An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith [e book reader pdf TXT] 📗
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The practice of funding has gradually enfeebled every state which
has adopted it. The Italian republics seem to have begun it.
Genoa and Venice, the only two remaining which can pretend to an
independent existence, have both been enfeebled by it. Spain
seems to have learned the practice from the Italian republics,
and (its taxes being probably less judicious than theirs) it has,
in proportion to its natural strength, been-still more enfeebled.
The debts of Spain are of very old standing. It was deeply in
debt before the end of the sixteenth century, about a hundred
years before England owed a shilling. France, not. withstanding
all its natural resources, languishes under an oppressive load of
the same kind. The republic of the United Provinces is as much
enfeebled by its debts as either Genoa or Venice. Is it likely
that, in Great Britain alone, a practice, which has brought
either weakness or dissolution into every other country, should
prove altogether innocent ?
The system of taxation established in those different countries,
it may be said, is inferior to that of England. I believe it is
so. But it ought to be remembered, that when the wisest
government has exhausted all the proper subjects of taxation, it
must, in cases of urgent necessity, have recourse to improper
ones. The wise republic of Holland has, upon some occasions, been
obliged to have recourse to taxes as inconvenient as the greater
part of those of Spain. Another war, begun before any
considerable liberation of the public revenue had been brought
about, and growing in its progress as expensive as the last war,
may, from irresistible necessity, render the British system of
taxation as oppressive as that of Holland, or even as that of
Spain. To the honour of our present system of taxation,
indeed, it has hitherto given so little embarrassment to
industry, that, during the course even of the most expensive
wars, the frugality and good conduct of individuals seem to have
been able, by saving and accumulation, to repair all the breaches
which the waste and extravagance of government had made in the
general capital of the society. At the conclusion of the late
war, the most expensive that Great Britain ever waged, her
agriculture was as flourishing, her manufacturers as numerous and
as fully employed, and her commerce as extensive, as they had
ever been before. The capital, therefore, which supported all
those different branches of industry, must have been equal to
what it had ever been before. Since the peace, agriculture has
been still further improved; the rents of houses have risen in
every town and village of the country, a proof of the increasing
wealth and revenue of the people; and the annual amount of the
greater part of the old taxes, of the principal branches of the
excise and customs, in particular, has been continually
increasing, an equally clear proof of an increasing consumption,
and consequently of an increasing produce, which could alone
support that consumption. Great Britain seems to support with
ease, a burden which, half a century ago, nobody believed her
capable of supporting, Let us not, however, upon this account,
rashly conclude that she is capable of supporting any burden; nor
even be too confident that she could support. without great
distress, a burden a little greater than what has already been
laid upon her.
When national debts have once been accumulated to a certain
degree, there is scarce, I believe, a single instance of their
having been fairly and completely paid. The liberation of the
public revenue, if it has ever been brought about at all, has
always been brought about by a bankruptcy ; sometimes by an
avowed one, though frequently by a pretended payment.
The raising of the denomination of the coin has been the most
usual expedient by which a real public bankruptcy has been
disguised under the appearance of a pretended payment. If a
sixpence, for example, should, either by act of parliament or
royal proclamation. be raised to the denomination of a shilling,
and twenty sixpences to that of a pound sterling ; the person
who, under the old denomination, had borrowed twenty shillings,
or near four ounces of silver, would, under the new, pay with
twenty sixpences, or with something less than two ounces. A
national debt of about a hundred and twenty-eight millions, near
the capital of the funded and unfunded debt of Great Britain,
might, in this manner, be paid with about sixty-four millions of
our present money. It would, indeed, be a pretended payment only,
and the creditors of the public would really be defrauded of ten
shillings in the pound of what was due to them. The calamity,
too, would extend much further than to the creditors of the
public, and those of every private person would suffer a
proportionable loss; and this without any advantage, but in most
cases with a great additional loss, to the creditors of the
public. If the creditors of the public, indeed, were generally
much in debt to other people, they might in some measure
compensate their loss by paying their creditors in the same coin
in which the public had paid them. But in most countries, the
creditors of the public are, the greater part of them, wealthy
people, who stand more in the relation of creditors than in that
of debtors, towards the rest of their fellow citizens. A
pretended payment of this kind, therefore, instead of
alleviating, aggravates, in most cases, the loss of the creditors
of the public; and, without any advantage to the public, extends
the calamity to a great number of other innocent people. It
occasions a general and most pernicious subversion of the
fortunes of private people; enriching, in most cases, the idle
and profuse debtor, at the expense of the industrious and frugal
creditor ; and transporting a great part of the national capital
from the hands which were likely to increase and improve it, to
those who are likely to dissipate and destroy it. When it becomes
necessary for a state to declare itself bankrupt, in the same
manner as when it becomes necessary for an individual to do so, a
fair, open, and avowed bankruptcy, is always the measure which is
both least dishonourable to the debtor, and least hurtful to the
creditor. The honour of a state is surely very poorly provided
for, when, in order to cover the disgrace of a real bankruptcy,
it has recourse to a juggling trick of this kind, so easily seen
through, and at the same time so extremely pernicious.
Almost all states, however, ancient as well as modern, when
reduced to this necessity, have, upon some occasions, played this
very juggling trick. The Romans, at the end of the first Punic
war, reduced the As, the coin or denomination by which they
computed the value of all their other coins, from containing
twelve ounces of copper, to contain only two ounces; that is,
they raised two ounces of copper to a denomination which had
always before expressed the value of twelve ounces. The republic
was, in this manner, enabled to pay the great debts which it had
contracted with the sixth part of what it really owed. So sudden
and so great a bankruptcy, we should in the present times be apt
to imagine, must have occasioned a very violent popular clamour.
It does not appear to have occasioned any. The law which enacted
it was, like all other laws relating to the coin, introduced and
carried through the assembly of the people by a tribune, and was
probably a very popular law. In Rome, as in all other ancient
republics, the poor people were constantly in debt to the rich
and the great, who, in order to secure their votes at the annual
elections, used to lend them money at exorbitant interest, which,
being never paid, soon accumulated into a sum too great either
for the debtor to pay, or for any body else to pay for him. The
debtor, for fear of a very severe execution, was obliged, without
any further gratuity, to vote for the candidate whom the creditor
recommended. In spite of all the laws against bribery and
corruption, the bounty of the candidates, together with the
occasional distributions of coin which were ordered by the
senate, were the principal funds from which, during the latter
times of the Roman republic, the poorer citizens derived their
subsistence. To deliver themselves from this subjection to their
creditors, the poorer citizens were continually calling out,
either for an entire abolition of debts, or for what they called
new tables ; that is, for a law which should entitle them to a
complete acquittance, upon paying only a certain proportion of
their accumulated debts. The law which reduced the coin of all
denominations to a sixth part of its former value, as it enabled
them to pay their debts with a sixth part of what they really
owed, was equivalent to the most advantageous new tables. In
order to satisfy the people, the rich and the great were, upon
several different occasions, obliged to consent to laws, both for
abolishing debts, and for introducing new tables; and they
probably were induced to consent to this law, partly for the same
reason, and partly that, by liberating the public revenue, they
might restore vigour to that government, of which they themselves
had the principal direction. An operation of this kind would
at once reduce a debt of �128,000,000 to �21,333,333:6:8. In the
course of the second Punic war, the As was still further reduced,
first, from two ounces of copper to one ounce, and afterwards
from one ounce to half an ounce ; that is, to the twenty-fourth
part of its original value. By combining the three Roman
operations into one, a debt of a hundred and twenty-eight
millions of our present money, might in this manner be reduced
all at once to a debt of �5,333,333:6:8. Even the enormous debt
of Great Britain might in this manner soon be paid.
By means of such expedients, the coin of, I believe, all nations,
has been gradually reduced more and more below its original
value, and the same nominal sum has been gradually brought to
contain a smaller and a smaller quantity of silver.
Nations have sometimes, for the same purpose, adulterated the
standard of their coin ; that is, have mixed a greater quantity
of alloy in it. If in the pound weight of our silver coin, for
example, instead of eighteen penny-weight, according to the
present standard, there were mixed eight ounces of alloy; a pound
sterling, or twenty shillings of such coin, would be worth little
more than six shillings and eightpence of our present money. The
quantity of silver contained in six shillings and eightpence of
our present money, would thus be raised very nearly to the
denomination of a pound sterling. The adulteration of the
standard has exactly the same effect with what the French call an
augmentation, or a direct raising of the denomination of the
coin.
An augmentation, or a direct raising of the denomination of the
coin, always is, and from its nature must be, an open and avowed
operation. By means of it, pieces of a smaller weight and bulk
are called by the same name, which had before been given to
pieces of a greater weight and bulk. The adulteration of the
standard, on the contrary, has generally been a concealed
operation. By means of it, pieces are issued from the mint, of
the same denomination, and, as nearly as could be contrived, of
the same weight, bulk, and appearance, with pieces which had been
current before of much greater value. When king John of
France,{See Du Cange Glossary, voce Moneta; the Benedictine
Edition.} in order to pay his debts, adulterated his coin, all
the officers of
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