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chapter eight: On Property in Public Funds - Benjamin Constant, Principles of Politics Applicable to All Governments [1815]

Edition used:

Principles of Politics Applicable to a all Governments, trans. Dennis O’Keeffe, ed. Etienne Hofmann, Introduction by Nicholas Capaldi (Indianapolis: Liberty Fund, 2003).

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chapter eight

On Property in Public Funds

The present situation of the great states of Europe has created in our times a new kind of property, that of public funds. This property does not at all tie its possessor to the soil, as does landed property. It demands neither assiduous work nor difficult speculations, like business property. It does not suppose distinguished talents, like the property we have termed intellectual.

The state’s creditor is interested in the wealth of his country only as any creditor is in the wealth of his debtor. Provided the latter pays him, he is satisfied, and the dealings whose purpose is to assure his payment always seem fair enough, however costly they may be. The right he has all the time to sell his holding makes him indifferent to the probable but distant chance of national ruin. There is not a corner of land, not a manufacture, not a source of production whose impoverishment he does not contemplate with insouciance, as long as there are other resources which defray the payment of his income and which sustain the market value of his capital in the public mind.15

Some writers have considered the establishment of the public debt as a cause of prosperity. Among the sophisms with which they have propped up this bizarre opinion, they have got across a consideration well tuned to seduce governments, namely that a State’s creditors are the natural supports of government. Associated with its fortunes, they have to defend it with all their might, as the sole guarantee of the capital due to them. What seems true to me is that in all circumstances, a lasting force, equally favorable to the worst and best of institutions, has at the very least as many drawbacks as advantages. It has to be added, however, that a body of men which depends [218] on government only out of a desire to see its assets secured is always ready to break off the instant anxiety affects its hopes. Now, is it a good thing for a realm that there should be a group of individuals who consider government only in purely pecuniary terms, sustaining it despite its abuses when it pays them and declaring themselves its bitter enemies the second it stops paying them?

Doubtless the bad faith of the administration and its slackness in the fulfillment of its promises imply a neglect of justice which must extend to many other things. Free governments have always been distinguished by their scrupulous reliability.16 England has never put the creditors of its immense debt through the least worry or delay. America, since the consolidation of its independence, has scrupulously observed the same principles of trustworthiness. Holland has deserved the same praise for as long as it has existed. It is not thus with states subject to despotic governments. The fact is, only free governments can in no circumstances separate their interests from their duties. In this respect, the creditors of national debts must desire like all other citizens that freedom be established and maintained.

I confess to preferring that they be animated by nobler motives. It might happen that a despotic government, aware of the danger of annoying its creditors, came to put all its efforts into pleasing them, and succeeded for a more or less long period in weighing the nation down with excessive taxes. In this case the holders of the national debt, cut off from the rest of the nation, would remain faithful to a government treating only them justly. Property in public funds is of an essentially egotistical and solitary nature, one easily becoming aggressive, because it exists only at others’ expense. By a remarkable effect of the complex organization of modern societies, while the natural interest of any nation is that taxation be lowered to the least possible, the creation of a national debt gives one part of each nation an interest in increasing it.17

We could muster many other arguments, furthermore, [219] against a theory which, in reality, like many other theories, is only an excuse, disguised as a precept. In thinking of the existence of a public debt as morally and politically unfortunate, however, I do envisage it at the same time, in the present situation of society, as an inevitable evil for the large States. Those which habitually make subventions to national expenditure out of taxation are almost always forced to anticipate, and their anticipations constitute debt. Moreover, at the first out-of-the-way happening they are all obliged to borrow. As for those which have adopted the loan system, in preference to the tax system, establishing taxes only to service their loans (today this is virtually the English system), a public debt is inseparable from their existence. Thus to recommend modern States to relinquish the resources that credit offers them would be a pointless exercise. But precisely because public debt creates a new kind of property, whose effects are very different from those of other kinds of property and above all from those of landed property, landed property must be given all the more importance to counterbalance the bad effects of this new kind.

This is what the English constitution has done effortlessly. The owners of a debt of fifteen billion have less political influence than the proprietors of land whose total income would not pay the interest on that debt.18 This explains why it has not corrupted British public-spiritedness. National representation, founded in large part on landed property, has maintained the integrity of that public spirit—an admirable result of well-managed freedom! The outlooks brought about by state rentiers in France conspired to overthrow the French monarchy, because under that monarchy there was no other center of legal and lasting public opinion. The State’s creditors in England identify with national feeling, because political organization, there taking as its base landed property, as its means of action the people’s rights,19 and for its limits the most important individual rights,20 has been able thereby to render salutary [220] the very features of the case whose natural tendencies seem most dangerous.

[15. ]See Constant’s Note E at the end of Book X.

[16. ]See Constant’s Note F at the end of Book X.

[17. ]See Constant’s Note G at the end of Book X.

[18. ]See Constant’s Note H at the end of Book X.

[19. ]See Constant’s Note I at the end of Book X.

[20. ]See Constant’s Note J at the end of Book X.

[E. [Refers to page 180.]]Smith, Livre V, Ch. 3.42

[F. [Refers to page 180.]]I am speaking here of modern states only. The Roman Republic more than once broke away from the rules of justice with respect to its creditors.43 The ancients, however, did not have the same ideas as we either on income or public credit.

[G. [Refers to page 181.]]Administration des finances, Tome II, pp. 378–379.44

[[243] H. [Refers to page 181.]]See A brief examination into the increase of the revenue, commerce and navigation of Great Britain by M. Beeke.45

[I. [Refers to page 181.]]Popular election.

[J. [Refers to page 181.]]Freedom of the press, habeas corpus, juries, freedom of conscience.

[E. [Refers to page 180.]]Smith, Livre V, Ch. 3.42

[F. [Refers to page 180.]]I am speaking here of modern states only. The Roman Republic more than once broke away from the rules of justice with respect to its creditors.43 The ancients, however, did not have the same ideas as we either on income or public credit.

[G. [Refers to page 181.]]Administration des finances, Tome II, pp. 378–379.44

[[243] H. [Refers to page 181.]]See A brief examination into the increase of the revenue, commerce and navigation of Great Britain by M. Beeke.45

[42]Adam Smith, op. cit., t. IV, pp. 509–510. It may be useful to relate the English author’s argument here: “A creditor of the state has unquestionably a general interest in the prosperity of a country’s agriculture, manufacturing, and commerce, and therefore in the various lands being well maintained and the capital advantageously managed. If one of these things were lacking or were to fail generally, the product of the various taxes would no longer be sufficient to pay him the annuity or the return which is owed him. But a state creditor, considered simply as such, has no interest in such and such a piece of land being in good shape or such and such a piece of capital being well run. As a state creditor he is not familiar with any piece of land or capital; he has none under inspection, none he can busy himself with. There is not one particular one that cannot be totally wiped out without for the most part his even suspecting or at least without his being directly affected.”

[43]Constant had left a blank in which to indicate the precise place in De l’esprit des lois where Montesquieu explains how the Romans swindled the financiers by devaluing the currency during the Second Punic War. [Livre XXII, Ch. 11. Translator’s note]

[44]Jacques Necker, De l’administration des finances de la France, s.l., 1784, t. II, pp. 378–379: “The growth of public debt in like manner has distorted the social outlook, by multiplying in some countries the number of people with an interest contrary to the general interest. Rentiers desire, above all else, the wealth of the royal treasury; and since the extension of taxation is the most fertile source of this, the contributors (and above all the people, who are the biggest element in this, and have no money to lend) find today within the very bosom of the State, an adversarial faction whose credit and influence grow from day to day.”

[45]Constant is in error here. The book he means, A brief examination into the increase of the revenue, commerce, and navigation of Great Britain, from 1792–1799, Dublin, Graisberry and Campbell, 1799, is not by Beeke but by George Rose.