An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith [e book reader pdf TXT] 📗

be annually spared out of

it towards the discharge of the debt. Another million,

accordingly, was paid in the course of last year ; but at the

same time, a large civil-list debt was left unpaid, and we are

now involved in a new war, which, in its progress, may prove as

expensive as any of our former wars.{It has proved more expensive

than any one of our former wars, and has involved us in an

additional debt of more than one hundred millions. During a

profound peace of eleven years, little more than ten millions of

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

millions was contracted.} The new debt which will probably be

contracted before the end of the next campaign, may, perhaps, be

nearly equal to all the old debt which has been paid off from the

savings out of the ordinary revenue of the state. It would be

altogether chimerical, therefore, to expect that the public debt

should ever be completely discharged, by any savings which are

likely to be made from that ordinary revenue as it stands at

present.

 

The public funds of the different indebted nations of Europe,

particularly those of England, have, by one author, been

represented as the accumulation of a great capital, superadded to

the other capital of the country, by means of which its trade is

extended, its manufactures are multiplied, and its lands

cultivated and improved, much beyond what they could have been by

means of that other capital only. He does not consider that the

capital which the first creditors of the public advanced to

government, was, from the moment in which he advanced it, a

certain portion of the annual produce, turned away from serving

in the function of a capital, to serve in that of a revenue ;

from maintaining productive labourers, to maintain unproductive

ones, and to be spent and wasted, generally in the course of the

year, without even the hope of any future reproduction. In return

for the capital which they advanced, they obtained, indeed, an

annuity of the public funds, in most cases, of more than equal

value. This annuity, no doubt, replaced to them their capital,

and enabled them to carry on their trade and business to the

same, or, perhaps, to a greater extent than before; that is, they

were enabled, either to borrow of other people a new capital,

upon the credit of this annuity or, by selling it, to get from

other people a new capital of their own, equal, or superior, to

that which they had advanced to government. This new capital,

however, which they in this manner either bought or borrowed of

other people, must have existed in the country before, and must

have been employed, as all capitals are, in maintaining

productive labour. When it came into the hands of those who had

advanced their money to government, though it was, in some

respects, a new capital to them, it was not so to the country,

but was only a capital withdrawn from certain employments, in

order to be turned towards others. Though it replaced to them

what they had advanced to government, it did not replace it to

the country. Had they not advanced this capital to government,

there would have been in the country two capitals, two portions

of the annual produce, instead of one, employed in maintaining

productive labour.

 

When, for defraying the expense of government, a revenue is

raised within the year, from the produce of free or unmortgaged

taxes, a certain portion of the revenue of private people is only

turned away from maintaining one species of unproductive labour,

towards maintaining another. Some part of what they pay in those

taxes, might, no doubt, have been accumulated into capital, and

consequently employed in maintaining productive labour ; but the

greater part would probably have been spent, and consequently

employed in maintaining unproductive labour. The public expense,

however, when defrayed in this manner, no doubt hinders, more or

less, the further accumulation of new capital; but it does not

necessarily occasion the destruction of any actually-existing

capital.

 

When the public expense is defrayed by funding, it is defrayed by

the annual destruction of some capital which had before existed

in the country; by the perversion of some portion of the annual

produce which had before been destined for the maintenance of

productive labour, towards that of unproductive labour. As in

this case, however, the taxes are lighter than they would have

been, had a revenue sufficient for defraying the same expense

been raised within the year ; the private revenue of individuals

is necessarily less burdened, and consequently their ability to

save and accumulate some part of that revenue into capital, is a

good deal less impaired. If the method of funding destroys more

old capital, it, at the same time, hinders less the accumulation

or acquisition of new capital, than that of defraying the public

expense by a revenue raised within the year. Under the system of

funding, the frugality and industry of private people can more

easily repair the breaches which the waste and extravagance of

government may occasionally make in the general capital of the

society.

 

It is only during the continuance of war, however, that the

system of funding has this advantage over the other system. Were

the expense of war to be defrayed always by a revenue raised

within the year, the taxes from which that extraordinary revenue

was drawn would last no longer than the war. The ability of

private people to accumulate, though less during the war, would

have been greater during the peace, than under the system of

funding. War would not necessarily have occasioned the

destruction of any old capitals, and peace would have occasioned

the accumulation of many more new. Wars would, in general, be

more speedily concluded, and less wantonly undertaken. The people

feeling, during continuance of war, the complete burden of it,

would soon grow weary of it; and government, in order to humour

them, would not be under the necessity of carrying it on longer

than it was necessary to do so. The foresight of the heavy and

unavoidable burdens of war would hinder the people from wantonly

calling for it when there was no real or solid interest to fight

for. The seasons during which the ability of private people to

accumulate was somewhat impaired, would occur more rarely, and be

of shorter continuance. Those, on the contrary, during which that

ability was in the highest vigour would be of much longer

duration than they can well be under the system of funding.

 

When funding, besides, has made a certain progress, the

multiplication of taxes which it brings along with it, sometimes

impairs as much the ability of private people to accumulate, even

in time of peace, as the other system would in time of war. The

peace revenue of Great Britain amounts at present to more than

ten millions a-year. If free and unmortgaged, it might be

sufficient, with proper management, and without contracting a

shilling of new debt, to carry on the most vigorous war. The

private revenue of the inhabitants of Great Britain is at present

as much incumbered in time of peace, their ability to accumulate

is as much impaired, as it would have been in the time of the

most expensive war, had the pernicious system of funding never

been adopted.

 

In the payment of the interest of the public debt, it has been

said, it is the right hand which pays the left. The money does

not go out of the country. It is only a part of the revenue of

one set of the inhabitants which is transferred to another ; and

the nation is not a farthing the poorer. This apology is founded

altogether in the sophistry of the mercantile system; and, after

the long examination which I have already bestowed upon that

system, it may, perhaps, be unnecessary to say anything further

about it. It supposes, besides, that the whole public debt is

owing to the inhabitants of the country, which happens not to be

true ; the Dutch, as well as several other foreign nations,

having a very considerable share in our public funds. But though

the whole debt were owing to the inhabitants of the country, it

would not, upon that account, be less pernicious.

 

Land and capital stock are the two original sources of all

revenue, both private and public. Capital stock pays the wages of

productive labour, whether employed in agriculture, manufactures,

or commerce. The management of those two original sources of

revenue belongs to two different sets of people; the proprietors

of land, and the owners or employers of capital stock.

 

The proprietor of land is interested, for the sake of his own

revenue, to keep his estate in as good condition as he can, by

building and repairing his tenants houses, by making and

maintaining the necessary drains and inclosures, and all those

other expensive improvements which it properly belongs to the

landlord to make and maintain. But, by different land taxes, the

revenue of the landlord may be so much diminished, and, by

different duties upon the necessaries and conveniencies of life,

that diminished revenue may be rendered of so little real value,

that he may find himself altogether unable to make or maintain

those expensive improvements. When the landlord, however, ceases

to do his part, it is altogether impossible that the tenant

should continue to do his. As the distress of the landlord

increases, the agriculture of the country must necessarily

decline.

 

When, by different taxes upon the necessaries and conveniencies

of life, the owners and employers of capital stock find, that

whatever revenue they derive from it, will not, in a particular

country, purchase the same quantity of those necessaries and

conveniencies which an equal revenue would in almost any other,

they will be disposed to remove to some other. And when, in order

to raise those taxes, all or the greater part of merchants and

manufacturers, that is, all or the greater part of the employers

of great capitals, come to be continually exposed to the

mortifying and vexatious visits of the tax-gatherers, this

disposition to remove will soon be changed into an actual

removing. The industry of the country will necessarily fall with

the removal of the capital which supported it, and the ruin of

trade and manufactures will follow the declension of agriculture.

 

To transfer from the owners of those two great sources of

revenue, land, and capital stock, from the persons immediately

interested in the good condition of every particular portion of

land, and in the good management of every particular portion of

capital stock, to another set of persons (the creditors of the

public, who have no such particular interest ), the greater part

of the revenue arising from either, must, in the long-run,

occasion both the neglect of land, and the waste or removal of

capital stock. A creditor of the public has, no doubt, a general

interest in the prosperity of the agriculture, manufactures, and

commerce of the country ; and consequently in the good condition

of its land, and in the good management of its capital stock.

Should there be any general failure or declension in any of these

things, the produce of the different taxes might no longer be

sufficient to pay him the annuity or interest which is due to

him. But a creditor of the public, considered merely as such, has

no interest in the good condition of any particular portion of

land, or in the good management of any particular portion of

capital stock. As a creditor of the public, he has no knowledge

of any such particular portion. He has no inspection of it. He

can have no care about it. Its ruin may in some cases be unknown

to him,