I suppose that all struggle for law has been conscious, that very
little of it has been blind or merely instinctive. It is the fashion to
say, as if with superior knowledge of affairs and of human weakness,
that every age has been an age of transition, and that no age is more
full of change than another; yet in very few ages of the world can the
struggle for change have been so widespread, so deliberate, or upon so
great a scale as in this in which we are taking part.

The transition we are witnessing is no equable transition of growth and
normal alteration; no silent, unconscious unfolding of one age into
another, its natural heir and successor. Society is looking itself
over, in our day, from top to bottom; is making fresh and critical
analysis of its very elements; is questioning its oldest practises as
freely as its newest, scrutinizing every arrangement and motive of its
life; and it stands ready to attempt nothing less than a radical
reconstruction, which only frank and honest counsels and the forces of
generous cooperation can hold back from becoming a revolution. We are
in a temper to reconstruct economic society, as we were once in a
temper to reconstruct political society, and political society may
itself undergo a radical modification in the process. I doubt if any
age was ever more conscious of its task or more unanimously desirous of
radical and extended changes in its economic and political practise.

We stand in the presence of a revolution--not a bloody revolution,
America is not given to the spilling of blood--but a silent revolution
whereby America will insist upon recovering in practise those ideals
which she has always professed, upon securing a government devoted to
the general interest and not to special interests.

We are upon the eve of a great reconstruction. It calls for creative
statesmanship as no age has done since that great age in which we set
up the government under which we live, that government which was the
admiration of the world until it suffered wrongs to grow up under it
which have made many of our own compatriots question the freedom of our
institutions and preach revolution against them. I do not fear
revolution. I have unshaken faith in the power of America to keep its
self-possession. Revolution will come in peaceful guise, as it came
when we put aside the crude government of the Confederation, and
created the great Federal Union which governed individuals, not States,
and which has been these one hundred and thirty years our vehicle of
progress. Some radical changes we must make in our law and practise.
Some reconstructions we must push forward, which a new age and new
circumstances impose upon us. But we can do it all in calm and sober
fashion, like statesmen and patriots.

I do not speak of these things in apprehension, because all is open and
above-board. This is not a day in which great forces rally in secret.
The whole stupendous program must be publicly planned and canvassed.
Good temper, the wisdom that comes of sober counsel, the energy of
thoughtful and unselfish men, the habit of cooperation and of
compromise which has been bred in us by long years of free government
in which reason rather than passion has been made to prevail by the
sheer virtue of candid and universal debate, will enable us to win
through to still another great age without violence.




THE INCOME TAX IN AMERICA

THE UNITED STATES CONSTITUTION AMENDED A.D. 1913

JOSEPH A. HILL

During the year 1913 a most amazing event happened. The United States
amended its Constitution by peaceful means. Indeed the Constitution was
twice amended; for, having passed the sixteenth amendment in February,
permitting an income tax, the States, just to show what they could do
when aroused to it, passed the seventeenth amendment in May,
authorizing the direct election of United States senators by the
people.

Amending the United States Constitution is so difficult and cumbrous a
proceeding, that it had not previously been accomplished for over a
century, except by the throes of the terrible Civil War. The original
Constitution had twelve amendments added to it before it was fully
established in running order in 1804. The thirteenth, fourteenth, and
fifteenth amendments were added after 1865 to prohibit slavery. They
were forced upon the unwilling Southern States. From 1804 to 1913 no
amendment was put through by the regular process. Yet in that time
efforts to amend were made on over one hundred and forty occasions. Men
had grown discouraged at last; they said that amendment was impossible.
The cumbrous system which has thus so long blocked all change was that
Congress must by a two-thirds vote in each House agree to submit an
amendment to the States. These must then pass upon the new law, each in
its own legislature. If three-fourths of the legislatures approved, the
amendment was to be accepted. Few of the proposed changes ever won a
two-thirds vote in both Congressional Houses; and of those few not one
had ever appealed to the necessary overwhelming majority of State
legislatures. The Senatorial amendment passed Congress several years
ago, and had long been knocking rather hopelessly at legislative doors.
Then the Income Tax amendment appeared. Congress passed it almost
hurriedly in a spasm of progressiveness in 1909. Then came the great
sweep of progressive policies to victory in the elections of 1912; and
legislatures everywhere awoke to the universal insistence on the Income
Tax. All the States but six approved the amendment; and one of the last
acts of President Taft during his administration was to proclaim its
adoption. The popular amendment swept along in its train the Senatorial
change; and the latter, though still opposed by most of the old South,
was ratified by all the rest of the States except Rhode Island and
Utah. So it also became law.

Nothing illustrates better the "tyranny of the dead hand" in the United
States than the history of the income tax. The Constitution laid it
down that no head tax or other direct tax should be imposed except by
apportioning it among the several States on the basis of their
population. No more effective barrier to any system of direct taxation
could possibly have been devised. It would seem clear that the main
intention of this Constitutional provision was not merely to protect
the people of the smaller States, but to force the United States
Government to depend for its revenue upon indirect taxes. Such, at any
rate, has been its effect. Legal ingenuity, however, can get round
anything. The Supreme Court decided as long ago as 1789 that an income
tax was not a direct tax, and need not, therefore, be apportioned among
the States. During the Civil War, though not, curiously enough, until
every other source of taxable wealth had pretty well run dry, an income
tax was actually imposed by three separate Acts of Congress, the Act of
1864 levying a tax of 5 per cent. on all incomes between $600 and
$5,000, and of 10 per cent. on all incomes above $5,000. The tax
continued to be collected up to 1872, when it was repealed.

The constitutional character of the tax, when levied without
apportionment among the States of the Union, was once more fully argued
out in the Supreme Court, which in 1880 reaffirmed its decision of
1789, that a tax on incomes was not a direct tax. Some fifteen years
later, however, the question emerged again, and in a crucial form. The
Democrats came into power in 1893, and proceeded to reduce the tariff,
relying upon a tax of 2 per cent. on all incomes of over $4,000 to make
good the expected loss of revenue. The Supreme Court in 1895 shattered
all their fiscal plans and policies by pronouncing the income tax to be
a direct tax, and therefore incapable of being levied, except in strict
proportion to the population of the various States, and therefore, in
effect, incapable of being levied at all.

That decision, in all its absurdity, has stood ever since. Its
consequences were to deny to the United States Government the right to
tax incomes, to restrict it still further to customs duties as
virtually its sole source of revenue, to deprive it of a power that
might one day be vital to the safety of the Union, and to exhibit it in
a condition of feebleness that was altogether incompatible with any
rational conception of a sovereign State. It is true that the Supreme
Court has changed not only its _personnel_, but its spirit, and its
whole attitude toward questions of public policy, since 1895. It has
more and more allowed the influence of the age and the necessities of
the times and the clear demands of social and economic justice to
moderate its decisions; and had the question of an income tax been
brought before it any time in the last five years, it would probably
have reversed its judgment of 1895. But President Taft was undoubtedly
right when he urged, in 1909, that the risk of another adverse decision
was too great to be run, and that the safer course was to proceed by
way of an amendment to the Constitution.

The mere passing of the Income Tax amendment did not, however,
establish an income tax. It merely authorized the government to do this
at will. President Wilson's administration was prompt to take the
matter up. The Democrats, in conjunction with their reduction of the
tariff, needed a new source of revenue. So in October of 1913 the
Income Tax law was passed. In theory an Income Tax is obviously the
most just of all taxes. It summons each citizen to pay for the
government in proportion to his wealth; and his wealth marks roughly
the amount of government protection that he needs. In practise,
however, the working out of an income tax is so complex that every
grumbler can find in its intricacies some cause of complaint. The
present tax is therefore described here by an expert statistician, Mr.
Joseph A. Hill, the United States Government official at the head of
the Division of Revision and Results of the Census Bureau in
Washington.

Among the notable events of the year 1913, one of the most important in
its influence upon the national finances and constitutional development
of the United States is the adoption of an amendment to the Federal
Constitution giving Congress the power "to lay and collect taxes on
incomes, from whatever source derived, without apportionment among the
several States and without regard to any census or enumeration." The
mere fact that an amendment of any kind has been adopted is notable,
this being the first occasion on which the Constitution had undergone
any change since the period of the Civil War, and the first amendment
adopted in peaceful and normal times since the early days of the
Republic.

It is a little remarkable, although perhaps not altogether accidental,
that the adoption of this amendment should coincide with the return to
power of the political party whose attempt to levy an income tax in
1894 was frustrated by the decision of the Supreme Court in that year.
Then as now an income tax was a component part of the program of fiscal
and commercial reform to which that party was committed. This program
included the reduction of protective tariff duties and the direct
taxation of incomes. What the Democratic party failed to accomplish in
1894, it has had a free hand to do in 1913. Indeed, the national
taxation of incomes might almost be regarded as a mandate of the people
of the United States. At any rate, it was a foregone conclusion that
the adoption of the constitutional amendment would be immediately
followed by the enactment of an income-tax law.

The law instituting the income tax was approved October 31[?], together
with the law revising the tariff, both measures being included in one
comprehensive statute entitled "An Act to reduce tariff duties and to
provide revenue for Government, and for other purposes." It is the
object of the present article to give a general description of the
income tax. This seems to be especially well worth while because the
tax can not be readily understood from a mere perusal of the involved
and sometimes obscure phraseology of the law itself. For the same
reason, however, the task of interpretation is not easy or entirely
safe. The law has certain novel features; and some of the questions of
detail to which they give rise can not be answered until we have the
official construction placed upon the language of the act by the
executive branch of the government and possibly by the courts. At the
same time, the main features of the tax become fairly evident to any
one who makes a careful study of the provisions of the act, even though
its application to specific cases may remain doubtful.

The law provides that incomes shall be subject to a tax of one per
cent. on the amount by which they exceed the prescribed minimum limit
of exemption. This is designated as the "normal income tax." There is,
then, an "additional tax" of one per cent, on the amount by which any
income exceeds $20,000. The rate is increased to two per cent. on the
amount above $50,000, to three per cent. above $75,000, to four per
cent. above $100,000, to five per cent. above $250,000, and to six per
cent. above $500,000. Therefore, under the normal and additional tax
combined, the first $20,000 of income, exclusive of the minimum
exemption, will be taxed one per cent.; the next $30,000, two per
cent.; the next $25,000, three per cent.; the next $25,000, four per
cent.; the next $150,000, five per cent.; the next $250,000, six per
cent.; and all income above that point seven per cent. This is a
rigorous application of the progressive principle.

The minimum exemption, at the same time, is comparatively high,--$4,000
for a married person and $3,000 for everybody else. The higher
exemption in case of the married is conditional upon husband and wife
living together, and applies only to their aggregate income; that is to
say, it can not be deducted from the income of each. It may be noted,
in this connection, that in England the exemption allowed under the
income tax is L160 or $800; in Prussia it is 900 marks, or $225; and in
the State of Wisconsin it is $800 for individuals and $1,200 for a
husband and wife, with a further allowance for children or dependent
members of the family.

The sharply progressive rates and the comparatively high exemption have
given rise to the criticism that this is a rich man's income tax and
disregards the principle that all persons should contribute to the
expenses of the government in proportion to their several abilities. It
is often said that an income tax ought to reach all incomes with the
exception of those which are close to or below the minimum necessary
for subsistence, and that if people generally were called upon to
contribute directly to the government they would take greater interest
in public affairs and show more concern over any wasteful or unwise
expenditure of public money. In reply it is contended that the
limitation of the tax to the wealthy or well-to-do classes is justified
because these classes do not pay their fair share of the indirect
national taxes, or of local property taxes. These debatable questions
lie outside the scope of the present article. It is evident, however,
that the income tax should not be criticized as if it were a single tax
or formed the only source of revenue for the Federal government. From
the fiscal standpoint it occupies a subordinate position in the
national finances, being expected to yield about $125,000,000 annually
out of a total estimated tax revenue of $680,000,000.

The normal tax of one per cent, is to be levied upon the income of
corporations. In effect this provision of the law merely continues the
corporation or "excise" tax which was already in existence. But that
tax now becomes an integral part of the income tax, covering the income
which accrues to the stockholder and is distributable in the form of
dividends. On the theory that this income is reached at the source by
the tax upon the net earnings of the corporation the dividends as such
are exempt. They are not to be included, so far as concerns the normal
tax, in the taxable incomes of the individual stockholders and the law
does not provide that the tax paid by the corporation shall be deducted
from the dividend.

It is perhaps a question whether under these conditions income which
consists of dividends should be considered as subject to the normal tax
or as exempt. It may be contended that a tax upon the net earnings of
corporations is virtually a tax on the stockholder's income, and in
theory this is true. But so long as the tax is not actually withheld
from the dividends, or the dividends are not reduced in consequence of
the tax, the stockholder's current income is not affected. The
imposition of the tax might indeed affect his prospective income and
might depreciate the value of his stocks. It is hardly likely, however,
that such effects will be perceptible, at least as regards the stocks
of railroads and other large corporations. If, however, it be
considered that income consisting of dividends pays the tax, it follows
that the stockholder's income is taxed no matter how small it may be.
No minimum is left exempt. On the other hand, if it be considered that
all dividends are virtually exempt, the stockholder would seem to be
unduly favored under this form of taxation in comparison with people
whose incomes are derived from other sources. Doubtless in future the
investor will look upon dividends as a form of income not subject to
the normal income tax.

In the levy of the normal income tax there is to be a limited
application of the method of assessment and collection at the source of
the income. This method is applied very completely in the taxation of
income in Great Britain. It may be well to recall summarily the
essential features of the British system. The tax is levied upon the
property or industrial enterprise which yields or produces the income.
But the person occupying the property or conducting the enterprise, and
paying the assessment in the first instance, is authorized and required
to deduct the tax from the income as it is distributed among the
persons entitled to share in it either as proprietors, landlords,
creditors, or employees. Under the English system, an industrial
corporation, for instance, pays the income tax upon its gross earnings
and then deducts it from the dividends, interest, salaries, and rents
as these payments are made. The householder pays an assessment levied
upon the annual value of his dwelling (less an allowance for repairs
and insurance) and then if he occupies the premises as tenant deducts
the tax from his rent. The income from agriculture is reached by a
similar assessment upon the farmer, based upon the annual or rental
value of the farm and with the same right of deduction from the rent if
he is a tenant farmer.

From the standpoint of the government, the main advantage of this mode
of assessment as compared with a tax levied directly upon the
recipients of the income is the greater certainty with which it reaches
the income subject to taxation. The opportunities for evasion by
concealment of income are reduced to a minimum, partly because the
sources of income are, in general, not easily concealed and partly
because, to a considerable extent, the persons upon whom the tax is
assessed are not interested in avoiding the tax. The advantages,
however, are not all on the side of the government. The tax possesses
certain advantages from the standpoint of the taxpayer, also, assuming
him to be an honest taxpayer who is not seeking opportunities to evade
taxation. One advantage is that he is relieved in almost every case
from the necessity of revealing to the tax officials the whole of his
personal income. The tax does not pry into his personal affairs.
Another advantage is that the tax is paid out of current income, being
deducted from the income as it is received. It is therefore distributed
over the year and adjusted to the flow of income as it comes in. A tax
thus collected is less burdensome in its incidence than a tax paid in
one lump sum several months after the expiration of the year to which
it related and after the income on which it is levied has been all
received and perhaps all expended.

The English system of assessing an income tax at the source, however,
has its disadvantages. It is admirably suited for a tax levied at a
uniform rate on all income or on all income above a small minimum. But
it is not well suited for the application of progressive taxation or
for the introduction of gradations or distinctions based upon the size
or character of the individual incomes. Nevertheless, the English
income tax, besides exempting a minimum, provides for graded reductions
or abatements in favor of the possessors of small incomes above the
minimum, and for a reduced rate on "unearned" income within certain
limits. All this, however, makes necessary a declaration or complete
statement of income from the persons claiming the benefit of those
provisions, and also necessitates refunding a large amount of the tax
collected at the source. Moreover, the progressive principle has
recently been applied by imposing a "super-tax" on incomes in excess of
L5,000, which also requires a declaration, the tax being necessarily
assessed upon the possessor of the income and not at the source. The
super-tax, it may be observed, occupies a position in the English
system similar to that of the additional tax in the United States,
serving to increase the tax upon the larger incomes in accordance with
the principle of progression.

Considering the various provisos and exceptions in connection with the
general rule of the act, the scope of the application of the method of
collecting the tax at the source may perhaps be safely stated thus: the
normal tax is to be deducted (1) from all interest payments made by
corporations on bonds and the like, without regard to the amount; (2)
from all other interest payments when the amount is more than $3,000 in
any one year; (3) from all payments of rents, salaries, or wages
amounting in any one case to over $3,000 annually; (4) from all other
payments of over $3,000 (excepting dividends) which may be comprised
under the designations "premiums, compensations, remuneration,
emoluments, or other fixed or determinable gains, profits, or income."

The principle of assessing income at its source, as applied in this
act, does not relieve the individual from the necessity of making a
full revelation to the tax officials of his personal income from all
sources. Though this statement needs to be qualified in one or two
particulars, the law provides in general that every person subject to
the tax and having an income of $3,000 or over shall make a true and
accurate return under oath or affirmation "setting forth specifically
the gross amount of income from all separate sources and from the total
thereof deducting the aggregate items or expenses and allowance"
authorized by the law. Although income from which the tax has been
withheld is not included in the net personal and taxable income of the
taxpayer, it must, nevertheless, be accounted for and included in his
declaration as a part of his gross income, forming one of the specified
items which are to be deducted from the gross income in arriving at the
income subject to taxation.

As already intimated, the general requirement of the full and complete
statement of income is subject to certain exceptions. One relates to
the income from dividends, the law providing that "persons liable to
the normal tax only ... shall not be required to make return of the
income derived from dividends on the capital stock or from the net
earnings of corporations, joint-stock companies or associations, and
insurance companies taxable upon their net income." It will be noted
that this proviso is restricted to persons who are "liable for the
normal tax only," _i.e._, persons having net incomes under $20,000. It
would seem, therefore, that the taxpayer claiming and securing this
privilege must in some way, without revealing the amount received from
dividends, satisfy the tax assessors that his total net income,
including the dividends (amount not stated), does not exceed $20,000.
Of course a form of statement can easily be devised to cover the
situation. But whether the law will be administered in such a way that
this provision affords some relief from the general obligation of
making a detailed and complete statement of income remains to be seen.

Another exception to the general requirement of a complete declaration
of income covers the case of the taxpayer whose entire income has been
assessed and the tax on it deducted at the source. The law relieves
such persons from the obligation of making any declaration of income;
although it is not certain that this privilege can be secured without
foregoing or sacrificing the benefits of any abatements to which the
individual taxpayer might be entitled on account of business expenses,
interest payments, losses, etc. It seems probable that where the income
is all assessed at the source the taxpayer may obtain the benefit of
the minimum exemption without making a declaration of income.

It appears, therefore, that assessment at the source does not, under
this law, operate in such a way as to afford the taxpayer any
substantial relief from the necessity of making a revelation of his
income to tax officials. Whatever basis there may be for the common
criticism or complaint that an income tax is inquisitorial remains
under the operation of this law to nearly the same extent that it
would if the tax were levied wholly and directly upon the recipients
of the income, with no resort to taxation at the source.

Regarding the assessment of the additional tax not much need be said in
the way of explanation. It is, in theory at least, a comparatively
simple matter. There is no attempt here to make any application of the
principle of collection at the source. The tax is all levied directly
upon the recipients of the individual incomes, and the assessment is
based upon the taxpayer's declaration, which for the purposes of this
tax must cover the "entire net income from all sources, corporate or
otherwise." The tax is thus largely distinct from the normal income tax
as regards both the method of assessment and the rates. It is, however,
to be administered through the same machinery, and no doubt to some
extent the information obtained as to the sources of income in
connection with the assessment of the normal tax will prove useful as a
check upon the returns of income required for assessment of the
additional tax. Every person whose income exceeds $20,000 will be
subject to both taxes, the normal and the additional, but presumably
will be required to make only one declaration. For the purposes of the
additional tax he will be required to declare his income from all
sources, and therefore any relief from the obligation of making a
complete revelation of income which may be secured to him through the
application of the principle of assessment at the source in connection
with the normal tax will be entirely sacrificed.

The administration of a direct personal income tax--using that term to
describe a tax levied directly on individual incomes--is a
comparatively simple matter, however ineffective it may prove to be in
reaching the income subject to it. Under this method of taxation it is
easy to exempt a minimum, to apply progression in the rates, or to make
any other adjustments that may be deemed equitable with reference
either to the size or character of the income or to the circumstances
of the taxpayer. But as soon as we depart from this simple method and
resort to taxation at the source, we encounter difficulties in varying
the rates, allowing exemptions, or making any similar adjustments. In
the English income tax, these difficulties are squarely met and
surmounted. As previously explained, that tax is in the first instance
levied indiscriminately on all accessible sources of income and the
adjustments are effected by refunding the tax collected at the source
so far as may be necessary. No provision is made for forestalling the
deduction of the tax, and no returns are required of the names and
addresses of persons to whom payments of incomes are made. The
exemption, however, is small ($800), and the abatements extend only to
incomes below $3,500. Above that point the entire income is taxable.

A tax which provides for the exemption of $3,000 or $4,000 from every
individual income places a formidable barrier in the way of a
thoroughgoing application of assessment at the source. It is evident
that with a universal exemption as high as this, a very large amount of
tax withheld and collected at the source would ultimately have to be
refunded. The law as enacted indicates an intention to secure in part
the advantage of assessment at the source and at the same time avoid in
part the attendant disadvantage of having to refund the tax. The
measure might be characterized as one which as regards the "normal tax"
applies the principle of assessment at the source to corporate income
completely and to other income in spots. The "additional tax" is simply
the direct personal tax. The normal tax will doubtless be successful in
reaching the large amount of income earned or created by enterprises
conducted under the corporate form of organization, much of which would
probably escape assessment under a direct personal income tax. But
beyond this it is questionable whether the method of assessment at the
source as here applied will be of sufficient advantage to justify the
administrative complications which it involves.

It seems useless, however, as well as unwise, to venture any
predictions as to how successful the tax will be in reaching the income
subject to it or how well it will work in actual practise. The law will
doubtless require amendment in many particulars, even if it does not
need to be radically revised. That the income tax in some form will be
perpetuated as a permanent part of our system of national finance may
safely be predicted. Properly adjusted and wisely administered, it
should greatly strengthen the financial resources of the Government,
make possible a closer adjustment of revenue to expenditure, and secure
a more equitable distribution of the burden of taxation.




THE SECOND BALKAN WAR

GREECE AND SERVIA CRUSH THE AMBITIONS OF BULGARIA

A.D. 1913

PROF. STEPHEN P. DUGGAN

CAPT. A.H. TRAPMANN

The crushing defeat of Turkey by the Balkan States during the winter of
1912-13 had been accomplished mainly by Bulgaria. The Bulgarians were
therefore eager to assert themselves as the chief Balkan State, the
Power which was to take the place of Turkey as ruler of the "Near
East." Naturally this roused the antagonism not only of Bulgaria's
recent allies, Greece and Servia, but also of the other neighboring
State, Roumania. Bulgaria hoped to meet and crush her two allies before
Roumania could join them. Thus she deliberately precipitated a war
which resulted in her utter defeat. From this contest Greece has
emerged as the chief State of the eastern Mediterranean, a growing
Power which at last bears some resemblance to the classic Greece of
ancient times.

To understand this war, it should be realized that the Bulgars are
really an Asiatic race, who broke into Europe as the Hungarians had
done before them, and as the Turks did afterward. Hence their kinship
with European races or manners is really slight, though they have
something of Slavic or Russian blood. The Servians are near akin to the
Russians. The Roumanians trace their ancestry proudly, if somewhat
dubiously, back to the old Roman colonists of the days of Rome's world
empire. The Greeks are really the most ancient dwellers in the region;
and to their pride of race was now added a furious eagerness to prove
their military power. This had been much scorned after their
ineffective war against Turkey in 1897, and they had found no
opportunity to give decisive proof of their strength during the war of
1912.

To Professor Duggan's account of the causes and results of the war,
which appeared originally in the _Political Science Quarterly_, we
append the picture of its most striking incidents by Captain Trapmann,
who was with the Greek army through its brief but brilliant campaign.


PROF. STEPHEN P. DUGGAN

When the secret treaty of alliance of March, 1912, between Bulgaria and
Servia against Turkey was signed, a division of the territory that
might possibly fall to the allies was agreed upon. Neither Bulgaria nor
Servia has ever published the treaty in full, but from the
denunciations and recriminations indulged in by the parliaments of
both, we know in general what the division was to be. The river
Maritza, it was hoped, would become the western boundary of Turkey, and
a line running from a point just east of Kumanova to the head of Lake
Ochrida was to divide the conquered territory between Servia and
Bulgaria. This would give Monastir, Prilip, Ochrida, and Veles to the
Bulgarians--a great concession on the part of Servia. Certain other
disputed towns were to be left to the arbitrament of the Czar of
Russia. The chief aim to be attained by this division was that Servia
should obtain a seaboard upon the Adriatic Sea, and Bulgaria upon the
Aegean. Incidentally Bulgaria would obtain western Thrace and the
greater part of Macedonia, and Servia would secure the greater part of
Albania.

These calculations had been entirely upset by the course of events.
Bulgaria's share had been considerably increased by the unexpected
conquest of eastern Thrace, including Adrianople, whereas Servia's
portion had been greatly diminished by the creation of an independent
Albania out of her share. Moreover, M. Pashitch, the Servian prime
minister, maintained that whereas by the preliminary treaty Bulgaria
was to send detachments to assist the Servian armies operating in the
Vardar valley, the reverse had been found necessary and Adrianople had
only been taken with the help of 60,000 Servians and by means of the
Servian siege guns. Equity demanded that the new conditions which had
arisen and which had entirely altered the situation should be given
consideration and that Bulgaria should not expect the preliminary
agreement to be carried out. Now, from the outbreak of hostilities
Bulgaria's foreign affairs, in which King Ferdinand was supposed to be
supreme, were really controlled by the prime minister, Dr. Daneff. He
proved to be the evil genius of his country; for his arrogant,
unyielding attitude upon every disputed point, not only with the enemy,
but with the allies and with the Powers, destroyed all kindly feeling
for Bulgaria, and left her friendless in her hour of need. Dr. Daneff's
answer to the Servian contention was that Bulgaria bore the brunt of
the fight; that, had she not kept the main Turkish force occupied,
Servia and Greece would have been crushed; that a treaty is a treaty,
and that the additional gain of eastern Thrace in no way invalidated
the old agreement.

The recriminations between Greeks and Bulgarians were quite as bitter.
There had been no preliminary agreement as to the division of conquered
territory between them, and this permitted each to indulge in the most
extravagant claims. The great bone of contention was the possession of
the fine port of Salonika. As soon as the war against Turkey broke out,
both states pushed forward troops to occupy that city. The Greeks
arrived first and were still in possession. Moreover, they maintained
that, except for the Jews, the population is chiefly Greek. So are the
trade and the schools. M. Venezelos, the Greek prime minister, insisted
also that the erection of an independent Albania deprived Greece of a
large part of northern Epirus, as it had deprived Servia of a great
part of Old Servia, and Montenegro of Scutari. In fact, he asserted
that Bulgaria alone would retain everything she hoped for, securing
nearly three-fifths of the conquered territory, and leaving only
two-fifths to be divided among her three allies; and this, despite the
fact that but for the activity of the Greek navy in preventing the
convoy of Turkey's best troops from Asia, Bulgaria would never have had
her rapid success at the beginning of the war. Finally, he strenuously
objected to the whole seaboard of Macedonia going to Bulgaria, as the
population where it was not Moslem was chiefly Greek. All the parties
to the dispute made much of ethnical and historical claims--"A thousand
years are as a day" in their sight. The answer of Dr. Daneff to the
Greek demands was to the effect that Greece already had one good port
on the Mediterranean, while Bulgaria had none, and that Bulgaria would
have to spend immense sums on either Kavala or Dedeagatch to make them
of any great value. Moreover, as a result of the war, Greece would get
Crete, the Aegean islands, and a good slice of the mainland. She had
suffered least in the war and was really being overpaid for her
services.

Behind all these formal contentions were the conflicting ambitions and
the racial hatreds which no discussion could effectually resolve.
Bulgaria was determined to secure the hegemony of the Balkan peninsula.
She believed that her role was that of a Balkan Prussia, and her great
victories made her confident of her ability to play the role
successfully. To this Servia would never consent. The Servians far
outnumber the Bulgarians. Were they united under one scepter they would
be the strongest nation in the Balkans. Their policy is to maintain an
equilibrium in the peninsula until the hoped-for annexation of Bosnia
and Herzegovina will give them the preponderance. This alone would
incline Servia to make common cause with Greece. In addition, she had
the powerful motive of direct self-interest. Since she did not secure
the coveted territory on the Adriatic, Salonika would be more than ever
the natural outlet for her products. Should Bulgaria wedge in behind
Greece at Salonika, Servia would have two Powers to deal with, each of
which could pursue the policy of destroying her commerce by a
prohibitory tariff, a policy so often adopted toward her by
Austria-Hungary. M. Pashitch, therefore, was determined to have the new
southern boundary of Servia coterminous with the northern boundary of
Greece. Moreover, Greeks and Servians were aware of the relative
weakness of the Bulgarians due to their great losses and to the wide
territory occupied by their troops. The war party was in the ascendant
in each country. The Servians were anxious to avenge Slivnitza, and the
Greeks still further to redeem themselves from the reputation of 1897.
Had peace been signed in January, there is little doubt that a greater
spirit of conciliation would have prevailed. The Young Turks were
universally condemned at that time for refusing to yield; but had they
deliberately adopted Abdul Hamid's policy of playing off one people
against another, they could not have succeeded better than by their
determination to fight.

Even before the fall of Adrianople, on March 26th, military conflicts
had taken place between Bulgarians and Servians and between Bulgarians
and Greeks. On March 12th a pitched battle occurred between the latter
at Nigrita; and though a mixed commission at once drew up a code of
regulations for use in towns occupied by joint armies, not the
slightest attention was subsequently paid to it. The Servians shortly
afterward expelled the manager of the branch of the National Bulgarian
Bank at Monastir, a step which drew forth emphatic protests from Sofia
against the policy of Serbizing districts in anticipation of the final
settlement. On April 17th, M. Pashitch informed Bulgaria that the
Government would refuse to be bound by the terms of the preliminary
treaty of March, 1912. From that date until the signing of the treaty
of peace with Turkey on May 31st, the recent allies carried on an
unofficial war, which consisted of combats of extermination marked by
inhuman rage. After that event each of the combatants strained every
nerve to push forward its armies and to possess new territories, while
each continued to accuse the other of violating every principle of
international law.

The ambassadors of the great Powers at the capitals of the Balkan
States made urgent representations to the Balkan Governments to
restrain their armies, but without effect. On June 10th the Servian
Government dispatched a note to Sofia demanding a categorical answer to
the Servian demand for a revision of the preliminary treaty. On July
11th the Czar telegraphed to King Peter and King Ferdinand appealing to
them to avoid a fratricidal war, reminding them of his position as
arbitrator under the preliminary treaty and warning them that he would
hold responsible whichever state appealed to force. "The state which
begins war will be responsible before the Slav cause." This well-meant
action had an effect the opposite of that hoped for. In Vienna it was
looked upon as an indirect assertion of moral guardianship by Russia
over the Slav world. The Austrian press insisted that the Balkan states
were of age and could take care of themselves. If not, it was for
Europe, not for Russia, to control them. The political horizon grew
still darker when one week later Dr. Daneff answered the Servian note
in the negative. This resulted in the Servian Minister withdrawing from
Sofia on June 22d.

What was the plan of campaign and the degree of preparedness of the
principal belligerent in the second Balkan war which was about to
commence? The plan of the Bulgarians was the only one whereby they
could hope to secure victory. It depended for success upon surprizing
the Servians by sending masses of Bulgarian troops into the home
territory of Servia by way of the passes leading directly from Sofia
westward through the mountains. This would cut off the Servian armies
operating in Macedonia from their base of supplies and require their
immediate recall for the defense of the home territory. It was an
operation attended by almost insurmountable obstacles. The major part
of the Bulgarian army was in eastern Thrace and would have to be
brought across a country unprovided with either railroads or sufficient
highways. Moreover, the army would have to rely for the transport of
provisions and equipment upon slow-moving bullock wagons. Nevertheless,
given time, secrecy, and freedom from interference, the aim might be
attained. The necessary divisions of the army were set in motion in the
beginning of May. So successful were the Bulgarians in keeping secret
the route and the progress of the army, that by the middle of June they
confidently looked forward to success. Their high hopes were destroyed
by the evil diplomacy of Dr. Daneff in his relations with Roumania.

Russia rewarded Roumania for her splendid assistance in the
Russo-Turkish war of 1877 by depriving her of her fertile province of
Bessarabia and compelling her to take in exchange the Dobrudja, a low,
marshy district inhabited chiefly by Bulgarians and Moslems. And that
was not all. Through Russian influence the commission appointed to
delimit the boundary between Roumania and the new principality of
Bulgaria put the town of Silistria upon the Bulgarian side of the
boundary. Now the heights of Silistria command absolutely the Roumanian
territory opposite to it and the Dobrudja. The Danube directly in front
of Silistria spreads out in a marsh several miles wide, so that it is
impossible to approach Silistria from the Roumanian side by bridge. As
a result Roumania has always felt that her southern border was at the
mercy of Bulgaria and has always, as one of the chief aims of her
national existence, looked forward to the rectification of her southern
boundary. The unfriendly attitude of Russia threw Roumania into the
arms of Austria, so that from the days of the Berlin treaty to the
Balkan war, Roumania has been considered a true friend of the Triple
Alliance. She viewed with jealousy and fear the rapid growth of
Bulgaria in power and in strength. Crowded in between the two military
empires of Russia and Austria-Hungary, Roumania naturally looked upon
the development of another military state upon her southern border as a
menace to her national existence. Hence when the Macedonian question
became very acute in 1903, and it seemed that action would be
undertaken by Bulgaria and Servia against Turkey, Roumania had declared
that she would not tolerate an alteration of the _status quo_. She did
not move, however, when the allies undertook the war of liberation in
October, 1912. But when a month's campaign changed the war from one of
liberation to one of conquest, Roumania demanded from Bulgaria as the
price of neutrality Silistria and a small slice of the Black Sea coast
sufficient to satisfy strategic military demands.

It was in his relations with Roumania that Daneff's diplomacy was most
stupid. M. Take Jonescu, one of Roumanians ablest statesmen, was sent
by the Government to the first Peace Conference at London to secure
pledges from Dr. Daneff in regard to the Roumanian demand. He could get
no answer. Daneff used every device to gain time in the hope that a
settlement with Turkey would relieve Bulgaria from the necessity of
giving anything. When the peace negotiations failed and the war between
the allies and Turkey recommenced, the relations between Roumania and
Bulgaria became very critical. However, at the Czar's suggestion, both