PART IV. OF PUBLIC CREDIT. (continued 2)
Reading edition
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 4s. 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
2do, The interest of about 131 millions of funded debts at different rates of interest, about 4 500 000
3tio, 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
399In 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 400mighty 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]
401Here 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.
402
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 403to 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
4046. 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 general farms livres. l. s. d. amount to 112 500 000 5 000 000 — — And the other branches to 158 300 000 7 035 555 11 1¼
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
405King’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
406Ditto 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 Francelibrary 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 000l. 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
407Farther 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
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 408from 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.
409Upon 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.
410Second 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:
4111. 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 17441744: 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.
412Were 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.
413This 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 414borrowed 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 415administration 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 416of 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.
417But 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.
418But 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.
419The 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 000l. a year paid to Charles II. for his courts of wards and liveries[32].
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].
420This 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.
1mo, Five years of the free gift of the clergy of France, amounting to 15 millions, were paid down at once by that body.
2do, That of the clergy of Alsace, paid in the same way, for the same term, produced 3 millions.
3tio, A duty on firewood, &c. in the city of Paris, valued at 3 400 000 a year, sold for 7 years, for 10 millions.
4to, Another duty upon the consumption of eggs, butter, &c. valued at 2 400 000, sold for 15 years for above 30 millions.
5to, 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.
6to, 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, 421as 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 777l. 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
422This 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.
4231. 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
4244. 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
4255. 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
4265. 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
427These 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
4282. 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
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
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 429any 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 — —
430And 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.
431Third 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: 1mo, To the profit of the farmers: 2do, Towards defraying the expence of collecting the three foregoing branches of revenue, which amount to about 403 millions: And 3tio, 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
432And 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 433footing 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
4343. 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
435There 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 436state 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 437his 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.
438
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.
439In 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 440acts 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.
441
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 442executed: 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 443a 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.
444As 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 445the 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.
446I 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 447nation; 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.
448From 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.
449As 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 450interest 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 451this 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.
1mo, 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.
2do, That this income so created, may be either the property of natives, or of strangers.
4523tio, That when money is found to stagnate, in a country where circulation is not diminishing, it may be supposed to proceed from the coming in of a right balance of trade.
4to, If stagnations in one part are found to interrupt circulation in another, public borrowing, for domestic purposes, has the good effect of giving vent to the stagnation, and throwing the money into a new channel of circulation.
5to, That the sum of interest paid by any nation to strangers, shews the general balance due by the nation, after deducting all the profits of their past trade out of all the expence of their foreign wars.
But here it must be observed, that as on one hand we are comprehending all that is paid to foreign creditors, on account of the funds they have in England, for example, so on the other hand, must be deducted from this, all the like payments made to Englishmen by other nations.
6to, From this last circumstance we discover, that the lending to other nations by private hands, produces the same effect to a nation as if the state were actually paying off the debts due to strangers. Consequently, when Moses permitted the Jews to lend to strangers at interest, and forbade such loans among themselves, his view was to establish a foreign tribute, as it were, in favour of his own nation, instead of establishing luxury at home.
7mo, As the balance due to a nation upon her trade, is found to compensate, pro tanto, the money she spends abroad, we may from the same principle conclude, that so soon as she ceases to expend money abroad, the balance of trade in her favour, if not realized at home in some new improvement, will diminish, pro tanto, the interest, or capitals due to strangers. This is evident from the nature of balances, of which we have treated already.
8vo, The consequence, for example, of England’s owing large sums to strangers, will, from the same principle, constantly prevent exchange from rising very high in her favour, when the balance of her trade is to be paid to her: because on every such occasion, 453her foreign creditors will be glad to disappoint exchangers, by furnishing bills for their interest, or capitals, to those who owe the balance; the consequence of which is plainly to diminish the foreign debts[36].
This circumstance implies no loss to the nation which is creditor in the balance of trade, and debtor upon the capitals; because we have proved that the price of exchange never affects a nation, but only certain individuals, who pay it to others.
This is sufficient, I think, to point out in some degree the nature of a national debt. I come next to examine the consequences of its constant augmentation, without proper measures being taken, either to pay it off, or to circumscribe it within certain bounds.
In what is to follow, I shall throw all consideration of capitals totally out of the question; and as to the amount of taxes, it is quite indifferent whether the money proceeding from them be in consequence of an improvement made upon those already established, or from new impositions: such combinations will come in more properly afterwards.
If the interest paid upon the national debt of England, for example, be found constantly to increase upon every new war, the consequence will be, that more money will be raised on the subject for the payment of it. The question then comes to be, 1. How far may debts extend? 2. How far may taxes be carried? And 3. What will be the consequence, supposing the one and the other carried to the greatest height possible?
I answer to the first, that abstracting from circumstances which may disturb the gradual progress of this operation, before it can arrive at the ne plus ultra, debts may be increased to the full proportion of all that can be raised for the payment of the interest. As to the second, How far taxes may be carried, I shall not here anticipate 454the subject of the following book, any farther than is necessary to resolve the question before us.
Taxes, we have said, either affect income, or consumption. The land-tax of England is now at 4 shillings in the pound, upon a supposed value of the property affected by it, which is all real and personal estates, the stock upon lands, and some few other particulars excepted.
This tax may be carried to the full value of all the real estates in England. As for personal estates it never can affect them proportionally; and that part of the statute of land-tax which passes every year, and imposes 4 shillings in the pound on personal estates, carries in it a vestige of our former ignorance in matters ©f taxation.
The notion of imposing (facto) 20 shillings in the pound upon the real value of all the land-rents of England, appears to us perfectly ridiculous. I admit it to be so; and could I have discovered any argument, by which I could have limited the rising of the land-tax to any precise number of shillings under twenty, I should have stated this as the maximum, rather than the other.