sharing in certain moods, which can develop their concentration and timid tenderness only with undisturbed glance from eye to eye. It may also be observed how extraordinarily rare and difficult it is for three people, even in the case of a visit to a museum or in the presence of a landscape, to come into a really united state of feeling, which, however, may occur with relative ease between two. A and B may emphasize the μ which they have in common and may feel it undisturbed, because the v which A does not share with B and the § which B does not share with A are felt immediately as an individual reserve, and as located in another story of one's being. If, however, a C joins the company, who shares the v with A and the § with B, the result is that even under this scheme, which is still favorable to the unity of the whole, the unification of feeling is in principle arrested. While two may actually be one party, or may stand quite beyond the party question, it is usual in precisely such finely tuned combinations for three to constitute at the same time three parties, and consequently to terminate the unified relation of each to every other. The sociological structure of the combination in twos is consequently distinguished by the fact that both phenomena are lacking: both the strengthened attachment through a third, or, it may be, through a social frame reaching out over both, and also the interruption and distraction of pure and immediate reciprocation. But in many cases this lack makes the relationship more intensive and strong, for in the feeling of being thrown exclusively upon each other, and of having no hope of recourse to cohesive forces which do not spring from immediate reciprocity, many otherwise undeveloped energies, which have their source in remoter psychical reservoirs, will become vital in the community, and many disturbances and threatenings into which there might be betrayal, under confidence in the third party and in a totality, are carefully avoided. This intimacy, to which the circumstances existing between two people incline them, furnishes the reason why precisely these constitute the chief seat of jealousy.

UNIVERSITY OF BERLIN.

PROFESSOR DR. Georg Simmel. [To be continued.]

THE FINANCIAL AND INDUSTRIAL OUTLOOK

OF ITALY.

It is an undeniable fact that foreigners in general and Englishspeaking peoples in particular are too often prone to overlook the real aspect and the true tendencies of modern Italian life. The highly cultured foreigner of superior taste finds it almost impossible to think of Italy in any other light than as the home of Dante, Michelangelo, Raphael, and the other great masters of art and literature who, by their everlasting work, have enlightened even the darkest pages of Italian history. On the other hand, to the average middle-class foreigner, who has probably only traveled through Italy on a Cook excursion ticket, the name of Italy is most likely to suggest the familiar figure of the bootblack or the organ-grinder seen in his own country, or the romantic silhouette of the brigante or the lazzarone, a creation of cheap literature. To both these types of foreigners a discussion of the financial and industrial outlook of Italy might seem, for various reasons, devoid of practical bearing. The truth is that they both have a false and incorrect notion of Italy. There is something else in Italy besides the art galleries, the ruins of Pompeii, and the prolific though somewhat primitive peasantry from which our emigration is chiefly derived. This something is "the real nation"—a growing community of active, enterprising, high-spirited citizens, who are fully alive to the exigencies of our time and are not lost in a Buddhistic contemplation of the past, however glorious. They are the true representatives of the country in its younger energies. In spite of obstacles arising from scantiness of natural resources and from social conditions created by centuries of misgovernment, oppression, and political disruption, they are striving to build up a modern Italy on the lines of industrial and commercial activity which have made other nations successful in the world's competition.

I.

The

The ups and downs of Italian finance, since the proclamation of the kingdom in 1861, are the outward token of the hard struggle fought by the nation for building up a great power out of the ruins of seven tiny states. Think of the magnitude of the task! When the kingdom was formed, in 1861, Italy was indeed in the most discouraging condition of immaturity. Europe regarded her with mistrust and suspicion, the foreigner still held a large area of her territory, while the Pope still ruled at Rome. There was no army, no navy, no civil service; there were, practically, no railroads and no schools. The rate of illiteracy was as high as 74 per cent. Industry and commerce were almost nil. Agriculture was in a primitive condition. public debt, resulting from the aggregated debt of the seven states, was more than 2,000,000,000 francs. It is no wonder that in 1862, that is, one year after the proclamation of the kingdom, the deficit between receipts and expenditures should have reached 446,000,000 francs. In 1866, the war with Austria adding to the tremendous difficulties of the situation, the deficit rose to 721,000,000. In 1871, after the occupation of Rome, and in spite of the most drastic measures, it was still 215,000,000. But, even at the darkest moments of this tempestuous period, Italian finance has been fundamentally honest, and Italy has made it a point to meet her financial engagements at all costs. She has never sunk to the condition of bankruptcy that has disgraced other countries.

After the occupation of Rome, in 1871, the financial situation of Italy began to show signs of positive improvement. It was not, however, until 1876 that Premier Minghetti was able to announce to the Parliament a surplus of 21,000,000. This most gratifying result was due not only to wise statesmanship, but also to the unflinching patriotism of the taxpayers, which alone made it possible to adopt the most vigorous measures in order to save the good name of the country from the blot of insolvency.

With the year 1876 ends what we might call the first period in the history of Italian finance. The deficit had been wiped

out, and the beginning of better times for the country at large seemed to be in sight.

But we were a young nation, with all the exuberance of life and the nonchalance of a reckless youth. Having got out of the woods safely, having succeeded in overcoming the tremendous difficulty of facing a disastrous deficit without going into bankruptcy, we began to think that we could do almost anything. We set out at once to build new railroads, to improve our civil service, to develop our educational system, to strengthen our army and navy, while, at the same time, we were trying to relieve the burden imposed upon the taxpayers by abolishing some of the heaviest taxes. The result of this policy could not fail to be disastrous. After various ominous oscillations, the surplus reached in 1876 disappeared in 1885, when we found ourselves again confronted by a deficit of 23,000,000 francs.

From 1885-86 to 1896-97 the deficit was constant. Owing to the general economic depression, to the increase in the military expenses, and to the colonial enterprises, it reached as high as 234,000,000 francs in 1888-89. But here again, by dint of sacrifices and through rigid economy, we found a way of re-establishing the financial equilibrium without becoming bankrupt. The men of the younger generation were as equal to the task as those great leaders who had faced the previous crisis. The most stringent measures were adopted in 1894, until we arrived at a surplus of 9,000,000 in 1897-98. Had it not been for the Abyssinian war, a surplus would have been reached a year earlier.

II.

This second financial crisis, which lasted for over ten years and greatly hampered our movements, had at least the merit of teaching us a valuable lesson. We learned through it that the corner-stone of a sound financial policy is that no expenditure be permitted, even for the purpose of creating instruments of production or of increasing the value of the government's property, as by the building of railroads, without a corresponding receipt due to a real source of revenue and not to debt. It is because we did not observe this golden rule of financial wisdom

that we lost the good results achieved in 1876, and were thrown into a condition of financial instability. Our motive was a high and noble one. We wanted to make up for lost time in the great race for progress: we were anxious to become in fact, not in word only, a great power, taking our part in the work of civilization; but we were hasty and impulsive, we lost sight of reality, and did not think of proportioning our efforts to our actual possibilities. Hence we built railroads and rebuilt cities, and threw the burden of the expense upon the labile structure of public debt.

Since the latest crisis, the watchword of our financial policy has been the most rigid enforcement of the rule: no more debts. We have come out of the struggle with a clearer head and a keener sense of reality.

The good results of such a change of methods were not slow in manifesting themselves. Since 1897 the surplus has not only been constant, but it has shown a steady increase. We had :

So far we have been considering only the actual receipts and expenditures of the kingdom, as the basis for our discussion of its financial situation. It is a fact that the kernel or soul, as it were, of every public budget lies in the relation that expenditure bears to receipt. But in order to get a comprehensive view of all the factors involved in the question, we have also to take into account the remarkable rise in the market quotation of government bonds-a striking feature of the present financial situation of Italy. This may be due in part to the great popularity enjoyed of late years by state bonds at large as a safer investment than industrial bonds. But the increase would have been neither so rapid nor so high, had it not been for the healthy condition of the budget shown above. The price of the Italian 5 per cent. consols on the Paris market had dropped to 72 in