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BOOK III: OF THE CONSUMPTION OF WEALTH - Jean Baptiste Say, A Treatise on Political Economy 
A Treatise on Political Economy; or the Production, Distribution, and Consumption of Wealth, ed. Clement C. Biddle, trans. C. R. Prinsep from the 4th ed. of the French, (Philadelphia: Lippincott, Grambo & Co., 1855. 4th-5th ed. ).
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OF THE CONSUMPTION OF WEALTH
BOOK III, CHAPTER I
OF THE DIFFERENT KINDS OF CONSUMPTION.
In the course of my work, I have frequently been obliged to anticipate the explanation of terms and notions which in the natural order should have been postponed to a later period of the investigation. Thus I was obliged in the first book to explain the sense, in which I used the term, consumption, because production cannot be effected without consumption.
My reader will have seen from the explanation there given, that, in like manner as by production is meant the creation, not of substance, but of utility, so by consumption is meant the destruction of utility, and not of substance, or matter. When once the utility of a thing is destroyed, there is an end of the source and basis of its value;—an extinction of that, which made it an object of desire and of demand. It thenceforward ceases to possess value, and is no longer an item of wealth.
Thus, the terms, to consume, to destroy the utility, to annihilate the value of any thing, are as strictly synonymous as the opposite terms to produce, to communicate utility, to create value, and convey to the mind precisely the same idea. Consumption, then, being the destruction of value, is commensurate, not with the bulk, the weight, or the number of the products consumed, but with their value. Large consumption is the destruction of large value, whatever form that value may happen to have assumed.
Every product is liable to be consumed; because the value, which can be added to, can likewise be subtracted from, any object. If it has been added by human exertion or industry, it may be subtracted by human use, or a variety of accidents. But it cannot be more than once consumed; value once destroyed cannot be destroyed a second time. Consumption is sometimes rapid, sometimes gradual. A house, a ship, an implement of iron, are equally consumable as a loaf, a joint of meat, or a coat. Consumption again may be but partial. A horse, an article of furniture, or a house when re-sold by the possessor, has been but partially consumed; there is still a residue of value, for which an equivalent is received in exchange on the re-sale. Sometimes consumption is involuntary, and either accidental, as when a house is burnt, or a vessel shipwrecked, or contrary to the consumer's intention, as when a cargo is thrown overboard, or stores set on fire to prevent their falling into enemies' hands.
Value may be consumed, either long after its production, or at the very moment, and in the very act of production, as in the case of the pleasure afforded by a concert, or theatrical exhibition. Time and labour may be consumed; for labour, applicable to an useful purpose, is an object of value, and when once consumed, can never be consumed again.
Whatever cannot possibly lose its value is not liable to consumption. A landed estate cannot be consumed; but its annual productive agency may; for when once that agency has been exerted, it cannot be exerted again. The improvements of an estate may be consumed, although their value may possibly exceed that of the estate itself; for these improvements are the effect of human exertion and industry; but the land itself is inconsumable.1
So likewise it is with any industrious faculty. One may consume a labourer's day's work, but not his faculty of working; which, however, is liable to destruction by the death of the person possessing it.
All products are consumed sooner or later; indeed they are produced solely for the purpose of consumption, and, whenever the consumption of a product is delayed after it has reached the point of absolute maturity, it is value inert and neutralized for the time. For as all value may be employed re-productively, and made to yield a profit to the possessor, the withholding a product from consumption is a loss of the possible profit, in other words, of the interest its value would have yielded, if usefully employed.2
But, products being universally destined for consumption, and that too in the quickest way, how, it may be asked, can there be ever an accumulation of capital, that is to say, of values produced?
I answer—that value may be accumulated, without being necessarily vested all the while in the same identical product, provided only it be perpetuated in some product or other. Now, values employed as capital are perpetuated by reproduction; the various products of which capital consists, are consumed like all other products: but their value is no sooner destroyed by consumption, than it re-appears in another, or a similar substance. A manufactory can not be kept up, without a consumption of victuals and clothes for the workmen, as well as of the raw material of manufacture; but, while value in those forms is undergoing consumption, new value is communicated to the object of manufacture. The items that composed the capital so expended, are consumed and gone; but the capital, the accumulated value, still exists and re-appears under a new form, applicable to a second course of consumption. Whereas, if consumed unproductively, it never re-appears at all.
The annual consumption of an individual, is, the aggregate of all the values consumed by that individual within the year. The annual consumption of a nation is, the aggregate of values consumed within the year by all the individuals and communities, whereof the nation consists.
In the estimate of individual or national consumption, must be included every kind of consumption, whatever be its motive or consequence, whether productive of new value or not; in like manner, as the estimate of the annual production of a nation comprises the total value of its products raised within the year. Thus, a soap manufactory is said to consume such or such a quantity or value of alkali in a year, although this value be re-produced from the manufactory in the shape of soap; on the other hand, it is said to produce annually such and such a quantity or value of soap, although the production may have cost the destruction of a great variety of values, which, if deducted, would vastly reduce the apparent product. By annual production, or consumption, national or individual, is therefore meant, the gross and not the net amount.3
Whence it naturally follows, that all the commodities, which a nation imports, must be reckoned as a part of its annual product, and all its exports as part of its annual consumption. The trade of France consumes the total value of the silk it exports to the United States; and produces, on the other hand, the total value of cotton received in return. And, in like manner, the manufacture of France consumes the value of alkali employed by the soap-boiler, and produces the value of soap derived from the concern.
The total annual consumption of a nation, or an individual, is a very different thing from the aggregate of capital. A capital may be wholly or partially consumed several times a year. When a shoemaker buys leather, and cuts and works it up into shoes, there is so much capital consumed and reproduced. Every time he repeats the operation, there is so much more capital consumed. Suppose the leather purchased to amount to 40 dollars, and the operation to be repeated 12 times in the year, there will have been an annual consumption of 480 dollars upon a capital of 40 dollars. On the other hand, there may be portions of his capital, implements of trade, for instance, which it may take several years to consume. Of this part of his capital he may consume annually but 1-4 or 1-10 perhaps.
In each country the wants of the consumer determine the quality of the product. The product most wanted is most in demand; and that which is most in demand yields the largest profit to industry, capital, and land, which are therefore employed in raising this particular product in preference; and, vice versâ, when a product becomes less in demand, there is a less profit to be got by its production; it is, therefore, no longer produced. All the stock on hand falls in price; the low price encourages the consumption, which soon absorbs the stock on hand.
The total national consumption may be divided into the heads of public consumption, and private consumption; the former is effected by the public, or in its service; the latter by individuals or families. Either class may be productive or unproductive.
In every community each member is a consumer; for no one can subsist, without the satisfaction of some necessary wants, however confined and limited; on the other hand, all, who do not live on mere charity, or gratuitous bounty, contribute somehow to production, by their industry, their capital, or their land; wherefore, the consumers may be said to be themselves the producers; and the great bulk of consumption takes place amongst the middling and poorer classes, whose numbers more than counterbalance the smallness of the share allotted to each.4
Opulent, civilised, and industrious nations, are greater consumers than poor ones, because they are infinitely greater producers. They annually, and in some cases, several times in the course of the year, re-consume their productive capital, which is thus continually renovated; and consume unproductively, the greater part of their revenues, whether derived from industry, from capital, or from land.
It is not uncommon to find authors proposing, as the model for imitation, those nations whose wants are few; whereas, it is far preferable to have numerous wants, along with the power to gratify them. This is the way at once to multiply the human species, and to give to each a more enlarged existence.
Stewart5 extols the Lacedæmonian policy, which consisted in practising the art of self-denial in the extreme, without aiming at progressive advancement in the art of production. But herein the Spartans were rivalled by the rudest tribes of savages, which are commonly neither numerous nor amply provided. Upon this principle, it would be the very acme of perfection to produce nothing and to have no wants; that is to say, to annihilate human existence.
BOOK III, CHAPTER II
OF THE EFFECT OF CONSUMPTION IN GENERAL.
The immediate effect of consumption of every kind is, the loss of value, consequently, of wealth, to the owner of the article consumed. This is the invariable and inevitable consequence, and should never be lost sight of in reasoning on this matter. A product consumed is a value lost to all the world and to all eternity; but the further consequence, that may follow, will depend upon the circumstances and nature of the consumption.
If the consumption be unproductive, there usually results the gratification of some want, but no reproduction of value whatever; if productive, there results the satisfaction of no want, but a creation of new value, equal, inferior, or superior in amount to that consumed, and profitable or unprofitable to the adventurer accordingly.6
Thus, consumption may be regarded as an act of barter, wherein the owner of the value consumed gives up that value on the one hand, and receives in return, either the satisfaction of a personal want, or a fresh value, equivalent to the value consumed.
It may be proper here to remark, that consumption, productive of nothing beyond a present gratification, requires no skill or talent in the consumer. It requires neither labour nor ingenuity to eat a good dinner, or dress in fine clothes.7 On the contrary, productive consumption, besides yielding no immediate or present gratification, requires an exertion of combined labour and skill, or, of what has all along been denominated, industry.
When the owner of a product ready for consumption has himself no industrious faculty, and wishes, but knows not how to consume it productively, he lends it to some one more industrious than himself, who commences by destroying it, but in such a way, as to reproduce another, and thereby enable himself to make a full restitution to the lender, after retaining the profit of his own skill and labour. The value returned consists of different objects from that lent, it is true; indeed, the condition of a loan is in substance this; to replace the value lent, of whatever amount, say 2000 dollars, at a time specified, by other value, equivalent to the same amount of silver coin of the like weight and quality at the time of repayment. An object, lent on condition of specific restitution, cannot be available for reproduction; because, by the terms of the loan, it is not to be consumed.
Sometimes a producer is the consumer of his own product; as when the farmer eats his own poultry or vegetables; or the clothier wears his own cloth. But, the objects of human consumption being far more varied and numerous, than the objects of each person's production respectively, most operations of consumption are preceded by a process of barter. He first turns into money, or receives in that shape, the values composing his individual revenue; and then changes again that money for the articles he purposes to consume. Wherefore, in common parlance, to spend and to consume have become nearly synonymous. Yet, by the mere act of buying, the value expended is not lost; for the article purchased has likewise a value, which may be parted with again for what it cost, if it has not been bought over-dear. The loss of value does not happen till the actual consumption, after which the value is destroyed; it then ceases to exist, and is not the object of a second consumption. For this reason it is, that in domestic life, the bad management of the wife soon runs through a moderate fortune; for she in general regulates the daily consumption of the family, which is the chief source of expense, and one that is always recurring.
This will serve to expose the error of the notion, that where there is no loss of money, there can be no loss of wealth. It is the commonest thing in the world to hear it roundly asserted, that the money spent is not lost, but remains in the country; and, therefore, that the country cannot be impoverished by its internal expenditure. It is true, the value of the money remains as before; but the object, or the hundred objects, perhaps, that have been successively bought with the same money, have been consumed, and their value destroyed.
Wherefore, it is superfluous, I had almost said ridiculous, to confine at home the national money, for the purpose of preserving national wealth. Money by no means prevents the consumption of value, and the consequent diminution of wealth; on the contrary, it facilitates the arrival of consumable objects at their ultimate destination; which is a most beneficial act, when the end is well chosen, and the result satisfactory. Nor would it be correct even to maintain, that the export of specie is at all events a loss, although its presence in the country may be no hindrance to consumption or to the diminution of wealth. For unless it be made without any view to a return, which is rarely the case, it is in fact the same thing as productive consumption; being merely a sacrifice of one value, for the purpose of obtaining another. Where no return whatever is in view, there indeed is so much loss of national capital; but the loss would be quite as great, were goods, and not money, so exported.
BOOK III, CHAPTER III
OF THE EFFECT OF PRODUCTIVE CONSUMPTION.
The nature of productive consumption has been explained above in Book I. The value absorbed by it is what has been called Capital. The trader, manufacturer, and cultivator, purchase the raw material8 and productive agency, which they consume in the preparation of new products; and the immediate effect is precisely the same as that of unproductive consumption, namely, to create a demand for the objects of their consumption, which operates upon their price, and upon their production; and to cause a destruction of value. But the ultimate effect is different; there is no satisfaction of a human want, and no resulting gratification, except that accruing to the adventurer from the possession of the fresh product the value which replaces that of the products consumed, and commonly affords him a profit into the bargain.
To this position, that productive consumption does not immediately satisfy any human want, a cursory observer may possibly object, that the wages of labour, though a productive outlay, go to satisfy the wants of the labourer, in food, raiment, and amusement perhaps. But, in this operation, there is a double consumption; 1. Of the capital consumed productively in the purchase of productive agency, wherefrom results no human gratification; 2. Of the daily or weekly revenue of the labourer, i.e. of his productive agency, the recompense for which is consumed unproductively by himself and his family, in like manner as the rent of the manufactory, which forms the revenue of the landlord, is by him consumed unproductively. And this does not imply the consumption of the same value twice over, first productively, and afterwards unproductively; for the values consumed are two distinct values resting on bases altogether different. The first, the productive agency of the labourer, is the effect of his muscular power and skill, which is itself a positive product, bearing value like any other. The second is a portion of capital, given by the adventurer in exchange for that productive agency. After the act of exchange is once completed, the consumption of the value given on either side is contemporaneous, but with a different object in view; the one being intended to create a new product, the other to satisfy the wants of the productive agent and his family. Thus, the object, expended and consumed by the adventurer, is the equivalent he receives for his capital; and that, consumed unproductively by the labourer, is the equivalent for his revenue. The interchange of these two values by no means makes them one and the same.
So likewise, the intellectual industry of superintendence is reproductively consumed in the concern; and the profits, accruing to the adventurer as its recompense, are consumed unproductively by himself and his family.
In short, this double consumption is precisely analogous to that of the raw material used in the concern. The clothier presents himself to the wool-dealer, with 1000 crowns in his hand; there are, at this moment, two values in existence, on the one side, that of the 1000 crowns, which is the result of previous production, and now forms a part of the capital of the clothier; on the other, the wool constituting a part of the annual product of a grazing farm. These products are interchanged, and each is separately consumed: the capital converted into wool, in a way to produce cloth; the product of the farm, converted into crown-pieces, in the satisfaction of the wants of the farmer, or his landlord.
Since every thing consumed is so much lost, the gain of reproductive consumption is equal, whether proceeding from reduced consumption, or from enlarged production. In China, they make a great saving, in the consumption of seed-corn, by following the drilling in lieu of the broad-cast, method. The effect of this saving is precisely the same, as if the land were, in China, proportionately more productive than in Europe.9
In manufacture, when the raw material used is of no value whatever, it is not to be reckoned as forming any part of the requisite consumption of the concern; thus, the stone used by the lime-burner, and the sand employed by the glass-blower, are no part of their respective consumption, whenever they have cost them nothing.
A saving of productive agency, whether of industry, of land, or of capital, is equally real and effectual, as a saving of raw material; and it is practicable in two ways; either by making the same productive means yield more agency; or by obtaining, the same result from a smaller quantity of productive means.
Such savings generally operate in a very short time to the benefit of the community at large; they reduce the charges of production; and in proportion as the economical process becomes better understood, and more generally practised, the competition of producers brings the price of the product gradually to a level with the charges of production. But for this very reason, all, who do not learn to economise like their neighbours, must necessarily lose, while others are gaining. Manufacturers have been ruined by hundreds, because they would go to work in a grand style with too costly and complex an apparatus, provided of course at an excessive expense of capital.
Fortunately, in the great majority of cases, self-interest is most sensibly and immediately affected by a loss of this kind; and in the concerns of business, like pain in the human frame, gives timely warning of injuries, that require care and reparation. If the rash or ignorant adventurer in production were not the first to suffer the punishment of his own errors or misconduct, we should find it far more common than it is to dash into improvident speculation; which is quite as fatal to public prosperity, as profusion and extravagance. A merchant, that spends 10,000 dollars in the acquisition of 6000 dollars, stands, in respect to his private concerns and to the general wealth of the community, upon exactly the same footing, as a man of fashion, who spends 4000 dollars in horses, mistresses, gluttony, or ostentation; except, perhaps, that the latter has more pleasure and personal gratification for his money.10
What has been said on this subject in Book I, of this work, makes it needless to enlarge here on the head of productive consumption. I shall, therefore, henceforward direct my reader's attention to the subject of unproductive consumption, its motives, and consequences; premising, that in what I am about to say, the word consumption, used alone, will import unproductive consumption, as it does in common conversation.
BOOK III, CHAPTER IV
OF THE EFFECT OF UNPRODUCTIVE CONSUMPTION IN GENERAL.
Having just considered the nature and effect of consumption in general, as well as the general effect of productive consumption in particular, it remains only to consider, in this and the following chapters, such consumption as is effected with no other end or object in view, than the mere satisfaction of a want, or the enjoyment of some pleasurable sensation.
Whoever has thoroughly comprehended the nature of consumption and production, as displayed in the preceding pages, will have arrived at the conviction, that no consumption of the class denominated unproductive, has any ulterior effect, beyond the satisfaction of a want by the destruction of existing value. It is a mere exchange of a portion of existing wealth on the one side, for human gratification on the other, and nothing more. Beyond this, what can be expected?—reproduction? how can the same identical utility be afforded a second time? Wine can not be both drunk and distilled into brandy too. Neither can the object consumed serve to establish a fresh demand, and thus indirectly to stimulate future productive exertion; for it has already been explained that the only effectual demand is created by the possession of wherewithal to purchase,—of something to give in exchange; and what can that be, except a product, which, before the act of exchange and consumption, must have been an item, either of revenue or of capital? The existence and intensity of the demand must invariably depend upon the amount of revenue and of capital: the bare existence of revenue and of capital is all that is necessary for the stimulus of production, which nothing else can stimulate. The choice of one object of consumption necessarily precludes that of another; what is consumed in the shape of silks cannot be consumed in the shape of linens or woollens; nor can what has once been devoted to pleasure or amusement, be made productive also of more positive or substantial utility.
Wherefore, the sole object of inquiry, with regard to unproductive consumption, is, the degree of gratification resulting from the act of consumption itself: and this inquiry will, in the remainder of this chapter, be pursued in respect of unproductive consumption in general, after which we shall give in the following chapters, a separate consideration to that of individuals, and that of the public, or community at large. The sole point is, to weigh the loss, occasioned to the consumer by his consumption, against the satisfaction it affords him. The degree of correctness, with which the balance of loss and gain is struck, will determine whether the consumption be judicious or otherwise; which is a point that next to the actual production of wealth, has the most powerful influence upon the well or ill-being of families and of nations.
In this point of view, the most judicious kinds of consumption seem to be:—
1. Such as conduce to the satisfaction of positive wants; by which term I mean those, upon the satisfaction of which depends the existence, the health, and the contentment of the generality of mankind; being the very reverse of such as are generated by refined sensuality, pride, and caprice. Thus, the national consumption will, on the whole, be judicious, if it absorb the articles rather of convenience than of display: the more linen and the less lace; the more plain and wholesome dishes, and the fewer dainties; the more warm clothing, and the less embroidery, the better. In a nation whose consumption is so directed, the public establishments will be remarkable rather for utility than splendour, its hospitals will be less magnificent than salutary and extensive; its roads well furnished with inns, rather than unnecessarily wide and spacious, and its towns well paved, though with few palaces to attract the gaze of strangers.
The luxury of ostentation affords a much less substantial and solid gratification, than the luxury of comfort, if I may be allowed the expression. Besides, the latter is less costly, that is to say, involves the necessity of a smaller consumption; whereas the former is insatiable; it spreads from one to another, from the mere proneness to imitation; and the extent to which it may reach, is as absolutely unlimited.11 "Pride," says Franklin, "is a beggar quite as clamorous as want, but infinitely more insatiable."
Taking society in the aggregate, it will be found that, one with another, the gratification of real wants is more important to the community, than the gratification of artificial ones. The wants of the rich man occasion the production and consumption of an exquisite perfume, perhaps those of the poor man, the production and consumption of a good warm winter cloak; supposing the value to be equal, the diminution of the general wealth is the same in both cases; but the resulting gratification will, in the one case, be trifling, transient, and scarcely perceptible; in the other, solid, ample, and of long duration.12
2. Such as are the most gradual, and absorb products of the best quality. A nation or an individual, will do wisely to direct consumption chiefly to those articles, that are the longest time in wearing out, and the most frequently in use. Good houses and furniture are, therefore, objects of judicious preference; for there are few products that take longer time to consume than a house, or that are of more frequent utility; in fact, the best part of one's life is passed in it. Frequent changes of fashion are unwise; for fashion takes upon itself to throw things away long before they have lost their utility, and sometimes before they have lost even the freshness of novelty, thus multiplying consumption exceedingly, and rejecting as good for nothing what is perhaps still useful, convenient, or even elegant. So that a rapid succession of fashions impoverishes a state, as well by the consumption it occasions, as by that which it arrests.
There is an advantage in consuming articles of superior quality, although somewhat dearer, and for this reason: in every kind of manufacture, there are some charges that are always the same, whether the product be of good or bad quality. Coarse linen will have cost, in weaving, packing, storing, retailing, and carriage, before it comes to the ultimate consumer, quite as much trouble and labour, as linen of the finest quality, therefore in purchasing an inferior quality, the only saving is the cost of the raw material: the labour and trouble must always be paid in full, and at the same rate; yet the product of that labour and trouble are much quicker consumed, when the linen is of inferior, than when it is of superior quality.
This reasoning is applicable indifferently to every class of product; for in every one there are some kinds of productive agency, that are paid equally without reference to quality; and that agency is more profitably bestowed in the raising of products of good than of bad quality; therefore, it is generally more advantageous for a nation to consume the former. But this can not be done, unless the nation can discern between good and bad, and have acquired taste for the former; wherein again appears the necessity of knowledge13 to the furtherance of national prosperity; and unless, besides, the bulk of the population be so far removed above penury, as not to be obliged to buy whatever is the cheapest in the first instance, although it be in the long-run the dearest to the consumer.
It is evident, that the interference of public authority in regulating the details of the manufacture, supposing it to succeed in making the manufacturer produce goods of the best quality, which is very problematical, must be quite ineffectual in promoting their consumption; for it can give the consumer, neither the taste of what is of the better quality, nor the ability to purchase. The difficulty lies, not in finding a producer, but in finding a consumer. It will be no hard matter to supply good and elegant commodities, if there be consumers both willing and able to purchase them. But such a demand can exist only in nations enjoying comparative affluence; it is affluence, that both furnishes the means of buying articles of good quality, and gives a taste for them. Now the interference of authority is not the road to affluence, which results from activity of production, seconded by the spirit of frugality;—from habits of industry pervading every channel of occupation, and of frugality tending to accumulation of capital. In a country, where these qualities are prevalent, and in no other, can individuals be at all nice or fastidious in what they consume. On the contrary, profusion and embarrassment are inseparable companions; there is no choice when necessity drives.
The pleasures of the table, of play, of pyrotechnic exhibitions, and the like, are to be reckoned amongst those of shortest duration. I have seen villages, that, although in want of good water, yet do not hesitate to spend in a wake or festival, that lasts but one day, as much money as would suffice to construct a conduit for the supply of that necessary of life, and a fountain or public cistern on the village green; the inhabitants preferring to get once drunk in honour of the squire or saint, and to go day after day with the greatest inconvenience, and bring muddy water from half a league distance. The filth and discomfort prevalent in rustic habitations are attributable, partly to poverty, and partly to injudicious consumption.
In most countries, if a part of what is squandered in frivolous and hazardous amusements, whether in town or country, were spent in the embellishment and convenience of the habitations, in suitable clothing, in neat and useful furniture, or in the instruction of the population, the whole community would soon assume an appearance of improvement, civilization, and affluence, infinitely more attractive to strangers, as well as more gratifying to the people themselves.
3. The collective consumption of numbers. There are some kinds of agency, that need not be multiplied in proportion to the increased consumption. One cook can dress dinner for ten as easily as for one; the same grate will roast a dozen joints as well as one; and this is the reason, why there is so much economy in the mess-table of a college, a monastery, a regiment, or a large manufactory, in the supply of great numbers from a common kettle or kitchen, and in the dispensaries of cheap soups.
4. And lastly, on grounds entirely different, those kinds of consumption are judicious, which are consistent with moral rectitude; and, on the contrary, those, which infringe its laws, generally end in public, as well as private calamity. But it would be too wide a digression from my subject to attempt the illustration of this position.
It is observable, that great inequality of private fortune is hostile to those kinds of consumption, that must be regarded as most judicious. In proportion as that inequality is more marked, the artificial wants of the population are more numerous, the real ones more scantily supplied, and the rapid consumption more common and destructive. The patrician spendthrifts and imperial gluttons of ancient Rome thought they never could squander enough. Besides, immoral kinds of consumption are infinitely more general, where the extremes of wealth and poverty are found blended together. In such a state of society, there are few, who can indulge in the refinement of luxury, but a vast number, who look on their enjoyments with envy, and are ever impatient to imitate them. To get into the privileged class is the grand object, be the means ever so questionable; and those who are little scrupulous in the acquirement, are seldom more so in the employment of wealth.14
The government has, in all countries, a vast influence, in determining the character of the national consumption; not only because it absolutely directs the consumption of the state itself, but because a great proportion of the consumption of individuals is gained by its will and example. If the government indulge a taste for splendour and ostentation, splendour and ostentation will be the order of the day, with the whole host of imitators; and even those of better judgment and discretion must, in some measure, yield to the torrent. For, how seldom are they independent of that consideration and good opinion, which, under such circumstances, are to be earned, not by personal qualities, but by a course of extravagance they can not approve?
First and foremost in the list of injudicious kinds of consumption stand those which yield disgust and displeasure, in lieu of the gratification anticipated. Under this class may be ranged, excess and intemperance in private individuals; and, in the state, wars undertaken with the motive of pure vengeance, like that of Louis XIV. in revenge for the attacks of a Dutch newspaper, or with that of empty glory, which leads commonly to disgrace and odium. Yet such wars are even less to be deplored for the waste of national wealth and resources, than for the irremediable loss of personal virtue and talent sacrificed in the struggle; a loss which involves families in distress enough, when exacted by the public good, and by the pressure of inexorable necessity; but must be doubly shocking and afflicting, when it originates in the caprice, the wickedness, the folly, or the ungovernable passions of national rulers.
BOOK III, CHAPTER V
OF INDIVIDUAL CONSUMPTION—ITS MOTIVES AND ITS EFFECTS.
The consumption of individuals, as contrasted with that of the public or community at large, is such as is made with the object of satisfying the wants of families and individuals. These wants chiefly consist in those of food, raiment, lodging, and amusement. They are supplied with the necessary articles of consumption in each department, out of the respective revenue of each family or individual, whether derived from personal industry, from capital, or from land. The wealth of a family advances, declines, or remains stationary, according as its consumption equals, exceeds, or falls short of its revenue. The aggregate of the consumption of all the individuals, added to that of the government for public purposes, forms the grand total of national consumption.
A family, or indeed a community, or nation, may certainly consume the whole of its revenue, without being thereby impoverished; but it by no means follows, that it either must, or would act wisely, in so doing. Common prudence would counsel to provide against casualties. Who can say with certainty, that his income will not fall off, or that his fortune is exempt from the injustice, the fraud, or the violence of mankind? Lands may be confiscated; ships may be wrecked; litigation may involve him in its expenses and uncertainties. The richest merchant is liable to be ruined by one unlucky speculation, or by the failure of others. Were he to spend his whole income, his capital might, and in all probability would, be continually on the decline.
But, supposing it to remain stationary, should one be content with keeping it so? A fortune, however large, will seem little enough, when it comes to be divided amongst a number of children. And, even if there be no occasion to divide it, what harm is there in enlarging it; so it be done by honourable means? what else is it, but the desire of each individual to better his situation, that suggests the frugality that accumulates capital, and thereby assists the progress of industry, and leads to national opulence and civilisation? Had not previous generations been actuated by this stimulus, the present one would now be in the savage state; and it is impossible to say, how much farther it may yet be possible to carry civilization. It has never been proved to my satisfaction, that nine-tenths of the population must inevitably remain in that degree of misery and semi-barbarism, which they are found in at present in most countries of Europe.
The observance of the rules of private economy keeps the consumption of a family within reasonable bounds: that is to say, the bounds prescribed in each instance by a judicious comparison of the value sacrificed in consumption, with the satisfaction it affords. None but the individual himself, can fairly and correctly estimate the loss and gain, resulting to himself or family from each particular act of consumption; for the balance will depend upon the fortune, the rank, and the wants of himself and family; and, in some degree, perhaps, upon personal taste and feelings. To restrain consumption within too narrow limits, would involve the privation of gratification that fortune has placed within reach; and, on the other hand, a too profuse consumption might trench upon resources, that it might be but common prudence to husband.15
Individual consumption has constant reference to the character and passions of the consumer. It is influenced alternately by the noblest and the vilest propensities of our nature; at one time it is stimulated by sensuality; at another by vanity, by generosity, by revenge, or even by covetousness. It is checked by prudence or foresight, by groundless apprehension, by distrust, or by selfishness. As these various qualities happen in turn to predominate, they direct mankind in the use they make of their wealth. In this, as in every other action of life, the line of true wisdom is the most difficult to observe. Human infirmity is perpetually deviating to the one side or the other, and seldom steers altogether clear of excess.16
In respect to consumption, prodigality and avarice are the two faults to be avoided: both of them neutralize the benefits that wealth is calculated to confer on its possessor; prodigality by exhausting, avarice by not using, the means of enjoyment. Prodigality is, indeed, the more amiable of the two, because it is allied to many amiable and social qualities. It is regarded with more indulgence, because it imparts its pleasures to others; yet it is of the two the more mischievous to society; for it squanders and makes away with the capital that should be the support of industry; it destroys industry, the grand agent of production, by the destruction of the other agent, capital. If, by expense and consumption, are meant those kinds only which minister to our pleasures and luxuries, it is a great mistake to say that money is good for nothing but to be spent, and that products are only raised to be consumed. Money may be employed in the work of re-production; when so employed, it must be productive of great benefit; and, every time that a fixed capital is squandered, a corresponding quantity of industry must be extinguished, in some quarter or other. The spendthrift, in running through his fortune, is at the same time exhausting, pro tanto, the source of the profits upon industry.
The miser, who, in the dread of losing his money, hesitates to turn it to account, does, indeed, nothing to promote the progress of industry; but at least he can not be said to reduce the means of production. His hoard is scraped together by the abridgment of his personal gratifications, not at the expense of the public, according to the vulgar notion; it has been withdrawn from no productive occupation, and will at any rate re-appear at his death, and be available for the purpose of extending the operations of industry, if it be not squandered by his heirs, or so effectually concealed, as to evade all search or recovery.
It is absurd in spendthrifts to boast of their prodigality, which is quite as unworthy the nobleness of our nature, as the sordid meanness of the opposite character. There is no merit in consuming all one can lay hands upon, and desisting only when one can get no more to consume; every animal can do as much; nay, there are some animals that set a better example of provident management. It is more becoming the character of a being gifted with reason and foresight, never to consume, in any instance, without some reasonable object in view. At least, this is the course that economy would prescribe.
In short, economy is nothing more than the direction of human consumption with judgment and discretion,—the knowledge of our means, and the best mode of employing them. There is no fixed rule of economy; it must be guided by a reference to the fortune, condition, and wants of the consumer. An expense, that may be authorized by the strictest economy in a person of moderate fortune, would, perhaps, be pitiful in a rich man, and absolute extravagance in a poor one. In a state of sickness, a man must allow himself indulgences, that he would not think of in health. An act of beneficence, that trenches on the personal enjoyments of the benefactor, is deserving of the highest praise; but it would be highly blamable, if done at the expense of his children's subsistence.
Economy is equally distant from avarice and profusion. Avarice hoards,not for the purpose of consuming or re-producing, but for the mere sake of hoarding; it is a kind of instinct, or mechanical impulse, much to the discredit of those in whom it is detected; whereas, true economy is the offspring of prudence and sound reason and does not sacrifice necessaries to superfluities, like the miser when he denies himself present comforts, in the view of luxury, ever prospective and never to be enjoyed. The most sumptuous entertainment may be conducted with economy, without diminishing, but rather adding to its splendour, which the slightest appearance of avarice would tarnish and deface. The economical man balances his means against his present or future wants, and those of his family and friends, not forgetting the calls of humanity. The miser regards neither family nor friends; scarcely attends to his own personal wants, and is an utter stranger to those of mankind at large. Economy never consumes without an object; avarice never willingly consumes at all; the one is a sober and rational study, the only one that supplies the means of fulfilling our duties, and being at the same time just and generous; the other, a vile propensity to sacrifice every thing to the sordid consideration of self.
Economy has not unreasonably been ranked among the virtues of mankind; for, like the other virtues, it implies self-command and control; and is productive of the happiest consequences; the good education of children, physical and moral; the careful attendance of old age; the calmness of mind, so necessary to the good conduct of middle life; and that independence of circumstances which alone can secure against mercenary motives, are all referable to this quality. Without it there can be no liberality, none at least of a permanent and wholesome kind; for, when it degenerates into prodigality, it is an indiscriminate largess, alike to deserving and undeserving; stinting those who have claims in favour of those who have none. It is common to see the spendthrift reduced to beg a favour from people that he has loaded with his bounty; for what he gives now, one expects a return will some day be called for; whereas, the gifts of the economical man are purely gratuitous; for he never gives except from his superfluities. The latter is rich with a moderate fortune; but the miser and the prodigal are poor, though in possession of the largest resources.
Economy is inconsistent with disorder, which stumbles blindfold over wealth, sometimes missing what it most desires, although close within its reach, and sometimes seizing and devouring what it is most interested in preserving; ever impelled by the occurrences of the moment, which it either can not foresee, or can not emancipate itself from; and always unconscious of its own position, and utterly incapable of choosing the proper course for the future. A household, conducted without order, is preyed upon by all the world: neither the fidelity of the servants, nor even the parsimony of the master, can save it from ultimate ruin. For it is exposed to the perpetual recurrence of a variety of little outgoings, on every occasion, however trivial.17
Among the motives that operate to determine the consumption of individuals, the most prominent is luxury, that frequent theme of declamation, which, however, I should probably not have dwelt upon, could I expect that every body would take the trouble of applying the principles I have been labouring to establish; and were it not always useful to substitute reason for declamation.
Luxury has been defined to be, the use of superfluities.18 For my own part, I am at a loss to draw the line between superfluities and necessaries; the shades of difference are as indistinct and completely blended as the colours of the rainbow.
Taste, education, temperament, bodily health, make the degrees of utility and necessity infinitely variable, and render it impossible to employ in an absolute sense, terms, which always of necessity convey an idea of relation and comparison.
The line of demarcation between necessaries and superfluities shifts with the fluctuating condition of society. Strictly speaking, mankind might exist upon roots and herbs, with a sheepskin for clothing, and a wigwam for lodging; yet, in the present state of European society, we cannot look upon bread or butcher's meat, woolien-clothes or houses of masonry, as luxuries. For the same reason, the line varies also according to the varying circumstances of individual fortune; what is a necessary in a large town, or in a particular line of life, may, in another line of life, or in the country, be a mere superfluity. Wherefore, it is impossible exactly to define the boundary between the one and the other. Smith has fixed it a little in advance of Stewart; including in the rank of necessaries, besides natural wants, such as the established rules of decency and propriety have made necessary in the lower classes of society. But Smith was wrong in attempting to fix at all what must, in the nature of things, be ever varying.
Luxury may be said, in a general way, to be, the use or consumption of dear articles; for the term dear is one of relation, and therefore may be properly enough applied in the definition of another term, whose sense is likewise relative. Luxury19 with us in France conveys the idea rather of ostentation than of sensuality; applied to dress, it denotes rather the superior beauty and impression upon the beholder, than superior convenience and comfort to the wearer; applied to the table, it means rather the splendour of a sumptuous banquet, than the exquisite farce of the solitary epicure. The grand aim of luxury in this sense is to attract admiration by the rarity, the costliness, and the magnificence of the objects displayed, recommended probably neither by utility, nor convenience, nor pleasurable qualities, but merely by their dazzling exterior and effect upon the opinions of mankind at large. Luxury conveys the idea of ostentation; but ostentation has itself a far more extensive meaning, and comprehends every quality assumed for the purpose of display. A man may be ostentatiously virtuous, but is never luxuriously so; for luxury implies expense. Thus, luxury of with or genius is a metaphorical expression, implying a profuse display or expenditure, if it may be so called, of those qualities of the intellect, which it is the characteristic of good taste to deal out with a sparing hand.
Although, with us in France, what we term luxury is chiefly directed to ostentatious indulgence, the excess and refinement of sensuality are equally unjustifiable, and of precisely similar effect: that is to say, of a frivolous and inconsiderable enjoyment or satisfaction, obtained by a large consumption, calculated to satisfy more urgent and extensive wants. But I should not stigmatise as luxury that degree of variety or abundance, which a prudent and well-informed person in a civilised community would like to see upon his table upon domestic and common occasions, or aim at in his dress and abode, when under no compulsion to keep up an appearance. I should call this degree of indulgence judicious and suitable to his condition, but not an instance of luxury.
Having thus defined the term luxury, we may go on to investigate its effect upon the well-ordering or economy of nations.
Under the head of unproductive consumption is comprised the satisfaction of many actual and urgent wants, which is a purpose of sufficient consequence to outweigh the mischief, that must ensue from the destruction of values. But what is there to compensate that mischief, where such consumption has not for its object the satisfaction of such wants? where money is spent for the mere sake of spending, and the value destroyed without any object beyond its destruction?
It is supposed to be beneficial, at all events, to the producers of the articles consumed. But it is to be considered, that the same expenditure must take place, though not, perhaps, upon objects quite so frivolous; for the money withheld from luxurious indulgences is not absolutely thrown into the sea; it is sure to be spent either upon more judicious gratifications or upon reproduction. In one way or other, all the revenue, not absolutely sunk or buried, is consumed by the receiver of it, or by some one in his stead; and in all cases whatever, the encouragement held out by consumption to the producer is co-extensive with the total amount of revenue to be expended. Whence it follows:
How great, then, must be the mistake of those, who, on observing the obvious fact, that the production always equals the consumption, as it must necessarily do, since a thing can not be consumed before it is produced, have confounded the cause with the effect, and laid it down as a maxim, that consumption originates production; therefore that frugality is directly adverse to public prosperity, and that the most useful citizen is the one who spends the most.
The partisans of the two opposite systems above adverted to, the economists, and the advocates of exclusive commerce, or the balance of trade, have made this maxim a fundamental article of their creed. The merchants and manufacturers, who seldom look beyond the actual sale of their products, or inquire into the causes which may operate to extend their sale, have warmly supported a position, apparently so consistent with their interests; the poets, who are ever apt to be seduced by appearances, and do not consider themselves bound to be wiser than politicians and men of business, have been loud in the praise of luxury;20 and the rich have not been backward in adopting principles, that exalt their ostentation into a virtue, and their self-gratification into benevolence.21
This prejudice, however, must vanish as the increasing knowledge of political economy begins to reveal the real sources of wealth, the means of production, and the effect of consumption. Vanity may take pride in idle expense, but will ever be held in no less contempt by the wise, on account of its pernicious effects, than it has been all along, for the motives by which it is actuated.
These conclusions of theory have been confirmed by experience. Misery is the inseparable companion of luxury. The man of wealth and ostentation squanders upon costly trinkets, sumptuous repasts, magnificent mansions, dogs, horses, and mistresses, a portion of value, which, vested in productive occupation, would enable a multitude of willing labourers, whom his extravagance now consigns to idleness and misery, to provide themselves with warm clothing nourishing food, and household conveniences. The gold buckles of the rich man leave the poor one without shoes to his feet; and the labourer will want a shirt to his back, while his rich neighbour glitters in velvet and embroidery.
It is vain to resist the nature of things. Magnificence may do what it will to keep poverty out of sight, yet it will cross it at every turn, still haunting, as if to reproach it for its excesses. This contrast was to be met with at Versailles, at Rome, at Madrid, and in every seat of royal residence. In a recent instance, it occurred in France in an afflicting degree, after a long series of extravagant and ostentatious administration; yet the principle is so undeniable, that one would not suppose it had required so terrible an illustration.22
Those who are little in the habit of looking through the appearance to the reality of things, are apt to be seduced by the glitter and the bustle of ostentatious luxury. They take the display of consumption as conclusive evidence of national prosperity. If they could open their eyes, they would see, that a nation verging towards decline will for some time continue to preserve a show of opulence; like the establishment of a spendthrift on the high road to ruin. But this false glare can not last long; the effort dries up the sources of reproduction, and, therefore, must infallibly be followed by a state of apathy and exhaustion of the political frame, which is only to be remedied by slow degrees, and by the adoption of a regimen the very reverse of that, by which it has thus been reduced.
It is distressing to see the fatal habits and customs of the nation one is attached to by birth, fortune, and social affection, extending their influence over the wisest individuals, and those best able to appreciate this danger and foresee its disastrous consequences. The number of persons, who have sufficient spirit and independence of fortune to act up to their principles, and set themselves forward as an example, is extremely small. Most men yield to the torrent, and rush on ruin with their eyes open, in search of happiness; although it requires a very small share of philosophy to see the madness of this course, and to perceive, that, when once the common wants of nature are satisfied, happiness is to be found, not in the frivolous enjoyments of luxurious vanity, but in the moderate exercise of our physical and moral faculties.
Wherefore, those, who abuse great power, or talent, by exerting it in diffusing a taste for luxury, are the worst enemies of social happiness. If there is one habit, that deserves more encouragement than another, in monarchies as well as republics, in great as well as small, it is this of economy. Yet, after all, no encouragement is wanted; it is quite enough to withdraw favour and honour from habits of profusion; to afford inviolable security to all savings and acquirements; to give perfect freedom to their investment and occupation in every branch of industry, that is not absolutely criminal.
It is alleged, that, to excite mankind to spend or consume, is to excite them to produce, inasmuch as they can only spend what they may acquire. This fallacy is grounded on the assumption, that production is equally within the ability of mankind as consumption; that it is as easy to augment as to expend one's revenue. But, supposing it were so, nay further, that the desire to spend, begets a liking for labour, although experience by no means warrants such a conclusion, yet there can be no enlargement of production, without an augmentation of capital, which is one of the necessary elements of production; but it is clear, that capital can only be accumulated by frugality; and how can that be expected from those, whose only stimulus to production is the desire of enjoyment.
Moreover, when the desire of acquirement is stimulated by the love of display, how can the slow and limited progress of real production keep pace with the ardour of that motive? Will it not find a shorter road to its object, in the rapid and disreputable profits of jobbing and intrigue, classes of industry most fatal to national welfare, because they produce nothing themselves, but only aim at appropriating a share of the produce of other people? It is this motive, that sets in motion the despicable art and cunning of the knave, leads the pettifogger to speculate on the obscurity of the laws, and the man of authority to sell to folly and wickedness that patronage which it is his duty to dispense gratuitously to merit and to right. Pliny mentions having seen Paulina at a supper, dressed in a network of pearls and emeralds, that cost 40 millions of sestertii,23 as she was ready to prove by her jeweller's bills. It was bought with the fruit of her ancestor's speculations. "Thus," says the Roman writer, "it was to dress out his grand-daughter in jewels at an entertainment, that Lollius forgot himself so far, as to lay waste whole provinces, to become the object of detestation to the Asiatics he governed, to forfeit the favour of Cæsar, and end his life by poison."
This is the kind of industry generated by love of display.
If it be pretended, that a system, which encourages profusion, operates only upon the wealthy, and thus tends to a beneficial end, inasmuch as it reduces the evil of the inequality of fortune, there can be little difficulty in showing, that profusion in the higher, begets a similar spirit in the middling and lower classes of society, which last must, of course, the soonest arrive at the limits of their income; so that, in fact, the universal profusion has the effect of increasing, instead of reducing, that inequality. Besides, the profusion of the wealthier class is always preceded, or followed, by that of the government, which must be fed and supplied by taxation, that is always sure to fall more heavily upon small incomes than on large ones.24
The apologists of luxury have sometimes gone so far as to cry up the advantages of misery and indigence; on the ground, that, without the stimulus of want, the lower classes of mankind could never be impelled to labour, so that neither the upper classes, nor society at large, could have the benefit of their exertions.
Happily, this position is as false in principle as it would be cruel in practice. Were nakedness a sufficient motive of exertion, the savage would be the most diligent and laborious, for he is the nearest to nakedness, of his species. Yet his indolence is equally notorious and incurable. Savages will often fret themselves to death, if compelled to work. It is observable throughout Europe, that the laziest nations are those nearest approaching to the savage state; a mechanic in good circumstances, at London or Paris, would execute twice as much work in a given time, as the rude mechanic of a poor district. Wants multiply as fast as they are satisfied; a man who has a jacket is for having a coat; and, when he has his coat, he must have a greatcoat too. The artisan, that is lodged in an apartment by himself, extends his views to a second; if he has two shirts, he soon wants a dozen, for the comforts of more frequent change of linen; whereas, if he has none at all, he never feels the want of it. No man feels any disinclination to make a further acquisition, in consequence of having made one already.
The comforts of the lower classes are, therefore, by no means incompatible with the existence of society, as too many have maintained. The shoemaker will make quite as good shoes in a warm room, with a good coat to his back, and wholesome food for himself and his family, as when perishing with cold in an open stall; he is not less skilful or inclined to work, because he has the reasonable conveniences of life. Linen is washed as well in England, where washing is carried on comfortably within doors, as where it is executed in the nearest stream in the neighbourhood.
It is time for the rich to abandon the puerile apprehension of losing the objects of their sensuality, if the poor man's comforts be promoted. On the contrary, reason and experience concur in teaching, that the greatest variety, abundance, and refinement of enjoyment are to be found in those countries, where wealth abounds most, and is the most widely diffused.
BOOK III, CHAPTER VI
ON PUBLIC CONSUMPTION
Of the Nature and general Effect of Public Consumption.
Besides the wants of individuals and of families which it is the object of private consumption to satisfy, the collection of many individuals into a community gives rise to a new class of wants, the wants of the society in its aggregate capacity, the satisfaction of which is the object of public consumption. The public buys and consumes the personal service of the minister, that directs its affairs, the soldier, that protects it from external violence, the civil or criminal judge, that protects the rights and interests of each member against the aggression of the rest. All these different vocations have their use, although they may often be unnecessarily multiplied or overpaid; but that arises from a defective political organization, which it does not fall within the scope of this work to investigate.
We shall see presently whence it is, that the public derives all the values, wherewith it purchases the services of its agents, as well as the articles its wants require. All we have to consider in this chapter is, the mode in which its consumption is effected, and the consequences resulting from it.
If I have made myself understood in the commencement of this third book, my readers will have no difficulty in comprehending, that public consumption, or that which takes place for the general utility of the whole community, is precisely analogous to that consumption, which goes to satisfy the wants of individuals or families. In either case, there is a destruction of values, and a loss of wealth; although, perhaps, not a shilling of specie goes out of the country.
By way of insuring conviction of the truth of this position, let us trace from first to last the passage of a product towards ultimate consumption on the public account.
The government exacts from a tax-payer the payment of a given tax in the shape of money. To meet this demand, the tax-payer exchanges part of the products at his disposal for coin, which he pays to the tax-gatherer:25 a second set of government agents is busied in buying with that coin, cloth and other necessaries for the soldiery. Up to this point, there is no value lost or consumed: there has only been a gratuitous transfer of value, and a subsequent act of barter: but the value contributed by the subject still exists in the shape of stores and supplies in the military depôt. In the end, however, this value is consumed; and then the portion of wealth, which passes from the hands of the tax-payer into those of the tax-gatherer, is destroyed and annihilated.
Yet it is not the sum of money that is destroyed: that has only passed from one hand to another, either without any return, as when it passed from the tax-payer to the tax-gatherer; or in exchange for an equivalent, as when it passed from the government agent to the contractor for clothing and supplies. The value of the money survives the whole operation, and goes through three, four, or a dozen hands, without any sensible alteration; it is the value of the clothing and necessaries that disappears, with precisely the same effect, as if the tax-payer had, with the same money, purchased clothing and necessaries for his own private consumption. The sole difference is, that the individual in the one case, and the state in the other enjoys the satisfaction resulting from that consumption.
The same reasoning may be easily applied to all other kinds of public consumption. When the money of the tax-payer goes to pay the salary of a public officer, that officer sells his time, his talents, and his exertions, to the public, all of which are consumed for public purposes. On the other hand, that officer consumes, instead of the tax-payer, the value he receives in lieu of his services; in the same manner as any clerk or person in the private employ of the tax-payer would do.
There has been long a prevalent notion, that the values, paid by the community for the public service, return to it again in some shape or other; in the vulgar phrase, that what government and its agents receive, is refunded again by their expenditure. This is a gross fallacy; but one that has been productive of infinite mischief, inasmuch as it has been the pretext for a great deal of shameless waste and dilapidation. The value paid to government by the tax-payer is given without equivalent or return: it is expended by the government in the purchase of personal service, of objects of consumption; in one word, of products of equivalent value, which are actually transferred. Purchase or exchange is a very different thing from restitution.26
Turn it which way you will, this operation, though often very complex in the execution, must always be reducible by analysis to this plain statement. A product consumed must always be a product lost, be the consumer who he may; lost without return, whenever no value or advantage is received in return; but, to the tax-payer, the advantage derived from the services of the public functionary, or from the consumption effected in the prosecution of public objects, is a positive return.
If, then, public and private expenditure affect social wealth in the same manner, the principles of economy, by which it should be regulated, must be the same in both cases. There are not two kinds of economy, any more than two kinds of honesty, or of morality. If a government or an individual consume in such a way, as to give birth to a product larger than that consumed, a successful effort of productive industry will be made. If no product result from the act of consumption, there is a loss of value, whether to the state or to the individual; yet, probably, that loss of value may have been productive of all the good anticipated. Military stores and supplies, and the time and labour of civil and military functionaries, engaged in the effectual defence of the state, are well bestowed, though consumed and annihilated; it is the same with them, as with the commodities and personal service, that have been consumed in a private establishment. The sole benefit resulting in the latter case is, the satisfaction of a want; if the want had no existence, the expense or consumption is a positive mischief, incurred without an object. So likewise of the public consumption; consumption for the mere purpose of consumption, systematic profusion, the creation of an office for the sole purpose of giving a salary, the destruction of an article for the mere pleasure of paying for it, are acts of extravagance either in a government or an individual, in a small state or a large one, a republic or a monarchy. Nay, there is more criminality in public, than in private extravagance and profusion; inasmuch as the individual squanders only what belongs to him; but the government has nothing of its own to squander, being, in fact, a mere trustee of the public treasure.27
What, then, are we to think of the principles laid down by those writers, who have laboured to draw an essential distinction between public and private wealth; to show, that economy is the way to increase private fortune, but, on the contrary, that public wealth increases with the increase of public consumption: inferring thence this false and dangerous conclusion, that the rules of conduct in the management of private fortune and of public treasure, are not only different, but in direct opposition?
If such principles were to be found only in books, and had never crept into practice, one might suffer them without care or regret to swell the monstrous heap of printed absurdity; but it must excite our compassion and indignation to hear them professed by men of eminent rank, talents, and intelligence; and still more to see them reduced into practice by the agents of public authority, who can enforce error and absurdity at the point of the bayonet or mouth of the cannon.28
Madame de Maintenon mentions in a letter to the Cardinal de Noailles, that, when she one day urged Louis XIV. to be more liberal in charitable donations, he replied, that royalty dispenses charity by its profuse expenditure; a truly alarming dogma, and one that shows the ruin of France to have been reduced to principle.29 False principles are more fatal than even intentional misconduct; because they are followed up with erroneous notions of self-interest, and are long persevered in without remorse or reserve. If Louis XIV. had believed his extravagant ostentation to have been a mere gratification of his personal vanity, and his conquests the satisfaction of personal ambition alone, his good sense and proper feeling would probably, in a short time, have made it a matter of conscience to desist, or at any rate, he would have stopped short for his own sake; but he was firmly persuaded, that his prodigality was for the public good as well as his own; so that nothing could stop him, but misfortune and humiliation.30
So little were the true principles of political economy understood, even by men of the greatest science, so late as the 18th century, that Frederick II. of Prussia, with all his anxiety in search of truth, his sagacity, and his merit, writes thus to D'Alembert, in justification of his wars: "My numerous armies promote the circulation of money, and disburse impartially amongst the provinces the taxes paid by the people to the state." Again I repeat, this is not the fact; the taxes paid to the government by the subject are not refunded by its expenditure. Whether paid in money or in kind, they are converted into provisions and supplies, and in that shape consumed and destroyed by persons, that never can replace the value, because they produce no value whatever.31 It was well for Prussia that Frederick II. did not square his conduct to his principles. The good he did to his people, by the economy of his internal administration, more than compensated for the mischief of his wars.
Since the consumption of nations or the governments which represent them, occasions a loss of value, and consequently, of wealth, it is only so far justifiable, as there results from it some national advantage, equivalent to the sacrifice of value. The whole skill of government, therefore, consists in the continual and judicious comparison of the sacrifice about to be incurred, with the expected benefit to the community; for I have no hesitation in pronouncing every instance, where the benefit is not equivalent to the loss, to be an instance of folly, or of criminality, in the government.
It is yet more monstrous, then, to see how frequently governments, not content with squandering the substance of the people32 in folly and absurdity, instead of aiming at any return of value, actually spend that substance in bringing down upon the nation calamities innumerable; practise exactions the most cruel and arbitrary, to forward schemes the most extravagant and wicked; first rifle the pockets of the subject, to enable them afterwards to urge him to the further sacrifice of his blood. Nothing, but the obstinacy of human passion and weakness, could induce me again and again to repeat these unpalatable truths, at the risk of incurring the charge of declamation.
The consumption effected by the government33 forms so large a portion of the total national consumption, amounting sometimes to a sixth, a fifth, or even a fourth part34 of the total consumption of the community, that the system acted upon by the government, must needs have a vast influence upon the advance or decline of the national prosperity. Should an individual take it into his head, that the more he spends the more he gets, or that his profusion is a virtue; or should he yield to the powerful attractions of pleasure, or the suggestions of perhaps a reasonable resentment, he will in all probability be ruined, and his example will operate upon a very small circle of his neighbours. But a mistake of this kind in the government, will entail misery upon millions, and possibly end in the national downfal or degradation. It is doubtless very desirable, that private persons should have a correct knowledge of their personal interests; but it must be infinitely more so, that governments should possess that knowledge. Economy and order are virtues in a private station; but, in a public station, their influence upon national happiness is so immense, that one hardly knows how sufficiently to extol and honour them in the guides and rulers of national conduct.
An individual is fully sensible of the value of the article he is consuming; it has probably cost him a world of labour, perseverance, and economy; he can easily balance the satisfaction he derives from its consumption against the loss it will involve. But a government is not so immediately interested in regularity and economy, nor does it so soon feel the ill consequences of the opposite qualities. Besides, private persons have a further motive than even self-interest; their feelings are concerned; their economy may be a benefit to the objects of their affection; whereas, the economy of a ruler accrues to the benefit of those he knows very little of; and perhaps he is but husbanding for an extravagant and rival successor.
Nor is this evil remedied, by adopting the principle of hereditary rule. The monarch has little of the feelings common to other men in this respect. He is taught to consider the fortune of his descendants as secure, if they have ever so little assurance of the succession. Besides, the far greater part of the public consumption is not personally directed by himself; contracts are not made by himself, but by his generals and ministers; the experience of the world hitherto all tends to show, that aristocratical republics are more economical, than either monarchies or democracies.
Neither are we to suppose, that the genius which prompts and excites great national undertakings, is incompatible with the spirit of public order and economy. The name of Charlemagne stands among the foremost in the records of renown; he achieved the conquest of Italy, Hungary, and Austria; repulsed the Saracens; broke the Saxon confederacy; and obtained at length the honours of the purple. Yet Montesquieu has thought it not derogatory to say of him, that "the father of a family might take a lesson of good housekeeping from the ordinances of Charlemagne. His expenditure was conducted with admirable system; he had his demesnes valued with care, skill, and minuteness. We find detailed in his capitularies the pure and legitimate sources of his wealth. In a word, such were his regularity and thrift, that he gave orders for the eggs of his poultry-yards, and the surplus vegetables of his garden, to be brought to market."35 The celebrated Prince Eugene, who displayed equal talent in negotiation and administration as in the field, advised the Emperor Charles VI. to take the advice of merchants and men of business, in matters of finance.36 Leopold, when Grand Duke of Tuscany, towards the close of the 18th century, gave an eminent example of the resources, to be derived from a rigid adherence to the principles of private economy, in the administration of a state of very limited extent. In a few years, he made Tuscany one of the most flourishing states of Europe.
The most successful financiers of France, Suger, Abbé de St. Dennis, the Cardinal D'Amboise, Sully, Colbert, and Necker, have all acted on the same principle. All found means of carrying into effect the grandest operations by adhering to the dictates of private economy. The Abbé de St. Dennis furnished the outfit of the second crusade; a scheme that required very large supplies, although one I am far from approving. The Cardinal furnished Louis XII. with the means of making his conquest of the Milanese. Sully accumulated the resources, that afterwards humbled the house of Austria.—Colbert supplied the splendid operations of Louis XIV. Necker provided the ways and means of the only successful war waged by France in the 18th century.37
Those governments, on the contrary, that have been perpetually pressed with the want of money, have been obliged, like individuals, to have recourse to the most ruinous, and sometimes the most disgraceful, expedients to extricate themselves. Charles the Bald put his titles and safe-conducts up to sale. Thus, too, Charles II. of England sold Dunkirk to the French king, and took a bribe of 80,000l. from the Dutch, to delay the sailing of the English expedition to the East Indies, 1680, intended to protect their settlements in that quarter, which, in consequence, fell into the hands of the Dutchmen.38 Thus, too, have governments committed frequent acts of bankruptcy, sometimes in the shape of adulteration of their coin, and sometimes by open breach of their engagements.
Louis XIV. towards the close of his reign, having utterly exhausted the resources of a noble territory, was reduced to the paltry shift of creating the most ridiculous offices, making his counsellors of state, one an inspector of fagots, another a licenser of barber-wig-makers, another, visiting inspector of fresh, or taster of salt, butter, and the like. Such paltry and mischievous expedients can never long defer the hour of calamities, that must sooner or later befal the extravagant and spendthrift governments. "When a man will not listen to reason," says Franklin, "she is sure to make herself felt."
Fortunately, an economical administration soon repairs the mischiefs of one of an opposite character. Sound health can not be restored all at once; but there is a gradual and perceptible improvement; every day some cause of complaint disappears, and some new faculty comes again into play. Half the remaining resources of a nation, impoverished by an extravagant administration, are neutralized by alarm and uncertainty; whereas, credit39 doubles those of a nation, blessed with one of a frugal character. It would seem, that there exists in the politic, to a stronger degree than even in the natural, body a principle of vitality and elasticity, which can not be extinguished without the most violent pressure. One can not look into the pages of history, without being struck with the rapidity, with which this principle has operated. It has nowhere been more strikingly exemplified, than in the frequent vicissitudes that our own France has experienced since the commencement of the revolution. Prussia has afforded another illustration in our time. The successor of Frederick the Great squandered the accumulations of that monarch, which were estimated at no less a sum than 42 millions of dollars, and left behind him, besides, a debt of 27 millions. In less than eight years, Frederick William III. had not only paid off his father's debts, but actually began a fresh accumulation; such is the power of economy, even in a country of limited extent and resources.
Of the principal Objects of National Expenditure.
In the preceding section, it has been endeavoured to show, that, since all consumption by the public is in itself a sacrifice of value, an evil balanced only by such benefit, as may result to the community from the satisfaction of any of its wants, a good administration will never spend for the mere sake of spending, but take care to ascertain that the public benefit, resulting, in such instance, from the satisfaction of a public want, shall exceed the sacrifice incurred in its acquirement.
A comprehensive view of the principal public wants of a civilized community, can alone qualify us to estimate with tolerable accuracy the sacrifice it is worth while for the community to make for their gratification.40
The public consumes little else, but what have been denominated Immaterial products, that is to say, products destroyed as soon as created; in other words, the services or agency, either of human beings, or of other objects, animate or inanimate.41
It consumes the personal service of all its functionaries, civil, judicial, military, or ecclesiastical. It consumes the agency of land and capital. The navigation of rivers and seas, utility of roads and ground open to the public, are so much agency derived by the public from land, of which either the absolute property, or the beneficial enjoyment, is vested in the public. Where capital has been vested in the land, in the shape of buildings, bridges, artificial harbours, causeways, dikes, canals, &c. the public then consumes the agency, or the rent of the land, plus the agency, or the interest, of the capital so vested.
Sometimes the public maintains establishments of productive industry for instance, the porcelain manufacture of Sevres, the Gobelin tapestry, the salt-works of Lorraine and of the Jura, &c., in France. When concerns of this kind bring more than their expenditure, which is but rarely the case, they furnish part of the national revenue, and must by no means be classed among the items of national charge.
Of the Charge of Civil and Judicial Administration.
The charge of civil and judicial administration is made up, partly of the specific allowances of magistrates and other officers, and partly of such degree of pomp and parade, as may be deemed necessary in the execution of their duties. Even if the burthen of that pomp and parade be thrown wholly or partially upon the public functionary, it must ultimately fall upon the shoulders of the public, for the salary of the functionary must be raised, in proportion to the appearance he is expected to make. This observation applies to every description of functionary, from the prince to the constable inclusive consequently, a nation, which reverences its prince only when surrounded with the externals of greatness, with guards, horse and foot, laced liveries, and such costly trappings of royalty, must pay dearly for its taste. If, on the contrary, it can be content, to respect simplicity rather than pageantry, and obey the laws, though unaided by the attributes of pomp and ceremony, it will save in proportion. This is what made the charges of government so light in many of the Swiss cantons, before the revolution, and in the North American colonies before their emancipation. It is well known, that those colonies, though under the dominion of England, had separate governments, of which they respectively defrayed the charge; yet the whole annual expenditure all together amounted to no more than 64,700l. sterling. "An ever memorable example," observes Smith, "at how small an expense three millions of people may not only be governed, but well governed."42
Causes entirely of a political nature as well as the form of government which they help to determine, have an influence in apportioning the salaries of public officers, civil and judicial, the charge of public display, and those likewise of public institutions and establishments. Thus, in a despotic government, where the subject holds his property at the will of the sovereign, who fixes himself the charge of his household, that is to say, the amount of the public money which he chooses to spend on his personal necessities and pleasures, and the keeping up of the royal establishment, that charge will probably be fixed at a higher rate, than where it is arranged and contested between the representatives of the prince and of the tax payers respectively.
The salaries of inferior public officers in like manner depend, partly upon their individual importance, and partly upon the general plan of government. Their services are dear or cheap to the public, not merely in proportion to what they actually cost, but likewise in proportion as they are well or ill executed. A duty ill performed is dearly bought, however little be paid for it; it is dear too, if it be superfluous, or unnecessary; resembling in this respect an article of furniture, that, if it do not answer its purpose, or be not wanted, is merely useless lumber. Of this description, under the old régime of France, were the officers of high-admiral, high-steward of the household, the king's cup-bearer, the master of his hounds, and a variety of others, which added nothing even to the splendour of royalty, and were merely so many means of dispensing personal favour and emolument.
For the same reason, whenever the officers of government are needlessly multiplied, the people are saddled with charges, which are not necessary to the maintenance of public order. It is only giving an unnecessary form to that benefit, or product, which is not at all the better of it, if indeed it be not worse.43 A bad government, that can not support its violence, injustice, and exaction, without a multitude of mercenaries, satellites, and spies, and gaols innumerable, makes its subjects pay for its prisons, spies, and soldiers, which nowise contribute to the public happiness.
On the other hand, a public duty may be cheap, although very liberally paid. A low salary is wholly thrown away upon an incapable and inefficient officer; his ignorance will probably cost the public ten times the amount of his salary; but the knowledge and activity of a man of ability are fully equivalent to the pay he receives; the losses he saves to the public, and the benefits derived from his exertions, greatly outweigh his personal emolument, even if settled on the most liberal scale.
There is real economy in procuring the best of every thing, even at a larger price. Merit can seldom be engaged at a low rate, because it is applicable to more occupations than one. The talent, that makes an able minister, would, in another profession, make a good advocate, physician, farmer, or merchant; and merit will find both employment and emolument in all these departments. If the public service offer no adequate reward for its exertion, it will choose some other more promising occupation.
Integrity is like talent; it can not be had without paying for it, which is not at all wonderful; for the honest man can not resort to those discreditable shifts and contrivances, which dishonesty looks to as a supplemental resource.
The power, which commonly accompanies the exercise of public functions, is a kind of salary, that often far exceeds the pecuniary emolument attached to them. It is true, that in a well ordered state, where law is supreme, and little is left to the arbitrary control of the ruler, there is little opportunity of indulging the caprice and love of domination implanted in the human breast. Yet the discretion, which the law must inevitably vest in those who are to enforce it, and particularly in the ministerial department, together with the honour commonly attendant on the higher offices of the state, have a real value, which makes them eagerly sought for, even in countries where they are by no means lucrative.
The rules of strict economy would probably make it advisable to abridge all pecuniary allowance, wherever there are other sufficient attractions to excite a competition for office, and to confer it on none but the wealthy, were there not a risk of losing, by the incapacity of the officer, more than would be gained by the abridgment of his salary. This, as Plato well observes in his Republic, would be like entrusting the helm to the richest man on board. Besides, there is some danger, that a man, who gives his services for nothing, will make his authority a matter of gain, however rich he may be. The wealth of a public functionary is no security against his venality: for ample fortune is commonly accompanied with desires as ample, and probably even more ample, especially if he have to keep up an appearance, both as a man of wealth and a magistrate. Moreover, supposing what is not altogether impossible, namely, that one can meet with wealth united with probity, and with, besides, the activity requisite to the due performance of public duty, is it wise to run the risk of adding the preponderance of authority to that of wealth, which is already but too manifest? With what grace could his employers call to account an agent, who could assume the merit of generosity, both with the people and with the government? There are, however, some ways, in which the gratuitous services of the rich may be employed with advantage; particularly in those departments, that confer more honour than power: as in the administration of institutions of public charity, or of public correction or punishment.
In France under the old régime, the government, when harassed with the want of money, was in the habit of putting up its offices to sale. This is the very worst of all expedients; it introduces all the mischiefs of gratuitous service; for the emolument is then no more, than the interest of the capital expended in the purchase of the office; and has the additional evil of costing to the state as much as if the service were not gratuitously performed; for the public remains charged with the interest of a capital, that has been consumed and lost.
It has been sometimes the practice to consign certain civil functions, such as the registry of births, marriages, and deaths, to the ecclesiastical body, whose emoluments, arising from their clerical duties, may be supposed to enable them to execute these without pay. But there is always danger in confiding the execution of civil duties to a class of men, that pretend to a commission from a still higher than a national authority.44
In spite of every precaution, the public or the monarch will never be served so well or so cheaply as individuals. Inferior public agents can not be so narrowly watched by their superiors, as private ones; nor have the superiors themselves an equal interest in vigilant superintendence. Besides, it is easy enough for underlings to impose on a superior, who has many to look after, is perhaps placed at a distance, and can give but little attention to each individually; and whose vanity makes him more alive to the officious zeal of his inferior, than to the real service and utility, that the public good requires. As to the monarch and the nation, who are the parties most interested in good public administration, because it consolidates the power of the one and enlarges the happiness of the other, it is next to impossible for them to exert a perpetual and effectual control. In most cases, this duty must of necessity devolve on agents, who will deceive them when it is their interest to do so, as is proved by abundance of examples. "Public services," says Smith, "are never better performed than when their reward comes only in consequence of their being performed, and is proportioned to the diligence employed in performing them." Accordingly, he recommends, that the salaries of judges should be paid at the final determination of each suit, and the share of each judge proportioned to their respective trouble in the progress of it. This would be some encouragement to the diligence of each particular judge, as well as to that of the court, in bringing litigation to an end. There would be some difficulty in applying this method to all the branches of the public service; and it would probably introduce as great abuses in the opposite way; but it would at least be productive of one good; viz. preventing the needless multiplication of offices. It would likewise give the public the same advantage of competition as is enjoyed by individuals, in respect to the services they call for.
Not only are the time and labour of public men in general better paid for than those of other persons, besides being often wasted by their own mismanagement, without the possibility of an efficient check; but there is often a further enormous waste, occasioned by compliance with the customs of the country, and court etiquette. It would be curious to calculate the time wasted in the toilet, or to estimate, if possible, the many dearly-paid hours lost, in the course of the last century, on the road between Paris and Versailles.
Thus, in the governments of Asia, there is an immense waste of the time of the superior public servants in tedious and ceremonious observances. The monarch, after allowing for the hours of customary parade, and those of personal pleasure, has little time left to look after his own affairs, which, consequently, soon go to ruin. Frederick II. of Prussia, by adopting a contrary line of conduct, and by the judicious distribution and apportionment of his time contrived to get through a great deal of business himself. By this means, he really lived longer than older men than himself, and succeeded in raising his kingdom to a first-rate power. His other great qualities, doubtless, contributed to his success; but they would not have been sufficient, without a methodical arrangement of his time.
Of Charges, Military and Naval.
When a nation has made any considerable progress in commerce, manufacture, and the arts, and its products have, consequently, become various and abundant, it would be an immense inconvenience, if every citizen were liable to be dragged from a productive employment, which has become necessary to society, for the purposes of national defence. The cultivator of the soil works no longer for the sustenance of himself and family only, but also for that of many other families, who are either owners of the soil, and share in its produce, or traders and manufacturers, that supply him with articles he cannot do without. He must, therefore, cultivate a larger extent of surface, must vary his tillage, keep a larger stock of cattle, and follow a complex mode of cultivation that will fully occupy his leisure between seed-time and harvest.45
Still less can the trader and manufacturer afford thus to sacrifice time and talents, whereof the constant occupation, except during the intervals of rest, is necessary to the production, from which they are to derive their subsistence.
The owners of land let out to farm may, undoubtedly, serve as soldiers without pay; as, indeed, the nobility and gentry do, in some measure, in monarchical states; but they are, for the most part, so much accustomed to the sweets of social existence, so little goaded by necessity towards the conception and achievement of great enterprises, and feel so little of the enthusiasm of emulation and esprit de corps, that they commonly prefer a pecuniary sacrifice to that of comfort, and possibly of life. And these motives operate equally with the owners of capital.
All these reasons have led individuals, in most modern states, to consent to a taxation, that may enable the monarch or the republic to defend the country against external violence with a hired and professional soldiery, who are, however, too apt to become the tools of their leader's ambition or tyranny.
When war has become a trade, it benefits, like all other trades, from the division of labour. Every branch of human science is pressed into its service. Distinction or excellence, whether in the capacity of general, engineer, subaltern, or even private soldier, can not be obtained without long training, perhaps, and constant practice. The nation, which should act upon a different principle, would lie under the disadvantage of opposing the imperfection, to the perfection, of art. Thus, excepting the cases, in which the enthusiasm of a whole nation has been roused to action, the advantage has uniformly been on the side of a disciplined and professional soldiery. The Turks, although professing the utmost contempt for the arts of their Christian neighbours, are compelled by the dread of extermination, to be their scholars in the art of war. The European powers were all forced to adopt the military tactics of the Prussians; and, when the violent agitation of the French revolution pressed every resource of science to the aid of the armies of the republic, the enemies of France were obliged to follow the example.
This extensive application of science, and adaptation of fresh means and more ample resources to military purposes, have made war far more expensive now than in former times. It is necessary now-a-days, to provide an army beforehand, with supplies of arms, ammunition, magazines of provision, ordnance, &c., equal to the consumption of one campaign at the least. The invention of gunpowder has introduced the use of weapons more complex and expensive, and very chargeable in the transport, especially the field and battering trains. Moreover, the wonderful improvement of naval tactics, the variety of vessels of every class and construction, all requiring the utmost exertion of human genius and industry; the yards, docks, machinery, store-houses, &c. have entailed upon nations addicted to war almost as heavy an expense in peace, as in times of actual hostility; and obliged them not only to expend a great portion of their income, but to vest a great amount of capital likewise in military establishments. In addition to which, it is to be observed, that the modern colonial system, that is to say, the system of retaining the sovereignty of towns and provinces in distant parts of the world, has made the European states open to attack and aggression in the most remote quarters of the globe, and the whole world the theatre of warfare, when any of the leading powers are the belligerents.46
Wealth has, consequently, become as indispensable as valour to the prosecution of modern warfare; and a poor nation can no longer withstand a rich one. Wherefore, since wealth can be acquired only by industry and frugality, it may safely be predicted, that every nation, whose agriculture, manufacture, and commerce, shall be ruined by bad government, or exorbitant taxation, must infallibly fall under the yoke of its more provident neighbours. We may further conclude, that henceforward national strength will accompany national science and civilization; for none but civilized nations can maintain considerable standing armies; so that there is no reason to apprehend the future recurrence of those sudden overthrows of civilized empires by the influx of barbarous tribes, of which history affords many examples.
War costs a nation more than its actual expense; it costs besides, all that would have been gained, but for its occurrence.
When Louis XIV. in 1672, resolved in a fit of passion, to chastise the Dutch for the insolence of their newspaper writers, Boreel, the Dutch ambassador, laid before him a memorial showing that France through the medium of Holland, sold produce annually to foreign nations, to the amount of sixty millions fr. at the then scale of price; which will fall little short of 120 millions (22,000,000 of dollars) at the present. But the court treated his representations as the mere empty bravado of an ambassador.
To conclude: the charges of war would be very incorrectly estimated, were we to take no account of the havoc and destruction it occasions; for that one at least of the belligerents, whose territory happens to be the scene of operations, must be exposed to its ravages. The more industrious the nation, the more does it suffer from warfare. When it penetrates into a district abounding in agricultural, manufacturing, and commercial establishments, it is like a fire in a place full of combustibles; its fury is aggravated, and the devastation prodigious. Smith calls the soldier an unproductive labourer; would to God he were nothing more, and not a destructive one into the bargain! he not only adds no product of his own47 to the general stock of wealth, in return for the necessary subsistence he consumes, but is often set to work to destroy the fruits of other people's labour and toil, without doing himself any benefit.
The tardy, but irresistible expansion of intelligence will probably operate a still further change in external political relations, and with it a prodigious saving of expenditure for the purposes of war. Nations will be taught to know that they have really no interest in fighting one another; that they are sure to suffer all the calamities incident to defeat, while the advantages of success are altogether illusory. According to the international policy of the present day, the vanquished are sure to be taxed by the victor, and the victor by domestic authority: for the interest of loans must be raised by taxation. There is no instance on record, of any diminution of national expenditure being effected by the most successful issue of hostilities. And, what is the glory it can confer more than a mere toy of the most extravagant price, that can never even amuse rational minds for any length of time? Dominion by land or sea will appear equally destitute of attraction, when it comes to be generally understood, that all its advantages rest with the rulers, and that the subjects at large derive no benefit whatever. To private individuals, the greatest possible benefit is entire freedom of intercourse, which can hardly be enjoyed except in peace. Nature prompts nations to mutual amity; and, if their governments take upon themselves to interrupt it, and engage them in hostility, they are equally inimical to their own people, and to those they war against. If their subjects are weak enough to second the ruinous vanity or ambition of their rulers in this propensity, I know not now to distinguish such egregious folly and absurdity, from that of the brutes that are trained to fight and tear each other to pieces, for the mere amusement of their savage masters.
But human intelligence will not stand still; the same impulse that has hitherto borne it onwards, will continue to advance it yet further.48 The very circumstance of the vast increase of expense attending national warfare has made it impossible for governments henceforth to engage in it, without the public assent, express or implied; and that assent will be obtained with the more difficulty, in proportion as the public shall become more generally acquainted with their real interest. The national military establishment will be reduced to what is barely sufficient to repel external attack; for which purpose little more is necessary, than a small body of such kinds of troops as can not be had without long training and exercise; as of cavalry and artillery. For the rest, nations will rely on their militia, and on the excellence of their internal polity: for it is next to impossible to conquer a people unanimous in their attachment to their national institutions; and their attachment will always be proportionate to the loss they will incur by a change of domination.49
Of the Charges of Public Instruction.
Two questions have been raised in political economy; 1. Whether the public be interested in the cultivation of science in all its branches? 2. Whether it be necessary, that the public should be at the expense of teaching those branches, it has an interest in cultivating?
Whatever be the position of man in society, he is in constant dependence upon the three kingdoms of nature. His food, his clothing, his medicines, every object either of business or of pleasure, is subject to fixed laws; and the better those laws are understood, the more benefit will accrue to society. Every individual, from the common mechanic, that works in wood or clay, to the prime minister that regulates with the dash of his pen the agriculture, the breeding of cattle, the mining, or the commerce of a nation, will perform his business the better, the better he understands the nature of things, and the more his understanding is enlightened.
For this reason, every advance of science is followed by an increase of social happiness. A new application of the lever, or of the power of wind or water, or even a method of reducing the friction of bodies, will, perhaps, have an influence on twenty different arts. An uniformity of weights and measures, arranged upon mathematical principles, would be a benefit to the whole commercial world, if it were wise enough to adopt such an expedient. An important discovery in astronomy or geology may possibly afford the means of ascertaining the longitude at sea with precision, which would be an immense advantage to navigation all over the world. The naturalisation in Europe of a new botanical genus or species might possibly influence the comfort of many millions of individuals.50
Among the numerous classes of science, theoretical and practical, which it is the interest of the public to advance and promote, there are fortunately many, that individuals have a personal interest in pursuing, and which the public, therefore, is not called upon to pay the expense of teaching. Every adventurer in any branch of industry is urged most strongly by self-interest to learn his business and whatever concerns it. The journeyman gains in his apprenticeship, besides manual dexterity, a variety of notions and ideas only to be learnt in the work-shop, and which can be no otherwise recompensed, than by the wages he will receive.
But it is not every degree or class of knowledge, that yields a benefit to the individual, equivalent to that accruing to the public. In treating above51 of the profits of the man of science, I have shown the reason, why his talents are not adequately remunerated; yet theoretical is quite as useful to society as practical knowledge; for how could science ever be applied to the practical utility of mankind, unless it were discovered and preserved by the theorist? It would rapidly degenerate into mere mechanical habit, which must soon decline; and the downfall of the arts would pave the way for the return of ignorance and barbarism.
In every country that can at all appreciate the benefits to be derived from the enlargement of human faculties, it has been deemed by no means a piece of extravagance, to support academies and learned institutions, and a limited number of very superior schools, intended not as mere repositories of science, and of the most approved mode of instruction, but as a means of its still further extension. But it requires some skill in the management, to prevent such establishments from operating as an impediment, instead of a furtherance, to the progress of knowledge, and as an obstruction rather than as an avenue to the improvement of education. Long before the revolution, it had become notorious, that most of our French universities had been thus perverted from the intention of their founders. All the principal discoveries were made elsewhere; and most of them had to encounter the weight of their influence over the rising generation and credit with men in power.52 53
From this example, we may see how dangerous it is, to entrust them with any discretionary control. If a candidate presents himself for examination, he must not be referred to teachers, who are at the same time judges and interested parties, sure to think well of their own scholars, and ill of those of every body else. The merit of the candidate should alone decide, and not the place where he happens to have studied, nor the length of his probation; for to oblige a student in any science, medicine for instance, to learn it at a particular place, is, possibly, to prevent his learning it better elsewhere; and, to prescribe any fixed routine of study, is, possibly, to prevent his fixing a shorter road. Moreover, in deciding upon comparative merit, there is much unfairness to be apprehended from the esprit de corps of such communities.
Encouragement may, with perfect safety, be held out to a mode of instruction of no small efficacy; I mean, the composition of good elementary54 works. The reputation and profit of a good book in this class do not indemnify the labour, science, and skill, requisite to its composition.55 A man must be a fool to serve the public in this line where the natural profit is so little proportioned to the benefit derived to the public. The want of good elementary books will never be thoroughly supplied, until the public shall hold out temptations, sufficiently ample to engage first-rate talents in their composition. It does not answer to employ particular individuals for the express purpose; for the man of most talents will not always succeed the best: nor to offer specific premiums; for they are often bestowed on very imperfect productions, and the encouragement ceases the moment the premium is awarded. But merit in this kind should be paid proportionately to its degree, and always liberally. A good work will thus be sure to be superseded by a better, till perfection is at last attained in each class. And I must observe, by the way, that there is no great expense incurred by liberally rewarding excellence; for it must always be extremely rare; and what is a great sum to an individual, is a small matter to the pockets of a nation.
These are the kinds of instruction most calculated to promote national wealth, and most likely to retrograde, if not in some measure supported by the public. There are others, which are essential to the softening of national manners, and stand yet more in need of that support.
When the useful arts have arrived at a high degree of perfection, and labour has been very generally and minutely subdivided, the occupation of the lowest classes of labourers is reduced to one or two operations, for the most part simple in themselves, and continually repeated: to these their whole thought and attention are directed; and from them they are seldom diverted by any novel or unforeseen occurrence: their intellectual faculties, being rarely or never called into play, must of course be degraded and bratified, and themselves rendered incapable of uttering two words of common sense out of their peculiar line of business, and utterly devoid of any generous ideas or elevated notions. Elevation of mind is generated by enlarged views of men and things, and can never exist in a being incapable of conceiving the general bearings and connexions of objects. A plodding mechanic can conceive no connexion between the inviolability of property and public prosperity, or how he can be more interested in that prosperity, than his more wealthy neighbour; but is apt to consider all these important benefits as so many encroachments on his rights and happiness. A certain degree of education, of reading, of reflection while at work, and of intercourse with persons of his own condition, will open his mind to these conceptions, as well as introduce a little more delicacy of feeling into his conduct, as a father, a husband, a brother, or a citizen.
But, in the vast machinery of national production, the mere manual labourer is so placed, as to earn little or nothing more than a bare subsistence. The most he can do is, to rear his young family, and bring them up to some occupation: he cannot be expected to give them that education, which we have supposed the well-being of society to require. If the community wish to have the benefit of more knowledge and intelligence in the labouring classes, it must dispense it at the public charge.
This object may be obtained by the establishment of primary schools, of reading, writing, and arithmetic. These are the groundwork of all knowledge, and are quite sufficient for the civilization of the lower classes. In fact, one can not call a nation civilized, nor consequently possessed of the benefits of civilization, until the people at large be instructed in these three particulars: till then it will be but partially reclaimed from barbarism. With the help of these advantages alone, it may safely be affirmed, that no transcendent genius or superior mind will long remain in obscurity, or be prevented from displaying itself to the infinite benefit of the community. The faculty of reading alone, will, for a few dollars, put a man in possession of all that eminent men have said or done, in the line to which the bent of genius impels. Nor should the female part of the creation be shut out from this elementary education; for the public is equally interested in their civilization; and they are indeed the first, and often the only teachers of the rising generation.
It would be the more unpardonable in governments to neglect the business of education, and abandon to their present ignorance the great majority of the population in those nations of Europe, that pretend to the character of refinement and civilization, now that the improved methods of mutual instruction, that have been tried with such complete success, afford a ready and most economical means of universally diffusing knowledge amongst the inferior classes.56
Thus, none but elementary and abstract science,—the highest and the lowest branches of knowledge, are so much less favoured in the natural course of things, and so little stimulated by the competition of demand, as to require the aid of that authority, which is created purposely to watch over the public interests. Not that individuals have no interest in the support and promotion of these, as well as of the other, branches of knowledge; but they have not so direct an interest,—the loss occasioned by their disappearance is neither so immediate nor so perceptible; a flourishing empire might retrograde, until it reached the confines of barbarism, before individuals had observed the operating cause of its decline.
I would not be understood to find fault with public establishments for purposes of education, in other branches than those I have been describing. I am only endeavouring to show, in what branches a nation may wisely, and with due regard to its own interest, defray the charge out of the public purse. Every diffusion of such knowledge, as is founded upon fact and experience, and does not proceed upon dogmatical opinions and assertions, every kind of instruction, that tends to improve the taste and understanding, is a positive good; and, consequently, an institution calculated to diffuse it must be beneficial. But care must be taken, that encouragement of one branch shall not operate to discourage another. This is the general mischief of premiums awarded by the public; a private teacher or institution will not be adequately paid, where the same kind of instruction is to be had for nothing, though, perhaps, from inferior teachers. There is, therefore, some danger, that talent may be superseded by mediocrity; and a check be given to private exertions, from which the resources of the state might expect incalculable benefit.
The only important science, which seems to me not susceptible of being taught at the public charge, is that of moral philosophy, which may be considered as either experimental or doctrinal. The former consists in the knowledge of moral qualities, and of the chain of connexion between events dependent upon human will; and forms indeed a part of the study of man, which is best pursued by social converse and intercourse. The latter is a series of maxims and precepts, possessing very little influence upon human conduct, which is best guided in the relations of public and of private life, by the operation of good laws, of good education, and of good example.57
The sole encouragement to virtue and good conduct, that can be relied on, is, the interest that every body has in discovering and employing no persons but those of good character. Men the most independent in their circumstances want something more to make them happy; that is to say, the general esteem and good opinion of their fellow-creatures; and these can only be acquired by putting on the appearance at least of estimable qualities, which it is much easier to acquire than to simulate. The influence of the sovereign or ruling body, upon the manners of the nation, is very extensive, because it employs a vast number of people; but it operates less beneficially than that of individuals, because it is less interested in employing none but persons of integrity. If to its lukewarmness in this particular be added, the example of immorality and contempt for honesty and economy too frequently held out to people by their rulers, the corruption of national morals will be wonderfully accelerated.58 But a nation may be rescued from moral degradation by the re-action of opposite causes. Colonies are, for the most part, composed of by no means the most estimable classes of the mother-country: in a very short time, however, when the hopes of return are wholly abandoned, and the settlers have made up their minds to pass the rest of their lives in their new abode, they gradually feel the necessity of conciliating the esteem of their fellow-citizens, and the morals of the colony improve rapidly. By morals, I mean the general course of human conduct and behavior.
These are the causes, that have a positive influence upon national morality. To these must be added, the effect of education in general, in opening the eyes of mankind to their real interests, and softening the temper and disposition.
Religious instruction ought, strictly speaking, to be defrayed by the respective religious communions and societies, each of which regards the opinions of the rest as heretical, and naturally revolts at the injustice of contributing to the propagation of what it deems erroneous, if not criminal.
Of the Charges of Public Benevolent Institutions.
It has been much debated, whether individual distress has any title to public relief. I should say none, except inasmuch as it is an unavoidable consequence of existing social institutions. If infirmity and want be the effect of the social system, they have a title to public relief: provided always, that it be shown, that the same system affords no means of prevention or cure. But it would be foreign to the matter to discuss the question of right in this place. All we need do is, to consider benevolent institutions with regard to their nature and consequences.
When a community establishes at the public charge any institution for benevolent purposes, it forms a kind of saving-bank, to which every member contributes a portion of his revenue, to entitle him to claim a benefit, in the event of accident or misfortune. The wealthy are generally impressed with an idea, that they shall never stand in need of public charitable relief; but a little less confidence would become them better. No man can reckon in his own case upon the continuance of good fortune, with as much certainty as upon the permanence of wants and infirmities; the former may desert him; but the latter are inseparable companions. It is enough to know, that good fortune is not inexhaustible, to infuse an apprehension that it may some day or other be exhausted: one has but to look round, and this apprehension will be confirmed by the experience of numbers, whose misfortunes were to themselves quite unexpected.
Hospitals for the sick, almshouses and asylums for old age and infancy, inasmuch as they partially relieve the poorer classes from the charge of maintaining those who are naturally dependent on them, and thereby to allow population to advance somewhat more rapidly, have a natural tendency a little to depress the wages of labour. That depression would be greater still, if such establishments should be so multiplied, as to take in all the sick, aged, and infants of those classes, who would then have none but themselves to provide for out of their wages. If they were entirely done away, there would be some rise of wages, although not sufficient to maintain so large a labouring population, as may be kept up with their help; for the demand for their labour would be somewhat reduced by the advance of its price.
From these two extreme suppositions, we may judge of the effect of those efforts to relieve indigence, which all nations have made in some degree or other; and see the reason, why the distress and relief go on increasing together, although not exactly in the same ratio.
Most nations preserve a middle course between the two extremes, affording public relief to a part only of those, who are helpless from age, infancy, or casual sickness. Of the rest they endeavour to rid themselves in one of two ways; either by requiring certain qualifications in the applicants, whether of age, of specific disease, or, perhaps, of mere interest and favouritism; or by limiting narrowly the extent of the relief, giving it upon hard terms to the applicants, or attaching some degree of shame to the acceptance.59
It is a distressing reflection, that there are no other methods of confining the number of applicants for relief within the means available to the community, except the offer of hard conditions, or the want of a patron. It were to be desired, that asylums of the more comfortable class, instead of favouritism, should be open to unmerited misfortune only; and that, to prevent improper nominations, the pretensions of the candidate should be ascertained by the inquest of a jury. The rest can probably be protected from too great an influx of indigence, by no other means consistent with humanity, except the observance of severe, though impartial, discipline, sufficient to invest them with some degree of terror.
This evil does not apply to the asylums devoted to invalid soldiers and sailors. The qualification is so plain and intelligible, that the doors ought to be shut against none who are possessed of it; and the comforts of the institution can never increase the number of applicants. Their being nursed in the public asylums with the same domestic care and comfort, as are to be found in the homes of persons in the same class of life, and indulged in repose, and some even of the whims of old age, will undoubtedly somewhat enhance the charge, that is to say, so far as it might prolong lives, that otherwise might fall a sacrifice to wretchedness; but this is the utmost increase of charge; and it is one, that neither patriotism nor humanity will grudge.60
The houses of industry, that are multiplying so rapidly in America, Holland, Germany, and France, are noble and excellent institutions of public benevolence. They are designed to provide all persons of sound health with work according to their respective capacities; some of them are open to any workman out of employ, that chooses to apply; others are a kind of houses of correction, where vagrants, beggars, and offenders, are kept to work for fixed periods. Convicts have sometimes been set to hard labour in their respective vocations, during their confinement; whereby the public has been wholly or partially relieved from the charge of keeping up gaols, and a method contrived for reforming the morals of the criminals, and rendering them a blessing, instead of a curse, to society.
Indeed, such establishments can hardly be reckoned among the items of public charge; for, the moment their production equals their consumption, they are no longer an incumbrance to any body. They are of immense benefit in a dense population, where, amidst the vast variety of occupations, some must unavoidably be in a state of temporary inaction. The perpetual shiftings of commerce, the introduction of new processes, the withdrawing of capital from a productive concern, accidental fire, or other calamity, may throw numbers out of employment; and the most deserving individual may, without any fault of his own, be reduced to the extreme of want. In these institutions, he is sure of earning at least a subsistence, if not in his own line, in one of a similar description.
The grand obstacle to such establishments is, the great outlay of capital they require. They are adventures of industry, and as such must be provided with a variety of tools, implements, and machines, besides raw material of different kinds to work upon. Before they can be said to maintain themselves, they must earn enough to pay the interest of the capital embarked, as well as their current expenses.
The favour shown them by the public authority, in the gratuitous supply of the capital and buildings, and in many other particulars, would make them interfere with private undertakings, were they not subject, on the other hand, to some peculiar disadvantages. They are obliged to confine their operations to such kinds of work, as sort with the feebleness and general inferiority in skill of the inmates, and can not direct them to such as may be most in demand. Moreover, it is in most of them a matter of regulation and police, to lay by always the third or fourth part of the labourer's wages or earnings, as a capital to set him up, on his quitting the establishment: this is an excellent precaution, but prevents their working at such cheap rates, as to drive all competition out of the market.
Although the honour, attached to the direction and management of institutions of public benevolence, will generally attract the gratuitous service of the affluent and respectable part of the community, yet, when the duties become numerous and laborious, they are commonly discharged by gratuitous administrators with the most unfeeling negligence. It was probably by no means wise, to subject all the hospitals of Paris to a general superintendence. At London, each hospital is separately administered; and the whole are managed with more economy and attention in consequence. A laudable emulation is thereby excited amongst the managers of rival establishments; which affords an additional proof of the practicability and benefit of competition in the business of public administration.
Of the Charges of Public Edifices and Works.
I shall not here attempt to enumerate the great variety of works requisite for the use of the public; but merely lay down some general rules, for calculating their cost to the nation. It is often impossible to estimate with any tolerable accuracy the public benefit derived from them. How is one to calculate the utility, that is to say, the pleasure which the inhabitants of a city derive from a public terrace or promenade? It is a positive benefit to have, within an easy distance of the close and crowded streets of a populous town, some place where the population can breathe a pure and wholesome atmosphere, and take health and exercise, under the shade of a grove, or with a verdant prospect before the eye; and where schoolboys can spend their hours of recreation; yet this advantage it would be impossible to set a precise value upon.
The amount of its cost, however, may be ascertained or estimated. The cost of every public work or construction consists:—
Sometimes, one or more of these items may be curtailed. When the soil, whereon a public work is erected, will fetch nothing from either a purchaser, or a tenant, the public will be charged with nothing in the nature of rent; for no rent could be got if the spot had never been built on. A bridge, for instance, costs nothing but the interest of the capital expended in its construction, and the annual charge of keeping it in repair. If it be suffered to fall into decay, the public consumes, annually, the agency of the capital vested, reckoned in the shape of interest on the sum expended, and, gradually, the capital itself, into the bargain; for, as soon as the bridge ceases to be passable, not only is the agency or rent of the capital lost, but the capital is gone likewise.
Supposing one of the dikes in Holland to have cost in the outset, 20,000 dollars; the annual charge on the score of interest, at 5 per cent., will be 1000 dollars; and, if it cost 600 dollars more in the keeping it up, the total annual charge will be 1600 dollars.
The same mode of reckoning may be applied to roads and canals. If a road be broader than necessary, there is annually a loss of the rent of all the superfluous land it occupies, and, besides, of all the additional charge of repair. Many of the roads out of Paris are 180 feet wide, including the unpaved part on each side; whereas, a breadth of 60 feet would be full wide for all useful purposes, and would be quite magnificent enough, even for the approaches to a great metropolis. The surplus is only so much useless splendour; indeed, I hardly know how to call it so; for the narrow pavement in the centre of a broad road, the two sides of which are impassable the greater part of the year, is an equal imputation upon the liberality, and upon the good sense and taste of the nation. It gives a disagreeable sensation, to see so much loss of space, more particularly if it be badly kept. It appears like a wish to have magnificent roads, without having the means of keeping them uniform and in good condition; like the palaces of the Italian nobles, that never feel the effects of the broom.
Be it as it may, on the sides of the road I am speaking of, there is a space of 120 feet, that might be restored to cultivation; that is to say, 48 acres to the ordinary league. Add together the rent of the surplus land, the interest of the sum expended in the first cost and preparation, and the annual charge of keeping up the unnecessary space, which is something, badly as it is kept up; you will then ascertain the sum France pays annually for the very questionable honour of having roads too wide, by more than the half, leading to streets too narrow, by three-fourths.61
Roads and canals are costly public works, even in countries where they are under judicious and economical management. Yet, probably, in most cases, the benefits they afford to the community far exceed the charges. Of this the reader may be convinced, on reference to what has been said above of the value generated by the mere commercial operation of transfer from one spot to another,62 and of the general rule, that every saving in the charges of production is so much gain to the consumer.63 Were we to calculate what would be the charge of carriage upon all the articles and commodities that now pass along any road in the course of a year, if the road did not exist, and compare it with the utmost charge under present circumstances, the whole difference that would appear, will be so much gain to the consumers of all those articles, and so much positive and clear net profit to the community.64
Canals are still more beneficial; for in them the saving of carriage is still more considerable.65
Public works of no utility, such as palaces, triumphal arches, monumental columns, and the like, are items of national luxury. They are equally indefensible, with instances of private prodigality. The unsatisfactory gratification afforded by them to the vanity of the prince or the people, by no means balances the cost, and often the misery they have occasioned.
BOOK III, CHAPTER VII
OF THE ACTUAL CONTRIBUTORS TO PUBLIC CONSUMPTION.
A portion of the objects of public consumption have, in some very rare instances, been provided by a private individual. We see occasional acts of private munificence, in the erection of a hospital, the laying out of a road, or of public gardens upon the land, and at the cost, of an individual. In ancient times, examples of this kind were more frequent, though much less meritorious. The private opulence of the ancients was commonly the fruit of domestic, or provincial, plunder and peculation, or perhaps the spoil of a hostile nation, purchased with the blood of fellow-citizens. Among the moderns, though such excesses do sometimes occur, individual wealth is, in the great majority of cases, the fruit of personal industry and economy. In England, where there are so many institutions founded and supported by private funds, most of the fortunes of the founders and supporters have been acquired in industrious occupations. It requires a greater exertion of generosity to sacrifice wealth, acquired by a long course of toil and self-denial, than to give away what has been obtained by a stroke of good fortune, or even by an act of lucky temerity.
Among the Romans, a further portion of the public consumption was supplied directly by the vanquished nations who were subjected to a tribute which the victors consumed.
In most modern states, there is some territorial property vested, either in the nation at large, or in the subordinate communities, cities, towns, and villages, which is leased out, or occupied directly by the public. In France, most of the public lands of tillage and pasturage, with their appurtenances, are let out on lease; the government reserving only the national forests under the direct administration of its agents. The produce of the whole forms a considerable item in the catalogue of public resources.
But these resources consist, for the most part, of the produce of taxes levied upon the subjects or citizens. These taxes are sometimes national, that is, levied upon the whole nation, and paid into the general treasury of the state, whence the public national expenditure is defrayed; and sometimes local, or provincial, that is, levied upon the inhabitants of a certain canton or province only, and paid into the local treasury, whence are defrayed the local expenses.
It is a principle of equity, that consumption should be charged to those who derive gratification from it; consequently, those countries must be pronounced to be the best governed, in respect of taxation, where each class of inhabitants contributes in taxation proportionately to the benefit derived by it from the expenditure.
Every individual and class in the community is benefitted by the central administration, or, in other words, the general government so likewise of the security afforded by the national military establishment; for the provinces can hardly be secure from external attack, if the enemy have possession of the metropolis, and can thence overawe and control them; imposing laws upon districts where his force has not penetrated, and disposing of the lives and property even of such as have not seen the face of an enemy. For the same reason the charge of fortresses, arsenals, and diplomatic agents is properly thrown upon the whole community.
It would seem, that the administration of justice should be classed among the general charges, although the security and advantage it affords have more of a local character. When the magistracy of Bordeaux arrests and tries an offender, the public internal security of France is unquestionably promoted. The charge of gaols and courthouses necessarily follows that of the magistracy. Smith has expressed an opinion, that civil justice should be defrayed by the litigating parties; which would be more practicable than at present, were the judges in the appointment of the parties in each particular case, and no otherwise in the nomination of the public authority, than inasmuch as the choice might be limited to specified persons of approved knowledge and integrity. They would then be arbitrators, and a sort of equitable jurors, and might be paid proportionately to the matter in dispute without regard to the length of the suit; and would thus have an obvious interest in simplifying the process, and sparing their own time and trouble, as well as in attracting business by the general equity of their decisions.66
But local administration and local institutions of utility, pleasure, instruction, or beneficence, appear to yield a benefit exclusively to the place or district where they are situated. Wherefore, it should seem, that their expenses ought to fall, as in most countries they do, upon the local population. Not but that the nation at large derives some benefit from good provincial administration, or institutions. A stranger has access to the public places, libraries, schools, walks, and hospitals of the district; but the principal benefit unquestionably results to the immediate neighbourhood.
It is good economy to leave the administration of the local receipts and disbursements to the local authorities; particularly where they are appointed by those, whose funds they administer. There is much less waste, when the money is spent under the eye of those who contribute it, and who are to reap the benefit; besides, the expense is better proportioned to the advantage expected. When one passes through a city or town badly paved and ill-conditioned, or sees a canal or harbour in a state of dilapidation, one may conclude, in nine cases out of ten, that the authorities, who are to administer the funds appropriated to those objects, do not reside on the spot.
In this particular, small states have an advantage over more extensive ones. They have more enjoyment from a less expenditure upon objects of public utility or amusement; because they are at hand to see that the funds, destined to the object, are faithfully applied.
BOOK III, CHAPTER VIII
Of the Effect of all kinds of Taxation in general.
Taxation is the transfer of a portion of the national products from the hands of individuals to those of the government, for the purpose of meeting the public consumption or expenditure. Whatever be the denomination it bears, whether tax, contribution, duty, excise, custom, aid, subsidy,67 grant, or free gift, it is virtually a burthen imposed upon individuals, either in a separate or corporate character, by the ruling power for the time being, for the purpose of supplying the consumption it may think proper to make at their expense; in short, an impost, in the literal sense.
It would be foreign to the plan of this work, to inquire in whom the right of taxation is or ought to be vested. In the science of political economy, taxation must be considered as matter of fact, and not of right; and nothing further is to be regarded, than its nature, the source whence it derives the values it absorbs, and its effect upon national and individual interests. The province of this science extends no further.
The object of taxation is, not the actual commodity, but the value of the commodity, given by the tax-payer to the tax-gatherer. Its being paid in silver, in goods, or in personal service, is a mere accidental circumstance, which may be more or less advantageous to the subject or to the sovereign. The essential point is, the value of the silver, the goods, or the service. The moment that value is parted with by the tax-payer, it is positively lost to him; the moment it is consumed by the government or its agents, it is lost to all the world, and never reverts to, or re-exists in society, This, I apprehend, has already been demonstrated, when the general effect of public consumption was under consideration. It was there shown, that however the money levied by taxation may be refunded to the nation, its value is never refunded; because it is never returned gratuitously, or refunded by the public functionaries, without receiving an equivalent in the way of barter or exchange.
The same causes, that we have found to make unproductive consumption nowise favourable to reproduction, prevent taxation from at all promoting it. Taxation deprives the producer of a product, which he would otherwise have the option of deriving a personal gratification from, if consumed unproductively, or of turning to profit, if he preferred to devote it to an useful employment. One product is a means of raising another; and, therefore, the subtraction of a product must needs diminish, instead of augmenting, productive power.
It may be urged, that the pressure of taxation impels the productive classes to redouble their exertions, and thus tends to enlarge the national production. I answer, that, in the first place, mere exertion can not alone produce, there must be capital for it to work upon, and capital is but an accumulation of the very products, that taxation takes from the subject: that, in the second place, it is evident, that the values, which industry creates expressly to satisfy the demands of taxation, are no increase of wealth; for they are seized on and devoured by taxation. It is a glaring absurdity to pretend, that taxation contributes to national wealth, by engrossing part of the national produce, and enriches the nation by consuming part of its wealth. Indeed, it would be trifling with my reader's time, to notice such a fallacy, did not most governments act upon this principle, and had not well-intentioned and scientific writers endeavoured to support and establish it.68
If, from the circumstance, that the nations most grievously taxed are those most abounding in wealth, as Great Britain, for example, we are desired to infer, that their superior wealth arises from their heavier taxation, it would be a manifest inversion of cause and effect. A man is not rich, because he pays largely; but he is able to pay largely, because he is rich. It would be not a little ridiculous, if a man should think to enrich himself by spending largely, because he sees a rich neighbour doing so. It must be clear, that the rich man spends, because he is rich; but never can enrich himself by the act of spending.
Cause and effect are easily distinguished, when they occur in succession; but are often confounded, when the operation is continuous and simultaneous.
Hence, it is manifest, that, although taxation may be, and often is, productive of good, when the sums it absorbs are properly applied, yet, the act of levying is always attended with mischief in the outset. And this mischief good princes and governments have always endeavoured to render as inconsiderable to their subjects as possible, by the practice of economy, and by levying, not to the full extent of the people's ability, but to such extent only as is absolutely unavoidable. That rigid economy is the rarest of princely virtues, is owing to the circumstance of the throne being constantly beset with individuals, who are interested in the absence of it; and who are always endeavouring, by the most specious reasoning, to impress the conviction, that magnificence is conducive to public prosperity, and that profuse public expenditune is beneficial to the state. It is the object of this third book to expose the absurdities of such representations.
Others there are, who are not impudent enough to pretend, that public profusion is a public benefit; yet undertake to show by arithmetical deduction, that the people are scarcely burthened at all, and are equal to a much higher scale of taxation. As Sully tells us in his Memoirs, "The ear of the prince is assailed by a set of flattering advisers, who think to make their court to him by perpetually suggesting new ways of raising money; discharged functionaries, for the most part, whose experience of the sweets of office has left no other impression, than the tincture of the baneful art of fiscal extortion; and who seek to recommend themselves to power and favour, by commending it to the lips of royalty."69
Others suggest financial projects, and ways and means for filling the coffers of the prince, as they assert, without fleecing the subject. But no plan of finance can give to the government, without taking either from the people, or from the government itself in some other way; unless it be a downright adventure of industry. Something can not be produced out of nothing by a mere touch of the wand. However an operation may be cloaked in mystery, however often we may twist and turn and transform values, there are but two ways of obtaining them, namely, creating oneself, or taking from others. The best scheme of finance is, to spend as little as possible; and the best tax is always the lightest.
Admitting these premises, that taxation is the taking from individuals a part of their property70 for public purposes; that the value levied by taxation never reverts to the members of the community, after it has once been taken from them; and that taxation is not itself a means of reproduction; it is impossible to deny the conclusion, that the best taxes, or, rather those that are least bad, are
These positions are almost self-evident; yet I shall proceed to illustrate them successively, with some few observations.
1. Of such as are most moderate in their ratio.
Since taxation does, in point of fact, deprive the tax-payer of a product, which is to him, either a means of personal gratification, or a means of reproduction, the lighter the tax is, the less must be the privation.
Taxation, pushed to the extreme, has the lamentable effect of impoverishing the individual, without enriching the state. We may readily conceive how this can happen, if we recall to our attention the former position; viz. that each tax-payer's consumption, whether productive or not, is always limited to the amount of his revenue. No part of his revenue, therefore, can be taken from him without necessarily curtailing his consumption in the same ratio. This must needs reduce the demand for all those objects he can no longer consume, and particularly those affected by taxation. The diminution of demand must be followed by diminution of the supply of production; and, consequently, of the articles liable to taxation. Thus, the tax-payer is abridged of his enjoyments, the producer of his profits, and the public exchequer of its receipts.71
This is the reason why a tax is not productive to the public exchequer, in proportion to its ratio; and why it has become a sort of apophthegm, that two and two do not make four in the arithmetic of finance. Excessive taxation is a kind of suicide, whether laid upon objects of necessity, or upon those of luxury; but there is this distinction, that, in the latter case, it extinguishes only a portion of the products on which it falls, together with the gratification they are calculated to afford; while, in the former, it extinguishes both production and consumption, and the tax-payer into the bargain.
Were it not almost self-evident, this principle might be illustrated, by abundant examples of the profit the state derives from a moderate scale of taxation, where it is sufficiently awake to its real interests.
When Turgot, in 1775, reduced to ½ the market-dues and duties of entry upon fresh sea-fish sold in Paris, their product was nowise diminished. The consumption of that article must, therefore, have doubled, the fishermen and dealers must have doubled their concerns and their profits; and, since population always increases with increasing production, the number of consumers must have been enlarged; and that of producers must have been enlarged likewise; for an increase of profits, that is to say of individual revenue, multiplies savings, and thus generates the multiplication of capital and of families; and that very increase of production will, beyond all doubt, augment the product of taxation in other branches; to say nothing of the popularity accruing to the government from the alleviation of the national burthens.
The government agents, who farm or administer the collection of the taxes, very often abuse their interest and authority, to construe all doubtful points of fiscal law in their own favour, and sometimes to create obscurity for the purpose of profiting by it. The effect is precisely the same, as if the scale of taxation were raised pro tanto.72 Turgot adopted a contrary course, and made it a rule to lean always to the side of the tax-payer. The public contractors made a great outcry at this innovation, declaring that it was impossible for them to fulfil their engagements, and offering to collect on the government account and risk. The event, however, falsified their predictions by an actual increase of the receipts. The greater lenity in the collection proved so advantageous to production, and the consumption, consequent upon it, that the profits, which had before not exceeded 10,550,000 liv., rose to 60,000,000 liv.; an advance which could hardly be credited, if it were not attested by unquestionable evidence.73
We are told by Humboldt,74 to whom we are indebted for a variety of valuable information, that in thirteen years from 1778, during which time Spain adopted a somewhat more liberal system of government in regard to her American dependencies, the increase of the revenue in Mexico alone amounted to no less a sum than 100 millions of dollars; and that she drew from that country, during the same period, an addition in the single article of silver, to the amount of 14,500,000 dollars. We may naturally suppose, that, in those years of prosperity, there was a corresponding, and rather greater increase of individual profits; for that is the source, whence all public revenue is derived.
A similar course of conduct has invariably been followed by a similar effect;75 and it is a great satisfaction to a writer of liberal principles to be able to prove by experience, that moderation is the best policy.76
Upon the same principles, it will be easy to demonstrate in the next place, that the taxes least mischievous are:
2. Such as are least attended with those vexatious circumstances, that harass the tax-payer, without bringing any thing into the public exchequer.
It has been held by many, that the costs of collection are no very great evil, inasmuch as they are refunded to the community in some other shape. On this head, I must refer my readers to what has been already observed.77 These costs are no more refunded, than the net proceeds of the taxes themselves; because both the one and the other consists in reality, not of the money, wherein the taxes are paid, but of the value, wherewith the tax-payer produces that money, and the value which the government again procures with it; which latter is destroyed and consumed outright.
The necessities of princes have operated far more effectually than their regard to the public good, to introduce the practice of better order and economy in the financial departments of most European states during the two last centuries, than in former times. The people are generally made to bear as much as they can well stand under; so that every saving in the charge of collection has gone to swell the receipts of the exchequer.
Sully tells us in his Memoirs,78 that, for about 6 millions of dollars brought into the royal treasury, in 1598, by means of taxation, individuals were out of pocket about 30 millions of dollars, and assures us, that he had with great pains ascertained the fact, however incredible it might appear. Under the administration of Necker, upon a revenue of about 110 millions of dollars, the charges of collection amounted to no more than 10 millions of dollars; yet, under his management, there were 250,000 persons employed in the collection: most of them, however, had other collateral occupations. The charge was, therefore, about 10 4/5 per cent.; yet this is much higher than the rate at which the business is done in England.79
Besides the charge of collection, there are other circumstances, that are burthensome to the people without being productive of gain to the public revenue. Law-suits, imprisonment and other preventive measures, entail additional expense, without procuring the smallest increase of revenue. And this addition is sure to fall on the most necessitous class of tax-payers; for the other classes pay without litigation or constraint. Such odious means of enforcing the payment of taxes are precisely the same as demanding of a man 12 dollars because he has not wherewithal to pay 10 dollars. Rigour is never necessary to enforce taxation where it presses lightly on the resources of individuals; but when a state is so unfortunate, as to be obliged to impose heavy burthens, of two evils, the process of levy by distress is preferable to that of personal constraint. For at any rate, by seizing and selling the tax-payer's goods, and thereby raising the arrears of his taxes, he is compelled to pay no more than is due; and the whole of what he does pay goes into the public purse.
On this account it is, that works executed by the public requisition of labour, as the roads were in France under the old régime, are always a mischievous kind of taxation. The time lost by the labourers put in requisition in coming three or four leagues, perhaps, to their work, and that which is always wasted by people who get no pay, and work against their inclination, is all a dead loss to the public, with no return of revenue. Even supposing the work to be well executed, there is often more loss incurred by the interruption of the regular agricultural pursuits, than gain made from the compulsory employment that has been substituted. Turgot called upon the surveyors and engineers of the respective provinces for an estimate of the average expense, one year with another, of keeping up old roads, and constructing the usual number of new ones, directing them to make their calculations on the most liberal scale. The estimate of the annual expense, made in compliance with his orders, amounted to 2 millions of dollars for the whole kingdom: whereas, according to the calculations of Turgot, the old corvée system involved a sacrifice to the nation of 8 millions of dollars.80
Days of rest, enjoined either by law, or by custom and usage too powerful to be infringed upon, are another kind of taxation, productive of nothing to the public purse.
3. Such as press impartially on all classes.
Taxation being a burthen, must needs weigh lightest on each individual, when it bears upon all alike. When it presses inequitably upon one individual or branch of industry, it is an indirect, as well as a direct, incumbrance; for it prevents the particular branch or the individual from competing on even terms with the rest. An exemption, granted to one manufacture, has often been the ruin of several others. Favour to one is most commonly injustice to all others.
The partial assessment of taxation is no less prejudicial to the public revenue, than unjust to individual interests. Those who are too lightly taxed, are not likely to cry out for an increase; and those who are too heavily taxed, are seldom regular in their payments. The public revenue suffers in both ways.
It has been questioned whether it be just to tax that portion of revenues, which is spent on luxuries, more heavily than that spent on objects of necessity. It seems but reasonable to do so; for taxation is a sacrifice to the preservation of society and of social organization, which ought not to be purchased by the destruction of individuals. Yet, the privation of absolute necessaries implies the extinction of existence. It would be somewhat bold to maintain, that a parent is bound in justice to stint the food or clothing of his child, to furnish his contingent to the ostentatious splendour of a court, or the needless magnificence of public edifices. Where is the benefit of social institutions to an individual, whom they rob of an object of positive enjoyment or necessity in actual possession, and offer nothing in return, but the participation in a remote and contingent good, which any man in his senses would reject with disdain?
But how is the line to be drawn between necessaries and superfluities? In this discrimination, there is the greatest difficulty, for the terms, necessaries and superfluities, convey no determinate or absolute notion, but always have reference to the time, the place, the age, and the condition of the party; so that, were it laid down as a general rule, to tax none but superfluities, there would be no knowing where to begin and where to stop. All that we certainly know is, that the income of a person or a family may be so confined, as barely to suffice for existence; and may be augmented from that minimum upwards by imperceptible gradation, till it embrace every gratification of sense, of luxury, or of vanity; each successive gratification being one step further removed from the limits of strict necessity, till at last the extreme of frivolity and caprice is arrived at; so that, if it be desired to tax individual income, in such manner as to press lighter, in proportion as that income approaches to the confines of bare necessity, taxation must not only be equitably apportioned, but must press on revenue with progressive gravity.
In fact, supposing taxation to be exactly proportionate to individual income, a tax of ten per cent. for instance, a family possessed of 60,000 dollars per annum would pay 6000 dollars in taxes, leaving a clear residue of 54,000 dollars for the family expenditure. With such an expenditure, the family could not only live in abundance, but could still enjoy a vast number of gratifications by no means essential to happiness. Whereas another family, with an income of 60 dollars, reduced by taxation to 54 dollars per annum, would, with our present habits of life, and ways of thinking, be stinted in the bare necessaries of subsistence. Thus, a tax merely proportionate to individual income would be far from equitable; and this is probably what Smith meant, by declaring it reasonable, that the rich man should contribute to the public expenses, not merely in proportion to the amount of his revenue, but even somewhat more. For my part, I have no hesitation in going further, and saying, that taxation can not be equitable, unless its ratio is progressive.81
4. Such as are least injurious to reproduction.
Of the values, whereof taxation deprives individuals, a great part would, undoubtedly, if left at the disposal of the individuals themselves, have gone to the satisfaction of their wants and appetites; but some part would have been laid by, and have gone to the further accumulation of productive capital. Thus, all taxation may be said to injure reproduction, inasmuch as it prevents the accumulation of productive capital.
This effect is more direct and serious, whenever the tax-payer is obliged to withdraw a part of the capital already embarked, for the purpose of enabling him to pay the tax; which case, as Sismondi has shrewdly observed, resembles the exaction of a tithe upon grain at seed-time, instead of harvest-time. Of this kind is the tax on legacies and successions. An heir, succeeding to a property of 20,000 dollars, and called upon for a tax of 5 per cent. upon it, will pay it, not out of his ordinary income, burthened as it is already with the ordinary taxes, but out of the inheritance, which is thereby reduced to 19,000 dollars. Wherefore, if it happen to be a vested capital of 20,000 dollars and be reduced by the tax to 19,000 dollars, the national capital will be diminished to the amount of the 1000 dollars thus diverted into the public exchequer.
It is the same with all taxes upon the transfer of property. The owner of land worth 20,000 dollars, will get but 19,000 dollars for it, if the purchaser be saddled with a tax of 5 per cent. The seller will have a disposable capital of 19,000 dollars only, in lieu of land worth 20,000 dollars; and the national capital will sustain a loss of the difference. Should the purchaser be so bad an arithmetician, as to pay the full value of the land, without allowing for the tax, he will sacrifice a capital of 21,000 dollars in the purchase of value to the amount of but 20,000 dollars. In either case, the loss to the national capital will be the same; although in the latter, it will fall upon the purchaser instead of the seller.
Taxes, upon transfer, besides the mischief of pressing upon capital, are a clog to the circulation of property. But, has the public any interest in its free circulation? So long as the object is in existence, is it not as well placed in one hand as in another? Certainly not. The public has a perpetual interest in the utmost possible freedom of its circulation; because by that means it is most likely to get into the hands of those, who can make the most of it. Why does one man sell his land? but because he thinks he can lay out the value to more advantage in some channel of productive industry. And why does another buy it? but because he wishes to invest a capital, that is lying idle, or less productively vested; or because he thinks it capable of improvement. The transfer tends to augment the national income, because it tends to augment the income of the two contracting parties. If they be deterred by the expenses of the transfer, those expenses will have prevented this probable increase of the national income.
Such taxes, however, as encroach upon the productive capital of the community, and consequently abridge the demand for labour and the profits of industry within the community, possess, in a very high degree, one quality, which that distinguished political economist, Arthur Young, has pronounced to be an essential requisite in taxation, namely, the facility and cheapness of collection.82 Since taxation presents at best but a choice of evils, a nation, heavily burthened, will probably do well, in submitting to a moderate impost upon capital.
Taxes upon law-proceedings, and, generally, all that is paid to law-officers and agents, are taxes upon capital.83 For litigation is not proportionate to the income of the suitors, but to accident, to the complexity of family interests, and to the imperfections of the law itself.
Forfeitures are equally a tax on capital.
The influence of taxation upon production is not confined to the circumstance of diminishing one of its sources, that is to say, capital; it operates besides in the nature of a penalty, inflicted upon certain branches of production and consumption. Patents, licenses to follow any specified calling, and, generally, all taxes, that bear directly upon industry, are liable to this objection; but, when moderate in their ratio, industry will contrive to surmount such obstacles without much difficulty.
Nor is industry affected only by taxes bearing directly upon it; it is indirectly affected by such also, as bear upon the consumption of the articles it has to work upon.
The products consumed in reproduction are, for the most part, those of primary necessity; and taxes, that discourage such products, must be injurious to reproduction. This is more especially the case in respect to those raw materials of manufacture, which can only be consumed reproductively. An excessive duty upon cotton, checks the production of all articles, wherein that substance is worked up.84
Brazil is a country abounding in animal productions, that might be cured and exported, if they were allowed to be salted. Its fisheries are very productive, and cattle so abundant, that they are killed merely for the sake of the hide. Indeed, it is thence that our tanneries in Europe are in a great measure supplied. But the salt duties prevent the export of either fish or meat; and thus, for the sake of a revenue of about 200,000 dollars perhaps, incalculable mischief is done to the productive powers of the country, as well as to the public revenue, which they might be made to yield.
In like manner, as taxation operates in the nature of a penalty, to discourage reproductive consumption, it may be employed to check consumption of an unproductive kind; in which case it has the two-fold advantage, of subtracting no value from reproductive investment, and of rescuing values from unproductive consumption, to be employed in a manner more beneficial to the community. This is the advantage of all taxes upon luxuries.85
When sums, levied by taxation upon capital, instead of being simply expended by the government, are laid out upon productive objects; or, when individuals contrive to make good the deficiency out of their private savings, the positive mischief of taxation is then balanced by a counteracting benefit. The proceeds of taxation are reproductively vested, when laid out in improving the internal communications, constructing harbours, or other such works of utility. Governments sometimes employ a part of the revenue thus realised in adventures of industry. Colbert did so, when he made advances to the manufacturers of Lyons. The governments of Hamburgh, and of some other places in Germany, were in the habit of embarking their revenues in productive undertakings; and it is said, that the authorities of Berne were in the habit of so employing a part of its revenues every year: but such instances are of very rare occurrence.
5. Such as are rather favourable than otherwise to the national morality; that is to say, to the prevalence of habits, useful and beneficial to society.
Taxation influences the habits of a nation, in the same way as it operates upon its production and consumption, that is, by imposing a pecuniary penalty upon specified acts; and it is, moreover, possessed of the grand requisites to render punishment effectual; namely, moderation and difficulty of evasion.86 Without reference, therefore, to the purposes of finance and revenue, it is a powerful engine in the hands of government, for either corrupting or reforming the national morals, and may be directed to the promotion of idleness or industry, extravagance or economy.
The tax of five per cent. upon all lands devoted to productive husbandry, and the exemption of pleasure-grounds, which existed in France before the revolution, operated, of course, as a premium upon luxury, and a penalty upon agricultural enterprise.
The tax of one per cent. upon the redemption of ground-rents and rent-charges was virtually a penalty upon an act, equally advantageous to the parties and to the community at large; a fine upon the meritorious exertions of prudent land-owners to pay off their incumbrances.
The law of Napoleon, exacting from each scholar, educated in a private academy, a specified payment into the chests of the public universities, operated as a penalty upon that mode of education, which alone can soften national manners and fully develope the faculties of the human mind.87
When a government derives a profit from the licensing of lotteries and gambling-houses, what does it else but offer a premium to a vice most fatal to domestic happiness, and destructive of national prosperity? How disgraceful is it, to see a government thus acting as the pander of irregular desires, and imitating the fraudulent conduct it punishes in others, by holding out to want and avarice the bait of hollow and deceitful chance!88
On the contrary, taxes, that check and confine the excesses of vanity and vice, besides yielding a revenue to the state, operate as a means of prevention. Humboldt mentions a tax upon cock-fighting, which yields to the Mexican government 45,000 dollars per annum, and has the further advantage of checking that cruel and barbarous diversion.
Exorbitant or inequitable taxation promotes fraud, falsehood, and perjury. Well-meaning persons are presented with the distressing alternative, of violating truth, or sacrificing their interests in favour of less scrupulous fellow-citizens. They can not but feel involuntary disgust, at seeing acts, in themselves innocent, and sometimes even useful and meritorious, branded with the name, and subjected to all the consequences, of criminality.
These are the principal rules, by which present or future taxation must be weighed, with a view to the public prosperity. After these general remarks, which are applicable to taxation in all its branches, it may be useful to examine the various modes of assessment; in other words, the methods adopted for procuring money from the subject; as well as to inquire, upon what classes of the community the burthen principally falls.
Of the different Modes of Assessment, and the Classes they press upon respectively.
Taxation, as we have seen above, is a requisition by the government upon its subjects for a portion of their products, or of their value. It is the business of the political economist to explain the effects resulting from the nature of the products put in requisition, and from the mode of apportioning the burthen, as well as upon whom the burthen of the charge really falls, since it must inevitably fall upon some one or other. The application of the above principles in a few specific instances will show, how they may be applied in all others.
The public authority levies the values taken in the way of taxation, sometimes in the shape of money, sometimes in kind, according to its own wants, or the ability of the tax-payer. In whatever shape it is paid, the actual contribution of the tax-payer is always of the value of the article he gives. If the government, wanting or pretending to want corn, or leather, or woollens, makes a requisition of those articles upon the tax-payer, and obliges him to furnish them in kind, the tax paid amounts exactly to what the payer has expended in procuring those articles, or what he could have sold them for, if the government had not taken them from him. This is the only way of ascertaining the amount of the tax, whatever price or rate the government may set upon it in the plenitude of its power.
So, likewise, the charges of collection, in whatever shape they may appear, are always an aggravation of the assessment, whether they accrue to the profit of the state or not. If the tax-payer be obliged to lose his time, or transport his goods, for the purpose of paying the tax, the whole of the time lost, or expense of transport, is an aggravation of the tax.
Among the contributions, that a government exacts from its subjects, should likewise be comprised, all the expenses which its political conduct may bring upon the nation. Thus, in estimating the expenses of war, we must include the value of equipment and pocket-money, with which the military are supplied by themselves or their families; the value of the time lost by the militia; the sums paid for exemption and substitutes; the full charge of quarters for the troops; the pillage and destruction they may be guilty of; the presents and attentions lavished on them by friends or countrymen on their return; to all which must be added, the alms extorted from pity and compassion by the misery consequent upon such misrule. For, in fact, none of these values need have been taken from the members of the community under a better system of government. And, although none of them have gone into the treasury of the monarch, yet have they been paid by the people, and their amount is as completely lost, as if they had contributed to the happiness of the human species.
Hence, we may form some notion of the extent of the national sacrifices. But, from what source are they drawn?—Doubtless, either from the annual product of the national industry, land, and capital; that is to say, from the national revenue; or from the values previously saved and accumulated; that is to say, from the national capital.
When taxation is moderate, the subject can not only pay his taxes wholly out of his revenue, but will not be altogether disabled from besides saving some part of that revenue: and although some of the tax-payers may be obliged to trench upon their capital for the payment of their taxes, the loss to the general stock is amply reimbursed by the savings, which this happy state of affairs allows others to effect.
But it is far otherwise, when military despotism or usurped authority extorts excessive contributions. Great part of the taxes is then taken from the vested and accumulated capital; and, if the country be long subjected to its domination, the revenues of each successive year are progressively reduced, and the ruin and depopulation of the country, will recoil upon its rulers, unless their downfall be accelerated by their own folly and excesses.
Under the protecting influence of just and regular government, on the contrary, there is a progressive annual enlargement of the profits and revenues, on which taxation is to be levied; and that taxation, without any alteration of its ratio, gradually becomes more productive by the mere multiplication of taxable products.
Nor is the government more deeply interested in moderating the ratio of taxation, than its impartial assessment upon every class of individual revenue, and its equal pressure upon all. In fact, when revenue is partially affected, taxation sooner reaches the extreme limits of the ability of some classes, while others are scarcely touched at all: it becomes vexatious and destructive, before it arrives at the highest practical ratio. The burthen is galling, not because of its weight, but because it does not rest upon all shoulders alike.
The different methods employed to reach individual revenues, may be classed under two grand divisions—direct, and indirect, taxation; the former is the absolute demand of a specific portion of an individual's real or supposed revenue; the latter, a demand of a specific sum on each act of consumption of certain specified objects, to which that income may be applied.
In neither case, is the real subject of taxation that commodity, on which the estimate is made, and which forms the ground-work of the demand for the tax; or of necessity that value, whereof a part is taken by the state; individual revenue is the only real subject of taxation; and the specific commodity is selected only as a more or less effective means of discovering and attacking that revenue. If individual honesty could in every case be relied on, the matter would be simple enough; all that would be requisite would be, to ask each person the amount of his annual profits, that is to say, his annual revenue. The contingent of each would be readily settled, and one tax only necessary, which would be at the same time the most equitable, and the cheapest in the collection. This was the method adopted at Hamburgh, before that city fell into misfortune; but it can never be practised, except in a republic of small extent, and very moderately taxed.
As a means of assessing direct taxation proportionately to the respective revenues of the tax-payers, governments sometimes compel the production of leases by landlords, or, where there is no lease, set a value on the land, and demand a certain proportion of that value from the proprietor; this is called a land-tax.89 Sometimes they estimate the revenue by the rent of the habitation, and the number of servants, horses, and carriages kept, and make the assessment accordingly. This is called in France, the tax on moveables.90 Sometimes they calculate the profits of each person's profession or calling, by the extent of the population and district where it is followed. This is called in France, the license-tax.91 All these different modes of assessment are expedients of direct taxation.
In the assessment of indirect taxation, and such as is intended to bear upon specific classes of consumption, the object itself is alone attended to, without regard to the party who may incur the charge. Sometimes a portion of the value of the specific product is demanded at the time of production; as in France, in the article of salt. Sometimes the demand is made on entry, either into the state, as in the duties of import;92 or into the towns only, as in the duties of entry.93 Sometimes a tax is demanded of the consumer at the moment of transfer to him from the last producer; as in the case of the stamp duty in England, and the duty on theatrical tickets in France. Sometimes the government requires a commodity to bear a particular mark, for which it makes a charge, as in the case of the assay-mark of silver, and stamp on newspapers. Sometimes it monopolizes the manufacture of a particular article, or the performance of a particular kind of business; as in the monopoly of tobacco, and the postage of letters. Sometimes, instead of charging the commodity itself, it charges the payment of its price; as in the case of stamps on receipts and mercantile paper. All these are different ways of raising a revenue by indirect taxation; for the demand is not made on any person in particular, but attaches upon the product or article taxed.94
It may easily be conceived, that a class of revenue, which may escape one of these taxes, will be affected by another; and that the multiplicity of the forms of taxation gives a great approximation to its equal distribution; provided always, that all are kept within the bounds of moderation.
Every one of these modes of assessment has peculiar advantages and peculiar disadvantages, besides the general evil of all taxation, to wit, that of appropriating a part of the products of the community to purposes little conducive to its happiness and reproductive powers. Direct taxation, for instance, is cheap in the collection; but, on the other hand, it is paid with reluctance, and must be enforced with considerable harshness and rigour. Besides, it bears very inequitably upon the individual. A rich merchant, charged only 120 dollars for his license, makes an annual profit, perhaps, of 20,000 dollars; while the retailer, who can scarcely be supposed to make more than 300 dollars, is charged for his license 20 dollars, which is the lowest rate. The revenue of the landholder is already affected by the land-tax, before it is further reduced by the tax on moveables; while the capitalist is subjected to the latter burthen only.
Indirect taxation has the recommendation of being levyable with more ease, and with less apparent vexation or hardship. All taxes are paid with reluctance, because the equivalent to be expected for them, that is, the security afforded by good order and government, is a negative benefit, which does not immediately interest individuals; for the benefit afforded consists rather in prevention of ill, than in the diffusion of good. But the buyer of the taxed commodity does not suspect himself to be paying for the protection of government, which probably he cares very little about; but merely for the commodity itself, which is an object of his urgent desire, although, in fact, that price is aggravated by the tax. The inducement to consume is strong enough to include the demand of the government; and he readily parts with a value, that procures an immediate gratification.
It is this circumstance, that makes such taxes appear to be voluntary. And, indeed, so much so were they considered by the United States before their emancipation, that, although the right of the British Parliament to tax America without her consent was stoutly denied, yet she was ready to acknowledge the right of imposing taxes upon consumption, which every body could evade if he pleased, by abstaining from the articles taxed.95 Personal taxes are viewed in a different light, and have more of the character of ostensible spoliation.
Indirect taxation is levied piecemeal, and paid by individuals according to their respective ability at the moment. It involves none of the perplexity of separate assessments on each province, department, or individual; or of the inquisitorial inspection into private circumstances; nor does it make one person suffer for the default of another. The inconvenience of appeals and private animosities, as well as of levy by distress or imprisonment, is avoided altogether.
Another advantage of indirect taxation is, that it enables the government to bias the different classes of consumption; favouring such as promote the public prosperity, as does reproductive consumption of all kinds; and checking such as tend to public impoverishment, as do all kinds of unproductive consumption; discouraging the costly and insipid indulgences of the wealthy, and promoting the simpler and cheaper enjoyments of the poor and industrious.
It has been objected to indirect taxation, that it entails a heavy expense of collection and management, and a large establishment of clerks, officers, directors, and subordinate agents; but it is observable, that these charges may be vastly reduced by good administration. The excise and stamp-duties in England cost but 3¼ per cent. in the collection, in the year 1799.96 There are few classes of direct taxation, that are managed so economically in France.
It has been further objected, that its product is uncertain and fluctuating; whereas, the public exigencies require a regular and certain supply: but there has never been any lack of bidders, whenever such taxes have been let out to farm; and experience has shown, that the product of every class of taxation may always be nearly estimated and safely reckoned upon, except in very rare and extraordinary emergencies. Besides, taxes on consumption are necessarily various; so that, the deficit of one is covered by the surplus of another.
Indirect taxation is, however, an incentive to fraud, and obliges governments to brand with the character of guilt, actions that are innocent in their nature; and, consequently, to resort to a distressing severity of punishment. But this mischief is never considerable, until taxation has grown excessive, so as to make the temptation to fraud counterbalance the danger incurred. All excess of taxation is attended with this evil; that, without enlarging the receipts of the public purse, it multiplies the sufferings of the population.
It may be observed, that consumption, and, consequently, individual revenue, are unequally affected by indirect, as well as by direct, taxation: for the private consumption of many articles is not proportionate to the revenue of the consumer. The possessor of an annual revenue of 20,000 dollars does not consume in the year an hundred times as much salt, as the possessor of a revenue of 200 dollars only. But this inequality may be obviated by the variety of taxes on consumption. Moreover, it is to be recollected, that such taxes fall upon incomes already charged with the taxes on land and on moveables. A person, whose whole income is derived from land, in respect to which he is taxed in the first instance, pays on the same income a second tax under the head of moveables; and a third on every taxed article, that he buys and consumes.
Although all these kinds of taxes be paid in the outset, by the persons of whom they are demanded by the public authority, it would be wrong to suppose, that they always ultimately fall on the original payers, who, in many instances, are not the parties really charged, but merely advance the tax in the first instance, and contrive to get indemnified wholly or partially by the consumers of their own peculiar products. But the rate of indemnity is infinitely diversified by the respective circumstances of the individuals.
Of this diversity, we may form some notion, by the consideration of the following general facts:
When the taxation of the producers of a specific commodity operates to raise its price, part of the tax is paid by the consumers of the commodity. If its price be nowise raised, it falls wholly upon the producers. If the commodity, instead of being thereby advanced in price, is deteriorated in quality, a portion of the tax at least must fall upon the consumer; for a purchase of inferior quality at equal price is equivalent to a purchase of equal quality and superior price.
Every addition to price must needs reduce the number of those possessed of the ability to purchase; or, at any rate, must diminish the extent of that ability.97 There is much less salt consumed, when it sells for three cents, than when it sells for one cent per lb. Now, the ratio of the demand to the means of production being lowered, productive agency in this department is worse paid; that is to say, the master-manufacturer of salt, and all the subordinate agents and labourers, together with the capitalist that supplies the funds, and the landlord of the premises where the concern is carried on, must be content with smaller profits, because their product is less in demand.98 The productive classes, indeed, naturally strive to indemnify themselves to the amount of the tax; but, they can never succeed to the full extent, because the intrinsic value of the commodity, that, I mean, which goes to pay the charges of production, is really diminished. So that, in fact, the tax upon an article never raises its total price by the full amount of the tax; because, to do so, the total demand must remain the same; which it never can do. Wherefore, in such cases, the tax falls, partly upon those, who still continue to consume, notwithstanding the increase of price, and partly upon the producers, who raise a less product, and find that, in consequence of the reduced demand, they really obtain less on the sale, when the tax comes to be deducted. The public revenue gains the whole excess of price to the consumer, and the whole of the profit, which the produce is thus compelled to resign. The effect is analogous to that of gunpowder, which at the same time propels the bullet, and makes the piece recoil.
By laying a tax upon the consumption of woollens, their consumption is reduced, and the revenue of the wool-grower suffers in consequence. It is true, he may take to a different kind of cultivation, but we may fairly suppose, that, under all the circumstances of soil and situation, the rearing of sheep was the most profitable kind of culture; otherwise, he would not have chosen it. A change in the mode of cultivation must, therefore, involve a loss of revenue. But the clothier and the capitalist will each be subjected to a portion of the loss resulting from the tax.
Each concurrent producer is affected by a tax on an article of consumption, in proportion only to the share he may have in raising the product taxed.
When the owner of the soil furnishes the greatest part of the value of a product, as he does in respect to products consumed nearly in the primary state, he it is that bears the greatest part of that portion of the tax, which falls on the producers. A duty of entry upon the wine imported into the towns, falls heavily upon the wine-grower; but an exorbitant excise upon lace will affect the flax-grower in a degree hardly perceptible; whereas, all the other producers, the dealers, the operative and speculative manufacturers, who create the far greater proportion of the value of the lace, will suffer very severely.
When the value of a product is partly of foreign, and partly of domestic creation, the domestic producers bear nearly the whole burthen of the tax. A tax upon cottons in France will reduce the earnings of her cotton manufacturers, by lowering the demand for their product; thus, part of the tax will fall on them. But the wages of the productive agency of the cotton-growers in America will be very little affected indeed, unless there be a concurrence of other circumstances. In fact, the tax would reduce the consumption in France 10 per cent. perhaps, and demand in America 1 per cent. only, if the demand from France were but one-tenth of the general demand upon America.
The taxation of an object of consumption, if it be one of primary necessity, operates upon the price of almost all other products, and consequently falls upon the revenues of all the other consumers. An octroi upon meat, corn, and fuel, at their entry into a town, enhances the price of every thing manufactured in it; while a tax upon the tobacco there consumed makes no other commodity dearer; the producers and consumers of tobacco alone are affected; and for a very plain reason; the producer who indulges in superfluities has to maintain a competition with another, who abstains from them; but, if he pays a tax upon necessaries, he need fear no competition; for his neighbours will be all in the same predicament.
The direct taxation of the productive classes must, à fortìori, affect the consumers of their products, but can never raise the prices of those products so much, as completely to indemnify the producer; because, as I have repeatedly explained, the increased price abridges the demand, and the contraction of the demand reduces the profits of all the productive agency, that has been exerted in the supply.
Of the concurrent producers of a specific product, some can more easily evade the effect of the tax than others. The capitalist, whose capital is not absolutely vested and sunk in a particular business, may withdraw it and transfer it elsewhere, from a concern that yields him a reduced interest, or has become more hazardous. The adventurer or master-manufacturer may, in many cases, liquidate his account, and transfer his labour and intelligence to some other quarter. Not so the land-owner and proprietor of fixed capital.99 An acre of vineyard or corn-land will only produce a given quantity of corn or wine, whatever be the ratio of taxation; which may take the ½ or even ¾ of the net produce, or rent as it is called, and yet the land be tilled for the sake of the remaining ½ or ¼.100 The rent, that is to say, the portion assigned to the proprietor, will be reduced, and that is all. The reason will be manifest to any one, who considers, that in the case supposed, the land continues to raise and supply the market with the same amount of produce as before; while on the other hand, the motives in which the demand originates remain just as they were.101 If, then, the intensity of supply and demand must both remain the same, in spite of any increase or diminution of the ratio of the direct taxation upon the land, the price of the product supplied will likewise remain unchanged, and nothing but a change of price can saddle the consumer with any portion whatever of that taxation.102
Nor can the proprietor evade the tax even by the sale of the estate; for the price or purchase-money will be calculated according to the revenue which may be left him by taxation. The purchaser makes his estimate according to the net revenue, charges and taxes deducted. If the ordinary interest on such investments of capital be five per cent., an estate that before would have sold for 20,000 dollars, will fetch but 16,000 dollars when it comes to be charged with an annual tax of 200 dollars; for its actual product to the proprietor will not exceed 800 dollars. The effect is precisely the same, as if government were to appropriate to itself 1-5 of the land in the country; which would make no difference at all to the consumers of its produce.103
But property in dwelling-houses is otherwise circumstanced; a tax upon the ownership raises the rents; for a house, or rather the satisfaction it yields to the occupier, is a product of manufacture and not of land; and the high rate of house-rent reduces the production and consumption of houses, in the like manner as of cloth or any other manufactured commodity. Builders, finding their profits reduced, will build less; and consumers, finding the accommodation dearer, will content themselves with inferior lodging.
From all those circumstances, we may judge of the temerity of asserting as a general maxim, that taxation falls exclusively upon any specific class or classes of the community. It always falls upon those who can find no means of evasion; for every one naturally tries to shift the burthen off his own shoulders if possible; but the ability to evade it is infinitely varied, according to the various forms of assessment, and the position of each individual in the social system. Nay, more; it varies at different times even in the same channel of production. When a commodity is in great request, the holder will not part with the possession, unless indemnified for all his advances, of which the tax he has paid is a part: he will take nothing short of a full and complete indemnity. But, if any unlooked-for occurrence should happen to lower the demand for his product, he will be glad enough to take the tax upon himself, for the sake of quickening the sale. There are few things so unsteady and variable, as the ratio of the pressure of taxation upon each respective class of the community. Those writers, who have maintained, that it bears upon any one or more classes in particular, or in any fixed or certain proportion, have found their theory contradicted by experience at every turn.
Furthermore, the effects I have been describing, and which are equally consonant to experience and to reason, are uniform in their operation and of equal duration with the causes in which they originate. The owner of land will never be able to saddle the consumers of its produce with any part of his land-tax; not so the manufacturer. A manufactured commodity will invariably feel a diminution in its consumption, in consequence of the price being raised by taxation, supposing other circumstances to be stationary; and its production will be a less profitable occupation. A person, who is neither producer nor consumer of an object of luxury, will never bear any portion whatever of the tax that may be laid upon it.—What, then, must we think of a proposition, unfortunately sanctioned by the approbation of an illustrious body,104 that has too much neglected this branch of science, namely, that it is of little importance whether a tax press upon one branch of revenue or another, provided it be of long standing; because every tax in the end affects every class of revenue, in like manner, as bleeding in the arm reduces the circulating blood of the whole human frame. The object of comparison has no analogy whatever with taxation. Social wealth is not a fluid, tending constantly to find a level. It rather resembles the vegetable creation, which admits of the loss of a limb without the destruction of the trunk, and in which the loss is more to be lamented, if the branch be productive, than if it be barren.—But the tree will bear cutting and hacking in every part, before it becomes barren all over, or necessarily falls into decay. This is a far more apposite case; but neither will do to reason upon. Comparisons are not proofs, but mere illustrations, tending to make that intelligible, which can be made out in proof without their assistance.
When speaking of taxes upon products, which I have sometimes called taxes upon consumption, although not paid entirely in all cases by the consumer, I have hitherto made no mention of the particular stage of production, at which the tax may be demanded, or of the consequence of this particular circumstance, which deserves a little of our attention.
Products increase in value progressively, as they pass through the hands of the different concurrent producers: and even the most simple undergo a variety of modifications, before they arrive at a fit state for consumption. Wherefore, a tax does not take the proportion of the value of a product which it professes, unless it be levied at the precise moment, when it has arrived at the full value, and has undergone all the productive modifications. If a tax be imposed on the raw material in the outset, proportioned, not to its then value, but to the value it is about to receive, the producer, in whose hands it happens to be, is obliged to advance a tax out of proportion to the value in hand; which advance, besides being highly inconvenient to himself, is refunded with equal inconvenience by every successive producer, till it reach the hands of the last, who is in turn but partially indemnified by the consumer. And there is this further mischief in such an advance of tax; that it prevents the class of industry, which is called upon to make it, from being originally set in motion, without a larger capital than the nature of the business requires; and that the additional interest of the capital, which must be paid, part by the consumers, and part by the producers, is so much additional taxation, without any addition of public revenue.105
Thus, both theory and experience lead to the conclusion precisely opposite to that drawn by the sect of economists; and show that portion of the tax, which presses upon the consumer's revenue, to be always the more burthensome, the earlier it is levied in the process of production.
Direct and personal taxes, which operate to raise the price of necessaries, or such as fall immediately upon necessaries, are liable to this inconvenience in the highest degree: for they oblige each producer to advance the personal tax on all the producers that have preceded him: so that the same amount of capital will set in motion a smaller amount of industry; and the tax-payers pay the tax, plus a compound interest upon it, yielding no benefit to the exchequer.
Nor is this mere theory: the neglect of these principles has occasioned may serious practical errors; like that of the Constituent Assembly of France, which carried to excess the system of direct taxation, especially upon land; being misled by the prevailing and fashionable doctrine of the economists;—that land is the source of all wealth, the agriculturist the only productive labourer, and France naturally and essentially an agricultural country.
It seems to me that, in the present stage of political economy, the principles of taxation will be more correctly laid down as follows:
Taxation is the taking a portion of the general product of the community, which never returns to the community in the channel of consumption.
It takes from the community over and above the values actually brought into the exchequer, the charges of collection, and the personal trouble it entails; together with all those values, of which it obstructs the creation.
The privation resulting from taxation, whether voluntary or compulsory, affects the tax-payer in his quality of producer, whenever it operates to curtail his profits; that is to say, his income or revenue; and affects him in his character of consumer, whenever it increases his expenditure, by raising the prices of products.
And, since an increase of expenditure is precisely the same thing as a diminution of revenue, whatever is taken by taxation may be said to be so much deducted from the revenues of the community.
In a great majority of cases, the tax-payer is affected by taxation in both his characters, of producer and consumer; and, when he can not manage to pay the public burthens out of his revenue, along with his personal consumption, he must encroach upon his capital. When this encroachment of one person is not counterbalanced by the savings of another, the wealth of the community must gradually decline.
The individual actually paying the tax to the tax-gatherer is not always the party really charged with it, at least, not the party charged with the whole that is paid. He frequently does no more than advance the tax, either wholly or partially; being afterwards reimbursed by the other classes of the community, in a very complicated way, and perhaps after a vast variety of intermediate operations; so that a great many persons are paying portions of the tax, at a time when probably they least suspect it, either in the shape of the advanced price of commodities, or of personal loss, which they feel but can not account for.
The individuals, on whose revenues the tax ultimately falls, are the real tax-payers, and contribute value greatly exceeding the sum that is brought into the exchequer, even with the addition of the charges of collection. The misconduct of the government in the matter of taxation, is proportioned to this excess of the payment above the receipt.
A country heavily taxed may be considered in the same light as one labouring under natural impediments to production. With a heavy charge of production, it raises a very small product. Personal exertion, capital, and the productive agency of land are all but poorly recompensed: and more is expended in earning a less profit.
It is worth while on this head to recur to the principles explained in the preceding book,106 when describing the difference between positive and relative dearness. High price resulting from taxation is positive dearness: it indicates a smaller product raised by the efforts of a larger amount of productive agency. Besides which, taxation generally occasions a contemporary advance of commodities in comparison with silver; that is to say, raises their money price: and for this reason; because specie is not an annual, regenerative product, like those that are swallowed up by taxation. Government is not a consumer of specie, except when it happens to export it for the payment of its armies, or foreign subsidies: it refunds in the purchases it makes all the specie it obtains by taxation: but the value levied is never refunded.107 Wherefore, since taxation paralyzes one part of the sources of production, and effects the rapid destruction of the product of the other, when its ratio is excessive, it must gradually render products more scarce in proportion to the specie, which is not varied in quantity by the operation. Now, whenever the commodities to be circulated become fewer in proportion to the specie that is to circulate them, their relative value to the specie must rise; the same money will purchase a smaller quantity of products.
It might be supposed, that such a superabundance of gold and silver specie ought to operate in exoneration of the public: yet it can not have that effect; for, however plentiful it may be in proportion to other commodities, still individuals can only obtain it by giving their own products in exchange, and the raising of those products has become more difficult and more costly.
Besides, when money-prices grow high, and specie is consequently reduced in relative value, it gradually takes its departure, and becomes scarcer, like all other commodities: and thus a country, burthened with a taxation too heavy for its productive powers, is first drained of its commodities, and next of its specie; till it gradually reaches the extreme of penury and depopulation.
The careful study of these principles will give some insight into the mode, in which the annual and really monstrous expenditure of national governments, in modern times, has habituated the subject to severer toil and exertion, without which it would be impossible that, after providing for the subsistence, comfort, and pleasures of himself and family, according to the habits of the time and place, he should be able to meet the consumption of the state, and the collateral waste and destruction it occasions, the amount of which it is impossible to ascertain, though in the larger states it is confessedly enormous.
This very profusion, though it proves the vices and defects of the political system and organization, has been attended with one advantage at any rate; it has operated to stimulate the approximation to perfection in the art of production, by obliging mankind to turn the natural agents to better account. In this point of view, taxation has certainly helped to develope and enlarge the human faculties; so that, when the progress of political science shall limit taxation to the supply of real public wants only, the improvements in the art of production will prove a vast accession to human happiness. But, should the abuses and complexity of the political system lead to the prevalence, extension, increase, and consolidation of oppressive and disproportionate taxation, it is much to be feared, that it may plunge again into barbarism those nations, whose productive powers are now the most astonishing; and the condition of the labouring classes, who are always the bulk of the community, may in such nations present a picture of drudgery so incessant and toilsome, as to make them cast a wistful eye upon the liberty of savage existence; which, though it offer no prospect of domestic comfort, at least promises emancipation from perpetual exertion to supply the prodigality of a public expenditure, yielding to them no satisfaction, and, perhaps even operating to their prejudice.108
Of Taxation in Kind.
Taxation in kind is the specific and immediate appropriation of a portion of the gross product to the public service.
It has this advantage, of calling on the producer only for what he has actually in hand, in the identical shape which it happens to be under. Belgium, after its conquest by France, found itself at times unable to pay its taxes, in spite of abundant crops; the war, and the prohibition of exportation, obstructed the sale of its produce, which the government enforced by demanding payment in money; whereas, the taxes might have been collected without difficulty, had the government been content to take payment in kind.
It has the further advantage of making it equally the interest of government and of the farmer to obtain plentiful crops, and improve the national agriculture. The levying of taxes in kind in China, was probably the origin of the peculiar encouragement, bestowed by its government upon the agricultural branch of production. But, why favour one branch, when all are equally entitled to protection, because all contribute to bear the public burthens? And, why has not government an equal interest in supporting the other branches, which it takes the trouble of extinguishing?
It has likewise the advantage of excluding all exaction and injustice in the collection; the individual, when he gathers in his harvest, knows exactly what he has to pay; and the state knows what it has to receive.
This tax, which might appear at first sight to be of all others the most equitable, is nevertheless of all others the most inequitable; for it makes no allowance for the advances made in the course of production, but is taken upon the gross, instead of the net, product. Take two farmers in different branches of cultivation; the one farming tillage-land of moderate quality; his expenses of cultivation, amounting, one year with another, say to 1600 dollars, and the gross product of his farm, say to 2400 dollars, so as to yield him a net product of 800 dollars only; the other farming pasturage or wood-land, yielding a gross product of precisely the same amount of 2400 dollars: with an expense of cultivation, amounting, perhaps, to but 400 dollars, leaving him a net product, one year with another, of 2000 dollars. Suppose a tax in kind to be imposed in the ratio of 1-12 of the annual product of land of all descriptions indiscriminately. The former will have to pay in sheaves of corn to the amount of 200 dollars; the latter will pay, in cattle or in wood, an equal value of 200 dollars. What is the result? The one will have paid the fourth part of a net revenue of 800 dollars; the other but a tenth part of a net revenue of 2000 dollars.
The revenue, that each person has for his own share, is the net residue only after replacing the capital he has embarked, whatever may be its amount. Is the gross amount of the sales he effects in the year the annual income of the merchant? Certainly not; all the income he gets is the surplus of his receipts above his advances; on this surplus alone can he pay taxes, without ruin to his concerns.
The ecclesiastical tithe levied in France under the old system was liable to this inconvenience in part only. It attached neither upon meadow, nor wood-land, nor kitchen-ground, nor many other kinds of cultivation; and in some places was 1-18, in others 1-15 or 1-10 of the gross product; so that the real, was corrected by the apparent inequality.
The marechal de Vauban, in his work entitled, Dixime Royale, a book replete with just views, and well worth the study of those who manage national finances, proposes a tax of 1-20 of the product of the land, which, in times of great emergency, might be raised to 1-10. But this proposition was made as a substitute for a still more inequitable system: namely, the saddling of the lands of the commonalty with the whole tax, and altogether exempting the lands of the nobles and clergy. The public-spirited writer, who had occasion, in his character of engineer, to become personally acquainted with every part of France, speaks most feelingly of the hardships resulting from the land-tax109 of those days. And there is no doubt, that the adoption of his plan at that time would have been a vast relief to the country. But it was disregarded. Why? Because every courtier had an interest to resist it: and this fine country was left to flounder through its distresses. The consequence was, a heavier loss of population from famine, than from the sword, in the war of the Spanish succession.
The difficulty and expense of collection, together with the abuses to which it is liable, are another objection to taxation in kind. The immense number of agents must open a fine field for peculation. The government may be imposed upon, in respect to the amount collected, upon the subsequent sale and disposal, in respect to the quantity damaged, as well as in the charges of storing, preservation and carriage. If the tax be farmed to contractors, the profits and expenses of numberless farmers and contractors must all fall upon the public. The prosecution of the farmers and contractors would require the active vigilance of administration. 'A gentleman of great fortune,' says Smith, 'who lived in the capital, would be in danger of suffering much by the neglect, and more by the fraud, of his factors and agents, if the rents of an estate in a distant province were to be paid to him in this manner. The loss of the sovereign, from the abuse and depredation of his tax-gatherers, would necessarily be much greater.'110
Various other objections have been urged against taxation in kind, which it would be useless and tedious to enumerate. I shall only take the liberty of remarking the violent operation upon relative price, which must follow from so vast a quantity of produce being thrown upon the market by the agents of the public revenue, who are notoriously equally improvident as buyers and as sellers. The necessity of clearing the storehouses to make room for the fresh crop, and the ever urgent demands upon the public purse, would oblige them to sell below the level, to which the price would naturally be brought by the rent of the land, the wages of labour, and the interest of the capital, engaged in agriculture; and private dealers would be unable to maintain the competition. Such taxation not only takes from the cultivator a portion of his product, but prevents his turning the residue to good account.
Of the Territorial or Land-Tax of England.
In the year 1692, which was four years after the happy revolution, that placed the prince of Orange upon the British throne, a general valuation was made of the income of all the land in the country; and, upon that valuation, the land-tax continues to be levied to this day; so that the tax of four shillings in the pound, upon the rents of land, is a fifth of its rent in 1692, and not of the actual rent at the present day.
It may easily be conceived how much this tax must operate to encourage improvements of the land. An estate that has been improved so as to double the rent, does not pay double the original tax; neither does it pay a less tax if it be suffered to fall into neglect and impoverishment; thus, it operates as a penalty upon negligence.
To this fixation of the tax, many writers attribute the high state of the cultivation of the land in England: and doubtless it may have done much to promote improvement. But, what would be thought of a government that should say to a tradesman in a small way of business, "You are trading in a small way upon a small capital, and consequently pay very little in direct taxes. Borrow, and enlarge your capital, extend your dealings, and increase your profits as much as you can, and we will not charge you with any increase of taxes. Nay, further, when your heirs succeed to the business, and have still further extended it, they shall be assessed at precisely the same rate, and shall continue subject to the same taxes only." All this might be a vast encouragement to trade and manufacture; but would there be any equity in such a proceeding? and might they not advance without such assistance? Has not England herself presented the example of a still more rapid improvement in commercial and manufacturing industry, without any such unjust partiality? A land-owner, by attention, economy, and intelligence, improves his annual income to the amount, say of 1000 dollars: if the state claim a fifth of this advance, there will still be a bonus of 800 dollars to stimulate and reward his exertions.
It would be easy to put cases, in which the tax, becoming by its fixation disproportionate to the means of the tax-payers and the condition of the soil, might be productive of as much mischief, as it has done good in other instances: where it would operate to throw out of cultivation a class of land, that, by one cause or other, had become incompetent to pay the same ratio of taxation. We have seen an example of this in Tuscany. There, a census or terrier was made in 1496, wherein the plains and valleys were rated very low, on account of the frequent floods and inundations, which prevented any regular and profitable cultivation; while the uplands, that were then the only cultivated spots, were rated very high. Since then, the torrents and inundations have been confined by drainage and embankment, and the plains reduced to fertility; their produce, being comparatively exempt from tax, came to market cheaper than that of the uplands, which, consequently, were unable to maintain the competition, under the pressure of disproportionate taxation, and have gradually been abandoned and deserted.111 Whereas, had the tax been adjusted to the change of circumstances, both might have been cultivated together.
In speaking of a tax, peculiar to a particular nation, I have used it merely in illustration of general and universal principles.
BOOK III, CHAPTER IX
OF NATIONAL DEBT.
Of the Contracting Debt by National Authority, and of its general Effect.
There is this grand distinction between an individual borrower and a borrowing government, that, in general, the former borrows capital for the purpose of beneficial employment, the latter for the purpose of barren consumption and expenditure. A nation borrows, either to satisfy an unlooked-for demand, or to meet an extraordinary emergency; to which ends, the loan may prove effectual or ineffectual: but, in either case, the whole sum borrowed is so much value consumed and lost, and the public revenue remains burthened with the interest upon it.
Melon maintains, that a national debt is no more than a debt from the right hand to the left, which nowise enfeebles the body politic. But he is mistaken; the state is enfeebled, inasmuch as the capital lent to its government, having been destroyed in the consumption of it by the government, can no longer yield any body the profit, or in other words, the interest, it might earn, in the character of a productive means. Wherewith, then, is the government to pay the interest of its debt? Why, with a portion of the revenue arising from some other source, which it must transfer from the tax-payer to the public creditor for the purpose.
Before the act of borrowing, there will have been in existence two productive capitals, each of them yielding, or capable of yielding, revenue; that is to say, a capital about to be lent to government, and a capital whereon the future tax-payers derive that revenue, which is about to be applied in satisfaction of the interest upon the capital lent. After the act of borrowing, there will remain but one of these capitals; viz. the latter of the two, whereof the revenue is thenceforward no longer at the disposal of its former possessors, the present tax-payers, since it must be taken in some form of taxation or other by the government, for the sake of providing the payment of interest to its creditors. The lender loses no part of his revenue: the only loser is the payer of taxes.
People are apt to suppose, that, because national loans do not necessarily occasion any diminution of the national money or specie, therefore, they occasion, not a loss but merely a transfer, of national wealth. With a view to the more ready exposure of this fallacy, I have subjoined a synoptical table, showing what becomes of the sum borrowed, and whence the public creditor's interest is satisfied.112
When a government borrows, it either does or does not engage to repay the principal. In the latter case, it grants what is called a perpetual annuity. Redeemable loans are capable of infinite variety in the terms. The principal is contracted to be repaid, sometimes gradually, and in the way of lottery; sometimes by instalments payable together with the interest, sometimes in the way of increased interest, with condition to expire on the death of the lender; as in the case of tontines and life-annuities, whereof the latter determine on the death of the individual lender; whereas, in tontines, the full interest continues to be divided amongst the survivors, until the whole of the lives have expired.
Tontines and life-annuities are very improvident modes of borrowing; for the borrower remains throughout liable to the full rate of interest, although he annually repays a part of the principal. Besides, they savour of immorality; offering a premium to egotism, and a stimulus to the dilapidation of capital, by enabling the lender to consume both principal and interest without fear of personal beggary.
The governments best acquainted with the business of borrowing and lending have not, of late years at least, given any engagement to repay the principal of the loan. Thus, public creditors have no other way of altering the investment of their capital, except by selling their transferable security, which they can do with more or less advantage to themselves, according to the buyer's opinion of the solidity of the debtor government, that has granted the perpetual annuity.113 Despotic governments have always found a great difficulty in negotiating such loans. Where the sovereign is powerful enough to violate his contracts at pleasure, or where there is a mere personal contract with the reigning monarch, with a risk of disavowal by the successor, lenders are loth to advance their money, without a near and definite period of payment.
The appointment to posts and offices, under condition of an annual payment, or of deposit for which the government engages to pay interest, is a mode of borrowing in perpetuity, in which the loan is compulsory. When once this paltry expedient is resorted to, it requires very little ingenuity to find plausible grounds, for converting almost every occupation, down to the dust-man and street-porter, into patent and saleable offices.
Another mode of borrowing is, by the anticipation of revenue by which is meant, the assignment by a government of revenues not yet due, with allowance in the nature of discount, the taking up money in advance from lenders, who charge a discount proportionate to the risk they run from the instability of the government and possible deficiency of the revenue. Engagements of this kind contracted by a government, and satisfied either out of the revenue when collected, or by the issue of fresh bills upon the public treasury, constitute what bears the uncouth English denomination of floating debt; the consolidated debt being that, whereon the creditor can demand the interest only, and not the principal.
National loans of every kind are attended with the universal disadvantage of withdrawing capital from productive employment, and diverting it into the channel of barren consumption; and, in countries where the credit of the government is at a low ebb, with the further and particular disadvantage, of raising the interest of capital. Who can be expected to lend at 5 per cent. to the farmer, the manufacturer, or the merchant, while he can readily get an offer of 7 or 8 per cent. from the government? That class of revenue which has been called, profit of capital, is thereby advanced in its ratio, at the expense of the consumer: the consumption falls off, in consequence of the advance in the real price of products; the productive agency of the other sources of production are less in demand, and consequently worse paid; and the whole community is the sufferer, with the sole exception of the capitalist.
The ability to borrow affords one main advantage to the state, namely, the power of apportioning the burthen entailed by a sudden emergency among a great number of successive years. In the present state of public affairs, and on the present scale of international warfare, no country could support the enormous expense from its ordinary annual revenue. The larger states pay in taxation nearly as much as they are able; for economy is by no means the order of the day with them; and their ordinary expenditure seldom falls much short of the income. If the expenditure must be doubled to save the nation from ruin, borrowing is usually the only resource unless it can make up its mind to violate all subsisting engagements and be guilty of spoliation of its own subjects and foreigners too. The faculty of borrowing is a more powerful agent, than even gun-powder; but probably the gross abuse that is made of it, will soon destroy its efficacy.
Great pains have been taken, to find in the system of borrowing, as well as in taxation, some inherent advantage beyond that of supplying the public consumption. But a close examination will expose the hopelessness of such an attempt.
It has been maintained, for instance, that the debentures and securities, which form a national debt, become real and substantial values, existing within the community; that the capital, of which they are the evidence or representative, is so much positive wealth, and must be reckoned as an item of the total substance of the nation.114 But it is not so; a written contract or security is a mere evidence, that such or such property belongs to such an individual. But wealth consists in the property itself, and not in the parchment, by which its ownership is evidenced; therefore à fortiori, a security is not even an evidence of wealth, where it does not represent an actual existing value, and when it operates as a mere power of attorney from the government to its creditor, enabling him to receive annually a specified portion of the revenue expected to be levied upon the tax-payers at large. Supposing the security to be cancelled, as it might be by a national bankruptcy, would there be any the least diminution of wealth in the community? Undoubtedly not. The only difference would be, that the revenue, which before went to the public creditor, would now be at the disposal of the tax-payer, from whom it used to be taken.
Those who tell us, that the annual circulation is increased by the whole amount of the annual disbursements of the government,115 forget that these disbursements are made out of the annual products and are a portion of the annual revenue, taken from the tax-payer, which would have been brought into the general circulation just the same, although no such thing as national debt had existed. The tax-payer would have spent what is now spent by the public creditor; that is all.
The sale or purchase of debentures or securities is not a productive circulation, but a mere substitution of one public creditor in place of another. When these transfers degenerate into stock-jobbing, that is to say, the making of a profit by the rise and fall of their price, they are productive of much mischief; in the first place, by the unproductive employment on this object of the agent of circulation, money, which is an item of the national capital; and, in the next, by procuring a gain to one person by the loss of another; which is the characteristic of all gaming. The occupation of the stock-jobber yields no new or useful product; consequently having no product of his own to give in exchange, he has no revenue to subsist upon, but what he contrives to make out of the unskilfulness or ill-fortune of gamesters like himself.
A national debt has been said to bind the public creditors more firmly to the government, and make them its natural supporters by a sense of common interest; and so it does, beyond all doubt. But, as this common interest may attach equally to a bad or a good government, there is just as much chance of its being an injury, as a benefit to a nation. If we look at England, we shall see a vast number of well-meaning persons, induced by this motive to uphold the abuses and misgovernment of a wretched administration.
It has been further urged, that a national debt is an index of the public opinion, respecting the degree of credit which the government deserves, and operates as a motive to its good conduct, and endeavours to preserve the public opinion, of which such a debt furnishes the index. This can not be admitted without some qualification. The good conduct of government in the eyes of the public creditors, consists in the regular payment of their own dividends; but in the eyes of the tax-payers, it consists in spending as little as possible. The market-price of stock does, indeed, furnish a tolerable index of the former kind of good conduct, but not of the latter. Perhaps it would be no exaggeration to say, that the punctual payments of the dividends, instead of being a sign of good, is in numberless instances a cloak to bad, government; and, in some countries, a boon for the toleration of frequent and glaring abuses.
Another argument in favour of national debt is, that it affords a prompt investment to capital, which can find no ready and profitable employment, and thus must, at any rate, prevent its emigration. If it do, so much the worse: it is a bait to tempt capital towards its destruction, leaving the nation burthened with the annual interest, which government must provide. It is far better that the capital should emigrate, as it would probably return sooner or later: and then its interest for the mean time will be chargeable to foreigners. A national debt of moderate amount, the capital of which should have been well and judiciously expended in useful works, might indeed be attended with the advantage of providing an investment for minute portions of capital, in the hands of persons incapable of turning them to account, who would probably keep them locked up, or spend them by driblets, but for the convenience of such an investment. This is perhaps the sole benefit of a national debt; and even this is attended with some danger; inasmuch as it enables a government to squander the national savings. For, unless the principal be spent upon objects of permanent public benefit, as on roads, canals, or the like, it were better for the public, that the capital should remain inactive, or concealed; since, if the public lost the use of it, at least it would not have to pay the interest.
Thus, it may be expedient to borrow, when capital must be spent by a government, having nothing but the usufruct at its command but we are not to imagine, that, by the act of borrowing, the public prosperity can be advanced. The borrower, whether a sovereign, or an individual, incurs an annual charge upon his revenue, besides impoverishing himself to the full amount of the principal, if it be consumed; and nations never borrow but with a view to consume outright.
Of public Credit, its Basis, and the Circumstances that endanger its Solidity.
Public credit is the confidence of individuals in the engagements of the ruling power, or government. This credit is at the extreme point of elevation, when the public creditor gets no higher interest, than he would by lending on the best private securities; which is a clear proof, that the lenders require no premium of insurance to cover the extra risk they incur, and that in their estimation there is no such extra risk. Public credit never reaches this elevation, except where the government is so constituted, as to find great difficulty in breaking its engagements, and where, moreover, its resources are known to be equal to its wants; for which latter reason, public credit is never very high, unless where the financial accounts of the nation are subject to general publicity.
Where the public authority is vested in a single individual, it is next to impossible, that public credit should be very extensive: for there is no security, beyond the pleasure and good faith of the monarch. When the authority resides in the people, or its representatives, there is the further security of a personal interest in the people themselves, who are creditors in their individual, and debtors in their aggregate character; and therefore, can not receive in the former, without paying in the latter. This circumstance alone would lead us to presume, that now, when great undertakings are so costly as to be effected by borrowing alone, representative governments will acquire a marked preponderance in the scale of national power, simply on account of their superior financial resources, without reference to any other circumstance.
In one light, the obligations of government inspire more confidence than those of individuals, that is to say, by the greater solidity of its resources. The resources of the most responsible individual may fail suddenly and totally, or at least to such an extent, as to disable him from performing his engagements.
Numerous commercial failures, political or national calamities, litigation, fraud or violence, may ruin him entirely; but the supplies of a government are derived from such various quarters, that the individual calamities of its subjects can operate but partially upon the revenue of the state. There is also another thing, that facilitates the borrowing of government even more than the credit it is fairly entitled to; and that is, the great facility of transfer presented to the stockholder. Public creditors always reckon upon the possibility of withdrawing by the sale of their debentures, before the occurrence of embarrassment or bankruptcy; and, even where they contemplate such a risk, generally consider some advance of the rate of interest a sufficient premium of insurance against it.
Moreover, it is observable, that the sentiments of lenders and indeed of mankind upon all occasions, are more powerfully operated upon by the impressions of the moment, than by any other motive; experience of the past must be very recent, and the prospect of the future very near, to have any sensible effect. The monstrous breach of faith on the part of the French government in 1721, in regard to its paper-money and the Mississippi share-holders, did not prevent the ready negotiation of a loan of 200,000,000 liv. in 1759; nor did the bankrupt measures of the Abbé Terrai in 1772 prevent the negotiation of fresh loans in 1778 and every subsequent year.
In other points of view, the credit of individuals is better founded than that of the government. There is no compulsory process against the latter, for the breach of its engagements; nor do governments ever husband the national resources with nearly the care and attention of individuals. Besides, in the event of external or internal subversion, individuals may withdraw their property from the wreck much better than governments can.
Public credit affords such facilities to public prodigality, that many political writers have regarded it as fatal to national prosperity. For, say they, when governments feel themselves strong in the ability to borrow, they are too apt to intermeddle in every political arrangement, and to conceive gigantic projects, that lead sometimes to disgrace, sometimes to glory, but always to a state of financial exhaustion; to make war themselves, and stir up others to do the like; to subsidize every mercenary agent, and deal in the blood and the consciences of mankind; making capital, which should be the fruit of industry and virtue, the prize of ambition, pride, and wickedness.
A nation, which has the power to borrow, and yet is in a state of political feebleness, will be exposed to the requisitions of its more powerful neighbours. It must subsidize them in its defence; must purchase peace; must pay for the toleration of its independence, which it generally loses after all; or perhaps must lend, with the certain prospect of never being repaid.
These are by no means hypothetical cases: but the reader is left to make the application himself.
By the establishment of sinking-funds, well-ordered governments have found means to extinguish and discharge their redeemable debt. The constant operation of this contrivance contributes more than any thing else to the consolidation of public credit. The mode of proceeding is simply this:
Suppose that the state borrows 100 millions of dollars at an interest of 5 per cent.; to pay that interest, it must appropriate a portion of the national revenue to the amount of 5 millions of dollars. For this purpose, it usually imposes a tax calculated to produce this sum annually. If the tax be made to produce somewhat more, say 5,462,400 dollars, and the surplus of 462,400 dollars be thrown into a particular fund, and laid out annually, in the purchase of government debentures to that amount in the market, and if, moreover, in addition to this surplus, the interest likewise upon the debt thus extinguished, be annually employed in such purchases, the whole principal debt will be extinguished at the end of fifty years. This is the mode in which a sinking-fund operates. The efficacy of this expedient depends upon the progressive power of compound interest; that is to say, the gradual augmentation of the interest of capital, by the addition of interest upon the arrears of interest, reckoned from certain stated periods.
It is obvious, that, by an annual instalment of not more than 10 per cent. upon its own interest, the principal of a debt bearing an interest of 5 per cent. may be extinguished in less than 50 years. However, the sale of the debentures being voluntary, if the holders will not sell at par, that is to say, at 20 years purchase, the redemption, in this way, will take somewhat longer time; but this very state of the market will be a convincing proof of the high ratio of national credit. On the other hand, if the credit decline, so that the same sum will purchase a larger amount of debentures, the extinction of the debt will be effected in a shorter period. So that the lower public credit falls, the more powerful is the operation of a sinking-fund to revive it; and that fund grows less efficient, exactly in proportion as it becomes less requisite.
To the establishment of such a fund, has the long-continued public credit of Great Britain been attributed, and her ability still to go on borrowing, in spite of a debt of more than 800 millions sterling.116 And doubtless this it is, that has made Smith declare sinking-funds, which were contrived expressly to reduce national debt, the main instruments of their increase. Had not governments the happy knack of abusing resources of every kind, they would soon grow too rich and powerful.
A sinking-fund is a complete delusion, whenever a government continues borrowing on one hand, as much as it redeems on the other; and à fortiori, when it borrows more than it redeems, as England has constantly done, since the year 1793 to the present time. Whencesoever the amount of the sinking-fund be derived, whether it be merely the product of a fresh tax, or that product, augmented by the interest on the extinguished debt, if the government borrow a million for every million of debt that it pays off, it creates an annual charge of precisely the same amount as that extinguished: it is precisely the same thing, as lending to itself the million devoted to the purpose of redemption. Indeed, the latter course would save the expense of the operation. This position has been fully established in an excellent work, by professor Hamilton,117 which is quite conclusive upon the subject. The enormous burthens of the people of England, the scandalous abuse its government has made of the power of borrowing, and her substitution of paper-money in place of specie, will have produced some benefit at least; inasmuch as they have assisted the solution of many problems, highly interesting to the happiness of nations, and given warning to all future generations, to beware of the like excesses.
It must be evident, that the grand requisite to the efficiency of a sinking-fund is, the punctual and inviolable application of the sums appropriated to the purpose of redemption. Yet this has never been rigidly adhered to, even in England, where consistency and good faith to the creditors are a point of honour with the government. So that English writers put no faith in the extinction of the debt by the operation of the sinking-fund: nay, Smith makes no scruple of declaring, that national debts have never been extinguished except by national bankruptcy.
It has been sometimes a matter of speculation, to inquire into the effect of a national bankruptcy upon the relative condition of individuals, and the internal economy of the nation. In ordinary cases, when a government commits an act of bankruptcy, it adds to the revenues of the tax-payers the whole amount that it discontinues paying to the public creditors.—Nay, it goes somewhat further: for it remits likewise the charges of collection and management of the revenue and the debt. A nation burthened with 100 millions of annual interest on its debt, whereon the charges above mentioned should amount to 30 per cent.118 more, might by a bankruptcy remit to the tax-payers 130 millions, while it stript its creditors of 100 millions only.
In England the effect would be more complicated; because she does not pay the dividends on her debt wholly out of the annual proceeds of taxation; at least, not at the moment of my writing; but annually borrows a sum nearly equal to the interest of her debt.119 Were she to commit an act of bankruptcy, the annual loans of 40 millions sterling, more or less, would be withdrawn from unproductive consumption by the public creditors, and be applicable to the purposes of re-productive consumption: for it may fairly be supposed, that the capitalists who accumulate and lend to the state, would look out for some profitable investment. In this point of view, the operation would tend vastly to the increase of the national capital and revenue: but the execution would be attended with very disastrous immediate consequences: for this annual amount of 40 millions would be withdrawn from the class of consumers, who have no other means of subsistence, and would be utterly unable to make good their losses in any other way, for want of both personal industry, and of the command of capital.
A bankruptcy would probably obviate the necessity of fresh loans; but would not release an atom of the former taxation, where the interest of the debt is habitually paid, not with the proceeds of taxation, but with new loans. Thus, the burthens of the people would not be alleviated,120 nor the charges of production reduced: consequently there would be no sensible reduction in the price of commodities; nor would British products find a readier market either at home or abroad.
The classes liable to taxation would be diminished in numerical strength, by the whole of the suppressed stockholders; and taxation less productive, although not lower in ratio. The 40 millions of revenue, withdrawn from the public creditors, would pay taxes only upon the annual profit or revenue, they might yield in the character of productive capital. The ruin of the public creditors would be attended with abundance of collateral distress; with private failures and insolvency without end; with the loss of employment to all their tradesmen and servants, and the utter destitution of all their dependants.
On the other hand, if she persevere in borrowing to pay the interest of the former loans, that interest and with it taxation also, must go on increasing to infinity. It is impossible to avoid a precipice, when one follows a road that leads nowhere else.
The potentates of Asia, and all sovereigns, who have no hopes of establishing a credit, have recourse to the accumulation of treasure. Treasure is the reserve of past, whereas a loan is the anticipation of future revenue. They are both serviceable expedients in case of emergency.
A treasure does not always contribute to the political security of its possessors. It rather invites attack, and very seldom is faithfully applied to the purpose for which it was destined. The accumulation of Charles V. of France fell into the hands of his brother, the duke of Anjou; those which pope Paul II. destined to oppose the Turkish arms, and drive them out of Europe, supplied the extravagancies of Sixtus IV. and his nephews. The treasures amassed by Henry IV., for the humiliation of the house of Austria, were lavished upon the favourites of the queen-mother: and, at a later period, we have seen the political power of Prussia brought into imminent hazard by those very savings, which were destined by Frederick III. to its consolidation.
The command of a large sum is a dangerous temptation to a national administration. Though accumulated at their expense, the people rarely, if ever profit by it: yet in point of fact, all value, and consequently, all wealth, originates with the people.
A Table, Showing the Result of Value Lent to the State.
General Fund, whence all Revenue is derivable; consisting of the Total Natural Agency, Capital and Industry, at the command of the Nation, divided into four equal portions, whereof respectively each Individual is supposed to possess a share, proportionate to his Wealth. Of this stock, the only part applicable to the purpose of a National Loan, is the transferable or floating value, capable of acting as capital.
A table, showing the comparative condition of France, Great Britain and Ireland, and the United States of America, in respect to Population, Debt, and Taxation, at the close of the year 1831.
[1.]Some materials are capable of receiving and discharging the same kind of value many times over; as linen, which will undergo repeated washing. The cleanliness given it by the laundress, is a value wholly consumed on each occasion, along with a part of that of the linen itself.
[2.]The values not consumed sooner or later in a useful way are of little moment; such are provisions spoiled by keeping, products lost accidentally, and those whose use has become obsolete, or which have never been used at all, owing to the failure of the demand for them, wherein value originates. Values buried, or concealed, are commonly withdrawn but for a time from consumption; when found, it is always the interest of the finder to turn them to account, which he cannot do without submitting them to consumption. In this case, the only loss is that of the profit derivable from them during the period of their disappearance, and may be reckoned equivalent to the interest for that time.
[3.]For the distinction between the gross and the net product, vide suprà, Book II. chap. 5.
[4.]It is probable, that, in all countries, anywise advanced in industry, the revenues of industry exceed those of capital and land united, and, consequently, that the consumption of those deriving income solely from industry, and wholly dependent for subsistence upon their personal faculties, exceeds that of both capitalists and landlords together. It is not uncommon to meet with a manufactory, that, with a capital, say of 120,000 dollars, will pay daily in wages to its people, 60 dollars, which, with the deduction of Sundays and holidays, makes 18,000 dollars per annum; if to this be added, 4000 dollars more for the net profits of personal superintendence and management, it will give a total of 22,000 dollars per annum, for the revenue of industry alone. The same capital, vested in land at but 20 years' purchase would yield a revenue of 6000 dollars only.
[5.]Book II. chap. 14.
[6.]This may be illustrated by the burning of fuel in a grate or furnace. The fuel burnt, serves either to give warmth, or to cook victuals, boil dyeing ingredients, and the like, and thereby to increase their value. There is no utility in the mere gratuitous act of burning, except inasmuch as it tends to satisfy some human want, that of warmth for instance; in which case, the consumption is unproductive; or inasmuch as it confers upon a substance submitted to its action, a value, that may replace the value of the fuel consumed; in which case the consumption is productive.
[7.]There is unquestionably a sort of talent requisite in the expenditure of a large income with credit to the proprietor, so as to gratify personal taste, without awakening the self-love of others; to oblige without the sense of humiliation; to labour for the public good, without alarming individual interests. But this kind of talent is referable rather to the head of practical, whilst its influence upon the rest of mankind falls within the province of theoretical, morality.
[8.]The raw materials of manufacture and commerce are, the products bought with a view to the communication to them of further value. Calicoes are raw material to the calico-printer, and printed calicoes to the dealer who buys them for re-sale or export. In commerce, every act of purchase is an act of consumption; and every act of re-sale, an act of production.
[9.]One of the suite of Lord Macartney estimated the saving of grain in China, by this method alone, to be equal to the supply of the whole population of Great Britain.
[10.]There is almost insuperable difficulty in estimating with precision the consumption and production of value; and individuals have no other means of knowing, whether their fortune be increased or diminished, except by keeping regular accounts of their receipt and expenditure; indeed, all prudent persons are careful to do so, and it is a duty imposed by law in the case of traders. An adventurer could otherwise scarcely know whether his concern were gainful or losing, and might be involving himself and his creditors in ruin. Besides keeping regular accounts, a prudent manager will make previous estimates of the value that will be absorbed in the concern, and of its probable proceeds; the use of which, like that of a plan or design in building, is to give an approximation, though it can afford no certainty.
[11.]It is strange, that so acute a writer should not have perceived, that the mischief of pure individual vanity can never be very formidable, because the pleasure it affords loses in intensity, in proportion to its diffusion. Indeed as far as individual consumption is concerned, attacks upon luxury are mere idle declamations; for the productive energies of mankind will always be directed towards an object, with a force and in a degree porportionate to the intensity of the want for it. It is the extravagance of public luxury alone that can ever be formidable; this, as well as public consumption of every kind, it is always the interest of the community at large to contract, and that of public functionaries to expand, to the utmost. Translator.
[12.]The lending at interest what might have been spent in frivolity is of this latter class; for interest can not be paid, unless the loan be productively employed; in which case it will go in part to the maintenance of the labouring classes.
[13.]By knowledge, I would always be understood to mean, acquaintance with the true state of things, or generally with truth in every branch.
[14.]In a wholesome state of society, when public institutions are not needlessly multiplied, and all tend to the common purpose of public good, this very impatience and anxiety is conducive to the welfare, and not to the injury, of society. Indeed, great inequality of fortune seems to be a necessary accompaniment to social wealth and great national productive power. It is the prospect of great prizes only, that can stimulate to the extreme of intellectual and corporeal industry; and there is no instance on record of a nation far advanced in industry, in which great inequality of fortune has not existed. One bishopric of Durham will tempt more clerical adventurers, than five hundred moderate benefices and the example of a single Arkwright or Peel will stimulate manufacturing science and activity more than a whole Manchester of moderate cotton spinning concerns. Translator.
[15.]On this ground sumptuary laws are superfluous and unjust. The indulgence proscribed is either within the means of the individual or not: in the former case, it is an act of oppression to prohibit a gratification involving no injury to others, equally unjustifiable as prohibition in any other particular; in the latter, it is at all events nugatory to do so; for there is no occasion for legal interference, where pecuniary circumstances alone are an effectual bar. Every irregularity of this kind works its own punishment. It has been said, that it is the duty of the government to check those habits, which have a tendency to lead people into expenses exceeding their means; but it will be found, that such habits can only be introduced by the example and encouragement of the public authorities themselves. In all other circumstances, neither custom nor fashion will ever lead the different classes of society into any expenses, but what are suitable to their respective means.
[16.]The weaker sex is, from the very circumstance of inferiority in strength of mind, exposed to greater excess both of avarice and prodigality.
[17.]I remember being once in the country a witness of the numberless minute losses that neglectful housekeeping entails. For want of a trumpery latch, the gate of the poultry-yard was forever open: there being no means of closing it externally, it was on the swing every time a person went out; and many of the poultry were lost in consequence. One day a fine young porker made his escape into the woods, and the whole family, gardener, cook, milk-maid, &c., presently turned out in quest of the fugitive. The gardener was the first to discover the object of pursuit, and in leaping a ditch to cut off his further escape, got a sprain that confined him to his bed for the next fortnight: the cook found the linen burnt that she had left hung up before the fire to dry; and the milk-maid, having forgotten in her haste to tie up the cattle properly in the cow-house, one of the loose cows had broken the leg of a colt that happened to be kept in the same shed. The linen burnt and the gardener's work lost, were worth full twenty crowns; and the colt about as much more: so that here was a loss in a few minutes of forty crowns, purely for want of a latch that might have cost a few sous at the utmost; and this in a household where the strictest economy was necessary, to say nothing of the suffering of the poor man, or the anxiety and other troublesome incidents. The misfortune was to be sure not very serious, nor the loss very heavy; yet when it is considered, that similar neglect was the occasion of repeated disasters of the same kind, and ultimately of the ruin of a worthy family, it was deserving of some little attention.
[18.]Stewart, Essay on Pol. Econ. book ii. c. 20. The same writer has in an other passage observed, that every thing not absolutely necessary to bare existence is a superfluity.
[19.]The English term luxury has a much more sensual meaning than the French luxe, and seems to comprise both luxe and luxure, the luxus, or luxuria, and luxuries of the Latin writers.
[20.]Though it is not every subject that allows equal scope to poetical genius, it does not seem, that error affords a finer field than truth. The lines of Voltaire on the system of the world, and on the discoveries of Newton regarding the properties of light, are strictly conformable to the rules of science, and nowise inferior in beauty to those of Lucretius on the fanciful dogmas of the Epicurean school. But if Voltaire had been better acquainted with the principles of political economy, he would never have given utterance to such sentiments as the following:
The progress of science compels those who covet literary fame, to make themselves acquainted with general principles at the least; without a close adherence to truth and nature, there is little chance of permanent reputation, even in the poetical department.
La Fontaine, Avantage de la Science.
[22.]There are other circumstances that contribute to veil the residence of the court in an atmosphere of human misery. It is there, that personal service is consumed by wholesale; and that is of all things the most rapidly consumed, being, indeed, consumed as fast as produced. Under this denomination, is to be comprised, the agency of the soldiery, of menial servants, of public functionaries, whether useful or not, of clerks, lawyers, judges, civilians, ecclesiastics, actors, musicians, drolls, and numerous other hangers-on, who all crowd towards the focus of power and occupation, civil, judicial, military, or religious. It is there also, that material products seem to be more wantonly consumed. The choicest viands, the most beautiful and costly stuffs, the rarest works of art and fashion, all seem emulous to reach this general sink, whence little or nothing ever emerges.
[23.][About 140,000 dollars. Some English ladies wear jewels of greater value; but some read the passage in Pliny Quadringenties, instead of Quadragies Sestertium. This would make the jewels of Paulina worth 1,400,000 dollars; the more probable sum.] American Editor.
[24.]In favour of luxury, the following paradoxical argument has been advanced; for what is too ridiculous to be hazarded in such a cause? "That since luxury consumes superfluities only, the objects it destroys are of little real utility, and therefore the loss to society can be but small." There is this ready answer: the value of the objects consumed by luxury must have been reduced by the competition of producers to a level with the charges of production, wherein are comprised the profits of the producers. Objects of luxury are equally the product of land, capital, and industry, which might have been employed in raising objects of real utility, had the demand taken that direction; for production invariably accommodates itself to the taste of the consumers.
[25.]Although the capitalist and landholder receive their interest and rent originally in the shape of money, and have, therefore, no occasion to go through any previous act of exchange, to obtain wherewithal to pay the tax, yet such a previous exchange must have been effected by the adventurer, who turns the land or capital to account. The effect is precisely the same, as if the rent or interest had been paid in kind; that is, in the immediate products of the land or capital; and the landholder or capitalist had paid the tax either by the direct transfer of part of those products, or by first selling them, and afterwards paying over the proceeds. On this subject, vide suprà, Book II. chap. 5, for the mode in which revenue is distributed amongst the community.
[26.]Dr. Hamilton, in his valuable tract upon The National Debt of Great Britain, illustrates the absurdity of the position here attacked, by comparing it to the "forcible entry of a robber into a merchant's house, who should take away his money, and tell him he did him no injury, for the money, or part of it, would be employed in purchasing the commodities he dealt in, upon which he would receive a profit." The encouragement afforded by the public expenditure is precisely analogous.
[27.]It is mere usurpation in a government, to pretend to a right over the property of individuals, or to act as if possessing such a right; and usurpation can never constitute right; although it may confer possession. Were it otherwise, a thief, who had once, by force or fraud, obtained possession of another man's property, could never be called upon to make restitution, when overpowered and taken prisoner, for he might set up the plea of legitimate ownership.
[28.]The reader will readily perceive, that this and many other passages, were written under the pressure of a military despotism, which had assumed the absolute disposal of the national resources, and suffered no one to express a doubt of the justice and policy of its acts.
[29.]Fenelon, Vauban, and a very few more, of the most distinguished talent, had a confused idea of the ruinous tendency of this system; but they failed in impressing the rest of the world with the same conviction; for want of just notions on the subject of the production and consumption of wealth. Thus Vauban, in his Dixme royale, says, 'the present misery of France is attributable, not to the rigour of the climate, the character of the inhabitants, or the barrenness of the soil: for the climate is most favourable, the people active, diligent, dexterous, and numerous: but to the frequency and long continuance of war, and the ignorance and neglect of economy.' Fenelon had expressed the same sentiments in several admirable passages of his Telemaque, but they passed for mere declamation, as well they might; for he was not qualified to prove their truth and accuracy.
[30.]When Voltaire tells us, speaking of the superb edifices of Louis XIV., that they were by no means burthensome to the nation, but served to circulate money in the community, he gives a decisive proof of the utter ignorance of the most celebrated French writers of his day upon these matters. He looked no further than the money employed on the occasion; and, when the view is limited to that alone, the extreme of prodigality exhibits no appearance of loss; for money is, in fact, an item, neither of revenue, nor of annual consumption. But a little closer attention will convince us of the fallacy of this position, which would lead us to the absurd inference, that no consumption whatever has occurred within the year, whenever the amount of specie at the end of it is found to be nowise diminished. The vigilance of the historian should have traced the 167 millions of dollars expended on the chateau of Versailles alone, from the original production by the laborious efforts of the productive classes of the nation, to the first exchange into money, wherewith to pay the taxes, through the second exchange into building materials, painting, gilding, &c. to the ultimate consumption in that shape, for the personal gratification of the vanity of the monarch. The money acted as a mere means of facilitating the transfers of value in the course of the transaction; and the winding up of the account will show, a destruction of value to the amount of 167 millions of dollars, balanced by the production of a palace, in need of constant repair, and of the splendid promenade of the gardens.
[31.]In the execution of the national military enterprise, two different values pass through the hands of the government or its agents: 1. The value paid in taxes by the public at large: 2. The value received in supplies and services from the parties affording them. For the first of these no return whatever is made; for the second, an equivalent is paid in wages or purchase-money. Wherefore, there it has no ground for saying that the government refunds with one hand what is received with the other; that the whole transaction is a mere circulation of value, and causes no loss to the nation; for the government returns but one, where it receives two; the loss of the other half falls upon the community at large. Thus, the national, being but the aggregate of individual wealth, is diminished to the extent of the total consumption of the government, minus the product of the public establishment; as we shall presently see more in detail.
[32.]It has been seen in the concluding chapter of Book II. that, inasmuch as population is always commensurate with production, the obstruction of the progressive multiplication of products is a preventive check to the further multiplication of the human race; and that the waste of capital, the extinction of industry, and the exhaustion of the sources of production, amount to positive decimation of those in actual existence. A wicked or ignorant administration may, in this way, be a far more destructive scourge, than war with all its atrocities.
[33.]By government, I mean, the ruling power in all its branches, and under whatever constitutional form; it would be wrong to limit the term to the executive branch alone; the first enactment of a law is as much an act of authority, as its subsequent enforcement.
[34.]The consumption of a nation may undoubtedly exceed its aggregate annual revenue; but we can hardly suppose that of Great Britain to have done so; for she has evidently been advancing in opulence, up to the present time, whence it may be inferred, that her consumption, at the very utmost, only equals her revenue. Gentz, who will hardly be accused of underrating the financial resources of that country, estimated her total annual revenue at no more than two hundred millions sterling; Dr. Beeke at two hundred and eighteen millions, inclusive of one hundred millions for the revenues of industry. Granting her to have made some further progress since those estimates were made, and that her total revenue in 1813 had advanced to two hundred and twenty-four millions, we are told by Colquhoun, in his Wealth, Power, and Resources of the British Empire, that her public expenditure in that year amounted to one hundred and twelve millions. By this statement it should seem, that her public expenditure then amounted to the half of the total expenditure of the nation! Moreover, the expenses of her central government do not include all her public charges; there are to be added, county and parish rates, poor rates, &c. &c. The business of government might be conducted, even in extensive empires, at a charge of not more than one per cent. upon the aggregate of individual revenue; but, to attain this degree of perfection, a vast improvement is still requisite in the department of practical policy.*
[35.]Esprit des Lois, liv. xxxi. c. 18.
[36.]Memoires du Prince Eugene par luimème, p. 187. The authenticity of this work has been contested, as well as the Testament Politique of Richelieu. If not themselves the authors, they must at least have been men of equal capacity, of which there is still less probability.
[37.]He contrived to meet the charges of the American war, without the imposition of any additional taxes. He has been reproached, indeed, with having incurred heavy loans; but it is obvious, that, so long as he found means to pay the interest upon them without fresh taxation, they were nowise burthensome upon the nation; and that the interest must have been defrayed by retrenchment of the expenditure.
[38.]Raynal. Histoire des Etab. des Europ. dans les Indes, tom. ii. p. 36
[39.]The expressions, credit is declining, credit is reviving, are common in the mouths of the generality, who are, for the most part, ignorant of the precise meaning of credit. It does not imply confidence in the government exclusively; for the bulk of the community have no concern with government, in respect to their private affairs. Neither is it exclusively applied to the mutual confidence of individuals; for a person in good repute and circumstances, does not forfeit them all at once; and, even in times of general distress, the forfeiture of individual character is by no means so universal, as to justify the assertion, that credit is at an end. It would rather seem to imply, confidence in future events. The temporary dread of taxation, arbitrary exaction, or violence, will deter numbers from exposing their persons or their property; undertakings, however promising and well-planned, become too hazardous; new ones are altogether discouraged, old ones feel a diminution of profit; merchants contract their operations; and consumption in general falls off, in consequence of the decline and the uncertainty of individual revenue. There can be no confidence in future events, either under an enterprising, ambitious, or unjust government, or under one, that is wanting in strength, decision, or method. Credit, like crystallization, can only take place in a state of quiescence.
[40.]A mere sketch is all that can be expected in a work like the present: a complete treatise on government would be equally appropriate with a survey of the arts, when it became incidentally necessary to touch upon the processes of manufacture. Yet, either would be a valuable addition to literary wealth.
[41.]This rule must be taken with some qualification. The habitual largesses of corn, distributed by the emperors to the people of ancient Rome, were material objects of public consumption. So likewise the provisions of all kinds consumed in hospitals and prisons, and the fireworks used on occasions of public display or rejoicing, for the amusement of the people at large.
[42.]It should be recollected, however, that they were at no charge of defence from external attack, except in respect to the savage tribes of the interior.
[43.]An example occurs to me of a city of France, whose municipal administration was both mildly and efficiently conducted before 1789, at a charge of 1000 crowns per annum only, but under the imperial government, though it cost 30,000 fr. (5,580 dollars) afforded no security against the caprice and arbitrary will of the sovereign.
[44.]Several times during the last century the Molinist priesthood refused to execute their clerical duties in favour of the Jansenists, in spite of all the government could do; on the pretence, that it was better to obey the divine command as conveyed by the voice of the Pope, than that of any human authority.*
[45.]The Greeks, until the second Persian war, and the Romans, until the siege of Veii, regularly made their military campaigns in that interval. Nations of hunters or shepherds, that pay little attention to the arts, and none to agriculture, like the Tartars and Arabs, are less circumscribed in time, and can prosecute their warlike enterprises in any quarter, that promises booty, and furnishes pasturage. Hence the vast area of the conquests of Attila, Genghis Khan, and Tamerlane and of the Moors and the Turks.
[46.]It has been calculated that every soldier, brought into the field by Great Britain, during her last war with America, cost her twice as much as one on the continent of Europe. And the other charges of warfare must of course be aggravated by the distance in an equal ratio.
[47.]This is too generally expressed. Where security from external attack is only to be had by means of a professional soldiery, the soldier is a productive agent—productive of the immaterial product, security from external attack, than which, under certain circumstances, none can be more valuable. Translator.
[48.]Those who deny the progressive influence of human reason must have studied history to very little purpose. The perfidy and cruelty of war have considerably abated, in Europe, more than in Asia or America, and most of all amongst the most polished of the European nations. The ungenerous character of some recent military enterprises roused so much public indignation, as to make them recoil upon the projectors with ruinous violence.
[49.]I am here speaking of the only sure reliance in an enlightened age. A people, that has nothing to lose by a change of domination, may defend itself with the most determined gallantry. The Mussulman will rush on certain destruction, in defence of a prince and a faith, that are neither of them worth defending. But political and religious prejudice will sooner or later fall to the ground; and leave mankind to seek for some more reasonable object of devotion.
[50.]Should the expected success attend the attempt to naturalise in Europe the flax of New Zealand, which is greatly superior to that of Europe in the length and delicacy of the fibre, as well as in the abundance of the crop, it is possible that fine linen may be produced at the rate now paid for the coarsest quality; which would greatly improve the cleanliness and health of the lower classes.
[51.]Book II. chap. 7. sect. 2.
[52.]What was denominated an University, under the reign of Napoleon, was a still more mischievous institution; being, in fact, but a most expensive and vexatious contrivance, for depraving the intellectual faculties of the rising generation, by substituting, in the place of just and correct notions of things, opinions calculated to perpetuate the political slavery of their country.
[53.]["It is chiefly," observes Dugald Stewart, "in judging of questions coming home to their business and bosoms, that casual associations lead mankind astray; and of such associations, how incalculable is the number arising from false systems of religion, oppressive forms of government, and absurd plans of education. The consequence is, that while the physical and mathematical discoveries of former ages present themselves to the hand of the historian, like masses of pure and native gold, the truths which we are here in quest of may be compared to iron, which although at once the most necessary and the most widely diffused of all the metals, commonly requires a discriminating eye to detect its existence, and a tedious as well as nice process, to extract it from the ore."
[54.]Under this head, I would include, the fundamental parts of knowledge in every department, and the familiar instruction adapted to each specific calling, respectively; such as would impart at a cheap rate to the hatter, the metal-founder, the potter, the dyer, &c., the general principles of their respective arts. Works of this kind keep up a constant channel of communication between the practical and theoretical branches, and enable them to profit mutually by each other's experience.
[55.]This can only be true where the demand for such works is limited. In England, works of instruction are probably amongst the most profitable to the authors. Translator.
[56.]According to the new method, introduced by Lancaster, and perfected by subsequent teachers, a single master with very little aid of books, pens, or paper, can rapidly and effectually teach reading, writing, and vulgar arithmetic, to five or six hundred scholars at a time. This truly economical result is produced, by taking advantage of the slightest superiority of intelligence of one above another, and directing the motive of emulation, natural to the human breast, towards an useful object. A large school is commonly divided into forms, consisting each of eight children, as nearly equal in advancement as possible, and instructed by a child somewhat more advanced, called the Monitor. These forms again are divided into eight classes; of which the lowest learns to pronounce the letters of the alphabet, and to trace their figures rudely with the finger upon sand spread out upon a flat board; and the highest is able to write upon paper, and to practise the four rules of arithmetic. The children of each form are ranged according to their progress; and whoever cannot give the answer, is immediately superseded by a more apt scholar. As soon as a child is perfected in one class, he is transferred to the next in degree. The lessons are received, sometimes in a sitting posture, and sometimes upright, with slates affixed to the walls. The instruction is thus always accommodated to the age and faculties of the child; it necessarily arrests and rewards his attention; and involves that personal activity, essential to the infant frame. The whole is conducted in a single apartment, and usually under the superintendence of a single master or mistress. The general adoption of this method will probably be for some time opposed by custom and prejudice; but its utility and conformity to the order of nature will ensure its ultimate and universal prevalence.
[57.]I am strongly disposed to say the same of logic. Were nothing taught, but what is consistent with truth and good sense, logic would follow of itself as a matter of course: all the teaching in the world will never make a man a good reasoner, whose notions and ideas of things are unsound and erroneous; and, with the foundation of just notions, he will require no teaching to make him reason well. Just ideas of things are only to be acquired by attentive examination; by taking account of every particular concerning them, and of nothing but what concerns them; which is the object of all knowledge in general, and by no means of logic alone.
[58.]The bad example of a vicious prince is of the most fatal tendency; it is notorious to all the world, and protected and abetted by public authority; and it is sure to be reflected by the subservience of courtiers to the extreme point of imitative servility.
[59.]At Paris, the limitation of relief afforded by the Hospice des Incurables, and those of Petites Maisons, of St. Louis, of Charite, and many others, is of the former kind; the admissions to the Hotel-Dieu, Bicêtre, Saltpétrière, and Enfans-Trouvés, are subject to a limitation of the latter kind. As the number of applicants duly qualified for admission in the establishment first mentioned always exceeds their capacity, the choice must ultimately be decided by favour or interest.
[60.]Yet it is well worth consideration, whether it be not more to the advantage, both of the state and of its pensioners, to maintain them at their own homes upon a fixed income, or to board them out with individuals. The Abbé de St. Pierre, whose mind was ever actively at work for the public good, has estimated the charge of maintaining the invalids in their sumptuous establishment at Paris, to be three times as much as that of their maintenance at their respective homes Annales Polit. p. 209.
[61.]With all this waste of space in the great roads of France, there are in none of them either paved or gravelled foot-ways, passable at all seasons, or stone seats, for the travellers to rest upon, or places of temporary shelter from the weather, or cisterns to quench the thirst; all which might be added with a very trifling expense.
[62.]Book I. chap. 9.
[63.]Book II. chap. 3.
[64.]To say, that if the road were not in existence, the charge of transport could never be so enormous as here suggested, because the transport would never take place at all, and people would contrive to do without the objects of transport, would be a strange way of eluding the argument. Self-denial of this kind, enforced by the want of means to purchase, is an instance of poverty, not of wealth. The poverty of the consumer is extreme, in respect to every object he is thus made too poor to purchase; and he becomes richer in respect to it, in proportion as its price or value declines.
[65.]In lieu of canals, iron rail-roads from one town to another will probably be one day constructed. The saving in the cost of transport would probably exceed the interest of the very heavy expense in the outset. Besides the additional facility of movement, roads of this kind would remedy the violent jolting of passengers and goods. Undertakings of such magnitude can only be prosecuted in countries where capital is very abundant, and where the government inspires the adventurers with the firm assurance of reaping themselves the profit of the adventure.
[66.]Our author seems in this passage to have become a convert to the opinion of Smith, in respect to the civil tribunals of a nation, from which he had expressed his dissent, in former editions. Though arbitration may be a very good mode of settling civil suits, where the parties are both anxious to come to a settlement, and indeed is frequently resorted to, and should always be encouraged; yet it is manifest, that there must be a compulsory tribunal for the obstinate, or refractory. And, since security of person and property is the main object of social institutions, it is but just, that invasion in a particular instance should be repelled and deterred at the public charge. In strict justice, the invader should be held to make good the whole damage; and so he is or ought to be, in the shape of costs, fine, damages, or otherwise. But it is not consistent with equity that the sufferer should be deterred from pursuing his claim, by superadding a proportion of the outlay upon the judicial establishments to the charge of witnesses and agents, which he must necessarily advance, and to the risk of inability in the delinquent, even in the event of ultimate success. Translator.
[67.]What avails it, for instance, that taxation is imposed by consent of the people or their representatives, if there exists in the state a power, that by its acts can leave the people no alternative but consent? De Lolme, in his Essay on the English Constitution, says that the right of the Crown to make war is nugatory, while the people have the right of refusing the supplies for carrying it on. May it not be said, with much more truth, that the right of the people to deny the supplies is nugatory, when the crown has involved them in a predicament that makes consent a matter of necessity? The liberties of Great Britain have no real security, except in the freedom of the press, which rests itself, rather upon the habits and opinions of the nation, than upon legal enactments or judicial decisions. A nation is free, when it is bent on freedom; and the most formidable obstacle to the establishment of civil liberty is the absence of the desire for it.
[68.]By the same reasoning it has been attempted to prove, that luxury and barren consumption operate as a stimulus to production. Yet they are less mischievous than taxation; inasmuch as they redound to the personal gratification of the party himself: whereas, to use the expedient of taxation as a stimulative to increased production, is to redouble the exertions of the community, for the sole purpose of multiplying its privations, rather than its enjoyments. For, if increased taxation be applied to the support of a complex, overgrown, and ostentatious internal administration, or of a superfluous and disproportionate military establishment, that may act as a drain of individual wealth, and of the flower of the national youth, and an aggressor upon the peace and happiness of domestic life, will not this be paying as dearly for a grievous public nuisance, as if it were a benefit of the first magnitude?
[69.]Memoires, liv. xx.
[70.]It is hardly necessary to controvert an opinion, entertained by sovereigns in times past, respecting the property of their subjects. We find Louis XIV. writing in these terms, professedly for the instruction of his son in matters of government: "Kings are absolute lords naturally possessing the entire and uncontrolled disposal of all property, whether belonging to the church or to the laity, to be exercised at all times with due regard to economy, and to the general interests of the state." Œuvres de Louis XIV., Mémoires Hist. A. D. 1666.
[71.]In France, before 1789, the average annual consumption of salt was estimated at 9 lbs. per head in the districts subject to the gabelle, and at 18 lbs. per head in those exempt from that impost. De Monthieu, Influence des divers Impots, p. 141. Thus, taxation in this form obstructed the production of ½ of this article in the districts subjected to it, and reduced to ½ the enjoyment it was capable of affording; to say nothing of the other mischiefs resulting from it; the injury to tillage, to the feeding of cattle, and to the preparation of salted goods; the popular animosity against the collectors of tax, the consequent increase of crime and conviction, and the consignment to the galleys of numerous individuals, whose industry and courage might have been made available to the increase of national opulence.
[72.]Of this, a striking instance is given in a work entitled, Diverses Idées sur la Legislation et l'Administration, par M. C. St. Paul. One of the principal bankers of Paris having died in 1817, the duty on legacies and inheritance was levied upon the aggregate of his credit-account, and not upon the balance, after deducting the debits; and this by virtue of a proviso in the revenue laws, which charges the duty upon the gross estate of a defunct, and not upon the residue after the discharge of the outstanding claims. The danger of fraud upon the revenue in stating the account, is not sufficient to justify the exaction of more than is fairly due.
[73.]Œuvres de Turgot, tom. i. p. 170. The accounts of the farmers-general were minutely stated, and rigidly investigated, because the crown participated in their profits.
[74.]Essai Pol. sur la Nouvelle Espagne, liv. v. c. 12.
[75.]This position is further confirmed by an instance mentioned in a letter, addressed in 1785, by the then Marquis of Lansdowne to the Abbé Morellet, stating, 'that in respect to the article of tea, the good effect of the reduction of duty had surpassed all expectation. The amount of sale had advanced from 5,000,000 lbs. to 12,000,000 lbs., in spite of many unfavourable circumstances, besides which, smuggling had been so much crippled, that the public revenue had been increased to a degree that astonished every body.'
[76.]This doctrine has been combated by Ricardo, in his Principles of Political Economy and Taxation. That writer maintains, that since the amount and the product of industry are always proportionate to the quantum of the capital engaged in it, the extinction of one branch by taxation must needs be compensated by the product of some other, towards which the industry and capital, thrown out of employ, will naturally be diverted. I answer, that whenever taxation diverts capital from one mode of employment to another, it annihilates the profits of all who are thrown out of employ by the change, and diminishes those of the rest of the community; for industry may be presumed to have chosen the most profitable channel. I will go further, and say, that a forcible diversion of the current of production annihilates many additional sources of profit to industry. Besides, it makes a vast difference to the public prosperity, whether the individual or the state be the consumer. A thriving and lucrative branch of industry promotes the creation and accumulation of new capital; whereas, under the pressure of taxation, and accumulation of new capital, it ceases to be lucrative; capital diminishes gradually instead of increasing; wealth and production decline in consequence, and prosperity vanishes, leaving behind the pressure of unremitting taxation. Ricardo has endeavoured to introduce the unbending maxims of geometrical demonstration; in the science of political economy, there is no method less worthy of reliance.
[77.]Chap. V. sect. I.
[79.]Under the system of Napoleon, which made civilization retrograde to this, as well as in most other particulars, the charges of collection in which must be included the charge of privation and the irrecoverable arrears, were much more considerable; but the full extent of the mischief he caused is not yet ascertained.
[80.]Necker reckons the corvée at four millions of dollars only; but probably he takes account of nothing, but the value the day-labour exacted; and does not notice the injury resulting from this method of supplying the public necessities.
[81.]Wealth of Nations, book v. c. 2. It has been objected, that a progressive scale of taxation presents the disadvantage of operating as a penalty to deter activity and frugality from the accumulation of capital. But it must be obvious, that taxation of all kinds subtracts a portion only, and generally a very moderate portion, of the addition made to the fortune of an individual; so that every one has a much stronger inducement to invite, than penalty to deter, accumulation. If a person had to pay 40 dollars more in taxes, upon every addition of 200 dollars to his revenue, still he would multiply his enjoyments in a larger ratio than his sacrifices. Vide what is said in Sect. 4. of the same Chapter, on the subject of the land-tax of England. Ibid.
[82.]This is the reason, why it has been found practicable to raise the duty on registration to its present high scale. Were it reduced, the product to the exchequer would probably be equally great; and the nation would enjoy the benefit of greater freedom of circulation, besides experiencing less encroachment upon its capital.
[83.]Taxes upon law proceedings are the most grievous and oppressive that have ever been resorted to, and since the appearance of Mr. Bentham's work on Law taxes, no one, who has read it, can doubt their impolicy. It is said in the Edinburgh Review (vol. 27, page 358.), "that one day Mr. Rose, in Mr. Pitt's presence, took Mr. Bentham aside, and informed him that they had read the pamphlet—that its reasoning was unanswerable—and that it was resolved there should be no more such taxes." "Yet Budget after Budget," remarks the reviewer, "has since been formed, in which those duties have made a part; and Mr. Pitt himself was found to patronize them upon his return to office in 1804." All the arguments ever brought forward in support of this objectionable impost, have been triumphantly refuted by Mr. Bentham, in this work, which it is said in the same Review, "for closeness of reasoning, has not perhaps been equalled, and for excellence of style, has certainly never been surpassed." American Editor.
[84.]In both England and France, premiums are given upon the importation of specific raw materials, with a view to encourage manufacture. This is an error on the opposite side. Upon this principle, instead of a tax on the product of land, a bounty should be given to all who would take the trouble to cultivate, for domestic agriculture furnishes the raw material of most manufactures; as grain in particular, which is transformed, through the mediation of human exertion, into value of various kinds, exceeding that consumed in the process. Customs or duties of import upon any article whatever are equally equitable with direct taxes upon land; both are positive evils; but the lighter the tax, the smaller the injury.
[85.]When it is absolutely necessary to lay a tax upon a particular kind of consumption or industry, which it is desirable not to extinguish altogether, the burthen must be light in the commencement, and increased gradually and cautiously. But if it be desired to repress or annihilate a mischievous class of consumption or industry, the full weight of the tax should be thrown upon it at once.
[86.]The efficacy of the characteristics of punishment has been placed beyond all doubt by Beccaria, in his tract, Dei delitti e delle pene.
[87.]This species of tax is still more iniquitous, because it must fall either upon orphans, or upon parents, who are disposed to submit to personal privations, for the purpose of rearing valuable citizens; because it is heavier in proportion to the number of children, and the degree of privation of the parent; and because it is disproportionate to the means of the individual, poor and rich being taxed alike. A parent of moderate fortune, with one son only, pays as much to the university as all the rest of his taxes together: if he have more sons than one, he is still worse off. Thus was this institution converted by the usurper into an instrument of fiscal extortion, sufficient of itself to have insured the relapse into barbarism, even had it never been made the medium of instilling false ideas or habits of servility. The pretext, of making the profits of private establishments contribute to the expense of compulsory tuition, is by no means satisfactory. Supposing the tuition of the public Lycées to be, of all others, the best calculated to train up useful citizens; and, admitting the justice of compelling a father, or a teacher to his choice, to bring his pupil to the lectures of the authorized professors, still the parties, least in need of this instruction, are those already placed in private establishments of education, and entrusted to teachers of their own selection. It may be for the interest of the community at large, to dispense particular classes of learning gratuitously; but it is the greatest oppression to force learning upon individuals, and make them pay dear for it into the bargain. If any one class in particular ought to defray the charge of moderate gratuitous tuition, it is that, which has no children of its own, and is in the reception of all the benefits of social life, without being subject to all its burthens.
[88.]Lotteries and games of hazard, besides occupying capital unprofitably, involve the waste of a vast deal of time, that might be turned to useful account, and this item of expenditure can never redound to the profit of the exchequer. They have the further mischievous effect of accustoming mankind to look to chance alone for what their own talents or enterprise might attain; and to seek for personal gain, rather in the loss of others, than in the original sources of wealth. The reward of active energy appears paltry beside the bait of a capital prize. Moreover, lotteries are a sort of tax, that, however voluntarily incurred, falls almost wholly upon the necessitous; for nothing, but the pressure of want can drive mankind to adventure, with the chances manifestly against them. The sums thus embarked are, for the most part, the portion of misery; or, what is worse, the fruit of actual crime.
[94.]Not because they affect the tax-payer indirectly; for this circumstance is equally applicable to many items of direct taxation; as, for instance, to the license-tax (patentes,) part of which falls indirectly upon the consumer, who buys of the licensed dealer.
[96.]Garnier, Traduction de Smith, tom. iv. p. 438. According to Arthur Young, the stamp-duties in his time cost but 5,691l. in the collection, upon the receipt of 1,330,000l.; which is less than ½ per cent.
[97.]Suprà, Book II. chap. I.
[98.]The position, that the interest of the capitalist and the rent of the landlord are thereby lowered, however paradoxical it may appear, is nevertheless quite true. It may be asked, why should the capitalist, who makes the advance to the manufacturer, or the landlord, whose land he occupies, lower their demands, in consequence of a portion of the product being subtracted by taxation? But is no allowance to be made for consequent delay of payment, claims of allowances, failures, and legal expenses? All, or at least a portion, of which must fall upon the landlord and capitalist: and often without any suspicion on their part, that they are thus made to participate in the burthen. In a complex social organization the pressure of taxation is often imperceptible.
[99.]Vide Suprà, Book I. chap. 4. for the explanation of the mode, in which the land-holder concurs in production by the advance of his land; and must, therefore, be included amongst the productive classes.
[100.]The cultivation need never be abandoned altogether, until taxation takes more than the whole surplus product applicable to the payment of rent; it is then worth nobody's while to cultivate at all; for not only could the proprietor receive nothing, the whole being appropriated by the state; but the farmer would be compelled to pay to the state a higher rent, than he could afford.
[101.]There is this peculiarity attending the products of agricultural industry, viz. that their average price is not raised by growing scarcity, because population is sure to decline co-extensively with the declining supply of human aliment; so that the demand necessarily diminishes equally with the supply. Thus it is not found, that wheat is dearer in those countries where great part of the land is thrown out of tillage, than where it is all in a high state of cultivation. In Spain, wheat is not now dearer, than in the time of Ferdinand and Isabella, though it is there produced in much less abundance; for the number of mouths to be fed is also much less. On the contrary, the lands of both England and France were less cultivated in the middle ages than at the present day; and their product of grain less abundant; yet it does not appear, from a comparison of other values, that it was then much dearer than at present. The product and the population were both greatly inferior; and the slackness of demand counter-balanced the slackness of supply.
[102.]It is a mistake to suppose, that the tax must bear equally upon the proprietor and the farmer, who finds the requisite capital and industry; for taxation can have no effect, either in reducing the quantity of land capable of cultivation, or in multiplying the number of farmers, able and willing to undertake it; and, if neither supply nor demand in this branch be varied, the ratio of the rent must needs remain unaltered likewise.
[103.]The economists were quite correct in their position, that a land or territorial tax falls wholly upon the net product, and consequently, upon the proprietors; but they were wrong in extending the doctrine so far as to assert, that all other taxes were defrayed out of the same fund.
[104.]The French institute, which awarded the prize of merit to an Essay of M. Canard, in support of this doctrine.
[105.]The duty on the import of cotton into France was, in 1812, as high as 200 dollars per bale, one bale with another. There were several manufactories averaging a consumption of two bales per day; and as the amount of duty was a dead outlay, during the whole interval between the purchase of the raw material and the realization of the manufactured product, which may be taken at twelve months, they must each have required an additional capital of 120,000 dollars more than would have been requisite but for the tax; the interest of which they must have charged to the consumer, or have paid out of their own profits. The whole of it was so much addition of price to the French consumer, and aggravation of the pressure of taxation, unproductive of a single additional dollar to the public revenue. The heaviest of the national burthens of that period were those that made the least figure in the annual budget of the ministry: the people suffered, in very many instances, without knowing the nature of the grievance, as in the example, just cited.
[106.]Book II. chap. 3.
[107.]For the reason already stated, viz. that purchases, made with the proceeds of taxation, are acts of exchange, and not of restitution.
[108.]This ground of apprehension is certainly just. It has been doubted by many political theorists, whether the total remission of taxation would operate to improve the condition of the inferior productive classes: inasmuch, as all that is now paid into the public exchequer, would quickly be appropriated by the classes, who should happen to be in possession of those sources and means of production, which are capable of exclusive appropriation; and the owners of mere personal agency would nowise benefit. But it should be observed, that private persons have an immediate personal interest in making the most of their property; and will, on their own account, so conduct themselves, as to promote their own advantage, which is the advantage of the public also, where equality of personal right prevails. Wherefore, the strongest impulse of private cupidity can never operate to retard the advance of productive power and national wealth, or to make them retrograde; but just the contrary. Thus, although the present condition of the mere labourer might not be improved, his means of bettering his condition would be enlarged, by the growing increase of wealth, and by greater freedom of personal agency. The extortion of private cupidity, unaided by authority, must, for its own sake, regulate itself by the ability of the object of it: but that of public authority is inexorable, and is restrained by no consideration of immediate personal interest. Besides, personal suffering, occasioned by the hard-heartedness of primate task-masters, is not so strong an incentive of odium against public authority, as where that authority is itself the ostensible task-master. Translator.
[109.]Taille; for the explanation of this tax, vide Wealth of Nations, book v. c. 2. art. 2. Translator.
[110.]Wealth of Nations, book v. c. 2. art. I.
[111.]Forbonnois, Principes et Observ. &c. tom. ii. p. 247.
[112.]Vide App. A.
[113.]In the next section it will be explained how an unredeemable debt may be extinguished by purchase at the market price.
[114.]Considerations sur les Advantages de l'Existence d'une Dette publique, p. 8.
[115.]The transferable nature of these securities does not invest them with the properties of money, since they do not act in that capacity. But the use of convertible paper, as money, operates to create a positive addition to the total national capital; because, but for their agency in the transfer of value in general it must be executed by specie, or some equally substantial item of capital. Government debentures of stock require money to circulate them, instead of acting themselves as money.
[116.]In a note, here subjoined, the author stated the amount of the British national debt, in the year 1815, on the authority of a speech made in parliament in February, of that year, by the chancellor of the exchequer, Mr. Vansittart. We now have it in our power, in place of the note in question, to furnish the reader with an exact statement of the British national debt, from its commencement, at the revolution of 1688, to the 5th of January, 1832. The abstract we give is extracted from the Tables to Part II. of "Pebrer on the Taxation, Debt, Capital, Resources, &c. of the whole British Empire," a work which we before had occasion to refer to, and of the highest statistical authority.
[117.]On the National Debt of Great Britain. 8vo., Edinburgh, 1813.
[118.]In England and the United States they are not nearly so high in proportion: but the ratio is even higher in some states that shall be nameless.
[119.]Colquhoun, Wealth, Power, and Resources of the British Empire, 4to. London, 1814. Stokes, Revenue and Expenditure of Great Britain, London, 1815. Should a continuance of peace enable her to square her income with her annual expenditure, inclusive of the interest of her debt, it would still afford no relief, but merely arrest the further progress of the evil.
[120.]Economy in the national expenditure is the only thing that can mitigate the pressure of taxation upon the British nation; yet were economy enforced, how is that system of corruption to be upheld, through which the interest of the minister of the day reglarly prevails over that of the nation?
[34.]The consumption of a nation may undoubtedly exceed its aggregate annual revenue; but we can hardly suppose that of Great Britain to have done so; for she has evidently been advancing in opulence, up to the present time, whence it may be inferred, that her consumption, at the very utmost, only equals her revenue. Gentz, who will hardly be accused of underrating the financial resources of that country, estimated her total annual revenue at no more than two hundred millions sterling; Dr. Beeke at two hundred and eighteen millions, inclusive of one hundred millions for the revenues of industry. Granting her to have made some further progress since those estimates were made, and that her total revenue in 1813 had advanced to two hundred and twenty-four millions, we are told by Colquhoun, in his Wealth, Power, and Resources of the British Empire, that her public expenditure in that year amounted to one hundred and twelve millions. By this statement it should seem, that her public expenditure then amounted to the half of the total expenditure of the nation! Moreover, the expenses of her central government do not include all her public charges; there are to be added, county and parish rates, poor rates, &c. &c. The business of government might be conducted, even in extensive empires, at a charge of not more than one per cent. upon the aggregate of individual revenue; but, to attain this degree of perfection, a vast improvement is still requisite in the department of practical policy.*
[42.]It should be recollected, however, that they were at no charge of defence from external attack, except in respect to the savage tribes of the interior.
[44.]Several times during the last century the Molinist priesthood refused to execute their clerical duties in favour of the Jansenists, in spite of all the government could do; on the pretence, that it was better to obey the divine command as conveyed by the voice of the Pope, than that of any human authority.*
[*]We copy from a Treatise on the Taxation of the British Empire, by R. Montgomery Martin, published in London, in 1833, the following note:—"Lord Liverpool said, in 1822, that the annual income of Great Britain, after making allowances for the reduction of rents, and the diminution of the profits of trade since the war, may be stated to be from 250,000,000l. to 280,000,000l. sterling. Now if the population of Great Britain in 1833 be taken in round numbers at 16 millions, and the average expenditure for each individual be so low as one shilling per day, or 18l. 5s. a-year, the annual income would be 452,000,000l. and double that sum if the average expenditure of each individual were taken at two shillings per day, which would not be an unreasonable calculation: applying the same rule to Ireland, but giving the average expenditure of each individual so low as sixpence a-day, on a population of eight millions, the annual income of Ireland would be 73,000,000l. Thus the annual income of the United Kingdom in 1833, is upwards of 500,000,000l. sterling on the lowest computation."Estimating, on such authority, the annual income of Great Britain and Ireland at 500 millions sterling, we perceive that this income, even after the payment of the taxes, enormous as they have been, is much greater now than at any former period of her history; and there therefore can be no doubt that a continued augmentation of the national capital must take place, even in defiance of many obstructions. The public expenditure, too, of the same kingdom, is in course of gradual reduction. During the late war, as has been observed by our author, on the authority of Colquhoun, the public expenditure of the year 1813 amounted to 112 millions, whereas in 1830 it was about 34 millions, in 1831, 33 millions, and in 1832 not so much by 100,000l. sterling. American Editor.
[*]At the period to which our author here refers, namely, the year 1806, the actual expenditure by the government of the United States, for that year, according to the report of the Secretary of the Treasury, was 15,070,093 dollars 97 cents, and of this amount, according to the same authority, 8,989,884 dollars 61 cents, was on account of the extinguishment of the principal and interest of the public debt. The population of the United States, for the same year, was only about 6 millions; for, according to the official enumerations, the population, in the year 1800, was 5,305,925, and in the year 1810, was 7,239,814. Now the charges of the government, exclusive of the payment of the public debt, it will be seen, amounted then to 6,080,209 dollars 36 cents, or an expenditure equal to more than treble the amount given by our author.The whole public expenditure of the people of the United States necessarily embraces the local disbursements of the different states, as well as the expenditure of the general government. Of the former, we have, as yet, no means of presenting our readers with any accurate or official account, and we will not venture to indulge in any loose estimates. Of the latter, however, we are enabled to furnish a tabular view, extracted from the letter of the Secretary of the Treasury to the Chairman of the Committee of the House of Representatives on Retrenchment, April 9, 1830, and from the subsequent annual Treasury Reports, which will exhibit an authentic and accurate view of the receipts and expenditures of the Federal Government, from the 4th of March, 1789, the period of its commencement, to the 31st of December, 1832, the last date to which the accounts have been all made up.We also subjoin the last official revision of the population returns of the several states and territories, according to the five enumerations of the years 1790, 1800, 1810, 1820, and 1830.
[*]This inconvenience can arise only in countries, where there is an exclusive national church, subjected, in matters of doctrine and discipline, to an independent or external superior: as in countries embracing the faith of Rome. But there is another inconvenience, that has been much dwelt upon by an eminent divine of the Scottish church; viz. the inconvenience of directing the attention of the priesthood from its clerical to civil functions, and, by a confusion of such different duties, abridging the benefit of division of labour. Translator.
[*]The denial went to the whole of what is called internal taxation; the admission, which appears on the part of the American agents to have been a concession for the sake of peace, went no farther than to external taxes for the regulation of trade. And even this concession on the part of some of the agents was very soon retracted, and the right of taxation denied in toto. Ibid. vol. i. passim. Translator.