‘A new scale of values is being set up everywhere’, wrote Gyan Chand in 1928, and the ‘fact cannot but have far-reaching reactions on the fiscal institutions of the world’.Footnote 1 As professor of economics at Patna University (Bihar province, British India), he saw this worldwide movement as clearly applicable to the colonial world. A specialist in public finance, Chand was a strong believer in taxation’s role in development, and he sought to instil a ‘positive attitude towards taxation’ in his compatriots. This positive attitude entailed a generous vision of the role of the state, a belief in its redistributive virtue, and a more cooperative approach to fiscal obligation and citizenship. The need for ‘fiscal reconstruction’ along these lines became an important issue in the aftermath of the First World War, notably because of the dramatic expansion of public expenditure generated by the conflict and by new political reforms in the non-Western world.
This re-evaluation of the role of taxation was rooted in earlier reflections about the nature of modern fiscal power that date back to the early 1890s. The idea that taxes should be socially transformative thanks to a more comprehensive individual assessment of income and wealth, as well as the introduction of progressive rates, had been hotly debated before 1914, and came to the fore more intensively during the interwar period. Edwin Robert Anderson Seligman, a Columbia professor and internationally acclaimed tax expert, played a significant role in spreading these new ideas about taxation.
Seligman’s ‘catholicity of interest, together with an exceptional erudition and a broad acquaintance with scholars of many countries’ placed him at the centre of an international network of academics, politicians, foundations, and international organizations that greatly relied on his expertise.Footnote 2 Many well-known public finance economists, including Chand, knew him personally, corresponded with him, or simply read his works, and made specific use of his ideas by adapting them to specific non-Western circumstances. Indeed, for more than fifty years, Seligman developed his standing as an initiator of progressive public finance by spreading knowledge about taxation throughout a rich global network of public finance scholars.
The historians Nicolas Delalande and Ajay Mehrotra have already underlined the significance of Edwin Seligman’s work. Ajay Mehrotra wrote extensively about Seligman’s role in the making of the US income tax and his status as a national tax expert in the late nineteenth and early twentieth centuries.Footnote 3 Nicolas Delalande uncovered Seligman’s links with European scholars, especially French public finance economists, and emphasized his role as an international tax expert.Footnote 4 This article proposes to go further and recover Seligman’s global dimension by exploring his links with Asia, principally China, India, and Japan, but also his engagement with American imperial ventures, notably in Cuba. The true scope of his non- Western network has hitherto remained largely unsuspected, and the time has come for a more connected history of American progressive public finance, in line with recent efforts to ‘decentre’ American history.Footnote 5 Most importantly, however, this article will analyse how Seligman’s non-Western students read his writings on fiscal issues. They were particularly eager to prepare a fiscally autonomous national future, where control of the public purse would go hand in hand with self-government. Financial questions were considered to be part and parcel of a necessary political education for the citizens of a future ‘free state’.Footnote 6 A first step was to demonstrate that ‘oriental people’ were as fit as their Western counterparts to be subjects of modern taxation, especially income tax.Footnote 7
Between the late 1880s and the 1930s, taxation policies underwent dramatic changes, and the clearest manifestation of fiscal modernity, according to Seligman, was income tax. Whereas older taxation systems had been much more reliant on indirect taxes ‘paid without the contributors being really conscious of it’, modern taxation required ‘a far greater sense of civic obligation’ because taxpayers were now expected to readily ‘contribute their share to the common burden’.Footnote 8 Seligman saw these developments as the culmination of a long history marked by successive stages of fiscal development. The opening chapter of his Essays in taxation provides a teleological reading of the history of taxation which traces an evolution from ‘primitive’ uniform poll taxes to the modern income tax.Footnote 9
The late nineteenth and early twentieth centuries represented the culmination of this logic, and in the 1914 edition of his landmark book on the topic, Seligman could claim that ‘everywhere, in short, there seems to be a trend toward the income tax’.Footnote 10 However, while the implementation of a progressive income tax was firmly on the agenda in much of Europe and North America, fiscal ideas travelled much less easily between European metropoles and their formal and informal empires. Colonial investors, European settlers, and wealthy local elites did not welcome these new calls for fiscal modernity as they dealt a direct blow to their fiscal privileges. A common argument was that fiscal reform was impossible because of the so-called fiscal ‘immaturity’ of the native population. Furthermore, modern personal taxation was not only too costly; it also disturbed the status quo and could eventually lead to political unrest.Footnote 11
Colonial budgets were mainly fed by customs duties levied on cash crops produced for international markets but also by personal taxes, which were considered highly disruptive of native economic life because they forced indigenous populations into a modern waged labour economy and led to the monetization of colonial economies. African colonies have received the greatest scholarly attention, with works using Marxist and Foucauldian frameworks and, more recently, quantitative evidence.Footnote 12 Specialists in economic history have been at the forefront of this upsurge of interest, especially in Africa and Southeast Asia.Footnote 13
Their works bear the mark of the 2001 article by Daron Acemoglu, Simon Johnson, and James A. Robinson on the ‘colonial origins of comparative development’, which inaugurated a spate of studies linking the existence of extractive institutions in non-settler colonies (such as taxation) to smaller future development prospects.Footnote 14 Ewout Frankema has critiqued this hypothesis in his recent attempt to evaluate tax levels in British non-settlers’ colonies. In a book published in 2014, Leigh Gardner also wrote extensively about the ‘problem of colonial taxation’ in colonial Kenya and Northern Rhodesia, using taxation as a lens to explain the ‘resource constraints’ of colonial polities, their role in shaping colonial economies, and their effects on long-term economic development. Anne Booth and Ian Brown, of the School of Oriental and African Studies, have published studies of taxation in colonial Southeast Asia. Although originally a specialist of Indonesia, Booth’s most recent articles have followed a comparative approach and have used taxation to understand the nature of colonial states. Brown has focused on colonial Burma and especially on tax policies during the interwar economic crisis.
The fiscal control exerted by Western powers over what Robinson and Gallagher have called their ‘informal empire’ has drawn more attention.Footnote 15 Debt imperialism in the late nineteenth and early twentieth centuries entailed the custody and control of tax revenues because they served as a guarantee for the disbursement of foreign loans. In China, the most important fiscal administrations, such as the Salt Inspectorate or the Maritime Customs Revenue Office, were indeed completely or partly in foreign hands.Footnote 16 In the turbulent early years of republican China, fiscal issues were thus a major topic of national politics. A number of Chinese scholars consequently began to write works advocating fiscal independence, modern fiscal techniques, and a reasoned distribution of fiscal responsibilities among different government levels. Some of Seligman’s students – Shou Jingwei, for instance – were genuine fiscal sociologists who understood that taxation was about much more than revenue and in fact intimately linked to the political system.Footnote 17
A careful consideration of the doctoral dissertations and pamphlets written by Seligman’s students shows that his guidance played no small role in encouraging a generation of Columbia-trained scholars to envisage the end of Western imperial fiscal domination, even if that meant proceeding well beyond the benevolent recommendations of their adviser. Seligman’s own published work was in fact rather Western-centric despite some early forays into colonial policy-making and a 1932 report on the fiscal system in Cuba. He seemed to have left it to his students, especially those from China and India, to ‘lift the veil’ which had ‘hitherto concealed the teachings and the motives that have guided fiscal theory and fiscal practice in China’ and elsewhere.Footnote 18 Yet his intermittent direct engagement with non-Western fiscal affairs shows that his rather conservative suggestions for American colonies in 1899 transformed into much more radical and transformative calls for change in the early 1930s, notably for Cuba, a client state of the United States. Convinced of the latter’s moral obligation to disseminate progressive values to the world, he thought that the ‘results of training and education’ would soon allow non-Western nations to attain ‘economic equality’ with Europe and America.Footnote 19 Greater fiscal cooperation and eventual convergence would ensue.
Seligman, progressivism, and public finance
Edwin Seligman was born in New York City in 1861 to a wealthy family of German-Jewish bankers. His father, Joseph Seligman, had immigrated to the United States from Bavaria in 1837 and rapidly grew to be a prominent financier. The Seligman family soon became highly involved in New York’s Jewish community and the city’s civic life. Together with his son, Joseph also became closely linked to Felix Adler’s Ethical Culture movement and more generally to a certain form of humanistic Judaism. Seligman and his siblings were educated at home by the American author Horatio Alger Jr and, thanks to frequent travels abroad, the young Edwin rapidly became proficient in German, French, Italian, and Russian.Footnote 20 This upbringing placed him in a very distinct community of American Jews of German origin who ‘maintained, to some degree, a set of loyalties to the lands, regions, and towns from which they or their parents had hailed’.Footnote 21
Seligman enrolled at Columbia College in 1875 and left for France and Germany after receiving his bachelor’s degree. As Daniel Rodgers has shown, study trips to Europe, and especially Germany, were a common feature of American graduate education at the time.Footnote 22 In Heidelberg and Berlin, Seligman studied under the guidance of Karl Knies, Gustav Schmoller, and Adolph Wagner and continued to correspond with them long after his return to the United States. These professors were the leading members of the German Historical School, whose founders spurned the deductive and ahistorical logic of classical economics. By stating the importance of social conditions and historical contingency, Historical School economists largely rebuffed the central tenets of laissez-faire economics and asserted the central role of the state.
Seligman viewed the economy as a set of interrelations between deeply socialized individuals, in which the state ought to play a crucial and active role. He thought that, ‘in civilized society, the state is as necessary to the individual as the air he breathes; unless he reverts to stateless savagery and anarchy he cannot live beyond its confines’.Footnote 23 The modern individual had thus grown increasingly inseparable from a wider group that endowed him or her with new and pressing obligations to his or her fellow citizens. Seligman’s German education reinforced this belief in the centrality of the state but also its crucial role in instigating social change. In his discussion of the links between the German Historical School and American Progressivism, Holger Nehring explains that, ‘rather than seeing the economy as an organic whole which developed in and of itself’, members of these two movements ‘regarded it as an entity which could be influenced’, and it is precisely this ethic of intervention and public expertise that young American students brought back to the United States.Footnote 24
This ethic soon coalesced into a more concrete historical moment that scholars have called the Progressive Era.Footnote 25 Progressives attempted to respond to the challenges posed by the ‘capitalist economy that they both embraced and tried to reform’ by devising new solutions to the major economic and social upheavals wrought by industrial development.Footnote 26 These solutions sought to improve individual lives through heightened state intervention but, more concretely, through a set of noteworthy innovations such as protective labour legislation, antitrust regulation, universal suffrage, and a progressive income tax.Footnote 27 Together with his fellow prominent public finance economists, Richard T. Ely and Henry Carter Adams, Edwin Seligman actively advocated the graduated taxation of incomes, profits, and inherited wealth transfers.Footnote 28 Indeed, in the last decade of the nineteenth century, an important intellectual revolution took place in the realm of public finance in America and in Europe. This change was conceptualized in a crucial distinction between the ‘benefit theory’ and the ‘ability to pay theory’.
The ‘benefit theory’ of taxation is based upon a reciprocal or transactional vision of the relation between the state and the citizen. This theory posits that citizens pay taxes in order to ensure the protection of their goods or the provision of services. The ‘ability to pay theory’, in contrast, pays much greater heed to economic inequality among taxpayers. It thus emphasizes the notion of ‘equal sacrifice’ by recognizing that the marginal utility of money decreases as income increases.Footnote 29 The system of progressive taxation that Seligman and other progressive public finance economists sought to put in place was meant to ensure real tax justice by raising the tax rate in close concordance with the tax base. The main justification for this new method of taxation was that it would allow for a fairer allocation of tax burdens but also that it was the modern endpoint of a long fiscal history. Seligman thought that the history of finance showed ‘the evolution of the principle of faculty or ability to pay – the principal that each individual should be held to help the state in proportion to his ability to help himself’.Footnote 30
This vision of taxation was not widely shared, and opponents of progressive taxation dreaded its ‘confiscatory’ nature. They began to organize against the reform in the early 1890s and that is also when Seligman embarked on a long and arduous defence of tax progressivity which spawned debate inside and outside the United States. As Marion Fourcade explains, from the 1890s onwards, ‘the identity of American economics … remained firmly located within universities, which alone could endow economists with essential skills, credentials and legitimacy’, and Seligman’s intense work of public advocacy was indeed exerted from the ivory tower of his Columbia University chair.Footnote 31 Together with his colleague Richard Mayo-Smith, Seligman built the reputation of the Department of Political Economy and Social Science and remained at Columbia until his retirement in 1931.Footnote 32
Seligman and the global dissemination of ideas about taxation
Through his university connections, Seligman’s opinions on taxation were made palatable to a large audience and soon became highly valued by academics, politicians, and lawyers outside the United States. The publication of The shifting and incidence of taxation in 1892, of Progressive taxation in theory and practice in 1894, and of his Essays in taxation in 1895 firmly established Seligman’s authority in the field. Faithful to the historical and comparative approach learned in Germany, he actively sought to give to his work a distinctive international and world-historical perspective. According to him,
in some respects the most significant fact of the recent development of economic thought is its growing international character. Not only does the modern economist find it necessary to draw his facts from a wider field than that of his own country; but if he desires to keep abreast of the advances in theory he also finds it incumbent on him to read many languages and note the movements in widely distant countries. In no domain is this more true than in the science of finance.Footnote 33
The dense and numerous bonds that Seligman was able to create with his foreign correspondents helped to bring about a new transnational sphere of expertise. Knowledge about taxation, democracy, and redistribution began to be circulated on an unprecedented scale.
The significance of Seligman’s German and French connections and their influence on the making of the American income tax has already been amply treated in recent historical scholarship.Footnote 34 However, further research into his uncatalogued correspondence reveals the diversity of his colleagues. For instance, in 1895, Bela Foldes, a professor of public finance at the University of Budapest, thanked him ‘for his most valuable volume on taxation’ and later published a much cited volume, classically entitled Finanzwissenschaft, containing numerous references to Seligman’s work.Footnote 35 One year later, the Italian economist Ugo Rabbeno began his review of Seligman’s Essays in taxation in the Riforma Sociale by stating that ‘Professor Seligman’ no longer needed to be presented to the readers, given his great reputation.Footnote 36 Giovanni Fasolis, author of a study on double taxation in 1914, wrote to introduce his work to Seligman and addressed him as his ‘dear magister’.Footnote 37 Seligman himself greatly admired the Italian scienza delle finanze and thought that the Italians, together with the Dutch, were responsible for the ‘best works on certain lines of public finance’.Footnote 38 His friendships with Vilfredo Pareto and Maffeo Pantaleoni, the author of a book on tax incidence in 1882 and later recognized as one of the founders of the Italian School of Economics and Finance, lasted a lifetime.Footnote 39
Seligman’s global networks
By the time he had reached the age of thirty-seven, Seligman’s work on taxation was already well recognized as applicable not only in the Western environment but beyond.Footnote 40 In 1899, his reputation and expertise even led the American Economic Association to appoint him, together with Jeremiah W. Jenks, Charles S. Hamlin, and Albert Shaw, to write essays on colonial finance. While the United States was still fighting a war of colonial conquest in the Philippines, this group of economists and lawyers were advising the fledgling American colonial state on how to raise revenue efficiently.Footnote 41 In his essay on the ‘French colonial fiscal system’, Seligman diligently enumerated revenue sources in all the colonies administered by France in the late nineteenth century and ended with a number of observations and recommendations. In accordance with colonial fiscal practice at the time, he suggested that metropoles should be allowed to become fiscally autonomous and that pre-colonial systems ought not to be jettisoned immediately.Footnote 42 In contrast to later suggestions, the ‘Report of the committee on colonies’ also recommended retaining the practice of tax farming and the levying of consumption taxes on commodities.Footnote 43
Dubbed an ‘imperialist’ by the historian Gary Marotta, Seligman indeed wholeheartedly embraced the ‘civilizing role’ of the United States and sought to contribute to it through the production of scientific knowledge. His indignant response to a radical anti-imperialist speech by John R. Commons at the 1899 annual meeting of the American Economic Association is a case in point.Footnote 44 In an impassioned address, Commons had accused economists of attending to the economic interests of the imperialist ruling class while allowing them to ‘govern 10 000 000 Asiatics without their consent and without giving them a share in our government’.Footnote 45 Seligman’s own brother Isaac, a banker whose firm had interests in Latin America, had helped fund the report on colonial finance.Footnote 46 Yet Seligman responded that ‘the economist’ should ‘repudiate with scorn the imputation that he is endeavouring to subserve the special interests of any individual or of any social class’.Footnote 47 Because of his unflinching belief in the superiority of liberal capitalism and the objectivity of the economic expert, Seligman paid little attention to the violent implications of American imperialism.
Seligman, firmly part of the New York elite, was thus no radical. His brother-in-law was George Louis Beer, a prominent historian of British colonial expansion and professor at Columbia, who later briefly became the director of the Mandates Section of the League of Nations secretariat. Seligman and Beer often hosted receptions: in December 1900, for instance, a dinner was given in honour of the Chinese Minister Wu Ting Fang, bringing together eminent financiers and academics.Footnote 48 Seligman was also a privileged interlocutor of high-profile personalities visiting the United States from both China and Japan. Among them was Count Kaneko Kentaro, a senior Japanese official who was sent to the United States in 1904 in order to gain support from President Roosevelt in the Russo-Japanese War.
In 1905, Seligman was set to depart for a year-long trip to the ‘Orient’ in order to ‘study the economic side of colonial administration in Egypt, India, and the other British possessions and the Colonies of Japan’.Footnote 49 Friedrich Hirth, then Professor of Chinese at Columbia and a member of the Chinese Maritime Customs service from 1870 to 1897, wrote numerous introduction letters for Seligman to colleagues and friends in China and Hong Kong. The American Embassy in London also notified Seligman that Lord Lansdowne, the British Secretary of State for Foreign Affairs, had been personally briefed about Seligman’s ‘proposed visit to East’.Footnote 50 Seligman, his wife, and his mother-in-law were able to go as far as Gibraltar in the summer of 1905, but in the autumn of the same year the couple abruptly lost one their two daughters. The trip was cancelled and no further attempt was made to travel to Asia. Seligman’s understanding of colonial government and finance would from then on mainly come from his own readings and his relationships with non-Western students.
These long-distance interactions were facilitated by institutional links as well as by Seligman’s intense editorial activities. As Delalande rightly puts it, Seligman was first and foremost a ‘man of reviews’.Footnote 51 As the chief editor of the Political Science Quarterly, he was very active in requesting papers and interventions for the journal. He also kept close ties with editors at non-American journals such as the Weltwirtschaftliches Archiv, the first journal with an exclusive focus on international economics. Such journals were usually eager either to review Seligman’s work or to publish original articles he had authored.Footnote 52 Seligman was later elected foreign correspondent or member of many prestigious academies and associations, such as the Institut de France, the Italian Academia del Lincei, the Russian Academy of Science, the Cuban Academy of Political and Social Science, the British Royal Economic Academy, the French Académie des sciences morales et politiques, the Chinese Political Science Society, and the China Institute in New York.Footnote 53
By the mid 1910s, Seligman’s work had become ‘so much in fashion’ internationally that it seems that no significant fiscal reform could be envisaged without mentioning his work.Footnote 54 In Japan, although the works of Richard T. Ely had apparently arrived earlier, Seligman’s influence was decisive in diffusing a belief in the merits of ‘modern’ fiscal practices. Japanese scholars and politicians began to use a new language of taxation, gradually jettisoning the old reliance on land taxes and extolling the virtues of personal and direct taxation based on the principle of the ability to pay.Footnote 55 Among his students, Seligman counted Masao Kambe, a professor of public finance at Kyoto Imperial University, Yetaro Kinosita, the author of a PhD thesis on Japan’s international trade, and Zensaku Sano, who later became president of the Tokyo Commercial School, now known as Hitotsubashi University.Footnote 56 Interestingly, Carl Shoup, selected as leader of the seven-member economic team sent to Japan in 1949 to overhaul the tax system, would benefit from his professor’s personal contacts. Indeed, before arriving in Japan, Shoup was already in touch with Matsushita Shutaro, the author of a notable essay on The economic effects of public debts, which was written under the guidance of Seligman and made extensive use of the latter’s work on war finance.Footnote 57
Among his Asian students, Seligman also counted a number of Chinese nationals and British Indians to whom he provided extensive pastoral care in addition to intellectual training. In 1909, for instance, he readily agreed to write a letter in defence of S. L. Joshi, a former student who later became a professor of comparative religion at Dartmouth College but whose involvement in support societies directed at Indian students in the United States in the early 1900s had been deemed ‘seditious’ by Scotland Yard. Seligman confidently assured recipients of his letter that, having often discussed political matters with Joshi, he thought that his student had always been a ‘very sensible fellow, thoroughly aware of the great civilizing work which Great Britain is accomplishing in India, and in no way tainted with anything which by the greatest stretch of imagination could be tortured into anything resembling “seditious utterances”’.Footnote 58 Similarly, in May 1914, Seligman wrote to J. M. Keynes to intercede with the India Office in favour of another of his students, Prabhakar Shilotri.Footnote 59
Seligman’s capacity to provide pastoral support became even more pronounced in the interwar period. For example, the Indian nationalist Benoy Kumar Sarkar’s lectureship at Columbia was greatly facilitated by Seligman.Footnote 60 Even after his departure from New York and while travelling in France, Germany, Italy and Switzerland, the itinerant Sarkar continued to request letters of introduction and advice from his American mentor.Footnote 61 B. R. Ambedkar, chairman of the committee appointed to draft a constitution for independent India, and Lajpat Rai, an Indian Punjabi author also known as one of the main leaders of the Indian independence movement, were among Seligman’s advisees. Seligman referred to Ambedkar as one his ‘favorite pupils’, while Lajpat Rai was considered to have been one of the Seligmans’ ‘closest house friends’ during his sojourn in America.Footnote 62
‘Fiscal reconstruction’ in colonial India
Seligman’s Indian students wrote their most interesting pieces during and after the First World War. The necessities of post-war ‘fiscal reconstruction’ compelled them to think about the incidence of taxation, the inequities of the land and salt taxes, the superiority of direct taxes over indirect taxes, and fiscal interrelations between federal, provincial, and local government levels. The first notable study was Lajpat Rai’s 1917 England’s debt to India: a historical narrative of Britain’s fiscal policy in India. Its focus on the economic rather than the political effects of British rule in India made it a companion to Young India, which had been published a year earlier.Footnote 63 The book owed much to Dadabhai Naoroji’s Poverty of India and the ‘drain theory’ popular among Indian economists at the time.Footnote 64 The first chapters were indeed concerned with the British economic exploitation of India but the last seven exposed the inadequacies of the land revenue system, the burden of taxation, and what Rai thought was a rather poor management of expenditures. The land tax and the salt tax were his main target, as he called for their thorough revision in order to alleviate wealth inequalities. ‘It is futile’, he wrote, ‘for Indians or English to talk of India’s economic development until she is free to lay down her own fiscal policy in her own interests.’Footnote 65
In his 1920 dissertation about income tax, Shankar Madhav Pagar also thought that this modern form of taxation would receive ‘proper consideration’ only when ‘the consummation of a democratic empire is achieved’.Footnote 66 This link between modern taxation and democracy found a very clear expression in B. R. Ambedkar’s 1925 Columbia dissertation on ‘Provincial finance in British India’. In this work, Ambedkar not only studied the evolution of financial and political decentralization in India. He also condemned the remaining fiscal injustices in India and harshly criticized the 1919 Government Act. The ‘masses’ were still taxed too much relative to the exempted ‘classes’, and political structures had to be changed promptly in order to ensure fiscal justice.Footnote 67 The land tax and the salt tax were also the object of Ambedkar’s ire but his indictment of taxation under colonial rule was one component of a more ambitious critique of the Government of India. Its incapacity to ‘venture to tax the tea planters’ was just as bad as its incapacity to ‘abolish the caste system, prescribe monogamy, alter the laws of succession’ or ‘legalize intermarriage’. Indeed, because ‘progress involved interference with the existing code of social life’ and because ‘interference is likely to cause resistance’, proper tax reform was not likely to happen until the government ‘is of the people’.Footnote 68 Ambedkar was then already on the path to becoming one of India’s most radical thinkers and a leader of the Dalit movement, calling for the ‘annihilation’ of the caste system and the advent of an equal society.Footnote 69
Another of Seligman’s correspondents, Gyan Chand, also noted that ‘the new impulses of national life’ were ‘trying to express themselves’ through ‘the financial system’ of India and that modern taxation was to serve as an emancipatory tool.Footnote 70 In fact, ‘fiscal questions’ had to be asked ‘from the point of view of the future’.Footnote 71 Citing ‘the words of Professor Seligman’, Chand wanted to convince fellow Indians that they should no longer regard taxation as a ‘burden to be exacted from the unwilling victim, but as a contribution cheerfully rendered by those who are alive to the sense of collective responsibility implicit in the very conception of democracy’.Footnote 72 The system did not necessarily have to be changed completely; what mattered was a radical ‘change in the purposes or purpose which the system is intended to fulfill’.Footnote 73 Most importantly, ‘national dividend’ was to be directed from ‘individual to collective channels’ and this sense of collective good was really the prerequisite for responsible fiscal citizenship.Footnote 74
J. C. Kumarappa, who later became Gandhi’s main economic advisor, wrote his 1930 book on Public finance and our poverty after Seligman had advised him to do so.Footnote 75 Not unlike Ambedkar, Kumarappa was principally concerned with the unequal incidence of indirect taxation, and linked poverty in India to the government’s fiscal policy. Borrowing from Seligman’s advocacy of the ‘ability to pay’ principle, he thought that ‘the incidence of taxation should be carefully considered, and [that] the burden should be according to faculty’. He asked for ‘those on the borderland of subsistence’ to be ‘relieved at the cost of those who are blessed with larger shares of worldly goods’.Footnote 76 He also celebrated the income tax as the only truly modern alternative: ‘In all taxation systems, income tax is gaining ground all over the world as the most satisfactory amongst taxes.’Footnote 77 Elites were still escaping just and progressive taxation, such as those ‘large landlords who merely pay the land revenue assessment, which works out as a proportional tax’.Footnote 78 Published in 1930, the year of the Salt March in India, Kumarappa’s book shared Ambedkar’s view on land and salt taxes. Kumarappa thought that the latter was nothing but ‘an unqualified evil bringing ruin to the nation, not only fiscally but also socially’.Footnote 79
In fact, quite a significant number of public finance works published in India during the interwar period made either direct or indirect references to Seligman’s work. In his 1931 volume on The taxation of income in India, the economist V. K. R. V. Rao, a prominent Indian economist and founder of the Delhi School of Economics in 1949, respectfully referred to Seligman in his discussion of the taxation of income in India by celebrating ‘Professor Seligman’ for providing ‘the first and probably the best exposition and popularization of the principles underlying the income-tax’.Footnote 80 Pramathanath Banerjea, the author of A history of Indian taxation in 1930, cited Seligman alongside British economists such as Arthur Pigou.Footnote 81 Seligman also kept close ties with Findlay Shirras, a British professor in Bombay who was a specialist in colonial Indian public finance. Shirras regularly kept Seligman abreast of fiscal developments in India, for example by sending him the report of the Tax Commission of India or simply by informing him of political debates.Footnote 82
British liberal imperialists such as the economist Vera Anstey understood the potential dangers of such an approach and deemed Seligman-inspired tax reform plans utterly ‘unrealistic’ and overly ‘ambitious’.Footnote 83 Yet the idea that modern taxes should be more closely adjusted to the personal capacity of the taxpayer and that regressive indirect taxes should be increasingly shunned was powerfully etched in the minds of Seligman’s students. An intriguing case is Mustapha Khan Fateh, a Persian student who wrote his PhD dissertation on ‘The economic position of Persia’ under the supervision of Seligman, as well as short articles on taxation in Persia.Footnote 84 After having left New York in early 1919, Fateh arrived in France and in July wrote Seligman a letter complaining about the cost of living in post-war Paris but also about the general backwardness of the tax system. He described a generally depressed economic life where ‘there are as many taxes on consumption as there are articles for consumption’ and where ‘everything is taxed in a uniform way’. ‘Their income tax’ he wrote, ‘though started recently, has not worked well yet, and many have evaded it … The burden is on the consumers … The protectionists are very strong here, and one wonders as if one is not living in a nineteenth century France rather than at present [sic]’.Footnote 85
A Chinese road to fiscal freedom
Seligman’s Chinese students shared many of the concerns and aspirations of their Persian and Indian counterparts in regard to their respective countries, namely chronic foreign indebtedness and a yearning for greater fiscal autonomy. In the case of China, however, the adaptability of Chinese fiscal principles to modern Western standards was of utmost importance.Footnote 86 As early as 1911, Seligman had a student who wrote a dissertation on the ‘Economics principles of Confucius and his school’. In this work, Chen Huanchang was eager to notice that Confucius’ writings on taxation were remarkably similar to Seligman’s and that the norms of modern public finance, such as the principle of the ability to pay or the link between representation and taxation, could also be found in early Chinese writings.Footnote 87 Furthermore, he remarked that Seligman’s teleological reading of fiscal history in his Essays on taxation found clear echoes in ancient Chinese fiscal theory.Footnote 88
Historians have written about John Dewey and his work with Chinese scholars at Columbia.Footnote 89 However, there were also ‘many able students of fiscal affairs among the young Chinese that throng the halls of Columbia’ working under Seligman’s guidance.Footnote 90 In 1914, Chen Zhao Kun’s overview of the system of taxation in the Ching dynasty was published in Studies in History, Economics, and Public Law, a series edited by Columbia University’s Faculty of Political Science. Many more would follow. The same year, Ma Yinchu, best known as the father of Chinese family planning, published his doctoral dissertation on the finances of the city of New York, claiming that ‘the finances of the Empire City of New York and those of the Empire Republic of China have many points of resemblance’.Footnote 91 Ma was primarily interested in New York’s capacity to pass from ‘financial chaos into a financial system’.Footnote 92 The study was divided into four parts, covering scientific budget-making, the system of taxation, administration of the city debt, and ‘the control of revenues and expenditures under the new system of accounting’.Footnote 93
A year later, Xu Xi wrote on ‘railway problems’ in China, focusing specifically on the question of railway bonds and China’s foreign debt.Footnote 94 In 1916, Jin Zhu wrote more broadly on the ‘tariff problem in China’ and compared China to Japan in earlier times, advocating greater control of customs and tariffs.Footnote 95 Yet another Chinese student of Seligman, Huang Hianliang, published his dissertation, ‘The land tax in China’, in 1918, which sought to apply modern land tax practices to the Chinese context. According to him, a proper land tax reform would require the creation of a bureau of land measurement, the compilation of a tax roll, and the creation of a ‘separate machinery of administration’.Footnote 96 In 1919, it was Huang Fenghua’s turn to publish his Columbia dissertation, on public debts in China, in which he lamented the challenges wrought by China’s ‘foreign indebtedness’. What, he asked, were ‘the prerequisites in order to borrow advantageously?’ They entailed a firmer control over the country’s finance, tax reform, and ‘honest and official officialdom’.Footnote 97 In the same year, Shi Zongshu sought to offer a vision of China’s future economic ‘potentialities’ after centuries of fiscal subjection and undue exemptions granted to foreigners.Footnote 98 In 1922, Seligman himself authored an article entitled ‘Some economic problems of China’ in the Chinese Students’ Monthly, urging Chinese students to reform ‘economic life’ through a thorough overhaul of the current public finance system.Footnote 99
Li Quanshi’s 1922 dissertation specifically dealt with the coordination of central and local finance, since China was still entangled in political turmoil.Footnote 100 Praising Seligman’s ‘constant guidance, encouragement, inspiration, and sound teaching’, Li nevertheless saw a different role for the Chinese state.Footnote 101 ‘Influenced by the wave of democracy throughout the whole world’, China would have to opt for ‘local self-government’ in order to break with a past of overly centralized statism.Footnote 102 As he remarked, ‘with constitutionalism came the issue of local self-government, and with local self-government came the question of the separation of local finance from the national finances’.Footnote 103 Citing Harold Laski and Franz Oppenheimer on the state, Li Quanshi stressed that local self-government was the only way to restore ‘popular control of the purse’.Footnote 104 The idea was eventually for China to become ‘one of the most prosperous, the most progressive, and the most liberal and democratic powers in the world’.Footnote 105
Local self-government was indeed the ‘quintessence of liberalism’ and in line with what the ‘leading countries’ were doing.Footnote 106 Furthermore, China could learn from America and Canada because of their size: in such large countries, there could be no ‘efficient working of a centralized and bureaucratic system of administration’.Footnote 107 Citing Seligman, Li suggested that indirect taxes should accrue to the national budget, while direct taxes should feed local budgets.Footnote 108 In America and Europe, income and inheritance taxes were increasingly centralized but China had to take a slightly different route. The main difference between China and the rest of the world was that there was no Chinese trend towards ‘the extension of governmental functions’. People and their ‘initiative, energy, and intelligence’ had to be given priority over ‘benevolent despotism’ from above. And, fundamentally, only sound local finance could enable this.Footnote 109
In 1924, the focus reverted to external tariffs, as a student of Seligman named Pan Xulun published a dissertation on the trade relationship of the US with China. The book was enthusiastically prefaced by Seligman and Jeremiah Jenks, an old colleague of Seligman and director of the ‘Division of Oriental Commerce and Politics’ at New York University. A prosperous and advanced civilization such as China would eventually catch up with the United States, Seligman wrote. However, the two countries would first have to ‘work out a cooperation that would not be to the detriment of the sovereignty of China’.Footnote 110 Ensuring the ‘safety’ of foreign capital would no longer mean endless fiscal subjection and humiliation. The intellectual and scholarly collaboration signalled in the book’s very origins should be replicated at a much larger scale in order to ensure ‘independent, fair cooperation for mutual interests’.Footnote 111
Among all these public finance dissertations, one study received particular praise from Seligman. Indeed, in his preface to Shou Jingwei’s sophisticated critique of China’s fiscal situation, Seligman expressed his admiration for Shou’s ‘intimate acquaintance with all that is best in the modern fiscal science of Europe’ but also his capacity to shed light on little-known Chinese fiscal theories and practice.Footnote 112 China’s taxation powers had to be liberated and become more democratic. A new ‘system of fiscal philosophy or ideology’ thus had to be created through the harmonization of ‘the fiscal ethics, the fiscal psychology and the fiscal sociology of the Chinese people, taking into account Chinese philosophy, history and present-day conditions’.Footnote 113 According to Shou, China was ready for fiscal change. Old ‘harmful’ forms of taxation such as the salt tax or the likin (an internal customs duty) should be abolished in favour of ‘the imposition of direct taxation in the form of an income tax or an inheritance tax’.Footnote 114 In his chapter on the ‘principles of fiscal reconstruction’, Shou specifically referred to Seligman’s contention that ‘in democratic communities, where legislation is influenced by the mass of the people, we commonly discern a tendency to oppose indirect taxes’.Footnote 115
Not unlike Chand in India, Shou’s main aim was to explain the importance of political participation in fiscal issues. Both were intimately linked as ‘China [was] ready for a modern democratic system of finance, without which no democratic government is possible.’Footnote 116 His fiscal reading of political history allowed him to explain that the republican regime was going in the right direction despite the current fiscal chaos.Footnote 117 In order to achieve ‘fiscal autonomy instead of fiscal restriction’, ‘civil control as opposed to military control over the fiscal machinery’, ‘finance by taxation instead of finance by loans’, and ‘direct’ rather than ‘indirect taxation’, a number of ethical, economic, sociological, regional, political, administrative, and even psychological reforms had to be achieved.Footnote 118 These entailed recognizing the ‘family’ as a fiscal unit, giving more power to local authorities, providing the means to avoid double taxation within China, installing an ‘honest’ and ‘efficient’ fiscal administration, and changing the ‘fiscal psychology’ of the Chinese. Taxation had to be understood as more than a mere tribute; it was a tool that the people could use to govern themselves. Finally, if tax policies were to be willingly accepted by the people, illicit taxation had to be fought very energetically.Footnote 119
Finance by the people thus had to be firmly based on ‘scientific accounting’. Indeed, the budget was ‘not mere arithmetic’ but ‘an expression of the will of the government as well as that of the people’, as it showed the ‘working capacity of the body politic’.Footnote 120 This ‘effective control of the budget with enlightened opinion’ would lead to greater welfare and ‘social amelioration’. That was, according to Shou via Seligman, the ultimate aim of a modern system of taxation.Footnote 121 Direct taxes were to be levied on the basis of income and would eventually lead to the ‘gradual reduction and eventual abolition of consumption taxes on the necessities of life’. In fact, further economic development was believed to ‘permit the introduction of better forms of taxation’.Footnote 122 Duan Maolan and Mai Jianzeng thought that they could perhaps find it in the economic thought of Simonde de Sismondi or the ‘fiscal policies of Albert Gallatin’, but many found it already germinating in China.Footnote 123
A new fiscal order for the American empire
While Seligman’s engagement with Western imperialism in China or India was only indirect, he dealt much more straightforwardly with places where American economic and political influence was extensive. Cuba proved to be an ideal testing ground for his fiscal ideas. In 1931, Seligman and his assistant Carl S. Shoup began working on their report on the Cuban tax system with the aim of making it more equitable and efficient through ‘modernization’ according to ‘scientific’ principles. Yet, while advocating a more ‘democratic’ tax system, Seligman refrained from making comments on Gerardo Machado’s authoritarian regime. The two economists restricted themselves to the examination of current deficiencies and simply sought to propose a ‘firm foundation’ upon which a new tax system could be built.Footnote 124 Called ‘El Plan Seligman’ by the Cubans, the 426-page-long detailed report carried two proposals. The boldest was ‘Proposal 1’, which anticipated that Machado’s Public Works loan could be reworked and recommended the abolition of the lottery tax, the sales tax, and most stamp taxes. A centralized tax on real estate and a ‘presumptive personal income tax’ would also be put in place.Footnote 125 ‘Plan 2’ remained much more in line with the demands of Wall Street and the necessities of debt servicing.Footnote 126
The report showed remarkable awareness of the practical difficulties of tax reform in a non-Western country. The authors knew that the Cuban system was still informed by the Spanish colonial system and that direct taxes could only be introduced slowly. Import duties were to be retained and would still ‘form the largest single source of revenue’.Footnote 127 After careful calculations, they recommended that administrative costs be drastically reduced and collection methods modernized. The proliferation of customs houses throughout the country was also to be curtailed in order for a new fiscal order to emerge. The latter would, of course, not appear fully formed. As a reviewer justly remarked, ‘the proposal is made for a tropical country with a native population hitherto taxed almost entirely by indirect taxes collected mainly from business firms’.Footnote 128 The revenue administration was to be thoroughly reformed: ‘privately-paid employees’ had to be abolished and the revenue administration thoroughly depoliticized.Footnote 129 Although the plan was certainly ‘a counsel of perfection’, some variant of the programme might still ‘be of benefit to every civilised community’.Footnote 130
In US overseas territories and nominally independent countries under US financial control, the first task was to dismantle the particularly unsound Spanish colonial system. Americans had started by abolishing the consumo taxes when they arrived in Cuba, the Philippines, and Puerto Rico, but more could be done.Footnote 131 Seligman’s students from these countries who were seeking to understand power structures in the world economy were thus urged to inquire into the nature of Spanish economic imperialism. Heeding Seligman’s suggestion, Andrès V. Castillo, who would later become Governor General of the Philippines Central Bank, wrote a much remarked upon PhD thesis on Spanish mercantilism in 1930.Footnote 132 Drawing clear links between Spanish economic imperialism in the seventeenth and eighteenth centuries and ‘the economic policies of the empires of today’, he made explicit references to the policies of the British in India, the Dutch in the East Indies, and the Americans in the Philippines.
The 1930s were an era of mounting imperial protectionism and Castillo observed that ‘present day tariff discussions only improve upon the theories of the mercantilists but do not differ from them’.Footnote 133 This new form of mercantilism, which assigned colonies to the exclusive service of metropoles, condemned the non-Western world to economic inequality with the West, a feature of the late interwar world economy that Seligman also openly criticized. At the very moment when he would have been proofreading Castillo’s dissertation, he was declaring at the Academy of Political Science annual meeting that ‘the time is past when each country expects to raise itself upon the prostrate form of its neighbour, and to monopolize either the control of raw materials or the disposal of finished products’.Footnote 134
World peace, fiscal convergence, and the challenges of international fiscal cooperation
The vision of a new global fiscal order shared by Seligman and his students needs to be placed within the broader history of his internationalist pursuits during the interwar years. During this time, the international aspects of fiscal questions posed particularly important questions. Shou, for instance, saw a clear link between international peace, the end of war, and ‘the fiscal conditions of nations’. Indeed, he wrote that ‘We may call this the fiscal normality of a nation as well as the whole world.’ Peace could only be durably achieved if countries were fiscally equal and used similar fiscal systems.Footnote 135 Although non-Western scholars were not included in official discussions about fiscal cooperation in the 1920s, they read Seligman’s work on the subject and approvingly cited his affirmation that fiscal cooperation would bring about ‘an era of world peace, and of world progress’.Footnote 136 Fiscal cooperation would first be enacted through treaties, of course, but, in the long term, the convergence of tax systems seemed more crucial.
Seligman’s role in fostering research about the evolution of economic and fiscal practices in Europe and the non-Western world made him acutely conscious of the challenges that these fiscal innovations could pose at an international level. As early as 1895, Seligman presciently remarked that ‘Today not only does the same capitalist invest in different enterprises, not only is the producer often dependent for a part of his capital on sums that belong to others, but the old geographical unity has been dissolved, and there is no necessary connection between the residence of the capitalist and the place where his capital is employed.’ This had clear consequences for national taxation systems, which ‘may now be entirely inadequate because of the failure of government to take account of these new complications in property rights’.Footnote 137 Needless to say, this inadequacy only became more problematic when tax burdens began to soar dramatically in the aftermath of the war.
In 1924, Seligman published an article in which he attempted to calculate the comparative evolution of tax burdens in the twentieth century despite glaring practical difficulties, notably the variance in fiscal years. He noted that direct taxes on wealth had increased spectacularly and that ‘the burden had now become a crushing one’ thanks to a ‘scale of graduation never attained before’, an observation confirmed by recent research on the impact of the First World War on tax burdens.Footnote 138 Indeed, in 1919, the United States was applying a rate of 77% on top incomes while rates in Great Britain and France spiked to 60% or more. These rises were utterly unprecedented given that, before the war, rates had never attained more than 10%.Footnote 139 Rates differed across countries but so did ways of calculating income, profits, and wealth. The result was ‘fiscal chaos’ with ‘every year of increasing international life’.Footnote 140 Yet, powerful forces were at play, in the non-Western world as well, in order to ‘normalize’ tax systems.
Taxation naturally grew into an important concern of international economic governance, whose new locus became the League of Nations.Footnote 141 During the seventh meeting of the Finance Section of the Provisional Economic and Financial Committee of the League of Nations, which took place in Geneva on 30 May 1921, members began their reunion by discussing the question of double taxation – that is, the levying of tax by two or more jurisdictions on the same declared income. This had arisen as a particularly thorny issue at the turn of the century, as income and capital ownership became much more complex and differentiated. When the idea of appointing an impartial international commission of economists whose task would be to ‘collect salient facts relating to the question; point out the economic consequences of double taxation and perhaps, suggest action’ was brought to the table, the name of Seligman sprang up quite spontaneously.Footnote 142 Seligman was eventually nominated along with three other scholars, with whom he hammered out the general principles governing international competence in taxation and proposed concrete measures. Important principles were articulated in the final report, namely that taxes should be paid to the source government.
This idea was Seligman’s brainchild: according to him, in matters of taxation ‘economic allegiance’ weighed more heavily than ‘political allegiance’. Indeed, given the complexities of modern international economic life, he thought that fiscal obligation was better tied to the site of economic activity than citizenship. As he said during his public lectures on international fiscal cooperation: ‘While the foreigner still retains in many respects his importance from the political point of view, he has lost his importance from the economic standpoint. We are, today, either directly or indirectly citizens of a world economy.’Footnote 143 As a result, Seligman became a proponent of a more systematic exchange of information on taxation and even dared to wish for a greater convergence of tax systems. He was convinced that economic issues had to be resolved on an international level. In 1932, he called for the advent of a ‘positive Adam Smith’ who would point to the ‘real meaning’ of ‘The Wealth of Nations’ as a ‘unified concept’.Footnote 144 In the troubled years of the interwar period, Seligman thought that it was irresponsible to think only ‘in terms of national management’ and demanded the transcendence of local and national efforts.
This international outlook found a clear expression in his intense internationalist commitments during the interwar period. Although Kuehl and Dunn do not refer to Seligman, he was an eminent internationalist and served for some time as the vice-president of the Non-Partisan League of Nations Association.Footnote 145 In the early 1920s, he made various trips to Geneva, which seemed to have left a lasting mark on him.Footnote 146 When not in Switzerland, he received regular updates from Americans appointed to the League, and novices sent him requests for letters of introduction to the Geneva institutions. Beside tax issues, Seligman was also involved in questions of labour and maintained a correspondence with Albert Thomas, the head of the International Labour Organization from 1919 to 1932.Footnote 147 Although he only rarely paid attention to colonial fiscal systems in Africa, in 1924 he nevertheless urged William Rappard, then director of the Mandates’ section at the League, to pay attention to ‘plans for an investigation into social conditions into the Portuguese colonies in Africa’ proposed by the University of Wisconsin sociologist and professor Edward Ross.Footnote 148
Many of Seligman’s internationalist pursuits were not directly linked to economic matters: he also became actively involved in a number of eclectic initiatives in the United States, such as the American Cooperative Committee of the Pan-European Union, the League of Neighbours, and the Union of East and West, the latter two initiated by Charles Frederick Weller and Kedar Nath Das Gupta respectively.Footnote 149 Seligman received dinner invitations in honour of Annie Besant, read Indian spiritualist journals, and attended the ‘First India Conference’ in New York in 1928. In fact, throughout the 1920s he was approached by world peace activists of all sorts who were interested in his expertise on taxation or simply in his internationalist commitments. These commitments culminated in Seligman’s final grand oeuvre, the Encyclopaedia of the social sciences, which serves as an impressive testimony to his deep belief that social science could and should serve a public purpose.Footnote 150
Conclusion: reappraising Seligman’s role within the ‘early Columbia school of taxation and development’
The universalizing nature of the infrastructures of Western knowledge in a world shaped by Western imperialism gave a special salience to Seligman’s message on taxation and modernity. A considerable number of his non-Western students absorbed the message and began to reflect on their own fiscal futures. Some even went on to play crucial roles in their country’s fight for independence, and suggested radical change. According to Lajpat Rai, Ambedkar, and Kumarappa, the tax system crystallized many of the evils of colonialism, and public finance reform could provide immediate solutions to the political and economic subjection of India. In China, fiscal issues formed an integral part of nationalist politics. According to the Chinese scholars who worked with Seligman, greater fiscal accountability would be attained through popular consent. Democratic and fiscal reforms were in fact one and the same thing.
Seligman’s exchanges with a wide array of public finance specialists outside the United States allowed radical ideas to emerge, although he never published any important work on the question himself. Yet this still made him an active member of the so-called ‘Columbia school of taxation and development’, rather than just an early precursor, as Mehrotra contends.Footnote 151 Seligman occupied a central position in a large and multifaceted transnational sphere of expertise on progressive taxation, and his teleological reading of the history of taxation led to the formulation of a powerful doctrine linking taxation to development. He was able to convince his numerous interlocutors that income tax was ‘essentially a modern phenomenon’ and that modern taxation was intrinsically linked to democratic government.Footnote 152 The First World War only accelerated this broader reflection about the ‘the relations between the fiscal systems and the fundamental conditions of economic and social progress’.Footnote 153 The field of ‘taxation and development’ was set on the road to a bright future.Footnote 154
Madeline Woker is a PhD candidate in history at Columbia University, New York. Her dissertation, ‘Empire of inequality: the politics of taxation in the French empire, 1918–1939’, examines the fiscal architecture of the French colonial empire and the politics of colonial tax reform during the interwar period. More particularly, it traces how colonial tax policies related to growing anxiety about the political, social, and moral consequences of financial inequality in the French colonial empire.
