds, therefore, does not do his whole
duty in simply bewailing the decadence of
public morality. He should give considern-
ton to this regularly y-organized business of
dishonesty, which levies SO large n tax oa
honesty rs to make the business of the latter
Improbable, and see if there is any way to
avoid paying the tax