The Online Library of Liberty

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• Preface
• Editorial Note
• I.: Biographical Sketch
• II.: Early Economic Writings: 1804-1808
• An Essay of the Impolicy of a Bounty On the Exportation of Grain
• Introduction
• Essay On the Corn Laws
• Chap. I: Of the History of the Corn Laws
• Chap. II: Influence of the Principle of Population Upon the Corn Trade
• Chap. III: Effects of the Bounty On the Rent of Land
• Chap. IV: Effects of the Bounty On the Profits of the Farmer
• Chap. V: Effects of the Bounty On the Value of Silver
• Chap. VI: Exportation
• Chap. VII: Importation
• Chap. VIII: Landlords, Farmers, and Corn-dealers
• Postscript to Essay On Impolicy
• Commerce Defended.
• Introduction
• Chapter I: On the Security Or Insecurity of the British Commerce
• Chapter II: On Land, As a Source of Wealth
• Chapter III: Of the Definition of the Terms Wealth and Prosperity
• Chapter IV: Of Manufactures
• Chapter V: Commerce
• Chapter VI: Consumption
• Chapter VII: Of the National Debt
• Chapter VIII: General Reflections
• Smith On Money and Exchange
• III.: James Mill and David Ricardo
• Elements of Political Economy,
• Preface
• Preface (to the 2nd Edn.)
• Introduction the Subject—its Limits—and Division
• Chapter I: Production
• Chapter II: Distribution
• Chapter III: Interchange
• Chapter IV: Consumption
• Mill On Scope and Method
• Whether Political Economy Is Useful London Review, Jan. 1836, Vol. Ii, Pp. 553–572.
• V.: James Mill and India
• Book Ii of the Hindus
• Chapter I: Chronology and Ancient History of the Hindus
• Chapter II: Classification and Distribution of the People
• Chapter III: The Form of Government
• Chapter IV: The Laws
• Chapter V: The Taxes
• Bibliography

CHAPTER VII

OF THE NATIONAL DEBT

Were the exhortations to consumption, of Mr Spence and others, addressed only to individuals, we might listen to them with a great deal of indifference; as we might trust with abundant confidence that the disposition in mankind to save and to better their condition would easily prevail over any speculative opinion, and be even little affected by its practical influence. When the same advice, however, is offered to government, the case is widely and awfully changed. Here the disposition is not to save but to expend. The tendency in national affairs to improve, by the disposition in individuals to save and to better their condition, here finds its chief counteraction.54 Here all the most obvious motives, the motives calculated to operate upon the greater part of mankind, urge to expence; and human wisdom has not yet devised adequate checks to confine within the just bounds this universal propensity. Let us consider then what are likely to be the consequences should this strong disposition become impelled, and precipitated by a prevailing sentiment among mankind. One of the most powerful restraints upon the prodigal inclinations of governments, is the condemnation with which expence, at least beyond the received ideas of propriety, is sure to be viewed by the people. But should this restraint be taken off, should the disposition of government to spend become heated by an opinion that it is right to spend, and should this be still farther inflamed by the assurance that it will by the people also be deemed right in their government to expend, no bounds would then be set to the consumption of the annual produce. Such a delusion could not certainly last long: but even its partial operation, and that but for a short time, might be productive of the most baneful consequences. The doctrines of Mr Spence which we have already considered, naturally lead to this dangerous application; but it is only when he comes to speak of the national debt that his advice is directly addressed to government.55

‘For my own part,’ says Mr Spence,56 ‘I am inclined to believe that the national debt, instead of being injurious, has been of the greatest service to our wealth and prosperity. It appears that man is in fact much more inclined to save than to spend. The land-proprietors accordingly have never fully performed their duty; they have never expended the whole of their revenue. What the land-proprietors have neglected to do, has been accomplished by the national debt. It has every now and then converted twenty or thirty millions of what was destined for capital into consumable revenue, and it has thus given a most beneficial stimulus to agriculture.’

The reader does not, I suppose, expect that I should compliment this doctrine with any very long discussion. As it is founded upon the very same mistakes which we have traced in our author's doctrines respecting the consumption of individuals; it would be necessary for me to tread over again the very same steps, to the fatigue of my reader as well as of myself. As the practical consequences, however, of these mistakes are deeply dangerous, and as there is reason to think that they have a more real operation in the administration of British affairs than the mere speculative reader, it is probable, would easily believe; it is necessary to consider with a little attention the principal points of this application of Mr Spence's theory.

According to Mr Spence the national debt has been advantageous because the government has thus spent what the land-proprietors would otherwise have saved. When his language is put into accurate terms it means this; the land-proprietors have every year endeavoured to increase to a certain amount that part of the annual produce which is destined for the business of reproduction, whereby they would have increased the annual produce, and the permanent riches of the country; but government has every year, or at least at every short interval of years, taken the property which the people would thus have employed in augmenting the riches of the country, and has devoted it to mere dead consumption, whence the increase of production has been prevented. It is in this manner, according to Mr Spence, that the national debt has been advantageous.

Let us hear Mr Spence's reasonings in defence of this doctrine. ‘Capital,’ says he,57 ‘is essential to a nation, but a nation may have too much of it; for what is the use of capital, but to prepare articles on which a revenue may be spent, and where is the revenue to be spent, to be derived from, if it be all converted into capital?’ It is evident that Mr Spence here falls into his old mistake, supposing that capital is not spent as well as revenue, that is, the part of the national produce which is appropriated to reproduction, as well as that which is appropriated to consumption.

‘When, during a war,’ says Mr Spence,58 ‘a loan of twenty or thirty millions is made, in what is the sum expended? Is it not consumed in providing food and clothing for the army and navy, &c.’ But, had no loan been wanted; and had the individuals of the army and navy been cultivators, manufacturers, and contributors, in all the necessary ways, to national production, might not the same sums have been employed in maintaining and clothing them? The difference would have been highly important. As industrious individuals, they would have reproduced within each year a property equivalent to that which they consumed, together with its natural profits. As soldiers and sailors, they consumed without producing any thing; and at the end of each year a property equal to what they consumed was destroyed, and not the value of a pin created to replace it.

After hearing what Mr Spence has to say in favour of loans, let us hear him on the subject of the taxes paid for the interest of those loans. ‘These taxes,’ says he,59 ‘are perhaps a greater cause of prosperity than the original debt was.’ His reason is immediately added; because, says he,60 ‘they are, for the most part, constantly devoted to the purchase of consumable commodities,’ that is to say, they are constantly devoted to dead consumption. The same fatal mistake still clings to Mr Spence. The double meaning of the word consumption still confounds him. Were the sums, paid in taxes, not sacrificed to dead consumption, would they not still be employed in making purchases? would they not be employed in purchasing the raw materials of manufactures, or in paying the wages of manufacturing and agricultural servants, who with these wages again would purchase their food and clothing? Mr Spence applauds the taxes, because they take so much from that part of the annual produce of the country which is destined for productive consumption, and add it to the part which is destined for dead consumption. This is the very cause for which the intelligent contemplator deplores them.

‘Heavy taxes,’ says Mr Spence,61 ‘are doubtless oppressive to many of the members of a society individually considered, yet where the whole, or by far the greater part of the taxes of a nation are expended in that nation, taxation may be carried to a very great extent, without injuring national prosperity.’ It is curious to observe how extremes meet. This is a favourite doctrine too of the mercantile system, of which those of the school of Mr Spence have so great an abhorrence. The reason of both is the same, that the taxes are laid out in the purchase of commodities; and they have not the discernment to reflect, that the money would have been as certainly laid out in the purchase of commodities, had it remained as capital. As capital, however, it would within the year have replaced itself with a profit; as taxes it is all consumed, and nothing is created to replace it. By its consumption as taxes the country is rendered poorer, by its consumption as capital, the country would have become richer.

Mr Spence has next a most excellent idea. The sums paid as taxes, he allows, might have employed productive labourers. ‘But,’ says he,62 ‘if we have already productive labourers, sufficient for the supply of all our wants, why increase their number?’ This is an argument the most commodious in the world. It is equally accommodated to all times and places. The population of England and Wales was found, in 1801, to be very nearly nine millions and a half. In the time of Edward the 1st, the population of England and Wales was found to be about two millions and a half. Had Mr Spence lived in the days of Edward the 1st, his argument would have been just as handy as at the present moment. It would apply as logically to the wilds of Tartary, as to England and France. Let us observe another of Mr Spence's consistencies. He here tells us, we see, that society ought to become stationary. We have already productive labourers enow; why increase their number? Yet Mr Spence informed us, in a passage which we have already quoted, that on this increase depended the prosperity of every country. ‘A nation,’ he told us, ‘may be said to be in prosperity, which is progressively advancing in wealth, where the checks to population are few, and where employment and subsistence are readily found for all classes of its inhabitants.’

This is all which I can perceive, that Mr Spence advances in the form of direct argument, to prove that the national debt, and heavy taxes, are a public blessing63 ; and, if the maxim be well founded, that the proofs of any proposition ought to be strong, in proportion as the doctrine is wonderful, great is the danger that Mr Spence's speculations will not have a very splendid fortune.64

There is an idea, which he has appended to this doctrine, which would furnish occasion to a most important inquiry; were it not of a more extensive nature than to admit of being brought within the limits of the present Tract. ‘In the time of war,’ says Mr Spence,65 when the most taxes are paid, the bulk of the population of this country enjoy greater prosperity than at any other time.’ He adds, ‘just now, for example, never were the bulk of the people so prosperous.’ As he states this merely as an inference from his theory, entirely unsupported by any reference to facts, and as we have seen that his theory is extremely erroneous, we might reject the inference without any farther inquiry. But I am desirous of entering my protest in a manner somewhat more circumstantial against an opinion demonstratively unfounded, cruel to the sufferers, and calculated, as far as its influence extends, to prolong the national calamity of war; an opinion the more likely, if false, to produce disastrous consequences, because it is entertained by many persons in the more affluent circumstances of life, for whom it is too natural to believe, when they themselves are at their ease, that all the world are in a similar situation. It must have been from such a consideration as this of the circumstances of the poor, from an attentive inquiry founded upon his own enjoyments, that Mr Spence must have learned to assure us, that they are in great prosperity. Surely, Mr Cobbett will here take up arms against his new confederate. There is no point which Mr Cobbett has laboured with greater industry, and better effect, for many months, than to prove that the situation of the lower orders has become much more unfavourable since the commencement of Mr Pitt's career as a minister. I remember some time ago, though the date I cannot assign, he presented to us a calculation to prove how much the price of the quartern loaf had risen upon the wages of the labourer, and how inadequate his weekly wages had now become, to afford even bread, (not to speak of fire, clothing, and lodging, or a day of sickness) even to a moderate family. To afford evidence upon this subject, sufficient to compel the assent of such persons as are resolved to withhold it as long as they possibly can, a very copious induction of well attested facts would be requisite. These on such a question could not be very easily procured; and the inquiry, even if the facts were ascertained, would extend itself beyond the limits to which we are at present confined. We can, however, appeal within a narrow compass to a few general facts, which afford a strong ground for inference to the whole subject. One of these, of a most extraordinary and important nature, is the state of the poor's rate. The medium average of the annual expenditure on account of the poor, in the years 1783, 1784, and 1785, was £2,004,238. During the period of peace, which intervened from this date till the breaking out of the war in 1793, no general account was taken of the poor's rate; and we have, therefore, no complete collection of facts, by which we can ascertain in what degree it increased during that period. If we may form however, a conclusion from the general state of the country, in which wages were continually advancing, while the price of provisions was stationary, or rather on the decline, we seem warranted to infer, that it did not increase at all, if it did not rather decline; at any rate that it did not increase, but in a very small degree. We have something indeed much more precise than this, on which to found our conclusions. In the Returns from the Parishes inserted in the Work of Sir F. M. Eden, on the Poor,66 we have statements of the annual expenditure during that period; and though they are not digested into tables, or the general results exhibited, a comparison in a few cases will satisfy the inquirer, that the poor's rate was the same, or very nearly the same, in 1785 and 1792. The case, however, widely altered during the progress of the war. The attention of the nation had been gradually more and more attracted to this growing calamity during some years previous to 1803, when an act of the legislature was passed, for taking an account of the nature and amount of the expenditure on the poor. At this time it was found to amount to the enormous sum of £4,267,965, 9s. 2d. In the course of ten years of war, therefore, the poor's rate had more than doubled. In nine years, from 1776 to 1785, it had increased only £473,434; in ten years, from 1793 to 1803, it increased £2,263,727. Does this fact seem to support the strange conclusion of Mr Spence, that the people of England are most prosperous during war? and above all, that they were never in so prosperous a condition, as they are at this moment? Does Mr Spence really know, that the number of persons in England, who receive parochial charity, is 1,234,768? The whole population, exclusive of military and convicts, but including the paupers, are 8,872,980. Deduct from this the number of paupers, we have 7,638,212. The paupers, therefore, are to the rest of the population, as one to six nearly. If we suppose, that the higher and middling classes form but one fourth of the population, we shall find that nearly every fifth individual in the labouring classes is a parish pauper. Does this lamentable and extraordinary fact indicate a state of prosperity? If we consider that it is the male part of the population chiefly, that is the earning part and pays the poor's rate, it will appear, that the paupers are equal to nearly one third of the whole male population, including old men, young men, and children. Mr Spence will here, it is probable, launch out into a declamation on the growing vices of the poor, (this at least is the general resource) and will to these ascribe the extraordinary increase of the poor's rate during the war. But why should the vices of the poor have increased so fast during the war? If this is the effect of war, deeply is its prolongation to be deplored. I know, however, no facts by which it can be made appear, that the poor are more vicious than they were in 1785; and as to complaints, these were as strong fifty years ago, as they are now. If it be said, that the poor's rate itself is a proof of the increase in the vices of the poor; this is merely begging the question. It is first making the vices of the poor account for the poor's rate, and next the poor's rate account for the vices. Besides, how much soever the growing tendency of vice is to be deplored, its progress in a whole people is always much slower than what is here ascribed to it. The comparison too of the wages of the labourer with the price of provisions, as made by Mr Cobbett, in the manner stated above, affords direct evidence on this subject, and leads to the same lamentable conclusion. There are, unluckily, but few recent statements publicly attested, to which on this subject a writer can appeal, and I am unwilling to advance any thing merely on my own experience and observation. There are, however, some general facts which afford a fair inference to all other cases. In some papers for example printed in 1807, by order of the society of shipowners in Great Britain, I find it stated, that since the year 1780, the price of provisions has increased £84. 8s. 2d. per cent. That wages, however, have increased only £39. 7s. 1d. per cent. a rate of increase which is not nearly one half of that of provisions. This account too of the low rate of wages is the more to be depended upon, that it was adverse to the conclusion which the ship owners wanted to establish. Now, though the shipping trade for a few years has been far from flourishing, it is only for a few years; and even during them there has been no diminution in the employment of shipwrights, because the enormous demand in the king's yards, and in the navy, has much more than compensated for any slackness in the yards of the merchants. We have never heard complaints, that shipwrights were not as well paid as any other artificers of a similar description; that their wages have not risen in a similar, or rather in a superior proportion. We may, therefore, infer, with abundant assurance, that the rate of wages, in proportion to that of provisions, has in all cases where some peculiar circumstances have not created an extraordinary competition for hands, suffered a similar depression. From all this we are surely authorised to conclude, that the assertion of Mr Spence respecting the prosperous condition of the people at large, is rash and unwarranted.

I am unwilling to dwell upon this topic, as I am sensible, that I expose myself to a very formidable argument, which we have acquired, in this country, a wonderful dexterity in wielding against one another, that is, the argumentum ad invidiam, (if Mr Cobbett will for once pardon the use of a learned phrase) the argument, not of refutation, but of odium. The opinion which I have just now ventured to express, and which, if true, it is of so much importance not only to express but to proclaim, there are many gentlemen, who will ingeniously refute, not by attacking the argument, but the author; not by showing that the opinion is unfounded, but by asserting, that the author wishes to stir up the poor against the rich. The two antagonists whom I have more particularly challenged in this tract, I must, however, deny the honour of belonging to that illustrious body. If my argument has not convinced them, they may, if they deem it of sufficient importance, endeavour to refute it; but both of them seem to be too much fettered by old fashioned prejudices, to satisfy themselves, that it is the best mode of refuting an argument to calumniate the arguer.

It might be not useless to those who are the most averse to hear of the fact, barely to allow themselves for one moment to suppose it real, and then to ask themselves, whether it ought to be disguised or to be made known; whether the fatal cause is more likely to be removed by concealment or by exposure. That the fact, if real, is a lamentable one, I suppose will not be doubted; first on principles of mere humanity, next on those of patriotism. For what would it indicate? Have we not seen that when a country is prosperous, the labouring classes of the people are by necessary consequence in comfortable circumstances? that when the comforts of the labouring classes have decayed, the prosperity of the country is at least at a stand, a point from which declension is the consequence, natural and very difficult to be avoided? Since the subject is then of so much importance, let us hope that all those whom the opinion here stated may offend, will exert themselves to refute it. If they can produce facts but nearly as strong against it as are stated to prove it, our wishes will forcibly incline us all to range ourselves of their party.

[54][Cf. Smith's statement that: ‘Great nations are never impoverished by private, though they are sometimes by public prodigality and misconduct.’ Wealth of Nations, p. 325.]

[55]We have already seen, p. 137, an application of the doctrine of the utility of expence, in the plea of Lord Henry Petty for alienating part of the sinking fund. The sinking fund has been operating for twenty years. It ought in that time to have given a tolerable specimen of its effects. Well, how has it paid the national debt? Why, the national debt is now nearly triple its amount at that time when the sinking fund was instituted. If the rapid payment of the national debt were the greatest of our dangers, we might bless God upon being the securest nation in the universe. We may here see, however, with some alarm, the extent of practice which might rapidly be given to the consuming doctrine. Lord Henry Petty professes to regard the sinking fund as the sheet anchor of the nation. Yet upon the strength of this speculation he could recommend to Parliament to devote part of that sinking fund to immediate consumption!

[56]Britain Indep. of Commerce, p. 74 [p. 78n].

[57]Britain Indep. of Commerce, p. 75 [p. 78n].

[58]Ibid.

[59]Britain Indep. of Commerce, p. 75 [p. 79n].

[60]Ibid.

[61]Britain Indep. of Commerce, p. 76 [p. 79n].

[62]Britain Indep. of Commerce, p. 76 [p. 79n].

[63]He refers to Lord Lauderdale's ‘Inquiry into the nature and origin of public wealth.’ His lordship's arguments, however, are merely those of Mr Spence extended. They are drawn from the same source, and applied to the same end. Wherever the above arguments are conclusive against Mr Spence, if they are conclusive against him at all, they are equally so against Lord Lauderdale. It seems therefore unnecessary to extend the pamphlet by any examination of arguments, which are already refuted.

[64]Among other accusations which Mr Spence has brought against Dr Smith, he wishes to prove, that, though he dissents from the doctrine of the Economistes, he yet ‘virtually admits its truth.’ (See p. 41 [p. 37] of Mr Spence's pamph. 3d edit.) ‘He asserts,’ says Mr Spence, ‘that all revenue must be derived from rent of land, profit of stock, or wages of labour. But in the course of his investigation, he admits, that no taxes are finally paid by the profit of stock; the employer of capital always shifting the burden from himself upon the consumer. He allows, too, that taxes cannot finally fall upon wages, since the wages of the labourer increase in proportion, as the price of the articles he consumes is augmented by taxation. On what, then, can taxes fall, but upon the rent of land? If all revenue be necessarily derived from rent, wages and profit, and the two latter cannot be affected by taxation, Dr Smith, on his own premises, admits the truth of the doctrine of the Economists.’ One can with some difficulty determine what to say of this. It is directly untrue. Dr Smith is so far from saying, that no taxes fall ultimately either upon the profit of stock or the wages of labour, that he explains particularly in what manner taxes do fall upon both. Mr Spence, however, certainly did not intend this misrepresentation. He tells us, that he borrowed the idea from the Edinburgh Review, [Jan. 1803, No. II, p. 445]. It is probable, that he trusted to this authority, without undergoing the drudgery of consulting Dr Smith; (taking the business of instructing the public very easily!) and the writer in the Review, with the precipitance natural to a reviewer must have made the assertion at random.

[65]Britain Indepen. of Commerce, p. 76 [p. 80n].

[66][The State of the Poor: or an History of the labouring classes in England from the Conquest to the present period, London, 1797.]