It was the object of the famous excise scheme of Sir Robert Walpole, to

establish, with regard to wine and tobacco, a system not very unlike

that which is here proposed. But though the bill which was then brought

into Parliament, comprehended those two commodities only, it was

generally supposed to be meant as an introduction to a more extensive

scheme of the same kind. Faction, combined with the interest of

smuggling merchants, raised so violent, though so unjust a clamour,

against that bill, that the minister thought proper to drop it; and,

from a dread of exciting a clamour of the same kind, none of his

successors have dared to resume the project.

The duties upon foreign luxuries, imported for home consumption, though

they sometimes fall upon the poor, fall principally upon people of

middling or more than middling fortune. Such are, for example, the

duties upon foreign wines, upon coffee, chocolate, tea, sugar, &c.

The duties upon the cheaper luxuries of home produce, destined for home

consumption, fall pretty equally upon people of all ranks, in proportion

to their respective expense. The poor pay the duties upon malt, hops,

beer, and ale, upon their own consumption; the rich, upon both their own

consumption and that of their servants.

The whole consumption of the inferior ranks of people, or of those below

the middling rank, it must be observed, is, in every country, much

greater, not only in quantity, but in value, than that of the middling,

and of those above the middling rank. The whole expense of the inferior

is much greater than that of the superior ranks. In the first place,

almost the whole capital of every country is annually distributed among

the inferior ranks of people, as the wages of productive labour.

Secondly, a great part of the revenue, arising from both the rent of

land and the profits of stock, is annually distributed among the same

rank, in the wages and maintenance of menial servants, and other

unproductive labourers. Thirdly, some part of the profits of stock

belongs to the same rank, as a revenue arising from the employment of

their small capitals. The amount of the profits annually made by small

shopkeepers, tradesmen, and retailers of all kinds, is everywhere very

considerable, and makes a very considerable portion of the annual

produce. Fourthly and lastly, some part even of the rent of land belongs

to the same rank; a considerable part to those who are somewhat below

the middling rank, and a small part even to the lowest rank; common

labourers sometimes possessing in property an acre or two of land.

Though the expense of those inferior ranks of people, therefore, taking

them individually, is very small, yet the whole mass of it, taking them

collectively, amounts always to by much the largest portion of the whole

expense of the society; what remains of the annual produce of the land

and labour of the country, for the consumption of the superior ranks,

being always much less, not only in quantity, but in value. The taxes

upon expense, therefore, which fall chiefly upon that of the superior

ranks of people, upon the smaller portion of the annual produce, are

likely to be much less productive than either those which fall

indifferently upon the expense of all ranks, or even those which fall

chiefly upon that of the inferior ranks, than either those which fall

indifferently upon the whole annual produce, or those which fall chiefly

upon the larger portion of it. The excise upon the materials and

manufacture of home-made fermented and spiritous liquors, is,

accordingly, of all the different taxes upon expense, by far the most

productive; and this branch of the excise falls very much, perhaps

principally, upon the expense of the common people. In the year which

ended on the 5th of July 1775, the gross produce of this branch of the

excise amounted to L.3,341,837 : 9 : 9.

It must always be remembered, however, that it is the luxuries, and not

the necessary expense of the inferior ranks of people, that ought ever

to be taxed. The final payment of any tax upon their necessary expense,

would fall altogether upon the superior ranks of people; upon the

smaller portion of the annual produce, and not upon the greater. Such a

tax must, in all cases, either raise the wages of labour, or lessen the

demand for it. It could not raise the wages of labour, without throwing

the final payment of the tax upon the superior ranks of people. It could

not lessen the demand for labour, without lessening the annual produce

of the land and labour of the country, the fund upon which all taxes

must be finally paid. Whatever might be the state to which a tax of this

kind reduced the demand for labour, it must always raise wages higher

than they otherwise would be in that state; and the final payment of

this enhancement of wages must, in all cases, fall upon the superior

ranks of people.

Fermented liquors brewed, and spiritous liquors distilled, not for sale,

but for private use, are not in Great Britain liable to any duties of

excise. This exemption, of which the object is to save private families

from the odious visit and examination of the tax-gatherer, occasions the

burden of those duties to fall frequently much lighter upon the rich

than upon the poor. It is not, indeed, very common to distil for private

use, though it is done sometimes. But in the country, many middling, and

almost all rich and great families, brew their own beer. Their strong

beer, therefore, costs them eight shillings a-barrel less than it costs

the common brewer, who must have his profit upon the tax, as well as

upon all the other expense which he advances. Such families, therefore,

must drink their beer at least nine or ten shillings a-barrel cheaper

than any liquor of the same quality can be drank by the common people,

to whom it is everywhere more convenient to buy their beer, by little

and little, from the brewery or the alehouse. Malt, in the same manner,

that is made for the use of a private family, is not liable to the visit

or examination of the tax-gatherer; but, in this case the family must

compound at seven shillings and sixpence a-head for the tax. Seven

shillings and sixpence are equal to the excise upon ten bushels of malt;

a quantity fully equal to what all the different members of any sober

family, men, women, and children, are, at an average, likely to consume.

But in rich and great families, where country hospitality is much

practised, the malt liquors consumed by the members of the family make

but a small part of the consumption of the house. Either on account of

this composition, however, or for other reasons, it is not near so

common to malt as to brew for private use. It is difficult to imagine

any equitable reason, why those who either brew or distil for private

use should not be subject to a composition of the same kind.

A greater revenue than what is at present drawn from all the heavy taxes

upon malt, beer, and ale, might be raised, it has frequently been said,

by a much lighter tax upon malt; the opportunities of defrauding the

revenue being much greater in a brewery than in a malt-house; and those

who brew for private use being exempted from all duties or composition

for duties, which is not the case with those who malt for private use.

In the porter brewery of London, a quarter of malt is commonly brewed

into more than two barrels and a-half, sometimes into three barrels of

porter. The different taxes upon malt amount to six shillings a-quarter;

those upon strong ale and beer to eight shillings a-barrel. In the

porter brewery, therefore, the different taxes upon malt, beer, and ale,

amount to between twenty-six and thirty shillings upon the produce of a

quarter of malt. In the country brewery for common country sale, a

quarter of malt is seldom brewed into less than two barrels of strong,

and one barrel of small beer; frequently into two barrels and a-half of

strong beer. The different taxes upon small beer amount to one shilling

and fourpence a-barrel. In the country brewery, therefore, the different

taxes upon malt, beer, and ale, seldom amount to less than twenty-three

shillings and fourpence, frequently to twenty-six shillings, upon the

produce of a quarter of malt. Taking the whole kingdom at an average,

therefore, the whole amount of the duties upon malt, beer, and ale,

cannot be estimated at less than twenty-four or twenty-five shillings

upon the produce of a quarter of malt. But by taking off all the

different duties upon beer and ale, and by trebling the malt tax, or by

raising it from six to eighteen shillings upon the quarter of malt, a

greater revenue, it is said, might be raised by this single tax, than

what is at present drawn from all those heavier taxes.

L. s. d.

In 1772, the old malt tax produced 722,023 11 11

The additional 356,776 7 9-3/4

In 1773, the old tax produced 561,627 3 7-1/2

The additional 278,650 15 3-3/4

In 1774, the old tax produced 624,614 17 5-3/4

The additional 310,745 2 8-1/2

In 1775, the old tax produced 657,357 0 8-1/4

The additional 323,785 12 6-1/4

____________________________

4)3,835,580 12 0-3/4

____________________________

Average of these four years 958,895 3 0-3/16

____________________________

In 1772, the country excise produced 1,243,120 5 3

The London brewery 408,260 7 2-3/4

In 1773, the country excise 1,245,808 3 3

The London brewery 405,406 17 10-1/2

In 1774, the country excise 1,246,373 14 5-1/2

The London brewery 320,601 18 0-1/4

In 1775, the country excise 1,214,583 6 1-1/4

The London brewery 463,670 7 0-1/4

____________________________

4)6,547,832 19 2-1/4

____________________________

Average of these four years 1,636,958 4 9-1/2

To which adding the average malt-tax, or 958,895 3 0-3/16

____________________________

The whole amount of those different

taxes comes out to be 2,595,853 7 9-11/16

____________________________

But, by trebling the malt tax, or by

raising it from six to eighteen

shillings upon the quarter of

malt, that single tax would produce 2,876,685 9 0-9/16

A sum which exceeds the foregoing by 280,832 1 2-14/16

Under the old malt tax, indeed, is comprehended a tax of four shillings

upon the hogshead of cyder, and another of ten shillings upon the barrel

of mum. In 1774, the tax upon cyder produced only L.3083 : 6 : 8. It

probably fell somewhat short of its usual amount; all the different

taxes upon cyder, having, that year, produced less than ordinary. The

tax upon mum, though much heavier, is still less productive, on account

of the smaller consumption of that liquor. But to balance whatever may

be the ordinary amount of those two taxes, there is comprehended under

what is called the country excise, first, the old excise of six

shillings and eightpence upon the hogshead of cyder; secondly, a like

tax of six shillings and eightpence upon the hogshead of verjuice;

thirdly, another of eight shillings and ninepence upon the hogshead of

vinegar; and, lastly, a fourth tax of elevenpence upon the gallon of

mead or metheglin. The produce of those different taxes will probably

much more than counterbalance that of the duties imposed, by what is

called the annual malt tax, upon cyder and mum.

Malt is consumed, not only in the brewery of beer and ale, but in the

manufacture of low wines and spirits. If the malt tax were to be raised

to eighteen shillings upon the quarter, it might be necessary to make

some abatement in the different excises which are imposed upon those

particular sorts of low wines and spirits, of which malt makes any part

of the materials. In what are called malt spirits, it makes commonly but

a third part of the materials; the other two-thirds being either raw

barley, or one-third barley and one-third wheat. In the distillery of

malt spirits, both the opportunity and the temptation to smuggle are

much greater than either in a brewery or in a malt-house; the

opportunity, on account of the smaller bulk and greater value of the

commodity, and the temptation, on account of the superior height of the

duties, which amounted to 3s. 10-2/3d.[73] upon the gallon of spirits.

By increasing the duties upon malt, and reducing those upon the

distillery, both the opportunities and the temptation to smuggle would

be diminished, which might occasion a still further augmentation of

revenue.

It has for some time past been the policy of Great Britain to discourage

the consumption of spirituous liquors, on account of their supposed

tendency to ruin the health and to corrupt the morals of the common

people. According to this policy, the abatement of the taxes upon the

distillery ought not to be so great as to reduce, in any respect, the

price of those liquors. Spirituous liquors might remain as dear as ever;

while, at the same time, the wholesome and invigorating liquors of beer

and ale might be considerably reduced in their price. The people might

thus be in part relieved from one of the burdens of which they at

present complain the most; while, at the same time, the revenue might be

considerably augmented.

The objections of Dr. Davenant to this alteration in the present system

of excise duties, seem to be without foundation. Those objections are,

that the tax, instead of dividing itself, as at present, pretty equally

upon the profit of the maltster, upon that of the brewer, and upon that

of the retailer, would so far as it affected profit, fall altogether

upon that of the maltster; that the maltster could not so easily get

back the amount of the tax in the advanced price of his malt, as the

brewer and retailer in the advanced price of their liquor; and that so

heavy a tax upon malt might reduce the rent and profit of barley land.

No tax can ever reduce, for any considerable time, the rate of profit in

any particular trade, which must always keep its level with other trades

in the neighbourhood. The present duties upon malt, beer, and ale, do

not affect the profits of the dealers in those commodities, who all get

back the tax with an additional profit, in the enhanced price of their

goods. A tax, indeed, may render the goods upon which it is imposed so

dear, as to diminish the consumption of them. But the consumption of

malt is in malt liquors; and a tax of eighteen shillings upon the

quarter of malt could not well render those liquors dearer than the

different taxes, amounting to twenty-four or twenty-five shillings, do

at present. Those liquors, on the contrary, would probably become

cheaper, and the consumption of them would be more likely to increase

than to diminish.

It is not very easy to understand why it should be more difficult for

the maltster to get back eighteen shillings in the advanced price of his

malt, than it is at present for the brewer to get back twenty-four or

twenty-five, sometimes thirty shillings, in that of his liquor. The

maltster, indeed, instead of a tax of six shillings, would be obliged to

advance one of eighteen shillings upon every quarter of malt. But the

brewer is at present obliged to advance a tax of twenty-four or

twenty-five, sometimes thirty shillings, upon every quarter of malt

which he brews. It could not be more inconvenient for the maltster to

advance a lighter tax, than it is at present for the brewer to advance a

heavier one. The maltster does not always keep in his granaries a stock

of malt, which it will require a longer time to dispose of than the

stock of beer and ale which the brewer frequently keeps in his cellars.

The former, therefore, may frequently get the returns of his money as

soon as the latter. But whatever inconveniency might arise to the

maltster from being obliged to advance a heavier tax, it could easily be

remedied, by granting him a few months longer credit than is at present

commonly given to the brewer.

Nothing could reduce the rent and profit of barley land, which did not

reduce the demand for barley. But a change of system, which reduced the

duties upon a quarter of malt brewed into beer and ale, from twenty-four

and twenty-five shillings to eighteen shillings, would be more likely to

increase than diminish that demand. The rent and profit of barley land,

besides, must always be nearly equal to those of other equally fertile

and equally well cultivated land. If they were less, some part of the

barley land would soon be turned to some other purpose; and if they were

greater, more land would soon be turned to the raising of barley. When

the ordinary price of any particular produce of land is at what may be

called a monopoly price, a tax upon it necessarily reduces the rent and

profit of the land which grows it. A tax upon the produce of those

precious vineyards, of which the wine falls so much short of the

effectual demand, that its price is always above the natural proportion

to that of the produce of other equally fertile and equally well

cultivated land, would necessarily reduce the rent and profit of those

vineyards. The price of the wines being already the highest that could

be got for the quantity commonly sent to market, it could not be raised

higher without diminishing that quantity; and the quantity could not be

diminished without still greater loss, because the lands could not be

turned to any other equally valuable produce. The whole weight of the

tax, therefore, would fall upon the rent and profit; properly upon the

rent of the vineyard. When it has been proposed to lay any new tax upon

sugar, our sugar planters have frequently complained that the whole

weight of such taxes fell not upon the consumer, but upon the producer;

they never having been able to raise the price of their sugar after the

tax higher than it was before. The price had, it seems, before the tax,

been a monopoly price; and the arguments adduced to show that sugar was

an improper subject of taxation, demonstrated perhaps that it was a

proper one; the gains of monopolists, whenever they can be come at,

being certainly of all subjects the most proper. But the ordinary price

of barley has never been a monopoly price; and the rent and profit of

barley land have never been above their natural proportion to those of

other equally fertile and equally well cultivated land. The different

taxes which have been imposed upon malt, beer, and ale, have never

lowered the price of barley; have never reduced the rent and profit of

barley land. The price of malt to the brewer has constantly risen in

proportion to the taxes imposed upon it; and those taxes, together with

the different duties upon beer and ale, have constantly either raised

the price, or, what comes to the same thing, reduced the quality of

those commodities to the consumer. The final payment of those taxes has

fallen constantly upon the consumer, and not upon the producer.

The only people likely to suffer by the change of system here proposed,

are those who brew for their own private use. But the exemption, which

this superior rank of people at present enjoy, from very heavy taxes

which are paid by the poor labourer and artificer, is surely most

unjust and unequal, and ought to be taken away, even though this change

was never to take place. It has probably been the interest of this

superior order of people, however, which has hitherto prevented a change

of system that could not well fail both to increase the revenue and to

relieve the people.

Besides such duties as those of customs and excise above mentioned,

there are several others which affect the price of goods more unequally

and more indirectly. Of this kind are the duties, which, in French, are

called peages, which in old Saxon times were called the duties of

passage, and which seem to have been originally established for the same

purpose as our turnpike tolls, or the tolls upon our canals and

navigable rivers, for the maintenance of the road or of the navigation.

Those duties, when applied to such purposes, are most properly imposed

according to the bulk or weight of the goods. As they were originally

local and provincial duties, applicable to local and provincial

purposes, the administration of them was, in most cases, entrusted to

the particular town, parish, or lordship, in which they were levied;

such communities being, in some way or other, supposed to be accountable

for the application. The sovereign, who is altogether unaccountable, has

in many countries assumed to himself the administration of those duties;

and though he has in most cases enhanced very much the duty, he has in

many entirely neglected the application. If the turnpike tolls of Great

Britain should ever become one of the resources of government, we may

learn, by the example of many other nations, what would probably be the

consequence. Such tolls, no doubt, are finally paid by the consumer; but

the consumer is not taxed in proportion to his expense, when he pays,

not according to the value, but according to the bulk or weight of what

he consumes. When such duties are imposed, not according to the bulk or

weight, but according to the supposed value of the goods, they become

properly a sort of inland customs or excise, which obstruct very much

the most important of all branches of commerce, the interior commerce of

the country.

In some small states, duties similar to those passage duties are imposed

upon goods carried across the territory, either by land or by water,

from one foreign country to another. These are in some countries called

transit-duties. Some of the little Italian states which are situated

upon the Po, and the rivers which run into it, derive some revenue from

duties of this kind, which are paid altogether by foreigners, and which,

perhaps, are the only duties that one state can impose upon the subjects

of another, without obstructing, in any respect, the industry or

commerce of its own. The most important transit-duty in the world, is

that levied by the king of Denmark upon all merchant ships which pass

through the Sound.

Such taxes upon luxuries, as the greater part of the duties of customs

and excise, though they all fall indifferently upon every different

species of revenue, and are paid finally, or without any retribution, by

whoever consumes the commodities upon which they are imposed, yet they

do not always fall equally or proportionally upon the revenue of every

individual. As every man's humour regulates the degree of his

consumption, every man contributes rather according to his humour, than

in proportion to his revenue: the profuse contribute more, the

parsimonious less, than their proper proportion. During the minority of

a man of great fortune, he contributes commonly very little, by his

consumption, towards the support of that state from whose protection he

derives a great revenue. Those who live in another country, contribute

nothing by their consumption towards the support of the government of

that country, in which is situated the source of their revenue. If in

this latter country there should be no land tax, nor any considerable

duty upon the transference either of moveable or immoveable property, as

is the case in Ireland, such absentees may derive a great revenue from

the protection of a government, to the support of which they do not

contribute a single shilling. This inequality is likely to be greatest

in a country of which the government is, in some respects, subordinate

and dependant upon that of some other. The people who possess the most

extensive property in the dependant, will, in this case, generally chuse

to live in the governing country. Ireland is precisely in this

situation; and we cannot therefore wonder, that the proposal of a tax

upon absentees should be so very popular in that country. It might,

perhaps, be a little difficult to ascertain either what sort, or what

degree of absence, would subject a man to be taxed as an absentee, or at

what precise time the tax should either begin or end. If you except,

however, this very peculiar situation, any inequality in the

contribution of individuals which can arise from such taxes, is much

more than compensated by the very circumstance which occasions that

inequality; the circumstance that every man's contribution is altogether

voluntary; it being altogether in his power, either to consume, or not

to consume, the commodity taxed. Where such taxes, therefore, are

properly assessed, and upon proper commodities, they are paid with less

grumbling than any other. When they are advanced by the merchant or

manufacturer, the consumer, who finally pays them, soon comes to

confound them with the price of the commodities, and almost forgets that

he pays any tax.

Such taxes are, or may be, perfectly certain; or may be assessed, so as

to leave no doubt concerning either what ought to be paid, or when it

ought to be paid; concerning either the quantity or the time of payment.

Whatever uncertainty there may sometimes be, either in the duties of

customs in Great Britain, or in other duties of the same kind in other

countries, it cannot arise from the nature of those duties, but from the

inaccurate or unskilful manner in which the law that imposes them is

expressed.

Taxes upon luxuries generally are, and always may be, paid piece-meal,

or in proportion as the contributors have occasion to purchase the goods

upon which they are imposed. In the time and mode of payment, they are,

or may be, of all taxes the most convenient. Upon the whole, such taxes,

therefore, are perhaps as agreeable to the three first of the four

general maxims concerning taxation, as any other. They offend in every

respect against the fourth.

Such taxes, in proportion to what they bring into the public treasury of

the state, always take out, or keep out, of the pockets of the people,

more than almost any other taxes. They seem to do this in all the four

different ways in which it is possible to do it.

First, the levying of such taxes, even when imposed in the most

judicious manner, requires a great number of custom-house and excise

officers, whose salaries and perquisites are a real tax upon the people,

which brings nothing into the treasury of the state. This expense,

however, it must be acknowledged, is more moderate in Great Britain

than in most other countries. In the year which ended on the 5th

of July, 1775, the gross produce of the different duties, under the

management of the commissioners of excise in England, amounted to

L.5,507,308 : 18 : 8-1/4, which was levied at an expense of little more

than five and a-half per cent. From this gross produce, however, there

must be deducted what was paid away in bounties and drawbacks upon the

exportation of exciseable goods, which will reduce the neat produce

below five millions.[74] The levying of the salt duty, and excise duty,

but under a different management, is much more expensive. The neat

revenue of the customs does not amount to two millions and a-half, which

is levied at an expense of more than ten per cent., in the salaries of

officers and other incidents. But the perquisites of custom-house

officers are everywhere much greater than their salaries; at some ports

more than double or triple those salaries. If the salaries of officers,

and other incidents, therefore, amount to more than ten per cent. upon

the neat revenue of the customs, the whole expense of levying that

revenue may amount, in salaries and perquisites together, to more than

twenty or thirty per cent. The officers of excise receive few or no

perquisites; and the administration of that branch of the revenue being

of more recent establishment, is in general less corrupted than that of

the customs, into which length of time has introduced and authorized

many abuses. By charging upon malt the whole revenue which is at present

levied by the different duties upon malt and malt liquors, a saving, it

is supposed, of more than L.50,000, might be made in the annual expense

of the excise. By confining the duties of customs to a few sorts of

goods, and by levying those duties according to the excise laws, a much

greater saving might probably be made in the annual expense of the

customs.

Secondly, such taxes necessarily occasion some obstruction or

discouragement to certain branches of industry. As they always raise the

price of the commodity taxed, they so far discourage its consumption,

and consequently its production. If it is a commodity of home growth or

manufacture, less labour comes to be employed in raising and producing

it. If it is a foreign commodity of which the tax increases in this

manner the price, the commodities of the same kind which are made at

home may thereby, indeed, gain some advantage in the home market, and a

greater quantity of domestic industry may thereby be turned toward

preparing them. But though this rise of price in a foreign commodity,

may encourage domestic industry in one particular branch, it necessarily

discourages that industry in almost every other. The dearer the

Birmingham manufacturer buys his foreign wine, the cheaper he

necessarily sells that part of his hardware with which, or, what comes

to the same thing, with the price of which, he buys it. That part of his

hardware, therefore, becomes of less value to him, and he has less

encouragement to work at it. The dearer the consumers in one country pay

for the surplus produce of another, the cheaper they necessarily sell

that part of their own surplus produce with which, or, what comes to the

same thing, with the price of which, they buy it. That part of their own

surplus produce becomes of less value to them, and they have less

encouragement to increase its quantity. All taxes upon consumable

commodities, therefore, tend to reduce the quantity of productive labour

below what it otherwise would be, either in preparing the commodities

taxed, if they are home commodities, or in preparing these with which

they are purchased, if they are foreign commodities. Such taxes, too,

always alter, more or less, the natural direction of national industry,

and turn it into a channel always different from, and generally less

advantageous, than that in which is would have run of its own accord.

Thirdly, the hope of evading such taxes by smuggling, gives frequent

occasion to forfeitures and other penalties, which entirely ruin the

smuggler; a person who, though no doubt highly blameable for violating

the laws of his country, is frequently incapable of violating those of

natural justice, and would have been, in every respect, an excellent

citizen, had not the laws of his country made that a crime which nature

never meant to be so. In those corrupted governments, where there is at

least a general suspicion of much unnecessary expense, and great

misapplication of the public revenue, the laws which guard it are little

respected. Not many people are scrupulous about smuggling, when, without

perjury, they can find an easy and safe opportunity of doing so. To

pretend to have any scruple about buying smuggled goods, though a

manifest encouragement to the violation of the revenue laws, and to the

perjury which almost always attends it, would, in most countries, be

regarded as one of those pedantic pieces of hypocrisy which, instead of

gaining credit with anybody, serve only to expose the person who affects

to practise them to the suspicion of being a greater knave than most of

his neighbours. By this indulgence of the public, the smuggler is often

encouraged to continue a trade, which he is thus taught to consider as

in some measure innocent; and when the severity of the revenue laws is

ready to fall upon him, he is frequently disposed to defend with

violence, what he has been accustomed to regard as his just property.

From being at first, perhaps, rather imprudent than criminal, he at last

too often becomes one of the hardiest and most determined violators of

the laws of society. By the ruin of the smuggler, his capital, which had

before been employed in maintaining productive labour, is absorbed

either in the revenue of the state, or in that of the revenue officer;

and is employed in maintaining unproductive, to the diminution of the

general capital of the society, and of the useful industry which it

might otherwise have maintained.

Fourthly, such taxes, by subjecting at least the dealers in the taxed

commodities, to the frequent visits and odious examination of the

tax-gatherers, expose them sometimes, no doubt, to some degree of

oppression, and always to much trouble and vexation; and though

vexation, as has already been said, is not strictly speaking expense, it

is certainly equivalent to the expense at which every man would be

willing to redeem himself from it. The laws of excise, though more

effectual for the purpose for which they were instituted, are, in this

respect, more vexatious than those of the customs. When a merchant has

imparted goods subject to certain duties of customs; when he has paid

those duties, and lodged the goods in his warehouse; he is not, in most

cases, liable to any further trouble or vexation from the custom-house

officer. It is otherwise with goods subject to duties of excise. The

dealers have no respite from the continual visits and examination of the

excise officers. The duties of excise are, upon this account, more

unpopular than those of the customs; and so are the officers who levy

them. Those officers, it is pretended, though in general, perhaps, they

do their duty fully as well as those of the customs; yet, as that duty

obliges them to be frequently very troublesome to some of their

neighbours, commonly contract a certain hardness of character, which the

others frequently have not. This observation, however, may very probably

be the mere suggestion of fraudulent dealers, whose smuggling is either

prevented or detected by their diligence.

The inconveniencies, however, which are, perhaps, in some degree

inseparable from taxes upon consumable commodities, fall as light upon

the people of Great Britain as upon those of any other country of which

the government is nearly as expensive. Our state is not perfect, and

might be mended; but it is as good, or better, than that of most of our

neighbours.

In consequence of the notion, that duties upon consumable goods were

taxes upon the profits of merchants, those duties have, in some

countries, been repeated upon every successive sale of the goods. If the

profits of the merchant-importer or merchant-manufacturer were taxed,

equality seemed to require that those of all the middle buyers, who

intervened between either of them and the consumer, should likewise be

taxed. The famous alcavala of Spain seems to have been established upon

this principle. It was at first a tax of ten per cent, afterwards of

fourteen per cent. and it is at present only six per cent. upon the sale

of every sort of property, whether moveable or immoveable; and it is

repeated every time the property is sold.[75] The levying of this tax

requires a multitude of revenue officers, sufficient to guard the

transportation of goods, not only from one province to another, but from

one shop to another. It subjects, not only the dealers in some sorts of

goods, but those in all sorts, every farmer, every manufacturer, every

merchant and shopkeeper, to the continual visit and examination of the

tax-gatherers. Through the greater part of the country in which a tax of

this kind is established, nothing can be produced for distant sale. The

produce of every part of the country must be proportioned to the

consumption of the neighbourhood. It is to the alcavala, accordingly,

that Ustaritz imputes the ruin of the manufactures of Spain. He might

have imputed to it, likewise, the declension of agriculture, it being

imposed not only upon manufactures, but upon the rude produce of the

land.

In the kingdom of Naples, there is a similar tax of three per cent. upon

the value of all contracts, and consequently upon that of all contracts

of sale. It is both lighter than the Spanish tax, and the greater part

of towns and parishes are allowed to pay a composition in lieu of it.

They levy this composition in what manner they please, generally in a

way that gives no interruption to the interior commerce of the place.

The Neapolitan tax, therefore, is not near so ruinous as the Spanish

one.

The uniform system of taxation, which, with a few exceptions of no great

consequence, takes place in all the different parts of the united

kingdom of Great Britain, leaves the interior commerce of the country,

the inland and coasting trade, almost entirely free. The inland trade is

almost perfectly free; and the greater part of goods may be carried from

one end of the kingdom to the other, without requiring any permit or

let-pass, without being subject to question, visit or examination, from

the revenue officers. There are a few exceptions, but they are such as

can give no interruption to any important branch of inland commerce of

the country. Goods carried coastwise, indeed, require certificates or

coast-cockets. If you except coals, however, the rest are almost all

duty-free. This freedom of interior commerce, the effect of the

uniformity of the system of taxation, is perhaps one of the principal

causes of the prosperity of Great Britain; every great country being

necessarily the best and most extensive market for the greater part of

the productions of its own industry. If the same freedom in consequence

of the same uniformity, could be extended to Ireland and the

plantations, both the grandeur of the state, and the prosperity of every

part of the empire, would probably be still greater than at present.

In France, the different revenue laws which take place in the different

provinces, require a multitude of revenue officers to surround, not only

the frontiers of the kingdom, but those of almost each particular

province, in order either to prevent the importation of certain goods,

or to subject it to the payment of certain duties, to the no small

interruption of the interior commerce of the country. Some provinces are

allowed to compound for the gabelle, or salt tax; others are exempted

from it altogether. Some provinces are exempted from the exclusive sale

of tobacco, which the farmers-general enjoy through the greater part of

the kingdom. The aides, which correspond to the excise in England, are

very different in different provinces. Some provinces are exempted from

them, and pay a composition or equivalent. In those in which they take

place, and are in farm, there are many local duties which do not extend

beyond a particular town or district. The traites, which correspond to

our customs, divide the kingdom into three great parts; first, the

provinces subject to the tariff of 1664, which are called the provinces

of the five great farms, and under which are comprehended Picardy,

Normandy, and the greater part of the interior provinces of the kingdom;

secondly, the provinces subject to the tariff of 1667, which are called

the provinces reckoned foreign, and under which are comprehended the

greater part of the frontier provinces; and, thirdly, those provinces

which are said to be treated as foreign, or which, because they are

allowed a free commerce with foreign countries, are, in their commerce

with the other provinces of France, subjected to the same duties as

other foreign countries. These are Alsace, the three bishoprics of

Mentz, Toul, and Verdun, and the three cities of Dunkirk, Bayonne, and

Marseilles. Both in the provinces of the five great farms (called so on

account of an ancient division of the duties of customs into five great

branches, each of which was originally the subject of a particular farm,

though they are now all united into one), and in those which are said to

be reckoned foreign, there are many local duties which do not extend

beyond a particular town or district. There are some such even in the

provinces which are said to be treated as foreign, particularly in the

city of Marseilles. It is unnecessary to observe how much both the

restraints upon the interior commerce of the country, and the number of

the revenue officers, must be multiplied, in order to guard the

frontiers of those different provinces and districts which are subject

to such different systems of taxation.

Over and above the general restraints arising from this complicated

system of revenue laws, the commerce of wine (after corn, perhaps, the

most important production of France) is, in the greater part of the

provinces, subject to particular restraints arising from the favour

which has been shown to the vineyards of particular provinces and

districts above those of others. The provinces most famous for their

wines, it will be found, I believe, are those in which the trade in that

article is subject to the fewest restraints of this kind. The extensive

market which such provinces enjoy, encourages good management both in

the cultivation of their vineyards, and in the subsequent preparation of

their wines.

Such various and complicated revenue laws are not peculiar to France.

The little duchy of Milan is divided into six provinces, in each of

which there is a different system of taxation, with regard to several

different sorts of consumable goods. The still smaller territories of

the duke of Parma are divided into three or four, each of which has, in

the same manner, a system of its own. Under such absurd management,

nothing but the great fertility of the soil, and happiness of the

climate, could preserve such countries from soon relapsing into the

lowest state of poverty and barbarism.

Taxes upon consumable commodities may either be levied by an

administration, of which the officers are appointed by government, and

immediately accountable to government, of which the revenue must, in

this case, vary from year to year, according to the occasional

variations in the produce of the tax; or they may be let in farm for a

rent certain, the farmer being allowed to appoint his own officers, who,

though obliged to levy the tax in the manner directed by the law, are

under his immediate inspection, and are immediately accountable to him.

The best and most frugal way of levying a tax can never be by farm. Over

and above what is necessary for paying the stipulated rent, the salaries

of the officers, and the whole expense of administration, the farmer

must always draw from the produce of the tax a certain profit,

proportioned at least to the advance which he makes, to the risk which

he runs, to the trouble which he is at, and to the knowledge and skill

which it requires to manage so very complicated a concern. Government,

by establishing an administration under their own immediate inspection,

of the same kind with that which the farmer establishes, might at least

save this profit, which is almost always exorbitant. To farm any

considerable branch of the public revenue requires either a great

capital, or a great credit; circumstances which would alone restrain the

competition for such an undertaking to a very small number of people. Of

the few who have this capital or credit, a still smaller number have the

necessary knowledge or experience; another circumstance which restrains

the competition still further. The very few who are in condition to

become competitors, find it more for their interest to combine together;

to become copartners, instead of competitors; and, when the farm is set

up to auction, to offer no rent but what is much below the rent value.

In countries where the public revenues are in farm, the farmers are

generally the most opulent people. Their wealth would alone excite the

public indignation; and the vanity which almost always accompanies such

upstart fortunes, the foolish ostentation with which they commonly

display that wealth, excite that indignation still more.

The farmers of the public revenue never find the laws too severe, which

punish any attempt to evade the payment of a tax. They have no bowels

for the contributors, who are not their subjects, and whose universal

bankruptcy, if it should happen the day after the farm is expired, would

not much affect their interest. In the greatest exigencies of the state,

when the anxiety of the sovereign for the exact payment of his revenue

is necessarily the greatest, they seldom fail to complain, that without

laws more rigorous than those which actually took place, it will be

impossible for them to pay even the usual rent. In those moments of

public distress, their commands cannot be disputed. The revenue laws,

therefore, become gradually more and more severe. The most sanguinary

are always to be found in countries where the greater part of the public

revenue is in farm; the mildest, in countries where it is levied under

the immediate inspection of the sovereign. Even a bad sovereign feels

more compassion for his people than can ever be expected from the

farmers of his revenue. He knows that the permanent grandeur of his

family depends upon the prosperity of his people, and he will never

knowingly ruin that prosperity for the sake of any momentary interest of

his own. It is otherwise with the farmers of his revenue, whose grandeur

may frequently be the effect of the ruin, and not of the prosperity, of

his people.

A tax is sometimes not only farmed for a certain rent, but the farmer

has, besides, the monopoly of the commodity taxed. In France, the duties

upon tobacco and salt are levied in this manner. In such cases, the

farmer, instead of one, levies two exorbitant profits upon the people;

the profit of the farmer, and the still more exorbitant one of the

monopolist. Tobacco being a luxury, every man is allowed to buy or not

to buy as he chuses; but salt being a necessary, every man is obligated

to buy of the farmer a certain quantity of it; because, if he did not

buy this quantity of the farmer, he would, it is presumed, buy it of

some smuggler. The taxes upon both commodities are exorbitant. The

temptation to smuggle, consequently, is to many people irresistible;

while, at the same time, the rigour of the law, and the vigilance of the

farmer's officers, render the yielding to the temptation almost

certainly ruinous. The smuggling of salt and tobacco sends every year

several hundred people to the galleys, besides a very considerable

number whom it sends to the gibbet. Those taxes, levied in this manner,

yield a very considerable revenue to government. In 1767, the farm of

tobacco was let for twenty-two millions five hundred and forty-one

thousand two hundred and seventy-eight livres a-year; that of salt for

thirty-six millions four hundred and ninety-two thousand four hundred

and four livres. The farm, in both cases, was to commence in 1768, and

to last for six years. These who consider the blood of the people as

nothing, in comparison with the revenue of the prince, may, perhaps,

approve of this method of levying taxes. Similar taxes and monopolies of

salt and tobacco have been established in many other countries,

particularly in the Austrian and Prussian dominions, and in the greater

part of the states of Italy.

In France, the greater part of the actual revenue of the crown is

derived from eight different sources; the taille, the capitation, the

two vingtiemes, the gabelles, the aides, the traites, the domaine, and

the farm of tobacco. The five last are, in the greater part of the

provinces, under farm. The three first are everywhere levied by an

administration, under the immediate inspection and direction of

government; and it is universally acknowledged, that in proportion to

what they take out of the pockets of the people, they bring more into

the treasury of the prince than the other five, of which the

administration is much more wasteful and expensive.

The finances of France seem, in their present state, to admit of three

very obvious reformations. First, by abolishing the taille and the

capitation, and by increasing the number of the vingtiemes, so as to

produce an additional revenue equal to the amount of those other taxes,

the revenue of the crown might be preserved; the expense of collection

might be much diminished; the vexation of the inferior ranks of people,

which the taille and capitation occasion, might be entirely prevented;

and the superior ranks might not be more burdened than the greater part

of them are at present. The vingtieme, I have already observed, is a tax

very nearly of the same kind with what is called the land tax of

England. The burden of the taille, it is acknowledged, falls finally

upon the proprietors of land; and as the greater part of the capitation

is assessed upon those who are subject to the taille, at so much a-pound

of that other tax, the final payment of the greater part of it must

likewise fall upon the same order of people. Though the number of the

vingtiemes, therefore, was increased, so as to produce an additional

revenue equal to the amount of both those taxes, the superior ranks of

people might not be more burdened than they are at present; many

individuals, no doubt, would, on account of the great inequalities with

which the taille is commonly assessed upon the estates and tenants of

different individuals. The interest and opposition of such favoured

subjects, are the obstacles most likely to prevent this, or any other

reformation of the same kind. Secondly, by rendering the gabelle, the

aides, the traites, the taxes upon tobacco, all the different customs

and excises, uniform in all the different parts of the kingdom, those

taxes might be levied at much less expense, and the interior commerce of

the kingdom might be rendered as free as that of England. Thirdly, and

lastly, by subjecting all those taxes to an administration under the

immediate inspection and direction of government, the exorbitant profits

of the farmers-general might be added to the revenue of the state. The

opposition arising from the private interest of individuals, is likely

to be as effectual for preventing the two last as the first-mentioned

scheme of reformation.

The French system of taxation seems, in every respect, inferior to the

British. In Great Britain, ten millions sterling are annually levied

upon less than eight millions of people, without its being possible to

say that any particular order is oppressed. From the Collections of the

Abbe Expilly, and the observations of the author of the Essay upon the

Legislation and Commerce of Corn, it appears probable that France,

including the provinces of Lorraine and Bar, contains about twenty-three

or twenty-four millions of people; three times the number, perhaps,

contained in Great Britain. The soil and climate of France are better

than those of Great Britain. The country has been much longer in a state

of improvement and cultivation, and is, upon that account, better

stocked with all those things which it requires a long time to raise up

and accumulate; such as great towns, and convenient and well-built

houses, both in town and country. With these advantages, it might be

expected, that in France a revenue of thirty millions might be levied

for the support of the state, with as little inconvenience as a revenue

of ten millions is in Great Britain. In 1765 and 1766, the whole revenue

paid into the treasury of France, according to the best, though, I

acknowledge, very imperfect accounts which I could get of it, usually

run between 308 and 325 millions of livres; that is, it did not amount

to fifteen millions sterling; not the half of what might have been

expected, had the people contributed in the same proportion to their

numbers as the people of Great Britain. The people of France, however,

it is generally acknowledged, are much more oppressed by taxes than the

people of Great Britain. France, however, is certainly the great empire

in Europe, which, after that of Great Britain, enjoys the mildest and

most indulgent government.

In Holland, the heavy taxes upon the necessaries of life have ruined, it

is said, their principal manufacturers, and are likely to discourage,

gradually, even their fisheries and their trade in ship-building. The

taxes upon the necessaries of life are inconsiderable in Great Britain,

and no manufacture has hitherto been ruined by them. The British taxes

which bear hardest on manufactures, are some duties upon the importation

of raw materials, particularly upon that of raw silk. The revenue of the

States-General and of the different cities, however, is said to amount

to more than five millions two hundred and fifty thousand pounds

sterling; and as the inhabitants of the United Provinces cannot well be

supposed to amount to more than a third part of those of Great Britain,

they must, in proportion to their number, be much more heavily taxed.

After all the proper subjects of taxation have been exhausted, if the

exigencies of the state still continue to require new taxes, they must

be imposed upon improper ones. The taxes upon the necessaries of life,

therefore, may be no impeachment of the wisdom of that republic, which,

in order to acquire and to maintain its independency, has, in spite of

its great frugality, been involved in such expensive wars as have

obliged it to contract great debts. The singular countries of Holland

and Zealand, besides, require a considerable expense even to preserve

their existence, or to prevent their being swallowed up by the sea,

which must have contributed to increase considerably the load of taxes

in those two provinces. The republican form of government seems to be

the principal support of the present grandeur of Holland. The owners of

great capitals, the great mercantile families, have generally either

some direct share, or some indirect influence, in the administration of

that government. For the sake of the respect and authority which they

derive from this situation, they are willing to live in a country where

their capital, if they employ it themselves, will bring them less

profit, and if they lend it to another, less interest; and where the

very moderate revenue which they can draw from it will purchase less of

the necessaries and conveniencies of life than in any other part of

Europe. The residence of such wealthy people necessarily keeps alive, in

spite of all disadvantages, a certain degree of industry in the country.

Any public calamity which should destroy the republican form of

government, which should throw the whole administration into the hands

of nobles and of soldiers, which should annihilate altogether the

importance of those wealthy merchants, would soon render it disagreeable

to them to live in a country where they were no longer likely to be much

respected. They would remove both their residence and their capital to

some other country, and the industry and commerce of Holland would soon

follow the capitals which supported them.

CHAP. III.

OF PUBLIC DEBTS.

In that rude state of society which precedes the extension of commerce

and the improvement of manufactures; when those expensive luxuries,

which commerce and manufactures can alone introduce, are altogether

unknown; the person who possesses a large revenue, I have endeavoured to

show in the third book of this Inquiry, can spend or enjoy that revenue

in no other way than by maintaining nearly as many people as it can

maintain. A large revenue may at all times be said to consist in the

command of a large quantity of the necessaries of life. In that rude

state of things, it is commonly paid in a large quantity of those

necessaries, in the materials of plain food and coarse clothing, in corn

and cattle, in wool and raw hides. When neither commerce nor

manufactures furnish any thing for which the owner can exchange the

greater part of those materials which are over and above his own

consumption, he can do nothing with the surplus, but feed and clothe

nearly as many people as it will feed and clothe. A hospitality in which

there is no luxury, and a liberality in which there is no ostentation,

occasion, in this situation of things, the principal expenses of the

rich and the great. But these I have likewise endeavoured to show, in

the same book, are expenses by which people are not very apt to ruin

themselves. There is not, perhaps, any selfish pleasure so frivolous, of

which the pursuit has not sometimes ruined even sensible men. A passion

for cock-fighting has ruined many. But the instances, I believe, are not

very numerous, of people who have been ruined by a hospitality or

liberality of this kind; though the hospitality of luxury, and the

liberality of ostentation have ruined many. Among our feudal ancestors,

the long time during which estates used to continue in the same family,

sufficiently demonstrates the general disposition of people to live

within their income. Though the rustic hospitality, constantly exercised

by the great landholders, may not, to us in the present times, seem

consistent with that order which we are apt to consider as inseparably

connected with good economy; yet we must certainly allow them to have

been at least so far frugal, as not commonly to have spent their whole

income. A part of their wool and raw hides, they had generally an

opportunity of selling for money. Some part of this money, perhaps, they

spent in purchasing the few objects of vanity and luxury, with which the

circumstances of the times could furnish them; but some part of it they

seem commonly to have hoarded. They could not well, indeed, do any thing

else but hoard whatever money they saved. To trade, was disgraceful to a

gentleman; and to lend money at interest, which at that time was

considered as usury, and prohibited by law, would have been still more

so. In those times of violence and disorder, besides, it was convenient

to have a hoard of money at hand, that in case they should be driven

from their own home, they might have something of known value to carry

with them to some place of safety. The same violence which made it

convenient to hoard, made it equally convenient to conceal the hoard.

The frequency of treasure-trove, or of treasure found, of which no owner

was known, sufficiently demonstrates the frequency, in those times,

both of hoarding and of concealing the hoard. Treasure-trove was then

considered as an important branch of the revenue of the sovereign. All

the treasure-trove of the kingdom would scarce, perhaps, in the present

times, make an important branch of the revenue of a private gentleman of

a good estate.

The same disposition, to save and to hoard, prevailed in the sovereign,

as well as in the subjects. Among nations, to whom commerce and

manufactures are little known, the sovereign, it has already been

observed in the fourth book, is in a situation which naturally disposes

him to the parsimony requisite for accumulation. In that situation, the

expense, even of a sovereign, cannot be directed by that vanity which

delights in the gaudy finery of a court. The ignorance of the times

affords but few of the trinkets in which that finery consists. Standing

armies are not then necessary; so that the expense, even of a sovereign,

like that of any other great lord, can be employed in scarce any thing

but bounty to his tenants, and hospitality to his retainers. But bounty

and hospitality very seldom lead to extravagance; though vanity almost

always does. All the ancient sovereigns of Europe, accordingly, it has

already been observed, had treasures. Every Tartar chief, in the present

times, is said to have one.

In a commercial country, abounding with every sort of expensive luxury,

the sovereign, in the same manner as almost all the great proprietors in

his dominions, naturally spends a great part of his revenue in

purchasing those luxuries. His own and the neighbouring countries supply

him abundantly with all the costly trinkets which compose the splendid,

but insignificant, pageantry of a court. For the sake of an inferior

pageantry of the same kind, his nobles dismiss their retainers, make

their tenants independent, and become gradually themselves as

insignificant as the greater part of the wealthy burghers in his

dominions. The same frivolous passions, which influence their conduct,

influence his. How can it be supposed that he should be the only rich

man in his dominions who is insensible to pleasures of this kind? If he

does not, what he is very likely to do, spend upon those pleasures so

great a part of his revenue as to debilitate very much the defensive

power of the state, it cannot well be expected that he should not spend

upon them all that part of it which is over and above what is necessary

for supporting that defensive power. His ordinary expense becomes equal

to his ordinary revenue, and it is well if it does not frequently exceed

it. The amassing of treasure can no longer be expected; and when

extraordinary exigencies require extraordinary expenses, he must

necessarily call upon his subjects for an extraordinary aid. The present

and the late king of Prussia are the only great princes of Europe, who,

since the death of Henry IV. of France, in 1610, are supposed to have

amassed any considerable treasure. The parsimony which leads to

accumulation has become almost as rare in republican as in monarchical

governments. The Italian republics, the United Provinces of the

Netherlands, are all in debt. The canton of Berne is the single republic

in Europe which has amassed any considerable treasure. The other Swiss

republics have not. The taste for some sort of pageantry, for splendid

buildings, at least, and other public ornaments, frequently prevails as

much in the apparently sober senate-house of a little republic, as in

the dissipated court of the greatest king.

The want of parsimony, in time of peace, imposes the necessity of

contracting debt in time of war. When war comes, there is no money in

the treasury, but what is necessary for carrying on the ordinary expense

of the peace establishment. In war, an establishment of three or four

times that expense becomes necessary for the defence of the state; and

consequently, a revenue three or four times greater than the peace

revenue. Supposing that the sovereign should have, what he scarce ever

has, the immediate means of augmenting his revenue in proportion to the

augmentation of his expense; yet still the produce of the taxes, from

which this increase of revenue must be drawn, will not begin to come

into the treasury, till perhaps ten or twelve months after they are

imposed. But the moment in which war begins, or rather the moment in

which it appears likely to begin, the army must be augmented, the fleet

must be fitted out, the garrisoned towns must be put into a posture of

defence; that army, that fleet, those garrisoned towns, must be

furnished with arms, ammunition, and provisions. An immediate and great

expense must be incurred in that moment of immediate danger, which will

not wait for the gradual and slow returns of the new taxes. In this

exigency, government can have no other resource but in borrowing.

The same commercial state of society which, by the operation of moral

causes, brings government in this manner into the necessity of

borrowing, produces in the subjects both an ability and an inclination

to lend. If it commonly brings along with it the necessity of borrowing,

it likewise brings with it the facility of doing so.

A country abounding with merchants and manufacturers, necessarily

abounds with a set of people through whose hands, not only their own

capitals, but the capitals of all those who either lend them money, or

trust them with goods, pass as frequently, or more frequently, than the

revenue of a private man, who, without trade or business, lives upon his

income, passes through his hands. The revenue of such a man can

regularly pass through his hands only once in a year. But the whole

amount of the capital and credit of a merchant, who deals in a trade of

which the returns are very quick, may sometimes pass through his hands

two, three, or four times in a year. A country abounding with merchants

and manufacturers, therefore, necessarily abounds with a set of people,

who have it at all times in their power to advance, if they chuse to do

so, a very large sum of money to government. Hence the ability in the

subjects of a commercial state to lend.

Commerce and manufactures can seldom flourish long in any state which

does not enjoy a regular administration of justice; in which the people

do not feel themselves secure in the possession of their property; in

which the faith of contracts is not supported by law; and in which the

authority of the state is not supposed to be regularly employed in

enforcing the payment of debts from all those who are able to pay.

Commerce and manufactures, in short, can seldom flourish in any state,

in which there is not a certain degree of confidence in the justice of

government. The same confidence which disposes great merchants and

manufacturers upon ordinary occasions, to trust their property to the

protection of a particular government, disposes them, upon extraordinary

occasions, to trust that government with the use of their property. By

lending money to government, they do not even for a moment diminish

their ability to carry on their trade and manufactures; on the contrary,

they commonly augment it. The necessities of the state render

government, upon most occasions willing to borrow upon terms extremely

advantageous to the lender. The security which it grants to the original

creditor, is made transferable to any other creditor; and from the

universal confidence in the justice of the state, generally sells in the

market for more than was originally paid for it. The merchant or monied

man makes money by lending money to government, and instead of

diminishing, increases his trading capital. He generally considers it as

a favour, therefore, when the administration admits him to a share in

the first subscription for a new loan. Hence the inclination or

willingness in the subjects of a commercial state to lend.

The government of such a state is very apt to repose itself upon this

ability and willingness of its subjects to lend it their money on

extraordinary occasions. It foresees the facility of borrowing, and

therefore dispenses itself from the duty of saving.

In a rude state of society, there are no great mercantile or

manufacturing capitals. The individuals, who hoard whatever money they

can save, and who conceal their hoard, do so from a distrust of the

justice of government; from a fear, that if it was known that they had a

hoard, and where that hoard was to be found, they would quickly be

plundered. In such a state of things, few people would be able, and

nobody would be willing to lend their money to government on

extraordinary exigencies. The sovereign feels that he must provide for

such exigencies by saving, because he foresees the absolute

impossibility of borrowing. This foresight increases still further his

natural disposition to save.

The progress of the enormous debts which at present oppress, and will in

the long-run probably ruin, all the great nations of Europe, has been

pretty uniform. Nations, like private men, have generally begun to

borrow upon what may be called personal credit, without assigning or

mortgaging any particular fund for the payment of the debt; and when

this resource has failed them, they have gone on to borrow upon

assignments or mortgages of particular funds.

What is called the unfunded debt of Great Britain, is contracted in the

former of those two ways. It consists partly in a debt which bears, or

is supposed to bear, no interest, and which resembles the debts that a

private man contracts upon account; and partly in a debt which bears

interest, and which resembles what a private man contracts upon his bill

or promissory-note. The debts which are due, either for extraordinary

services, or for services either not provided for, or not paid at the

time when they are performed; part of the extraordinaries of the army,

navy, and ordnance, the arrears of subsidies to foreign princes, those

of seamen's wages, &c. usually constitute a debt of the first kind. Navy

and exchequer bills, which are issued sometimes in payment of a part of

such debts, and sometimes for other purposes, constitutes a debt of the

second kind; exchequer bills bearing interest from the day on which they

are issued, and navy bills six months after they are issued. The bank of

England, either by voluntarily discounting those bills at their current

value, or by agreeing with government for certain considerations to

circulate exchequer bills, that is, to receive them at par, paying the

interest which happens to be due upon them, keeps up the value, and

facilitates their circulation, and thereby frequently enables government

to contract a very large debt of this kind. In France, where there is no

bank, the state bills (billets d'etat[76]) have sometimes sold at sixty

and seventy per cent. discount. During the great recoinage in king

William's time, when the bank of England thought proper to put a stop to

its usual transactions, exchequer bills and tallies are said to have

sold from twenty-five to sixty per cent. discount; owing partly, no

doubt, to the supposed instability of the new government established by

the Revolution, but partly, too, to the want of the support of the bank

of England.

When this resource is exhausted, and it becomes necessary, in order to

raise money, to assign or mortgage some particular branch of the public

revenue for the payment of the debt, government has, upon different

occasions, done this in two different ways. Sometimes it has made this

assignment or mortgage for a short period of time only, a year, or a few

years, for example; and sometimes for perpetuity. In the one case, the

fund was supposed sufficient to pay, within the limited time, both

principal and interest of the money borrowed. In the other, it was

supposed sufficient to pay the interest only, or a perpetual annuity

equivalent to the interest, government being at liberty to redeem, at

any time, this annuity, upon paying back the principal sum borrowed.

When money was raised in the one way, it was said to be raised by

anticipation; when in the other, by perpetual funding, or, more shortly,

by funding.

In Great Britain, the annual land and malt taxes are regularly

anticipated every year, by virtue of a borrowing clause constantly

inserted into the acts which impose them. The bank of England generally

advances at an interest, which, since the Revolution, has varied from

eight to three per cent., the sums of which those taxes are granted, and

receives payment as their produce gradually comes in. If there is a

deficiency, which there always is, it is provided for in the supplies of

the ensuing year. The only considerable branch of the public revenue

which yet remains unmortgaged, is thus regularly spent before it comes

in. Like an improvident spendthrift, whose pressing occasions will not

allow him to wait for the regular payment of his revenue, the state is

in the constant practice of borrowing of its own factors and agents, and

of paying interest for the use of its own money.

In the reign of king William, and during a great part of that of queen

Anne, before we had become so familiar as we are now with the practice

of perpetual funding, the greater part of the new taxes were imposed but

for a short period of time (for four, five, six, or seven years only),

and a great part of the grants of every year consisted in loans upon

anticipations of the produce of those taxes. The produce being

frequently insufficient for paying, within the limited term, the

principal and interest of the money borrowed, deficiencies arose; to

make good which, it became necessary to prolong the term.

In 1697, by the 8th of William III., c. 20, the deficiencies of several

taxes were charged upon what was then called the first general mortgage

or fund, consisting of a prolongation to the first of August 1706, of

several different taxes, which would have expired within a shorter

term, and of which the produce was accumulated into one general fund.

The deficiencies charged upon this prolonged term amounted to

L.5,160,459 : 14 : 9-1/2.

In 1701, those duties, with some others, were still further prolonged,

for the like purposes, till the first of August 1710, and were called

the second general mortgage or fund. The deficiencies charged upon it

amounted to L.2,055,999 : 7 : 11-1/2.

In 1707, those duties were still further prolonged, as a fund for new

loans, to the first of August 1712, and were called the third general

mortgage or fund. The sum borrowed upon it was L.983,254 : 11 : 9-1/4.

In 1708, those duties were all (except the old subsidy of tonnage and

poundage, of which one moiety only was made a part of this fund, and a

duty upon the importation of Scotch linen, which had been taken off by

the articles of union) still further continued, as a fund for new loans,

to the first of August 1714, and were called the fourth general mortgage

or fund. The sum borrowed upon it was L.925,176 : 9 : 2-1/4.

In 1709, those duties were all (except the old subsidy of tonnage and

poundage, which was now left out of this fund altogether) still further

continued, for the same purpose, to the first of August 1716, and were

called the fifth general mortgage or fund. The sum borrowed upon it was

L.922,029 : 6s.

In 1710, those duties were again prolonged to the first of August 1720,

and were called the sixth general mortgage or fund. The sum borrowed

upon it was L.1,296,552 : 9 : 11-3/4.

In 1711, the same duties (which at this time were thus subject to four

different anticipations), together with several others, were continued

for ever, and made a fund for paying the interest of the capital of

the South-sea company, which had that year advanced to government,

for paying debts, and making good deficiencies, the sum of

L.9,177,967 : 15 : 4, the greatest loan which at that time had ever

been made.

Before this period, the principal, so far as I have been able to

observe, the only taxes, which, in order to pay the interest of a debt,

had been imposed for perpetuity, were these for paying the interest of

the money which had been advanced to government by the bank and

East-India company, and of what it was expected would be advanced, but

which was never advanced, by a projected land bank. The bank fund at

this time amounted to L.3,375,027 : 17 : 10-1/2, for which was paid an

annuity or interest of L.206,501 : 13 : 5. The East-India fund amounted

to L.3,200,000, for which was paid an annuity or interest of L.160,000;

the bank fund being at six per cent., the East-India fund at five per

cent. interest.

In 1715, by the first of George I., c. 12, the different taxes which had

been mortgaged for paying the bank annuity, together with several

others, which, by this act, were likewise rendered perpetual, were

accumulated into one common fund, called the aggregate fund, which was

charged not only with the payment of the bank annuity, but with several

other annuities and burdens of different kinds. This fund was afterwards

augmented by the third of George I., c. 8., and by the fifth of George

I., c. 3, and the different duties which were then added to it were

likewise rendered perpetual.

In 1717, by the third of George I., c. 7, several other taxes were

rendered perpetual, and accumulated into another common fund, called the

general fund, for the payment of certain annuities, amounting in the

whole to L.724,849 : 6 : 10-1/2.

In consequence of those different acts, the greater part of the taxes,

which before had been anticipated only for a short term of years were

rendered perpetual, as a fund for paying, not the capital, but the

interest only, of the money which had been borrowed upon them by

different successive anticipations.

Had money never been raised but by anticipation, the course of a few

years would have liberated the public revenue, without any other

attention of government besides that of not overloading the fund, by

charging it with more debt than it could pay within the limited term,

and not of anticipating a second time before the expiration of the first

anticipation. But the greater part of European governments have been

incapable of those attentions. They have frequently overloaded the fund,

even upon the first anticipation; and when this happened not to be the

case, they have generally taken care to overload it, by anticipating a

second and a third time, before the expiration of the first

anticipation. The fund becoming in this manner altogether insufficient

for paying both principal and interest of the money borrowed upon it, it

became necessary to charge it with the interest only, or a perpetual

annuity equal to the interest; and such improvident anticipations

necessarily gave birth to the more ruinous practice of perpetual

funding. But though this practice necessarily puts off the liberation of

the public revenue from a fixed period, to one so indefinite that it is

not very likely ever to arrive; yet, as a greater sum can, in all cases,

be raised by this new practice than by the old one of anticipation, the

former, when men have once become familiar with it, has, in the great

exigencies of the state, been universally preferred to the latter. To

relieve the present exigency, is always the object which principally

interests those immediately concerned in the administration of public

affairs. The future liberation of the public revenue they leave to the

care of posterity.

During the reign of queen Anne, the market rate of interest had fallen

from six to five per cent.; and, in the twelfth year of her reign, five

per cent. was declared to be the highest rate which could lawfully be

taken for money borrowed upon private security. Soon after the greater

part of the temporary taxes of Great Britain had been rendered

perpetual, and distributed into the aggregate, South-sea, and general

funds, the creditors of the public, like those of private persons, were

induced to accept of five per cent. for the interest of their money,

which occasioned a saving of one per cent. upon the capital of the

greater part of the debts which had been thus funded for perpetuity, or

of one-sixth of the greater part of the annuities which were paid out of

the three great funds above mentioned. This saving left a considerable

surplus in the produce of the different taxes which had been accumulated

into those funds, over and above what was necessary for paying the

annuities which were now charged upon them, and laid the foundation of

what has since been called the sinking fund. In 1717, it amounted to

L.323,434 : 7 : 7-1/2. In 1727, the interest of the greater part of the

public debts was still further reduced to four per cent.; and, in 1753

and 1757, to three and a-half, and three per cent., which reductions

still further augmented the sinking fund.

A sinking fund, though instituted for the payment of old, facilitates

very much the contracting of new debts. It is a subsidiary fund, always

at hand, to be mortgaged in aid of any other doubtful fund, upon which

money is proposed to be raised in any exigency of the state. Whether the

sinking fund of Great Britain has been more frequently applied to the

one or to other of those two purposes, will sufficiently appear by and

by.

Besides these two methods of borrowing, by anticipations and by a

perpetual funding, there are two other methods, which hold a sort of

middle place between them; these are, that of borrowing upon annuities

for terms of years, and that of borrowing upon annuities for lives.

During the reigns of king William and queen Anne, large sums were

frequently borrowed upon annuities for terms of years, which were

sometimes longer and sometimes shorter. In 1693, an act was passed for

borrowing one million upon an annuity of fourteen per cent., or

L.140,000 a-year, for sixteen years. In 1691, an act was passed for

borrowing a million upon annuities for lives, upon terms which, in the

present times, would appear very advantageous; but the subscription was

not filled up. In the following year, the deficiency was made good, by

borrowing upon annuities for lives, at fourteen per cent. or a little

more than seven years purchase. In 1695, the persons who had purchased

those annuities were allowed to exchange them for others of ninety-six

years, upon paying into the exchequer sixty-three pounds in the hundred;

that is, the difference between fourteen per cent. for life, and

fourteen per cent. for ninety-six years, was sold for sixty-three

pounds, or for four and a-half years purchase. Such was the supposed

instability of government, that even these terms procured few

purchasers. In the reign of queen Anne, money was, upon different

occasions, borrowed both upon annuities for lives, and upon annuities

for terms of thirty-two, of eighty-nine, of ninety-eight, and of

ninety-nine years. In 1719, the proprietors of the annuities for

thirty-two years were induced to accept, in lieu of them, South-sea

stock to the amount of eleven and a-half years purchase of the

annuities, together with an additional quantity of stock, equal to the

arrears which happened then to be due upon them. In 1720, the greater

part of the other annuities for terms of years, both long and short,

were subscribed into the same fund. The long annuities, at that time,

amounted to L.666,821 : 8 : 3-1/2 a-year. On the 5th of January 1775,

the remainder of them, or what was not subscribed at that time, amounted

only to L.136,453 : 12 : 8.

During the two wars which began in 1739 and in 1755, little money was

borrowed, either upon annuities for terms of years, or upon those for

lives. An annuity for ninety-eight or ninety-nine years, however, is

worth nearly as much as a perpetuity, and should therefore, one might

think, be a fund for borrowing nearly as much. But those who, in order

to make family settlements, and to provide for remote futurity, buy into

the public stocks, would not care to purchase into one of which the

value was continually diminishing; and such people make a very

considerable proportion, both of the proprietors and purchasers of

stock. An annuity for a long term of years, therefore, though its

intrinsic value may be very nearly the same with that of a perpetual

annuity, will not find nearly the same number of purchasers. The

subscribers to a new loan, who mean generally to sell their subscription

as soon as possible, prefer greatly a perpetual annuity, redeemable by

parliament, to an irredeemable annuity, for a long term of years, of

only equal amount. The value of the former may be supposed always the

same, or very nearly the same; and it makes, therefore, a more

convenient transferable stock than the latter.

During the two last-mentioned wars, annuities, either for terms of years

or for lives, were seldom granted, but as premiums to the subscribers of

a new loan, over and above the redeemable annuity or interest, upon the

credit of which the loan was supposed to be made. They were granted, not

as the proper fund upon which the money was borrowed, but as an

additional encouragement to the lender.

Annuities for lives have occasionally been granted in two different

ways; either upon separate lives, or upon lots of lives, which, in

French, are called tontines, from the name of their inventor. When

annuities are granted upon separate lives, the death of every individual

annuitant disburdens the public revenue, so far as it was affected by

his annuity. When annuities are granted upon tontines, the liberation of

the public revenue does not commence till the death of all the

annuitants comprehended in one lot, which may, sometimes consist of

twenty or thirty persons, of whom the survivors succeed to the annuities

of all those who die before them; the last survivor succeeding to the

annuities of the whole lot. Upon the same revenue, more money can always

be raised by tontines than by annuities for separate lives. An annuity,

with a right of survivorship, is really worth more than an equal annuity

for a separate life; and, from the confidence which every man naturally

has in his own good fortune, the principle upon which is founded the

success of all lotteries, such an annuity generally sells for something

more than it is worth. In countries where it is usual for government to

raise money by granting annuities, tontines are, upon this account,

generally preferred to annuities for separate lives. The expedient which

will raise most money, is almost always preferred to that which is

likely to bring about, in the speediest manner, the liberation of the

public revenue.

In France, a much greater proportion of the public debts consists in

annuities for lives than in England. According to a memoir presented by

the parliament of Bourdeaux to the king, in 1764, the whole public debt

of France is estimated at twenty-four hundred millions of livres; of

which the capital, for which annuities for lives had been granted, is

supposed to amount to three hundred millions, the eighth part of the

whole public debt. The annuities themselves are computed to amount to

thirty millions a-year, the fourth part of one hundred and twenty

millions, the supposed interest of that whole debt. These estimations, I

know very well, are not exact; but having been presented by so very

respectable a body as approximations to the truth, they may, I

apprehend, be considered as such. It is not the different degrees of

anxiety in the two governments of France and England for the liberation

of the public revenue, which occasions this difference in their

respective modes of borrowing; it arises altogether from the different

views and interests of the lenders.

In England, the seat of government being in the greatest mercantile city

in the world, the merchants are generally the people who advance money

to government. By advancing it, they do not mean to diminish, but, on

the contrary, to increase their mercantile capitals; and unless they

expected to sell, with some profit, their share in the subscription for

a new loan, they never would subscribe. But if, by advancing their

money, they were to purchase, instead of perpetual annuities, annuities

for lives only, whether their own or those of other people, they would

not always be so likely to sell them with a profit. Annuities upon their

own lives they would always sell with loss; because no man will give for

an annuity upon the life of another, whose age and state of health are

nearly the same with his own, the same price which he would give for one

upon his own. An annuity upon the life of a third person, indeed, is, no

doubt, of equal value to the buyer and the seller; but its real value

begins to diminish from the moment it is granted, and continues to do

so, more and more, as long as it subsists. It can never, therefore, make

so convenient a transferable stock as a perpetual annuity, of which the

real value may be supposed always the same, or very nearly the same.

In France, the seat of government not being in a great mercantile city,

merchants do not make so great a proportion of the people who advance

money to government. The people concerned in the finances, the

farmers-general, the receivers of the taxes which are not in farm, the

court-bankers, &c. make the greater part of those who advance their

money in all public exigencies. Such people are commonly men of mean

birth, but of great wealth, and frequently of great pride. They are too

proud to marry their equals, and women of quality disdain to marry them.

They frequently resolve, therefore, to live bachelors; and having

neither any families of their own, nor much regard for those of their

relations, whom they are not always very fond of acknowledging, they

desire only to live in splendour during their own time, and are not

unwilling that their fortune should end with themselves. The number of

rich people, besides, who are either averse to marry, or whose condition

of life renders it either improper or inconvenient for them to do so, is

much greater in France than in England. To such people, who have little

or no care for posterity, nothing can be more convenient than to

exchange their capital for a revenue, which is to last just as long, and

no longer, than they wish it to do.

The ordinary expense of the greater part of modern governments, in time

of peace, being equal, or nearly equal, to their ordinary revenue, when

war comes, they are both unwilling and unable to increase their revenue

in proportion to the increase of their expense. They are unwilling, for

fear of offending the people, who, by so great and so sudden an increase

of taxes, would soon be disgusted with the war; and they are unable,

from not well knowing what taxes would be sufficient to produce the

revenue wanted. The facility of borrowing delivers them from the

embarrassment which this fear and inability would otherwise occasion. By

means of borrowing, they are enabled, with a very moderate increase of

taxes, to raise, from year to year, money sufficient for carrying on the

war; and by the practice of perpetual funding, they are enabled, with

the smallest possible increase of taxes, to raise annually the largest

possible sum of money. In great empires, the people who live in the

capital, and in the provinces remote from the scene of action, feel,

many of them, scarce any inconveniency from the war, but enjoy, at their

ease, the amusement of reading in the newspapers the exploits of their

own fleets and armies. To them this amusement compensates the small

difference between the taxes which they pay on account of the war, and

those which they had been accustomed to pay in time of peace. They are

commonly dissatisfied with the return of peace, which puts an end to

their amusement, and to a thousand visionary hopes of conquest and

national glory, from a longer continuance of the war.

The return of peace, indeed, seldom relieves them from the greater part

of the taxes imposed during the war. These are mortgaged for the

interest of the debt contracted, in order to carry it on. If, over and

above paying the interest of this debt, and defraying the ordinary

expense of government, the old revenue, together with the new taxes,

produce some surplus revenue, it may, perhaps, be converted into a

sinking fund for paying off the debt. But, in the first place, this

sinking fund, even supposing it should be applied to no other purpose,

is generally altogether inadequate for paying, in the course of any

period during which it can reasonably be expected that peace should

continue, the whole debt contracted during the war; and, in the second

place, this fund is almost always applied to other purposes.

The new taxes were imposed for the sole purpose of paying the interest

of the money borrowed upon them. If they produce more, it is generally

something which was neither intended nor expected, and is, therefore,

seldom very considerable. Sinking funds have generally arisen, not so

much from any surplus of the taxes which was over and above what was

necessary for paying the interest or annuity originally charged upon

them, as from a subsequent reduction of that interest; that of Holland

in 1655, and that of the ecclesiastical state in 1685, were both formed

in this manner. Hence the usual insufficiency of such funds.

During the most profound peace, various events occur, which require an

extraordinary expense; and government finds it always more convenient to

defray this expense by misapplying the sinking fund, than by imposing a

new tax. Every new tax is immediately felt more or less by the people.

It occasions always some murmur, and meets with some opposition. The

more taxes may have been multiplied, the higher they may have been

raised upon every different subject of taxation; the more loudly the

people complain of every new tax, the more difficult it becomes, too,

either to find out new subjects of taxation, or to raise much higher the

taxes already imposed upon the old. A momentary suspension of the

payment of debt is not immediately felt by the people, and occasions

neither murmur nor complaint. To borrow of the sinking fund is always an

obvious and easy expedient for getting out of the present difficulty.

The more the public debts may have been accumulated, the more necessary

it may have become to study to reduce them; the more dangerous, the more

ruinous it may be to missapply any part of the sinking fund; the less

likely is the public debt to be reduced to any considerable degree, the

more likely, the more certainly, is the sinking fund to be misapplied

towards defraying all the extraordinary expenses which occur in time of

peace. When a nation is already overburdened with taxes, nothing but the

necessities of a new war, nothing but either the animosity of national

vengeance, or the anxiety for national security, can induce the people

to submit, with tolerable patience, to a new tax. Hence the usual

misapplication of the sinking fund.

In Great Britain, from the time that we had first recourse to the

ruinous expedient of perpetual funding, the reduction of the public

debt, in time of peace, has never borne any proportion to its

accumulation in time of war. It was in the war which began in 1668, and

was concluded by the treaty of Ryswick, in 1697, that the foundation of

the present enormous debt of Great Britain was first laid.

On the 31st of December 1697, the public debts of Great Britain, funded

and unfunded, amounted to L.21,515,742 : 13 : 8-1/2. A great part of

those debts had been contracted upon short anticipations, and some part

upon annuities for lives; so that, before the 31st of December 1701, in

less than four years, there had partly been paid off, and partly

reverted to the public, the sum of L.5,121,041 : 12 : 0-3/4; a greater

reduction of the public debt than has ever since been brought about in

so short a period of time. The remaining debt, therefore, amounted only

to L.16,394,701 : 1 : 7-1/4.

In the war which began in 1702, and which was concluded by the treaty of

Utrecht, the public debts were still more accumulated. On the 31st of

December 1714, they amounted to L.53,681,076 : 5 : 6-1/12. The

subscription into the South-sea fund, of the short and long annuities,

increased the capital of the public debt; so that, on the 31st of

December 1722, it amounted to L.55,282,978 : 1 : 3-5/6. The reduction of

the debt began in 1723, and went on so slowly, that, on the 31st of

December 1739, during seventeen years of profound peace, the whole sum

paid off was no more than L.8,328,354 : 17 : 11-3/12, the capital of the

public debt, at that time, amounting to L.46,954,623 : 3 : 4-7/12.

The Spanish war, which began in 1739, and the French war which soon

followed it, occasioned a further increase of the debt, which, on the

31st of December 1748, after the war had been concluded by the treaty of

Aix-la-Chapelle, amounted to L.78,293,313 : 1 : 10-3/4. The most

profound peace of 17 years continuance, had taken no more than

L.8,328,354 : 17 : 11-1/4 from it. A war, of less than nine years

continuance, added L.31,338,689 : 18 : 6-1/6 to it.[77]

During the administration of Mr. Pelham, the interest of the public debt

was reduced, or at least measures were taken for reducing it, from four

to three per cent.; the sinking fund was increased, and some part of the

public debt was paid off. In 1755, before the breaking out of the late

war, the funded debt of Great Britain amounted to L.72,289,673. On the

5th of January 1763, at the conclusion of the peace, the funded debt

amounted to L.122,603,336 : 8 : 2-1/4. The unfunded debt has been stated

at L.13,927,589 : 2 : 2. But the expense occasioned by the war did not

end with the conclusion of the peace; so that, though on the 5th

of January 1764, the funded debt was increased (partly by a new

loan, and partly by funding a part of the unfunded debt) to

L.129,586,789 : 10 : 1-3/4, there still remained (according to the very

well informed author of Considerations on the Trade and Finances of

Great Britain) an unfunded debt, which was brought to account in that

and the following year, of L.9,975,017, 12s. 2-15/44d. In 1764,

therefore, the public debt of Great Britain, funded and unfunded

together, amounted, according to this author, to L.139,561,807 : 2 : 4.

The annuities for lives, too, which had been granted as premiums to the

subscribers to the new loans in 1757, estimated at fourteen-years

purchase, were valued at L.472,500; and the annuities for long terms of

years, granted as premiums likewise, in 1761 and 1762, estimated at

twenty-seven years and a-half purchase, were valued at L.6,826,875.

During a peace of about seven years continuance, the prudent and truly

patriotic administration of Mr. Pelham was not able to pay off an old

debt of six millions. During a war of nearly the same continuance, a new

debt of more than seventy-five millions was contracted.

On the 5th of January 1775, the funded debt of Great Britain amounted

to L.124,996,086, 1s. 6-1/4d. The unfunded, exclusive of a large

civil-list debt, to L.4,150,236 : 3 : 11-7/8. Both together, to

L.129,146,322 : 5 : 6. According to this account, the whole debt

paid off, during eleven years of profound peace, amounted only to

L.10,415,476 : 16 : 9-7/8. Even this small reduction of debt, however,

has not been all made from the savings out of the ordinary revenue of

the state. Several extraneous sums, altogether independent of that

ordinary revenue, have contributed towards it. Amongst these we may

reckon an additional shilling in the pound land tax, for three

years; the two millions received from the East-India company, as

indemnification for their territorial acquisitions; and the one hundred

and ten thousand pounds received from the bank for the renewal of their

charter. To these must be added several other sums, which, as they arose

out of the late war, ought perhaps to be considered as deductions from

the expenses of it. The principal are,

The produce of French prizes L.690,449 18 9

Composition for French prisoners 670,000 0 0

What has been received from the sale of the ceded 95,500 0 0

islands ______________

Total, L.1,455,949 18 9

If we add to this sum the balance of the earl of Chatham's and Mr.

Calcraft's accounts, and other army savings of the same kind, together

with what has been received from the bank, the East-India company, and

the additional shilling in the pound land tax, the whole must be a good

deal more than five millions. The debt, therefore, which, since the

peace, has been paid out of the savings from the ordinary revenue of the

state, has not, one year with another, amounted to half a million

a-year. The sinking fund has, no doubt, been considerably augmented

since the peace, by the debt which had been paid off, by the reduction

of the redeemable four per cents to three per cents, and by the

annuities for lives which have fallen in; and, if peace were to

continue, a million, perhaps, might now be annually spared out of it

towards the discharge of the debt. Another million, accordingly, was

paid in the course of last year; but at the same time, a large

civil-list debt was left unpaid, and we are now involved in a new war,

which, in its progress, may prove as expensive as any of our former

wars.[78] The new debt which will probably be contracted before the end

of the next campaign, may, perhaps, be nearly equal to all the old debt

which has been paid off from the savings out of the ordinary revenue of

the state. It would be altogether chimerical, therefore, to expect that

the public debt should ever be completely discharged, by any savings

which are likely to be made from that ordinary revenue as it stands at

present.

The public funds of the different indebted nations of Europe,

particularly those of England, have, by one author, been represented as

the accumulation of a great capital, superadded to the other capital of

the country, by means of which its trade is extended, its manufactures

are multiplied, and its lands cultivated and improved, much beyond what

they could have been by means of that other capital only. He does not

consider that the capital which the first creditors of the public

advanced to government, was, from the moment in which he advanced it, a

certain portion of the annual produce, turned away from serving in the

function of a capital, to serve in that of a revenue; from maintaining

productive labourers, to maintain unproductive ones, and to be spent and

wasted, generally in the course of the year, without even the hope of

any future reproduction. In return for the capital which they advanced,

they obtained, indeed, an annuity of the public funds, in most cases, of

more than equal value. This annuity, no doubt, replaced to them their

capital, and enabled them to carry on their trade and business to the

same, or, perhaps, to a greater extent than before; that is, they were

enabled, either to borrow of other people a new capital, upon the credit

of this annuity or, by selling it, to get from other people a new

capital of their own, equal, or superior, to that which they had

advanced to government. This new capital, however, which they in this

manner either bought or borrowed of other people, must have existed in

the country before, and must have been employed, as all capitals are, in

maintaining productive labour. When it came into the hands of those who

had advanced their money to government, though it was, in some respects,

a new capital to them, it was not so to the country, but was only a

capital withdrawn from certain employments, in order to be turned

towards others. Though it replaced to them what they had advanced to

government, it did not replace it to the country. Had they not advanced

this capital to government, there would have been in the country two

capitals, two portions of the annual produce, instead of one, employed

in maintaining productive labour.

When, for defraying the expense of government, a revenue is raised

within the year, from the produce of free or unmortgaged taxes, a

certain portion of the revenue of private people is only turned away

from maintaining one species of unproductive labour, towards maintaining

another. Some part of what they pay in those taxes, might, no doubt,

have been accumulated into capital, and consequently employed in

maintaining productive labour; but the greater part would probably have

been spent, and consequently employed in maintaining unproductive

labour. The public expense, however, when defrayed in this manner, no

doubt hinders, more or less, the further accumulation of new capital;

but it does not necessarily occasion the destruction of any

actually-existing capital.

When the public expense is defrayed by funding, it is defrayed by the

annual destruction of some capital which had before existed in the

country; by the perversion of some portion of the annual produce which

had before been destined for the maintenance of productive labour,

towards that of unproductive labour. As in this case, however, the taxes

are lighter than they would have been, had a revenue sufficient for

defraying the same expense been raised within the year; the private

revenue of individuals is necessarily less burdened, and consequently

their ability to save and accumulate some part of that revenue into

capital, is a good deal less impaired. If the method of funding destroys

more old capital, it, at the same time, hinders less the accumulation or

acquisition of new capital, than that of defraying the public expense by

a revenue raised within the year. Under the system of funding, the

frugality and industry of private people can more easily repair the

breaches which the waste and extravagance of government may occasionally

make in the general capital of the society.

It is only during the continuance of war, however, that the system of

funding has this advantage over the other system. Were the expense of

war to be defrayed always by a revenue raised within the year, the taxes

from which that extraordinary revenue was drawn would last no longer

than the war. The ability of private people to accumulate, though less

during the war, would have been greater during the peace, than under the

system of funding. War would not necessarily have occasioned the

destruction of any old capitals, and peace would have occasioned the

accumulation of many more new. Wars would, in general, be more speedily

concluded, and less wantonly undertaken. The people feeling, during

continuance of war, the complete burden of it, would soon grow weary of

it; and government, in order to humour them, would not be under the

necessity of carrying it on longer than it was necessary to do so. The

foresight of the heavy and unavoidable burdens of war would hinder the

people from wantonly calling for it when there was no real or solid

interest to fight for. The seasons during which the ability of private

people to accumulate was somewhat impaired, would occur more rarely, and

be of shorter continuance. Those, on the contrary, during which that

ability was in the highest vigour, would be of much longer duration than

they can well be under the system of funding.

When funding, besides, has made a certain progress, the multiplication

of taxes which it brings along with it, sometimes impairs as much the

ability of private people to accumulate, even in time of peace, as the

other system would in time of war. The peace revenue of Great Britain

amounts at present to more than ten millions a year. If free and

unmortgaged, it might be sufficient, with proper management, and without

contracting a shilling of new debt, to carry on the most vigorous war.

The private revenue of the inhabitants of Great Britain is at present as

much incumbered in time of peace, their ability to accumulate is as much

impaired, as it would have been in the time of the most expensive war,

had the pernicious system of funding never been adopted.

In the payment of the interest of the public debt, it has been said, it

is the right hand which pays the left. The money does not go out of the

country. It is only a part of the revenue of one set of the inhabitants

which is transferred to another; and the nation is not a farthing the

poorer. This apology is founded altogether in the sophistry of the

mercantile system; and, after the long examinatior, which I have already

bestowed upon that system, it may, perhaps, be unnecessary to say any

thing further about it. It supposes, besides, that the whole public debt

is owing to the inhabitants of the country, which happens not to be

true; the Dutch, as well as several other foreign nations, having a very

considerable share in our public funds. But though the whole debt were

owing to the inhabitants of the country, it would not, upon that

account, be less pernicious.

Land and capital stock are the two original sources of all revenue, both

private and public. Capital stock pays the wages of productive labour,

whether employed in agriculture, manufactures, or commerce. The

management of those two original sources of revenue belongs to two

different sets of people; the proprietors of land, and the owners or

employers of capital stock.

The proprietor of land is interested, for the sake of his own revenue,

to keep his estate in as good condition as he can, by building and

repairing his tenants houses, by making and maintaining the necessary

drains and inclosures, and all those other expensive improvements which

it properly belongs to the landlord to make and maintain. But, by

different land taxes, the revenue of the landlord may be so much

diminished, and, by different duties upon the necessaries and

conveniencies of life, that diminished revenue maybe rendered of so

little real value, that he may find himself altogether unable to make or

maintain those expensive improvements. When the landlord, however,

ceases to do his part, it is altogether impossible that the tenant

should continue to do his. As the distress of the landlord increases,

the agriculture of the country must necessarily decline.

When, by different taxes upon the necessaries and conveniencies of life,

the owners and employers of capital stock find, that whatever revenue

they derive from it, will not, in a particular country, purchase the

same quantity of those necessaries and conveniencies which an equal

revenue would in almost any other, they will be disposed to remove to

some other. And when, in order to raise those taxes, all or the greater

part of merchants and manufacturers, that is, all or the greater part of

the employers of great capitals, come to be continually exposed to the

mortifying and vexatious visits of the tax-gatherers, this disposition

to remove will soon be changed into an actual removing. The industry of

the country will necessarily fall with the removal of the capital which

supported it, and the ruin of trade and manufactures will follow the

declension of agriculture.

To transfer from the owners of those two great sources of revenue, land,

and capital stock, from the persons immediately interested in the good

condition of every particular portion of land, and in the good

management of every particular portion of capital stock, to another set

of persons (the creditors of the public, who have no such particular

interest), the greater part of the revenue arising from either, must, in

the long-run, occasion both the neglect of land, and the waste or

removal of capital stock. A creditor of the public has, no doubt, a

general interest in the prosperity of the agriculture, manufactures, and

commerce of the country; and consequently in the good condition of its

land, and in the good management of its capital stock. Should there be

any general failure or declension in any of these things, the produce of

the different taxes might no longer be sufficient to pay him the annuity

or interest which is due to him. But a creditor of the public,

considered merely as such, has no interest in the good condition of any

particular portion of land, or in the good management of any particular

portion of capital stock. As a creditor of the public, he has no

knowledge of any such particular portion. He has no inspection of it. He

can have no care about it. Its ruin may in some cases be unknown to him,

and cannot directly affect him.

The practice of funding has gradually enfeebled every state which has

adopted it. The Italian republics seem to have begun it. Genoa and

Venice, the only two remaining which can pretend to an independent

existence, have both been enfeebled by it. Spain seems to have learned

the practice from the Italian republics, and (its taxes being probably

less judicious than theirs) it has, in proportion to its natural

strength, been still more enfeebled. The debts of Spain are of very old

standing. It was deeply in debt before the end of the sixteenth century,

about a hundred years before England owed a shilling. France,

notwithstanding all its natural resources, languishes under an

oppressive load of the same kind. The republic of the United Provinces

is as much enfeebled by its debts as either Genoa or Venice. Is it

likely that, in Great Britain alone, a practice, which has brought

either weakness or dissolution into every other country, should prove

altogether innocent?

The system of taxation established in those different countries, it may

be said, is inferior to that of England. I believe it is so. But it

ought to be remembered, that when the wisest government has exhausted

all the proper subjects of taxation, it must, in cases of urgent

necessity, have recourse to improper ones. The wise republic of Holland

has, upon some occasions, been obliged to have recourse to taxes as

inconvenient as the greater part of those of Spain. Another war, begun

before any considerable liberation of the public revenue had been

brought about, and growing in its progress as expensive as the last war,

may, from irresistible necessity, render the British system of taxation

as oppressive as that of Holland, or even as that of Spain. To the

honour of our present system of taxation, indeed, it has hitherto given

so little embarrassment to industry, that, during the course even of the

most expensive wars, the frugality and good conduct of individuals seem

to have been able, by saving and accumulation, to repair all the

breaches which the waste and extravagance of government had made in the

general capital of the society. At the conclusion of the late war, the

most expensive that Great Britain ever waged, her agriculture was as

flourishing, her manufacturers as numerous and as fully employed, and

her commerce as extensive, as they had ever been before. The capital,

therefore, which supported all those different branches of industry,

must have been equal to what it had ever been before. Since the peace,

agriculture has been still further improved; the rents of houses have

risen in every town and village of the country, a proof of the

increasing wealth and revenue of the people; and the annual amount of

the greater part of the old taxes, of the principal branches of the

excise and customs, in particular, has been continually increasing, an

equally clear proof of an increasing consumption, and consequently of an

increasing produce, which could alone support that consumption. Great

Britain seems to support with ease, a burden which, half a century ago,

nobody believed her capable of supporting. Let us not, however, upon

this account, rashly conclude that she is capable of supporting any

burden; not even be too confident that she could support, without great

distress, a burden a little greater than what has already been laid upon

her.

When national debts have once been accumulated to a certain degree,

there is scarce, I believe, a single instance of their having been

fairly and completely paid. The liberation of the public revenue, if it

has ever been brought about at all, has always been brought about by a

bankruptcy; sometimes by an avowed one, though frequently by a pretended

payment.

The raising of the denomination of the coin has been the most usual

expedient by which a real public bankruptcy has been disguised under the

appearance of a pretended payment. If a sixpence, for example, should,

either by act of parliament or royal proclamation, be raised to the

denomination of a shilling, and twenty sixpences to that of a pound

sterling; the person who, under the old denomination, had borrowed

twenty shillings, or near four ounces of silver, would, under the new,

pay with twenty sixpences, or with something less than two ounces. A

national debt of about a hundred and twenty-eight millions, near the

capital of the funded and unfunded debt of Great Britain, might, in this

manner, be paid with about sixty-four millions of our present money. It

would, indeed, be a pretended payment only, and the creditors of the

public would really be defrauded of ten shillings in the pound of what

was due to them. The calamity, too, would extend much further than to

the creditors of the public, and those of every private person would

suffer a proportionable loss; and this without any advantage, but in

most cases with a great additional loss, to the creditors of the public.

If the creditors of the public, indeed, were generally much in debt to

other people, they might in some measure compensate their loss by paying

their creditors in the same coin in which the public had paid them. But

in most countries, the creditors of the public are, the greater part of

them, wealthy people, who stand more in the relation of creditors than

in that of debtors, towards the rest of their fellow-citizens. A

pretended payment of this kind, therefore, instead of alleviating,

aggravates, in most cases, the loss of the creditors of the public; and,

without any advantage to the public, extends the calamity to a great

number of other innocent people. It occasions a general and most

pernicious subversion of the fortunes of private people; enriching, in

most cases, the idle and profuse debtor, at the expense of the

industrious and frugal creditor; and transporting a great part of the

national capital from the hands which were likely to increase and

improve it, to those who are likely to dissipate and destroy it. When it

becomes necessary for a state to declare itself bankrupt, in the same

manner as when it becomes necessary for an individual to do so, a fair,

open, and avowed bankruptcy, is always the measure which is both least

dishonourable to the debtor, and least hurtful to the creditor. The

honour of a state is surely very poorly provided for, when, in order to

cover the disgrace of a real bankruptcy, it has recourse to a juggling

trick of this kind, so easily seen through, and at the same time so

extremely pernicious.