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Subject Area: Political Theory
Collection: The Collected Works of John Stuart Mill

142.: FRENCH NEWS [46] EXAMINER, 5 FEB., 1832, P. 88 - John Stuart Mill, The Collected Works of John Stuart Mill, Volume XXIII - Newspaper Writings August 1831 - October 1834 Part II [1831]

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The Collected Works of John Stuart Mill, Volume XXIII - Newspaper Writings August 1831 - October 1834 Part II, ed. Ann P. Robson and John M. Robson, Introduction by Ann P. Robson and John M. Robson (Toronto: University of Toronto Press, London: Routledge and Kegan Paul, 1986).

Part of: Collected Works of John Stuart Mill, in 33 vols.

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142.

FRENCH NEWS [46]

EXAMINER, 5 FEB., 1832, P. 88

For the entry in Mill’s bibliography, see No. 116. The item, headed “London, February 5, 1832,” is listed as “Article on France” and enclosed in square brackets in the Somerville College set of the Examiner.

m. de cormenin has published a letter1 to M. Casimir Périer, which is the hardest blow the Minister has ever yet received. With this exception, scarcely any thing of importance has occurred in France during the last week. The discussion of the Budget continues. The Chamber has decided, by a small majority, that it will persevere in the detected juggle of paying off debt by borrowing; the preposterous and self-contradictory job of giving large profits to contractors and stockbrokers for allowing the French Government the use of its own money.

Several good speeches have been delivered in the Chamber on this question. Those of MM. Pagès, Jollivet, de Tracy, and Mauguin, have excited our particular attention.2 Yet there are several points on which even they have curiously missed the mark.

It was contended, for example, by the advocates of a Sinking Fund, that its operations tend to keep up the price of public securities, and thereby enable the State, when it stands in need of loans, to obtain them on easier terms. Now, the answer to this, though extremely obvious, was not given.

There is no doubt that the purchases of stock made in redemption of the debt have some slight effect in keeping up the price of the funds, when the redemption is bonâ fide, from a real surplus revenue—that is, when the State has not occasion to borrow. But when there is no surplus revenue, but, on the contrary, a deficit,—when the State must borrow to defray even the expenses of Government, it is surely obvious, that if it then employs any of its own money in redeeming old debt, it must borrow so much the more: if it redeems ten millions of old stock, it must, in consequence, create an additional ten millions of new, which it would not otherwise have had occasion for. If, therefore, the one operation tends to raise the funds, the other must have an equal tendency to depress them.

It has even a greater tendency. For, the contractor of the new loan must have his profits—seldom so little as four or five per cent. More, therefore, than ten millions of new debt must be contracted, in order to redeem ten millions of old. More new stock must be created and thrown into the market than is numerically equivalent to the stock redeemed. The funds, therefore, instead of being raised, are actually lowered, by keeping up the operations of the Sinking Fund while the country is obliged to borrow. And this piece of hocus-pocus, instead of rendering the terms of the new loan more favourable, renders them actually more unfavourable.

We can believe, indeed, that before the subject was understood, the Sinking Fund might, even under the circumstances we have described, have had some influence in keeping up the price of stocks; not by its effect on the real pecuniary interests of the buyers and sellers,—for that, as has just been shown, is all the other way; but by what, in France, is called a moral influence: an influence of mere feeling. During the currency of the notions which were prevalent at the commencement of Mr. Pitt’s system,3 respecting the magical virtues of compound interest—when the Sinking Fund was regarded as a mine of wealth, as something which (to use the expression of Lord Henry Petty, now Marquis of Lansdowne) creates something out of nothing;4 —the vague feeling of confidence generated by this strange delusion, had a tendency, no doubt, to keep up the value of the funds, as of all other securities, public and private. In like manner we have no doubt that the funds would rise, if the public could be induced to believe that at ten o’clock every morning, beginning with to-morrow, food for twenty millions of people would be rained down from Heaven. But an increase of commercial confidence, arising from such a source, is not to be sought or desired: for the reasons which have led mankind, in all ages, to agree that delusion is an evil, and that it is a virtue to tell the truth.

[1 ]Quoted widely in the newspapers; see, e.g., “L.B.,” “De la lettre de M. de Cormenin à M. Périer,” La Tribune, 30 Jan., 1832, pp. 1-4.

[2 ]See Nos. 116 and 135, n16, for the Budget. Pagès’s speech of 24 Jan. is in Moniteur, 1832, pp. 249-50; Jollivet’s speeches of the 24th are ibid., pp. 244, 247-8; Tracy’s speeches of the 25th and 27th are ibid., pp. 260 and 279; and Mauguin’s speeches of the 26th and 27th are ibid., pp. 268-70 and 281-2.

[3 ]William Pitt (1759-1806), Prime Minister 1783-1801 and 1804-06; he instituted the Sinking Fund by 26 George III, c. 31, to pay off the national debt in 1786.

[4 ]See Statement of a Plan of Finance, Proposed to Parliament in the Year 1807 (London: printed Harrison, 1807), by Henry Petty-Fitzmaurice (1780-1863), 3rd Marquis of Lansdowne.