Taxes upon consumable commodities may either be levied by an

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

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 real 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 obliged 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. Those 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 or

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 Abbé

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.

CHAPTER 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 manufacture

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, etc. 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, constitute 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 their 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 {See Examen des Reflections

Politiques sur les Finances.}) 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 £5,160,459: 14: 9½.

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 £2,055,999: 7: 11½.

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 £983,254:11:9¼.

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 £925,176:9:2¼.

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

£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 £1,296,552:9:11¾.

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 £9,177,967:15:4d, 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 those 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

£3,375,027:17:10½, for which was paid an annuity or interest of

£206,501:15:5d. The East-India fund amounted to £3,200,000, for which was

paid an annuity or interest of £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 £724,849:6:10½.

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 or 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 £523,454:7:7½. 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 the

other of those two purposes, will sufficiently appear by and by.

Besides those 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 1695, an act was passed for

borrowing one million upon an annuity of fourteen per cent., or £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 £666,821:

8:3½ a-year. On the 5th of January 1775, the remainder of them, or what

was not subscribed at that time, amounted only to £136,453:12:8d.

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, etc. 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

misapply 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 £21,515,742:13:8½. 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 £5,121,041:12:0¾d; 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 £16,394,701:1:7¼d.

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 £53,681,076:5:6½. 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

£55,282,978:1:3 ⅚. 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 £8,328,554:17:11

³⁄₁₂, the capital of the public debt, at that time, amounting to

£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 £78,293,313:1:10¾. The most profound peace,

of 17 years continuance, had taken no more than £8,328,354, 17:11¼ from

it. A war, of less than nine years continuance, added £31,338,689:18: 6

⅙ to it. {See James Postlethwaite’s History of the Public Revenue.}

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 £72,289,675. On the 5th

of January 1763, at the conclusion of the peace, the funded debt amounted

debt to £122,603,336:8:2¼. The unfunded debt has been stated at

£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 £129,586,789:10:1¾, 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 £9,975,017: 12:2 ¹⁵⁄₄₄d. In

1764, therefore, the public debt of Great Britain, funded and unfunded

together, amounted, according to this author, to £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 £472,500; and the annuities for long terms of

years, granted as premiums likewise, in 1761 and 1762, estimated at

twenty-seven and a-half years purchase, were valued at £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

£124,996,086, 1:6¼d. The unfunded, exclusive of a large civil-list debt,

to £4,150,236:3:11 ⅞. Both together, to £129,146,322:5:6. According to

this account, the whole debt paid off, during eleven years of profound

peace, amounted only to £10,415,476:16:9 ⅞. 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.............. £690,449: 18: 9

Composition for French prisoners......... 670,000: 0: 0

What has been received from the sale

of the ceded islands......................... 95,500: 0: 0

Total, .....................................£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. {It has proved more expensive than any one of our former

wars, and has involved us in an additional debt of more than one hundred

millions. During a profound peace of eleven years, little more than ten

millions of debt was paid; during a war of seven years, more than one

hundred millions was contracted.} 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 examination which I have already

bestowed upon that system, it may, perhaps, be unnecessary to say anything

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 may be 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; nor

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.

Almost all states, however, ancient as well as modern, when reduced to

this necessity, have, upon some occasions, played this very juggling

trick. The Romans, at the end of the first Punic war, reduced the As, the

coin or denomination by which they computed the value of all their other

coins, from containing twelve ounces of copper, to contain only two

ounces; that is, they raised two ounces of copper to a denomination which

had always before expressed the value of twelve ounces. The republic was,

in this manner, enabled to pay the great debts which it had contracted

with the sixth part of what it really owed. So sudden and so great a

bankruptcy, we should in the present times be apt to imagine, must have

occasioned a very violent popular clamour. It does not appear to have

occasioned any. The law which enacted it was, like all other laws relating

to the coin, introduced and carried through the assembly of the people by

a tribune, and was probably a very popular law. In Rome, as in all other

ancient republics, the poor people were constantly in debt to the rich and

the great, who, in order to secure their votes at the annual elections,

used to lend them money at exorbitant interest, which, being never paid,

soon accumulated into a sum too great either for the debtor to pay, or for

any body else to pay for him. The debtor, for fear of a very severe

execution, was obliged, without any further gratuity, to vote for the

candidate whom the creditor recommended. In spite of all the laws against

bribery and corruption, the bounty of the candidates, together with the

occasional distributions of coin which were ordered by the senate, were

the principal funds from which, during the latter times of the Roman

republic, the poorer citizens derived their subsistence. To deliver

themselves from this subjection to their creditors, the poorer citizens

were continually calling out, either for an entire abolition of debts, or

for what they called new tables; that is, for a law which should entitle

them to a complete acquittance, upon paying only a certain proportion of

their accumulated debts. The law which reduced the coin of all

denominations to a sixth part of its former value, as it enabled them to

pay their debts with a sixth part of what they really owed, was equivalent

to the most advantageous new tables. In order to satisfy the people, the

rich and the great were, upon several different occasions, obliged to

consent to laws, both for abolishing debts, and for introducing new

tables; and they probably were induced to consent to this law, partly for

the same reason, and partly that, by liberating the public revenue, they

might restore vigour to that government, of which they themselves had the

principal direction. An operation of this kind would at once reduce a debt

of £128,000,000 to £21,333,333:6:8. In the course of the second Punic war,

the As was still further reduced, first, from two ounces of copper to one

ounce, and afterwards from one ounce to half an ounce; that is, to the

twenty-fourth part of its original value. By combining the three Roman

operations into one, a debt of a hundred and twenty-eight millions of our

present money, might in this manner be reduced all at once to a debt of

£5,333,333:6:8. Even the enormous debt of Great Britain might in this

manner soon be paid.

By means of such expedients, the coin of, I believe, all nations, has been

gradually reduced more and more below its original value, and the same

nominal sum has been gradually brought to contain a smaller and a smaller

quantity of silver.

Nations have sometimes, for the same purpose, adulterated the standard of

their coin; that is, have mixed a greater quantity of alloy in it. If in

the pound weight of our silver coin, for example, instead of eighteen

penny-weight, according to the present standard, there were mixed eight

ounces of alloy; a pound sterling, or twenty shillings of such coin, would

be worth little more than six shillings and eightpence of our present

money. The quantity of silver contained in six shillings and eightpence of

our present money, would thus be raised very nearly to the denomination of

a pound sterling. The adulteration of the standard has exactly the same

effect with what the French call an augmentation, or a direct raising of

the denomination of the coin.

An augmentation, or a direct raising of the denomination of the coin,

always is, and from its nature must be, an open and avowed operation. By

means of it, pieces of a smaller weight and bulk are called by the same

name, which had before been given to pieces of a greater weight and bulk.

The adulteration of the standard, on the contrary, has generally been a

concealed operation. By means of it, pieces are issued from the mint, of

the same denomination, and, as nearly as could be contrived, of the same

weight, bulk, and appearance, with pieces which had been current before of

much greater value. When king John of France, {See Du Cange Glossary, voce

Moneta; the Benedictine Edition.} in order to pay his debts, adulterated

his coin, all the officers of his mint were sworn to secrecy. Both

operations are unjust. But a simple augmentation is an injustice of open

violence; whereas an adulteration is an injustice of treacherous fraud.

This latter operation, therefore, as soon as it has been discovered, and

it could never be concealed very long, has always excited much greater

indignation than the former. The coin, after any considerable

augmentation, has very seldom been brought back to its former weight; but

after the greatest adulterations, it has almost always been brought back

to its former fineness. It has scarce ever happened, that the fury and

indignation of the people could otherwise be appeased.

In the end of the reign of Henry VIII., and in the beginning of that of

Edward VI., the English coin was not only raised in its denomination, but

adulterated in its standard. The like frauds were practised in Scotland

during the minority of James VI. They have occasionally been practised in

most other countries.

That the public revenue of Great Britain can never be completely

liberated, or even that any considerable progress can ever be made towards

that liberation, while the surplus of that revenue, or what is over and

above defraying the annual expense of the peace establishment, is so very

small, it seems altogether in vain to expect. That liberation, it is

evident, can never be brought about, without either some very considerable

augmentation of the public revenue, or some equally considerable reduction

of the public expense.

A more equal land tax, a more equal tax upon the rent of houses, and such

alterations in the present system of customs and excise as those which

have been mentioned in the foregoing chapter, might, perhaps, without

increasing the burden of the greater part of the people, but only

distributing the weight of it more equally upon the whole, produce a

considerable augmentation of revenue. The most sanguine projector,

however, could scarce flatter himself, that any augmentation of this kind

would be such as could give any reasonable hopes, either of liberating the

public revenue altogether, or even of making such progress towards that

liberation in time of peace, as either to prevent or to compensate the

further accumulation of the public debt in the next war.

By extending the British system of taxation to all the different provinces

of the empire, inhabited by people either of British or European

extraction, a much greater augmentation of revenue might be expected.

This, however, could scarce, perhaps, be done, consistently with the

principles of the British constitution, without admitting into the British

parliament, or, if you will, into the states-general of the British

empire, a fair and equal representation of all those different provinces;

that of each province bearing the same proportion to the produce of its

taxes, as the representation of Great Britain might bear to the produce of

the taxes levied upon Great Britain. The private interest of many powerful

individuals, the confirmed prejudices of great bodies of people, seem,

indeed, at present, to oppose to so great a change, such obstacles as it

may be very difficult, perhaps altogether impossible, to surmount.

Without, however, pretending to determine whether such a union be

practicable or impracticable, it may not, perhaps, be improper, in a

speculative work of this kind, to consider how far the British system of

taxation might be applicable to all the different provinces of the empire;

what revenue might be expected from it, if so applied; and in what manner

a general union of this kind might be likely to affect the happiness and

prosperity of the different provinces comprehended within it. Such a

speculation, can, at worst, be regarded but as a new Utopia, less amusing,

certainly, but no more useless and chimerical than the old one.

The land-tax, the stamp duties, and the different duties of customs and

excise, constitute the four principal branches of the British taxes.

Ireland is certainly as able, and our American and West India plantations

more able, to pay a land tax, than Great Britain. Where the landlord is

subject neither to tythe nor poor’s rate, he must certainly be more able

to pay such a tax, than where he is subject to both those other burdens.

The tythe, where there is no modus, and where it is levied in kind,

diminishes more what would otherwise be the rent of the landlord, than a

land tax which really amounted to five shillings in the pound. Such a

tythe will be found, in most cases, to amount to more than a fourth part

of the real rent of the land, or of what remains after replacing

completely the capital of the farmer, together with his reasonable profit.

If all moduses and all impropriations were taken away, the complete church

tythe of Great Britain and Ireland could not well be estimated at less

than six or seven millions. If there was no tythe either in Great Britain

or Ireland, the landlords could afford to pay six or seven millions

additional land tax, without being more burdened than a very great part of

them are at present. America pays no tythe, and could, therefore, very

well afford to pay a land tax. The lands in America and the West Indies,

indeed, are, in general, not tenanted nor leased out to farmers. They

could not, therefore, be assessed according to any rent roll. But neither

were the lands of Great Britain, in the 4th of William and Mary, assessed

according to any rent roll, but according to a very loose and inaccurate

estimation. The lands in America might be assessed either in the same

manner, or according to an equitable valuation, in consequence of an

accurate survey, like that which was lately made in the Milanese, and in

the dominions of Austria, Prussia, and Sardinia.

Stamp duties, it is evident, might be levied without any variation, in all

countries where the forms of law process, and the deeds by which property,

both real and personal, is transferred, are the same, or nearly the same.

The extension of the custom-house laws of Great Britain to Ireland and the

plantations, provided it was accompanied, as in justice it ought to be,

with an extension of the freedom of trade, would be in the highest degree

advantageous to both. All the invidious restraints which at present

oppress the trade of Ireland, the distinction between the enumerated and

non-enumerated commodities of America, would be entirely at an end. The

countries north of Cape Finisterre would be as open to every part of the

produce of America, as those south of that cape are to some parts of that

produce at present. The trade between all the different parts of the

British empire would, in consequence of this uniformity in the

custom-house laws, be as free as the coasting trade of Great Britain is at

present. The British empire would thus afford, within itself, an immense

internal market for every part of the produce of all its different

provinces. So great an extension of market would soon compensate, both to

Ireland and the plantations, all that they could suffer from the increase

of the duties of customs.

The excise is the only part of the British system of taxation, which would

require to be varied in any respect, according as it was applied to the

different provinces of the empire. It might be applied to Ireland without

any variation; the produce and consumption of that kingdom being exactly

of the same nature with those of Great Britain. In its application to

America and the West Indies, of which the produce and consumption are so

very different from those of Great Britain, some modification might be

necessary, in the same manner as in its application to the cyder and beer

counties of England.

A fermented liquor, for example, which is called beer, but which, as it is

made of molasses, bears very little resemblance to our beer, makes a

considerable part of the common drink of the people in America. This

liquor, as it can be kept only for a few days, cannot, like our beer, be

prepared and stored up for sale in great breweries; but every private

family must brew it for their own use, in the same manner as they cook

their victuals. But to subject every private family to the odious visits

and examination of the tax-gatherers, in the same manner as we subject the

keepers of ale-houses and the brewers for public sale, would be altogether

inconsistent with liberty. If, for the sake of equality, it was thought

necessary to lay a tax upon this liquor, it might be taxed by taxing the

material of which it is made, either at the place of manufacture, or, if

the circumstances of the trade rendered such an excise improper, by laying

a duty upon its importation into the colony in which it was to be

consumed. Besides the duty of one penny a-gallon imposed by the British

parliament upon the importation of molasses into America, there is a

provincial tax of this kind upon their importation into Massachusetts Bay,

in ships belonging to any other colony, of eight-pence the hogshead; and

another upon their importation from the northern colonies into South

Carolina, of five-pence the gallon. Or, if neither of these methods was

found convenient, each family might compound for its consumption of this

liquor, either according to the number of persons of which it consisted,

in the same manner as private families compound for the malt tax in

England; or according to the different ages and sexes of those persons, in

the same manner as several different taxes are levied in Holland; or,

nearly as Sir Matthew Decker proposes, that all taxes upon consumable

commodities should be levied in England. This mode of taxation, it has

already been observed, when applied to objects of a speedy consumption, is

not a very convenient one. It might be adopted, however, in cases where no

better could be done.

Sugar, rum, and tobacco, are commodities which are nowhere necessaries of

life, which are become objects of almost universal consumption, and which

are, therefore, extremely proper subjects of taxation. If a union with the

colonies were to take place, those commodities might be taxed, either

before they go out of the hands of the manufacturer or grower; or, if this

mode of taxation did not suit the circumstances of those persons, they

might be deposited in public warehouses, both at the place of manufacture,

and at all the different ports of the empire, to which they might

afterwards be transported, to remain there, under the joint custody of the

owner and the revenue officer, till such time as they should be delivered

out, either to the consumer, to the merchant-retailer for home

consumption, or to the merchant-exporter; the tax not to be advanced till

such delivery. When delivered out for exportation, to go duty-free, upon

proper security being given, that they should really be exported out of

the empire. These are, perhaps, the principal commodities, with regard to

which the union with the colonies might require some considerable change

in the present system of British taxation.

What might be the amount of the revenue which this system of taxation,

extended to all the different provinces of the empire, might produce, it

must, no doubt, be altogether impossible to ascertain with tolerable

exactness. By means of this system, there is annually levied in Great

Britain, upon less than eight millions of people, more than ten millions

of revenue. Ireland contains more than two millions of people, and,

according to the accounts laid before the congress, the twelve associated

provinces of America contain more than three. Those accounts, however, may

have been exaggerated, in order, perhaps, either to encourage their own

people, or to intimidate those of this country; and we shall suppose,

therefore, that our North American and West Indian colonies, taken

together, contain no more than three millions; or that the whole British

empire, in Europe and America, contains no more than thirteen millions of

inhabitants. If, upon less than eight millions of inhabitants, this system

of taxation raises a revenue of more than ten millions sterling; it ought,

upon thirteen millions of inhabitants, to raise a revenue of more than

sixteen millions two hundred and fifty thousand pounds sterling. From this

revenue, supposing that this system could produce it, must be deducted the

revenue usually raised in Ireland and the plantations, for defraying the

expense of the respective civil governments. The expense of the civil and

military establishment of Ireland, together with the interest of the

public debt, amounts, at a medium of the two years which ended March 1775,

to something less than seven hundred and fifty thousand pounds a year. By

a very exact account of the revenue of the principal colonies of America

and the West Indies, it amounted, before the commencement of the present

disturbances, to a hundred and forty-one thousand eight hundred pounds. In

this account, however, the revenue of Maryland, of North Carolina, and of

all our late acquisitions, both upon the continent, and in the islands, is

omitted; which may, perhaps, make a difference of thirty or forty thousand

pounds. For the sake of even numbers, therefore, let us suppose that the

revenue necessary for supporting the civil government of Ireland and the

plantations may amount to a million. There would remain, consequently, a

revenue of fifteen millions two hundred and fifty thousand pounds, to be

applied towards defraying the general expense of the empire, and towards

paying the public debt. But if, from the present revenue of Great Britain,

a million could, in peaceable times, be spared towards the payment of that

debt, six millions two hundred and fifty thousand pounds could very well

be spared from this improved revenue. This great sinking fund, too, might

be augmented every year by the interest of the debt which had been

discharged the year before; and might, in this manner, increase so very

rapidly, as to be sufficient in a few years to discharge the whole debt,

and thus to restore completely the at-present debilitated and languishing

vigour of the empire. In the meantime, the people might be relieved from

some of the most burdensome taxes; from those which are imposed either

upon the necessaries of life, or upon the materials of manufacture. The

labouring poor would thus be enabled to live better, to work cheaper, and

to send their goods cheaper to market. The cheapness of their goods would

increase the demand for them, and consequently for the labour of those who

produced them. This increase in the demand for labour would both increase

the numbers, and improve the circumstances of the labouring poor. Their

consumption would increase, and, together with it, the revenue arising

from all those articles of their consumption upon which the taxes might be

allowed to remain.

The revenue arising from this system of taxation, however, might not

immediately increase in proportion to the number of people who were

subjected to it. Great indulgence would for some time be due to those

provinces of the empire which were thus subjected to burdens to which they

had not before been accustomed; and even when the same taxes came to be

levied everywhere as exactly as possible, they would not everywhere

produce a revenue proportioned to the numbers of the people. In a poor

country, the consumption of the principal commodities subject to the

duties of customs and excise, is very small; and in a thinly inhabited

country, the opportunities of smuggling are very great. The consumption of

malt liquors among the inferior ranks of people in Scotland is very small;

and the excise upon malt, beer, and ale, produces less there than in

England, in proportion to the numbers of the people and the rate of the

duties, which upon malt is different, on account of a supposed difference

of quality. In these particular branches of the excise, there is not, I

apprehend, much more smuggling in the one country than in the other. The

duties upon the distillery, and the greater part of the duties of customs,

in proportion to the numbers of people in the respective countries,

produce less in Scotland than in England, not only on account of the

smaller consumption of the taxed commodities, but of the much greater

facility of smuggling. In Ireland, the inferior ranks of people are still

poorer than in Scotland, and many parts of the country are almost as

thinly inhabited. In Ireland, therefore, the consumption of the taxed

commodities might, in proportion to the number of the people, be still

less than in Scotland, and the facility of smuggling nearly the same. In

America and the West Indies, the white people, even of the lowest rank,

are in much better circumstances than those of the same rank in England;

and their consumption of all the luxuries in which they usually indulge

themselves, is probably much greater. The blacks, indeed, who make the

greater part of the inhabitants, both of the southern colonies upon the

continent and of the West India islands, as they are in a state of

slavery, are, no doubt, in a worse condition than the poorest people

either in Scotland or Ireland. We must not, however, upon that account,

imagine that they are worse fed, or that their consumption of articles

which might be subjected to moderate duties, is less than that even of the

lower ranks of people in England. In order that they may work well, it is

the interest of their master that they should be fed well, and kept in

good heart, in the same manner as it is his interest that his working

cattle should be so. The blacks, accordingly, have almost everywhere their

allowance of rum, and of molasses or spruce-beer, in the same manner as

the white servants; and this allowance would not probably be withdrawn,

though those articles should be subjected to moderate duties. The

consumption of the taxed commodities, therefore, in proportion to the

number of inhabitants, would probably be as great in America and the West

Indies as in any part of the British empire. The opportunities of

smuggling, indeed, would be much greater; America, in proportion to the

extent of the country, being much more thinly inhabited than either

Scotland or Ireland. If the revenue, however, which is at present raised

by the different duties upon malt and malt liquors, were to be levied by a

single duty upon malt, the opportunity of smuggling in the most important

branch of the excise would be almost entirely taken away; and if the

duties of customs, instead of being imposed upon almost all the different

articles of importation, were confined to a few of the most general use

and consumption, and if the levying of those duties were subjected to the

excise laws, the opportunity of smuggling, though not so entirely taken

away, would be very much diminished. In consequence of those two

apparently very simple and easy alterations, the duties of customs and

excise might probably produce a revenue as great, in proportion to the

consumption of the most thinly inhabited province, as they do at present,

in proportion to that of the most populous.

The Americans, it has been said, indeed, have no gold or silver money, the

interior commerce of the country being carried on by a paper currency; and

the gold and silver, which occasionally come among them, being all sent to

Great Britain, in return for the commodities which they receive from us.

But without gold and silver, it is added, there is no possibility of

paying taxes. We already get all the gold and silver which they have. How

is it possible to draw from them what they have not?

The present scarcity of gold and silver money in America, is not the

effect of the poverty of that country, or of the inability of the people

there to purchase those metals. In a country where the wages of labour are

so much higher, and the price of provisions so much lower than in England,

the greater part of the people must surely have wherewithal to purchase a

greater quantity, if it were either necessary or convenient for them to do

so. The scarcity of those metals, therefore, must be the effect of choice,

and not of necessity.

It is for transacting either domestic or foreign business, that gold or

silver money is either necessary or convenient.

The domestic business of every country, it has been shewn in the second

book of this Inquiry, may, at least in peaceable times, be transacted by

means of a paper currency, with nearly the same degree of conveniency as

by gold and silver money. It is convenient for the Americans, who could

always employ with profit, in the improvement of their lands, a greater

stock than they can easily get, to save as much as possible the expense of

so costly an instrument of commerce as gold and silver; and rather to

employ that part of their surplus produce which would be necessary for

purchasing those metals, in purchasing the instruments of trade, the

materials of clothing, several parts of household furniture, and the iron

work necessary for building and extending their settlements and

plantations; in purchasing not dead stock, but active and productive

stock. The colony governments find it for their interest to supply the

people with such a quantity of paper money as is fully sufficient, and

generally more than sufficient, for transacting their domestic business.

Some of those governments, that of Pennsylvania, particularly, derive a

revenue from lending this paper money to their subjects, at an interest of

so much per cent. Others, like that of Massachusetts Bay, advance, upon

extraordinary emergencies, a paper money of this kind for defraying the

public expense; and afterwards, when it suits the conveniency of the

colony, redeem it at the depreciated value to which it gradually falls. In

1747, {See Hutchinson’s History of Massachusetts Bay vol. ii. page 436 et

seq.} that colony paid in this manner the greater part of its public

debts, with the tenth part of the money for which its bills had been

granted. It suits the conveniency of the planters, to save the expense of

employing gold and silver money in their domestic transactions; and it

suits the conveniency of the colony governments, to supply them with a

medium, which, though attended with some very considerable disadvantages,

enables them to save that expense. The redundancy of paper money

necessarily banishes gold and silver from the domestic transactions of the

colonies, for the same reason that it has banished those metals from the

greater part of the domestic transactions in Scotland; and in both

countries, it is not the poverty, but the enterprizing and projecting

spirit of the people, their desire of employing all the stock which they

can get, as active and productive stock, which has occasioned this

redundancy of paper money.

In the exterior commerce which the different colonies carry on with Great

Britain, gold and silver are more or less employed, exactly in proportion

as they are more or less necessary. Where those metals are not necessary,

they seldom appear. Where they are necessary, they are generally found.

In the commerce between Great Britain and the tobacco colonies, the

British goods are generally advanced to the colonists at a pretty long

credit, and are afterwards paid for in tobacco, rated at a certain price.

It is more convenient for the colonists to pay in tobacco than in gold and

silver. It would be more convenient for any merchant to pay for the goods

which his correspondents had sold to him, in some other sort of goods

which he might happen to deal in, than in money. Such a merchant would

have no occasion to keep any part of his stock by him unemployed, and in

ready money, for answering occasional demands. He could have, at all

times, a larger quantity of goods in his shop or warehouse, and he could

deal to a greater extent. But it seldom happens to be convenient for all

the correspondents of a merchant to receive payment for the goods which

they sell to him, in goods of some other kind which he happens to deal in.

The British merchants who trade to Virginia and Maryland, happen to be a

particular set of correspondents, to whom it is more convenient to receive

payment for the goods which they sell to those colonies in tobacco, than

in gold and silver. They expect to make a profit by the sale of the

tobacco; they could make none by that of the gold and silver. Gold and

silver, therefore, very seldom appear in the commerce between Great

Britain and the tobacco colonies. Maryland and Virginia have as little

occasion for those metals in their foreign, as in their domestic commerce.

They are said, accordingly, to have less gold and silver money than any

other colonies in America. They are reckoned, however, as thriving, and

consequently as rich, as any of their neighbours.

In the northern colonies, Pennsylvania, New York, New Jersey, the four

governments of New England, etc. the value of their own produce which they

export to Great Britain is not equal to that of the manufactures which

they import for their own use, and for that of some of the other colonies,

to which they are the carriers. A balance, therefore, must be paid to the

mother-country in gold and silver and this balance they generally find.

In the sugar colonies, the value of the produce annually exported to Great

Britain is much greater than that of all the goods imported from thence.

If the sugar and rum annually sent to the mother-country were paid for in

those colonies, Great Britain would be obliged to send out, every year, a

very large balance in money; and the trade to the West Indies would, by a

certain species of politicians, be considered as extremely

disadvantageous. But it so happens, that many of the principal proprietors

of the sugar plantations reside in Great Britain. Their rents are remitted

to them in sugar and rum, the produce of their estates. The sugar and rum

which the West India merchants purchase in those colonies upon their own

account, are not equal in value to the goods which they annually sell

there. A balance, therefore, must necessarily be paid to them in gold and

silver, and this balance, too, is generally found.

The difficulty and irregularity of payment from the different colonies to

Great Britain, have not been at all in proportion to the greatness or

smallness of the balances which were respectively due from them. Payments

have, in general, been more regular from the northern than from the

tobacco colonies, though the former have generally paid a pretty large

balance in money, while the latter have either paid no balance, or a much

smaller one. The difficulty of getting payment from our different sugar

colonies has been greater or less in proportion, not so much to the extent

of the balances respectively due from them, as to the quantity of

uncultivated land which they contained; that is, to the greater or smaller

temptation which the planters have been under of over-trading, or of

undertaking the settlement and plantation of greater quantities of waste

land than suited the extent of their capitals. The returns from the great

island of Jamaica, where there is still much uncultivated land, have, upon

this account, been, in general, more irregular and uncertain than those

from the smaller islands of Barbadoes, Antigua, and St. Christopher’s,

which have, for these many years, been completely cultivated, and have,

upon that account, afforded less field for the speculations of the

planter. The new acquisitions of Grenada, Tobago, St. Vincent’s, and

Dominica, have opened a new field for speculations of this kind; and the

returns from those islands have of late been as irregular and uncertain

as those from the great island of Jamaica.

It is not, therefore, the poverty of the colonies which occasions, in the

greater part of them, the present scarcity of gold and silver money. Their

great demand for active and productive stock makes it convenient for them

to have as little dead stock as possible, and disposes them, upon that

account, to content themselves with a cheaper, though less commodious

instrument of commerce, than gold and silver. They are thereby enabled to

convert the value of that gold and silver into the instruments of trade,

into the materials of clothing, into household furniture, and into the

iron work necessary for building and extending their settlements and

plantations. In those branches of business which cannot be transacted

without gold and silver money, it appears, that they can always find the

necessary quantity of those metals; and if they frequently do not find it,

their failure is generally the effect, not of their necessary poverty, but

of their unnecessary and excessive enterprise. It is not because they are

poor that their payments are irregular and uncertain, but because they are

too eager to become excessively rich. Though all that part of the produce

of the colony taxes, which was over and above what was necessary for

defraying the expense of their own civil and military establishments, were

to be remitted to Great Britain in gold and silver, the colonies have

abundantly wherewithal to purchase the requisite quantity of those metals.

They would in this case be obliged, indeed, to exchange a part of their

surplus produce, with which they now purchase active and productive stock,

for dead stock. In transacting their domestic business, they would be

obliged to employ a costly, instead of a cheap instrument of commerce; and

the expense of purchasing this costly instrument might damp somewhat the

vivacity and ardour of their excessive enterprise in the improvement of

land. It might not, however, be necessary to remit any part of the

American revenue in gold and silver. It might be remitted in bills drawn

upon, and accepted by, particular merchants or companies in Great Britain,

to whom a part of the surplus produce of America had been consigned, who

would pay into the treasury the American revenue in money, after having

themselves received the value of it in goods; and the whole business might

frequently be transacted without exporting a single ounce of gold or

silver from America.

It is not contrary to justice, that both Ireland and America should

contribute towards the discharge of the public debt of Great Britain. That

debt has been contracted in support of the government established by the

Revolution; a government to which the protestants of Ireland owe, not only

the whole authority which they at present enjoy in their own country, but

every security which they possess for their liberty, their property, and

their religion; a government to which several of the colonies of America

owe their present charters, and consequently their present constitution;

and to which all the colonies of America owe the liberty, security, and

property, which they have ever since enjoyed. That public debt has been

contracted in the defence, not of Great Britain alone, but of all the

different provinces of the empire. The immense debt contracted in the late

war in particular, and a great part of that contracted in the war before,

were both properly contracted in defence of America.

By a union with Great Britain, Ireland would gain, besides the freedom of

trade, other advantages much more important, and which would much more

than compensate any increase of taxes that might accompany that union. By

the union with England, the middling and inferior ranks of people in

Scotland gained a complete deliverance from the power of an aristocracy,

which had always before oppressed them. By a union with Great Britain, the

greater part of people of all ranks in Ireland would gain an equally

complete deliverance from a much more oppressive aristocracy; an

aristocracy not founded, like that of Scotland, in the natural and

respectable distinctions of birth and fortune, but in the most odious of

all distinctions, those of religious and political prejudices;

distinctions which, more than any other, animate both the insolence of the

oppressors, and the hatred and indignation of the oppressed, and which

commonly render the inhabitants of the same country more hostile to one

another than those of different countries ever are. Without a union with

Great Britain, the inhabitants of Ireland are not likely, for many ages,

to consider themselves as one people.

No oppressive aristocracy has ever prevailed in the colonies. Even they,

however, would, in point of happiness and tranquillity, gain considerably

by a union with Great Britain. It would, at least, deliver them from those

rancourous and virulent factions which are inseparable from small

democracies, and which have so frequently divided the affections of their

people, and disturbed the tranquillity of their governments, in their form

so nearly democratical. In the case of a total separation from Great

Britain, which, unless prevented by a union of this kind, seems very

likely to take place, those factions would be ten times more virulent than

ever. Before the commencement of the present disturbances, the coercive

power of the mother-country had always been able to restrain those

factions from breaking out into any thing worse than gross brutality and

insult. If that coercive power were entirely taken away, they would

probably soon break out into open violence and bloodshed. In all great

countries which are united under one uniform government, the spirit of

party commonly prevails less in the remote provinces than in the centre of

the empire. The distance of those provinces from the capital, from the

principal seat of the great scramble of faction and ambition, makes them

enter less into the views of any of the contending parties, and renders

them more indifferent and impartial spectators of the conduct of all. The

spirit of party prevails less in Scotland than in England. In the case of

a union, it would probably prevail less in Ireland than in Scotland; and

the colonies would probably soon enjoy a degree of concord and unanimity,

at present unknown in any part of the British empire. Both Ireland and the

colonies, indeed, would be subjected to heavier taxes than any which they

at present pay. In consequence, however, of a diligent and faithful

application of the public revenue towards the discharge of the national

debt, the greater part of those taxes might not be of long continuance,

and the public revenue of Great Britain might soon be reduced to what was

necessary for maintaining a moderate peace-establishment.

The territorial acquisitions of the East India Company, the undoubted

right of the Crown, that is, of the state and people of Great Britain,

might be rendered another source of revenue, more abundant, perhaps, than

all those already mentioned. Those countries are represented as more

fertile, more extensive, and, in proportion to their extent, much richer

and more populous than Great Britain. In order to draw a great revenue

from them, it would not probably be necessary to introduce any new system

of taxation into countries which are already sufficiently, and more than

sufficiently, taxed. It might, perhaps, be more proper to lighten than to

aggravate the burden of those unfortunate countries, and to endeavour to

draw a revenue from them, not by imposing new taxes, but by preventing the

embezzlement and misapplication of the greater part of those which they

already pay.

If it should be found impracticable for Great Britain to draw any

considerable augmentation of revenue from any of the resources above

mentioned, the only resource which can remain to her, is a diminution of

her expense. In the mode of collecting and in that of expending the public

revenue, though in both there may be still room for improvement, Great

Britain seems to be at least as economical as any of her neighbours. The

military establishment which she maintains for her own defence in time of

peace, is more moderate than that of any European state, which can pretend

to rival her either in wealth or in power. None of these articles,

therefore, seem to admit of any considerable reduction of expense. The

expense of the peace-establishment of the colonies was, before the

commencement of the present disturbances, very considerable, and is an

expense which may, and, if no revenue can be drawn from them, ought

certainly to be saved altogether. This constant expense in time of peace,

though very great, is insignificant in comparison with what the defence of

the colonies has cost us in time of war. The last war, which was

undertaken altogether on account of the colonies, cost Great Britain, it

has already been observed, upwards of ninety millions. The Spanish war of

1739 was principally undertaken on their account; in which, and in the

French war that was the consequence of it, Great Britain, spent upwards of

forty millions; a great part of which ought justly to be charged to the

colonies. In those two wars, the colonies cost Great Britain much more

than double the sum which the national debt amounted to before the

commencement of the first of them. Had it not been for those wars, that

debt might, and probably would by this time, have been completely paid;

and had it not been for the colonies, the former of those wars might not,

and the latter certainly would not, have been undertaken. It was because

the colonies were supposed to be provinces of the British Empire, that

this expense was laid out upon them. But countries which contribute

neither revenue nor military force towards the support of the empire,

cannot be considered as provinces. They may, perhaps, be considered as

appendages, as a sort of splendid and shewy equipage of the empire. But if

the empire can no longer support the expense of keeping up this equipage,

it ought certainly to lay it down; and if it cannot raise its revenue in

proportion to its expense, it ought at least to accommodate its expense to

its revenue. If the colonies, notwithstanding their refusal to submit to

British taxes, are still to be considered as provinces of the British

empire, their defence, in some future war, may cost Great Britain as great

an expense as it ever has done in any former war. The rulers of Great

Britain have, for more than a century past, amused the people with the

imagination that they possessed a great empire on the west side of the

Atlantic. This empire, however, has hitherto existed in imagination only.

It has hitherto been, not an empire, but the project of an empire; not a

gold mine, but the project of a gold mine; a project which has cost, which

continues to cost, and which, if pursued in the same way as it has been

hitherto, is likely to cost, immense expense, without being likely to

bring any profit; for the effects of the monopoly of the colony trade, it

has been shewn, are to the great body of the people, mere loss instead of

profit. It is surely now time that our rulers should either realize this

golden dream, in which they have been indulging themselves, perhaps, as

well as the people; or that they should awake from it themselves, and

endeavour to awaken the people. If the project cannot be completed, it

ought to be given up. If any of the provinces of the British empire cannot

be made to contribute towards the support of the whole empire, it is

surely time that Great Britain should free herself from the expense of

defending those provinces in time of war, and of supporting any part of

their civil or military establishment in time of peace; and endeavour to

accommodate her future views and designs to the real mediocrity of her

circumstances.