ART. VI. THE DRINK QUESTION IN RUSSIA.

A SYSTEM of regulating the liquor business, which has extended over half of the Russian empire within the brief period of five years, ought to be of more than ordinary interest to Americans. In the United States especially it is public opinion that drives the various administrations to regulative measures affecting the traffic in question. In Russia, however, the attitude of the government is different. There the political authorities regard themselves as standing in a position of conscious responsibility for the results of any economic policy upon the social welfare of the people as a whole. With us, public opinion has to be developed to a reform-compelling heat before the government essays to inaugurate and execute radical changes. With Russia the government leads the way, long before the popular mind has been convinced of the failure of the old system, and longer still before current opinion has conceived of the situation clearly enough to propose a substitute that has any chance of success. Nothing more clearly illustrates the vast difference between the governmental genius of the Slav and the Saxon than a comparative study of the ways in which they both deal with this common social problem, the drink question.

Within a period of about eighty years-from 1816 to 1894 -Russia tried three distinct experiments in her effort to solve the liquor problem. Previous to this period the production and trade in spirituous liquors were, of course, subjects of legislation; but since then they have been contiuously under three successive methods of systematic control. These systems are historically known as the farming system, the excise system, and the monopoly system, the last of which is now in operation. The first of these experiments was inaugurated in 1819.*

trade.

It created a State monopoly of the wholesale spirit The success of these experiments in Russia has al"Report on the Government Spirit Monopoly in Russia," by Mr. Carnegie, Second Secretary of the British Embassy at St. Petersburg, Misc. Series, No. 465.

ways been judged by two standards, fiscal and social. One object of each successive attempt has been to get the largest possible revenue; the other object has been to reduce the amount of drunkenness. Judged by these standards, the system which prevailed after 1819 was only a partial success. It, indeed, reduced the consumption of liquors, and to that extent it commended itself. But certain other indirect economic consequences caused its downfall. The reduced consumption reacted so unfavorably upon the rural distilleries as to cause a considerable decline in the price of corn. This fact, aided by a series of years of general distress in agricultural districts, enabled the landed interests to have the law repealed in 1826. Undoubtedly, too, the government yielded without a struggle because its revenues must have been reduced with the decline of the volume of the traffic. This monopoly experiment ended, therefore, after a trial of seven years, not because it was socially unsuccessful, but because of the unfavorable economic conditions which surrounded it. The production of spirituous liquors was still an agricultural industry, not yet incorporated into the factory system.

Previous to this brief period of wholesale monopoly the much more ancient method of farming-out prevailed. It was to this system of farming-out that the government again returned in 1826. This second experiment continued down to the year 1862. On the whole, these thirty-six years are among the most instructive in the annals of Russian liquor legislation. The State, under this system, had the revenueyielding capacity of the trade well in view. It, therefore, sold at auction to the highest bidder the exclusive right of wholesale and retail traffic in spirituous liquors in each town, district, or province. So much for the method of distribution. The production of liquors was another branch of the system of control. Their manufacture was conducted under government authority; and the farming companies, which this system called into existence, obtained their supply from the governmentally supervised factories. The price to the companies was fixed by contract, and the quantity supplied was based on

the average amount sold in each district during a series of years. In practical operation the farming companies managed to defeat the fiscal aims of the government, and equally to demoralize the people who patronized the retailing establishments. The companies paid a very high price for the minimum supply for a given district; but this did not keep them from selling off this minimum below cost, because whatever supply was required by a district beyond this high-priced minimum, to meet local consumption, was sold to the companies at one half the contract rate, or even at the cost of manufacture by the government. This arrangement put the impetus of exploitation upon the distributing companies. Until they sold the legal minimum there was no profit whatever in the business, at the high price paid the government; but all sales beyond that would yield an extraordinary profit at current retail prices to the public. The difference between cost and selling price of all above the minimum sales amounted to a profit of five hundred or six hundred per cent.

A pecuniary interest of such magnitude pushed retail sales to the utmost limit. As compared with the system in force before 1819, it doubled the consumption of spirits in Russia proper. The farming companies came so completely into control of the situation as to enable them to ignore with impunity the statutes and regulations under which they were required to operate. Consequently they became a most thoroughly demoralizing force throughout the empire, wherever they had control of the liquor trade. The consuming community, as well as the fiscal coffers, suffered alike from these companies. They extended credit in all sorts of compromising forms to consumers beyond their capacity to pay, thus keeping many under their control by undermining the economic independence of the poorer portion of the peasantry. They also succeeded in retaining sixty per cent of the imperial revenues from taxes on liquors by licenses to dealers and others to whom they sold these privileges, by a system of subletting. Even the forty per cent which the State actually received of what the farming companies actually owed was paid in so

slowly as to make this item of the budget an increasingly uncertain source of revenue. There was not a single organic interest of the community that was not successfully fleeced by these legally armed shearers of the multitude. They cheated the State and exhausted the resources of the very portion of the population whose well-being it is the pride and duty of the State to protect from the wolves of society. For the farming-out system began by shearing and ended by slaughtering the poor. Self-condemned, it was abolished in 1862 to be succeeded by the third form of experiment-the excise system.

This system (1862-1894) was in some respects a radical departure from previous attempts at liquor regulation. It left the manufacture of spirits entirely free to private enterprise, but required publicity of operations, charged an annual franchise or factory tax based upon the capacity of the establishment, and collected an excise tax on the quantity and quality produced. A feature known as the "legal minimum" produced important industrial consequences, by driving the manufacture of spirits from being a farm-industry to that of a factory organized on the large scale of production. This regulation required each factory to produce a minimum, according to the capacity of its apparatus. On all of the residue output a lighter tax was charged, or none at all. The small factories on farms could often produce little if any beyond the legal minimum, and therefore paid the higher tax on almost their whole output, while the larger factories, by escaping taxation practically on much or all in excess of the legal minimum, ran up their profits enormously. They alone could utilize also the superior machinery which reduced the cost of production per unit of product to a point beyond which the small factories could not afford to produce at all. Between the upper millstone of reduced tax and the nether of reduced cost the small rural spirit factory tended to disappear. The following figures speak for themselves:

The social consequences of the excise system were no less noteworthy than the industrial effects which followed over the greater part of rural Russia. These consequences reveal themselves in connection with the commercial aspects of this experiment. Commercially the system was without central responsibility. The wholesale trade was left virtually without regulation. The licensing of retail trading was also inadequately controlled. Prices were lowered, greatly lowered, indeed; and with it came, not an improvement in quality, which was expected, but a conscienceless deterioration of the most damaging sort. Consequently drunkenness increased among the poorer classes. Says Mr. Carnegie:

The educated classes felt no inclination to imbibe in the usual Russian fashion more than the customary glass of vodka (corn brandy) before each meal, because it had become cheaper; but the peasant considered that fact an excellent reason for drinking four times as much as he had done previously. . . . This occasion was also forthcoming in the dramshop, the proprietor of which was usually willing to supply drink on credit, advance it on wages owing, or exchange it for agricultural produce, clothes, etc.

In 1885 it was found necessary to summarily abolish the dramshop (kabak), so demoralizing had its unregulated existence become among the less prosperous peasantry. The sale of spirits was thenceforth confined to restaurants and traktirs.* Local authorities were authorized to reduce the number of retail licenses and to raise their cost. The tax on spirits was likewise raised, with very little effect, however, upon the revenue receipts. Yet with all this it was generally held that the amount of drunkenness had not decreased. Though fairly successful as a fiscal plan, the excise system was evidently gradually impairing the tax-paying capacity of the peasantry and thus reducing the permanent strength of the State. In the long run, therefore, even the fiscal resources of the empire must be irreparably impaired, through the exhaustion of its rural population. As the revelations of Count Tolstoi's letters have shown, the awakening of the powers that be to this fact has by no means been premature.

*Establishments where food and spirits are sold for consumption on the premises.