Destutt de Tracy on the damage which government debt and the class which lives off loans to the state cause the industrious classes (1817)

Destutt de Tracy was one of Thomas Jefferson’s favourite economists and he spent much effort in having two of his books translated into English. As an arch foe of Emperor Napoleon, Tracy witnessed how public debt was used to dramatically increase government expenditure without a corresponding increase in taxation (at least this unpleasant necessity was put off until some uncertain future date). A superficial reading of Tracy might suggest that he was opposed to lending at interest with his comments about “a crowd of useless annuitants” and “a crowd of licentious gamblers” who were “idle” and “indifferent” to fate of the industrious class. But this would be a mistake. He distinguished between lending for productive activities and lending to the government. Tracy realised that debt was essential for productive economic activity but he regarded government activities as far from being productive. They were damaging to both taxpayers who footed the bill and to consumers and producers who had to suffer the consequences of government regulation at home and war fighting abroad. Furthermore, the investors who made this harmful government activity possible were indifferent to the productive sector of the economy and had “absolutely no interest but the permanence of the borrowing government” which was the only way they could get a return on their “investment.” Thus they and the government they lent to had interests diametrically opposed to those of the “industrious class.”