contracted by Government with the public creditors, differ from those between individuals in one important particular, that, in the former the lender is not at liberty to reclaim his principal, it is reasonable that the obligation from Government be of such a nature as to make the debt transferable to any other person who may be inclined to purchase it. The regular payment of the interest on the Government Funds, and the number of persons in this country who prefer the interest they afford to the hazardous profits of trade, secure continual demands for those shares in them which are brought to market. The facility also, and trifling expense with which transfers are made in these funds, are inducements to prefer vesting money in them to laying it out on mortgages or other private security, which, though probably yielding a greater interest, is frequently attended with trouble and uncertainty. By these constant transferences, the confidence reposed in the State is maintained and augmented; the funds are converted into a mighty engine for the circulation of capital; an immense field is opened for mercantile speculation in transactions with Government, and it becomes an object of interest and competition to advance money to the public. The consequence is such as might be expected; the readiness to lend increases the disposition to borrow, and the facility of getting money lessens the anxiety to save. Hence the rapid progress of the enormous debts which at present oppress all the great nations of Europe.

"The progress of these debts," as Mr. Smith has remarked, "has been everywhere pretty uniform. Nations, like private men, have generally begun to borrow upon what may be called personal credit, without assigning or mortgaging any particular fund for the payment of the debt; and when this resource has failed them, they have proceeded to borrow upon assignments or mortgages of particular funds."*

The establishment of the funds was introduced into Britain at the time of the Revolution, and has since been gradually enlarged, and carried to an amazing extent. In the reign of chap. iii.; Vol. III. p. 402, tenth edition.]

1 Fairman, On the Stocks.

[Wealth of Nations, Book V.

King William, and during a great part of that of Queen Anne, the greater portion of the new taxes were imposed but for a short period of time, (for four, five, six, or seven years only,) and a great part of the grants of every year consisted in loans upon anticipations of the produce of those taxes. The produce being frequently insufficient for paying within the limited term the principal and interest of the money borrowed, deficiencies arose, to make good which it became necessary to prolong the term. The continued operation of the same causes led Government to go on in this business of anticipation by mortgaging taxes for farther loans and longer periods, till they at length made the assignments perpetual in a great proportion of cases, or in other words converted taxes into a fund for the payment of perpetual annuities. In this manner, the greater part of the taxes which before had been anticipated only for a short term of years, were rendered perpetual, for the purpose of paying, not the capital, but the interest only, of the money which had been borrowed upon them by different successive anticipations. The obvious effect of this practice is to put off the liberation of the public revenue from a fixed period to an indefinite one. As a greater sum, however, can, in all cases, be raised by this plan of perpetual funding, than by the old method of anticipations, the former has, in the great exigencies of the state, been universally preferred to the latter. "To relieve the present exigency," says Mr. Smith, "is always the object which principally interests those immediately concerned in the administration of public affairs. The future liberation of the public revenue they leave to the care of posterity."*

This mode of raising money by anticipations and by funding, is the least disagreeable of any to the people, because large sums are obtained for small annual taxes; and even when these annual taxes are multiplied, the expenditure of the sums raised upon them furnishes occupations which benefit a large proportion of the community. Nor is it a consideration of trifling moment, that this expenditure is frequently a source of great and interesting events which amuse the imaginations of * [Ibid. p. 409.]

men, even when the events on the whole are unfavourable to their interests. The contingencies of a great war have, in this respect, not unaptly been compared to the "caparisons and bells, which, by their show and jingle, induce a poor animal to jog on under his load, with cheerfulness."1

According to some writers, the introduction of this system by King William, was the effect of political foresight, in order to secure the attachment of individuals to Government, from the dependence of their property on its support and security; by others, it has been ascribed to a disposition in Ministers to multiply places, and to gain patronage; by a third description of politicians, (with still greater absurdity,) to the view of increasing the capital property of the kingdom. From the remarks which have been made, it appears plainly to have been the natural offspring of the circumstances in which the country was placed, and which, in proportion as they have existed in the other states of Europe, have been followed by similar consequences.

At the death of King William, our public debt was about fourteen millious sterling. At the death of Queen Anne, it amounted to fifty millions.2 In the year 1797, (according to a report of a Committee of Parliament,) the funded debt amounted to £380,672,945.3

Our present war expenditure exceeds £30,000,000, and our permanent taxes amount to upwards of £20,000,000.*

I have entered into this detail concerning the Funding System, in order to convey a general idea of the causes which

1 Eden's Letters, p. 86.

2 The war of 1739 increased it to more than 78 millions. Before the breaking out of the war of 1755, it was reduced to little more than 724 millions. But at the conclusion of the peace in 1763, the funded debt amounted to more than 1224 millions, and in 1764, the whole debt was 139 millions; and by the American war, it was increased to upwards of 230 millions.Smith, [Wealth of Nations, Book V.

chap. iii.; Vol. III. p. 421, seq., tenth edition.]

Eden, [1. c.] p. 92; Hamilton, [l. c.]

p. 552.

ture

Lauderdale's last Pamphlet. During the American war the expendinever exceeded £20,000, [000,] and the permanent taxes never exceeded £10,000,000.-Ibid. Permanent Taxes in 1783, £10,194,259; in 1798, £21,049,945.-Rose's Pamphlet.

have produced such a weight and complication of taxes in some of the greater states of modern Europe; and which have of consequence rendered the principles of taxation one of the most important in the science of Political Economy. What are the effects of such enormous burdens on the industry, the population, and the general industry of a country, is a question of very difficult discussion, to which different and opposite answers have been given by some of our most eminent writers.

In the very general sketches to which I am obliged to confine myself at present, it is impossible for me to attempt an examination of their arguments; and therefore I shall content myself (without expressing any opinion of my own) with pointing out this inquiry as one of the most interesting which this branch of Political Economy presents to the curiosity of a subject of Great Britain.

The most ingenious and best informed writer who has hitherto appeared as an advocate for the policy of our national debt, is Mr. Pinto, a Portuguese Jew, of whom I had occasion formerly to make mention. [Pol. Econ. Vol. I. pluries.*] His Essay on Circulation and Credit is said, by Sir Francis D'Ivernois, to "be the first work in which the true theory of National Debts was unfolded; and to contain," in his opinion, "a greater variety, both of luminous views and of practical truths, than all the writings of the French Economists put together." The utility of the National Debt is also contended for, though on different and much less plausible principles, by the late Soame Jenyns; and by Mr. Edward King, in a pamphlet, (published in 1793,) entitled Considerations on the Utility of the National Debt.1 Sir F. D'Ivernois, in some of his late publications, takes nearly the same ground with Mr. Pinto.

The arguments on the other side may be found in Mr. Hume and Mr. Smith. The latter has suggested various observations which are particularly directed against the theory of Pinto.† The former treats his antagonists with still less ceremony, com

* [For articulate references, see Index.] 1 Printed for T. Payne, Mews Gate, [London.]

t[Wealth of Nations, Book V. c. iii.; Vol. III. p. 424, seq., tenth edition.]

paring their apologies for the national debt to "the panegyrics that were pronounced at Rome, as trials of wit, on Folly and Fevers, on Busiris and Nero."*

Among the various ingenious remarks which Mr. Hume has made on this subject, there is one very unaccountable observation in the earlier editions of his Political Discourses. "There is a word," says he," which is here in the mouth of everybody, and which has also, I find, got abroad, and is much employed by foreign writers in imitation of the English, and that is Circulation. This word serves as an account of everything; and though I confess that I have sought for its meaning in the present subject ever since I was a schoolboy, I have never yet been able to discover it. What possible advantage is there which the nation can reap by the easy transference of stock from hand to hand? Or is there anything parallel to be drawn from the circulation of other commodities, to that of chequer notes and India bonds ?"+

This observation is the more extraordinary, that in the next paragraph a very satisfactory answer is given to the foregoing questions. "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 enough to embrace it; nor need a trader, who has sums in the public stocks, fear to launch out in 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 escritoire, 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 comThis must enable them to trade on less profit. The * [Essays, Vol. I. Of Public Credit.] [Ibid., old editions.]

merce.