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William Cobbett opposes the government bail-out at taxpayer expence of those who lent money to the state (1815)

The English radical William Cobbett (1763-1835) did not believe that the British taxpayer should bail out those who had lent money to the British government which had been so profligate in its spending during the wars against Napoleon:

These conferences will not, I trust, as some persons appear to suppose, lead to any application of the public money, that is to say, of the taxes, to the assisting, as it is called, of these Loan-holders. The Loan-holders, or Loan-makers, have never been known to return to the people any part of the immense profits, which they, from time to time, have made upon their loaning transactions. We see, from one of the above-quoted passages, that Sir Francis Baring has gained enough to lay out half a million of money in freehold estates. Great part of this was, it is reasonable to suppose, gained by the many loans to government, in which he has been at different times concerned. Well, then, if these profits, these immense gains, be considered as fairly belonging to him, or his heirs and successors; and, if we view the not less immense gains of Goldsmidt in the same light; if the gains be theirs, ought not the loss to be theirs also? Upon any other principle, what a sort of bargain would a government loan be? A bargain where all the chance of gain would be on one side, and all the chance of loss on the other.

These conferences will not, I trust, as some persons appear to suppose, lead to any application of the public money, that is to say, of the taxes, to the assisting, as it is called, of these Loan-holders. The Loan-holders, or Loan-makers, have never been known to return to the people any part of the immense profits, which they, from time to time, have made upon their loaning transactions. We see, from one of the above-quoted passages, that Sir Francis Baring has gained enough to lay out half a million of money in freehold estates. Great part of this was, it is reasonable to suppose, gained by the many loans to government, in which he has been at different times concerned. Well, then, if these profits, these immense gains, be considered as fairly belonging to him, or his heirs and successors; and, if we view the not less immense gains of Goldsmidt in the same light; if the gains be theirs, ought not the loss to be theirs also? Upon any other principle, what a sort of bargain would a government loan be? A bargain where all the chance of gain would be on one side, and all the chance of loss on the other. If the loan-maker gained, well; but, if he lost, the people must make good his loss. Is this the way that dealings take place between man and man? Is there any one of you, Gentlemen, who would sell a load of wheat to a miller, leaving him the chance of gaining by it, and, if he happened to lose by it, would give him back again the amount of his loss? Oh, no! You would keep the whole of the price of your wheat, and leave the miller to console himself in counting his gains upon other occasions.

But, if contrary to my wish and expectation, “relief,” as it is called, were to be given to these persons, in what way could it be done? The loan is made and ratified in virtue of an Act of Parliament. There can be no alteration made in the bargain; there can be no change in the terms of payment; there can be no abatement in the demands of the government, without another Act of Parliament, previously passed. Those who made the loan must pay the 14 millions into the King’s Exchequer, let what will be their loss upon the transaction, unless indeed, the whole of their property, real and personal, be insufficient for the purpose; and, in that case, the people have a right to expect, that the government will take care to hold back from the loan-makers, or to recover from them, so much of the new Stock as will not leave the loan-makers a farthing in the people’s debt.

Loyalty Loan. During Pitt’s Anti-jacobin War, which, as you will bear in mind, was to succeed by producing the destruction of the paper-money in France; during that war, which was to diminish the power of France, and to restore the Bourbons by the means of ruin to the French finances; during that famous war, which was to plunge, and which, as Pitt told us, did plunge, France “into the very gulph of Bankruptcy;” during that renowned war, there was what was called a “LOYALTY LOAN.” People were invited in the name of loyalty, to come forward and lend their money to the government, for the purpose of carrying on the Anti-jacobin war with vigour; and, at the same time, no very unintelligible hints were given, in some of the public prints, that those who had it in their power to lend, and did not lend, upon this occasion, were deficient in point of loyalty, an imputation not very pleasant at any time, and, at the time to which we are referring, singularly inconvenient. The Loyalty Loan was accomplished; but, owing to some cause or other, it did not prove to be a profitable concern for the lenders; and, as in the case of the present loan, as far as it has gone, the loan fell to a discount, and a loss was sustained upon it. Such loss, one might have expected, would have been not only contentedly, but gladly, sustained, as a sacrifice upon the altar of loyalty; and this, it was said by Pitt, would have been the case, but that he and his associates in the ministry, did not think it wise to suffer loyalty so disinterested to experience any loss. An act, therefore, was passed for making good to the lenders whatever they would otherwise have lost by their ardent affection for their king and country, and loyalty was thus prevented from costing them any thing.

About this Quotation:

Cobbett was a vehement critic of the British government’s costly war against Napoleon because it introduced what he called a “Paper-Money System” to fund the war. The Bank of England suspended payment of specie (gold) in 1797 and replaced it with a paper currency which depreciated in value. Cobbett realised that this depreciation harmed the ordinary working people of England who saw their wages steadily lose purchasing power. This caused greatest hardship among the labouring poor whom he championed in his writings. In this quotation he discusses the problem of repaying those who lent money to the government. The Loan-holders did not want to be paid back in paper money which had depreciated in value but wanted the government, that is the taxpayers, to repay the loans at the higher pre-devalued rate. Cobbett argued that only those who were forced to lend money to the state should be recompensed. All others should accept the risk that lending money to a profligate government entails. For further information see David Ricardo on the Bullion Controversy and James Gillray’s cartoons on war and taxes.

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