It was also conceded that the effective discharge of these protective and primary functions necessarily involved the secondary activities of taxation, and legislation.
Beyond these activities the State was to do nothing and every individual should be left alone with the maximum of economic freedom. It was asserted that the State was a necessary evil and it should perform only negative functions.
But it soon became apparent that the policy of non-interference or laissez faire led to the widespread evils of the factory system, to the sordid exploitation of the workers, and to the terrible oppression of the poor.
The negative role of the State was severely criticised and it was emphasised that the State had duties other than the provision of army, navy and police, and that a defence of quite a different kind was necessary.
The community, as a whole, must unite to enforce right against might, to protect the economically weak against the economically strong, to prevent the exploitation of the poor by the rich and to restrict the growth of poverty and disease.
It came to be acknowledged that certain services of public utility could not be left to private enterprise. The State, in brief, has positive functions to perform.
This viewpoint was actively supported by the Socialists who advocated nationalisation of the factors of production. Former Soviet Russia, China and a few other countries were the only countries which had socialised structure of society. Other countries of the world are capitalist and recognise laissez faire to be the basis of society.
But it is not Individualism of the old pattern. The modern individualist State has emerged as a guardian of the rights of man and community. Its end is to uplift man from the political, economic and social degradation.
The functions of the State, therefore, are not only political they are economic and social as well. It means considerable expansion in the province of the State and, thus, it brings into prominence the nature of public expenditure.
Analysis of the Objects of Public Expenditure:
The general principle of public expenditure in the modem State is that the government is for the good of the governed and the best criterion of State interference and State expenditure in any form is the benefit which will accrue, directly or indirectly, to the community as a whole. “Any
State, then, which directly or indirectly develops the natural or human resources of the nation or leads to their more economical use may be expected to increase national prosperity by increasing the national wealth and may thus be expected ultimately to ‘pay for itself’ given the important qualification that the gain due to the increased expenditure is not less than the loss caused by the heavier taxation.”
Following is an analysis of the general objects of public expenditure:
1. The first object of the public expenditure is the provision of services yielding indivisible benefit. In this category is included maintenance of law and order, defence, safeguards against spread of diseases and epidemics, etc.
2. The provision of collective benefits or services that cannot, even if it were desirable, be undertaken by private enterprise, for example, construction and maintenance of roads.
3. The provision for the sick, destitute and unemployed.
4. All such functions in the field of industry where the primary object is to secure great efficiency and output, for example, public utility services, as railways, posts and telegraphs, airways, supply of gas and electricity.
5. Functions in the field of income and social standards where the chief aim is to safeguard the interests of citizens and mitigate tile effects of unequal distribution of income. These functions include control and regulation of currency, exchange and credit, social insurance, factory legislation, fixing of minimum national wages, protective tariff, mechanism of rationing and price control, etc.