An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader macos .TXT) 📕

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