Of Public Credit.
IT appears to have been the common practice of antiquity, to make provision, during peace, for the necessities of war, and to hoard up treasures before-hand, as the instruments either of conquest or defence; without trusting to extraordinary impositions, much less to borrowing, in times of disorder and confusion. Besides the immense sums above mentioned, which were amassed by Athens, and by the Ptolemies, and other successors of Alexander; we learn from Plato, that the frugal Lacedemonians had also col|lected a great treasure; and Arrian and Plutarch take notice of the riches which Alexander got possession of on the conquest of Susa and Ecbatana, and which were reserved, some of them, from the time of Cyrus. If I remember right, the scripture also mentions the treasure of Hezekiah and the Jewish princes; as profane history does that of Philip and Perseus, kings of Macedon. The ancient republics of Gaul had commonly large sums in reserve. Every one knows the treasure seized in Rome by Julius Cæsar, during the civil wars: and we find afterwards, that the wiser emperors, Augustus, Tiberius, Vespasian, Severus, &c. always discovered the prudent foresight, of saving great sums against any public exigency.
On the contrary, our modern expedient, which has become very general, is to mortgage the public revenues, and to trust that posterity will pay off the incumbrances contracted by their ancestors: And they, having before their eyes, so good an example of their wise fathers, have the same prudent reliance on their posterity; who, at last, from necessity more than choice, are obliged to place the same confidence in a new posterity. But not to waste time in declaiming against a practice which appears ruinous, beyond all controversy; it seems pretty apparent, that the ancient maxims are, in this respect, more prudent than the modern; even though the latter had been confined within some reasonable bounds, and had ever, |in any instance, been attended with such frugality, in time of peace, as to discharge the debts incurred by an expensive war. For why should the case be so different between the public and an individual, as to make us establish different maxims of conduct for each? If the funds of the former be greater, its necessary expences are proportionably larger; if its resources be more numerous, they are not infinite; and as its frame should be calculated for a much longer duration than the date of a single life, or even of a family, it should embrace maxims, large, durable, and generous, agreeably to the supposed extent of its existence. To trust to chances and temporary expedients, is, indeed, what the necessity of human affairs frequently renders unavoidable; but whoever voluntarily depend on such resources, have not necessity, but their own folly, to accuse for their misfortunes, when any such befal them.
If the abuses of treasures be dangerous, either by engaging the state in rash enterprizes, or making it neglect military discipline, in confidence of its riches; the abuses of mortgaging are more certain and inevitable; poverty, impotence, and subjection to foreign powers.
According to modern policy war is attended with every destructive circumstance; loss of men, encrease of taxes, decay of commerce, dissipation of money, devastation by sea and land. According to ancient maxims, the opening of the public treasure, as it produced an uncommon affluence of gold and silver, served as a temporary encouragement to industry, and atoned, in some degree, for the inevitable calamities of war.
It is very tempting to a minister to employ such an expedient, as enables him to make a great figure during his administration, without overburthening the people with taxes, or exciting any immediate clamours against himself. The practice, therefore, of contracting debt will almost infallibly be abused, in every government. It would scarcely be more imprudent to give a prodigal son a credit in every banker's shop in London, than to impower a statesman to draw bills, in this manner, upon posterity.
What then shall we say to the new paradox, that public incumbrances, are, of themselves, advantageous, independent of the necessity of contracting them; and that any state, even though it were not pressed by a foreign enemy, could not possibly have embraced a wiser expedient for promoting commerce and riches, than to create funds, and debts, and taxes, without limitation? Reasonings, such as these, might naturally have passed for trials of wit among rhetoricians, like the panegyrics on folly and a fever, on Busiris and Nero, had we not seen such absurd maxims patronized by great ministers, and by a whole party among us.
Let us examine the consequences of public debts, both in our domestic management, by their influence on commerce and industry; and in our foreign transactions, by their effect on wars and negociations.
Public securities are with us become a kind of money, and pass as readily at the current price as gold or silver. Wherever any profitable undertaking offers itself, how expensive soever, there are never wanting hands enow to embrace it; nor need a trader, who has sums in the public stocks, fear to launch out into the most extensive trade; since he is possessed of funds, which will answer the most sudden demand that can be made upon him. No merchant thinks it necessary to keep by him any considerable cash. Bank-stock, or India-bonds, especially the latter, serve all the same purposes; because he can dispose of them, or pledge them to a banker, in a quarter of an hour; and at the same time they are not idle, even when in his scritoire, but bring him in a constant revenue. In short, our national debts furnish merchants with a species of money, that is continually multiplying in their hands, and produces sure gain, besides the profits of their commerce. This must enable them to trade upon less profit. The small profit of the merchant renders the commodity cheaper, causes a greater consumption, quickens the labour of the common people, and helps to spread arts and industry throughout the whole society.
There are also, we may observe, in England and in all states, which have both commerce and public debts, a set of men, who are half merchants, half stock-holders, and may be |supposed willing to trade for small profits; because commerce is not their principal or sole support, and their revenues in the funds are a sure resource for themselves and their families. Were there no funds, great merchants would have no expedient for realizing or securing any part of their profit, but by making purchases of land; and land has many disadvantages in comparison of funds. Requiring more care and inspection, it divides the time and attention of the merchant; upon any tempting offer or extraordinary accident in trade, it is not so easily converted into money; and as it attracts too much, both by the many natural pleasures it affords, and the authority it gives, it soon converts the citizen into the country gentleman. More men, therefore, with large stocks and incomes, may naturally be supposed to continue in trade, where there are public debts; and this, it must be owned, is of some advantage to commerce, by diminishing its profits, promoting circulation, and encouraging industry.
But, in opposition to these two favourable circumstances, perhaps of no very great importance, weigh the many disadvantages which attend our public debts, in the whole interior œconomy of the state: You will find no comparison between the ill and the good which result from them.
First, It is certain, that national debts cause a mighty confluence of people and riches to the capital, by the great sums, levied in the provinces to pay the interest; and perhaps, too, by the advantages in trade above mentioned, which they give the merchants in the capital above the rest of the kingdom. The question is, whether, in our case, it be for the public interest, that so many privileges should be conferred on London, which has already arrived at such an enormous size, and seems still encreasing? Some men are apprehensive of the consequences. For my own part, I cannot forbear thinking, that, though the head is undoubtedly too large for the body, yet that great city is so happily situated, that its excessive bulk causes less inconvenience than even a smaller capital to a greater kingdom. There is more difference between the prices of all provisions in Paris and Languedoc, than between |those in London and Yorkshire. The immense greatness, indeed, of London, under a government which admits not of discretionary power, renders the people factious, mutinous, seditious, and even perhaps rebellious. But to this evil the national debts themselves tend to provide a remedy. The first visible eruption, or even immediate danger, of public disorders must alarm all the stockholders, whose property is the most precarious of any; and will make them fly to the support of government, whether menaced by Jacobitish violence or democratical frenzy.
Secondly, Public stocks, being a kind of paper-credit, have all the disadvantages attending that species of money. They banish gold and silver from the most considerable commerce of the state, reduce them to common circulation, and by that means render all provisions and labour dearer than otherwise they would be.
Thirdly, The taxes, which are levied to pay the interests of these debts, are apt either to heighten the price of labour, or be an oppression on the poorer sort.
Fourthly, As foreigners possess a great share of our national funds, they render the public, in a manner, tributary to them, and may in time occasion the transport of our people and our industry.
Fifthly, The greater part of the public stock being always in the hands of idle people, who live on their revenue, our funds, in that view, give great encouragement to an useless and unactive life.
But though the injury, that arises to commerce and industry from our public funds, will appear, upon balancing the whole, not inconsiderable, it is trivial, in comparison of the prejudice that results to the state considered as a body politic, which must support itself in the society of nations, and have |various transactions with other states in wars and negociations. The ill, there, is pure and unmixed, without any favourable circumstance to atone for it; and it is an ill too of a nature the highest and most important.
We have, indeed, been told, that the public is no weaker upon account of its debts; since they are mostly due among ourselves, and bring as much property to one as they take from another. It is like transferring money from the right hand to the left; which leaves the person neither richer nor poorer than before. Such loose reasonings and specious comparisons will always pass, where we judge not upon principles. I ask, Is it possible, in the nature of things, to overburthen a nation with taxes, even where the sovereign resides among them? The very doubt seems extravagant; since it is requisite, in every community, that there be a certain proportion observed between the laborious and the idle part of it. But if all our present taxes be mortgaged, must we not invent new ones? And may not this matter be carried to a length that is ruinous and destructive?
In every nation, there are always some methods of levying money more easy than others, agreeably to the way of living of the people, and the commodities they make use of. In Great Britain, the excises upon malt and beer afford a large revenue; because the operations of malting and brewing are tedious, and are impossible to be concealed; and at the same time, these commodities are not so absolutely necessary to life, as that the raising of their price would very much affect the poorer sort. These taxes being all mortgaged, what difficulty to find new ones! what vexation and ruin of the poor!
Duties upon consumptions are more equal and easy than those upon possessions. What a loss to the public, that the former are all exhausted, and that we must have recourse to the more grievous method of levying taxes!
Were all the proprietors of land only stewards to the public, must not necessity force them to practise all the arts of oppression used by stewards; where the absence or negligence of the proprietor render them secure against enquiry?
It will scarcely be asserted, that no bounds ought ever to be set to national debts; and that the public would be no weaker, were twelve or fifteen shillings in the pound, land-tax, mortgaged, with all the present customs and excises. There is something, therefore, in the case, beside the mere transferring of property from the one hand to another. In 500 years, the posterity of those now in the coaches, and of those upon the boxes, will probably have changed places, without affecting the public by these revolutions.
Suppose the public once fairly brought to that condition, to which it is hastening with such amazing rapidity; suppose the land to be taxed eighteen or nineteen shillings in the pound; for it can never bear the whole twenty; suppose all the excises and customs to be screwed up to the utmost which the nation can bear, without entirely losing its commerce and industry; and suppose that all those funds are mortgaged to perpetuity, and that the invention and wit of all our projectors can find no new imposition, which may serve as the foundation of a new loan; and let us consider the necessary consequences of this situation. Though the imperfect state of our political knowledge, and the narrow capacities of men, make it difficult to fortel the effects which will result from any untried measure, the seeds of ruin are here scattered with such profusion as not to escape the eye of the most careless observer.
In this unnatural state of society, the only persons, who possess any revenue beyond the immediate effects of their industry, are the stock-holders, who draw almost all the rent of the land and houses, besides the produce of all the customs and excises. These are men, who have no connexions with the state, who can enjoy their revenue in any part of the globe in which they chuse to reside, who will naturally bury themselves in the capital or in great cities, and who will sink into the lethargy of a stupid and pampered luxury, without spirit, |ambition, or enjoyment. Adieu to all ideas of nobility, gentry, and family. The stocks can be transferred in an instant, and being in such a fluctuating state, will seldom be transmitted during three generations from father to son. Or were they to remain ever so long in one family, they convey no hereditary authority or credit to the possessor; and by this means, the several ranks of men, which form a kind of independent magistracy in a state, instituted by the hand of nature, are entirely lost; and every man in authority derives his influence from the commission alone of the sovereign. No expedient remains for preventing or suppressing insurrections, but mercenary armies: No expedient at all remains for resisting tyranny: Elections are swayed by bribery and corruption alone: And the middle power between king and people being totally removed, a grievous despotism must infallibly prevail. The landholders, despised for their poverty, and hated for their oppressions, will be utterly unable to make any opposition to it.
Though a resolution should be formed by the legislature never to impose any tax which hurts commerce and discourages industry, it will be impossible for men, in subjects of such extreme delicacy, to reason so justly as never to be mistaken, or amidst difficulties so urgent, never to be seduced from their resolution. The continual fluctuations in commerce require continual alterations in the nature of the taxes; which exposes the legislature every moment to the danger both of wilful and involuntary error. And any great blow given to trade, whether by injudicious taxes or by other accidents, throws the whole system of government into confusion.
But what expedient can the public now employ, even supposing trade to continue in the most flourishing condition, in order to support its foreign wars and enterprizes, and to defend its own honour and interests, or those of its allies? I do not ask how the public is to exert such a prodigious power as it has maintained during our late wars; where we have so much exceeded, not only our own natural strength, but even that of the greatest empires. This extravagance is the abuse complained of, as the source of all the dangers, to which we are at |present exposed. But since we must still suppose great commerce and opulence to remain, even after every fund is mortgaged; these riches must be defended by proportional power; and whence is the public to derive the revenue which supports it? It must plainly be from a continual taxation of the annuitants, or, which is the same thing, from mortgaging anew, on every exigency, a certain part of their annuities; and thus making them contribute to their own defence, and to that of the nation. But the difficulties, attending this system of policy, will easily appear, whether we suppose the king to have become absolute master, or to be still controuled by national councils, in which the annuitants themselves must necessarily bear the principal sway.
If the prince has become absolute, as may naturally be expected from this situation of affairs, it is so easy for him to encrease his exactions upon the annuitants, which amount only to the retaining money in his own hands, that this species of property would soon lose all its credit, and the whole income of every individual in the state must lie entirely at the mercy of the sovereign: A degree of despotism, which no oriental monarchy has ever yet attained. If, on the contrary, the consent of the annuitants be requisite for every taxation, they will never be persuaded to contribute sufficiently even to the support of government; as the diminution of their revenue must in that case be very sensible, would not be disguised under the appearance of a branch of excise or customs, and would not be shared by any other order of the state, who are already supposed to be taxed to the utmost. There are instances, in some republics, of a hundredth penny, and sometimes of the fiftieth, being given to the support of the state; |but this is always an extraordinary exertion of power, and can never become the foundation of a constant national defence. We have always found, where a government has mortgaged all its revenues, that it necessarily sinks into a state of languor, inactivity, and impotence.
Such are the inconveniencies, which may reasonably be foreseen, of this situation, to which Great Britain is visibly tending. Not to mention, the numberless inconveniencies, which cannot be foreseen, and which must result from so monstrous a situation as that of making the public the chief or sole proprietor of land, besides investing it with every branch of customs and excise, which the fertile imagination of ministers and projectors have been able to invent.
I must confess, that there is a strange supineness, from long custom, creeped into all ranks of men, with regard to public debts, not unlike what divines so vehemently complain of with regard to their religious doctrines. We all own, that the most sanguine imagination cannot hope, either that this or any future ministry will be possessed of such rigid and steady frugality, as to make a considerable progress in the payment of our debts; or that the situation of foreign affairs will, for any long time, allow them leisure and tranquillity for such an undertaking. What then is to become of us? Were we ever so good Christians, and ever so resigned to Providence; this, methinks, were a curious question, even considered as a speculative one, and what it might not be altogether impossible to form some conjectural solution of. The events here will depend little upon the contingencies of battles, negociations, intrigues, and factions. There seems to be a natural progress of things, which may guide our reasoning. As it would have required but a moderate share of prudence, when we first began this practice of mortgaging, to have foretold, from the nature of men and of ministers, that things would necessarily be carried to the length we see; so now, that they have at last happily reached it, it may not be difficult to guess at the consequences. It must, indeed, be one of these two events; either the nation must destroy public credit, or public credit |will destroy the nation. It is impossible that they can both subsist, after the manner they have been hitherto managed, in this, as well as in some other countries.
There was, indeed, a scheme for the payment of our debts, which was proposed by an excellent citizen, Mr. Hutchinson, above thirty years ago, and which was much approved of by some men of sense, but never was likely to take effect. He asserted, that there was a fallacy in imagining that the public owed this debt; for that really every individual owed a proportional share of it, and paid, in his taxes, a proportional share of the interest, beside the expence of levying these taxes. Had we not better, then, says he, make a distribution of the debt among ourselves, and each of us contribute a sum suitable to his property, and by that means discharge at once all our funds and public mortgages? He seems not to have considered, that the laborious poor pay a considerable part of the taxes by their annual consumptions, though they could not advance, at once, a proportional part of the sum required. Not to mention, that property in money and stock in trade might easily be concealed or disguised; and that visible property in lands and houses would really at last answer for the whole: An inequality and oppression, which never would be submitted to. But though this project is not likely to take place; it is not altogether improbable, that, when the nation becomes heartily sick of their debts, and is cruelly oppressed by them, some daring projector may arise with visionary schemes for their discharge. And as public credit will begin, by that time, to be a little frail, the least touch will destroy it, as happened in France during the regency; and in this manner it will die of the doctor.
But it is more probable, that the breach of national faith will be the necessary effect of wars, defeats, misfortunes, and |public calamities, or even perhaps of victories and conquests. I must confess, when I see princes and states fighting and quarrelling, amidst their debts, funds, and public mortgages, it always brings to my mind a match of cudgel-playing fought in a China shop. How can it be expected, that sovereigns will spare a species of property, which is pernicious to themselves and to the public, when they have so little compassion on lives and properties, that are useful to both? Let the time come (and surely it will come) when the new funds, created for the exigencies of the year, are not subscribed to, and raise not the money projected. Suppose, either that the cash of the nation is exhausted; or that our faith, which has hitherto been so ample, begins to fail us. Suppose, that, in this distress, the nation is threatened with an invasion; a rebellion is suspected or broken out at home; a squadron cannot be equipped for want of pay, victuals, or repairs; or even a foreign subsidy cannot be advanced. What must a prince or minister do in such an emergence? The right of self-preservation is unalienable in every individual, much more in every community. And the folly of our statesmen must then be greater than the folly of |those who first contracted debt, or, what is more, than that of those who trusted, or continue to trust this security, if these statesmen have the means of safety in their hands, and do not employ them. The funds, created and mortgaged, will, by that time, bring in a large yearly revenue, sufficient for the defence and security of the nation: Money is perhaps lying in the exchequer, ready for the discharge of the quarterly interest: Necessity calls, fear urges, reason exhorts, compassion alone exclaims: The money will immediately be seized for the current service, under the most solemn protestations, perhaps, of being immediately replaced. But no more is requisite. The whole fabric, already tottering, falls to the ground, and buries thousands in its ruins. And this, I think, may be called the natural death of public credit: For to this period it tends as naturally as an animal body to its dissolution and destruction.
So great dupes are the generality of mankind, that, notwithstanding such a violent shock to public credit, as a voluntary bankruptcy in England would occasion, it would not probably be long ere credit would again revive in as flourishing a condition as before. The present king of France, during the late war, borrowed money at lower interest than ever his grandfather did; and as low as the British parliament, comparing the natural rate of interest in both kingdoms. And though men are commonly more governed by what they have seen, than by what they foresee, with whatever certainty; yet promises, protestations, fair appearances, with the allurements of present interest, have such powerful influence as few are able to resist. Mankind are, in all ages, caught by the same baits: The same tricks, played over and over again, still trepan them. The heights of popularity and patriotism are still the beaten road to power and tyranny; flattery to treachery; standing armies to arbitrary government; and the glory of God to the temporal interest of the clergy. The fear of an everlasting destruction of credit, allowing it to be an evil, is a needless bugbear. A prudent man, in reality, would rather lend to the |public immediately after we had taken a spunge to our debts, than at present; as much as an opulent knave, even though one could not force him to pay, is a preferable debtor to an honest bankrupt: For the former, in order to carry on business, may find it his interest to discharge his debts, where they are not exorbitant: The latter has it not in his power. The reasoning of Tacitus, as it is eternally true, is very applicable to our present case. Sed vulgus ad magnitudinem beneficiorum aderat: Stultissimus quisque pecuniis mercabatur: Apud sapientes cassa habebantur, quæ neque dari neque accipi, salva republica, poterant. The public is a debtor, whom no man can oblige to pay. The only check which the creditors have upon her, is the interest of preserving credit; an interest, which may easily be overbalanced by a great debt, and by a difficult and extraordinary emergence, even supposing that credit irrecoverable. Not to mention, that a present necessity often forces states into measures, which are, strictly speaking, against their interest.
These two events, supposed above, are calamitous, but not the most calamitous. Thousands are thereby sacrificed to the safety of millions. But we are not without danger, that the contrary event may take place, and that millions may be sacrificed for ever to the temporary safety of thousands. Our |popular government, perhaps, will render it difficult or dangerous for a minister to venture on so desperate an expedient, as that of a voluntary bankruptcy. And though the house of Lords be altogether composed of proprietors of land, and the house of Commons chiefly; and consequently neither of them can be supposed to have great property in the funds. Yet the connections of the members may be so great with the proprietors, as to render them more tenacious of public faith, than prudence, policy, or even justice, strictly speaking, requires. And perhaps too, our foreign enemies may be so politic as to discover, that our safety lies in despair, and may not, therefore, show the danger, open and barefaced, till it be inevitable. The balance of power in Europe, our grandfathers, our fathers, and we, have all deemed too unequal to be preserved without our attention and assistance. But our children, weary of the struggle, and fettered with incumbrances, may sit down secure, and see their neighbours oppressed and conquered; till, at last, they themselves and their creditors lie both at the mercy of the conqueror. And this may properly enough be denominated the violent death of our public credit.
These seem to be the events, which are not very remote, and which reason foresees as clearly almost as she can do any thing that lies in the womb of time. And though the ancients maintained, that in order to reach the gift of prophecy, a certain divine fury or madness was requisite, one may safely affirm, that, in order to deliver such prophecies as these, no more is necessary, than merely to be in one's senses, free from the influence of popular madness and delusion.
Plut. in vita Alex. He makes these treasures amount to 80,000 talents, or about 15 millions sterl. Quintus Curtius (lib. v. cap. 2.) says, that Alexander found in Susa above 50,000 talents.
Strabo, lib. iv.
Hist. lib. iii.
See NOTE [S].
I Have heard it has been computed, that all the creditors of the public, natives and foreigners, amount only to 17,000. These make a figure at present on their income; but in case of a public bankruptcy, would, in an instant, become the lowest, as well as the most wretched of the people. The dignity and authority of the landed gentry and nobility is much better rooted; and would render the contention very unequal, if ever we come to that extremity. One would incline to assign to this event a very near period, |such as half a century, had not our fathers' prophecies of this kind been already found fallacious, by the duration of our public credit so much beyond all reasonable expectation. When the astrologers in France were every year foretelling the death of Henry IV. These fellows, says he, must be right at last. We shall, therefore, be more cautious than to assign any precise date; and shall content ourselves with pointing out the event in general.