Essays, Thomas Paine [digital book reader .txt] 📗

no further. But in the absence of a constitution, men look entirely to party; and instead of principle governing party, party governs principle.

An avidity to punish is always dangerous to liberty. It leads men to stretch, to misinterpret, and to misapply even the best of laws. He that would make his own liberty secure, must guard even his enemy from oppression; for if he violates this duty, he establishes a precedent that will reach to himself.

Thomas Paine.

Paris, July, 1795.

The Decline and Fall of the English System of Finance19

“On the verge, nay even in the gulf of bankruptcy.”

Debates in Parliament

Nothing, they say, is more certain than death, and nothing more uncertain than the time of dying; yet we can always fix a period beyond which man cannot live, and within some moment of which he will die. We are enabled to do this, not by any spirit of prophecy, or foresight into the event, but by observation of what has happened in all cases of human or animal existence. If then any other subject, such, for instance, as a system of finance, exhibits in its progress a series of symptoms indicating decay, its final dissolution is certain, and the period of it can be calculated from the symptoms it exhibits.

Those who have hitherto written on the English system of finance, (the funding system,) have been uniformly impressed with the idea that its downfall would happen some time or other. They took, however, no data for their opinion, but expressed it predictively⁠—or merely as opinion, from a conviction that the perpetual duration of such a system was a natural impossibility. It is in this manner that Dr. Price has spoken of it; and Smith, in his Wealth of Nations, has spoken in the same manner; that is, merely as opinion without data. “The progress,” says Smith, “of the enormous debts, which at present oppress, and will in the long run most probably ruin, all the great nations of Europe [he should have said governments] has been pretty uniform.” But this general manner of speaking, though it might make some impression, carried with it no conviction.

It is not my intention to predict anything; but I will show from data already known, from symptoms and facts which the English funding system has already exhibited publicly, that it will not continue to the end of Mr. Pitt’s life, supposing him to live the usual age of a man. How much sooner it may fall, I leave to others to predict.

Let financiers diversify systems of credit as they will, it is nevertheless true, that every system of credit is a system of paper money. Two experiments have already been had upon paper money; the one in America, the other in France. In both those cases the whole capital was emitted, and that whole capital, which in America was called continental money, and in France assignats, appeared in circulation; the consequence of which was, that the quantity became so enormous, and so disproportioned to the quantity of population, and to the quantity of objects upon which it could be employed, that the market, if I may so express it, was glutted with it, and the value of it fell. Between five and six years determined the fate of those experiments. The same fate would have happened to gold and silver, could gold and silver have been issued in the same abundant manner that paper had been, and confined within the country as paper money always is, by having no circulation out of it; or, to speak on a larger scale, the same thing would happen in the world, could the world be glutted with gold and silver, as America and France have been with paper.

The English system differs from that of America and France in this one particular, that its capital is kept out of sight; that is, it does not appear in circulation. Were the whole capital of the national debt, which at the time I write this is almost one hundred million pounds sterling, to be emitted in assignats or bills, and that whole quantity put into circulation, as was done in America and in France, those English assignats, or bills, would soon sink in value as those of America and France have done; and that in a greater degree, because the quantity of them would be more disproportioned to the quantity of population in England, than was the case in either of the other two countries. A nominal pound sterling in such bills would not be worth one penny.

But though the English system, by thus keeping the capital out of sight, is preserved from hasty destruction, as in the case of America and France, it nevertheless approaches the same fate, and will arrive at it with the same certainty, though by a slower progress. The difference is altogether in the degree of speed by which the two systems approach their fate, which, to speak in round numbers, is as twenty is to one; that is, the English system, that of funding the capital instead of issuing it, contained within itself a capacity of enduring twenty times longer than the systems adopted by America and France; and at the end of that time it would arrive at the same common grave, the Potter’s Field of paper money.

The datum, I take for this proportion of twenty to one, is the difference between a capital and the interest at five percent. Twenty times the interest is equal to the capital. The accumulation of paper money in England is in proportion to the accumulation of the interest upon every new loan; and therefore the progress to the dissolution is twenty times slower than if the capital were to be emitted and put into circulation immediately. Every twenty years in the English system is equal to one year in the French and American systems.

Having thus stated the duration of the two systems, that of funding upon interest, and that