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success of the American policy. We are not merely New Yorkers. We are Americans; and the interests of all Americans, whether from the North, the South, the East or the great West, are equally dear to the men of the Empire State. As we grow into a mighty nation, which, whether it will or not, must inevitably play a great part for good or for evil in the affairs of the world at large, the people of New York wish it understood that they look at all questions of American foreign policy from the most thoroughly national standpoint. The tropic islands we have taken must neither be allowed to lapse into anarchy nor to return under the sway of tyranny. War is a grim thing at best, but the war through which we have passed has left us not merely memories of glory won on land and sea, but an even more blessed heritage, the knowledge that it was waged from the highest motives, for the good of others as well as for our own national honor. Above all, we are thankful that it brought home to all of us the fact that the country was indeed one when serious danger confronted it. The men from the East and the West, from the North and the South, the sons of those who wore the blue and of those who wore the gray, the men of means and the men who all their lives long had possessed only what day by day they toiled to earn, stood shoulder to shoulder in the fight, met the same dangers, shared the same hardships and won the same ultimate triumph.

In our domestic affairs, the State is to be congratulated on the gradual return of prosperity. Though temporarily checked by the war this return has been, on the whole, steady. The capitalist finds constantly greater business opportunities; the wageworker, in consequence, is more steadily employed; the farmer has a better market. TAXATION No other question is of such permanent importance in the domestic economy of our State as the question of taxation. At present our system of taxation is in utter confusion, full of injustices and of queer anomalies. It is an exceedingly difficult subject, one well worthy the attention of our best men, the men with most highly trained minds and the broadest practical experience; men who are able to approach the subject from the standpoints alike of the farmer, the merchant, and the manufacturer. Not only is it necessary to consider whether any kind of tax ought, if practicable, to be levied, but whether it is in fact practicable to levy it. We should discourage the building up of non-taxable interests, and yet we should discourage driving property out of the State by unwise taxation, or levying a tax which is in effect largely a tax upon honesty. I most earnestly commend the whole matter to your special attention.

CANALS AND COMMERCE New York State took the lead in this country in the promotion of a canal system, and the operation of the Erie Canal has been of incalculable benefit, not merely to Buffalo, New York and Brooklyn and the cities of the Mohawk Valley, but to all of the State; for, when a part of it is benefited, the benefit is shared ultimately by the whole.

Of recent years the city of New York has fallen off relatively to other cities as regards the increase of her commerce, and in exports there has been a positive decrease. Under my predecessor a commission was appointed to examine into the causes of this decline. I recommend that this commission be allowed ample additional time to close its work, the subject being one of such vast importance, and that it be given all needful aid.

The canals at present are in such condition that the money already expended will avail nothing if the work is discontinued. As a chain is only as strong as its weakest link, so the navigability of the canals is determined by the shallowest sections. While I do not now recommend the voting of any large amounts of money, yet in fixing up those different parts, expenditures that can be clearly made within the constitution should be authorized.

It is essential to the State no less than to the city of New York that our commercial supremacy should be maintained. With this end in view the canals should be administered economically and with an eye single to the welfare of the whole people. Any man, whether public servant or contractor, who in any way defrauds the State or perverts the business of the State to his private gain must be dealt with as rigorously as the laws will permit.

The Canal Investigating Commission, appointed by my predecessor pursuant to the provisions of Chapter 15 of the Laws of 1898, has completed its work and made its report. Its work has been of great service to the State. The act provided that the commission should serve without pay, but should receive the actual and necessary expenses incurred in the performance of its duty. The commission was also authorized to employ counsel, experts, engineers and such other assistants as it might deem necessary. The time for making its report was extended by my predecessor to the latest date authorized by law, and the investigation made was broad in its scope and searching in its nature.

In addition to the report of the commission required by law, which is herewith transmitted to you, a supplemental report of the commission's expenses has been made and filed, by which it appears that the appropriation made for the expenses of the investigation has been exhausted, and that it will require an additional sum of eleven thousand eight hundred and sixty-nine and fifty-one one-hundredths dollars to discharge the obligations of the commission properly incurred in the performance of its duty. I recommend that the further sunt of twelve thousand dollars, or so much thereof as may be necessary, be appropriated without delay, for such purpose.

I shall later communicate with you further on the subject of the canals and as to the exact course to be followed in regard to them.

LABOR INTERESTS Of late years there has been a tendency to extend the sphere of State action in various directions. This is a tendency 'which may readily be carried too far, and the State should give expression to it only when the good to be achieved is undoubted, and when there is no reasonable probability that it will be counteracted by harm. Nevertheless, much good has resulted in the past from such State action. In bygone ages, when wrong most frequently took the form of brutal violence, the aid of the State was invoked to shackle force; and exactly as we have shackled force in the past, so it may be necessary more and more to shackle cunning in the present. The right to interfere against the individual who does wrong by craft is, of course, as great as the right to interfere against one who does wrong by open violence; though it

is a much more simple matter to interfere effectually in the one case than in the other. Great care, however, must be exercised in the interference. The machinery of business is delicate and complicated, and if it is improperly disarranged or interfered with, the harm, which at first falls on the business men of greater or less wealth and on the corporations, will ultimately be distributed throughout the community at large.

In dealing with the interests which we have grown to group together as the interests of labor, we must always keep in mind the fact that ultimately each man's salvation rests mainly with himself, and that no amount of legislation or of combination can supply the lack of individual initiative — the lack of individual energy, honesty, thrift and industry. Yet this capacity for individual self-help can, and should, be generally supplemented by that form of self-help that follows on organization and association, as has been shown by the careers of many of the trade unions and labor federations; and sometimes it can be supplemented by the direct action of the State itself.

The development in extent and variety of industries has necessitated legislation in the interest of labor. This legislation is not necessarily against the interest of capital; on the contrary, if wisely devised it is for the benefit of both laborers and employers. We have very wisely passed many laws for the benefit of labor, in themselves good, and for the time being sufficient; but experience has shown that the full benefit of these laws is not obtained, through the lack of proper means of enforcing them, and the failure to make any one department responsible for their enforcement.

At present the enforcement of the law regulating the hours of labor of minors under fourteen years of age and

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