cent._ and the premium upon the ten lottery tickets was raised to 9_l._
life-annuity.
It would be unnecessary to trace the various methods of contriving the
premiums given in the succeeding years of this war. The principle upon
which they were regulated was always to proportion them to the rate of
interest at the time; and the motive was, I suppose, that by this method
of borrowing, a part at least of the debt would become extinguished with
the lives of the subscribers. There might perhaps be another, to wit,
that by swelling the capital, for value not received, there was an
appearance of borrowing at a lower rate of interest than what in reality
was the case. Thus in 1747, when 6 300 000_l._ were borrowed, instead of
giving not quite 4½ _per cent._ for this sum, they gave 4 _per cent._
upon 6 930 000_l._ which capital, although money should return to 3 _per
cent._ was still to stand at its full value; whereas, had 6 300 000_l._
been borrowed at 4½ _per cent._ there would have been a saving of 600
000_l._ upon the capital; and at the peace, the interest of 4½ _per
cent._ would equally have come down to 3 _per cent._ with the other
funds.
Footnote 26:
This may seem a high valuation, and is, in fact, far beyond what any
of those annuities sold for: but as the interest of money cannot be
estimated, for a constancy, at more than 3 _per cent._ and that
probably the best lives were chosen, the value to government of such
annuities may well be estimated at 20 years purchase. By De Moivre’s
tables, annuities for the most favourable ages, interest being at 3
_per cent._ are valued at 19.87 years purchase; and his valuations are
generally allowed not to be too high.
During this first war of George the Second, the land-tax was constantly
at 4_s._ in the pound; and new branches of customs, excise, or other
inland duties, were created in proportion to the swelling of the
national debts, which, on the 31st of December 1748, amounted to 78 293
313_l._ sterling, bearing 3 005 325_l._ interest; and the sinking fund,
or surplus of all permanent taxes then imposed, after paying the civil
list, and the interest upon this capital, amounted to 1 060 948_l._
sterling. During this war, the debts were increased above what they were
at the end of 1738, by 31 631 546_l._ sterling capital, and by 1 043
272_l._ of interest or annuities.
The war was no sooner over, and the national expence diminished, than
money began to regorge in the hands of the monied interest: an
infallible consequence of such a violent revolution, when extraneous
circumstances, such as occurred after the peace 1763, do not prevent it.
To profit of this conjuncture, government, early in 1749, proposed that
all the public creditors upon capitals bearing 4 _per cent._ interest,
redeemable by parliament, and amounting to upwards of 57 millions, who
should accept of 3 _per cent._ from December 1757, should have their
debts made irredeemable until that time; and in the interval should
continue to have 4 _per cent._ till December 1750; and 3½ _per cent._
from thence, until the total reduction to _per cent._ in December 1757.
This bold undertaking had the desired effect. Many obstacles were thrown
in the way; but the regorging capitals in the hands of many, made every
one fear the reimbursement for himself; and the credit of France was
then so low, that very few chose its funds as an outlet for their
superfluous money.
But an outlet, unfortunately, was not wanting at the end of the last war
in 1763, as we shall shew in its proper place.
Here then is a notable instance of the effects of regorging money. A
small sum, when compared with a nation’s debt, operates upon the whole
capital; as a small balance upon trade affects the whole mass of
reciprocal payments.
The reimbursement of 57 millions offered by government, in 1749, was, to
the conviction of all the world, an impracticable scheme; but the
stockholders seeing a large sum ready to be subscribed, at the interest
offered, and feeling the effects which that regorging money must, in all
events, have produced, willingly, and wisely perhaps, consented to the
offer made them. Had they refused, and had the scheme proposed become
abortive thereby, perhaps the nation might have been so far animated
against the creditors, from the disappointment, as to have consented to
be at the expence of defraying the service of the following years,
without encroaching upon the sinking fund. What effect this would have
produced upon the rate of interest, in that conjuncture, no man can
tell, nor will the real consequence of such a measure ever be known,
until the happy trial be made. That it would have brought interest below
3 _per cent._ in December 1757, is, I think, evident: for as matters
stood, had the creditors of 57 millions been able to hold out, I must do
them the justice to believe, they would not have consented to the
proposal made to them; and an addition of all the sinking fund thrown
among them annually, at a time they could not dispose of what they had,
upon better terms than those offered them, would undoubtedly then, as at
all times, operate a very great national relief, in bringing down the
interest.
During the tranquillity which continued from the peace of
Aix-la-Chapelle, in 1748, to the commencement of hostilities in 1755,
the money expended for extraordinary services amounted on an average to
above four millions _per annum_. The expence of government was then
increased, by supporting the colonies, and by several great and uncommon
outgoings at home, for purposes mentioned in the supplies of those
years.
A little before the breaking out of the last war, that is to say, on the
5th of January 1755, the national funded debt was reduced to 72 289
674_l._ upon which was paid an annuity of 2 654 500_l._ and the sinking
fund amounted to 1 308 814_l_[27]. At the end of 1763, the year of the
peace, the funded debt amounted to 130 586 789_l._ 10_s._ besides above
9 millions not provided for. So that at the end of last war the national
debt exceeded 140 millions; besides the value of the annuities granted
in 1757, 1761, and 1762. Hence it appears, that the war occasioned an
augmentation of upwards of 58 297 116_l._ upon the funded national debt;
besides the difference between the unfunded debts at the beginning and
end of the war; and also the value of those annuities[28].
Footnote 27:
To this funded debt must be added the unfunded debt, which I do not
know exactly; and the value of the annuities granted in 1745, and
1746.
Footnote 28:
The annuities of 1757, are estimated, by the author of the
Considerations on Trade and the Finances, at 472 500_l._ or at 14
years purchase; and the annuities of 1761, 1762, at 6 826 875_l._ or
at 27½ years purchase. But this valuation seems too low, for the
reasons given in the note, p. 394.
I shall, before I conclude this chapter, present a short scheme of the
state of the nation at that time: but first let us take a view of the
methods used to borrow so large a sum in the short period of eight
years.
Until 1757, money was borrowed by government, at a little above 3 _per
cent._ but then a loan of 5 millions being necessary, government
consented to create annuities of 4½ _per cent._ irredeemable for 24
years. By this expedient the monied people eluded the operation of
reducing the interest of this fund, upon the return of peace. How far
this expedient was to be preferred to the former, of increasing the
capital beyond the money paid; or whether it would not have been still
better to have paid for the money wanted, according to the current rate
of interest in the market at the time, waiting until a peace might
afford a favourable opportunity of reducing it, I shall not take upon me
to determine.
I have observed how rash it is for any one to censure acts of
administration, when the motives of a statesman’s conduct are unknown.
This, however, I have sometimes ventured to do, in speaking of things
which happened many years ago; but we ought to be more cautious as we
come nearer to our own times, because not having, as in this case, a
course of experience to point out the errors, we must entirely rely upon
our own sagacity, and reason only from analogy.
During the last war, as in that preceeding it, taxes were increased in
proportion to the interest of the money borrowed; and new impositions
were now laid on the articles of great consumption, which produced
abundantly. The new malt-duty of 3_d._ _per_ bushel, and the new
beer-duty of 3_s._ _per_ barrel, bring in net into the exchequer near
820 000_l._ _per annum_, and discharge the interest of above 27 millions
sterling, at 3 _per cent._ Such a sum raised at the end of a war so very
expensive, and at the very time when the credit of France was totally
fallen, must have operated in the strongest manner, and did in fact
operate more, perhaps, than any other consideration to put an end to
that war, the most glorious that Europe has beheld since the beginning
of this century, or perhaps in any age whatever: advantageous to Great
Britain, notwithstanding all the expence, providing that the
consequences happen to correspond to what may be reasonably expected.
I shall now set before my reader a short state of the taxes, debts, and
public funds of Great Britain, at this bright period of her history.
From the best authority I have been able to procure, the revenue of the
state, considered under the three general branches of customs, excise,
and other inland duties, which comprehend the whole permanent income of
this kingdom, was then as follows:
Customs net into the exchequer, about £2 000 000
Excise in all its permanent branches net, about 4 600 000
Other inland duties net 1 000 000
Land tax at 4_s._ in the pound 2 000 000
Annual malt tax net 613 000
——————————
In all 10 213 000
Let us next state the annual charges and appropriations settled upon
this fund.
First then the civil list, to the amount
of £800 000
2_do_, The interest of about 131
millions of funded debts at different
rates of interest, about 4 500 000
3_tio_, The interest of nine millions
not then provided for, supposed to be
at 4 _per cent._ 360 000
——————————
In all of regular and permanent annual charge 5 660 000
——————————
So there remains free, about 4 553 000
From which if we deduct the annual grants of land and
malt-taxes, which extend together, as above, to 2 613 000
——————————
There will remain as the produce of the sinking
fund[29] 1 940 000
Footnote 29:
I find that the sinking fund is now estimated at 2 100 000_l._ by the
author of the Considerations on Trade, &c. above cited. I am also
informed that the net produce of the customs exceeds 2 000 000_l._
considerably: but 4 600 000_l._ is rather the gross than the net
produce of the _permanent_ duties of excise; that is, of all the
excise duties, excepting the annual malt-duty. It must also be
observed, that the annuities payable to the national creditors,
amounted, the 5th January 1764, to more than 4 720 000_l._ But on the
other hand, the interest of the unfunded 9 millions is rated too high,
as appears from the author above quoted. I cannot pretend to give
exact details. The general sketch here stated is sufficient for my
purpose.
In that state, nearly, stood the affairs of Great Britain after the
conclusion of the peace in 1763.
It now only remains to offer some conjectures why, after this period,
money was not found to regorge, as after the peace of Aix-la-Chapelle,
so as to furnish an opportunity of reducing the rate of interest upon
all redeemable debts, and by that of raising the amount of the sinking
fund, and more firmly establishing the national credit.
After the fall of the credit of France towards the end of 1759, Great
Britain had the command of all the money to be lent in Europe; and
accordingly amazing sums were borrowed in 1760, 1761, and 1762. Of the
sums borrowed, a great part, no doubt, was the property of strangers;
but they, not being so well acquainted with the affairs of this nation
as the English themselves, instead of subscribing to the loans, lent the
money to our own country people, who, in hopes of a great rise upon the
return of peace, filled the subscriptions with borrowed money.
The consequence was, that no sooner did the funds begin to rise after
the peace, than every creditor demanded his money of those who had
invested it in the public funds. This obliged the latter to bring their
stock to market, and this again had naturally the effect of keeping the
funds very low. Some, more prudent than the rest, had borrowed upon a
long term of repayment; which had the effect of putting off still longer
the settlement of the funds in the hands of the real proprietors, and of
taking them out of those who only held them nominally.
Besides this accidental cause of the low price of the funds, other
circumstances, no doubt, greatly contributed to produce the same effect.
However great the balance of trade, that is, of exportations above
importations, may have been of late in favour of England, still the
mighty sums drawn out by strangers have certainly, upon the whole,
prevented much money from coming home on the general or grand balance of
payments. While that remains the case, it is impossible money should
regorge at home in the hands of the natives, and until this happens,
there is no hope of seeing the 3 _per cents._ above par. But then the
rise, small as it is, since the peace, may encourage us to hope that
that time is not far off: for had the profits of our trade been quite
unable to balance the loss upon our foreign debts, the funds would
undoubtedly still continue to fall, which is demonstrably not the case
from the circumstances of the loan in April 1766, obtained by
government, with the assistance of a lottery indeed, at 3 _per
cent._[30]
Footnote 30:
The loan of 1766, was 1 500 000_l._ at 3 _per cent._ Every subscriber
for 100_l._ had an annuity of 3 _per cent._ on 60_l._ and 4 lottery
tickets, valued to them by government at 10_l._ each, in all 100_l._
The prizes and blanks in the lottery amount to 600 000_l._ and bear 3
_per cent._ paid by government. The annuities amount to 900 000_l._
and bear also 3 _per cent._ The number of tickets are 60 000. Hence,
at 10_l._ each, they amount to 600 000_l._
The advantage government reaps by this way of borrowing, is, that the
desire of gaming, raises the lottery tickets above their value, when
thrown into the hands of the public; and this advanced value being a
profit to those who receive them in part of their subscription, that
profit they share with government. Example. In April 1766, when
government borrowed 1 500 000_l._ at 3 _per cent._ the 3 _per cents._
were only at 89: consequently, the difference between 89 and 100,
which is 11_l._ must have been supposed to be the sum which the
subscribers, from the propensity of people to game, had a reasonable,
or rather a certain expectation of gaining upon the sale of 4 lottery
tickets, that is, 2_l._ 15_s._ upon every one.
To know therefore the real par of a lottery ticket, you must proceed
thus: it costs the subscribers 10_l._ for which they receive from
government 3 _per cent._ This 10_l._ as 3 _per cents._ stood at 89, is
worth at that rate no more than 8_l._ 18_s._ add to this sum what the
public must pay for the liberty to play, which we have stated above at
2_l._ 15_s._ and you have the exact par of a lottery ticket at 11_l._
13_s._
Whatever they sell at above 11_l._ 13_s._ is profit to the
subscribers, whatever they sell below 11_l._ 13_s._ is a loss to them.
This profit, though small in appearance, is greatly increased from
another circumstance, viz. That the subscribers may sell their
subscriptions at a time when they have really advanced but a small
part of it. The first payment is commonly of 15 _per cent._ on their
subscription: when they sell, they make this profit upon the whole
capital. Suppose then 15 _per cent._ paid in: if the profit upon
selling be no more than 1 _per cent._ upon the capital, that 1 _per
cent._ turns out no less than 6⅔ _per cent._ upon the money they have
advanced. Thus a person who is possessed of 1500_l._ only, may
subscribe for 10 000_l._ in this loan: he pays in his 1500_l._ and
receives his subscription; when he sells he sells 10 000_l._
subscription, upon which he gains 1 _per cent._: 1 _per cent._ of 10
000_l._ is 100_l._ so (in one month suppose) he gains by this means
100_l._ for the use of 1500_l._ But as a counterbalance for this
profit, he runs the risk of the falling of the subscription, which
involves him in a proportional loss if he sells out; or in the
inconvenience of advancing more money than he had to employ in that
way, in case he should prefer keeping his subscription for a longer
time, in hopes of a rise in the public funds. By this mode of
borrowing, government profits by the disposition of the people to
game. But this propensity has its bounds, and at present it is found
by experience not to exceed 60 000 lottery tickets, or 600 000_l._
Were, therefore, a subscription of 3 millions taken in upon the same
plan with the present of 1 500 000_l._ the regorging number of tickets
would so glut the market, that the whole would fall below the par of
their supposed value.
Here then was an outlet provided for more money than all that could
regorge at home, viz. the payment of those foreign creditors, to whom
the stock-holders were indebted. Besides this, the sale by government,
of such tracts of land in the new acquired islands in the West Indies,
provided another; money was even placed in the funds of France soon
after the peace, until the adventurers were checked by the operations of
the King’s council, in reducing both capitals and interest upon them,
contrary to the original stipulations with the creditors. A lucky
circumstance for Great Britain, as it forces, in a manner, all the money
of the continent into the English funds, which equally remain a debt
upon the nation, whether high or low in the market.
------------------------------------------------------------------------
CHAP. VI.
_State of the public Credit in France, their Debts, Funds, and
Appropriations, at the Peace 1763._
Were it as easy to get information of the political state of France as
of Britain, one might attempt to give such a sketch of their affairs as
we have now done of the other; but when we consider the lame accounts
given by French authors who have made researches of that kind their
particular study, it would be inconsiderate in a stranger ever to
undertake a task so difficult.
In France, the finances are considered as a political arcanum, of great
consequence to the state to conceal from vulgar eyes. It is not long
ago, since the farmers of the greatest part of the revenue used
regularly to burn their books at the end of the year, to prevent the
King’s servants from knowing the state of the most essential part of his
affairs. Cardinal de Fleuri abolished this custom, and obliged them to
lay every thing open to his eyes.
I shall now endeavour to communicate, in as short and distinct a manner
as I can, an idea of the present state of the French revenue; of the
taxes from which it proceeds; of the manner they are administred; of the
purposes to which they are appropriated; and of the state of the King’s
debts at the end of the last war.
From this view we shall form a general notion of their public expences;
of their public debts; and of what is most material, of the resources of
that kingdom in time to come.
For this purpose, I shall divide the whole revenue of France, that is,
all that is raised on the people, to whatever purpose it may be applied,
into five branches; and after having first explained the nature of each,
I shall give a general detail of them in their order.
The first branch is what is called the King’s ordinary revenue. This is
composed of about twelve articles of permanent taxes, supposed to be
sufficient for defraying the whole expence of government, civil and
military, in time of peace.
The second is composed of all the extraordinary impositions which were
laid upon the people, in consequence of debts contracted in the former
war, ended in 1748.
The third, what was imposed during the last war, for the service of the
state, and for paying off the debts then contracted.
The debts of France, contracted in periods anterior to those two wars,
are charged on the ordinary revenue, as we shall presently see.
The fourth branch consists of two articles. The first comprehends
certain perpetual taxes appropriated for certain state expences, not
charged upon the ordinary revenue. The second, what is computed to be
the expence of levying all the taxes, and also the profit of the
farmers: or in other words, what the people pay more than the public
receives from the hands of the tax-gatherers.
The fifth and last branch, comprehends the taxes paid to the court of
Rome, to the clergy, and to the poor; with other duties belonging to
private persons. Under one or other of these five branches, may be very
properly arranged all the taxes paid by the French nation.
First general branch.
The King’s ordinary revenue, with the charges upon it for the year 1761.
Articles of revenue. Fr. money. Sterling ditto.
livres. l. s. d.
1. Domain (the King’s landed
estate) 6 000 000 266 666 13 4
2. Taille (the land-tax) 56 600 000 2 515 555 11 1¼
3. Double capitation (the
poll-tax) 53 200 000 2 364 444 8 10½
4. Ditto upon such as have
civil employments,
pensions, &c. 6 700 000 297 777 15 6½
5. 2s. in the pound on all
civil employments. 6 800 000 302 222 4 5¼
6. The mint, or coinage 2 400 000 106 666 13 4
7. Decimes and capitation of
the clergy 12 400 000 551 111 2 2½
8. Free gifts from the
states of Burgundy,
Provence, Languedoc, and
Brittany 10 000 000 444 444 8 10½
9. Paulette, or annual tax
upon hereditary offices 2 600 000 115 555 11 1¼
10. Tax on the Lutheran
clergy of Alsace 200 000 8 888 17 9¼
11. Regale, or the
sovereign’s right on
ecclesiastical benefices 1 400 000 62 222 4 5¼
12. General farms 112 500 000 5 000 000 — —
——————————— ————————————————————
Total of the ordinary
revenue 270 800 000 12 035 555 11 [31]1¼
Of this total the livres. l. s. d.
general farms
amount to 112 500 000 5 000 000 — —
And the other 158 300 000 7 035 555 11 1¼
branches to
The farms were increased
_anno_ 1762 by 11 500 000 511 111 2 2½
——————————— ————————————————————
Total ordinary revenue at the }
end of the war } 282 300 000 12 546 666 13 4
——————————— ————————————————————
Articles of Expence.
Houshold of the King and royal
family 9 400 000 417 777 15 6½
Ditto, their personal expence 4 600 000 204 444 8 10½
King’s stables and stud 2 500 000 111 111 2 2½
Hunting equipages 1 600 000 71 111 2 2½
Alms 600 000 26 666 13 4
Pay of the palace guards,
(_gardes de la porte_) &c. 3 300 000 146 666 13 4
King’s buildings 6 600 000 293 333 6 8
——————————— ————————————————————
Total expence of the court 28 600 000 1 271 111 2 2
——————————— ————————————————————
Pay of all the houshold troops 8 000 000 355 555 11 1¼
Pay of all the other troops of
France 48 000 000 2 133 333 6 8
Fortifications 6 000 000 266 666 13 4
Artillery for land service 6 600 000 293 333 6 8
Military gratifications, over
and above the pay 10 000 000 444 444 8 10½
Pay of general officers
commanding in provinces and
fortresses 2 000 000 88 888 17 9¼
Pay, &c. of the marechaussée 2 200 000 97 777 15 6½
Expence of prisoners of state 1 200 000 53 333 6 8
Ordinary expence of the navy 25 000 000 1 111 111 2 2½
——————————— ————————————————————
Total regular military expence
by land and sea 109 000 000 4 844 444 8 10
——————————— ————————————————————
Royal pensions 9 000 000 400 000 — —
The appointments of the King’s
ministers 310 000 13 777 15 6½
Ditto of the first presidents
of all the parliaments in
France, expence of criminal
prosecutions, and many other
articles of that sort 22 000 000 977 777 15 6½
Appointments of the venal
employments, of the robe,
treasurers, receivers,
comptrollers, &c. 10 000 000 444 444 8 10½
Bridges, highways, dykes, &c. 4 000 000 177 777 15 6½
For the royal academies 1 400 000 62 222 4 5¼
To the King’s library and
archives of France 1 800 000 80 000 — —
Extraordinary and casual
expence upon the two last
articles 400 000 17 777 15 6½
For lighting and cleaning the
city of Paris 840 000 37 333 6 8
Appointments of the secretary
of the cabinet council, for
couriers, and other expence 1 400 000 62 222 4 5¼
Ditto of ministers at foreign
courts 1 800 000 80 000 — —
——————————— ————————————————————
Total sum of this branch 52 950 000 2 353 333 6 8
——————————— ————————————————————
Interest at 2½ _per cent._
upon 990 000 000 livres, or
44 000 000_l._ sterl. of the
late King’s debts,
constituted after the
bankruptcy 1720 24 750 000 1 100 000 — —
Interest at 2½, upon 94
millions due to the company
of the Indies, upon their
old accompts 1720 2 350 000 104 444 8 10½
Farther allowed to the
company, for paying their
dividends 2 400 000 106 666 13 4
Annuities on lives constituted
during the last war 16 000 000 711 111 2 2½
——————————— ————————————————————
Total interest of debts 45 500 000 2 022 222 4 5
——————————— ————————————————————
Footnote 31:
These reductions of French money to sterling, are computed at the rate
of 22½ livres to the pound sterling. Hence 270 800 000 livres make 12
035 555_l._ 11_s._ and 1½_d._ sterling, or nearly 1¼_d._ as stated,
though the amount of the partial sums differs by 1_d._
This article of 16 millions of annuities on lives is the only charge
cast upon the King’s ordinary revenue, in consequence of the last war.
Articles of revenue. Fr. money. Sterling ditto.
livres. l. s. d.
Recapitulation of the expences.
Expence of the court 28 600 000 1 271 111 2 2½
Fixed military ditto, by sea
and land 109 000 000 4 844 444 8 10½
Justice, pensions, &c. 52 950 000 2 353 333 6 8
Interest of debts 45 500 000 2 022 222 4 5¼
——————————— ————————————————————
Total expence 236 050 000 10 491 111 2 2½
Total ordinary revenue at the
end of the war 282 300 000 12 546 666 13 4
——————————— ————————————————————
The first deducted from the }
latter, Remains free } 46 250 000 2 055 555 11 1½
——————————— ————————————————————
Besides the articles of expence here stated, there are many others, to
which no limit can be set. The _comptant_, or the King’s private orders
for secret service, and many different expences, form a great article.
Subsidies also to foreign courts: in short, much more, in all human
probability, is spent, than all the produce of this permanent revenue
can answer. So that from this no relief from debts can be expected,
except so far as it may be augmented by the falling in of the annuities
on lives. But public debts are to be paid only by funds appropriated for
that purpose: and were this revenue to be relieved of the whole 45
millions of interest charged upon it, I have little doubt but the King’s
expence would augment in proportion.
I shall delay making any observation upon the nature of the impositions
which produce this revenue, until we come to the subject of taxes, to
which it naturally belongs.
Besides this ordinary revenue of the Kings of France, which (if we
except 26 600 000 livres, or 1 182 222 _l._ 4 _s._ 5¼ _d._ upon the
capitation, added on account of the war only for a time) may be
considered as their civil list; there are other branches of revenue,
which are to be looked on as extraordinary supplies, imposed for raising
money in time of war, and for paying off the debts contracted, upon the
return of peace. Of this nature are _dixiemes_ and _vingtiemes_; taxes
very contrary to the spirit of the French nation, and to which they
never have submitted without the greatest reluctance, and only on very
urgent occasions.
The credit of France fell very low towards the end of the former war,
which began in 1744, and ended in 1748. The parliament registred with
great unwillingness every edict imposing new burthens. The _dixieme_ was
a great augmentation of revenue, for the time it lasted; but being an
imposition which the Kings of France never have been able to make
perpetual, it could not be pledged for such large sums as are required
in time of war, and which no nation, however wealthy, can furnish
annually, as they are demanded.
To supply, therefore, the want of a fund to be mortgaged, and
consequently the want of public credit, the King’s banker M. de
Monmartel, with other men in business, joined their credit, and supplied
the King’s extraordinary occasions. They opened a sort of bank _anno_
1745, where they received money at ½ _per cent._ _per_ month, the
principal payable on demand. This fund gained credit; payments being
regularly made as soon as demanded.
Upon settling accounts after the peace, _anno_ 1748, the King was found
indebted to this bank for a vast sum of money. In order to pay it,
lotteries were set on foot. The tickets were given to the bankers, and
they by the sale of them withdrew their own paper, which was circulating
with very good credit on the exchange of Paris. In order to furnish a
fund for this lottery, the King had interest with the parliament to get
a twentieth penny established, or one shilling in the pound, upon all
the revenues of private people in France, except the clergy, and some
hospitals. The same was charged upon the industry of all corporations of
trades and merchants; and to these was added a capitation upon the Jews.
This was thrown into what they call the _caisse d’amortissement_, or
sinking fund; and appropriated for paying off the lotteries, and some of
the antient debts which were to be drawn, for this purpose, by lot; and
for other extraordinary expences incurred in consequence of the war.
This tax was to subsist, I believe, till 1767. It was this _caisse
d’amortissement_ which was shut up in 1759, by which step a mortal blow
was given to French credit.
Besides this first twentieth penny, there were five other taxes imposed,
and appropriated during a determinate number of years, not exceeding 15
in some, 12 in others, for paying off the debts contracted in the war
ended 1748, and for some extraordinary expences of government.
These shall be specified in the following general view of this branch of
the French revenue.
Second general branch.
Extraordinary taxes established after the peace of Aix-la-Chapelle, with
their appropriations.
Articles of revenue. Fr. money. Sterling ditto.
livres. l. s. d.
The first twentieth penny on
all income 23 800 000 1 057 777 15 6½
Ditto upon tradesmen and
merchants incorporated 6 500 000 288 888 17 9¼
Ditto upon the Jews 1 400 000 62 222 4 5¼
—————————— —————————
Total of the twentieth penny,
which formed a sinking fund,
shut up in 1759 31 700 000 1 408 888 17 9¼
The farm of the posts and
_relais_ of France 6 000 000 266 666 13 4
Two shillings in the pound of
the capitation added to it 5 520 000 245 333 6 8
The farm of stamp-duties on
leather, and duties on
tanners bark 2 960 000 131 555 11 1¼
The farm of duties upon
gunpowder and saltpetre 2 988 000 132 800 — —
Two shillings in the pound of
the twentieth penny added 3 170 000 140 888 17 9¼
Total of this second branch
of }
French taxes } 52 338 000 2 326 133 6 8
—————————— —————————
Appropriations of this fund, as follows:
1. For paying, during 10
years, a part of the 990
millions, of livres, of old
Annuities, charged above on
the King’s ordinary revenue,
and bearing an interest of
2½ _per cent._ the yearly
sum of 5 000 000 222 222 4 5¼
2. To the India Company, in
discharge of a debt due to
them: for 12 years 2 000 000 88 888 17 9¼
3. For paying the prizes of
the bankers lotteries every
year as they are drawn: for
12 years 3 800 000 168 888 17 9¼
4. Towards making good
deficiencies upon the funds
appropriated for the war,
yearly, till paid 18 700 000 831 111 2 2½
5. Ditto upon the funds
appropriated to the new
_Ecole militaire_ 1 200 000 53 333 6 8
6. For payment of perpetual
annuities created during
last war 14 500 000 644 444 8 10½
7. For making good
deficiencies upon the
artillery and magazines,
during the war 1744: for 12
years, the annual sum of 1 800 000 80 000 — —
8. Ditto upon the article of
foreign affairs 8 690 000 386 222 4 5¼
Total appropriation 55 690 000 2 475 111 2 2½
—————————— ————————————————
This branch of revenue appears, by this state, to be totally
appropriated to certain purposes.
Were appropriations adhered to in France, and could one be certain that
debts are actually discharged, at the period appointed, in consequence
of the appropriation for that purpose, we might form a better judgment
of the _actual_ amount of the debts of France, than in fact any man can
do who is not in the administration.
Of this second branch of taxes I consider the twentieth penny, the two
shillings in the pound augmentation upon it, and a like augmentation
upon the double capitation; amounting in all to above 40 millions a
year, as a resource which France may have at all times, in cases of
necessity; although I do not suppose it will be possible to establish
them as a fixed revenue. They will probably, however, as matters stand,
be continued, either in whole or in part, until the great load of debts,
recently contracted, shall be considerably diminished.
As for the remaining sum, arising from the posts, leather, and
saltpetre, these I consider as perpetual; because by their nature they
are not burdensome to the people.
We are not to understand that the annual sum of five millions of livres,
appropriated for paying off the capital of 990 millions of the old
annuities, bearing 2½ _per cent._ stated in art. 1st, was intended to be
applied to these capitals, at the rate they stand. In France it is
supposed that he who gets 20 years purchase of the interest of his debt,
is always fairly paid off; and people there are so fond of
reimbursements, even at this rate of making them, that when, about the
year 1755, a like scheme of paying off those old annuities was
suggested, it was upon condition that every one having, for instance, an
annuity of 100 livres, should, in order to be intitled to this
reimbursement, pay to the King 20 years purchase of it, or 2000 livres
ready money; and that being complied with, his contract was to be put
into the lottery wheel, with all the rest subscribed for, and if it
happened to be drawn, he was to receive 4000 livres; to wit, the 2000 he
had paid down, and the other 2000 as the value of a capital of 4000
livres, at 2½ _per cent._
This every body must allow procures a wonderful facility in paying off
debts. If the English creditors could be engaged to enter into the
spirit of such reimbursements, government, I am persuaded, would not
apply so closely as they do, to reduce the interest upon them; whereby a
great distress comes upon poor widows and orphans, who have their all
vested in the funds. This inconvenience is avoided in France: the poor
are cherished by the comfort of high interest; the state is set free;
and the creditors rejoice in getting back their money, in any shape
whatever.
The war of 1756 breaking out, obliged the King to think of every
expedient to increase his income. Had he set out by borrowing upon
annuities for lives, at 10 _per cent._ and by mortgaging his ordinary
revenue for the payment of them, his credit would have been more solid,
and the plan of running in debt more systematical: but in the end, it
would have involved him in the terrible dilemma of either making a
bankruptcy, in order to re-instate himself in the possession of his
ordinary revenue, or of making him depend more than he inclined upon his
parliament; whose authority is absolutely necessary for laying a
perpetual and regular imposition, which alone can form a solid basis of
national credit.
He was therefore resolved, in one way or other, to increase the
impositions on the people in the time of war, in order to avoid the
consequences he foresaw from the loss of his fixed revenue.
The King’s ministers at this time could not convince the parliament of
Paris, that in order to borrow money upon the best terms, it was
necessary to have a sure fund for paying the interest of it.
It had been usual to borrow money, on pressing occasions, from the
farmers of the revenue, bankers, and financiers, as they are called, at
7 and even 10 _per cent._ They understanding the chain of the affairs of
France, used to obtain credit both abroad and at home, from people who
would not lend directly to the King; although they knew at the time of
the loan that the money was borrowed for his use. The reason was, that
the King was under an absolute necessity to keep faith with this set of
men, upon whom the credit of France has depended for many ages: and as
the profits they used to make were very great, ministers knew, by a sort
of instinct, when they had gained enough; and in clearing their accounts
in the usual way, a sufficiency was left to them, to repay what they had
borrowed from others.
Perhaps the parliament thought, and perhaps with reason, that in the
main it was cheaper to borrow in this way, at 10 _per cent._ than in the
English way, at 3 _per cent._ because of the great facility in paying
off the debts which attended it; but this is only a conjecture. That
there was however a contrast of sentiments between the parliament, and
the minister of the finances at that time, who had contracted English
ideas of credit, is most undoubted; and it was this contrast which
brought on the bankruptcy in 1759, when the sinking fund was shut up
against the creditors by an act of power. To judge of the sentiments of
both parties with candour, let us then examine the plan of borrowing
proposed by the one, and by the other.
The minister, M. de Silhouëtte, proposed to the King, to levy, as a
solid fund of credit to borrow upon, a general subvention, as it was
called, over all France; or in other words, to make the repartition of a
large annual payment, over all the cities, towns, villages, and suburbs
in France.
This was to be divided according to the supposed wealth and quantity of
circulation every where. Every district was ordered to report to the
King’s council their opinion concerning the particular mode of raising
their proportional part of it, in the best way relative to their
situation. This report the council was to examine, and to approve or
amend the proposal given in, according to information.
This was perhaps the best plan of taxation, if properly executed, that
ever has been thought of, for a nation already under a regular
administration of government, and accustomed to pay considerable
impositions.
It removes the inconvenience attending all general taxes, which never
fail to affect unequally different places and districts. It admits of a
prudent mixture of excises, with taxes upon possessions, according to
the internal circumstances of every place. It confines them to towns,
where alone all excises at least can be levied with propriety. It
lightens the oppression of tax-gatherers; because the corporation may
employ whom they will for that purpose. In a word, it is a tax
administred with all the advantages of a farm.
This tax, the general subvention, after it had been imposed by edict,
registred in a Bed of justice September 1759, fell to the ground, from
the nature of the French constitution; because it could not be levied
without a systematic administration, supported by the authority of the
courts of law, to which the parliament would not give their concurrence,
for a very plain reason.
The general subvention being very extensive, and calculated for a fund
of credit to borrow upon, was, by its nature, of a species proper to
become a perpetual tax, as all excises are. The parliament of Paris
seemed to think it agreeable to the constitution, which they are sworn
to maintain, to preserve at all times in their hands a certain power
over the King’s purse, in order to prevent an extravagant minister from
impoverishing the King and the kingdom at once, or running them into the
inextricable confusion of an infallible bankruptcy.
This circumspection of the parliament was represented in another light
at court; and odious parallels were drawn between what had happened in
England about the middle of the last century, and what soon might be
expected in France.
Upon such topics every one judges as he is affected. The minister was
railed at by the parliament-party, in the most virulent manner. Who was
in the right, and who was in the wrong, upon the general question, of
the propriety of raising so large an imposition, to serve as a fund of
credit, under a government like that of France, I shall not here
examine. But that a solid fund should be provided, in one way or other,
proportional to the actual deficiency of the annual supplies, and to
what could not be raised within the year, for the uses of the war, was,
I think, entirely agreeable to principles.
This the minister had proposed in the subvention, though perhaps the
plan was too great; and the parliament, when they rejected the proposal,
sensible that the exigencies of the state demanded a supply of money,
proposed in their turn, as an equivalent for the general subvention, to
coin for 600 millions of notes, which were to have the sanction of
parliament for their fund of payment; but no provision was made for the
ready circulation of them in the interim.
Here then is an example where the sentiments of the French nation were
divided upon the principles of public credit. And this affords a good
opportunity of reconciling them, and of confirming the doctrine we have
been endeavouring to establish.
The minister felt the disadvantage of the King’s borrowing upon a lame
security; he therefore proposed a solid and permanent fund of credit for
performing the obligations to be contracted with the creditors.
The parliament, on the other hand, examined the situation of the people,
who, they thought, were no longer in a capacity to pay the taxes already
imposed; and therefore concluded, that it was unnecessary to establish
any new one. They therefore proposed to augment circulation, by
providing a means whereby alienations might be carried on, and by that
they expected to render the taxes already imposed more productive.
Both parties were in the right, as commonly is the case in such
disputes; but they did not perceive how their opinions could be
reconciled.
Had circulation been facilitated by the establishment of a bank upon
true principles, perhaps the taxes already imposed, might have produced
a sufficient fund for carrying on the war, without the expedient of the
general subvention.
But the manner proposed by the parliament to increase circulation, by
paying with paper money, and not providing a fund for realizing it when
it came to stagnate, was an expedient entirely delusive. The paper would
soon have fallen to a great discount: the remembrance of the Missisippi
would probably have been revived, which would have occasioned the
locking up of the coin; and the kingdom might have been involved in the
greatest distress and bankruptcy.
The minister should therefore have concurred with the parliament in a
scheme for establishing a bank: the King might safely have entrusted the
administration of it to parliament, and even have supplied coin from the
royal treasury for circulating the paper. But the minister, I suppose,
took it for granted, that taxes _would_ be paid, providing they were
imposed; and the parliament, that the paper _would_ circulate, providing
it was issued.
The reasonings I have ascribed to each party in this dispute, are not
founded upon information: they are only natural conjectures which I form
from the opposition of sentiments between men who were all, I suppose,
well acquainted with the situation of France, and who respectively took
part according to the combinations which occurred to them.
The remonstrances of the parliament at that time were filled with an
enumeration of distresses, all of which are the necessary effects of a
scanty circulation. In the King’s edicts there is strong reasoning upon
the principles of public credit. The candour I feel in my breast, while
I examine the merits of this important dispute, will I hope serve as an
apology for all mistakes in point of exact information.
The result upon the whole was what might have been expected. The
subvention was dropt, and the proposal of the paper was rejected by the
King.
The middle term adopted by the parties, shewed however, I think, that in
the main the minister had been in the right; because the taxes were
increased and paid: had the paper been issued, the success, I am
persuaded, would not have been favourable in proportion.
But instead of a permanent subvention, a tax of the most odious nature
was established, which, from this very circumstance, there was little
danger of seeing long continued.
In the preceeding year, a second twentieth penny upon possessions had
been imposed, to which had been added 2 shillings in the pound of the
tax itself; a new poll-tax upon certain classes of the people in
proportion to the number of their servants; an additional duty upon the
stamps upon silver and gold plate; higher duties on foreign manufactures
imported; and 20 _per cent._ on all former duties on consumption. The
second twentieth was to continue until two years after the peace; the
other duties for eight years longer.
Notwithstanding this heavy load already laid upon property, the
parliament, rather than consent to the subvention, agreed to impose a
third twentieth penny upon possessions; and to render this tax more
productive, additional poll-taxes upon place-men, &c. were comprehended
in that edict. Thus ended the dispute: the minister was dismissed, and
the edict for the general subvention was withdrawn.
Besides the second and third twentieth penny, several augmentations of
revenue were obtained during the last war, which I shall presently
mention, two of which, for their peculiarity, I shall briefly explain.
The clergy of France, strongly pressed by the King, supported by his
parliaments, to give in a declaration of their income, in order to be
taxed at so many shillings in the pound, like other subjects, after many
evasions, at last succeeded in disappointing the scheme. They offered an
extraordinary free gift equivalent to the two twentieths, to be paid
annually until 1765, and this was accepted.
The ordinary free gift of the clergy is at the rate of a million and a
half of livres a year; this they doubled and paid at the rate of three
millions a year, which we may consider as two shillings in the pound of
all the clergy possess in France, which makes their revenue to be about
thirty millions a year, and I believe it does not far exceed it.
The other branch of revenue is something analogous to a circumstance in
the history of English taxes: it was called an extraordinary free gift
to be paid by every corporation in France. Charles I. had a very exact
valuation put upon all England, when he proposed to levy ship-money.
This was found so correct that it served for a basis to regulate the
distribution of the sum of 100 000_l._ a year paid to Charles II. for
his courts of wards and liveries[32].
Footnote 32:
Davenant’s Ways and Means, Article of Monthly Assessments.
In like manner the King of France had a very accurate estimate made of
all France, when he formed his edict for a general subvention, which had
pretty much the fate of the ship-money. And though the parliament
refused their consent to the great subvention, they agreed to establish
the epitome of it in August 1759: which see in the note[33].
Footnote 33:
This free gift was imposed upon all cities, towns, buroughs, villages,
and suburbs, in France. And those lying within the jurisdiction of
every Intendant were joined in one sum, leaving the repartition of
them to those magistrates, as the custom is.
For the generality of Amiens 153 300
For the generality of Orleans 356 000
For the generality of Paris 1 578 000
For the generality of Chalons 200 900
For the generality of Poitiers 265 200
For the generality of Soissons 60 700
For the generality of Tours 34 434
For the generality of Rochelle 131 800
For the generality of Bourges 105 600
For the generality of Moulin 91 770
For the generality of Riom 165 628
For the generality of Lyons 397 454
For the generality of Artois 150 000
——————— Sterling.
Sum total 3 690 786 £164 034 18 8
The duties imposed by this arret are to be levied upon all classes of
the people, nobility, commons, clergy, even nuns and monks; no
exception is made except in favour of hospitals for their own
consumption only.
This tax, small as it is, may be of infinite consequence in times to
come. The great difficulty of raising taxes is in the beginning; and if
the levying of this trifle in every city, town, village, and suburb, in
France, be carefully conducted, with a view to subsequent augmentations,
and if it be properly distributed upon every branch of consumption and
revenue, nothing will be so easy to the King as, by his own private
authority, to enforce a gradual augmentation of it, and perhaps in time
to absorb in it, the whole, or at least the greatest part of the revenue
of his kingdom.
Besides the two twentieths, and the free gift of the cities, several
other taxes of less moment were either imposed, renewed, or continued
for a longer term, and then sold for raising money for the service of
the year, viz.
1_mo_, Five years of the free gift of the clergy of France, amounting to
15 millions, were paid down at once by that body.
2_do_, That of the clergy of Alsace, paid in the same way, for the same
term, produced 3 millions.
3_tio_, A duty on firewood, &c. in the city of Paris, valued at 3 400
000 a year, sold for 7 years, for 10 millions.
4_to_, Another duty upon the consumption of eggs, butter, &c. valued at
2 400 000, sold for 15 years for above 30 millions.
5_to_, A like sum got from the farmers general, for allowing them to
raise the price of their tobacco 10 _per cent._ for 10 years. The annual
amount of this I do not know.
6_to_, And in the last place, the third twentieth penny, which produced
36 270 000 a year, was sold for the two years for which it was imposed,
for 60 millions.
Thus, of all the impositions raised during the last war, the second
twentieth, and an epitome of the subvention raised in all cities, towns,
villages, and suburbs, in France, remain unalienated.
In order to throw all the light I possibly can upon the present state of
that nation, I shall next briefly recapitulate the extent of the annual
supplies raised for the service of the different years of the war, from
1756 to 1762 inclusive; in which I shall point out, as well as I can,
how this third branch of revenue was appropriated.
It is in this manner only I can communicate to the reader what I can
guess concerning the present state of that nation. Could we know, as
with us, the amount of taxes, and outstanding debts at every period,
that detail would be unnecessary.
The extraordinary grants of 1756, amounted to 121 millions, 5 377
777_l._ sterling.
In October 1755, the farms of almost all the taxes were renewed. Upon
such occasions, it is usual for the farmers to advance sums in
proportion to the extent of their farms, for security of the lease; for
which advances the King, at that time, allowed them an interest out of
their yearly farm-rent of 5 _per cent._ and the sums advanced were
appropriated for the service of the year 1756. Here follow the sums
advanced upon the several farms.
Fr. money. Sterling ditto.
livres. l. s. d.
1. Upon the general farms,
after repaying what had been
advanced upon the former
lease, nett into the royal
treasure 40 000 000 1 777 777 15 6½
2. Upon the farm of the posts
of France 3 000 000 133 333 6 8
3. Upon the farm of the stamps
upon leather 1 000 000 44 444 8 10½
4. Upon the farm of the
_paulette_ 1 000 000 44 444 8 10½
5. Upon the farm of duties on
gun-powder and salt-petre 1 000 000 44 444 8 10½
6. The farm of the market of
Poissi was sold for seven
years, for 15 000 000 666 666 13 4
This sum was the price of the
total alienation of the
duties collected in that
market for the whole time;
which duties should be
marked as a branch of
revenue; but as the annual
amount of them cannot be
ascertained, it is here
thrown in as an
extraordinary means of
supply arising from the sale
of a tax.
7. Besides those casual supplies
from the new farms, there was
levied this year, for the sale
of five years revenue of the
free gift of the clergy of
France, to 1761 exclusive 15 000 000 666 666 13 4
8. And for that of Alsace 3 000 000 133 333 6 8
9. Raised by a lottery, for which
the annual sum of 3 800 000 was
set apart for 11 years 32 000 000 1 422 222 4 5¼
10. And for the sale of the
duties upon firewood, &c. in
Paris, for 7 years 10 000 000 444 444 8 10½
———————————— ———————————————————
Total extraordinary supplies }
for 1756 121 000 000 5 377 777 15 5¾
The supplies for 1757, amounted
to 136 millions, £6 044 444
sterl.
1. Two lotteries, for which
were appropriated, for the
first, 3 800 000 during 12
years; and for the second, 4
000 000 during 11 years.
These sums were annually to
be drawn, and paid every
year; for which was paid to
the King, for the first, 36
millions; for the second, 40
millions; together 76 000 000 3 377 777 15 6½
2. The ordinary revenue was
charged with 6 millions of
life annuities, at 10 _per
cent._ sold for 60 000 000 2 666 666 13 4
———————————— ———————————————————
136 000 000 6 044 444 8 10½
The supplies for 1758, amounted
to 135 millions, £6 000 000
sterl.
1. The first was a loan of 40
millions, upon a perpetual
annuity of 5 _per cent._
proposed to be paid off by way
of lottery, at the rate of 3
200 000 yearly — — 40 000 000 1 777 777 15 6½
2. The King obliged those who
have hereditary offices
proportionally to purchase
additional salaries, to the
extent of 1 million a year,
at the rate of 20 years
purchase, or forfeit what
they had 20 000 000 888 888 17 9¼
3. The additional 10 _per
cent._ upon the price of
tobacco, was sold this year
to the farmers, for 30 000 000 1 333 333 6 8
4. The ordinary revenue was
charged with 3 600 000
livres, life-annuities, upon
two lives, at 8 _per cent._;
sold for the sum of 45 000 000 2 000 000 — —
———————————— ———————————————————
135 000 000 5 999 999 19 11¾
The supplies for 1759, amounted
to upwards of 194 millions, £8
652 923 sterl.
1. The first supply for this
year was the epitome of the
general subvention, called
an extraordinary free gift
from all the cities, towns,
burgs, villages, and suburbs
in France 3 690 786 164 034 18 8
2. 3 600 000 livres of
perpetual annuities,
borrowed upon the general
farms, at 5 _per cent._
until reimbursement, sold
for 72 000 000 3 200 000 — —
These are called the contracts
upon the farms; each one
thousand livres capital.
3. The free gift of the
clergy, for five years from
1761 inclusive, sold at once
for 16 000 000 711 111 2 2½
4. The second twentieth penny
produced for this year 35 000 000 1 555 555 11 1¼
5. Sold to the magistrates and
heads of colleges in some
towns in Flanders, some
branches of their own taxes,
for 8 000 000 355 555 11 1¼
6. The ordinary revenue was
charged with 3 millions of
annuities, called
_tontines_, sold for 60 000 000 2 666 666 13 4
———————————— ———————————————————
194 690 786 8 652 923 16 5
The supplies for 1760,
amounted to above 251
millions, £ 11 186 430
sterling.
1. The Paris-duties above
mentioned sold for 15 years 30 283 900 1 345 951 2 2½
2. The 3d shilling in the
pound sold for two years,
for 72 340 000 3 215 111 2 2½
3. The 2d shilling produced
this year 35 000 000 1 555 555 11 1¼
4. Raised by perpetual
annuities, at 3 _per cent._
secured on the King’s
ordinary revenue[34] 60 000 000 2 666 666 13 4
5. The free gift of the
cities, &c. 3 690 787 164 034 19 6½
6. By a lottery at 5 _per cent._
where the discredited paper
(the payment of which was
stopt, when the sinking fund
was shut up in 1759) was taken
in payment for one half, was
raised 50 000 000 2 222 222 4 5¼
7. Borrowed from the officers of the town-house of Paris, at 5 _per
cent._
secured on the ordinary revenue 380 000 16 888 17 9¼
———————————— ———————————————————
251 694 687 11 186 430 10 7¼
The supplies for 1761, exceeded
120 millions, £5 364 034 sterl.
1. Charged upon the ordinary
revenue, 200 000 livres a
year upon lives and other
annuities, at 10 _per cent._
in favour of the order of
the Holy Ghost, sold for 2 000 000 88 888 17 9¼
2. Borrowed on the duties upon
leather, at 3 _per cent._ 30 000 000 1 333 333 6 8
These were the annuities which
were ordered to be reimbursed
after the peace of 1763, at 20
years purchase; and which, I
suppose, had been subscribed
for, partly, in discredited
paper.
3. Charged on the ordinary
revenue, 4 millions a year,
for annuities at 8 _per
cent._ upon two lives, sold
for 50 000 000 2 222 222 4 5¼
—————————— ———————————————————
82 000 000 3 644 444 8 10½
4. Besides these sums, there
was the amount of the 2d
twentieth, and the small
subvention, or free gift,
which continued to be
applied to the current
service, as they had not
been sold off; _inde_ 38 690 787 1 719 590 10 8
———————————— ———————————————————
Total 120 690 787 5 364 034 19 6½
The supplies for 1762,
exceeded 159 millions, £7
076 923 sterl.
1. The farms which had been
lett in 1755, came to be
again renewed this year;
from which arose a sum for
the security of them, of 83 200 000 3 697 777 15 6½
2. There was no borrowing this
last year of the war. The
second twentieth, which
never had been sold; the
third twentieth, which this
year became free, as it was
imposed a-new for two years
more; and the little free
gift by all the towns of
France; made together an
additional sum of 76 030 787 3 379 146 1 9¼
———————————— ———————————————————
159 230 787 7 076 923 17 4¾
———————————— ———————————————————
Footnote 34:
When the bad consequences of shutting up the sinking fund were
discovered, the King opened subscriptions, such as were the _tontines_
of the last year, this of 60 millions, and one the next year of 30
millions; in which the discredited paper was received, in part payment
of the sum. This I suppose is the reason why the supplies of 1759 and
1760 appear so high, and also why money appears to have been borrowed
at so low a rate as 5 _per cent._ upon tontines, and 3 _per cent._ on
article 4th of this year; because the interest of that part only which
was paid in specie is stated; not the interest upon the discredited
paper subscribed, which was paid out of the first twentieth.
Recapitulation of the expence of the seven years of the war.[35]
Fr. money. Sterl. ditto.
livres. l.
For 1756 121 000 000 5 377 778
For 1757 136 000 000 6 044 444
For 1758 135 000 000 6 000 000
For 1759 194 690 786 8 652 924
For 1760 251 694 687 11 186 431
For 1761 120 690 787 5 364 034
For 1762 159 230 787 7 076 924
———————————— ———————————
Total 1 118 307 047 49 702 535
———————————— ———————————
Footnote 35:
The Sterling money, in this recapitulation, is reduced to the nearest
integer, neglecting fractions of a pound.
Having gathered together, from the best information I can, the amount of
all the extraordinary supplies raised in France, for the service of the
last war, let us suppose, that at the peace, no part of any capitals
borrowed had been paid off, according to the plan laid down for that
purpose at the time of contracting. Let us suppose, I say, that all the
lottery funds and life-annuities, as well as those annuities which were
intended to be paid off by way of lottery, stood at their full extent,
without diminution, at the peace, and then calculate what sum of debt
should have remained upon France in consequence of the war.
As for the sums raised, either upon renewing the farms of the revenue,
the amount of new taxes imposed, or such branches of them as were sold
at once for a sum of money, they remain no debt upon the King; and are
therefore to be considered (as they really were) extraordinary resources
drawn from the people, without any recourse to credit or borrowing.
Fr. money. Sterling ditto.
livres. l. s. d.
These sums collected from the
above supplies, and laid
together, amount to 520 926 948 23 152 308 16 —
———————————— ———————————————————
Let us then state the whole of
the supplies as above 1 118 307 047 49 702 535 — —
And from thence deduct the
extraordinary resources
drawn from the people, as
above, to wit 520 926 947 23 152 308 16 —
———————————— ———————————————————
There will remain a capital of }
borrowed money } 597 380 100 26 550 226 4 —
———————————— ———————————————————
Of this the life-annuities
(charged upon the ordinary
revenue) form a capital of 217 000 000 9 644 444 8 10½
The lotteries form a capital
of 108 000 000 4 800 000 — —
And the perpetual annuities, a
capital of 272 380 100 12 105 781 15 6½
———————————— ———————————————————
In all, as above 597 380 100 26 550 226 4 5
———————————— ———————————————————
Let us next see the amount of annual payments for discharging either the
capital or the interest.
Fr. money. Sterling ditto.
livres. l. s. d.
For the life-annuities until
extinguished, paid out of
the ordinary revenue 16 200 000 720 000 — —
To discharge the lottery fund,
in 12 years at most 11 600 000 515 555 11 1¼
Suppose the perpetual
annuities all at 5 _per
cent._; _inde_ 13 619 000 605 288 17 9¼
———————————— ———————————————————
Annual sum of interest 41 419 000 1 840 844 8 10½
———————————— ———————————————————
Let me now draw up a state of the taxes raised for defraying the
expences of this war. In that I shall only comprehend such articles as
existed at the peace, unsold: as for the other, we may consider them
only as expedients for raising money for the current service; but which,
in time to come, may serve to augment the revenue.
Third general branch.
Fr. money. Sterling ditto.
livres. l. s. d.
1. The 2d twentieth, never
alienated 35 000 000 1 555 555 11 1¼
2. The 3d twentieth, imposed
for the years 1762 and 1763,
not alienated 30 000 000 1 333 333 6 8
3. The free gift of the
cities, towns, &c. never
alienated 3 690 786 164 034 18 8
———————————— ———————————————————
68 690 787 3 052 923 16 5¼
———————————— ———————————————————
Let me now proceed to the fourth general branch of taxes, or of money
raised upon the people of France: 1_mo_, To the profit of the farmers:
2_do_, Towards defraying the expence of collecting the three foregoing
branches of revenue, which amount to about 403 millions: And 3_tio_, To
pay what is appropriated to certain purposes within the country, here to
be specified.
Fourth general branch.
Fr. money. Sterling ditto.
livres. l. s. d.
1. First then, the net profits
of all the farmers of the
revenue are calculated to
amount to about 17 240 000 766 222 4 5¼
2. The expence of levying all
the revenue is calculated to
amount to about 10 _per
cent._ of the whole; _inde_ 40 300 000 1 791 111 2 2½
3. There is a revenue
appropriated for keeping up
the water-works at all the
royal palaces 1 200 000 53 333 6 8
And to the invalids, St. Cir,
and the _hotel militaire_ 7 300 000 324 444 8 10½
There are taxes imposed for
clothing the militia, to the
amount of 3 800 000 168 888 17 9¼
All the towns in France have
particular branches of taxes
appropriated to themselves,
for pavement, buildings, &c.
and for maintaining the
police; which amounts to 15 000 000 666 666 13 4
And the duties levied in the
courts of law for sentence
money, emoluments to the
judges (_epices_), and
expence of registrations,
the vast sum of 27 000 000 1 200 000 — —
———————————— ———————————————————
111 840 000 4 970 666 13 3½
Formerly, all the officers of the courts of justice had salaries paid
out of the King’s revenue. These were insensibly diminished in every
reign, and those court-fees were augmented in order to fill up the void;
from which the greatest oppression ensues.
If to the sum in this last article we add 22 millions above stated as a
charge upon the ordinary revenue for salaries to first presidents, &c.
and other expences of the law, we shall find that the article of justice
alone costs near 50 millions of livres, a year, to the public. The
greatest part of this sum should be considered as the interest of money
borrowed by the Kings of France, the capitals whereof are still
outstanding; and if the capitals were paid off, a great augmentation of
income would arise from it. But the bad footing upon which their credit
stands, renders even this burden expedient on some occasions; because
the King can oblige all those who have such hereditary offices, to lend
money upon an augmentation of their salaries.
To conclude this enormous catalogue of taxes paid by the kingdom of
France, we must not omit the last branch, which comprehends the heads
following:
Fifth general branch.
Fr. money. Sterling ditto.
livres. l. s. d.
1. What is paid for bulls,
dispensations, baptisms and
burials, to the pope,
bishops, and inferior
clergy, very near 10 000 000 444 444 8 10½
2. For the support of
hospitals, a sort of poors
rates 11 500 000 511 111 2 2½
3. To branches of impositions,
of various kinds, belonging
to private people, peers of
France, governors of
provinces, and officers of
all the royal jurisdictions
within the kingdom 20 000 000 888 888 17 9¼
———————————— ———————————————————
41 500 000 1 844 444 8 10¼
———————————— ———————————————————
General recapitulation of all the money raised in France by public
authority, for whatever purpose employed.
Fr. money. Sterling ditto.
livres. l. s. d.
1. The King’s ordinary
revenue as it stood at the
peace 1762 282 300 000 12 546 666 13 4
2. The extraordinary revenue
raised at the peace 1748 52 338 000 2 326 133 6 8
3. The extraordinary revenue
raised on account of last
war, and for the payment of
debts then contracted, not
sold at the peace 68 690 787 3 052 923 17 4
4. The expence of raising the
taxes, and emoluments of
the farmers, with other
branches perpetually
appropriated for defraying
regular expences 111 840 000 4 970 666 13 4
5. Taxes paid to the church,
poor, and private persons 41 500 000 1 844 444 8 10½
———————————— ———————————————————
Sum total raised annually in
France 556 668 787 24 740 834 19 6½
———————————— ———————————————————
Charges, or appropriations of it.
1. Charges upon the ordinary
revenue _per_ list above 236 050 000 10 491 111 2 2½
2. Ditto upon the second
general branch _per_ ditto 55 690 000 2 475 111 2 2½
3. Ditto upon the third
general branch for
lotteries and perpetual
annuities constituted
during the war: the
life-annuities being
already charged in article
1st 25 219 000 1 120 844 8 10½
4. Ditto upon the fourth
general branch totally
exhausted _inde_ 111 840 000 4 970 666 13 4
5. Ditto upon the fifth
general branch ditto 41 500 000 1 844 444 8 10
There remains
(unappropriated) for all
extraordinary expences of
state, which compleats the
sum total of what is
raised in France 86 369 787 3 838 657 4 —
———————————— ———————————————————
556 668 787 24 740 834 19 6
———————————— ———————————————————
In this light does the state of the French affairs appear, from the
sketch I have been able to give of it.
Had the sum of 86 millions, remaining as unappropriated at the peace,
been any way sufficient for paying off claims which have not appeared
upon the state we have given, and for all extraordinary expences, the
credit of France would not have been so low as it then was, and still
continues to be.
The expence of a kingdom must constantly exceed the amount of all
regular and permanent income.
At the end of a war what great sums of debts unprovided for are
constantly found! Taxes also, when stretched as they were, and imposed
in so great a proportion upon possessions, in respect of what was raised
upon consumption, must always diminish in their produce; but the expence
and charges never fall short. This is more especially the case in a
country where paper credit is not established.
The constant complaints for want of money to carry on circulation in the
time of war, is a proof of it. When peace returns, and money is kept at
home, then all taxes are readily paid in France, and half the burden of
them is not felt, although they be more productive than before.
As I said in setting out, I do not pretend that the account I have given
of this dark affair, is in any degree so correct as to satisfy a French
minister; but it is a rough sketch, which contains the general state of
their affairs; and if it be worth any man’s while, who is better
informed, he may correct it, and thereby bring on a farther inquiry into
the true state of the question.
What interest a nation, which is not in an actual state of bankruptcy,
can have in concealing its affairs, I cannot find out. How much more
then is it not the interest of a mighty kingdom, which possesses such
amazing resources, to expose its situation in a fair light to the world,
to which it must, upon all occasions, have recourse for assistance in
point of credit?
Of the many branches which compose this great national revenue of above
550 millions, there are several articles which must of necessity be cut
off, so soon as the debts are brought into a regular form. The double
poll-tax is most oppressive on the poorer sort, and therefore was
imposed only for a time: the three twentieths, as they are levied, are
no less so upon the higher classes of the people.
These four articles amount, however, to 116 millions. If we deduct this
from the revenue, as we have stated the account of it, it will not only
exhaust the balance of 86 millions, but it will create a deficiency,
upon the whole, of 30 millions, which can only be compensated by
discharging a corresponding part of the burden of debts, while those
branches do subsist.
But then the same resources are open upon every new emergency; and as
they have now begun to be collected, they will be more easily paid at
another time.
Besides, what an acquisition will be made to the revenue by the
extinction of 16 millions of life-annuities, and by the expiration of so
many anticipations of taxes for terms of years!
On the other hand, it is not to be supposed that the King will continue
to demand of the clergy, above 1 500 000 livres a year, or one shilling
in the pound upon their benefices. That body is becoming daily more and
more indebted, by the practice introduced of late, of making payment of
their free gifts to the King, by borrowing the money, instead of paying
every one’s proportion out of his benefice. This in time may oblige them
to accept of pensions for their benefices, and to make over their
revenue in tithes to the King: they will, at least, in one way or other,
become entirely at his mercy, and at that of their own creditors.
Before I conclude, I must say a word concerning the method of levying
the taxes in France.
The most general distribution I can make of this, is to reduce it under
four principal heads.
The first comprehends the general _receptes_; to wit, the _taille_, or
land-tax, the _capitation_, or poll-tax, and all the twentieths. These
are administred by the intendants of the provinces, who both make the
distribution of them upon the subjects, and who levy them by officers
under their direction; and for the expence of levying, is superadded to
the taxes, 10 _per cent._ upon the whole. When they are collected, they
are paid in to the receivers general at Paris, who deliver them in, and
account for them to the royal treasury.
The second comprehends all the taxes which are farmed. The farmers are
vested with the King’s authority for raising the duties let to them,
according to certain regulations; and as they are obliged to keep open
books, the expence of management is known, and at every new lease a
reasonable profit is allowed to them over and above.
The third branch comprehends all free gifts of determinate sums of
money, imposed according to certain regulations prescribed to those
bodies politic who pay them; into which may be comprehended all taxes
upon the clergy; because they levy them themselves.
The fourth comprehends retentions which the King makes out of the
salaries he pays. This needs no explanation.
What farther observations may be made on this head will find a place
when we speak of taxes.
------------------------------------------------------------------------
CHAP. VII.
_Comparative View of the Revenue, Debts, and Credit of Great Britain and
France._
In comparing the state of credit in the two nations, I must first
observe, that it is not so essential to compare the _extent of the
revenue_ of both countries, as the _resources_ they have for obtaining
extraordinary supplies in case of need.
Whatever be the permanent revenue of a state, we may be very certain
that the exigencies of it will be in proportion; and whenever any
extraordinary expence is to be incurred, it must be provided for by
extraordinary means.
In examining the state of Great Britain and France, we have found this
observation verified. If the expences of the year do no more than absorb
the revenue of it, and if the sinking funds appropriated for paying off
incumbrances be properly applied, the state has no reason to complain.
This distribution evidently points out how necessary it is not to
confound those branches of revenue which are appropriated to state
expences, with those which ought to be set apart for the payment of
debts and interest. This however I apprehend is too much neglected in
both kingdoms.
If times of tranquillity be not made use of, to disengage those funds
which necessity had opened, it cannot be denied, that future exigencies
must then seek for a supply, from resources as yet undiscovered.
That nation, therefore, which has certain branches of revenue lying
dormant in time of peace, has the advantage in point of resources.
In this respect the advantage hitherto has lain on the side of France;
she has had her _dixiemes_, _vingtiemes_, and double poll-tax, which
have never been imposed except in cases of necessity.
But on the other hand, Great Britain has a noble and opulent branch of
permanent taxes, which composes her sinking fund. Were this employed in
times of peace, as it ought to be, it would prove in time of war a more
ready fund of credit than any France can boast of.
Those extraordinary resources of France cannot be mortgaged. They are
supplies for the current service; but they are no fund of credit.
Whereas the sinking fund of Great Britain is always ready in the mean
time to supply urgent demands. While this subsists, there is no danger
of being obliged to break faith with all the public creditors, upon a
demand for a million and a half sterling, as was the case with France in
1759. The one resembles a credit in bank; the other the rents of a great
estate. The sinking fund affords time to raise new supplies, in
proportion to the debts contracted; and if these, when new, and raised
in time of war, prove sufficient to answer the interest of the loan,
they will probably do more as they continue to be levied, and upon the
return of peace.
One very remarkable difference between the state of credit in the two
nations is, that in Britain the object of attention is the rate of
interest; in France it is the speedy repayment of the capital. The great
care of a British minister is to support the price of the funds: the
meaning of which is, to keep the interest of money low. Did not the
price of the funds regulate the rate of money, the state would be nowise
concerned in the price of them.
Now the credit of Great Britain is so firmly established, that she may
command money at all times, providing she will give the interest
required.
The case is totally different in France. Her credit is not well
established; that terrible Missisippi-monument, of near a thousand
millions, standing fixed upon the ordinary revenue to this day at 2½
_per cent._ first reduced from the most exorbitant interest, by
successive acts of power, after the late King’s death, and afterwards
from a moderate interest to 2½ _per cent._ in the year 1720, is reason
sufficient to deter monied men from lending to France upon perpetual
interest.
In borrowing upon life-annuities at 10 _per cent._ and upon lotteries at
nearly the same rate, for 11 or 12 years, France obtains credit for
large sums. She also borrows with tolerable success at 5 _per cent._
when there is a lottery-clause put in, which stipulates a large sum to
be annually paid for extinguishing the capital. The reason is, she is
more punctual to such engagements: they remain constantly under the eye
of the public: the stock-holders consider their money as constantly
coming in; and any interruption in the payment gives a general alarm.
But when funds are settled at perpetual interest, people lose sight of
the capital altogether. The contracts by which they are commonly
constituted, are not so easily transferred as other funds: in a word, it
is not the taste of the French nation to lend their money in that way,
and far less the taste of strangers; and the reason is, that as matters
have hitherto been conducted, it has by no means been their interest.
Before the commencement of the late war, no security in France was
looked upon as better than the actions of the company of the Indies.
This was a fund of perpetual interest. They brought in to purchasers
little more than 4 _per cent._ and every body wished to have them. Every
action bore a dividend of eighty livres a year; and the action itself
sold from eighteen to nineteen hundred livres. The war had not lasted
four years, when the dividends were reduced to one half, and the capital
fell to about 700.
In short, all perpetual funds in France, whether upon government or
company-security, are very precarious; and while this is the case, we
may decide that the credit they are built on is precarious also.
------------------------------------------------------------------------
CHAP. VIII.
_Contingent Consequences of the Extension of Credit, and Increase of
Debts._
Having applied the principles of public credit to the state of facts in
Great Britain and France, such as I have been able to collect, I must
observe, that all short sketches of this kind are intended only to
satisfy a general curiosity which mankind has, to know a little of every
thing. Although they may appear superficial and incorrect, to persons
thoroughly instructed in those matters, they still are for our purpose;
which is only to take them as something approaching nearer to truth than
bare suppositions can do; and they sufficiently answer the purpose of
illustrating the subject we are upon.
I now proceed to inquire what may be the consequences of this mighty
change produced upon the policy of industrious and trading states, from
the establishment of credit, debts, and taxes.
I have, from the very beginning of this inquiry, occasionally taken
notice of the influence that such a change must make upon the spirit and
manners of a people. The lower classes, who are slow in forming
combinations, do not soon comprehend the necessary consequences of such
revolutions. Even ministers have been often at a loss to judge of the
consequences which might follow upon some steps of their own conduct
relative thereto, although taken upon mature deliberation.
When public credit is employed for raising money upon a plan of
refunding the capital, either by uniform annual payments exceeding the
interest, or by funds established for sinking the capital, no contingent
consequences can happen, providing the plan be executed: the debts
contracted will be paid, and matters will return to their former state.
When public credit is employed for raising money upon payment of a
perpetual interest; or if, whatever be the plan laid down, capitals
should not happen to be discharged, and that the debts should swell
continually; in this case, the contingent consequences are many and
various, far exceeding any man’s sagacity to investigate.
If we judge of them from what past experience teaches us, we may
conclude, that, in one way or other, all debts contracted will in time
disappear, either by being paid, or by being abolished: because it is
not to be expected that posterity will groan under such a load any
longer than it is convenient; and because in fact we see no very old
public debts as yet outstanding, where interest has been regularly paid.
This is a very rational conclusion from past experience; but it is only
relative to the circumstances of past times. While the debtors are the
masters, there is no difficulty of getting clear of debts: but if the
consequence of this new system should be to make the creditors the
masters, I suppose the case might be different. Farther,
In former times public debts were contracted between the state and its
own subjects; but at present we see that in such loans, foreigners, even
enemies, are invited to concur: and the better to engage them to it, a
total immunity is promised from all taxes upon the interest to be paid
by the borrowers.
This circumstance has already drawn the attention of Princes, in the
discussion of their reciprocal concerns. We saw how, in the treaty of
Dresden, which took place after the King of Prussia’s invasion of Saxony
in 1745, it was provided by the 6th article, that all debts due by the
bank of the _Steuer_ to that Prince’s subjects, were to be paid, on
presentation of their contracts.
We have not indeed as yet seen wars carried on for the payment of debts;
but the case may happen, and kingdoms may be carried off upon such
pretensions, as well as private property. What a chain of contingent
consequences arises from this single combination, were this a proper
place to introduce them!
But without going to the supposition of Princes or nations becoming
reciprocally engaged in debts, and thereby involving such mighty
interests in the support of public faith, we may easily conceive, that a
monied interest, of a long standing, may have influence enough to
operate a change upon the spirit and manners of a people.
Let me here take the example of Great Britain. Do we not see how the
spirit of that nation is totally bent upon the support of public credit?
And do we not see how absolutely their commercial interest depends upon
it? Can it be supposed, that every one has combined all the consequences
which may flow from the constant swelling of their debts? Or indeed is
it possible to determine what will be the consequences of them? This
however we may suppose at least, because we see the progress of it
already, that the interest of the creditors will daily gather strength,
both in parliament and without: and if from small beginnings it has
arrived at the pitch we now see, it is very natural to conclude, that,
in time, it may become stronger, and at last, that the creditors of the
nation may become the masters of it.
When any one interest becomes too predominant, the prosperity of the
state stands upon a precarious footing. Every interest should be
encouraged, protected, and kept within due bounds. The following
speculations are intended for the application of principles to new and
unexperienced combinations; where natural causes _may_ work their direct
and immediate effects, and thereby prove prejudicial to the general
welfare, unless they be foreseen in some degree, and proper remedies be
prepared against them.
Europe was possessed by our ancestors free from taxes; our fathers saw
them imposed, and we see how fast they become mortgaged for our debts.
We can as little judge of the extent of our credit, as they could of the
possibility of contributing so large a fund for the support of it.
As the plan of imposing taxes has been extended, we see the public
coffers every day receiving a vast flux of money, and like the heart in
the human body, throwing it out again into circulation. Happy state,
could it be lasting, and were this flux and reflux preserved in a due
proportion to all the uses for which it is intended! But states have
their vices, as well as private people. Public opulence should be
proportioned to public exigencies: but how often do we see ambition
putting on the face of public spirit, and animating the resentment of a
nation, under colour of providing for her security? Hence wars, from
wars expence: recourse is had to credit, money is borrowed, debts are
contracted, taxes are augmented; all this increases circulation, which
demands a supply of currency: this is procured by melting down the solid
property. These operations performed, the public money is either sent
abroad, or remains at home. If sent abroad, more property must be melted
down, in order to fill up the void. If it remains at home, it will
animate every branch of circulation; and when the exigency, which
required this additional quantity of money, is over, what circulation
finds superfluous, will stagnate in the hands of the monied interest,
and will either form a new fund for contracting more debts, or it will
be laid out in the purchase of the property formerly melted down, which
produced it; and thereby will be consolidated a-new.
Every interest in a state must influence the government of it, in
proportion to its consequence and weight; and every government must
influence the spirit of the people who live under it.
Now, as we have seen how industry creates wealth; how wealth and
confidence create credit; how credit creates debts and taxes; how these
again occasion an augmentation of money, by the melting down of
property; and how this property is transferred to a new set of men, who
were once the monied interest, and who afterwards acquire the lands, and
consolidate this additional circulation; does not this chain of
consequences represent a kind of circle, returning into itself? And is
it not plain, that without the intervention of this engine, the money
created in proportion to the demand for it, the chain would be cut off,
before it could reach the link from which it first set out? Will not
this conversion of a monied interest into a landed interest, insensibly
inspire the bulk of the landlords with sentiments analogous to a monied
interest? Is not that evidently more and more the case every day in
England? And from this may we not prognosticate the solidity of public
credit in that nation?
If on the other hand we find, as in France, industry in times of peace
drawing wealth from other nations, and thereby increasing the coin, upon
which alone credit is circulated through the kingdom; and then foreign
expence sending it away in times of war; must not circulation keep pace
with the coin, that is to say, be circumscribed within the proportion of
it?
If the solidity and extent of the French King’s free revenue should
afford credit to borrow this coin; and if, instead of providing a
proportional supply of currency to fill up this new loan, the coin
borrowed be sent out of France; how will the ordinary circulation be
carried on?
Let us here recal to mind what was said in the 22d chapter, upon banks,
where we distinguished voluntary circulation, which is buying, from
_involuntary_ circulation, which is paying: we there observed how
_paying_ must always take place of _buying_; consequently, we may here
determine that taxes must be paid before buying, that is consumption,
can go on. The deficiency therefore of coin for circulation, will,
first, proportionally affect the trade, manufactures, and consumption of
France, and afterwards the revenue which arises from them. Is not this
the constant complaint in France, when war carries off their coin? The
remonstrances of all their parliaments are filled with it.
In times of peace, the amount of what comes from the people is greater
than in time of war: but then there is coin sufficient for all the
payments; and when they are made to the royal treasury, they immediately
return into circulation, and no hurt is felt.
I insist the more upon this principle, and I introduce it in so many
different ways, and under such a variety of views, because I take it to
be one of the most important considerations in the whole doctrine of
credit, and one which I have never seen suggested by any French, or
English writer upon this subject. Many are the complaints for want of
money; but no method have I ever seen proposed for obtaining it from
solid property; the easiest and safest of all operations, when conducted
with honesty, and according to principles.
As money therefore is the means of closing the chain of consequences
already mentioned, and forming it into a circle, as has been said, we
plainly see how, when it is wanting, the same effects cannot be
produced; and consequently the country of France, when money is confined
to the coin, will be very long in adopting the sentiments of a monied
interest; whether for its profit or loss, in the end, is not here the
question.
We have now traced the contingent consequences of public credit so far
as to shew how it _may_ tend to influence the spirit of a people, and
make them adopt the sentiments of a monied interest.
The allurement of acquiring land-property is very great, no doubt,
especially to monied men. The ease and affluence of those, on the other
hand, who have their capitals in their pocket-books, is very attracting
to the eyes of many landlords, especially at a time when they are paying
the heavy taxes laid upon their possessions.
The firm establishment of public credit tends greatly to introduce those
reciprocal sentiments of good-will among the two great classes of a
people, and thereby preserves a balance between them. The monied
interest wish to promote the prosperity of the landlords; the landlords,
the solidity of credit; and the well-being of both depends upon the
success of trade and industry.
Let us now suppose what is actually the case in Great Britain, that from
the swelling of public debts an enormous fund of property is created.
This is formed out of the income of the whole nation; and as it has been
purchased by those who have lent money to the state, in common language
it is included in what we call the monied interest: it is however very
distinct from it, as will be understood from what is to follow.
The capital of the public debts is the price which was paid for the
annuities due to the creditors, and is now no more money to them than
land is money to the landlord. It may be turned into money, no doubt;
but so may land.
By the monied interest, properly, should be understood, those who have
money, not realized upon any fund, and who either employ it in the way
of trade, in the way of industry, in jobbing in land, in stock, or in
any way they please, so as to draw from it an annual income. While it is
fixed, that is, given for any permanent value, it ceases to be money;
when it is called in, it becomes money again. Let stock, therefore,
suffer ever so many alienations from hand to hand, it still continues
stock: it never can become land, it never can become money, until it be
paid off. I hope this idea is clear, and understood. Stock, therefore, I
here consider as one great branch of solid property; so far as the
security of government is solid and good; and as such, may be melted
down into money by banks, as well as any other thing.
Now I have said that this fund is formed out of the income of the whole
nation; consequently by _fund_, here, I do not understand the capital,
which exists no more, but the interest which is drawn for it: it is this
interest, I say, which arises from the land, money, trade, industry, &c.
From the land, out of the amount of the taxes charged upon it; from the
money, trade, industry, &c. out of the amount of proportional taxes,
such as excises, customs, salt-tax, stamp-duties, and the like.
The more the debts increase, by the monied interest realizing into this
branch of solid property, the more the taxes must augment; and
consequently, the more the solid property of the funds themselves will
be affected, as well as the land.
From this exposition of the matter, I think it appears pretty evident,
that as proportional taxes affect every man’s income, according to his
consumption; the landlord, _cæteris paribus_, who pays a land tax, as
well as his proportion upon his consumption, is more hardly dealt with
than the proprietor of the other branch of solid property, the funds,
who only pays the proportion of the last.
But the condition of the stockholder is not equal to that of the
landlord, for two very plain reasons. The first is, that the income of
his stock cannot increase; that of the land may. The second is, that the
swelling of this great capital of stock has the effect of sinking the
interest upon it, and consequently of diminishing the income of the
stockholder; and in proportion to that diminution, the value of land is
augmented. Now I readily allow that the augmentation upon the _value_ of
lands is no inducement to a landlord to turn them into money; because he
would then lose upon his money, what he gains upon the additional price
received. But it is a great advantage in this respect, that he thereby
diminishes the interest he pays upon his debts, if he has any; and if he
has none, it enables him to borrow at a lower rate for the future; and
by improving his lands with the money borrowed, he augments his income
much beyond the proportion of the interest paid.
It is therefore necessary, in imposing land taxes, rightly to combine
every circumstance; that the load of all impositions may be equally
distributed upon every class of a people who enjoy superfluity, and upon
no other. If, after a fair deduction of principles, this shall appear a
thing possible to be done, we may expect to see statesmen engaged to
depart from the old maxim of grasping at what is readiest and nearest at
hand, to wit, the landed property, with a view to spare a class of
people, which, in a well regulated state, never can be made to feel the
burden of any proportional tax whatsoever; I mean the industrious poor.
I now proceed in my inquiry into the nature and consequences of the
swelling of this great branch of property, the public funds.
As to the nature of it, we have said already, that it is formed by
realizing money into stock. When government borrows, the lenders must be
people who have money. If the loan is made at home, the money is no
sooner paid in, than it is spent; and as we may suppose that it would
not have been lent, had either the lenders found it necessary for their
current expence, or had they found a more profitable way of realizing it
than by lending it to government, we consider it as in a state of
stagnation; but being lent to government, it is thrown into a new
channel of circulation.
Farther, this money stagnating in the hands of the lender, either
proceeded from his income, which exceeded his expence, or from the
profits of his industry. In either case, the country is neither poorer
or richer, when considered in a cumulative view, than if the same sum
had been lent to private people at home.
Let us next suppose the money to have been borrowed for the exigence of
a foreign war. In this case, if it be borrowed at home and sent abroad,
it must first be converted into the money of the world, gold and silver,
and then sent off, to the diminution of this kind of property; or it
must go abroad in the money of the country, credit, to the diminution of
the annual income upon which the credit is established. As this last
operation may not be so clear, an example will explain it.
Government borrows a million; it is paid in paper, and must be sent to
Holland. If at that time a balance be due by Holland for a million,
bills will readily be found for it. In this case, the balance of trade
is borrowed by government, and is converted into a capital of a million
in the public funds, the interest of which will remain at home, and
continue to be the property of the nation. But as the value of this
balance is sent to Holland and spent abroad, it is, upon the whole, to
the nation, as if the balance had not been due to them. This I call a
_lucrum cessans_ to the country.
But suppose no balance due at the time the million comes to be sent off,
I say the consequence will be, to alienate in favour of foreigners a
part of the annual income, proportional to the whole interest paid for
the loan, whether it has been subscribed for by foreigners, or by
natives.
If the subscription comes from foreigners, the consequence is evident:
it is equally so in the other case, upon a little reflection.
Suppose then the million subscribed for, and paid in London. Bills are
sought for; none are found, I mean in the way of reciprocal
compensation, does not this sum immediately become a balance against
London? And as a country loses all such balances, and that the country
to which they are due gains them, this million is lost to England, and
forms what I call a _damnum emergens_; that is to say, her former
property or income is so far diminished, or comes to be transferred to
strangers.
From this we may conclude, that in all matters of public borrowing, it
is of no consequence whether the subscription be filled by natives, or
by foreigners, when the value of it is to be sent abroad.
Let us next examine the state of the question when the loan is made in
order to be spent at home, as is the case after a war, when the unfunded
debts come to be paid off.
We have said that loans are filled by money stagnating, which the owner
desires to realize: if he cannot do better, he lends it to government;
if he can do better, he will not lend it.
While the uses of domestic circulation absorb all the money in the
country, that is to say, when there are private persons ready to borrow
all the money to be lent, at this time government cannot borrow at home;
and if they did, by offering a high interest for it, the borrowing would
do harm to circulation; because it would raise interest at home, or
disappoint those who would gladly borrow it, for little more than the
interest offered by government.
Let us next suppose that after a war, when the unfunded debts are either
bearing a high interest, or selling at discount, government shall find
an advantage in opening a subscription, which may be filled from abroad,
at a lower rate than the then actual value of money. Suppose, I say, the
Dutch should be willing to lend at 3 _per cent._ while money in England
stood at 4 _per cent._ I ask if, in this case, government ought to
borrow from Holland, at the expence of sending the interest out of the
country, rather than suffer such debts to sell at discount; or to
continue paying a higher interest at home for what they owe?
It is my opinion that still they ought to borrow, for the following
reasons. That if the high interest at home proceeds from want of money,
that is to say, from circulation not being full enough, it is their
interest to borrow, were it for nothing else than to supply circulation;
because unless this be full, all industry must languish. But suppose it
should be said that circulation is full enough, that industry suffers no
check from that quarter, but that there being no superfluity of money,
interest stands 1 _per cent._ higher than it would do were there
considerable stagnations. In that case also, I think it is their
interest to borrow, were it for no other reason than to produce such
stagnations.
It is a general rule every where, that there is no having enough without
having a superfluity; at least there is no certainty of one’s having
enough without finding a superfluity. Borrowing, therefore, in small
sums, at such a time, will produce stagnations at home, from which
succeeding loans may be filled, after circulation is sufficiently
provided: and even in case more should be borrowed from strangers than
is necessary, and that in consequence of it, too much should come to
stagnate at home, after the demand of government is over, in that case,
the monied interest would lend, in their turn, to other states, where
interest is higher; and the annual returns from that quarter would more
than compensate what must be sent away, in consequence of the former
borrowing.
From these combinations, let us draw some conclusions.
1_mo_, That the effect of public borrowing, or national debt, is to
augment the permanent income of the country, out of stagnating money,
and balances of trade.
2_do_, That this income so created, may be either the property of
natives, or of strangers.