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Jeremy Bentham, The Works of Jeremy Bentham, vol. 3 (Usury, Political Economy, Equity, Parliamentary Reform) [1843]

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Jeremy Bentham, The Works of Jeremy Bentham, published under the Superintendence of his Executor, John Bowring (Edinburgh: William Tait, 1838-1843). 11 vols. Vol. 3.

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About this Title:

An 11 volume collection of the works of Jeremy Bentham edited by the philosophic radical and political reformer John Bowring. Vol. 3 contains Defence Of Usury; A Manual Of Political Economy; Observations On The Restrictive And Prohibitory Commercial System; A Plan For Saving All Trouble And Expense In The Transfer Of Stock; General View Of A Complete Code of Laws; Pannomial Fragments; Nomography; Or The Art Of Inditing Laws; Equity Dispatch Court Proposal; Equity Dispatch Court Bill; Plan Of Parliamentary Reform, In The Form Of A Catechism; A Sketch Of The Various Proposals For A Constitutional Reform In The Representation Of The People; Radical Reform Bill; Radicalism Not Dangerous.

For a complete list of the titles in The Works of Jeremy Bentham see this page.

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Table of Contents:

Edition: current; Page: [i]
Edition: current; Page: [ii]
the WORKS of JEREMY BENTHAM, published under the superintendence of his executor, JOHN BOWRING.
Volume Three
Edition: current; Page: [iii]


Reproduced from the Bowring Edition of 1838-1843

Library of Congress Catalog Number 62—13987

printed in the united states of america

Edition: current; Page: [iv]


  • DEFENCE OF USURY; Showing the Impolicy of the present Legal Restraints on the terms of Pecuniary Bargains; in Letters to a Friend. To which is added, a Letter to Adam Smith, Esq., LL.D., on the Discouragements opposed by the above Restraints to the Progress of Inventive Industry, . . . . . . Page 1
  • A MANUAL OF POLITICAL ECONOMY, . . . . . . . . 31
  • OBSERVATIONS ON THE RESTRICTIVE AND PROHIBITORY COMMERCIAL SYSTEM; especially with a Reference to the Decree of the Spanish Cortes of July, 1820, . . . . . . . . . . . . . 85
  • A PLAN FOR SAVING ALL TROUBLE AND EXPENSE IN THE TRANSFER OF STOCK, and for enabling the Proprietors to receive their Dividends without powers of Attorney, or attendance at the Bank of England, by the conversion of Stock into Note Annuities, . . . . . . . . . . 105
  • PANNOMIAL FRAGMENTS, . . . . . . . . . . 211
    • — — — Appendix:—Local Arrangements, or Instruments of Invention and Discovery employed by Jeremy Bentham, . . . . . . . 285
  • EQUITY DISPATCH COURT PROPOSAL; Containing a Plan for the Speedy and unexpensive termination of the Suits now depending in Equity Courts. With the Form of a Petition, and some account of a proposed Bill for that purpose, . . 297
  • EQUITY DISPATCH COURT BILL: Being a Bill for the Institution of an Experimental Judicatory under the name of the Court of Dispatch, for exemplifying in Practice the manner in which the proposed Summary may be substituted to the so called Regular System of Procedure; and for clearing away by the experiment, the arrear of business in the Equity Courts, . . . . . . . . 319
  • PLAN OF PARLIAMENTARY REFORM, IN THE FORM OF A CATECHISM, with Reasons for each Article: With an Introduction, showing the Necessity of Radical, and the Inadequacy of Moderate Reform, . . . . . . 433
  • RADICAL REFORM BILL, WITH EXTRACTS FROM THE REASONS. Bill, intituled Parliamentary Reform Act: Being an act for the more adequate Representation of the People in the Commons’ House of Parliament, . . . . 558
  • RADICALISM NOT DANGEROUS, . . . . . . . . . 599
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Page Col. Line
88 2 48 for usefulness put uselessness.
409 2 last for ppellatives put appellatives.
448 n 3 for 5 and 6 put 436 and 437.
483 2 17 for questionably put questionable.
526 2 50 for in and put and in.
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to which is added


on the


(originally printed in 1816.)

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  • LETTER I. Introduction, . . . . . . . page 3
  • LETTER II. Reasons for Restaint—Prevention of Usury, ib.
  • LETTER III. Reasons for Restraint—Prevention of Prodigality, . . . . . . . . . . . . 5
  • LETTER IV. Reasons for Restraint—Protection of Indigence, . . . . . . . . . . . . 7
  • LETTER V. Reasons for Restraint—Protection of Simplicity, . . . . . . . . . . . . 8
  • LETTER VI. Mischiefs of the anti-usurious Laws, . . . 9
  • LETTER VII. Efficacy of anti-usurious Laws, . . page 11
  • LETTER VIII. Virtual Usury allowed, . . . . . . . 12
  • LETTER IX. Blackstone considered, . . . . . . . 14
  • LETTER X. Grounds of the Prejudices against Usury, 15
  • LETTER XI. Compound Interest, . . . . . . . . 18
  • LETTER XII. Maintenance and Champerty, . . . . . 19
  • LETTER XIII. To Dr. Smith, on Projects in Arts, &c. . 20

asterisks The following alterations have been made on the Usury Laws, since the Defence of Usury was published. By 5 & 6 W. IV. c. 41 (31st August 1834,) intituled, “An Act to amend the law relating to securities given for considerations arising out of gaming, usurious, and certain other illegal transactions,” documents arising from usurious transactions are no longer null, but are in the same situation with obligations arising from other illegal transactions; i. e. they are effectual in the hands of bonâ fide holders, who have given value for them, but not in the hands of those who have obtained them through the usurious transaction. The obligor having been compelled to pay the contents of the obligation, has recourse against the usurious obligee, as for money paid on his account. By section 7 of the act for the renewal of the Charter of the Bank of England, (3 & 4 W. IV. c. 98,) bills at three months, or having no more than three months to run, are exempt from the Usury Laws; and by 7 W. IV. and 1 Vict. c. 80 (17th July 1837,) the exemption is extended to bills at twelve months, or only having that time to run. This act is temporary, granting the privilege only to 1st January 1840.

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Jeremy Bentham
Bentham, Jeremy
January 1787
Crichoff, in White Russia
Adam Smith
Smith, Adam


Among the various species or modifications of liberty, of which, on different occasions, we have heard so much in England, I do not recollect ever seeing anything yet offered in behalf of the liberty of making one’s own terms in money-bargains. From so general and universal a neglect, it is an old notion of mine, as you well know, that this meek and unassuming species of liberty has been suffering much injustice.

A fancy has taken me, just now, to trouble you with my reasons: which, if you think them capable of answering any good purpose, you may forward to the press: or in the other case, what will give you less trouble, to the fire.

In a word, the proposition I have been accustomed to lay down to myself on this subject is the following one, viz. that no man of ripe years and of sound mind, acting freely, and with his eyes open, ought to be hindered, with a view to his advantage, from making such bargain, in the way of obtaining money, as he thinks fit: nor (what is a necessary consequence) anybody hindered from supplying him, upon any terms he thinks proper to accede to.

This proposition, were it to be received, would level, you see, at one stroke, all the barriers which law, either statute or common, have in their united wisdom set up, either against the crying sin of Usury, or against the hard-named and little-heard-of practice of Champerty; to which we must also add a portion of the multifarious, and as little-heard-of offence, of Maintenance.

On this occasion, were it any individual antagonist I had to deal with, my part would be a smooth and easy one. “You, who fetter contracts—you, who lay restrains on the liberty of man, it is for you,” I should say, “to assign a reason for your doing so.” That contracts in general ought to be observed, is a rule, the propriety of which, no man was ever yet found wrong-headed enough to deny: if this case is one of the exceptions (for some doubtless there are) which the safety and welfare of every society require should be taken out of that general rule, in this case, as in all those others, it lies upon him, who alleges the necessity of the exception, to produce a reason for it.

This, I say, would be a short and very easy method with an individual: but, as the world has no mouth of its own to plead by, no certain attorney by which it can “come and defend this force and injury,” I must even find arguments for it at a venture, and ransack my own imagination for such phantoms as I can find to fight with.

In favour of the restraints opposed to the species of liberty I contend for, I can imagine but five arguments:—

1. Prevention of usury.

2. Prevention of prodigality.

3. Protection of indigence against extortion.

4. Repression of the temerity of projectors.

5. Protection of simplicity against imposition.—

Of all these in their order.

Jeremy Bentham
Bentham, Jeremy
Adam Smith
Smith, Adam


I will begin with the prevention of usury: because in the sound of the word usury lies, I take it, the main strength of the argument: or, to speak strictly, of what is of more importance than all argument, of the hold which the opinion I am combating has obtained on the imaginations and passions of mankind.

Usury is a bad thing, and as such ought to be prevented: usurers are a bad sort of men, a very bad sort of men, and as such ought to be punished and suppressed. These are among the string of propositions which every man finds handed down to him from his progenitors—which most men are disposed to accede to without examination; and indeed not unnaturally nor even unreasonably disposed, for it is impossible that the bulk of mankind should find leisure, had they the ability, to examine into the grounds of an hundredth part of the rules and maxims which they find themselves obliged to act upon. Very good apology this for John Trot: but a little more inquisitiveness may be required of legislators.

You, my friend, by whom the true force of words is so well understood, have, I am sure, gone before me in perceiving, that to say usury is a thing to be prevented, is neither Edition: current; Page: [4] more nor less than begging the matter in question. I know of but two definitions that can possibly be given of usury. One is, the taking of a greater interest than the law allows of: this may be styled the political or legal definition. The other is, the taking of a greater interest than it is usual for men to give and take: this may be styled the moral one: and this, where the law has not interfered, is plainly enough the only one. It is plain, that in order for usury to be prohibited by law, a positive description must have been found for it by law, fixing, or rather superseding, the moral one. To say, then, that usury is a thing that ought to be prevented, is saying neither more nor less than that the utmost rate of interest which shall be taken ought to be fixed, and that fixation enforced by penalties, or such other means, if any, as may answer the purpose of preventing the breach of it. A law punishing usury supposes, therefore, a law fixing the allowed legal rate of interest: and the propriety of the penal law must depend upon the propriety of the simply-prohibitive, or, if you please, declaratory one.

One thing, then, is plain: that, antecedently to custom growing from convention, there can be no such thing as usury; for what rate of interest is there that can naturally be more proper than another? what natural fixed price can there be for the use of money, more than for the use of any other thing? Were it not, then, for custom, usury, considered in a moral view, would not so much as admit of a definition: so far from having existence, it would not so much as be conceivable; nor, therefore, could the law, in the definition it took upon itself to give of such offence, have so much as a guide to steer by. Custom, therefore, is the sole basis, which either the moralist in his rules and precepts, or the legislator in his injunctions, can have to build upon. But what basis can be more weak or unwarrantable, as a ground for coercive measures, than custom resulting from free choice? My neighbours, being at liberty, have happened to concur among themselves in dealing at a certain rate of interest. I, who have money to lend, and Titius, who wants to borrow it of me, would be glad, the one of us to accept, the other to give, an interest somewhat higher than theirs: why is the liberty they exercise to be made a pretence for depriving me and Titius of ours?

Nor has blind custom, thus made the sole and arbitrary guide, anything of steadiness or uniformity in its decisions: it has varied, from age to age, in the same country—it varies, from country to country, in the same age, and the legal rate has varied along with it; indeed, with regard to times past, it is from the legal rate, more readily than from any other source, that we collect the customary. Among the Romans, till the time of Justinian, we find it as high as 12 per cent.: in England, so late as the time of Henry VIII., we find it at 10 per cent.: succeeding statutes reduced it to 8, then to 6, and lastly to 5, where it stands at present. Even at present, in Ireland it is at 6 per cent., and in the West Indies at 8 per cent.; and in Hindostan, where there is no rate limited by law, the lowest customary rate is 10 or 12. At Constantinople, in certain cases, as I have been well informed, 30 per cent. is a common rate. Now, of all these widely different rates, what one is there, that is intrinsically more proper than another? What is it that evidences this propriety in each instance?—what but the mutual convenience of the parties, as manifested by their consent? It is convenience, then, that has produced whatever there has been of custom in the matter: what can there, then, be in custom, to make it a better guide than the convenience which gave it birth? and what is there in convenience, that should make it a worse guide in one case than in another? It would be convenient to me to give six per cent. for money: I wish to do so. “No,” says the law—“you shan’t.” Why so? “Because it is not convenient to your neighbour to give above five for it.” Can anything be more absurd than such a reason?

Much has not been done, I think, by legislators as yet, in the way of fixing the price of other commodities: and, in what little has been done, the probity of the intention has, I believe, in general, been rather more unquestionable than the rectitude of the principle, or the felicity of the result. Putting money out at interest, is exchanging present money for future: but why a policy, which as applied to exchanges in general would be generally deemed absurd and mischievous, should be deemed necessary in the instance of this particular kind of exchange, mankind are as yet to learn. For him who takes as much as he can get for the use of any other sort of thing, a house for instance, there is no particular appellation, nor any mark of disrepute: nobody is ashamed of doing so, nor is it usual so much as to profess to do otherwise. Why a man who takes as much as he can get, be it six, or seven, or eight, or ten per cent. for the use of a sum of money, should be called usurer, should be loaded with an opprobrious name, any more than if he had bought a house with it, and made a proportionable profit by the house, is more than I can see.

Another thing I would also wish to learn, is, why the legislator should be more anxious to limit the rate of interest one way, than the other? why he should set his face against the owners of that species of property more than of any other? why he should make it his business to prevent their getting more than a certain price for the use of it, rather Edition: current; Page: [5] than to prevent their getting less? why, in short, he should not take means for making it penal to offer less, for example, than five per cent., as well as to accept more? Let any one that can, find an answer to these questions: it is more than I can do: I except always the distant and imperceptible advantage, of sinking the price of goods of all kinds, and in that remote way multiplying the future enjoyments of individuals. But this was a consideration by far too distant and refined, to have been the original ground for confining the limitation to this side.

Jeremy Bentham
Bentham, Jeremy
Adam Smith
Smith, Adam


Having done with sounds, I come gladly to propositions; which, as far as they are true in point of fact, may deserve the name of reasons. And first, as to the efficacy of such restrictive laws with regard to the prevention of prodigality.

That prodigality is a bad thing, and that the prevention of it is a proper object for the legislator to propose to himself, so long as he confines himself to (what I look upon as) proper measures, I have no objection to allow, at least for the purpose of the argument; though, were this the principal question, I should look upon it as incumbent on me to place in a fair light the reasons there may be for doubting how far, with regard to a person arrived at the age of discretion, third persons may be competent judges which of two pains may be of greater force and value to him—the present pain of restraining his present desires, or the future contingent pain he may be exposed to suffer from the want to which the expense of gratifying these desires may hereafter have reduced him. To prevent our doing mischief to one another, it is but too necessary to put bridles into all our mouths—it is necessary to the tranquillity and very being of society: but that the tacking of leading-strings upon the backs of grown persons, in order to prevent their doing themselves a mischief, is not necessary either to the being or tranquillity of society, however conducive to its well-being, I think cannot be disputed. Such paternal, or, if you please, maternal, care, may be a good work, but it certainly is but a work of supererogation.

For my own part, I must confess, that so long as such methods only are employed as to me appear proper ones, and such there are, I should not feel myself disinclined to see some measures taken for the restraining of prodigality: but this I cannot look upon as being of the number. My reasons I will now endeavour to lay before you.

In the first place, I take it, that it is neither natural nor usual for prodigals, as such, to betake themselves to this method: I mean, that of giving a rate of interest above the ordinary one, to supply their wants.

In the first place, no man, I hope you will allow, prodigal or not prodigal, ever thinks of borrowing money to spend, so long as he has ready money of his own, or effects which he can turn into ready money without loss. And this deduction strikes off what, I suppose, you will look upon as the greatest proportion of the persons subject, at any given time, to the imputation of prodigality.

In the next place, no man, in such a country as Great Britain at least, has occasion, or is at all likely, to take up money at an extraordinary rate of interest, who has security to give, equal to that upon which money is commonly to be had at the highest ordinary rate. While so many advertise, as are to be seen every day advertising, money to be lent at five per cent., what should possess a man, who has anything to offer that can be called a security, to give, for example, six per cent., is more than I can conceive.

You may say, perhaps, that a man who wishes to lend his money out upon security, wishes to have his interest punctually, and that without the expense, and hazard, and trouble, and odium of going to law; and that on this account it is better to have a sober man to deal with than a prodigal. So far I allow you; but were you to add, that on this account it would be necessary for a prodigal to offer more than another man, there I should disagree with you. In the first place, it is not so easy a thing, nor, I take it, a common thing, for the lender upon security to be able to judge, or even to form any attempt to judge, whether the conduct of one who offers to borrow his money is or is not of such a cast as to bring him under this description. The question, prodigal or not prodigal, depends upon two pieces of information, neither of which, in general, is very easy to come at: on the one hand, the amount of his means and reasonable expectations; on the other hand, the amount of his expenditure. The goodness or badness of the security is a question of a very different nature: upon this head, every man has a known and ready means of obtaining that sort of information which is the most satisfactory the nature of things affords, by going to his lawyer. It is accordingly, I take it, on their lawyer’s opinion, that lenders in general found their determination in these cases, and not upon any calculations they may have formed concerning the receipt and expenditure of the borrower. But even supposing a man’s disposition to prodigality to be ever so well known, there are always enough to be found, to whom such a disposition would be rather an inducement than an objection, so long as they were satisfied with Edition: current; Page: [6] the security. Everybody knows the advantage to be made in case of mortgage, by foreclosing or forcing a sale: and that this advantage is not uncommonly looked out for, will, I believe, hardly be doubted by any one who has had occasion to observe the course of business in the court of Chancery.

In short, so long as a prodigal has anything to pledge, or to dispose of—whether in possession, or even in reversion—whether of a certain, or even of a contingent nature, I see not how he can receive the smallest benefit from any laws that are or can be made to fix the rate of interest. For, suppose the law to be efficacious as far as it goes, and that the prodigal can find none of those monsters called usurers to deal with him, does he lie quiet? No such thing: he goes on and gets the money he wants, by selling his interest, instead of borrowing. He goes on, I say; for if he has prudence enough to stop him anywhere, he is not that sort of man whom it can be worth while for the law to attempt stopping by such means. It is plain enough, then, that to a prodigal thus circumstanced, the law cannot be of any service; on the contrary, it may, and in many cases must, be of disservice to him, by denying him the option of a resource, which, how disadvantageous soever, could not well have proved more so, but would naturally have proved less so, than those which it leaves still open to him. But of this hereafter.

I now come to the only remaining class of prodigals, viz. those who have nothing that can be called a security to offer. These, I should think, are not more likely to get money upon an extraordinary rate of interest, than an ordinary one. Persons who either feel, or find reasons for pretending to feel, a friendship for the borrower, cannot take of him more than the ordinary rate of interest: persons who have no such motive for lending him, will not lend him at all. If they know him for what he is, that will prevent them, of course; and even though they should know nothing of him by any other circumstance, the very circumstance of his not being able to find a friend to trust him at the highest ordinary rate, will be sufficient reason to a stranger for looking upon him as a man who, in the judgment of his friends, is not likely to pay.

The way that prodigals run into debt, after they have spent their substance, is, I take it, by borrowing of their friends and acquaintance, at ordinary interest, or more commonly at no interest, small sums, such as each man may be content to lose, or be ashamed to ask real security for; and as prodigals have generally an extensive acquaintance (extensive acquaintance being at once the cause and effect of prodigality,) the sum-total of the money a man may thus find means to squander may be considerable, though each sum borrowed may, relatively to the circumstances of the lender, have been inconsiderable. This I take to be the race which prodigals, who have spent their all, run at present, under the present system of restraining laws; and this and no other, I take it, would be the race they would run, were those laws out of the way.

Another consideration there is, I think, which will complete your conviction, if it was not complete before, of the inefficacy of these laws, as to the putting any sort of restraint upon prodigality. This is, that there is another set of people from whom prodigals get what they want, and always will get it so long as credit lasts, in spite of all laws against high interest; and, should they find it necessary, at an expense more than equal to any excess of interest they might otherwise have to give: I mean, the tradesmen who deal in the goods they want. Everybody knows it is much easier to get goods than money. People trust goods upon much slenderer security than they do money: it is very natural they should do so. Ordinary profit of trade upon the whole capital employed in a man’s trade,—even after the expense of warehouse-rent, journeymen’s wages, and other such general charges, are taken into the account, and set against it,—is at least equal to double interest; say 10 per cent. Ordinary profit upon any particular parcel of goods must therefore be a great deal more, say at least triple interest, 15 per cent. In the way of trading, then, a man can afford to be at least three times as adventurous as he can in the way of lending, and with equal prudence. So long, then, as a man is looked upon as one who will pay, he can much easier get the goods he wants than he could get the money to buy them with, though he were content to give for it twice, or even thrice, the ordinary rate of interest.

Supposing anybody, for the sake of extraordinary gain, to be willing to run the risk of supplying him, although they did not look upon his personal security to be equal to that of another man, and for the sake of the extraordinary profit, to run the extraordinary risk,—in the trader—in short, in every sort of trader whom he was accustomed to deal with in his solvent days, he sees a person who may accept of any rate of profit, without the smallest danger from any laws that are or can be made against usury. How idle, then, to think of stopping a man from making six, or seven, or eight per cent. interest, when, if he chooses to run a risk proportionable, he may in this way make 30 or 40 per cent., or any rate you please. And as to the prodigal, if he cannot get what he wants upon these terms, what chance is there of his getting it upon any terms, supposing the laws against Edition: current; Page: [7] usury to be away? This, then, is another way in which, instead of serving, it injures him, by narrowing his option, and driving him from a market which might have proved less disadvantageous, to a more disadvantageous one.

As far as prodigality, then, is concerned, I must confess I cannot see the use of stopping the current of expenditure in this way at the fosset, when there are so many unpreventable ways of letting it run out at the bung-hole.

Whether any harm is done to society, upon the whole, by letting so much money drop at once out of the pockets of the prodigal, who would have gone on wasting it, into the till of the frugal tradesman, who will lay it up, is not worth the inquiry for the present purpose: what is plain is, that, so far as the saving the prodigal from paying at an extraordinary rate for what he gets to spend, is the object of the law, that object is not at all promoted by fixing the rate of interest upon money borrowed. On the contrary, if the law has any effect, it runs counter to that object; since, were he to borrow, it would only be in as far as he could borrow at a rate inferior to that at which otherwise he would be obliged to buy. Preventing his borrowing at an extra rate may have the effect of increasing his distress, but cannot have the effect of lessening it: allowing his borrowing at such a rate might have the effect of lessening his distress, but could not have the effect of increasing it.

To put a stop to prodigality, if indeed it be worth while, I know but of one effectual course that can be taken, in addition to the incomplete and insufficient courses at present practicable; and that is, to put the convicted prodigal under an interdict, as was practised formerly among the Romans, and is still practised among the French, and other nations who have taken the Roman law for the ground-work of their own. But to discuss the expediency, or sketch out the details of such an institution, belongs not to the present purpose.

Jeremy Bentham
Bentham, Jeremy
Adam Smith
Smith, Adam


Besides prodigals, there are three other classes of persons, and but three, for whose security I can conceive these restrictive laws to have been designed: I mean the indigent, the rashly enterprising, and the simple; those whose pecuniary necessities may dispose them to give an interest above the ordinary rate, rather than not have it; and those who, from rashness, may be disposed to venture upon giving such a rate, or from carelessness, combined with ignorance, may be disposed to acquiesce in it.

In speaking of these three different classes of persons, I must beg leave to consider one of them at a time; and accordingly, in speaking of the indigent, I must consider indigence in the first place as untinctured with simplicity. On this occasion I may suppose, and ought to suppose, no particular defect in a man’s judgment, or his temper, that should mislead him, more than the ordinary run of men. He knows what is his interest as well as they do, and is as well disposed and able to pursue it as they are.

I have already intimated what I think is undeniable, that there are no one, or two, or other limited number of rates of interest, that can be equally suited to the unlimited number of situations, in respect of the degree of exigency in which a man is liable to find himself: insomuch that, to the situation of a man who, by the use of money, can make for example 11 per cent., 6 per cent. is as well adapted as 5 per cent. is to the situation of him who can make but 10,—to that of him who can make 12 per cent., 7, and so on. So, in the case of his wanting it to save himself from a loss (which is that which is most likely to be in view under the name of exigency,) if that loss would amount to 11 per cent., 6 per cent. is as well adapted to his situation as 5 per cent. would be to the situation of him who had but a loss amounting to 10 per cent. to save himself from by the like means. And in any case, though, in proportion to the amount of the loss, the rate of interest were even so great as that the clear saving should not amount to more than 1 per cent. or any fraction per cent., yet so long as it amounted to anything, he would be just so much the better for borrowing, even on such comparatively disadvantageous terms. If, instead of gain, we put any other kind of benefit or advantage—if, instead of loss, we put any other kind of mischief or inconvenience of equal value, the result will be the same.

A man is in one of these situations, suppose, in which it would be for his advantage to borrow. But his circumstances are such, that it would not be worth anybody’s while to lend him, at the highest rate which it is proposed the law should allow—in short, he cannot get it at that rate. If he thought he could get it at that rate, most surely he would not give a higher: he may be trusted for that, for by the supposition he has nothing defective in his understanding. But the fact is, he cannot get it at that lower rate. At a higher rate, however, he could get it: and at that rate, though higher, it would be worth his while to get it: so he judges, who has nothing to hinder him from judging right—who has every motive and every means for forming a right judgment—who has every motive and every means for informing himself of the circumstances upon which rectitude of judgment, Edition: current; Page: [8] in the case in question, depends. The legislator, who knows nothing, nor can know anything, of any one of all these circumstances—who knows nothing at all about the matter, comes and says to him—“It signifies nothing; you shall not have the money: for it would be doing you a mischief to let you borrow it upon such terms.” And this out of prudence and loving-kindness! There may be worse cruelty, but can there be greater folly?

The folly of those who persist, as is supposed without reason, in not taking advice, has been much expatiated upon. But the folly of those who persist, without reason, in forcing their advice upon others, has been but little dwelt upon, though it is, perhaps, the more frequent, and the more flagrant of the two. It is not often that one man is a better judge for another, than that other is for himself, even in cases where the adviser will take the trouble to make himself master of as many of the materials for judging, as are within the reach of the person to be advised. But the legislator is not, cannot be, in the possession of any one of these materials. What private can be equal to such public folly?

I should now speak of the enterprising class of borrowers: those who, when characterized by a single term, are distinguished by the unfavourable appellation of projectors; but in what I shall have to say of them, Dr. Smith, I begin to foresee, will bear so material a part, that when I come to enter upon that subject, I think to take my leave of you, and address myself to him.

Jeremy Bentham
Bentham, Jeremy
Adam Smith
Smith, Adam


I come, lastly, to the case of the simple. Here, in the first place, I think I am by this time entitled to observe, that no simplicity, short of absolute idiotism, can cause the individual to make a more groundless judgment, than the legislator, who, in the circumstances above stated, should pretend to confine him to any given rate of interest, would have made for him.

Another consideration, equally conclusive, is, that were the legislator’s judgment ever so much superior to the individual’s, how weak soever that may be, the exertion of it on this occasion can never be any otherwise than useless, so long as there are so many similar occasions, as there ever must be, where the simplicity of the individual is equally likely to make him a sufferer, and on which the legislator cannot interpose with effect, nor has ever so much as thought of interposing.

Buying goods with money, or upon credit, is the business of every day; borrowing money is the business only of some particular exigency, which, in comparison, can occur but seldom. Regulating the prices of goods in general would be an endless task, and no legislator has ever been weak enough to think of attempting it. And supposing he were to regulate the prices, what would that signify for the protection of simplicity, unless he were to regulate also the quantum of what each man should buy? Such quantum is indeed regulated, or rather means are taken to prevent buying altogether: but in what cases? In those only where the weakness is adjudged to have arrived at such a pitch as to render a man utterly unqualified for the management of his affairs; in short, when it has arrived at the length of idiocy.

But in what degree soever a man’s weakness may expose him to imposition, he stands much more exposed to it in the way of buying goods, than in the way of borrowing money. To be informed, beforehand, of the ordinary prices of all the sorts of things a man may have occasion to buy, may be a task of considerable variety and extent. To be informed of the ordinary rate of interest, is to be informed of one single fact, too interesting not to have attracted attention, and too simple to have escaped the memory. A few per cent. enhancement upon the price of goods, is a matter that may easily enough pass unheeded; but a single per cent. beyond the ordinary interest of money, is a stride more conspicuous and startling, than many per cent. upon the price of any kind of goods.

Even in regard to subjects, which by their importance would, if any, justify a regulation of their price, such as for instance land, I question whether there ever was an instance where, without some such ground as, on the one side fraud, or suppression of facts necessary to form a judgment of the value, or at least ignorance of such facts, on the other, a bargain was rescinded, merely because a man had sold too cheap, or bought too dear. Were I to take a fancy to give a hundred years purchase instead of thirty, for a piece of land, rather than not have it, I don’t think there is any court in England, or indeed anywhere else, that would interpose to hinder me, much less to punish the seller with the loss of three times the purchase money, as in the case of usury. Yet when I had got my piece of land, and paid my money, repentance, were the law ever so well disposed to assist me, might be unavailing: for the seller might have spent the money, or gone off with it. But, in the case of borrowing money, it is the borrower always, who, according to the indefinite or short term for which money is lent, is on the safe side: any imprudence he may have committed with regard to the rate of interest may be corrected at any time: if Edition: current; Page: [9] I find I have given too high an interest to one man, I have no more to do than to borrow of another at a lower rate, and pay off the first: if I cannot find anybody to lend me at a lower, there cannot be a more certain proof that the first was not in reality too high. But of this hereafter.

Jeremy Bentham
Bentham, Jeremy
Adam Smith
Smith, Adam


In the preceding Letters, I have examined all the modes I can think of, in which the restraints imposed by the laws against usury can have been fancied to be of service.

I hope it appears by this time, that there are no ways in which those laws can do any good. But there are several, in which they cannot but do mischief.

The first I shall mention, is that of precluding so many people altogether from the getting the money they stand in need of, to answer their respective exigencies. Think what a distress it would produce, were the liberty of borrowing denied to everybody: denied to those who have such security to offer, as renders the rate of interest they have to offer a sufficient inducement, for a man who has money, to trust them with it. Just that same sort of distress is produced, by denying that liberty to so many people whose security, though if they were permitted to add something to that rate it would be sufficient, is rendered insufficient by their being denied that liberty. Why the misfortune of not being possessed of that arbitrarily exacted degree of security should be made a ground for subjecting a man to a hardship which is not imposed on those who are free from that misfortune, is more than I can see. To discriminate the former class from the latter, I can see but this one circumstance, viz. that their necessity is greater. This it is by the very supposition: for were it not, they could not be, what they are supposed to be, willing to give more to be relieved from it. In this point of view, then, the sole tendency of the law is, to heap distress upon distress.

A second mischief is that of rendering the terms so much the worse, to a multitude of those whose circumstances exempt them from being precluded altogether from getting the money they have occasion for. In this case, the mischief, though necessarily less intense than in the other, is much more palpable and conspicuous. Those who cannot borrow may get what they want, so long as they have anything to sell. But while, out of loving-kindness or whatsoever other motive, the law precludes a man from borrowing upon-terms which it deems too disadvantageous, it does not preclude him from selling, upon any terms, howsoever disadvantageous. Everybody knows that forced sales are attended with a loss: and to this loss, what would be deemed a most extravagant interest bears in general no proportion. When a man’s moveables are taken in execution, they are, I believe, pretty well sold, if, after all expenses paid, the produce amounts to two-thirds of what it would cost to replace them. In this way, the providence and loving-kindness of the law costs him 33 per cent. and no more, supposing, what is seldom the case, that no more of the effects are taken than what is barely necessary to make up the money due. If, in her negligence and weakness, she were to suffer him to offer 11 per cent. per annum for forbearance, it would be three years before he paid what he is charged with, in the first instance, by her wisdom.

Such being the kindness done by the law to the owner of moveables, let us see how it fares with him who has an interest in immoveables. Before the late war, thirty years’ purchase for land might be reckoned, I think it is pretty well agreed, a medium price. During the distress produced by the war, lands which it was necessary should be sold, were sold at twenty, eighteen, nay, I believe, in some instances, even so low as fifteen years’ purchase. If I do not misrecollect, I remember instances of lands put up to public auction, for which nobody bid so high as fifteen. In many instances, villas which had been bought before the war, or at the beginning of it, and in the interval had been improved rather than impaired, sold for less than half, or even the quarter, of what they had been bought for. I dare not here for my part pretend to be exact: but on this passage, were it worth their notice, Mr. Skinner, or Mr. Christie, could furnish very instructive notes. Twenty years’ purchase, instead of thirty, I may be allowed to take, at least for illustration. An estate, then, of £100 a-year, clear of taxes, was devised to a man, charged, suppose, with £1500, with interest till the money should be paid. Five per cent. interest, the utmost which could be accepted from the owner, did not answer the incumbrancer’s purpose: he chose to have the money. But 6 per cent., perhaps, would have answered his purpose; if not, most certainly it would have answered the purpose of somebody else: for multitudes there all along were, whose purposes were answered by five per cent. The war lasted, I think, seven years; the depreciation of the value of land did not take place immediately; but as, on the other hand, neither did it immediately recover its former price upon the peace, if indeed it has even yet recovered it, we may put seven years for the time during which it would be more advantageous to pay this extraordinary rate of interest than sell the land, and during which, accordingly, this extraordinary rate of interest would have had to run. One per cent. for seven years, is not quite of Edition: current; Page: [10] equal worth to seven per cent. the first year; say, however, that it is. The estate, which before the war was worth thirty years’ purchase, that is, £3000, and which the devisor had given to the devisee for that value, being put up to sale, fetched but twenty years’ purchase, £2000. At the end of that period it would have fetched its original value, £3000. Compare, then, the situation of the devisee at the seven years’ end, under the law, with what it would have been without the law. In the former case, the land selling for twenty years’ purchase, i. e. £2000, what he would have, after paying the £1500, is £500; which, with the interest of that sum at five per cent. for seven years, viz. £175, makes, at the end of that seven years, £675. In the other case, paying six per cent. on the £1500, that is, £90 a-year, and receiving all that time the rent of the land, viz. £100, he would have had, at the seven years’ end, the amount of the remaining £10 during that period, that is, £70, in addition to his £1000; £675 subtracted from £1070 leaves £395. This £395, then, is what he loses out of £1070, almost thirty-seven per cent. of his capital, by the loving-kindness of the law. Make the calculations, and you will find, that by preventing him from borrowing the money at six per cent. interest, it makes him nearly as much a sufferer as if he had borrowed it at ten.

What I have said hitherto is confined to the case of those who have present value to give for the money they stand in need of. If they have no such value, then, if they succeed in purchasing assistance upon any terms, it must be in breach of the law; their lenders exposing themselves to its vengeance; for I speak not here of the accidental case of its being so constructed as to be liable to evasion. But, even in this case, the mischievous influence of the law still pursues them—aggravating the very mischief it pretends to remedy. Though it be inefficacious in the way in which the legislator wishes to see it efficacious, it is efficacious in the way opposite to that in which he would wish to see it so. The effect of it is, to raise the rate of interest higher than it would be otherwise, and that in two ways. In the first place, a man must, in common prudence, as Dr. Smith observes, make a point of being indemnified, not only for whatsoever extraordinary risk it is that he runs, independently of the law, but for the very risk occasioned by the law: he must be insured, as it were, against the law. This cause would operate, were there even as many persons ready to lend upon the illegal rate, as upon the legal. But this is not the case: a great number of persons are, of course, driven out of this competition by the danger of the business, and another great number by the disrepute which, under cover of these prohibitory laws or otherwise, has fastened itself upon the name of usurer. So many persons, therefore, being driven out of the trade, it happens in this branch, as it must necessarily in every other, that those who remain have the less to withhold them from advancing their terms; and without confederating (for it must be allowed that confederacy in such a case is plainly impossible) each one will find it easier to push his advantage up to any given degree of exorbitancy, than he would, if there were a greater number of persons of the same stamp to resort to.

As to the case where the law is so worded as to be liable to be evaded, in this case it is partly inefficacious and nugatory, and partly mischievous. It is nugatory as to all such whose confidence of its being so is perfect: it is mischievous, as before, in regard to all such who fail of possessing that perfect confidence. If the borrower can find nobody at all who has confidence enough to take advantage of the flaw, he stands precluded from all assistance, as before: and though he should, yet the lender’s terms must necessarily run the higher, in proportion to what his confidence wants of being perfect. It is not likely that it should be perfect: it is still less likely that he should acknowledge it so to be: it is not likely, at least as matters stand in England, that the worst-penned law made for this purpose should be altogether destitute of effect: and while it has any, that effect, we see, must be in one way or other mischievous.

I have already hinted at the disrepute, the ignominy, the reproach, which prejudice, the cause and the effect of these restrictive laws, has heaped upon that perfectly innocent and even meritorious class of men, who, not more for their own advantage than to the relief of the distresses of their neighbour, may have ventured to break through these restraints. It is certainly not a matter of indifference, that a class of persons, who, in every point of view in which their conduct can be placed, whether in relation to their own interest or in relation to that of the persons whom they have to deal with, as well on the score of prudence as on that of beneficence (and of what use is even benevolence, but in as far as it is productive of beneficence?) deserve praise rather than censure, should be classed with the abandoned and profligate, and loaded with a degree of infamy which is due to those only whose conduct is in its tendency the most opposite to their own.

“This suffering,” it may be said, “having already been taken account of, is not to be brought to account a second time: they are aware, as you yourself observe, of this inconvenience, and have taken care to get such amends for it, as they themselves look upon as sufficient.” True: but is it sure that the compensation, such as it is, will always, in the event, have proved a sufficient one? Is there no room here for miscalculation? May Edition: current; Page: [11] there not be unexpected, unlooked-for incidents, sufficient to turn into bitterness the utmost satisfaction which the difference of pecuniary emolument could afford? For who can see to the end of that inexhaustible train of consequences that are liable to ensue from the loss of reputation?—who can fathom the abyss of infamy? At any rate, this article of mischief, if not an addition in its quantity to the others above noticed, is at least distinct from them in its nature, and as such ought not to be overlooked.

Nor is the event of the execution of the law by any means an unexampled one: several such, at different times, have fallen within my notice. Then comes absolute perdition: loss of character, and forfeiture, not of three times the extra-interest, which formed the profit of the offence, but of three times the principal, which gave occasion to it.*

The last article I have to mention in the account of mischief, is, the corruptive influence exercised by these laws on the morals of the people, by the pains they take, and cannot but take, to give birth to treachery and ingratitude. To purchase a possibility of being enforced, the law neither has found, nor, what is very material, must it ever hope to find, in this case, any other expedient, than that of hiring a man to break his engagement, and to crush the hand that has been reached out to help him. In the case of informers in general, there has been no troth plighted, nor benefit received. In the case of real criminals invited by rewards to inform against accomplices, it is by such breach of faith that society is held together, as in other cases by the observance of it. In the case of real crimes, in proportion as their mischievousness is apparent, what cannot but be manifest even to the criminal, is, that it is by the adherence to his engagement that he would do an injury to society, and that, by the breach of such engagement, instead of doing mischief he is doing good: in the case of usury, this is what no man can know, and what one can scarcely think it possible for any man, who in the character of the borrower has been concerned in such a transaction, to imagine. He knew that, even in his own judgment, the engagement was a beneficial one to himself, or he would not have entered into it: and nobody else but the lender is affected by it.

Jeremy Bentham
Bentham, Jeremy
Adam Smith
Smith, Adam


Before I quit altogether the consideration of the case in which a law, made for the purpose of limiting the rate of interest, may be inefficacious with regard to that end, I cannot forbear taking some further notice of a passage already alluded to of Dr. Smith’s: because, to my apprehension, that passage seems to throw upon the subject a degree of obscurity, which I could wish to see cleared up in a future edition of that valuable work.

“No law,” says he, “can reduce the common rate of interest below the lowest ordinary market rate at the time when that law was made. Notwithstanding the edict of 1766, by which the French king attempted to reduce the rate of interest from five to four per cent., money continued to be lent in France at five per cent., the law being evaded in several different ways.”

As to the general position, if so it be, so much, according to me, the better: but I must confess I do not see why this should be the case. It is for the purpose of proving the truth of this general position, that the fact of the inefficacy of this attempt seems to be adduced: for no other proof is adduced but this. But, taking the fact for granted, I do not see how it can be sufficient to support the inference. The lw, we are told at the same time, was evaded: but we are not told how it came to be open to evasion. It might be owing to a particular defect in the penning of that particular law; or, what comes to the same thing, in the provisions made for carrying it into execution. In either case, it affords no support to the general position: nor can that position be a just one, unless it were so in the case where every provision had been made that could be made, for giving efficacy to the law. For the position to be true, the case must be, that the law would still be broken, even after every means of what can properly be called evasion had been removed. True or untrue, the position is certainly not self-evident enough to be received without proof: yet nothing is adduced in proof of it but the fact above noticed, which we see amounts to no such thing. What is more, I should not expect to find it capable of proof. I do not see what it is that should render the law incapable of “reducing the common rate of interest below the lowest ordinary market rate,” but such a state of things, such a combination of circumstances, as should afford obstacles equally powerful, or nearly so, to the efficacy of the law against all higher rates. For destroying the law’s efficacy altogether, I know of nothing that could serve, but a resolution on the part of all persons anyway privy not to inform: but by such a resolution, any higher rate is just as effectually protected as any lower one. Suppose the resolution, strictly speaking, universal, and the law must in all instances be equally inefficacious—all rates of interest Edition: current; Page: [12] equally free; and the state of men’s dealings in this way just what it would be, were there no law at all upon the subject. But in this case, the position, in as far as it limits the inefficacy of the law to those rates which are below the “lowest ordinary market rate,” is not true. For my part, I cannot conceive how any such universal resolution could have been maintained, or could ever be maintained, without an open concert, and as open a rebellion against government; nothing of which sort appears to have taken place: and, as to any particular confederacies, they are as capable of protecting any higher rates against the prohibition as any lower ones.

Thus much, indeed, must be admitted, that the low rate in question, viz. that which was the lowest ordinary market rate immediately before the making of the law, is likely to come in for the protection of the public against the law, more frequently than any other rate. That must be the case on two accounts: first, because, by being of the number of the ordinary rates, it was, by the supposition, more frequent than any extraordinary ones: secondly, because the disrepute annexed to the idea of usury, a force which might have more or less efficacy in excluding from the protection above spoken of such extraordinary rates, cannot well be supposed to apply itself, or at least not in equal degree, to this low and ordinary rate. A lender has certainly less to stop him from taking a rate which may be taken without disrepute, than from taking one which a man could not take without subjecting himself to that inconvenience: nor is it likely that men’s imaginations and sentiments should testify so sudden an obsequiousness to the law, as to stamp disrepute to-day, upon a rate of interest to which no such accompaniment had stood annexed the day before.

Were I to be asked how I imagined the case stood in the particular instance referred to by Dr. Smith,—judging from his account of it, assisted by general probabilities, I should answer thus:—The law, I should suppose, was not so penned as to be altogether proof against evasion. In many instances, of which it is impossible any account should have been taken, it was indeed conformed to: in some of those instances, people who would have lent otherwise, abstained from lending altogether; in others of those instances, people lent their money at the reduced legal rate. In other instances, again, the law was broken: the lenders trusting, partly to expedients recurred to for evading it, partly to the good faith and honour of those whom they had to deal with: in this class of instances it was natural, for the two reasons above suggested, that those where the old legal rate was adhered to, should have been the most numerous. From the circumstance, not only of their number, but of their more direct repugnancy to the particular recent law in question, they would naturally be the most taken notice of. And this, I should suppose, was the foundation in point of fact for the Doctor’s general position above mentioned, that “no law can reduce the common rate of interest below the lowest ordinary market rate at the time when that law was made.”

In England, as far as I can trust my judgment and imperfect general recollection of the purport of the laws relative to this matter, I should not suppose that the above position would prove true. That there is no such thing as any palpable and universally notorious, as well as universally practicable receipt for that purpose, is manifest from the examples which, as I have already mentioned, every now and then occur, of convictions upon these statutes. Two such receipts, indeed, I shall have occasion to touch upon presently: but they are either not obvious enough in their nature, or too troublesome or not extensive enough in their application, to have despoiled the law altogether of its terrors or of its preventive efficacy.

In the country in which I am writing, the whole system of laws on this subject is perfectly, and very happily, inefficacious. The rate fixed by law is 5 per cent.: many people lend money; and nobody at that rate: the lowest ordinary rate, upon the very best real security, is 8 per cent.: 9, and even 10, upon such security, are common. Six or seven may have place, now and then, between relations or other particular friends: because, now and then, a man may choose to make a present of one or two per cent. to a person whom he means to favour. The contract is renewed from year to year: for a thousand roubles, the borrower, in his written contract, obliges himself to pay at the end of the year one thousand and fifty. Before witnesses, he receives his thousand roubles; and, without witnesses, he immediately pays back his thirty roubles, or his forty roubles, or whatever the sum may be, that is necessary to bring the real rate of interest to the rate verbally agreed on.

This contrivance, I take it, would not do in England: but why it would not, is a question which it would be in vain for me to pretend, at this distance from all authorities, to discuss.

Jeremy Bentham
Bentham, Jeremy
Adam Smith
Smith, Adam


Having proved, as I hope, by this time, the utter impropriety of the law’s limiting the rate of interest in every case that can be conceived, it may be rather matter of curiosity than anything else, to inquire how far the law on this head is consistent with itself, and with any principles upon which it can have built.

Edition: current; Page: [13]

1. Drawing and re-drawing is a practice which it will be sufficient here to hint at. It is perfectly well known to all merchants, and may be so to all who are not merchants, by consulting Dr. Smith. In this way, he has shown how money may be, and has been, taken up at so high a rate as 13 or 14 per cent.; a rate nearly three times as high as the utmost which the law professes to allow. The extra interest is in this case masked under the names of commission, and price of exchange. The commission is but small upon each loan—not more, I think, than one half per cent.: custom having stretched so far but no farther, it might be thought dangerous perhaps, to venture upon any higher allowance under that name. The charge being repeated a number of times in the course of the year, makes up in frequency what it wants in weight. The transaction is by this shift rendered more troublesome indeed, but not less practicable, to such parties as are agreed about it. But if usury is good for merchants, I do not very well see what should make it bad for everybody else.

2. At this distance from all the fountains of legal knowledge, I will not pretend to say whether the practice of selling accepted bills at an under-value would hold good against all attacks. It strikes my recollection as a pretty common one, and I think it could not be brought under any of the penal statutes against usury. The adequateness of the consideration might, for aught I know, be attacked with success, in a court of equity—or perhaps, if there were sufficient evidence (which the agreement of the parties might easily prevent,) by an action at common law, for money had and received. If the practice be really proof against all attacks, it seems to afford an effectual and pretty commodious method of evading the restrictive laws. The only restraint is, that it requires the assistance of a third person, a friend of the borrower’s: as for instance, B, the real borrower, wants £100, and finds U, a usurer, who is willing to lend it to him at 10 per cent. B has F, a friend, who has not the money himself to lend him, but is willing to stand security for him to that amount. B therefore draws upon F, and F accepts a bill of £100, at 5 per cent. interest, payable at the end of a twelvemonth from the date. F draws a like bill upon B: each sells his bill to U for £50; and it is endorsed to U accordingly. The £50 that F receives, he delivers over without any consideration to B. This transaction, if it be a valid one, and if a man can find such a friend, is evidently much less troublesome than the practice of drawing and re-drawing. And this, if it be practicable at all, may be practised by persons of any description, concerned or not in trade. Should the effect of this page be to suggest an expedient, and that a safe and commodious one, for evading the laws against usury, to some, to whom such an expedient might not otherwise have occurred, it will not lie very heavy upon my conscience. The prayers of usurers, whatever efficacy they may have in lightening the burthen, I hope I may lay some claim to. And I think you will not now wonder at my saying, that in the efficacy of such prayers I have not a whit less confidence, than in that of the prayers of any other class of men.

One apology I shall have to plead at any rate—that in pointing out these flaws to the individual who may be disposed to creep out at them, I point them out at the same time to the legislator, in whose power it is to stop them up, if in his opinion they require it. If, notwithstanding such opinion, he should omit to do so, the blame will lie, not on my industry, but on his negligence.

These, it may be said, should they even be secure and effectual evasions, are still but evasions, and, if chargeable upon the law at all, are chargeable not as inconsistencies but as oversights. Be it so. Setting these aside, then, as expedients practised or practicable only behind its back, I will beg leave to remind you of two others, practised from the day of its birth, under its protection, and before its face.

The first I shall mention is pawn-broking. In this case there is the less pretence for more than ordinary interest, inasmuch as the security is in this case not only equal to, but better than, what it can be in any other; to wit, the present possession of a moveable thing, of easy sale, on which the creditor has the power, and certainly does not want the inclination, to set such price as is most for his advantage. If there be a case in which the allowing of such extraordinary interest is attended with more danger than another, it must be this: which is so particularly adapted to the situation of the lowest poor, that is, of those who on the score of indigence or simplicity, or both, are most open to imposition. This trade, however, the law, by regulating, avowedly protects. What the rate of interest is, which it allows to be taken in this way, I cannot take upon me to remember; but I am much deceived if it amounts to less than 12 per cent. in the year, and I believe it amounts to a good deal more.* Whether it were 12 per cent. or 1200, I believe would make in practice but little difference. What commission is in the business of drawing and re-drawing, warehouse-room is in that of pawnbroking. Whatever limits, then, are set to the profits of this trade, are set, I take it, not by the vigilancy of the law, but, as in the case of other trades, by the competition Edition: current; Page: [14] amongst the traders. Of the other regulations contained in the acts relative to this subject, I recollect no reason to doubt the use.

The other instance is that of bottomry and respondentia: for the two transactions, being so nearly related, may be spoken of together. Bottomry is the usury of pawnbroking: respondentia is usury at large, but combined in a manner with insurance, and employed in the assistance of a trade carried on by sea. If any species of usury is to be condemned, I see not on what grounds this particular species can be screened from the condemnation. “Oh, but,” says Sir William Blackstone, or anybody else who takes upon himself the task of finding a reason for the law, “this is a maritime country, and the trade which it carries on by sea is the great bulwark of its defence.” It is not necessary I should here inquire, whether that branch, which, as Dr. Smith has shown, is, in every view but the mere one of defence, less beneficial to a nation than two others out of the four branches which comprehend all trade, has any claim to be preferred to them in this or any other way. I admit, that the liberty which this branch of trade enjoys, is no more than what it is perfectly right it should enjoy. What I want to know is, what there is in the class of men embarked in this trade, that should render beneficial to them, a liberty which would be ruinous to everybody else? Is it that sea adventures have less hazard on them than land adventures? or that the sea teaches those who have to deal with it, a degree of forecast and reflection which has been denied to landmen?

It were easy enough to give farther and farther extension to this charge of inconsistency, by bringing under it the liberty given to insurance in all its branches, to the purchase and sale of annuities and of post-obits; in a word, to all cases where a man is permitted to take upon himself an unlimited degree of risk, receiving for so doing an unlimited compensation. Indeed, I know not where the want of instances would stop me: for in what part of the magazine of events, about which human transactions are conversant, is certainty to be found? But to this head of argument, this argument ad hominem, as it may be called, the use of which is but subsidiary, and which has more of confutation in it than of persuasion or instruction, I willingly put an end.

Jeremy Bentham
Bentham, Jeremy
Adam Smith
Smith, Adam


I hope you are, by this time, at least, pretty much of my opinion, that there is just the same sort of harm, and no other, in making the best terms one can for one’s self in a money loan, as there is in any other sort of bargain. If you are not, Blackstone however is, whose opinion I hope you will allow to be worth something. In speaking of the rate of interest,* he starts a parallel between a bargain for the loan of money, and a bargain about a horse, and pronounces, without hesitation, that the harm of making too good a bargain is just as great in the one case as in the other. As money-lending, and not horse-dealing, was what you lawyers call the principal case, he drops the horse-business as soon as it has answered the purpose of illustration which it was brought to serve. But as, in my conception, as well the reasoning by which he supports the decision, as that by which anybody else could have supported it, is just as applicable to the one sort of bargain as to the other, I will carry on the parallel a little farther, and give the same extent to the reasoning, as to the position which it is made use of to support. This extension will not be without its use: for if the position, when thus extended, should be found just, a practical inference will arise; which is, that the benefits of these restraints ought to be extended from the money-trade to the horse-trade. That my own opinion is not favourable to such restraints in either case, has been sufficiently declared; but if more respectable opinions than mine are still to prevail, they will not be the less respectable for being consistent.

The sort of bargain which the learned commentator has happened to pitch upon for the illustration, is indeed, in the case illustrating, as in the case illustrated, a loan: but as, to my apprehension, loan or sale makes in point of reasoning no sort of difference, and as the utility of the conclusion will in the latter case be more extensive, I shall adapt the reasoning to the more important business of selling horses, instead of the less important one of lending them.

A circumstance, that would render the extension of these restraints to the horse-trade more smooth and easy, is, that in the one track as well as in the other, the public has already got the length of calling names. Jockeyship—a term of reproach not less frequently applied to the arts of those who sell horses than to the arts of those who ride them—sounds, I take it, to the ear of many a worthy gentleman, nearly as bad as usury: and it is well known to all those who put their trust in proverbs, and not less to those who put their trust in party, that when we have got a dog to hang, who is troublesome and keeps us at bay, whoever can contrive to fasten a bad name to his tail, has gained more than half the battle. I now proceed with my application. The words in italics are my own: all the rest are Sir William Blackstone’s: Edition: current; Page: [15] and I restore, at bottom, the words I was obliged to discard in order to make room for mine.

“To demand an exorbitant price is equally contrary to conscience, for the loan of a horse, or for the loan of a sum of money: but a reasonable equivalent for the temporary inconvenience which the owner may feel by the want of it, and for the hazard of his losing it entirely, is not more immoral in one case than in the other. . . . .

As to selling horses, a capital distinction must be made between a moderate and an exorbitant profit: to the former of which we give the name of horse-dealing,a to the latter the truly odious appellation of jockeyship:b the former is necessary in every civil state, if it were but to exclude the latter. For, as the whole of this matter is well summed up by Grotius, “if the compensation allowed by law does not exceed the proportion of the inconvenience which it is to the seller of the horse to part with it,c or the want which the buyer has of it,d its allowance is neither repugnant to the revealed law, nor to the natural law: but if it exceeds these bounds, it is then an oppressive jockeyship:e and though the municipal laws may give it impunity, they never can make it just.”

“We see that the exorbitance or moderation of the price given for a horsef depends upon two circumstances,—upon the inconvenience of parting with the horse one has,g and the hazard of not being able to meet with such another.h The inconvenience to individual sellers of horsesi can never be estimated by laws; the general price for horsesk must depend therefore upon the usual or general inconvenience. This results entirely from the quantity of horsesl in the kingdom: for the more horsesm there are running aboutn in any nation, the greater superfluity there will be beyond what is necessary to carry on the business of the mail-coacheso and the common concerns of life. In every nation or public community there is a certain quantity of horses,p thus, necessary, which a person well skilled in political arithmetic might perhaps calculate as exactly as a private horses dealerq can the demand for running horses in his own stables:r all above this necessary quantity may be spared, or lent, or sold, without much inconvenience to the respective lenders or sellers; and the greater the national superfluity is, the more numerous will be the sellers,s and the lower ought the national price of horse-flesht to be: but where there are not enough, or barely enough spare horsesu to answer the ordinary uses of the public, horse-fleshx will be proportionably high; for sellersy will be but few, as few can submit to the inconvenience of selling.z So far the learned commentator.

I hope by this time you are worked up to a proper pitch of indignation at the neglect and inconsistency betrayed by the law, in not suppressing this species of jockeyship, which it would be so easy to do, only by fixing the price of horses. Nobody is less disposed than I am to be uncharitable: but when one thinks of the £1500 taken for Eclipse, and £2000 for Rockingham, and so on, who can avoid being shocked to think how little regard those who took such enormous prices must have had for “the law of revelation and the law of nature?” Whoever it is that is to move for the municipal law, not long ago talked of, for reducing the rate of interest,—whenever that motion is made, then would be the time for one of the Yorkshire members to get up, and move, by way of addition, for a clause for fixing and reducing the price of horses. I need not expatiate on the usefulness of that valuable species of cattle, which might have been as cheap as asses before now, if our lawgivers had been as mindful of their duty in the suppression of jockeyship, as they have been in the suppression of usury.

It may be said, against fixing the price of horse-flesh, that different horses may be of different values. I answer—and I think I shall show you as much, when I come to touch upon the subject of champerty—not more different than the values which the use of the same sum of money may be of to different persons, on different occasions.

Jeremy Bentham
Bentham, Jeremy
Adam Smith
Smith, Adam


It is one thing to find reasons why it is fit a law should have been made—it is another to find the reasons why it was made: in other words, it is one thing to justify a law—it is another thing to account for its existence. In the present instance, the former task, if the observations I have been troubling you with are just, is an impossible one. The other, though not necessary for conviction, may contribute something, perhaps, in the way of satisfaction. To trace an error to its fountain-head, says Lord Coke, is to refute it; and many men there are, who till they have received this satisfaction, be the error what it may, cannot prevail upon themselves Edition: current; Page: [16] to part with it. “If our ancestors have been all along under a mistake, how came they to have fallen into it?” is a question that naturally presents itself upon all such occasions. The case is, that, in matters of law more especially, such is the dominion of authority over our minds, and such the prejudice it creates in favour of whatever institution it has taken under its wing, that, after all manner of reasons that can be thought of in favour of the institution have been shown to be insufficient, we still cannot forbear looking to some unassignable and latent reason for its efficient cause. But if, instead of any such reason, we can find a cause for it in some notion, of the erroneousness of which we are already satisfied, then at last we are content to give it up without further struggle; and then, and not till then, our satisfaction is complete.

In the conceptions of the more considerable part of those through whom our religion has been handed down to us, virtue, or rather godliness, which was an improved substitute for virtue, consisted in self-denial,—not in self-denial for the sake of society, but in self-denial for its own sake. One pretty general rule served for most occasions: not to do what you had a mind to do; or, in other words, not to do what would be for your advantage. By this, of course, was meant temporal advantage; to which spiritual advantage was understood to be in constant and diametrical opposition. For the proof of a resolution on the part of a being of perfect power and benevolence, to make his few favourites happy in a state in which they were to be, was his determined pleasure that they should keep themselves as much strangers to happiness as possible in the state in which they were. Now, to get money is what most men have a mind to do; because he who has money gets, as far as it goes, most other things that he has a mind for. Of course, nobody was to get money; indeed, why should he, when he was not so much as to keep what he had got already? To lend money at interest, is to get money, or at least to try to get it; of course, it was a bad thing to lend money upon such terms. The better the terms, the worse it was to lend upon them; but it was bad to lend upon any terms by which anything could be got. What made it much the worse was, that it was acting like a Jew; for though all Christians at first were Jews, and continued to do as Jews did, after they had become Christians, yet, in process of time, it came to be discovered, that the distance between the mother and the daughter church could not be too wide.

By degrees, as old conceits gave place to new, nature so far prevailed, that the objections to getting money in general were pretty well over-ruled: but still this Jewish way of getting it was too odious to be endured. Christians were too intent upon plaguing Jews, to listen to the suggestion of doing as Jews did, even though money were to be got by it. Indeed, the easier method, and a method pretty much in vogue, was, to let the Jews get the money any how they could, and then squeeze it out of them as it was wanted.

In process of time, as questions of all sorts came under discussion, and this not the least interesting among the rest, the anti-Jewish side of it found no unopportune support in a passage of Aristotle, that celebrated heathen, who, in all matters wherein heathenism did not destroy his competence, had established a despotic empire over the Christian world. As fate would have it, that great philosopher, with all his industry and all his penetration, notwithstanding the great number of pieces of money that had passed through his hands (more perhaps than ever passed through the hands of philosopher before or since,) and notwithstanding the uncommon pains he had bestowed on the subject of generation, had never been able to discover, in any one piece of money, any organs for generating any other such piece. Emboldened by so strong a body of negative proof, he ventured at last to usher into the world the result of his observations, in the form of an universal proposition, that all money is in its nature barren. You, my friend, to whose cast of mind sound reason is much more congenial than ancient philosophy,—you have, I dare to say, gone before me in remarking that the practical inference from this shrewd observation, if it afforded any, should have been, that it would be to no purpose for a man to try to get five per cent. out of money—not that, if he could contrive to get so much, there would be any harm in it. But the sages of those days did not view the matter in that light.

A consideration that did not happen to present itself to that great philosopher, but which, had it happened to present itself, might not have been altogether unworthy of his notice, is, that though a daric would not beget another daric, any more than it would a ram, or an ewe, yet for a daric which a man borrowed, he might get a ram and a couple of ewes; and that the ewes, were the ram left with them a certain time, would probably not be barren. That then, at the end of the year, he would find himself master of his three sheep, together with two, if not three, lambs; and that, if he sold his sheep again to pay back his daric, and gave one of his lambs for the use of it in the meantime, he would be two lambs, or at least one lamb, richer than if he had made no such bargain.

These theological and philosophical conceits, the offspring of the day, were not ill seconded by principles of a more permanent complexion.

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The business of a money-lender, though only among Christians and in Christian times a proscribed profession, has nowhere, nor at any time, been a popular one. Those who have the resolution to sacrifice the present to future, are natural objects of envy to those who have sacrificed the future to the present. The children who have eaten their cake, are the natural enemies of the children who have theirs. While the money is hoped for, and for a short time after it has been received, he who lends it is a friend and benefactor: by the time the money is spent, and the evil hour of reckoning is come, the benefactor is found to have changed his nature, and to have put on the tyrant and the oppressor. It is an oppression for a man to reclaim his own money; it is none to keep it from him. Among the inconsiderate, that is, among the great mass of mankind, selfish affections conspire with the social in treasuring up all favour for the man of dissipation, and in refusing justice to the man of thrift who has supplied him. In some shape or other, that favour attends the chosen object of it through every stage of his career. But in no stage of his career can the man of thrift come in for any share of it. It is the general interest of those with whom a man lives, that his expense should be at least as great as his circumstances will bear; because there are few expenses which a man can launch into, but what the benefit of them is shared, in some proportion or other, by those with whom he lives. In that circle originates a standing law, forbidding every man, on pain of infamy, to confine his expenses within what is adjudged to be the measure of his means, saving always the power of exceeding that limit as much as he thinks proper; and the means assigned him by that law may be ever so much beyond his real means, but are sure never to fall short of them. So close is the combination thus formed between the idea of merit and the idea of expenditure, that a disposition to spend finds favour in the eyes even of those who know that a man’s circumstances do not entitle him to the means: and an upstart, whose chief recommendation is this disposition, shall find himself to have purchased a permanent fund of respect, to the prejudice of the very persons at whose expense he has been gratifying his appetites and his pride. The lustre which the display of borrowed wealth has diffused over his character, awes men during the season of his prosperity into a submission to his insolence, and when the hand of adversity has overtaken him at last, the recollection of the height from which he has fallen, throws the veil of compassion over his injustice.

The condition of the man of thrift is the reverse. His lasting opulence procures him a share, at least, of the same envy that attends the prodigal’s transient display: but the use he makes of it procures him no part of the favour which attends the prodigal. In the satisfactions he derives from that use—the pleasure of possession, and the idea of enjoying at some distant period, which may never arrive—nobody comes in for any share. In the midst of his opulence he is regarded as a kind of insolvent, who refuses to honour the bills which their rapacity would draw upon him, and who is by so much the more criminal than other insolvents, as not having the plea of inability for an excuse.

Could there be any doubt of the disfavour which attends the cause of the money-lender in his competition with the borrower, and of the disposition of the public judgment to sacrifice the interest of the former to that of the latter, the stage would afford a compendious, but a pretty conclusive proof of it. It is the business of the dramatist to study, and to conform to, the humours and passions of those on the pleasing of whom he depends for his success; it is the course which reflection must suggest to every man, and which a man would naturally fall into, though he were not to think about it. He may, and very frequently does, make magnificent pretences of giving the law to them: but woe be to him that attempts to give them any other law than what they are disposed already to receive! If he would attempt to lead them one inch, it must be with great caution, and not without suffering himself to be led by them at least a dozen. Now I question whether, among all the instances in which a borrower and a lender of money have been brought together upon the stage, from the days of Thespis to the present, there ever was one, in which the former was not recommended to favour in some shape or other—either to admiration, or to love, or to pity, or to all three;—and the other, the man of thrift, consigned to infamy.

Hence it is, that in reviewing and adjusting the interests of these apparently rival parties, the advantage made by the borrower is so apt to slip out of sight, and that made by the lender to appear in so exaggerated a point of view. Hence it is, that though prejudice is so far softened as to acquiesce in the lender’s making some advantage, lest the borrower should lose altogether the benefit of his assistance, yet still the borrower is to have all the favour, and the lender’s advantage is forever to be clipped, and pared down, as low as it will bear. First it was to be confined to ten per cent. then to eight, then to six, then to five, and now lately there was a report of its being to be brought down to four; with constant liberty to sink as much lower as it would. The burthen of these restraints, of course, has been intended exclusively for the lender: in reality, as I think Edition: current; Page: [18] you have seen, it presses much more heavily upon the borrower: I mean him who either becomes, or in vain wishes to become so. But the presents directed by prejudice, Dr. Smith will tell us, are not always delivered according to their address. It was thus that the mill-stone designed for the necks of those vermin, as they have been called, the dealers in corn, was found to fall upon the heads of the consumers. It is thus—but further examples would lead me further from the purpose.

Jeremy Bentham
Bentham, Jeremy
Adam Smith
Smith, Adam


A word or two I must trouble you with, concerning compound interest; for compound interest is discountenanced by the law—I suppose, as a sort of usury. That, without an express stipulation, the law never gives it, I well remember: whether, in case of an express stipulation, the law allows it to be taken, I am not absolutely certain. I should suppose it might: remembering covenants in mortgages that interest should become principal. At any rate, I think the law cannot well punish it under the name of usury.

If the discountenance shown to this arrangement be grounded on the horror of the sin of usury, the impropriety of such discountenance follows of course from the arguments which show the un-“sinfulness of that sin.

Other argument against it, I believe, was never attempted, unless it were the giving to such an arrangement the epithet of a hard one: in doing which, something more like a reason is given, than one gets in ordinary from the common law.

If that consistency were to be found in the common law, which has never yet been found in man’s conduct, and which perhaps is hardly in man’s nature, compound interest never could have been denied.

The views which suggested this denial, were, I dare to say, very good: the effects of it are, I am certain, very pernicious.

If the borrower pays the interest at the day—if he performs his engagement, that very engagement to which the law pretends to oblige him to conform,—the lender, who receives that interest, makes compound interest of course, by lending it out again, unless he chooses rather to expend it: he expects to receive it at the day, or what meant the engagement?—if he fails of receiving it, he is by so much a loser. The borrower, by paying it at the day, is no loser—if he does not pay it at the day, he is by so much a gainer: a pain of disappointment takes place in the case of the one, while no such pain takes place in the case of the other. The cause of him whose contention is to catch a gain, is thus preferred to that of him whose contention is to avoid a loss—contrary to the reasonable and useful maxim of that branch of the common law which has acquired the name of equity. The gain, which the law in its tenderness thus bestows on the defaulter, is an encouragement, a reward, which it holds out for breach of faith, for iniquity, for indolence, for negligence.

The loss which it thus throws upon the forbearing lender, is a punishment which it inflicts on him for his forbearance: the power which it gives him of avoiding that loss, by prosecuting the borrower upon the instant of failure, is thus converted into a reward which it holds out to him for his hard-heartedness and rigour. Man is not quite so good as it were to be wished he were; but he would be bad indeed, were he bad on all the occasions where the law, as far as depends on her, has made it his interest so to be.

It may be impossible, say you—it often is impossible, for the borrower to pay the interest at the day;—and you say truly. What is the inference? That the creditor should not have it in his power to ruin the debtor for not paying at the day, and that he should receive a compensation for the loss occasioned by such failure. He has it in his power to ruin him, and he has it not in his power to obtain such compensation. The judge, were it possible for an arrested debtor to find his way into a judge’s chamber instead of a spunging-house, might award a proper respite, suited to the circumstances of the parties. It is not possible: but a respite is purchased, proper or not proper, perhaps at ten times, perhaps at a hundred times, the expense of compound interest, by putting in bail, and fighting the creditor through all the windings of mischievous and unnecessary delay. Of the satisfaction due either for the original failure, or for the subsequent vexation by which it has been aggravated, no part is ever received by the injured creditor; but the instruments of the law receive, perhaps at his expense, perhaps at the debtor’s, perhaps ten times, perhaps a hundred times, the amount of that satisfaction. Such is the result of this tenderness of the law.

It is in consequence of such tenderness, that on so many occasions a man, though ever so able, would find himself a loser by paying his just debts—those very debts of which the law has recognized the justice. The man who obeys the dictates of common honesty—the man who does what the law pretends to bid him, is wanting to himself. Hence your regular and securely profitable writs of error in the House of Lords—hence your random and vindictive costs, of one hundred pounds, and two hundred pounds, now and then given in that House. It is natural, and it is something, Edition: current; Page: [19] to find in a company of lords a zeal for justice: it is not natural to find, in such a company, a disposition to bend down to the toil of calculation.

Jeremy Bentham
Bentham, Jeremy
Adam Smith
Smith, Adam


Having in the preceding letters had occasion to lay down, and, as I flatter myself, to make good the general principle, that no man of ripe years and of sound mind, ought, out of loving-kindness to him, to be hindered from making such bargain in the way of obtaining money, as, acting with his eyes open, he deems conducive to his interest, I will take your leave for pushing it a little farther, and extending the application of it to another class of regulations still less defensible. I mean the antique laws against what are called Maintenance and Champerty.

To the head of Maintenance, I think you refer, besides other offences which are not to the present purpose, that of purchasing, upon any terms, any claim, which it requires a suit at law, or in equity, to enforce.

Champerty, which is but a particular modification of this sin of Maintenance, is, I think, the furnishing a man who has such a claim with regard to a real estate, such money as he may have occasion for to carry on such claim, upon the terms of receiving a part of the estate in case of success.

What the penalties are for these offences I do not recollect, nor do I think it worth while hunting for them, though I have Blackstone at my elbow. They are at any rate sufficiently severe to answer the purpose, the rather as the bargain is made void.

To illustrate the mischievousness of the laws by which they have been created, give me leave to tell you a story, which is but too true a one, and which happened to fall within my own observation.

A gentleman of my acquaintance had succeeded, during his minority, to an estate of about £3000 a-year; I won’t say where. His guardian, concealing from him the value of the estate, which circumstances rendered it easy for him to do, got a conveyance of it from him during his non-age, for a trifle. Immediately upon the ward’s coming of age, the guardian, keeping him still in darkness, found means to get the conveyance confirmed.—Some years afterwards, the ward discovered the value of the inheritance he had been throwing away. Private representations proving, as it may be imagined, ineffectual, he applied to a court of equity. The suit was in some forwardness: the opinion of the ablest counsel highly encouraging, but money there remained none. We all know but too well, that in spite of the unimpeachable integrity of the bench, that branch of justice which is particularly dignified with the name of equity is only for those who can afford to throw away one fortune for the chance of recovering another. Two persons, however, were found, who, between them, were content to defray the expense of the ticket for this lottery, on condition of receiving half the prize. The prospect now became encouraging;—when unfortunately one of the adventurers, in exploring the recesses of the bottomless pit, happened to dig up one of the old statutes against Champerty. This blew up the whole project: however, the defendant, understanding that somehow or other his antagonist had found support, had thought fit in the meantime to propose terms, which the plaintiff, after his support had thus dropped from under him, was very glad to close with. Hereceived, I think it was £3000; and for that he gave up the estate, which was worth about as much yearly, together with the arrears, which were worth about as much as the estate.

Whether, in the barbarous age which gave birth to these barbarous precautions—whether, even under the zenith of feudal anarchy, such fettering regulations could have had reason on their side, is a question of curiosity rather than use. My notion is, that there never was a time—that there never could have been or can be a time—when the pushing of suitors away from court with one hand, while they are beckoned into it with another, would not be a policy equally faithless, inconsistent, and absurd. But what everybody must acknowledge is, that to the times which called forth these laws, and in which alone they could have started up, the present are as opposite as light to darkness. A mischief, in those times it seems but too common, though a mischief not to be cured by such laws, was, that a man would buy a weak claim, in hopes that power might convert it into a strong one, and that the sword of a baron, stalking into court with a rabble of retainers at his heels, might strike terror into the eyes of a judge upon the bench. At present, what cares an English judge for the swords of a hundred barons? Neither fearing nor hoping, hating nor loving, the judge of our days is ready with equal phlegm to administer, upon all occasions, that system, whatever it be, of justice or injustice, which the law has put into his hands. A disposition so consonant to duty could not have then been hoped for: one more consonant is hardly to be wished. Wealth has indeed the monopoly of justice against poverty; and such monopoly it is the direct tendency and necessary effect of regulations like these to strengthen and confirm. But with this monopoly no judge that lives now is at all chargeable. The law created this monopoly: the law, whenever it pleases, may dissolve it.

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I will not, however, so far wander from my subject, as to inquire what measure might have been necessary to afford a full relief to the case of that unfortunate gentleman, any more than to the cases of so many other gentlemen who might be found as unfortunate as he: I will not insist upon so strange and so inconceivable an arrangement, as that of the judge’s seeing both parties face to face in the first instance, observing what the facts are in dispute, and declaring, that as the facts should turn out this way or that way, such or such would be his decree. At present, I confine myself to the removal of such part of the mischief as may arise from the general conceit of keeping men out of difficulties, by cutting them off from such means of relief as each man’s situation may afford. A spunge in this, as in so many other cases, is the only needful, and only availing remedy: one stroke of it for the musty laws against Maintenance and Champerty: another for the more recent ones against usury. Consider, for example, what would have respectively been the effect of two such strokes, in the case of the unfortunate gentleman I have been speaking of. By the first, if what is called equity has any claim to confidence, he would have got, even after paying off his champerty-usurers, £1500 a-year in land, and about as much in money, instead of getting, and that only by an accident, £3000 once told. By the other, there is no saying to what a degree he might have been benefited. May I be allowed to stretch so far in favour of the law as to suppose, that so small a sum as £500 would have carried him through his suit in the course of about three years? I am sensible that may be thought but a short sum, and this but a short term, for a suit in equity: but, for the purpose of illustration, it may serve as well as a longer. Suppose he had sought this necessary sum in the way of borrowing; and had been so fortunate, or, as the laws against the sin of usury would style it, so unfortunate, as to get it at 200 per cent. He would then have purchased his £6000 a-year at the price of half as much once paid, viz. £3000; instead of selling it at that price. Whether, if no such laws against usury had been in being, he could have got the money, even at that rate, I will not pretend to say: perhaps he might not have got it under ten times that rate, perhaps he might have got it at the tenth part of that rate. Thus far I think we may say, that he might, and probably would, have been the better for the repeal of those laws: but thus far we must say, that it is impossible he should have been the worse. The terms upon which he met with adventurers willing to relieve him, though they come not within that scanty field which the law in the narrowness of its views calls usury, do in the present case, at twenty years’ purchase of the £3000 a-year he was content to have sacrificed for such assistance, amount, in effect, to 4000 per cent. Whether it was likely that any man, who was disposed to venture his money at all upon such a chance, would have thought of insisting upon such a rate of interest, I will leave you to imagine: but thus much may be said with confidence, because the fact demonstrates it, that, at a rate not exceeding this, the sum would actually have been supplied. Whatever becomes, then, of the laws against Maintenance and Champerty, the example in question, when applied to the laws against usury, ought, I think, to be sufficient to convince us, that so long as the expense of seeking relief at law stands on its present footing, the purpose of seeking that relief will of itself, independently of every other, afford a sufficient ground for allowing any man, or every man, to borrow money on any terms on which he can obtain it.

Jeremy Bentham
Bentham, Jeremy
Adam Smith
Smith, Adam


Sir,—I forget what son of controversy it was among the Greeks, who having put himself to school to a professor of eminence, to learn what, in those days, went by the name of wisdom, chose an attack upon his master for the first public specimen of his proficiency. This specimen, whatever entertainment it might have afforded to the audience, afforded, it may be supposed, no great satisfaction to the master: for the thesis was, that the pupil owed him nothing for his pains. For my part, being about to show myself in one respect as ungrateful as the Greek, it may be a matter of prudence for me to look out for something like candour, by way of covering to my ingratitude: instead, therefore, of pretending to owe you nothing, I shall begin with acknowledging that, as far as your track coincides with mine, I should come much nearer the truth were I to say I owed you everything. Should it be my fortune to gain any advantage over you, it must be with weapons which you have taught me to wield, and with which you yourself have furnished me; for, as all the great standards of truth which can be appealed to in this line, owe, as far as I can understand, their establishment to you, I can see scarce any other way of convicting you of any error or oversight, than by judging you out of your own mouth.

In the series of Letters to which this will form a sequel, I had travelled nearly thus far in my researches into the policy of the laws fixing the rate of interest, combating such arguments as fancy rather than observation had suggested to my view, when, on a sudden, recollection presented me with your formidable image, bestriding the ground over Edition: current; Page: [21] which I was travelling pretty much at my ease, and opposing the shield of your authority to any arguments I could produce.

It was a reflection mentioned by Cicero as affording him some comfort, that the employment his talents till that time had met with, had been chiefly on the defending side. How little soever blest on any occasion with any portion of his eloquence, I may on the present occasion, however, indulge myself with a portion of what constituted his comfort: for if I presume to contend with you, it is only in defence of what I look upon as not only an innocent, but a most meritorious race of men, who are so unfortunate as to have fallen under the rod of your displeasure. I mean projectors: under which invidious name I understand you to comprehend, in particular, all such persons as, in the pursuit of wealth, strike out into any new channel, and more especially into any channel of invention.

It is with the professed view of checking, or rather of crushing these adventurous spirits, whom you rank with “prodigals,” that you approve of the laws which limit the rate of interest, grounding yourself on the tendency they appear to you to have to keep the capital of the country out of two such different sets of hands.

The passage I am speaking of is in the fourth chapter of your second book, volume the second of the 8vo edition of 1784. “The legal rate,” you say, “it is to be observed, though it ought to be somewhat above, ought not to be much above, the lowest market rate. If the legal rate of interest in Great Britain, for example, was fixed so high as eight or ten per cent., the greater part of the money which was to be lent, would be lent to prodigals and projectors, who alone would be willing to give the high interest. Sober people, who will give for the use of money no more than a part of what they are likely to make by the use of it, would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it. Where the legal interest, on the contrary, is fixed but a very little above the lowest market rate, sober people are universally preferred as borrowers, to prodigals and projectors. The person who lends money, gets nearly as much interest from the former, as he dares to take from the latter, and his money is much safer in the hands of the one set of people, than in those of the other. A great part of the capital of the country is thus thrown into the hands in which it is most likely to be employed with advantage.”

It happens, fortunately for the side you appear to have taken, and as unfortunately for mine, that the appellative which the custom of the language has authorized you, and which the poverty and perversity of the language has in a manner forced you, to make use of, is one which, along with the idea of the sort of persons in question, conveys the idea of reprobation as indiscriminately and deservedly applied to them. With what justice or consistency, or by the influence of what causes, this stamp of indiscriminate reprobation has been thus affixed, it is not immediately necessary to inquire; but that it does stand thus affixed, you and everybody else, I imagine, will be ready enough to allow. This being the case, the question stands already decided, in the first instance at least, if not irrevocably, in the judgments of all those who, unable or unwilling to be at the pains of analyzing their ideas, suffer their minds to be led captive by the tyranny of sounds; that is, I doubt, of by far the greater proportion of those whom we are likely to have to judge us. In the conceptions of all such persons, to ask whether it be fit to restrain projects and projectors, will be as much as to ask whether it be fit to restrain rashness, and folly, and absurdity, and knavery, and waste.

Of prodigals I shall say no more at present. I have already stated my reasons for thinking that it is not among them that we are to look for the natural customers for money at high rates of interest. As far as those reasons are conclusive, it will follow, that of the two sorts of men you mention as proper objects of the burthen of these restraints—prodigals and projectors—that burthen falls exclusively on the latter. As to these, what your definition is of projectors, and what description of persons you meant to include under the censure conveyed by that name, might be material for the purpose of judging of the propriety of that censure, but makes no difference in judging of the propriety of the law which that censure is employed to justify. Whether you yourself, were the several classes of persons made to pass before you in review, would be disposed to pick out this or that class, or this and that individual, in order to exempt them from such censure, is what for that purpose we have no need to inquire. The law, it is certain, makes no such distinctions; it falls with equal weight, and with all its weight, upon all those persons, without distinction, to whom the term projectors, in the most unpartial and extensive signification of which it is capable, can be applied. It falls, at any rate (to repeat some of the words of my former definition,) upon all such persons as, in the pursuit of wealth, or even of any other object, endeavour by the assistance of wealth to strike into any channel of invention. It falls upon all such persons as, in the cultivation of any of those arts which have been by Edition: current; Page: [22] way of eminence termed useful, direct their endeavours to any of those departments in which their utility shines most conspicuous and indubitable: upon all such persons as, in the line of any of their pursuits, aim at anything that can be called improvement, whether it consist in the production of any new article adapted to man’s use, or in the meliorating the quality, or diminishing the expense, of any of those which are already known to us. It falls, in short, upon every application of the human powers in which ingenuity stands in need of wealth for its assistant.

High and extraordinary rates of interest, how little soever adapted to the situation of the prodigal, are certainly, as you very justly observe, particularly adapted to the situation of the projector;—not, however, to that of the imprudent projector only, nor-even of his case more than another’s, but to that of the prudent and well-grounded projector, if the existence of such a being were to be supposed. Whatever be the prudence or other qualities of the project—in whatever circumstance the novelty of it may lie—it has this circumstance against it, viz. that it is new. But the rates of interest, the highest rates allowed, are, as you expressly say they are, and as you would have them to be, adjusted to the situation which the sort of trader is in whose trade runs in the old channels, and to the best security which such channels can afford. But in the nature of things, no new trade—no trade carried on in any new channel, can afford a security equal to that which may be afforded by a trade carried on in any of the old ones: in whatever light the matter might appear to perfect intelligence,—in the eye of every prudent person, exerting the best powers of judging which the fallible condition of the human faculties affords, the novelty of any commercial adventure will oppose a chance of ill success, superadded to every one which could attend the same or any other adventure, already tried, and proved to be profitable by experience.

The limitation of the profit that is to be made by lending money to persons embarked in trade, will render the moneyed man more anxious, you may say, about the goodness of his security, and accordingly more anxious to satisfy himself respecting the prudence of a project, in the carrying on of which the money is to be employed, than he would be otherwise: and in this way it may be thought that these laws have a tendency to pick out the good projects from the bad, and favour the former at the expense of the latter. The first of these positions I admit; but I can never admit the consequence to follow. A prudent man—(I mean nothing more than a man of ordinary prudence)—a prudent man, acting under the sole governance of prudential motives, I still say, will not, in these circumstances, pick out the good projects from the bad; for he will not meddle with projects at all. He will pick out old established trades from all sorts of projects, good and bad; for with a new project, be it ever so promising, he never will have anything to do. By every man that has money, five per cent., or whatever be the highest legal rate, is at all times, and always will be, to be had upon the very best security that the best and most prosperous old-established trade can afford. Traders in general, I believe it is commonly understood, are well enough inclined to enlarge their capital, as far as all the money they can borrow at the highest legal rate, while that rate is so low as five per cent., will enlarge it. How it is possible, therefore, for a project, be it ever so promising, to afford to a lender at any such rate of interest, terms equally advantageous upon the whole with those he might be sure of obtaining from an old-established business, is more than I can conceive. Loans of money may certainly chance, now and then, to find their way into the pockets of projectors as well as of other men; but when this happens, it must be through incautiousness, or friendship, or the expectation of some collateral benefit, and not through any idea of the advantageousness of the transaction in the light of a pecuniary bargain.

I should not expect to see it alleged that there is anything that should render the number of well-grounded projects, in comparison of the ill-grounded, less in time future, than it has been in time past. I am sure, at least, that I know of no reasons why it should be so, though I know of some reasons, which I shall beg leave to submit to you by and by, which appear to me pretty good ones, why the advantage should be on the side of futurity. But unless the stock of well-grounded projects is already spent, and the whole stock of ill-grounded projects that ever were possible are to be looked for exclusively in the time to come, the censure you have passed on projectors, measuring still the extent of it by that of the operation of the laws in the defence of which it is employed, looks as far backward as forward: it condemns as rash and ill-grounded, all those projects by which our species have been successively advanced from that state in which acorns were their food, and raw hides their clothing, to the state in which it stands at present: for think, Sir, let me beg of you, whether whatever is now the routine of trade was not, at its commencement, project?—whether whatever is now establishment was not, at one time, innovation?

How it is that the tribe of well-grounded projects, and of prudent projectors (if by this time I may have your leave for applying this epithet to some at least among the projectors Edition: current; Page: [23] of time past,) have managed to struggle through the obstacles which the laws in question have been holding in their way, it is neither easy to know, nor necessary to inquire. Manifest enough, I think, it must be by this time, that difficulties, and those not inconsiderable ones, those laws must have been holding up in the way of projects of all sorts, of improvement (if I may say so) in every line, so long as they have had existence: reasonable, therefore, it must be to conclude, that had it not been for these discouragements, projects of all sorts—well-grounded and successful ones, as well as others, would have been more numerous than they have been: and that accordingly, on the other hand, as soon, if ever, as these discouragements shall be removed, projects of all sorts, and among the rest well-grounded and successful ones, will be more numerous than they would otherwise have been: in short, that as, without these discouragements, the progress of mankind in the career of prosperity would have been greater than it has been under them in time past; so, were they to be removed, it would be at least proportionably greater in time future.

That I had done you no injustice in assigning to your idea of projectors so great a latitude, and that the unfavourable opinion you have professed to entertain of them is not confined to the above passage, might be made, I think, pretty apparent, if it be material, by another passage in the tenth chapter of your first book:* “The establishment of any new manufacture, of any new branch of commerce, or of any new practice in agriculture,” all these you comprehend by name under the list of “projects:” of every one of them you observe, that “it is a speculation from which the projector promises himself extraordinary profits. These profits (you add) are sometimes very great, and sometimes, more frequently perhaps, they are quite otherwise: but in general they bear no regular proportion to those of other old trades in the neighbourhood. If the project succeeds, they are commonly at first very high. When the trade or practice becomes thoroughly established and well known, the competition reduces them to the level of other trades.” But on this head I forbear to insist: nor should I have taken this liberty of giving you back your own words, but in the hope of seeing some alteration made in them in your next edition, should I be fortunate enough to find my sentiments confirmed by yours. In other respects, what is essential to the public is, what the error is in the sentiments entertained, not who it is that entertains them.

I know not whether the observations which I have been troubling you with will be thought to need, or whether they will be thought to receive, any additional support from those comfortable positions, of which you have made such good and such frequent use concerning the constant tendency of mankind to get forward in the career of prosperity—the prevalence of prudence over imprudence, in the sum of private conduct at least—and the superior fitness of individuals for managing their own pecuniary concerns, of which they know the particulars and the circumstances, in comparison of the legislator, who can have no such knowledge. I will make the experiment, for so long as I have the mortification to see you on the opposite side, I can never think the ground I have taken strong enough, while anything remains that appears capable of rendering it still stronger.

“With regard to misconduct, the number of prudent and successful undertakings,” you observe, “is everywhere much greater than that of injudicious and unsuccessful ones. After all our complaints of the frequency of bankruptcies, the unhappy men who fall into this misfortune make but a very small part of the whole number engaged in trade and all other sorts of business; not much more, perhaps, than one in a thousand.”

’Tis in support of this position that you appeal to history for the constant and uninterrupted progress of mankind, in our island at least, in the career of prosperity: calling upon any one who should entertain a doubt of the fact, to divide the history into any number of periods, from the time of Cæsar’s visit down to the present: proposing, for instance, the respective eras of the Restoration, the accession of Elizabeth, that of Henry VII., the Norman Conquest, and the Heptarchy; and putting it to the sceptic to find out, if he can, among all these periods, any one at which the condition of the country was not more prosperous than at the period immediately preceding it: spite of so many wars, and fires, and plagues, and all other public calamities, with which it has been at different times afflicted, whether by the hand of God, or by the misconduct of the sovereign. No very easy task, I believe: the fact is too manifest for the most jaundiced eye to escape seeing it. But what, and whom, are we to thank for it, but projects and projectors?

“No,” I think I hear you saying, “I will not thank projectors for it; I will rather thank the laws, which, by fixing the rates of interest, have been exercising their vigilance in repressing the temerity of projectors, and preventing their imprudence from making those defalcations from the sum of national prosperity, which it would not have failed to make had it been left free. If, during all these periods, that adventurous race of men had Edition: current; Page: [24] been left at liberty by the laws to give full scope to their rash enterprises, the increase of national prosperity during these periods might have afforded some ground for regarding them in a more favourable point of view. But the fact is, that their activity has had these laws to check it; without which checks you must give me leave to suppose that the current of prosperity, if not totally stopped or turned the other way, would at any rate have been more or less retarded. Here, then,” you conclude, “lies the difference between us. What you look upon as the cause of the increase about which we are both agreed, I look upon as an obstacle to it; and what you look upon as the obstacle, I look upon as the cause.”

Instead of starting this as a sort of plea that might be urged by you, I ought, perhaps, rather to have mentioned it as what might be urged by some people in your place; for as I do not imagine your penetration would suffer you to rest satisfied with it, still less can I suppose that, if you were not, your candour would allow you to make use of it as if you were.

To prevent your resting satisfied with it, the following considerations would, I think, be sufficient.

In the first place, of the seven periods which you have pitched upon, as so many stages for the eye to rest at in viewing the progress of prosperity, it is only during the three last that the country has had the benefit, if such we are to call it, of these laws; for it is to the reign of Henry VIII. that we owe the first of them.

Here a multitude of questions might be started:—whether the curbing of projectors formed any part of the design of that first statute, or whether the views of it were not wholly confined to the reducing the gains of that obnoxious and envied class of men, the money-lenders?—whether projectors have been most abundant before that statute, or since that statute?—and whether the nation has suffered, as you might say—benefited, as I should say—most by them, upon the whole, during the former period or the latter? All these discussions, and many more that might be started, I decline engaging in, as more likely to retard than to forward our coming to any agreement concerning the main question.

In the next place, I must here take the liberty of referring you to the proof which I think I have already given, of the proposition that the restraints in question could never have had the effect, in any degree, of lessening the proportion of bad projects to good ones, but only of diminishing, as far as their influence may have extended, the total number of projects, good and bad together. Whatever, therefore, was the general tendency of the projecting spirit previously to the first of these laws, such it must have remained ever since, for any effect which they could have had in purifying and correcting it.

But what may appear more satisfactory, perhaps, than both the above considerations, and may afford us the best help towards extricating ourselves from the perplexity which the plea I have been combating (and which I thought it necessary to bring to view as the best that could be urged) seems much better calculated to plunge us into than bring us out of, is, the consideration of the small effect which the greatest waste that can be conceived to have been made within any compass of time by injudicious projects, can have had on the sum of prosperity, even in the estimation of those whose opinion is most unfavourable to projectors, in comparison of the effect which, within the same compass of time, must have been produced by prodigality.

Of the two causes, and only two causes which you mention, as contributing to retard the accumulation of national wealth, as far as the conduct of individuals is concerned, projecting, as I observed before, is the one, and prodigality is the other: but the detriment which society can receive even from the concurrent efficacy of both these causes, you represent on several occasions as inconsiderable, and, if I do not misapprehend you, too inconsiderable, either to need, or to warrant, the interposition of government to oppose it. Be this as it may, with regard to projecting and prodigality taken together—with regard to prodigality at least, I am certain I do not misapprehend you. On this subject you ride triumphant, and chastise the “impertinence and presumption of kings and ministers,” with a tone of authority which it required a courage like yours to venture upon, and a genius like yours to warrant a man to assume.* After drawing the parallel between private thrift and public profusion—“It is,” you conclude, “the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, and without exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.”

That the employing the expedients you mention for restraining prodigality, is indeed generally, perhaps even without exception, improper, and in many cases even ridiculous, I agree with you: nor will I here step aside Edition: current; Page: [25] from my subject to defend from that imputation another mode suggested in a former part of these papers. But however presumptuous and impertinent it may be for the sovereign to attempt in any way to check by legal restraints the prodigality of individuals, to attempt to check their bad management by such restraints, seems abundantly more so. To err in the way of prodigality is the lot—though, as you well observe, not of many men, in comparison of the whole mass of mankind—yet at least of any man: the stuff fit to make a prodigal of is to be found in every alehouse, and under every hedge. But even to err in the way of projecting, is the lot only of the privileged few. Prodigality, though not so common as to make any very material drain from the general mass of wealth, is however too common to be regarded as a mark of distinction or as a singularity. But the stepping aside from any of the beaten paths of traffic, is regarded as a singularity—as serving to distinguish a man from other men. Even where it requires no genius, no peculiarity of talent—as where it consists in nothing more than the finding out a new market to buy or sell in, it requires, however, at least a degree of courage, which is not to be found in the common herd of men. What shall we say of it, where, in addition to the vulgar quality of courage, it requires the rare endowment of genius, as in the instance of all those successive enterprises by which arts and manufactures have been brought from their original nothing to their present splendour? Think how small a part of the community these must make, in comparison of the race of prodigals—of that very race which, were it only on account of the smallness of its number, would appear too inconsiderable to you to deserve attention. Yet prodigality is essentially and necessarily hurtful, as far as it goes, to the opulence of the state: projecting is so only by accident. Every prodigal, without exception, impairs—by the very supposition impairs, if he does not annihilate—his fortune. But it certainly is not every projector that impairs his: it is not every projector that would have done so, had there been none of those wise laws to hinder him: for the fabric of national opulence—that fabric of which you proclaim, with so generous an exultation, the continual increase—that fabric, in every apartment of which, innumerable as they are, it required the reprobated hand of a projector to lay the first stone, has required some hands at least to be employed, and successfully employed. When, in comparison of the number of prodigals, which is too inconsiderable to deserve notice, the number of projectors of all kinds is so much more inconsiderable—and when, from this inconsiderable number, must be deducted the not inconsiderable proportion of successful projectors—and from this remainder again, all those who can carry on their projects without need of borrowing,—think whether it be possible that this last remainder could afford a multitude, the reducing of which would be an object deserving the interposition of government by its magnitude, even taking for granted that it were an object proper in its nature?

If it be still a question whether it be worth while for government, by its reason, to attempt to controul the conduct of men visibly and undeniably under the dominion of passion, and acting under that dominion, contrary to the dictates of their own reason,—in short, to effect what is acknowledged to be their better judgment, against what everybody, even themselves, would acknowledge to be their worse,—is it endurable that the legislator should by violence substitute his own pretended reason, the result of a momentary and scornful glance, the offspring of wantonness and arrogance, much rather than of social anxiety and study, in the place of the humble reason of individuals, binding itself down with all its force to that very object which he pretends to have in view? Nor let it be forgotten, that, on the side of the individual in this strange competition, there is the most perfect and minute know ledge and information which interest—the whole interest of a man’s reputation and fortune, can insure: on the side of the legislator, the most perfect ignorance. All that he knows all that he can know, is, that the enterprise is a project, which, merely because it is susceptible of that obnoxious name, he looks upon as a sort of cock, for him, in childish wantonness, to shie at. Shall the blind lead the blind? is a question that has been put of old to indicate the height of folly: but what then shall we say of him who, being necessarily blind, insists on leading, in paths he never trode in, those who can see?

It must be by some distinction too fine for my conception, if you clear yourself from the having taken, on another occasion, but on the very point in question, the side, on which it would be my ambition to see you fix:—

“What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual,” you say,* “it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatsoever, Edition: current; Page: [26] and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.

“To give the monopoly of the home market to the produce of domestic industry in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must in almost all cases be either a useless or a hurtful regulation.”—Thus far you: and I add,—to limit the legal interest to a rate at which the carriers on of the oldest and best-established and least hazardous trades are always glad to borrow, is to give the monopoly of the money-market to those traders, as against the projectors of new-imagined trades, not one of which but, were it only from the circumstance of its novelty, must, as I have already observed, appear more hazardous than the old.

These, in comparison, are but inconclusive topics. I touched upon them merely as affording what appeared to me the only shadow of a plea that could be brought in defence of the policy I am contending against. I come back, therefore, to my first ground, and beg you once more to consider, whether, of all that host of manufactures, which we both exult in as the causes and ingredients of national prosperity, there be a single one that could have existed at first but in the shape of a project. But if a regulation, the tendency and effect of which is merely to check projects in as far as they are projects, without any sort of tendency, as I have shown, to weed out the bad ones, is defensible in its present state of imperfect efficacy, it should not only have been defensible, but much more worthy of our approbation, could the efficacy of it have been so far strengthened and completed as to have opposed from the beginning an unsurmountable bar to all sorts of projects whatsoever;—that is to say, if, stretching forth its hand over the first rudiments of society, it had confined us, from the beginning, to mud for our habitations, to skins for our clothing, and to acorns for our food.

I hope you may by this time be disposed to allow me, that we have not been ill served by the projects of time past. I have already intimated, that I could not see any reason why we should apprehend our being worse served by the projects of time future. I will now venture to add, that I think I do see reason why we should expect to be still better and better served by these projects, than by those: I mean, better upon the whole, in virtue of the reduction which experience, if experience be worth anything, should make in the proportion of the number of the ill-grounded and unsuccessful, to that of the well-grounded and successful ones.

The career of art, the great road which receives the footsteps of projectors, may be considered as a vast, and perhaps unbounded plain, bestrewed with gulphs such as Curtius was swallowed up in. Each requires a human victim to fall into it ere it can close; but when it once closes, it closes to open no more, and so much of the path is safe to those who follow. If the want of perfect information of former miscarriages renders the reality of human life less happy than this picture, still the similitude must be acknowledged: and we see at once the only plain and effectual method for bringing that similitude still nearer and nearer to perfection: I mean, the framing the history of the projects of time past, and (what may be executed in much greater perfection, were but a finger held up by the hand of government) the making provision for recording, and collecting, and publishing as they are brought forth, the race of those with which the womb of futurity is still pregnant. But to pursue this idea, the execution of which is not within my competence, would lead me too far from the purpose.

Comfortable it is to reflect, that this state of continually-improving security is the natural state, not only of the road to opulence, but of every other track of human life. In the war which industry and ingenuity maintain with fortune, past ages of ignorance and barbarism form the forlorn hope, which has been detached in advance, and made a sacrifice of for the sake of future. The golden age, it is but too true, is not the lot of the generation in which we live: but if it is to be found in any part of the track marked out for human existence, it will be found, I trust, not in any part which is past, but in some part which is to come.

But to return to the laws against usury, and their restraining influence on projectors. I have made it, I hope, pretty apparent, that these restraints have no power or tendency to pick out bad projects from the good. Is it worth while to add, which I think I may do with some truth, that the tendency of them is rather to pick the good out from the bad? Thus much at least may be said, and it comes to the same thing, that there is one case in which, be the project what it may, they may have the effect of checking it, and another in which they can have no such effect; and that the first has for its accompaniment, and that a necessary one, a circumstance which has a strong tendency to separate and discard every project of the injudicious stamp, but which is wanting in the other case: I mean, in a word, the benefit of discussion.

It is evident enough, that upon all such projects, whatever be their nature, as find funds sufficient to carry them on, in the hands of him whose invention gave them birth, these laws are perfectly, and if by this time you will allow me to say so, very happily, without Edition: current; Page: [27] power. But for these there has not necessarily been any other judge, prior to experience, than the inventor’s own partial affection. It is not only not necessary that they should have had, but it is natural enough that they should not have had, any such judge; since in most cases the advantage to be expected from the project depends upon the exclusive property in it, and consequently upon the concealment of the principle. Think, on the other hand, how different is the lot of that enterprise which depends upon the good opinion of another man; that other, a man possessed of the wealth which the projector wants, and before whom necessity forces him to appear in the character of a suppliant at least: happy if, in the imagination of his judge, he adds not to that degrading character, that of a visionary enthusiast or an impostor! At any rate, there are in this case, two wits set to sift into the merits of the project, for one which was employed upon that same task in the other case: and of these two, there is one whose prejudices are certainly not most likely to be on the favourable side. True it is, that in the jumble of occurrences, an over-sanguine projector may stumble upon a patron as over-sanguine as himself; and the wishes may bribe the judgment of the one, as they did of the other. The opposite case, however, you will allow, I think, to be by much the more natural. Whatever a man’s wishes may be for the success of an enterprise not yet his own, his fears are likely to be still stronger. That same pretty generally implanted principle of vanity and self-conceit, which disposes most of us to overvalue each of us his own conceptions, disposes us, in a proportionable degree, to undervalue those of other men.

Is it worth adding, though it be undeniably true, that could it even be proved by ever so uncontrovertible evidence, that from the beginning of time to the present day, there never was a project that did not terminate in the ruin of its author; not even from such a fact as this, could the legislator derive any sufficient warrant, so much as for wishing to see the spirit of projects in any degree repressed? The discouraging motto, Sic vos non vobis, may be matter of serious consideration to the individual, but what is it to the legislator? What general, let him attack with ever so superior an army, but knows that hundreds, or perhaps thousands, must perish at the first onset? Shall he, for that consideration alone, lie inactive in his lines? “Every man for himself—but God” adds the proverb (and it might have added the general, and the legislator, and all other public servants) “for us all.” Those sacrifices of individual to general welfare, which on so many occasions are made by third persons against men’s wills, shall the parties themselves be restrained from making, when they do it of their own choice? To tie men neck and heels, and throw them into the gulphs I have been speaking of, is altogether out of the question: but if at every gulph a Curtius stands mounted and caparisoned, ready to take the leap, is it for the legislator, in a fit of old-womanish tenderness, to pull him away? Laying even public interest out of the question, and considering nothing but the feelings of the individuals immediately concerned, a legislator would scarcely do so, who knew the value of hope, “the most precious gift of heaven.”

Consider, Sir, that it is not with the invention-lottery (that great branch of the project-lottery, for the sake of which I am defending the whole, and must continue so to do until you or somebody else can show me how to defend it on better terms,) it is not, I say, with the invention-lottery, as with the mine-lottery, the privateering-lottery, and so many other lotteries which you speak of, and in no instance, I think, very much to their advantage. In these lines, success does not, as in this, arise out of the embers of ill-success, and thence propagate itself, by a happy contagion, perhaps to all eternity. Let Titius have found a mine, it is not the more easy, but by so much the less easy, for Sempronius to find one too: let Titius have made a capture, it is not the more easy, but by so much the less easy, for Sempronius to do the like. But let Titius have found out a new dye, more brilliant or more durable than those in use—let him have invented a new and more convenient machine, or a new and more profitable mode of husbandry,—a thousand dyers, ten thousand mechanics, a hundred thousand husbandmen, may repeat and multiply his success: and then, what is it to the public though the fortune of Titius, or of his usurer, should have sunk under the experiment?

Birmingham and Sheffield are pitched upon by you as examples, the one of a projecting town, the other of an unprojecting one.* Can you forgive my saying, I rather wonder that this comparison of your own choosing did not suggest some suspicions of the justice of the conceptions you had taken up to the disadvantage of projectors. Sheffield is an old oak: Birmingham but a mushroom. What if we should find the mushroom still vaster and more vigorous than the oak? Not but the one as well as the other, at what time soever planted, must equally have been planted by projectors: for though Tubal Cain himself were to be brought post from Armenia to plant Sheffield, Tubal Cain himself was as arrant a projector in his day, as ever Sir Thomas Lombe was, or Bishop Blaise. But Birmingham, it seems, claims, in common parlance, the title of a projecting town, to the exclusion of the Edition: current; Page: [28] other, because, being but of yesterday, the spirit of project smells fresher and stronger there than elsewhere.

When the odious sound of the word projector no longer tingles in your ears, the race of men thus stigmatized do not always find you their enemy. Projects, even under the name of “dangerous and expensive experiments,” are represented as not unfit to be encouraged, even though monopoly be the means: and the monopoly is defended in that instance, by its similarity to other instances in which the like means are employed to the like purpose.

“When a company of merchants undertake at their own risk and expense to establish a new trade with some remote and barbarous nation, it may not be unreasonable,” you observe, “to incorporate them into a jointstock company, and to grant them, in case of their success, a monopoly of the trade for a certain number of years. It is the easiest and most natural way in which the state can recompense them, for hazarding a dangerous and expensive experiment, of which the public is afterwards to reap the benefit. A temporary monopoly of this kind may be vindicated upon the same principles upon which a like monopoly of a new machine is granted to its inventor, and that of a new book to its author.”

Private respect must not stop me from embracing this occasion of giving a warning which is so much needed by mankind. If so original and independent a spirit has not been always able to save itself from being drawn aside by the fascination of sounds into the paths of vulgar prejudice, how strict a watch ought not men of common mould to set over their judgments, to save themselves from being led astray by similar delusions!

I have sometimes been tempted to think, that were it in the power of laws to put words under proscription, as it is to put men, the cause of inventive industry might perhaps derive scarcely less assistance from a bill of attainder against the words project and projectors, than it has derived from the act authorizing the grant of patents. I should add, however, for a time: for even then the envy, and vanity, and wounded pride, of the uningenious herd, would sooner or later infuse their venom into some other word, and set it up as a new tyrant, to hover, like its predecessor, over the birth of infant genius, and crush it in its cradle.

Will not you accuse me of pushing malice beyond all bounds, if I bring down against you so numerous and respectable a body of men as the members of the Society for the Encouragement of Arts? I do not, must not, care: for you command too much respect to have any claim to mercy. At least you will not accuse me of spiriting up against you barbarian enemies, and devoting you to the vengeance of Cherokees and Chicasaws.

Of that popular institution, the very professed and capital object is the encouragement of projects, and the propagating of that obnoxious breed, the crushing of which you commend as a fit exercise for the arm of power. But if it be right to crush the acting malefactors, it would be downright inconsistency not to crush at the same time, or rather not to begin with crushing, these their hirers and abettors. Thank, then, their inadvertence, or their generosity, or their prudence, if their beadle has not yet received orders to burn in ceremony, as a libel on the Society, a book that does honour to the age.

After having had the boldness to accuse so great a master of having fallen unawares into an error, may I take the still farther liberty of setting conjecture to work to account for it? Scarce any man, perhaps no man, can push the work of creation, in any line, to such a pitch of completeness as to have gone through the task of examining with his own eyes into the grounds of every position without exception, which he has had occasion to employ. You heard the public voice, strengthened by that of law, proclaiming all round you, that usury was a sad thing, and usurers a wicked and pernicious set of men: you heard from one at least of those quarters, that projectors were either a foolish and contemptible race, or a knavish and destructive one. Hurried away by the throng, and taking, very naturally, for granted, that what everybody said must have some ground for it, you have joined the cry, and added your suffrage to the rest. Possibly, too, among the crowd of projectors which the lottery of occurrences happened to present to your observation, the prejudicial sort may have borne such a proportion to the beneficial, or shown themselves in so much stronger colours, as to have given the popular notion a firmer hold in your judgment, than it would have had, had the contrary proportion happened to present itself to your notice. To allow no more weight to examples that fall close under our eyes, than to those which have fallen at ever so great a distance—to suffer the judgment on no occasion to indulge itself in the licence of a too hasty and extensive generalization—not to give any proposition footing there, till after all such defalcations have been made as are necessary to reduce it within the limits of rigid truth,—these are laws, the complete observance whereof forms the ultimate, and hitherto, perhaps for ever, ideal term of human wisdom.

You have defended against unmerited obloquy two classes of men—the one innocent at least, the other highly useful: the spreaders of English arts in foreign climes, and those whose industry exerts itself in distributing that necessary commodity which is called by Edition: current; Page: [29] the way of eminence the staff of life.* May I flatter myself with having succeeded at last in my endeavours to recommend to the same powerful protection, two other highly useful and equally persecuted sets of men—usurers and projectors? Yes: I will, for the moment at least, indulge so flattering an idea; and in pursuance of it, leaving usurers, for whom I have said enough already, I will consider myself as joined now with you in the same commission, and thinking with you of the best means of relieving the projector from the load of discouragement laid on him by these laws, in so far as the pressure of them falls particularly upon him. In my own view of the matter, indeed, no temperament, no middle course, is either necessary or proper: the only perfectly effectual, is the only perfectly proper remedy—a spunge. But as nothing is more common with mankind than to give opposite receptions to conclusions flowing with equal necessity from the same principle, let us accommodate our views to that contingency.

According to this idea, the object, as far as confined to the present case, should be, to provide, in favour of projectors only, a dispensation from the rigour of the anti-usurious laws;—such, for instance, as is enjoyed by persons engaged in the carrying trade, in virtue of the indulgence given to loans made on the footing of respondentia or bottomry. As to abuse, I see not why the danger of it should be greater in this case than in those. Whether a sum of money be embarked, or not embarked, in such or such a new manufacture on land, should not, in its own nature, be a fact much more difficult to ascertain, than whether it be embarked, or not embarked, in such or such a trading adventure by sea: and in the one case as in the other, the payment of the interest, as well as the repayment of the principal, might be made to depend upon the success of the adventure. To confine the indulgence to new undertakings, the having obtained a patent for some invention, and the continuance of the term of the patent, might be made conditions of the allowance given to the bargain: to this might be added affidavits expressive of the intended application, and bonds, with sureties, conditioned for the performance of the intention so declared; to be registered in one of the patent-offices, or elsewhere. After this, affidavits once a-year, or oftener, during the subsistence of the contract, declaring what has been done in execution of it.

If the leading-string is not yet thought tight enough, boards of controul might be instituted to draw it tighter. Then opens a scene of vexation and intrigue: waste of time consumed in courting the favour of the members of the board: waste of time in opening their understandings, clenched perhaps by ignorance, at any rate by disdain and self-sufficiency, and vanity, and pride: the favour (for pride will make it a favour) granted to skill in the arts of self-recommendation and cabal, devoid of inventive merit, and refused to naked merit unadorned by practice in those arts: waste of time on the part of the persons themselves engaged in this impertinent inquiry: waste of somebody’s money in paying them for this waste of time. All these may be necessary evils, where the money to be bestowed is public money: how idle where it is the party’s own! I will not plague you, nor myself, with inquiring of whom shall be composed this board of nurses to grown gentlemen: were it only to cut the matter short, one might name at once the committees of the Society of Arts. There you have a body of men ready trained in the conduct of inquiries, which resemble that in question in every circumstance but that which renders it ridiculous: the members or representatives of this democratic body would be as likely, I take it, to discharge such a trust with fidelity and skill, as any aristocracy that could be substituted in their room.

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  • CHAPTER I. Introduction, . . . . . . . . page 33
  • CHAPTER II. Analytical Survey of the Field of Political Economy, . . . . . . . . . . . 35
  • CHAPTER III. Of Wealth.
    • § 1. Sponte acta, . . . . . . . . . 40
    • 2. Agenda, . . . . . . . . . . . 41
    • 3. Non-agenda, . . . . . . . . . 42
    • 4. Broad measures—
    • Example 1. Forced frugality, . . . 44
    • 5. Example 2. Increasing money, . . 45
    • 6. Example 3. Forced reduction of rate of interest, . . . . 47
    • 7. Rates of interest—evils of fixation, . ib.
    • 8. Broad measures—
    • Example 4. Increasing land, . . . 52
    • 9. Narrow measures—General observations, 57
    • 10. Example 1. False encouragements, loans, 58
    • 11. Example 2. Gift or gratuitous loans, . 59
    • 12. Example 3. Bounties upon production, ib.
    • 13. Example 4. Exemptions from taxes on production, . . . . . 62
    • 14. Example 5. Bounties on exportation, . ib.
    • 15. Example 6. Prohibition of rival productions, . . . . . . . 63
    • 16. Example 7. Prohibition of rival imports, 64
    • 17. Example 8. Taxation of rival branches of home manufactures, . 65
    • § 18. Example 9. Taxation of rival imports, . . . . page 65
    • 19. Example 10. Drawbacks on exportation, ib.
    • 20. Example 11. Non-importation agreements, . . . . . . ib
    • 21. Example 12. Premiums for the importation of foreign arts and hands, . . . . . . ib.
    • 22. Example 13. Fixation of prices, . . . 66
    • 23. Wealth, means of increase, . . . . ib.
  • CHAPTER IV. Of Population.
    • 1. Sponte acta, . . . . . . . . . 72
    • 2. Agenda, . . . . . . . . . . . ib.
    • 3. Non-agenda, . . . . . . . . . 73
  • CHAPTER V. Of Finance.
    • 1. General observations, . . . . . . 75
    • 2. Of direct and indirect taxation, . . . 76
    • 3. Taxes—effects on production, . . . 78
  • CHAPTER VI. Operation of a Sinking Fund on the production of Wealth, . . . . . . . . 80
  • CHAPTER VII. Noscenda, . . . . . . . . . . . . 82
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Political Economy is at once a science and an art. The value of the science has for its efficient cause and measure, its subserviency to the art.

According to the principle of utility in every branch of the art of legislation, the object or end in view should be the production of the maximum of happiness in a given time in the community in question.

In the instance of this branch of the art, the object or end in view should be the production of that maximum of happiness, in so far as this more general end is promoted by the production of the maximum of wealth and the maximum of population.

The practical questions, therefore, are—How far the measures respectively suggested by these two branches of the common end agree?—how far they differ, and which requires the preference?—how far the end in view is best promoted by individuals acting for themselves? and in what cases these ends may be best promoted by the hands of government?

Those cases in which, and those measures or operations by which, the end is promoted by individuals acting for themselves, and without any special interference exercised with this special view on the part of government, beyond the distribution made and maintained, and the protection afforded by the civil and penal branches of the law, may be said to arise sponte acta.

What the legislator and the minister of the interior have it in their power to do towards increase either of wealth or population, is as nothing in comparison with what is done of course, and without thinking of it, by the judge, and his assistant the minister of police.

The cases in which, and the measures by which, the common end may be promoted by the hands of government, may be termed agenda.

With the view of causing an increase to take place in the mass of national wealth, or with a view to increase of the means either of subsistence or enjoyment, without some special reason, the general rule is, that nothing ought to be done or attempted by government. The motto, or watchword of government, on these occasions, ought to be—Be quiet.

For this quietism there are two main reasons:—1. Generally speaking, any interference for this purpose on the part of government is needless. The wealth of the whole community is composed of the wealth of the several individuals belonging to it taken together. But to increase his particular portion is, generally speaking, among the constant objects of each individual’s exertions and care. Generally speaking, there is no one who knows what is for your interest, so well as yourself—no one who is disposed with so much ardour and constancy to pursue it.

2. Generally speaking, it is moreover likely to be pernicious, viz. by being unconducive, or even obstructive, with reference to the attainment of the end in view. Each individual bestowing more time and attention upon the means of preserving and increasing his portion of wealth, than is or can be bestowed by government, is likely to take a more effectual course than what, in his instance and on his behalf, would be taken by government.

It is, moreover, universally and constantly pernicious in another way, by the restraint or constraint imposed on the free agency of the individual. Pain is the general concomitant of the sense of such restraint, wherever it is experienced.

Without being productive of such coercion, and thereby of such pain—in a way more or less direct—more or less perceptible, with this or any other view, the interposition of government can hardly take place. If the coercion be not applied to the very individual whose conduct is endeavoured to be made immediately subservient to this purpose, it is at any rate applied to others—indeed, to the whole community taken together.

In coercive measures, so called, it is only to the individual that the coercion is applied. In the case of measures of encouragement, Edition: current; Page: [34] the field of coercion is vastly more extensive. Encouragements are grants of money or money’s worth, applied in some shape or other to this purpose. But for this, any more than any other purpose, money is not raised but by taxes, and taxes are the produce of coercive laws applied to the most coercive purpose.

This would not be the less true, though the individual pieces of money thus applied happened to come from a source which had not been fed by any such means. In all communities, by far the greatest share of the money disposed of by government being supplied by taxes, whether this or that particular portion of money so applied, be supplied from that particular source, makes no sort of difference.

To estimate the good expected from the application of any particular mass of government money, compare it always with the mischief produced by the extraction of an equal sum of money by the most burthensome species of tax; since, by forbearing to make application of that sum of money, you might forbear levying the amount of that same sum of money by that tax, and thereby forbear imposing the mass of burthen that results from it.

It would, however, be a gross error, and an extremely mischievous one, to refer to the defalcation thus resulting from the mass of liberty or free agency, as affording a conclusive objection against the interposition of the law for this or any other purpose. Every law which does not consist in the repeal, total or partial, of a coercive law, is itself a coercive law. To reprobate as a mischief resulting from this or that law, a property which is of the very essence of all law, is to betray a degree of blindness and ignorance one should think hardly possible on the part of a mind accustomed to the contemplation of any branch of the system of laws—a total unacquaintance with what may be called the logic of the laws.

Yet so imperfect is the state of legal knowledge,—marks of this perfectly surprising, as it will one day be, as well as much to be lamented ignorance, are to be found among the most experienced pens, not to mention the most loquacious tongues.

Power, knowledge* or intelligence, and inclination: where these requisites concur on the part of him on whom the production of the desirable effect in question depends, it is produced; when any one of them is wanting, it is not produced.

When these requisites exist already in perfection with reference to the production of any effect operating in addition to the mass of wealth on the part of the members of the community taken respectively in their individual capacities, it will be produced without the interference of the government; and as this interference is never a matter of pure indifference,—never otherwise than hurtful when it is not beneficial, these cases are among the cases in which that interference is not desirable.

In the cases where any one of these requisites is deficient, insomuch that for want of it the effect cannot be produced,—in such case the interposition of government may be desirable or not, according to the state of the account—according as the inconveniences attached to the measures in which the interposition of government consists, preponderate or fail of preponderating over the advantage attached to the effect which it is proposed should be produced.

If the effect fail of being produced without the interposition of government for want of any one or more of these requisites, it is by the supply of the requisite or requisites so wanting that the action of government may display itself. Thence, on every such occasion, these questions present themselves for consideration:—

1. Whether the effect in question fail of being produced in the degree in which it might be produced?

2. To the want of what requisite or requisites such failure is to be ascribed?

3. What are the means by which such failure may be supplied by government at the least expense?

4. When reduced to its least dimensions, is the expense necessary for the purpose in question such that the advantage will preponderate over the expense?

In a general view of the three requisites, inclination appears least apt to be deficient on the part of individuals. The general mass of national wealth is composed of the particular masses appertaining to individuals. On the part of the individual there is seldom any deficiency in respect of inclination to make addition to the amount of that particular mass of wealth which has fallen to his share.

It is in respect to the two other requisites, power and intelligence, that deficiency is much more apt to take place.

To these deficiencies the abilities of government are happily adapted. Inclination it could not give—it has not power to give it in the great mass of cases:—not by punishments, on account of the expensiveness, and in such cases the comparative inefficacy of such means;—not by reward, for want of a sufficient stock of that scarce and valuable matter which is not to be extracted but by taxes—that is, by punishments.

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Intelligence and power may be administered by government at a much cheaper rate. A mite of reward, skilfully applied, is often sufficient to produce an immensity of intelligence. In many instances, it frequently requires nothing more than the removal of coercion from one hand to another, or even the repeal of it altogether, in order to confer the sort and degree of requisite power;* the operation, in either case, not being attended, in the shape of pain, with any perceptible effect.

The two most extensive descriptions of the cases in which it is necessary or expedient to interfere for the purpose of regulating the exertions of individuals in respect to the increase of wealth, are those in which it is necessary to regulate the pursuit of the several objects in view, according to the order of their importance:—in giving to the matter of wealth that modification which adapts it to the several purposes of subsistence and defence—security in respect of subsistence, and security in respect of defence—in preference to that which adapts it to the mere purpose of enjoyment.

With few exceptions, and those not very considerable ones, the attainment of the maximum of enjoyment will be most effectually secured by leaving each individual to pursue his own maximum of enjoyment, in proportion as he is in possession of the means. Inclination in this respect will not be wanting on the part of any one. Power, the species of power applicable to this case—viz. wealth, pecuniary power—could not be given by the hand of government to one, without being taken from another; so that by such interference there would not be any gain of power upon the whole.

The gain to be produced in this article by the interposition of government, respects principally the head of knowledge. There are cases in which, for the benefit of the public at large, it may be in the power of government to cause this or that portion of knowledge to be produced and diffused, which, without the demand for it produced by government, would either not have been produced, or would not have been diffused.

We have seen above the grounds on which the general rule in this behalf—Be quiet—rests. Whatever measures, therefore, cannot be justified as exceptions to that rule, may be considered as non agenda on the part of government. The art, therefore, is reduced within a small compass: security and freedom are all that industry requires. The request which agriculture, manufactures, and commerce present to governments, is modest and reasonable as that which Diogenes made to Alexander: “Stand out of my sunshine.” We have no need of favour—we require only a secure and open path.


For the genesis of the matter of wealth—the causes and mode of its production under its several modifications—reference may for the present be made to Adam Smith, who has not left much to do, except in the way of method and precision.

The following are the first steps in an analytical survey of the field of political economy, showing how to draw a circle round the subject, and how to invent or discover what remains to be invented or discovered in this quarter of the field of human knowledge.

On the part of the individuals by whom increase of wealth is produced, the production of it is either purely spontaneous, or (with or without design directed to the increase of it) either promoted or obstructed by the operations of government. The correspondent practical division of acts and operations, the effect of which is to exert an influence on the quantity of the national, to which may be added the mundane stock of the matter of wealth, is—1. Sponte acta; 2. Agenda; 3. Non-agenda.

In the track of political economy as in any other, whatever is done towards the attainment of the object, must be by creating inclination, or by bestowing power.

Inclination can only be operated upon by inducements, as—

1. By applications of a coercive or obligatory nature,—which are either injunctions or prohibitions.

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2. By applications of an invitative nature, or encouragements,—which are either direct or indirect.

Power may to this purpose be distinguished into—1. Legal; 2. Physical; 3. Intellectual, or knowledge.

1. Legal power may be conferred—1. By forbearing to impose on the party proposed to be assisted coercion of any kind: 2. By coercing others in such a manner as to prevent them from obstructing his making use of the power of the preceding kind; 3. By compelling them to afford him assistance. In the two first of these cases, power is no more than liberty.

2. Physical power is conferred by giving to a party the physical instruments requisite to the attainment of the end proposed;—viz. money, or something that is to be had for money. This can only be done by legal power of one or other of the three kinds above mentioned.

3. Intellectual power is either—1. Active power; or, 2. Knowledge. If active power be given by law, it can only be in some indirect way, through physical and thence through legal power.

Knowledge is either—1. Of the modes of operating towards the end proposed;—viz. which are good, which bad—which worst, and which best; or, 2. Of matters of fact;—which may be conducive to this end, either—1. By pointing out inducement; 2. By pointing out legal power; 3. By conducing to physical power or to intellectual power—either as leading to knowledge of the modes of operating, or to other matters of fact more immediately leading to such knowledge.

Encouragements may be distinguished into—1. Direct; and, 2. Indirect. Direct consist of rewards, commonly called in this instance bounties, given to him who shall exercise his industry in such or such a way. Indirect, consist in discouragements opposed in the way of others, in the view of restraining them from exercising their industry in such or such a way; i. e. in such a way as shall prevent his exercising his in the way desired. If discouragements thrown in the way of A, answer the purpose of encouragement to B, it is because A’s acting in the track he is thus discouraged from would have tended to discourage B from acting in the track he is meant to be encouraged to act in, by diminishing the reward, natural or factitious, he would have got in some way by acting in it.

To the head of encouragements may also be added operations the tendency of which is to confer power, and in particular physical power; such as the giving or lending money or money’s worth, to be employed in the shape of a capital towards the carrying on a branch of industry meant to be encouraged.

In whichever of the above ways aid is applied, it must be either—1. With a view of increasing the quantity of industry in general; or, 2. With a view of increasing the relative quantity of a particular branch of industry.

The causes of wealth, or say rather the matter of wealth,* are—

1. Final—well-being.

2. Material—matter considered in respect of its possessing, or being capable of possessing value—viz. subservency to well-being, the final cause.

3. Efficient—viz. motion.

The modifications of well-being, ranged in the order of their importance, are—

1. Subsistence, present.

2. Security in respect of defence—viz. against the evils to which human nature is exposed, particularly from the action of agents exterior to a man’s body. Security in respect of future subsistence.

3. Enjoyment—viz. mere enjoyment, distinct from the maintenance of subsistence and the contemplation of security.

Matter, considered with reference to the final cause,—well-being, may be termed (such parts of it as by the use made of them become subservient to well-being, the final cause) matter of wealth.

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The term, matter of wealth, is applicable in common to—

1. Articles or instruments of subsistence;

2. Instruments of defence;

3. Instruments of enjoyment.

Articles of subsistence are either of constant or occasional use.

Articles of constant use are—

1. Articles of nourishment—viz. food and drink, i. e. liquid or solid; the distinction between which is at their point of nearest approach undeterminable.

2. Articles serving for the regulation of temperature and state of the air in respect of moisture. These are—either lodging or clothing.

3. Articles of occasional use, are articles of medicine.

The evils to which defence bears reference may be considered as having their source in the agency of irrational agents or rational agents.

Defence against evils apprehended from the agency of irrational agents, is defence against calamities.

Among rational agents, those from whose agency evil is apprehended, are either considered as members of the community in question, or not: in the first case, the defence is against delinquency; in the other case, against hostility.

A modification of the matter of wealth may be referred to that one of the above three heads to which it is conducive in the greatest degree;—for the same article which is principally subservient to one, may occasionally be subservient to either or both of the two others.*

Enjoyment being in a manner inseparable from the application of articles of subsistence to their use, all articles of subsistence are instruments of enjoyment likewise. The distinction is, therefore, not between articles of subsistence and instruments of enjoyment, but between articles of subsistence and instruments of mere enjoyment—viz. that by their application to use contribute nothing to subsistence any more than to defence.

The practice of exchange being established, each modification of the matter of wealth, to whichsoever of the above-mentioned divisions it belongs, is in virtue of that practice convertible with more or less facility and certainty into every other. The richer a community, the better secured it is thereby against hostility and famine.

A stock of instruments of mere enjoyment presupposes, on the part of each individual, a preassured stock of the articles of subsistence. The stock of articles of subsistence capable of being produced and kept up in a country, in any other view than that of exchange, has its limits: it can never extend much beyond the stock necessary for the subsistence of the inhabitants—the stock of instruments of mere enjoyment is without limit.

It is only in respect and in virtue of the quantity of the stock of instruments of mere enjoyment, that one country can exceed another country in wealth. The quantity of wealth is as the quantity of its instruments of enjoyment.

In cases where, two articles of subsistence contributing in an equal degree to that end, one contributes in a greater degree to enjoyment (as is testified by the greater price given for it,) it may be considered as possessed of a compound value, which by analysis may be resolved as it were into two values; Edition: current; Page: [38] one belonging to it in its capacity of an article of subsistence, the other in its capacity of an article of mere enjoyment.*

It is out of the fund for enjoyment that the portion of wealth allotted to defence, and the portion, if any, allotted to security in respect of subsistence, must be taken: for out of the portion allotted to subsistence none can be spared.

But though security increase in proportion as opulence increases, and inequality be an inseparable accompaniment of opulence, security does not increase in proportion as inequality increases. Take away all the ranks in respect of opulence, between the highest and the lowest—the inequality will be increased, but the degree of security will be diminished.

Luxury is not only an inseparable accompaniment to opulence, but increases in proportion to it. As men rise one above another in the scale of opulence, the upper one may, without excess, give into expenses which those below cannot give into without prodigality. It is therefore no more desirable that luxury should be repressed, than it is that opulence should be repressed—that is, that security should be diminished. If it were desirable that luxury should be repressed, it could be done no otherwise than either by depriving the more opulent classes of a part of their property in this view, or coercing them in the use of it. It would be less unreasonable to restrain prodigality wherever it is to be found, than to restrain the highest imaginable pitch of luxury on the part of those whose expense does not exceed their income.

The mass of that matter which is the material cause of wealth, has for its sources—

1. Land—i. e. dry land uncovered with water.

2. Water—i. e. land covered with water.

The matter of wealth considered in respect of its modifications, may be distinguished, in the first place, into matter in an unimproved state—in the state in which it comes out of the hands of nature; and matter in an improved state, i. e. modified by human labour, for the purpose of its being adapted to whatever uses it may be designed for.

Any distinguishable portion of the matter of wealth may be either an article of immediate or of subservient use.

It is an article of immediate use, when it is itself applicable to any one of the three above-mentioned ends, viz. subsistence, security, or enjoyment.

It is an article of subservient use, when, though it contribute to some one or more of those ends, it does so not by any immediate application of its powers to any one of the above three ends, but by the instrumentality of some other article which is of immediate use, and which it renders, or contributes or tends to render, subservient to that use.

The operations by which an increase of the matter of wealth is produced or promoted, may be enumerated under the following principal heads, viz.—

1. Discovery—viz. of the source of the raw material, or portion of matter of wealth in an unimproved state.

2. Discovery of this or that portion of land, considered as the source from which portions of matter in an unimproved state are extracted.

3. Extraction—viz. of the raw material from the portion of land which is its source.

When an increase of wealth to any given amount takes place, it is either by means of an increase of labour, or without any increase.

When it takes place without any increase in the quantity of labour, it takes place by means of an increase in the effect, or say, efficiency of the quantity of labour employed.

The degree of efficiency in the quantity of labour employed being given, the increase of wealth produced by the labour will be as the quantity of it.

If the quantity of wealth which, before the increase of efficiency, required a year’s labour of two thousand men, be now produced by a year’s labour of one thousand, there remains the year’s labour of one of the sets of a thousand men, which, when employed in the same way, or with the same degree of efficiency as that of the first set, will produce a fresh mass of wealth equal to the original one.

Reducing by one-half the number of men employed about an individual mass of work, the quantity of the work done not being diminished by such reduction, is therefore the same thing in effect as doubling the number of men employed with the same degree of efficiency as before.

But this supposes that the number of hands thus rendered unnecessary with regard to the production of the given quantity of work, are employed with the same degree of efficiency, or at any rate are employed. If not Edition: current; Page: [39] employed at all, no increase in the quantity of wealth will be brought about by the increase in the efficiency of the mass of labour which continues to be employed:—if employed, but employed with a less degree of efficiency, then the fresh quantity of wealth thus produced by the expelled hands will fail of being equal to the quantity produced by the hands retained, in a degree proportioned to the difference in the degree of efficiency.

If by means of the introduction of machinery, or improvement in the machinery in use, a manufacturer be enabled with one thousand hands to perform the same quantity of work as that which before the improvement required two thousand hands, it might seem at first sight, from this statement, that the natural effect of the improvement would be the retaining the same quantity of hands employed in that branch of manufacture, and thence the doubling the quantity of goods manufactured in the time. But without an addition to the mass of pecuniary capital, which is a circumstance accidental and not belonging to the case, the retaining of the same number of hands so employed would in no instance be possible; for the production and keeping up of the machinery or other auxiliary means would always require a considerable quantity of labour, the payment of which would be attended with a proportionable mass of expense, by which a proportionable part of the capital would be absorbed.

If the hands employed on the machinery should be paid at a higher rate than the hands employed in the manufacture, the capital being the same after the improvement as before, the number of manufacturing hands would be still further decreased on this account.

Hence it follows, that increase of wealth by saving of labour is not so great as increase of wealth by increase of quantity of labour; and that, consequently, opposition to machinery is well grounded, if no care be taken to provide immediate employment for the discharged hands. At first, the temporary distress will outweigh the temporary enjoyment; but, so far as depends on increase of wealth, the increase of enjoyment is perpetual.

The quantity of wealth, or matter of wealth, existing in a community at the end of a given space of time (say forty years,) will be as the quantity of wealth existing therein at the commencement of the period—plus the quantity of wealth that has come into it, minus the quantity that has gone out of it.

Hence two modes of increasing the quantity of wealth:—1. The direct and positive mode, increasing the quantity that comes in; 2. The indirect and negative mode, diminishing the quantity that goes out.

Wealth has two sources, to which correspond two modes of coming into a community:—1. Home production; 2. Importation.

It has in like manner two correspondent modes of going out:—1. Consumption; 2. Exportation.

In the case of importation, the increase is only relative, relation being had to the community in question: importation alone being considered, by so much as the wealth of this community is increased, by so much is the wealth of some other community decreased.

In the like manner, in the case of exportation, the decrease is only relative: exportation alone being considered, by so much as the wealth of this community is decreased, that of some other is increased: in relation to the world at large, the quantity suffers not in either case any change.

In general, import, in respect of one portion of wealth, does not take place, but export, in respect to another and correspondent portion, a portion generally regarded as being of equal value takes place at nearly the same time; the transfer or self-deprivation having the acquisition, for what in the language of English law is called its consideration, and in the language of general logic, its final cause. But between community and community, as between individuals, from matters of fear, amity, or remote personal interest, it will sometimes happen that export from this community shall take place without a correspondent import into it from that—import into this country without export from it into that; though import into this cannot take place (unless it be from spots occupied in common by the two, such as the greater part of the sea, and some unappropriated parts of the land) without export from that.

Consumption, again, takes place in either of two ways:—1. Purposely, in the way of use; or, 2. Undesignedly, in the way of deperition without use.

Deperition is either total or partial: partial, is deterioration.

Deperition is in strictness no otherwise true of any portion of matter than in as far as it respects form, and value as resulting from that form—value, i. e. subserviency to use.

An act whereby deperition is produced, is called destruction. An act whereby deterioration is produced, may be termed deterioration (the word being used in the active sense) or endamagement.

Acts whereby destruction or deterioration is produced, and thereby loss without preponderant benefit, it is the province of the non-penal branch of the law to define, and of the penal to prevent.

Preservation may be either total or partial: Edition: current; Page: [40] it can only be partial in cases where decrease to a greater or less amount is indispensable, as in case of taxes.

Taxes may be imposed either to furnish means for future expenditure, or to afford compensation to those who in times past have furnished the means for expenditure which then was future: in other words, for growing expenses, or for discharge of debts.

The amount of taxes imposed for growing expenses, takes from the amount of national wealth in certain ways, and adds to it in other ways, more or less, according as it is employed. It takes from the means or instruments of enjoyment, present or future, immediate or more or less remote, according as it would have been spent, lent out, or hoarded, had it not been for the tax. It adds to the security of the whole, in proportion as it is employed for the purpose of national security, in the way of national defence and otherwise. It adds to the subsistence and enjoyment of a part, in proportion as it is applied to those purposes, by those among whom it is distributed in consideration of the services by which they have respectively contributed to that end.

The amount of taxes imposed in discharge of debt, of itself neither adds to nor takes from the mass of national wealth, but is the necessary result of measures of expense, necessary or unnecessary, avoidable or unavoidable, beneficial or pernicious, by which in former times a decrease in the mass of national wealth was produced. But when, and in so far as, the money produced by these taxes is actually employed in discharge of debt, it adds to capital, and thereby to growing wealth.

Finance is an appendix and inseparable accompaniment to political economy. Taxes are sacrifices made of wealth and opulence at the expense of enjoyment, to security, in respect of defence, and security in respect of subsistence.

Taxes and other means of supply for the expenses of government,—wars with their taxes and their devastations, are means by which, of necessity, in a certain degree, and too often beyond the extent of the necessity, decrease in the amount of wealth and population is produced. In this way the field of political economy includes within it the field of finance.

A tax, in as far as the thing taxed is abstained from, operates as a prohibition—as a discouragement to that branch of trade or production to which the thing belongs, and as an encouragement to rival branches; that is, more or less to all other branches. Hence another head of connexion between finance and political economy in its narrower sense. The same illusion which has recommended the encouragement of particular branches of wealth as a means of increase to the whole, has led to the exaggeration of the bad effect of taxes in this point of view.

Hence the care taken by governments to throw the weight of taxes upon imports and home productions, rather than upon exports; that is, upon their own subjects, rather than upon foreigners.

Under the above heads may be reduced, without violence, everything that can be said on the subject of political economy, including finance.


§ 1.: Sponte Acta.

The national wealth is the sum of the particular masses of the matter of wealth belonging respectively to the several individuals of whom the political community—the nation—is composed. Every atom of that matter, added by any one such individual to his own stock, without being taken from that of any other individual, is so much added to the stock of national wealth.

To add to his own particular stock, and to add in each portion of time more than by use or otherwise is taken from it in that same portion of time, is, with a very few exceptions, the constant aim and occupation of every individual in every civilized nation. Enjoyment is the offspring of wealth,—wealth of labour. What men want from government is, not incitement to labour, but security against disturbance—security to each for his portion of the matter of wealth, while labouring to acquire it, or occupied in enjoying it.

For the purpose of increasing wealth, individuals require neither to be forced to labour, nor allured. The want of that which is not to be had without labour is sufficient force: the assurance of being able to enjoy it, is sufficient allurement. Leave men to themselves: each man is occupied either in the acquisition of wealth (the instrument of enjoyment,) or in some actual enjoyment, which, in the eyes of the only competent judge, is of more value. If idleness be to be discouraged, it is not because it is the non-acquisition of wealth, but because it is the source of crimes.

Whoever takes upon him to add to national wealth by coercive, and thence vexatious measures, stands engaged to make out two propositions:—1. That more wealth will be produced by the coercion than would have been produced without it; 2. That the comfort flowing from the extra wealth thus produced, is more than equivalent to whatever Edition: current; Page: [41] vexation may be found attached to the measure by which it was produced.

§ 2.: Agenda.

The application of the matter of wealth to its several purposes, in the character of an instrument of general security, is evidently of anterior and superior importance to the increase of it. But this class of operations belongs to other heads—to legislation and administration in general—to the establishment of laws distributive and laws penal; and the institution, collation, and exercise of powers military, fiscal, judicial; and of police.

The operations coming under the head of Agenda—viz. on the part of government,—may be described as those which are conducive either to the increase of the national stock of the matter of wealth, or to the application of it in the most efficient mode, to any of its three uses, viz. subsistence, security, and enjoyment; and which not being attended with preponderant vexation, are not to be expected to be performed by the spontaneous exertions of individuals: of the three conditions requisite for the production of this or any other effect, viz. inclination, power, and knowledge, some one or more being wanting on the part of individuals.*

A particular case for the interference of government in this view, is where inclination and knowledge, both adequate to the purpose, and even power (so far as depends on the possession of the matter of wealth,) being pre-existent on the part of individuals, nothing but an allotment of political power of an appropriate kind, requires to be supplied on the part of government. Such is the case where corporate powers are requisite for the management of a common stock; and thereby for enabling individuals spontaneously associated for the purpose, to give a more effectual combination to their exertions in the pursuit of a common end.

Whenever non-agenda have been acta, the doing away of these male acta may form so many additions to the catalogue of agenda.

To this head belong those operations which consist in the removal of obstructions to sponte acta.

From the catalogue of agenda, having for their object the increase of the national stock of the matter of wealth in all its three shapes together, must be distinguished any such measures, the aim of which is confined to the increasing of it in any one of those shapes, at the expense of either of the two others. Measures of this tendency will, so far as they are justifiable, find their justification in the same considerations which prescribe the application of the matter of wealth to its several uses.

In this way, if a sacrifice be made of the matter of wealth in the most agreeable of its shapes, to the same matter in one or other of the two necessary ones—of the matter of enjoyment to the matter of subsistence, Edition: current; Page: [42] or the matter of defence;—if the assumed necessity be real, the transformation belongs, by the supposition, to the catalogue of agenda.

If in any nation, for the use of the whole or any part of such nation, government were to establish, in the character of security funds, magazines of the matter of subsistence, not to be drawn upon but in times of extraordinary scarcity,—an institution of this sort would hardly be thought of, much less be regarded as beneficial and desirable, under the notion of its producing a clear addition to the aggregate mass of the national stock of the matter of wealth, in all its shapes taken together. In the catalogue of agenda it could not be placed in any other character than as a sacrifice of enjoyment to subsistence.

If the nature of the case be such, that the aggregate of the security-funds laid up in the country in question by dealers, may at all times be safely depended upon as sufficient, the establishment of such funds by government, on its own account, will be plainly indefensible: being pregnant with loss instead of gain (as, in the business of buying and selling, trust-management will naturally be, when compared with interested management,) it would disturb the operations of individual dealers, and be prejudicial rather than conducive to the end aimed at;—viz. national security in respect of subsistence.

If, on the other hand, in that same country, seasons are continually liable to recur in which the aggregate of these private security-funds cannot with safety be depended upon, the proposition is reversed: government need not scruple to insure its subjects in this way, against loss and distress by scarcity.

In each country the establishment of such security-funds is an affair of calculation. For the meridian of England, a very considerable stock of data have already been furnished by experience. But what is shorter than calculation, is the reflection that the world is wide, and should the country ever receive another visit from famine (a visit too unpleasant to be thought of,) what is not to be had here, may perhaps be to be got elsewhere.

In a similar manner, sacrifices may be made of enjoyment to national defence. An example of this kind was found in the English navigation act. It operated in diminution, rather than in augmentation, of the aggregate mass of the matter of wealth. It made England pay more for freight than she would otherwise; and pro tanto drove the foreign nations in question from this line of industry into some less profitable one. This loss, whatever was the amount of it, was the price paid by England for whatever addition it thus made to its stock of the matter of defence; viz. for a sort of navy of reserve, for an extra portion of possible marine force—convertible into actual at pleasure. The measure could only be deemed eligible by assuming the necessity for the maintenance of the sort of security-fund thus kept up; i. e. for that part of the national stock of maritime skill which owed its production and maintenance to this measure.*

Another example may be found in the allowances in money given for the encouragement of certain fisheries. The object was the same as in the former case; the mode of encouragement being, not as in that case indirect, but direct,—the money being given at the expense of national wealth, and thence of national enjoyment. If without this encouragement the trade would not have been beneficial enough to be carried on, the quantity of the matter of wealth thus bestowed upon it was so much taken from enjoyment and given to defence,—and thence, if not necessary to defence, thrown away. If the trade would have been beneficial, the result of the measure is, besides the transfer of so much of the matter of wealth from the account of enjoyment to the account of defence, a net addition to the quantity of the whole. But it is only in the supposed necessity of it for the purpose of defence, that such sacrifice of national enjoyment can receive its justification. Take away the necessity, there remains wealth, purchased at the expense of justice—enjoyment given to one man, at the expense of enjoyment taken from another. A case conceivable, and perhaps realized, is—that as to part, the allowance may fall under one of the above suppositions; as to another part, under the other.

§ 3.: Non-Agenda.

Whatever is not sponte actum on the part of individuals, falls thereby into the class of non-agenda on the part of government. Coercion, the inseparable accompaniment, precedent, concomitant, or subsequent of every act of government, is in itself an evil: to be anything better than a pure evil, it requires to be followed by some more than equivalent good. Spontaneous action excludes it: action on the part of government, and by impulse from government, supposes it.

Among non-agenda, therefore, must be reckoned the attempting to give birth or increase to this or that particular branch of industry productive of wealth, under the notion of giving an increase thereby to the aggregate of the national mass of wealth.

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No kind of productive labour of any importance can be carried on without capital. Hence it follows, that the quantity of labour applicable to any object is limited by the quantity of capital which can be employed on it.

If I possess a capital of £10,000, and two species of trade, each yielding twenty per cent. profit, but each requiring a capital of £10,000 for carrying them on, are proposed to me, it is clear that I may carry on the one or the other with this profit, so long as I confine myself to one; but that, in carrying on the one, it is not in my power to carry on the other; and that if I seek to divide my capital between them both, I shall not make more than twenty per cent.; but I may make less, and even convert my profit into a loss. But if this proposition be true in the case of one individual, it is true for all the individuals in a whole nation. Production is therefore limited by capital.

There is one circumstance which demonstrates that men are not sensible of this truth, apparently so obvious. When they recommend the encouragement of particular branches of trade, they do not pretend that they are more profitable than others;—but that they are branches of trade, and they cannot possess too many. In a word, they would encourage trade in general,—as if all trade did not yield its own reward—as if an unprofitable trade deserved to be encouraged—and as if a profitable trade stood in need of encouragement; as if, indeed, by these capricious operations, it were possible to do any other thing than transfer capital from one branch of trade to another.

The quantity of capital being given, the increase of wealth will, in a certain period, be in proportion to the good employment of this capital—that is to say, of the more or less advantageous direction which shall have been given to it.

The advantageous direction of capital depends upon two things:—1. The choice of the undertaking; 2. The choice of the means for carrying it on.

The probability of the best choice in both these respects will be in proportion to the degree of interest which the undertaker has in its being well made, in connexion with the means he has of acquiring the information relative to his undertaking.

But knowledge itself depends in a great measure upon the degree of interest which the individual has in obtaining it: he who possesses the greatest interest will apply himself with the greatest attention and constancy to obtain it.

The interest which a man takes in the concerns of another, is never so great as he feels in his own.

If we consider everything necessary for the most advantageous choice of an undertaking, or the means of carrying it on, we shall see that the official person, so fond of intermeddling in the detail of production and trade, is in no respect superior to the individuals he desires to govern, and that in most points he is their inferior.

A prime minister has not so many occasions for acquiring information respecting farming as a farmer—respecting distillation as a distiller—respecting the construction of vessels as a shipbuilder—respecting the sale of commodities, as those who have been engaged in it all their lives.

It is not probable that he should either have directed his attention to these objects for so long a time, or with the same degree of energy, as those who have been urged on by such powerful motives. It is therefore probable, that in point of information relative to these professions, he is inferior to those who follow them.

If by chance a minister should become informed of any circumstance which proves the superior advantage of a certain branch of trade, or of a certain process, it would not be a reason for employing authority in causing its adoption. Publicity alone would produce this effect: the more real the advantage, the more superfluous the exercise of authority.

To justify the regulatory interference of government in the affairs of trade, one or other of these two opinions must be maintained:—that the public functionary understands the interests of individuals better than they do themselves; or that the quantity of capital in every nation being infinite, or that the new branches of trade not requiring any capital, all the wealth produced by a new and favourite commerce is so much clear gain, over and above what would have been produced, if these advantages had not been conferred on this trade.

These two opinions being contrary to the truth, it follows that the interference of government is altogether erroneous—that it operates rather as an obstacle than a means of advancement.

It is hurtful in another manner. By imposing restraints upon the actions of individuals, it produces a feeling of uneasiness: so much liberty lost—so much happiness destroyed.

Divide the aggregate mass of profit-seeking industry into any number of branches: each calls, or at least has an equal right to call upon government for encouragement—for encouragement at the expense of the public purse; that is, of all the other branches. Gratify all alike,—there is, as between them at least, no injustice on the one hand, no profit on the other. Gratify any number short of the whole—injustice is certain—profit questionable.

The measures which present themselves in the character of non-agenda, may be distinguished Edition: current; Page: [44] into broad measures and narrow measures:—broad measures having for their effect, or their object, the augmentation of wealth in all its shapes without distinction: narrow measures having for their object the augmentation of wealth by the increase of profit-seeking industry in this or that particular branch in preference to others, under the notion of its producing more wealth in that than in others. We shall proceed more particularly to consider some of the measures which have been so employed.

§ 4.: Non-agenda—Broad measures.

Example 1. Forced frugality.

By raising money as other money is raised, by taxes (the amount of which is taken by individuals out of their expenditure on the score of maintenance,) government has it in its power to accelerate to an unexampled degree the augmentation of the mass of real wealth.

By a proportionable sacrifice of present comfort, it may make any addition that it pleases to the mass of future wealth; that is, to the increase of comfort and security. But though it has it in its power to do this, it follows not that it ought to exercise this power—to compel the community to make this sacrifice.

To a certain degree—to a degree which in the ordinary course of things is quite sufficient for the purpose, the community makes this sacrifice of itself. This voluntary sacrifice is, at least in the ordinary state of things, amply sufficient for the purpose—for every purpose; and as the impulse is spontaneous, so far all is right.

On the other hand, the application of money raised by taxes in the shape of capital to the endeavour to promote national opulence, can only be carried into effect at the expense of justice. In the first place, it operates unjustly by forcing a man to labour, though it were for his own benefit, when he wishes to enjoy. It operates unjustly in the second place, by forcing one man to labour for the sake of increasing the enjoyments of another man—increasing his enjoyments, or rather the stock of the instruments of enjoyment in his hands; for all that government can do in behalf of enjoyment, otherwise than by security, is to increase the quantity of the mass of instruments of enjoyment:—application of these instruments in such manner as to produce actual enjoyment, depending altogether upon the individual, and being an effect altogether out of the reach of government.*

The effect of forced frugality is produced by paying off national debts. In this case, the production of the effect is not only unexceptionable, but necessary: it is a collateral result, and that a very advantageous one, from a necessary act of justice.

On the buying-in or paying-off of the government annuities in which the debt in Great Britain consists, the money raised by taxes—of which the whole mass, with a trifling exception or two, bears not upon capital but upon income, passes into the hands of the expelled annuitants; who to make it afford them an income, as before, must employ it themselves in the shape of capital, or lend it to others, who will employ it in that shape.

If the sum of money paid by government to such annuitants on the redemption of their annuities be greater than the sum received by government on the creation of those same annuities, the quantity of the sum thus raised by forced frugality, and poured into the money market, receives a proportionable increase.

The effect of forced fruganty is also produced by the creating of paper money by government, or the suffering the creation of paper money on the part of individuals.

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In this case, the effect is produced by a species of indirect taxation, which has hitherto passed almost unnoticed.

§ 5.: Non-agenda—Broad measures.

Example 2. Increasing money.

Labour, and not money, is the real source of wealth. All hands being employed, and employed in the most advantageous manner, wealth, real wealth, could admit of no further increase:—but money would be increasable ad infinitum.*

The effect of every increase of money (understand, of the ratio of the quantity of money employed in the purchase of things vendible, to the quantity of things vendible for money,) is to impose an unprofitable income tax upon the incomes of fixed incomists.

If on the introduction of the additional money into the circulation, it pass in the first instance into hands which employ it in the way of unproductive expenditure, the suffering from this tax remains altogether uncompensated:—if before it come into any hands of that description, it have come into hands by which it has been employed in the shape of capital, the suffering by the income tax is partly reduced and partly compensated. It is reduced, by the mass of things vendible produced by means of it:—a mass, by the amount of which, were it not for the correspondent increase in the mass of money, the value of the mass of money would pro tanto have been increased, and the prices of things vendible decreased. It is in a certain degree, though in a very inadequate degree, compensated for§ by the same means;—viz. by the amount of the addition made to the quantity of sensible wealth—of wealth possessing a value in the way of use. Here, as in the above case of forced frugality, national wealth is increased at the expense of national comfort and national justice.

On those who receive no share of the fresh addition to money—on those whose sole income consists in an unincreasing sum of money, the income tax bears with all its pressure; whilst those who receive a share of the fresh money equal to the amount of the depreciation, receive beforehand a compensation adequate (in money at least, howsoever it may be in regard to feelings) to their loss by the indirect tax.

In this case, the measure coincides with the one already reprobated,—the increasing the mass of real capital by money raised by taxes. The difference is, that the mode in which the Edition: current; Page: [46] money is raised is disadvantageous to a degree of usuriousness much beyond anything ever exemplified under that name;—the money being raised at an interest of 300 per cent., payable for ever by the possessors of fixed incomes—subject to a small deduction as an equivalent for the goods produced in each year by the addition made to the mass of real capital.

No sooner, however, does such additional sum of money pass on from the hands by which it is employed in the shape of capital, into those hands by which it is employed in adding to unproductive expenditure, than its operation in the way of making an addition to real wealth is at an end. No sooner does it go in addition to money employed in the purchase of articles for consumption, than its power of producing an addition to the mass of the matter of real wealth is at an end:—thenceforward and for ever it keeps on contributing by its whole amount to the increase of prices, in the same manner as if from the mines it had come in the first instance into an unproductive hand, without passing through any productive one.

In all cases where the addition thus made to wealth is not illusory in toto, it is so as to part, and that by far the greater part. Of the proportion between the illusory and the real part of the supposed addition to real wealth, the rise of prices in a country where no fresh money has been poured into unproductive hands, without first passing through a productive hand, is at once a demonstration and a measure. So much of the added wealth as hath not been accompanied by a counter-vailing addition to wealth, whether it have contributed anything to that addition or no, is over and above that portion which has been solely employed in producing the rise of prices.

Supposing that within the last half century, in the whole commercial world together, wealth has received an increase to the amount of one-fourth, and at the same time prices have doubled,—it follows, that of the money now existing in that world, nearly half has to a certainty been worse than thrown away, having been employed in the imposition of the unproductive income tax above described:—and as to the addition to wealth, it is a matter of uncertainty what part, and even whether any part, has been produced by the addition to money, since without any such addition it might have been produced as well as by it.

In respect of the ratio of money to things vendible—of the aggregate of the one, to the aggregate of the other,—the state of things most desirable is—that it should continue the same at all times—no increase at any one time, no decrease at any other.

The tendency of a decrease, if sudden, and to a certain degree considerable, is to produce general bankruptcy: the mass of pecuniary engagements entered into within any given period of time, being grounded of course on the existing ratio of money to things vendible at that time, and not on the supposed suddenly supervening, or any inferior ratio. If at any time, the mass of things vendible not being in the same proportion decreased, out of the quantity of money of all kinds habitually in circulation, a portion of any sort, in the supposed degree considerable, be suddenly defalcated, the deficiency must be supplied by some portion of another sort, or something that will be accepted as equivalent, or the supposed general bankruptcy follows of course.*

The tendency of the like decrease, in so far as it is permanent, but too gradual to be productive of general bankruptcy, is—to impose an unproductive income tax, parallel to that above mentioned, but upon a different set of parties—upon all parties charged with annuities, or other fixed payments, on the ground of contracts to which it is not in their power to put an end.

As to an increase in the ratio of money to things vendible, the tendency of it in respect of the unprofitable income tax, by increase of prices of things vendible—by depreciation of money—has been shown above.

So far as addition to money is made in the shape of metallic money, the mischief producible by it is confined to that of the depreciation, as above. So far as it is made in the shape of paper money—consisting in promises of metallic money—the amount of which promises is accordingly exigible in the shape of metallic money,—to the actual mischief of depreciation, is superadded the contingent mischief of general bankruptcy.

When governments add to money by paper money, it is commonly in a non-commercial way: when individuals, singly, or in association, make the like addition, it is most commonly in a commercial way;—though, in a non-commercial way, it is natural that these coiners of money at the public expense—these uncommissioned sovereigns, or unpunishable and irreproachable robbers (for they may be called both or either,) should put off as much of it as they can get anybody to take.

Whether by governments or individuals, it may now be seen at what expense the profit is acquired, and at how much cheaper a rate the end, whatever it be, would be accomplished without any such addition by money drawn out of the old stock.

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§ 6.: Non-agenda—Broad measures.

Example 3. Forced reduction of the rate of interest.

Of reducing the rate of interest allowed to be given by individuals for money borrowed of individuals, the principal mischief consists in another sort of unproductive income tax, imposed upon all such individuals whose income arises out of a mass of money lent out at interest to individuals;—the produce of which tax, instead of being paid in to the public treasury for the service of the public, and in lieu of the burthen which would otherwise be to be imposed to the same amount in some other shape, is made over gratis to those whose circumstances oblige them to borrow money, or enable them to borrow it with a profit.

It imposes not, as in the former case, an indirect unproductive income tax, but a direct one. It is not, as in the case of the increase of money, gradual, and in its amount in some measure uncertain and questionable, but sudden and determinate. Reduction from 5 to 4 per cent. would be a tax of exactly 4s. in the pound.

As to the effect in the way intended, it would be purely illusory. To the proportion of money employed in the shape of capital it would make no addition: if by impoverishment it forced some who, by anterior opulence, had been either withholden from trade or withdrawn from it, to embark in trade so much capital as they thus embarked in a trade of their own, so much would they withdraw from the trade of those other traders, to whom otherwise it would have been lent.

Instead of adding to, it would defalcate from the aggregate mass of wealth. Being a tax on money, lent in the shape of capital within the country, it would in effect be a prohibition—prohibiting the keeping it there, and under a penalty equal to the amount of the tax. It would have the effect of a bounty on the exportation of it—on the exportation of it to any country where any rate of interest higher than the reduced rate would be to be had.

The expectation that the reduction of interest would produce an addition to the aggregate mass of wealth, is an illusion which has its source in another illusion. Increase of wealth, though not the effect, is apt to be an accompaniment of a reduction in the rate of interest. As capital increases, wealth increases;—and as capital increases, if the effectual demand for capital (for money in the shape of capital) do not increase in so great a proportion, men will not give so high a price for the use of it as they did before. The reduction in this case is the result of freedom; and though it do not itself increase wealth, it cannot take place any further than as wealth is increased by other causes. The reduction here contended against is the product of coercion: and whenever the illusion prevails, it may be carried into effect at any time, in the poorest country as well as the richest, in the most declining as well as the most prosperous, accelerating and aggravating the decline.*

The mischief that would be produced by a reduction in the rate of lawful interest, is over and above the constant mischief produced by the fixation of that rate.

§ 7.: Rates of interest—evils of fixation.

If it be reasonable for legislators to encourage inventive industry by fictitious rewards, it is much more reasonable that they should not oppose obstacles to the productiveness of natural rewards.

The natural reward of inventions, when carried into effect, is the profit to be derived from them in the way of trade. But all trade requires capital. If the inventor have it of his own, it is well; if not, he must seek it from others. Many circumstances, however, conspire to hinder his obtaining it.

Does he endeavour to borrow it, upon what conditions can he hope to find a lender? Upon the ordinary conditions, it is naturally impossible that he should find one. A new undertaking cannot fail of being hazardous, if it were only because it is new. It is therefore necessary to grant to the lender an advantage proportionate to the apparent degree of risk. There are two methods of granting this advantage: the English laws proscribe them both. One method consists in granting interest at a rate superior to the ordinary rate: but this is prohibited by the laws fixing the rate of interest. This prohibition is partly inefficacious, and partly pernicious; that it was altogether useless, would be its greatest elogium.

The second method consists in granting a variable interest, proportioned to the profits of the undertaking.

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In France, there is one branch of commerce at least, in which it is possible to limit the portion of property that one is willing to risk. It is in the business of banking. The sum employed in this manner is said to be en commandite. If this liberty be useful in this branch of commerce, why should it not be equally so in every other, and especially in newly-discovered branches, which have so many natural obstacles to overcome, which it is needless to increase by legal interference? This liberty, under certain restrictions for the prevention of monopolies from the unrestrained accumulation of capital, has been established in Ireland. When will England have the wisdom to imitate this example?*

An inventor, therefore, in want of funds can only apply to a tradesman or merchant to enter into partnership with him; but persons engaged in business are those who have the least portion of disposable capital; and as they are enabled to make their own terms, inventive industry is often stifled or oppressed.

Were it lawful for every one to engage in commercial undertakings for a limited amount, how many facilities would be afforded to men of genius! All classes of society would furnish assistance to inventive industry: those who wished to risk only a small sum—those who could annually dispose of a certain sum, would be enabled to engage in this species of lottery, which promised to yield them an interest above the ordinary rate. The most elevated classes might find an amusement in descending into the territories of industry, and there staking a small part of that wealth which they risk upon games of chance. The spirit of gaming, diverted from its pernicious direction, might serve to increase the productive energy of commerce and art.

There are some who are natural enemies to merit of every kind: every conquest achieved by industry in the career of invention, is a loss to them—every discovery an injury. Common-place men have a common interest, which they understand but too well: it is, that all should be common-place like themselves. It is to be regretted that Adam Smith, in his “Wealth of Nations,”—a work which will rise in public estimation in proportion as genius shall be held in honour—should have furnished arms which the adversaries of genius may direct against that work itself. It is to be regretted that, under the odious name of projects, a name applied to the most useful enterprises, even to the moment when they receive the sanction of success, they may there be seen indiscriminately stamped with the seal of opprobrium, and indiscriminately enveloped with contempt.

It is not only that he may prevent prodigals from obtaining money, but that he may prevent its reaching the hands of projectors, whom he places with them upon the same level, that he approves of the fixing of the rate of interest upon the footing upon which he found it. “If the legal rate of interest in Great Britain, for example, were fixed so high as 8 or 10 per cent., the greater part of the money which was to be lent, would be lent to prodigals and projectors, who alone would be willing to give this high interest. Sober people, who will give for the use of money no more than a part of what they are likely to make by the use of it, would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it. Where the legal rate of interest, on the contrary, is fixed but a very little above the lowest market rate, sober people are universally preferred as borrowers, to prodigals and projectors. The person who lends money gets nearly as much interest from the former as he dares to take from the latter, and his money is much safer in the hands of the one set of people, than in those of the other.”

This is not the only passage in which this author attacks projectors (see b. i. ch. iv.;) but it is here that he attack them more directly; whilst as to prodigals, it has been elsewhere shown that it is not to them that money is lent, or that any are willing to lend at extraordinary interest. Friends will either not lend at all, or will lend at the ordinary rate. Strangers will only lend, to those who are without industry, upon security. But he who has security to offer, has no need to give a halfpenny more, because he is a prodigal: it is upon his security that the money will be lent, and not upon his character. Whether the security offered be present or future, certain or contingent, produces no difference: a future or contingent security, by means of a valuation, becomes as good a pledge as if it were present or certain. In a word, if money be lent upon the industry of the borrower, it is lent not to a prodigal, but to a projector. It is therefore upon the latter class alone, that the burthen of these prohibitory laws presses.

An opinion which derives all its force from the authority of the individual who publishes it, cannot be better combated than by that authority itself.

1. The prosperity of England has been progressive, ever since the number of projectors has been not only in an uninterrupted, but in an accelerated state of increase;—2. The Edition: current; Page: [49] aggregate of the good economy has always been greater than the aggregate of the bad;—3. With respect to commerce, each individual is a better judge of his own interests than government can be for him;—and 4. General laws must be much more defective with respect to commercial regulations. The members of a government may take notice of particular cases, but general laws can never regard them.

These are the general propositions of the work of Adam Smith;—truths precious and irrefragable, which no one has more successfully laboured to unfold than this illustrious politician. But if these principles are followed out, no laws ought to exist for the restraint of projectors, and for preventing them from obtaining loans of the capital of which they stand in need.

The censure which condemns projectors, falls upon every species of new industry. It is a general attack upon the improvement of the arts and sciences. Everything which is routine to-day was originally a project;* every manufacture, how old soever it may be, was once new; and when new, it was the production of that mischievous and bold race who ought to be destroyed—the race of projectors!

I know not what can be replied to this, unless it be said that the past projects have been useful, but that all future projects will not be so. Such an assertion would, however, require proof, strong in proportion to its opposition to general opinion. In every career, experience is considered as worth something. The warning to be derived from past failures may contribute to future security, if not to success.

Were it even proved that no projector ever engaged in a new branch of industry without being ruined, it would not be proper to conclude that the spirit of invention and of projects ought to be discouraged. Each projector, in ruining himself, may have opened a new path, by which others may have attained to wealth. So soon as a new die, more brilliant or more economical than the old ones, a new machine, or a new practice in agriculture,—has been discovered, a thousand dyers, ten thousand mechanicians, a hundred thousand agriculturists, may reap the benefit: and then—though the original author of the invention have been ruined in the bringing the discovery to perfection—as it respects the national wealth, of what consequence is this, when considered as the price of so much gain?

That restrictions of this nature are inefficacious, has been successfully shown by Adam Smith himself.* But if inefficacious, this is sufficient reason for their condemnation: unless they effect the purpose designed, they are positively mischievous.

They tend, in the first place, to drive away useful projectors. I do not say that they drive away all: had that been the case, we should not have attained our present degree of prosperity. But they drive away a part: unhappily, we cannot know what part, nor how great a part of their number. The talent required for operating upon matter, or directing the powers of nature, is extremely different from that required for operating upon the mind—the talent of meditating in a study, and thereby making discoveries, from that requisite for making known those discoveries to the world. The chance of success in the career of invention is in proportion to the talent of the individual; the chance of obtaining a loan of capital from another to make an invention productive, is in proportion to his reputation. But this latter, far from being in direct, is naturally in inverse proportion with the former. The more unaccustomed an individual is to society, the greater his dread of mingling in it, the less is he at his ease—the less is he master of his faculties, when he is obliged to mingle with it. The effect produced upon the mind of the individual who has, or who supposes that he has, made a great discovery, is a mixture of pride and timidity, both which feelings concur in alienating the minds of men, and diminishing the probability of success in every enterprise, inasmuch as it may depend upon the degree in which such individual succeeds in rendering himself and his projects estimable in the eyes of others. This pride has for its cause the superiority which he believes himself to possess above them; this timidity is caused by the faint hope he possesses of making them sensible of this superiority. But though pride united with courage is one of the most powerful means of subjugating men, pride united with timidity is one of the most certain causes of exposure to their aversion and contempt. That disposition, which under the name of modesty is so much praised as a companion well adapted to the introduction of true merit, and which is so necessary when inferiority of situation will not allow the employment of boldness in the service, is not true timidity, but skill which has learnt to assume this appearance; it is skill, which to strength, and consciousness of that strength, unites the knowledge of when, and how, and in what sense, and in what proportion, this strength ought to be displayed, for the most favourable exhibition of its pretensions; and when, and how, and in what sense, it ought to be hidden, that the protector whose assistance is desired, may enjoy the feeling of his own superiority. If ever timidity has effected anything at the expense of that assurance which assumes its appearance, it has been when allied with beauty, which causes everything to be forgiven, and which nothing can resist. Separated from this powerful protectrix, Edition: current; Page: [50] it labours in grief, in darkness, in awkwardness, embarrassment, and false shame—the bugbears of love and of esteem, but the frequent and afflictive companions, and most cruel enemies, of merit and solitary genius.

Not to speak of the obstacles which oppose the progress of an inventor incumbered with his projects and his wants, before he reaches the anti-chamber of the rich, or the noble, whom it may be necessary to persuade—suppose these obstacles overcome, and that he is admitted to their presence; how will the poor inventor, the necessitous man of genius, behave when he has arrived there? Oftentimes he will lose his presence of mind, forget what he was about to say, stammer out some unconnected propositions; and finding himself despised, indignant that his merit should be thus treated, he will retire, resolving never again to expose himself to such an adventure. And even when he is not devoid of courage, there is nothing more different, though in certain points the connexion may appear most intimate, than the talent of conceiving new ideas of certain kinds, and the talent of developing these same ideas. Altogether occupied with the idea itself, the inventor is most frequently incapable of directing his attention to all the accessories which must be re-united before his invention can be understood and approved: his attention being entirely occupied with what is passing in his own mind, he is incapable of attending to what passes in the minds of others—incapable of arranging and directing his operations, so that he may make the most favourable impression upon them.

Thus the ingenious philosopher, who has delivered the most excellent instructions respecting the art of developing the thoughts of others, and who possessed in so perfect a degree the talent of developing his own, well knew how necessary it was, that in every career of invention except that of eloquence, minds should be attended by an accoucheur. How many difficulties did not Diderot experience in effecting this development—he who possessed this talent in so excellent a degree—where the two parties were agreed, had a common interest, and were equally well disposed! How numerous were the difficulties experienced by the ingenious artists of every description to whom he applied, in making him comprehend the fruits of their studies, when they had for their interpreter the man the most capable and the best disposed to understand them! How much more difficult would they have found it, had they been applicants for the assistance necessary to render their projects available to a rich ignoramus, filled with the idea of the necessity which existed for his assistance, and puffed up with that pride which commonly accompanies wealth, when unattended by that politeness which education teaches, and full of that distrust which a poor projector cannot fail to inspire in the mind of an individual favoured with the gifts of fortune!

Should the inventor succeed in making his plan understood, he will still find it difficult to make the interest of the capitalist accord with his desires: it is in this respect that the prohibition displays its mischievous qualities. How shall the poor inventor dare to propose a loan at the ordinary rate of interest? This rate may at all times be obtained without risk: where, then, would be the advantage to the capitalist in such a bargain? Is it possible that it could be otherwise than disadvantageous to him? A loan at the ordinary rate of interest cannot be hoped for; it is only to a most intimate friend that such a loan would be granted. Deprived of this resource, how shall he dare to propose to the individual whose assistance he seeks, to expose himself to the rigour of the laws? Scarcely daring to ask for the assistance he needs, upon the most secure and unexceptionable conditions, how shall he propose conditions which the laws consider criminal? Whilst there are laws against usury, it may be said, there will still be usury. Yes, and whilst there are laws against theft, there will still be thieves: does it follow that the laws which forbid theft are without effect, and that theft is as common as if these laws did not exist?

In the same proportion as the tendency of these prohibitory laws is unfavourable to true merit in the career of invention, is it favourable to the cheat which assumes the appearance of merit, were it only by the advantage given to imposture, by preventing merit from entering into the competition. The essential requisite is not merit, but the gift of persuasion: this gift most naturally belongs to the superficial man, who knows the world, half enthusiast and half rogue; and not to the studious and laborious individual, who is only acquainted with the abstract subjects of his studies. It is true, that at all times truth possesses powerful advantages; but these advantages are less in proportion as the career to which it relates is more removed from the ordinary routine, respecting which ordinary minds are capable of forming a judgment upon what is presented to them. It has therefore happened, that of all projectors, those have been treated with the greatest confidence, whose projects are now known to have been founded upon no basis of truth. Were it possible to ascertain the amount furnished under the existing laws against usury by capitalists, to the authors of useful and practicable projects, it would most probably be found less than the amount which in the same space of time has been drawn by the professors of alchemy from the avaricious credulity of the ignorant or half learned.

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Truth possesses, however, this advantage over error of every kind: it will ultimately prevail, how frequent or how deplorable soever may have been the disgraces it has undergone. This error respecting prohibitory laws is nearly discredited—this source of delusion is nearly closed for ever. As the world advances, the snares, the traps, the pitfalls, which inexperience has found in the path of inventive industry, will be filled up by the fortunes and the minds of those who have fallen into them and been ruined. In this, as in every other career, the ages gone by have been the forlorn hope, which has received for those who follow them the blows of fortune. There is not one reason for hoping less well of future projects than of those which are passed; but here is one for hoping better.

The more closely the reasons, on account of which Adam Smith would have desired to discourage projectors, are examined, the more astonishing it appears that he should have so widely deviated from the principles he had himself laid down. It is probable that his imagination had been pre-occupied with the idea of certain incautious or dishonest projectors, the history of whose proceedings had fallen under his own observation, and that he had a little too promptly taken these few individuals as exact models of the whole race. To preserve himself from the error of too hasty and indiscriminate generalizations, never to allow any proposition to escape without having made all the reservations necessary to confine it within the limits of the exact truth, is the last boundary, and even now the ideal boundary, of human wisdom.*

Nothing would more contribute to the preliminary separation of useless from useful projects, and to secure the labourers in the hazardous routes of invention from failure, than a good treatise upon projects in general. It would form a suitable appendix to the judicious and philosophical work of the Abbé Condillac upon Systems. What this is in matters of theory, the other would be in matters of practice. The execution of such a work might be promoted by the proposal of a liberal reward for the most instructive work of this kind.

A survey might be made of the different branches of human knowledge; and what each presents as most remarkable in this respect might be brought to view. Chemistry has its philosopher’s stone; medicine its universal panacea; mechanics its perpetual motion; politics, and particularly that part which regards finance, its method of liquidating, without funds and without injustice, national debts. Under each head of error, the insuperable obstacles presented by the nature of things to the success of any such scheme, and the illusions which may operate upon the human mind to hide the obstacles, or to nourish the expectation of seeing them surmounted, might be pointed out.

Above all, dishonest projectors, impostors of every kind, ought to be depicted;—the qualities of mind and character which they possess in common should be described; their volubility, their rapidity; that lightness, natural or affected, with which they treat the arguments opposed to them; that manner which they have, and which for the accomplishment of their ends it is necessary they should have, of declaiming, instead of analyzing and reasoning—of flying off in tangents when they are pressed—of giving birth to incidents—of pretending to be tired with the species of opposition they experience—of attaching themselves to the manner in which questions and doubts, or arguments, are proposed to them, instead of to the foundations of things themselves—of complaining of the prejudices which they pretend are experienced against them—and in quitting the ground under those circumstances, in which, if they were sincere, it would be most proper for them to maintain themselves there.

But throughout the whole work, that tone of malignity which seems to triumph in the disgraces of genius, and which seeks to envelope wise, useful, and successful projects, in the contempt and ridicule with which useless and rash projects are justly covered, should be guarded against. Such is the character, for example, of the works of the splenetic Swift. Under the pretence of ridiculing projectors, he seeks to deliver up to the contempt of the ignorant, the sciences themselves. They were hateful in his eyes on two accounts: the one, because he was unacquainted with them; the other, because they were the work, and the glorious work, of that race which he hated ever since he had lost the hope of governing part of it.

The projectors who seek to deceive ought to be unmasked—those who are deceived, to be instructed: the interests of science and justice equally demand that they should be distinguished. I cannot discern what purpose ridicule can serve, if it be not to confound the distinction between useless and useful projectors.

In conclusion, some general counsels might be added for the use of those who, little versed in the fundamental sciences in which the respective projects take their rise, may find themselves in a situation to be addressed by the author of a project, with the design of Edition: current; Page: [52] obtaining their assistance. In effect, it is true that the whole work would be a collection of more or less approved counsels; but in making the recapitulation, some general remarks might be added, which would not have been suitable elsewhere, but which might be particularly useful here. They might, for example, be advised to apply to those learned individuals who would be able to supply their ignorance; the class of learned men who ought to be found competent judges in each department might be pointed out; instructions might be furnished, to enable them to judge of the counsels of the judges themselves, by warning them of the interests and prejudices, to the seduction of which these judges may themselves be exposed.

§ 8.: Non-agenda—Broad measures.

Example 4. Increasing land—viz. by colonization.

Land is worth nothing, but in proportion as labour is applied to it. Land at a distance is worth less than land at home, by the amount of all the distance. Of the mass of labour which is employed in adding to real wealth, no inconsiderable portion is employed in lessening the expense of carriage—in reducing the expense of carriage from a great distance, to a level with the expense of carriage from a less distance. If it could be done without destruction to existing capital, and above all without vexation, and destruction of security of property, wealth might be increased by taking the existing population, and transplanting it from greater distances with reference to the metropolis, to lesser distances.

Land newly acquired, especially in the way of colonization, is acquired at a greater distance. The foundation of a colony is an introductory expense,—the government of it a continual standing expense,—war for the defence of it an occasional one. All this requires money: and money is not to be had for these expenses but from taxes. To the mother-country, the positive profit from a colony is equal to 0; the negative profit, the loss—the defalcation from national wealth—is equal to the amount of such taxes.*

When an excess of population in relation to territory exists or is foreseen, colonization is a very proper measure. As a means of increasing the general wealth of a country, or of increasing the revenue of the mother-country, it is a very improper measure. All the common ideas upon this subject are founded in illusions.

That colonies add to the general wealth of the world, is what cannot be doubted; for if labour be necessary to production, land is no less so. The soil also of many colonies, independently of what it annually produces, is rich in raw materials, which only require that they should be extracted and carried away, to give them value. But this wealth belongs to the colonists—to those who occupy the land, and not to the mother country.

When first established, colonies are not in a condition to pay taxes: in the end, they will not pay them. In order to establish them—to protect them—to keep them in dependence, expense is required;—and all these expenses must be discharged by taxes levied upon the mother-country.

Colonization requires an immediate expense—an actual loss of wealth, for a future profit—for a contingent gain. The capital which is carried away for the improvement of the land in the colonies, had it been employed in the mother-country, would have added to its increasing wealth, as well as to its population, and to the means of its defence; whilst, as to the produce of the colonies, only a small part ever reaches the mother-country.

If colonization be a folly when employed as a means of enrichment, it is at least an agreeable folly. New enjoyments, insomuch as enjoyments depend upon the novelty and variety of objects, result from it. The substitution of sugar for honey—of tea, coffee, and chocolate, for the beer and meat which composed the breakfast of maids of honour in the reign of Elizabeth—the indigo which varies our dyes—the cochineal which furnishes the most brilliant scarlet—the mahogany which ornaments our apartments—the vessels of gold and silver which decorate our tables,—are all sources of enjoyment, and the pleasure which results from these objects of luxury is in part the profit of colonization; whilst the medicinal and nutritive plants which have been received from the colonies, in particular bark and potatoes, are possessed of much superior utility.

Novelty and variety, in respect of means of enjoyment, add nothing to the quantity of wealth, which remains as it was, if the old Edition: current; Page: [53] productions are supplanted by the new ones. It is thus also with new fruits, new flowers, new colours, new clothes, new furniture, if the new supplant the old. But as novelty and variety are sources of pleasure, in proportion as they are increased, wealth increases also, if not in quantity, at least in value. And if these new wants are incentives to new labour, a positive increase of real wealth results from them.

These advantages, such as they are, can only be derived from a colony situated in a climate whose productions cannot be naturalized in the mother-country; whilst, as to the mines of Mexico and Potosi, their effect has been to add to the quantity of vessels composed of the precious metals, and to the quantity of coin. The addition to the vessels increases the amount of real wealth—the addition to the coin has all been lost: the new mass of gold and silver has had no other effect than to depreciate the old, and to diminish, in the same proportion, the value of all pecuniary revenues, without adding to the amount of real capital or future wealth.

However, in taking all interests into the calculation, it is certain that the welfare of mankind has been increased by the establishment of colonies. There can be no doubt on this subject, in respect to the nations who by degrees have become established there, and who owe their existence to colonization. The mother-countries also have themselves gained in happiness in another point of view. Let us take England, for example. According to the progress which population has made during the last century, it may be supposed that it would soon have attained its extreme limits—that is to say, that it would have exceeded the ordinary means of subsistence, if the superabundance had not found means of discharging itself in these new countries. But a long time before population has reached these limits, there will be a great diminution of relative opulence, a painful feeling of general poverty and distress, a superabundance of men in all the laborious classes, and a mischievous rivalry in offering their labour at the lowest price.

For the benefit of mankind at large, it is desirable that the offsets which are to be employed as new plants should be taken from the most healthy stocks and the most flourishing roots; that the people who go forth to colonize unoccupied lands, should go forth from the nation whose political constitution is most favourable to the security of individuals; that the new colonies should be swarms from the most industrious hive; and that their education should have formed them to those habits of frugality and labour which are necessary to make transplanted families succeed.

It may often be advantageous for colonies to remain a long time under the government of the mother-country, provided always that such government be what it ought to be.

It would, without doubt, have been advantageous to Egypt to have remained under the government of Great Britain—a government which would have bestowed upon it peace, security, the fine arts, and the enjoyment of the magnificent gifts which nature has lavished upon it. But in respect to wealth, the possession of Egypt, far from being advantageous to England, would have proved only a burthen.

I hear a universal cry raised against this paradox. So many profound politicians, divided upon every other point, are unanimous upon the importance of colonies,—are they only agreed that they may fall into an error? So many merchants,—have they deceived themselves in so simple a calculation as that of the profit or loss of colonial commerce? The experience of two or three centuries,—has it not opened the eyes of governments? would it not be extraordinary that they should still obstinately sustain the enormous weight of these distant establishments, if their advantages were not clear and manifest?

I might reply, that a long train of alchymists, after all the misfortunes of their predecessors, long continued obstinately to seek after the philosopher’s stone, and that this great work yet has its partisans;—I might reply, that many nations in the East have, during many ages, been governed by astrology;—I might enumerate a long list of errors which have misled both governments and people. But a question of this nature ought not to be obscured by declamation. He who alleges the number of partisans by which a system is supported, instead of supporting it by proofs, desires to intimidate, and not to convince his adversery. Let us examine all the arguments by which the advantages of colonies, in respect of wealth, have been endeavoured to be proved: we shall not find a single one which is not in opposition to the most firmly established principles of political economy.

I. The wealth of the colonies is poured into the mother-country: it is brought thither by commerce; it consequently animates manufactures, and they support the large towns: the prosperity of Bordeaux, for example, is one proof; its wealth depends upon its trade with the West Indies.

This reasoning proves nothing in favour of a system of colonies: there is no necessity for governing or possessing any island, in order that we may sell merchandise there. The inhabitants of the Antilles stand in need of the productions of England and France: were they independent states, it would still be necessary that they should buy them: during their state of dependence, what can they do more? They will not give their sugars to the Edition: current; Page: [54] mother-country; they exchange them for corn and cloth. Those who supply these commodities, if they had not sold them to these parties, would have sold them to others. Suppose that the inhabitants of St. Domingo, in place of buying their corn in France, were to buy it in England; France would lose nothing, because, on the whole, the consumption of corn would not be less: England having supplied St. Domingo, would not be able to supply other countries, which would be obliged to supply themselves from France.

Trade is in proportion to capital. This is the principle: the total amount of trade in each country is always in proportion to the capital which each country possesses. I am a merchant;—I have a capital of £10,000 employed in commerce. Suppose Spanish America were opened to me, could I, with my £10,000, carry on a greater trade than I do at present? Suppose the West Indies were shut against me, would my £10,000 become useless in my hands? should I not be able to apply them to some other foreign trade, or to make them useful in the interior of the country, or to employ them in some enterprise of domestic agriculture? It is thus that capital always preserves its value: the trade to which it gives birth may change its form or its direction, may flow in different channels, may be directed upon one manufacture or another, upon foreign or domestic undertakings; but the final result is, that these productive capitals always produce; and they produce the same quantity, the same value, or at least the difference does not deserve attention.

It is therefore the quantity of capital which determines the quantity of trade, and not the extent of the market, as has been generally believed. Open a new market,—the quantity of trade will not, unless by some accidental circumstance, be increased: shut up an old market,—the quantity of trade will not be diminished, unless by accident, and only for a moment.

Should the new market be more advantageous than the old ones, in this case the profit will be greater—the trade may become more extended; but the existence of this extra profit is always supposed but never proved.*

The mistake consists in representing all the profit of a new trade as so much added to the amount of national profit, without considering that the same capital employed in any other branch of trade would not have been unproductive. People suppose themselves to have created, when they have only transferred. A minister pompously boasts of certain new acquisitions, certain establishments upon far distant shores; and if the adventures which have been made have yielded a million of profit, for example, he does not fail to believe that he has opened a new source of national wealth; he supposes that this million of profit would not have existed without him, whilst he may have occasioned a loss: he will have done so, if the capital employed in this new trade have only yielded ten per cent., and that employed in the ordinary trade have yielded twelve.

The answer to this first objection may be reduced to two points:—1. That the possession of colonies is not necessary to the carrying on of trade with them; 2. That even when trade is not carried on with the colonies, the capital which such trade would have required, will be applied as productively to other undertakings.

II. The advocates of the colonial system would consider the above answer extremely weak: they see in this commerce two circumstances which render it more advantageous than that which is carried on with free nations.

“We established,” say they, “a double monopoly against the colonist: first, the monopoly of their productions, which we permit them to sell to us alone, and which we thus obtain from them at the lowest price;—secondly, the monopoly of their purchases, which we oblige them to make among ourselves, so that we are able to sell our produce and manufactures to them at a dearer rate than we could to a free people, among whom, other nations would enter into competition with us.”

Let us examine the effect of these two monopolies separately.

1. You prevent your colonies from selling their productions to any but yourselves; but you cannot oblige them to cultivate their lands, or to manufacture at a loss. There is a natural price for every commodity, determined by the average rate of profit in commerce in general. If the cultivator cannot obtain this natural price, he will not continue to cultivate; he will apply his capital to other undertakings. The monopoly may produce a forced reduction of price for a time; but the colonist will not continue to cultivate sugar, if he lose by its cultivation instead of gaining. It is therefore impossible for this monopoly to produce a constant reduction of the price of commodities below their natural price; whilst free competition is sufficient to reduce them and keep them at this natural price. The Edition: current; Page: [55] high price which you wish to remedy by the monopoly is an evil which will cure itself. Large profits in any one branch of trade will draw thither a large number of competitors: all merchants are rivals, and their rivalry naturally produces a reduction of price, till the rate of profit in each particular branch of trade be upon a level with all others.

2. You may oblige your colonist to buy everything of you; but the advantage you expect to derive from this exclusive commerce is deceptive.

If it respect commodities and manufactures, which, owing to a natural superiority, you are enabled to furnish of better quality and at a lower price than foreigners, it is clear that, without monopoly, your colonists would rather buy them of you than of others. The monopoly will not enable you to sell them at a higher price; your merchants, being all in a state of competition with each other, naturally seek to supplant each other by offering their goods at the lowest price possible.

While as to the productions and other articles which you are not able to furnish them upon terms equally favourable with foreigners, it is certain that, without the monopoly, your colonists will not buy them of you. Ought we to conclude, that the monopoly will be advantageous to you? Not in the least: the nation in general will gain nothing. It will only follow, that a species of industry will be cultivated among you, which does not naturally suit you; that bad commodities will be produced, and bad manufactures carried on.

The monopoly is similar to a reward bestowed by government for the maintenance of manufactures inferior to those of other nations. If this monopoly did not exist, the same capital would be applied to other species of industry in which you have a decided advantage. Instead of losing by this arrangement, you will gain a more stable prosperity; since the manufactures which cannot be maintained but by forced means are exposed to a thousand vicissitudes. Observe further, that this monopoly is burthened with a counter-monopoly. It is not permitted to you to purchase productions similar to those of your colonies, when you find them elsewhere at a lower price: in compensation for the restraint you impose upon your colonies, you impose one upon yourselves. If they can buy only of you, you can buy only of them. How many inconveniences result from this! When the harvest has been deficient in your colonies, you are not able to supply yourselves from those places where the season has been more favourable; in the midst of abundance, you are suffering from dearth. The monopoly has no effect in lowering the price of commodities; but the counter-monopoly is certain occasionally to produce extraordinarily high prices.

III. The partisans of the colonial system consider colonies under another point of view—the advantage they produce to the revenue. The taxes levied upon the commerce of the colonies, whether upon importation or upon exportation, produce a revenue which would cease, or be much diminished, if they were independent.

The taxes levied upon the commerce with the colonies may produce a considerable amount. But if they were free, would they carry on no commerce? Could not this commerce be taxed?—could it not be taxed as heavily as smuggling would permit? England levies taxes upon its commerce with France; France levies taxes upon its commerce with England. The possession of colonies is not necessary to the levying of taxes upon the commerce carried on with them.

I do not repeat here, that your taxes upon the articles of their production, and upon those of your importation from the colonies, are taxes of which you pay every farthing yourself: this has already been demonstrated. What you make the colonies to pay, are only the taxes upon your exportation to them.

I allow that you may thus gain more from your colonies than you would be able to gain from foreign nations; since the foreigners can quit your market when they please, if they cannot obtain among you certain articles so cheap as from others: you are therefore obliged to humour them. But your own subjects, obliged to supply themselves from you, are obliged to submit: you keep them in a prison, and you can put what price you please upon their existence.

An advantage, however, of this nature can only be deceptive. When you have made a prison of your colonies, it is necessary to keep all the doors carefully shut: you have to strive against the Proteus of smuggling; fleets are necessary to blockade their ports, armies to restrain a discontented people, courts of justice to punish the refractory. How enormous are the expenses to be deducted, before this forced commerce will yield a net revenue!

To the amount of the expenses of peace, add that of a single armament—of a single war, and you will perceive, that dependent colonies cost much to the mother-country, and never yield an equal return; that, far from contributing to the strength of a state, they are always its weak and vulnerable points; that they keep up among maritime nations continual jealousy; and that thus the people in France, and in England, are subjected to heavy taxes, which have no other effect than to render the productions of the colonies dearer than if they were free.

To these considerations opposed to the colonial system, drawn from political economy, many others may be added, derived from justice and humanity. This system is Edition: current; Page: [56] often mischievous to the people submitted to it; government is almost always, as it respects them, in a state either of jealousy or indifference: they are either neglected or pillaged—they are made places of banishment for the reception of the vilest part of society, or places to be pillaged by minions and favourites, whom it is considered desirable suddenly to enrich. The sovereign, at two thousand leagues distance from his subjects, can be acquainted neither with their wants, their interests, their manners, nor their character. Their most legitimate and weighty complaints, weakened by reason of distance, stripped of everything which might excite sensibility—of everything which might soften or subdue the pride of power, are delivered without defence into the cabinet of the prince, to the most insidious interpretations, to the most unfaithful representations: the colonists are still too happy, if their demand of justice be not construed into a crime, and if their most moderate remonstrances are not punished as acts of rebellion. In a word, little is cared for their affection—nothing is feared for their resentment—and their despair is contemned. The most violent procedures are easily disguised under an appearance of necessity, and the best intentions will not always suffice to prevent the sacrifice of the public to private interests.

If we proceed to consider the situation of colonies in detail, we shall not fail to be struck with its disadvantages. Have the colonists any lawsuits in their mother-country? Their witnesses must cross the seas; they are at the mercy of their agents; years glide away, and the expenses of justice continually accumulate. Is there danger of a revolt? are they threatened by an enemy? Succours arrive when the mischief is done: the remedy oftentimes proves an additional calamity. Do they want food? Famine has laid waste the country before the mother-country has been apprised of their necessities.

These are not mere assertions: they are borne out by a faithful summary of the history of every colony. It is tragical, even to horror! The evils suffered in these establishments, from the ignorance, the weakness, or the insensibility of European governments, exceed everything which can be imagined. When we consider the multitude of men destroyed, the fleets lost, the treasures swallowed up, the establishments pillaged—we are astonished to hear colonies spoken of as a means of enrichment. The natural development of their fruitfulness, and of their industry, has been retarded for ages; they have been covered a thousand times with ruins; nations have impoverished themselves, that they might hold them in servitude, when they might have been sharers in their wealth by leaving to them the enjoyment of the benefits of liberty.

There are many arguments which prove the inutility of their dependence. North America presents a striking fact which ought to enlighten Europe. Has the trade of England diminished, since her former subjects became free? Since she lost these immense possessions, has she exhibited any symptoms of decay?—has she had fewer sailors?—has her maritime power been weakened? She has found a new source of wealth in the independence of the United States. The emancipation of this great country has carried thither a greater number of men, more capital, and more industry. Great Britain, relieved from the expense of defence and government, has carried on a more advantageous commerce with a more numerous and wealthy people; and it is thus that everything concurs in proving, that the prosperity of a nation is a benefit in which all others participate, every one in proportion to his means; and that the colonial system is hurtful to Europeans, only because it is hurtful to the colonies.

Let us, however, see the consequences which we ought to draw from these data.

1. Ought we not to form any colonial establishment? Certainly not with the intention of enriching the mother-country: it is always a certain expense, for a contingent and far distant profit. But we have seen that, as a means of relieving the population—of preventing its excess, by providing a vent for those who find themselves overburthened upon their native soil, colonization offers an advantageous resource; and when it is well conducted, and free from any regulations which may hinder its prosperity, there may result from it a new people, with whom we shall possess all the connexions of language, of social habits, of natural and political ties.

2. Ought colonies already possessed to be emancipated? Yes, certainly; if we only consider the saving of the expenses of their government, and the superior advantages of a free commerce. But it is necessary to examine what is due to colonial establishments—to a family which has been created, and which ought not to be abandoned. Can they maintain themselves? Will not their internal tranquillity be interrupted? Will not one class of the inhabitants be sacrificed to another? for example, the free men to the slaves, or the slaves to the free men? Is it not necessary that they should be protected and directed, in their condition of comparative weakness and ignorance? Is not their present state of dependence their safeguard against anarchy, murder, and pillage? Such are the points of view under which this question ought to be considered.

When we shall have ceased to consider colonies with the greedy eyes of fiscality, the greater number of these inconveniences will cease of themselves. Let governments lay Edition: current; Page: [57] aside all false mercantile notions, and all jealousy of their subjects, and everything which renders their yoke burthensome will fall at once: there will no longer be any reason to fear hostile dispositions and wars for independence. If wisdom alone were listened to, the ordinary object of contention would be reversed—the mother-country would desire to see her children powerful, that they might become free, and the colonies would fear the loss of that tutelary authority which gave them internal tranquillity and security against external foes.

§ 9.: Non-agenda—Narrow measures.

General Observations.—Given in the shape of money, encouragements (so called,) special encouragements, though they miss the good they aim at in the shape of special encouragement, produce, in the shape of general encouragement, another good which they do not aim at—the addition made, as above, by forced frugality at the expense of justice.

Given otherwise than in the shape of money—given by discouragements applied to rival branches—they make no addition to wealth by forced frugality, and therefore make no addition at all to wealth. Discouragements to the import, and thence to the production of foreign goods, are discouragements to the export, and thence to the production, of the home goods that would have been taken by the foreigners in exchange for their goods.

Of the favour shown to home goods in comparison with foreign goods, what is the result? That, in each country, men get their commodities either not so good, or not so cheap, and thence not in such plenty as they would otherwise. Such not only is the result of all these conflicting operations, on the part of all nations taken together, but, to the extent of the operation, would be so in each, even if there were no such retaliation anywhere else.

Giving birth or increase to this or that particular branch of productive industry, under the notion of giving an increase thereby to the aggregate of the national mass of wealth, is either useless or mischievous.

The aggregate mass of money employed in the shape of productive capital, will, in all branches of industry taken together, be productive of so much per cent. upon the amount of it—say 15 per cent., or more or less, according to the average rate of profit upon stock in the country in question, which is in the inverse ratio of that portion of the mass of money in circulation, which is employed within the year in the shape of productive capital, to that portion of it which is employed, as money is employed, by a man who is said to spend his income.*

If in one of these branches the rate of profit be greater than in others—in the one 16 per cent. for example, in the others but 15—the greater the portion of capital employed in this most productive branch, in preference to the other less productive ones, the greater the annual addition to the aggregate mass of national wealth. But so long as they do but know which of all the branches open to them is most productive, individuals that have unengaged pecuniary capital to employ, are already as completely disposed to employ it in this most profitable branch, as all the exertions that can be employed by government can make them be.

When, by the exertions of government, a mass of capital, which otherwise would have gone into a branch of productive industry producing but 15 per cent., is directed into a branch producing 16 per cent., the profit by these exertions is not the 16 per cent., but the difference between that and the 15 per cent., viz. the one per cent. It is for the 16 per cent., however, and not the 1 per cent., that credit is commonly taken by those statesmen who go to market for glory with the merit of affording encouragement to trade: and if 10 per cent. be the profit upon stock in the new branch, the whole 10 per cent. is taken credit for as profit by the measure, though 5 per cent. less have been the real fruit of it.

It is for the encouragement or creation of particular branches of trade or industry that statesmen have founded and defended, and conquered or attempted to conquer colonies. It is for the sake of colonies, more than for anything else, that governments have been at the expense of a marine: and reciprocally for the sake of a marine that they have established or defended colonies. In Europe, those who are governed pay for the expense: in America, it is become a principle that those Edition: current; Page: [58] who govern should pay the expense. It is in Hindostan alone, that men pay in wealth for that security which before they never knew: a better bargain on both sides was never made. Ambition, always blind, stumbles sometimes upon profit—sometimes upon a loss, at the command of chance. Man is always ready to govern, no matter what the terms.

Divide productive industry into any number of branches,—for instance four, as with Adam Smith:—husbandry, including mines and fishing; manufactures for home consumption; manufactures for foreign consumption; and carrying trade. Every encouragement afforded to any one of the four branches operates to the amount in discouragement of all the others. If, however, the encouragement be given in the shape of capital granted or lent, it will make an addition, to the amount of it, to the aggregate of real capital, and thence, to the amount of a per centage upon that capital, to the annual aggregate of growing wealth. But the addition thus made to wealth will depend for its magnitude, not on the choice made of the branch of industry, unless as to an extremely minute part of it, but on the addition made to the productive capital of the community at the expense of its income. A mode that would bid as fair for disposing of the money to the best advantage, would be to let a certain number of commercial men draw lots for the money, with liberty to apply it each in his own way. But what, again, would contribute in an equal degree to the same end is, if the nation has a debt, to employ the same sum in the buying in or paying off a portion of the debt; for in that case the receivers of the money, in lieu of annuities, would employ each of them his money in some branch of industry, in his own way of course, under his own management, or that of somebody to whom he lends the money.

The first course is attended with expense, the other not. In the first way, the money being levied by taxes, which whether direct or indirect bear principally upon income, is so much added to national capital at the expense of national income—in the other way, the money is so much taken from income on the same score; but by the redemption of so much capital, it extinguishes or transfers into the hands of government so much income: in the latter case, the community is exonerated from a charge upon its income—a charge to which it continues subject in the other case.

Such are the general grounds, from which it appears, that these narrow measures deserve to be reckoned among the non-agenda;—we shall proceed to examine a variety of examples of measures of these kinds more in detail.

§ 10.: Non-agenda—Narrow measures.

Example 1. False encouragements—loans.

Of all the means whereby a government may give a particular direction to production, the loan of pecuniary capital to individuals, to be employed in any particular branch of trade, is the least open to objection.

It ought, however, at all times, to be free from objection with respect to justice and prudence. All the treasure of the government, whence does it arise but from taxes, and these taxes levied by constraint?* To take from one portion of its subjects to lend to another, to diminish their actual enjoyments, or the amount which they would have laid up in reserve, is to do a certain evil for an uncertain good—is to sacrifice security for the hope of increasing wealth.

If loans of this nature were always faithfully repaid, their injustice would be limited to a certain period. Let us suppose that the capital thus employed is £100,000, and that the whole sum has been levied in one year—the injustice of the measure will have begun and ended in a year; and if the money thus lent has produced an increase of industry, it is an advantage to be set in opposition to the evil arising from the tax.

But these loans have a natural tendency to be ill employed, wasted, or stolen. Monarchs, and their ministers, are as liable to be deceived in the choice of individuals as in the selection of particular branches of commerce. Those who succeed with them prove only that they possess the talent of persuasion, or understand the practices of courts; but these are not the things which produce success in trade. It may be seen in the work of Mirabeau upon the Prussian Monarchy, that Frederick II., with all his vigilance and severity, was often deceived by the ignorance or dishonesty of those who obtained from his avaricious credulity loans of this nature. Thus, in the train of the first unjust tax for the formation of the capital lent, follow other taxes, rendered necessary to replace the thefts and dilapidations to which the first has been exposed.

It is also most probable, that the capital thus employed will only be applied upon branches of industry less productive than those towards which it would naturally have directed itself. What is the argument of the borrower? That the trade he wishes to establish is new, or that it is necessary to support an established trade. But why should the government intermeddle with it, if not because individuals who consider their own interests are not willing to meddle with it? The presumption is therefore against the enterprise.

Suppose even, that, by chance, this loan should take the most advantageous direction Edition: current; Page: [59] possible, the loan is not justified by this profit: it was unnecessary. For employing capital in the most advantageous manner, it is only necessary that the most advantageous employment should be known. If it be not well employed, it is because a better employment is not known. It is knowledge which is wanted: it is proper to teach, and not to lend. If the government cannot tell which is the most advantageous employment of capital, it is still less able to employ it well; if it can tell which is the best employment, that is all it need do. If the money of government had not taken this direction, that of individuals would, had they been instructed and left free.

There are circumstances in which loans of this nature are always justifiable: when they are not employed for the encouragement of new enterprises, but only to afford support to particular branches of commerce, labouring under temporary difficulties, and which need only to be sustained for a short time till the crisis of peril or suspension is past. This is not a speculation on the part of government, but rather an assurance against a calamity, which it seeks to prevent or to lighten. In such cases of distress, individuals will not of themselves assist the merchants whose affairs are thus in danger: it is necessary, therefore, that assistance be supplied; and, when supplied, it is not in the way of regulation, but of remedy.

§ 11.: Non-agenda—Narrow measures.

Example 2. Gift, or gratuitous loan.

Were we to judge from the number of instances in which it has been adopted, we should conclude that gratuitous grants of capital for the encouragement of commerce were most excellent measures.

Their inconveniences are of the same kinds as those of loans, but they greatly exceed them in degree. In case of a loan, if it be repaid, the same sum may serve the same purpose a second time; and so of the rest: the oppressive act by which the government obtained the capital need not be repeated. But if, in place of being lent, it be given,—so often as this favour is repeated, so often must the amount be levied by taxes: and upon every occasion it may be said, that the produce of the tax is lost, if we consider the use which might have been made of it in lightening the public burthens.

Sometimes capital has been lent with this view without interest—sometimes at an interest below the ordinary rate. In the first case, if it be repaid, it is not the capital which is lost, but only the interest; in the second case, it is not all the interest, but only the difference between the lower and the ordinary rate. It is still the same false policy as to its kind: all the difference is in the degree.

It may be observed, that gratuitous grants are more likely to be wasted than loans: it may be, because in the latter case responsibility is always incurred: it may be, because money received as a gift tends to produce prodigality: as it has been obtained without labour, it seems to have the less value.

In some cases, capital has been given, not in the shape of money, but in that of goods; by advancing to a manufacturer, for example, those articles which he wants for the completion of his work.

This plan may have the good effect of insuring the employment of the articles furnished upon the intended object. Those articles, however, with which the government interferes, are ordinarily dearer, and worse in quality, than those which the individual, with the same sum of money, could have obtained at his own choice. It is not the best method of treating men worthy of confidence; and it will not succeed with those who are unworthy of trust, since, after they are put in possession of them, they can convert the articles into money, and spend the amount. There may be measures which would obviate this danger:—inspection, suretyship, &c.; but, when it regards a plan radically bad, the discussion of the comparative inconveniences of any particular scheme, whereby the risk may be diminished, is not worth the labour it would cost.

§ 12.: Non-agenda—Narrow measures.

Example 3. Bounties upon production.

This mode of encouragement much exceeds the two former in the career of absurdity. In the two former cases, it was an expense, a risk, without sufficient reason for supposing it would prove successful, and even without sufficient reason in case of success. But a bounty is an expense incurred with the certainty of not obtaining the object sought, and even because it is certain that it cannot be obtained.

In the case of a bounty upon production, it is not only the end which is absurd, but the means also, which possess this particular character of contributing nothing towards the end.

It is uniformly because the trade in question is disadvantageous, that it is necessary to bestow money upon its maintenance: if it were advantageous, it would maintain itself. It is because the workman is not able to obtain from the buyer a price for his merchandise which will yield an ordinary profit, that it is necessary that he should receive from the government a bounty which shall make up the difference.

Whether the kind of product upon which it operates be advantageous or not, the bounty has no efficacy in increasing the ability of the producer to augment it. Since it follows the production—since he receives it when the thing is done, and not before, it is clear that Edition: current; Page: [60] he has possessed other means of producing it. The bounty may have operated upon his inclination, but it cannot have contributed to his ability.

Bounties have been bestowed upon particular branches of trade for all sorts of reasons:—on account of their antiquity, on account of their novelty—because they were flourishing, because they were decaying—because they were advantageous, because they were burthensome—because there were hopes of improving them, and because it was feared they would grow worse;—so that there is no species of commerce in the world which could not, by one or other of these contrary reasons, claim this kind of favour during every moment of its existence.

It is in the case of an old branch of trade that the evil of such measures is most enormous, and in that of a new one that its inefficacy is most striking. A long-established branch of trade is in general widely extended: this extent furnishes the best reason for those who solicit these favours for its support; and, to give it effect, it ought at the same time to be represented as gaining and losing,—gaining, that there may be a disposition to preserve it—losing, that there may be a disposition to assist it.*

In the case of a new branch of trade or industry, the futility of the measure is its principal feature. Here, there is no reason which carries the mask of an apparent necessity—no pompous descriptions of its extent. All which can be alleged is, that, once established, it will become great and lucrative, but what it wants is to be established. What, then, is done for its establishment? Measures are taken, which can only operate after it is established. When the trade is established, it will have such great success that it will yield, for example, fifty per cent. profit; but, to establish it, is requires such large advances, that it is doubtful if those who possess capital will make them, on account of the risks which are almost always inseparable from every new undertaking. What course does the government pursue? Does it give capital? No, this would be foolish. Does it lend capital? No, this would be to run too great risk; it will give a bounty upon the article when it shall have been made: till then, it says, we shall give no money. Thus, to the fifty per cent. you will gain by your merchandize, we will add a bounty of ten per cent. Very well: and, according to this reasoning, at what time will you refuse assistance? You refuse so long as the bestowment of it will be useful—you grant it in order that something may be done, and you do not give it till it is already done by means independent of you.

Mistrust, short-sightedness, a suspicious disposition, and a confused head, are very susceptible of union. Why are bounties preferred to advance of capital? They are afraid of being deceived in the latter case. If £10,000 are given at once, nothing may perhaps be done: to avoid this risk, they give, when the thing is done, £10,000 per annum, which they will never receive again.

Instead of being beneficial, the expense to the state becomes more burthensome in proportion as the trade becomes extended. The bounty instituted for one reason, is continued on an opposite account: at first it was given in order to obtain—in the end it is continued for fear of losing, the particular branch of trade. What would have been necessary for its establishment was a trifle—what must be paid for its continuance knows no bounds.

The capital bestowed upon a new branch of industry for an experiment, is always comparatively a small sum; but what is given as a bounty is always, or at least it is always hoped that it will be, a large one; for unless a large quantity of the merchandize be manufactured and sold, and consequently, unless a large bounty be paid for its production and sale, the object is considered as unaccomplished—it is considered that the bounty has not answered its end.

When the article is one which would not have been manufactured without the bounty, all that is paid is lost; but if it be one of those which, even without the bounty, the manufacturers would have found it their interest to produce, only a portion of the bounty is lost. As it makes an addition, and that a very sensible addition to the ordinary profit of the trade, it attracts a great number of individuals towards this particular enterprise: by their competition, the article is sold at the lowest rate, and the diminution of price is in proportion to the bounty itself (allowance being made for the necessary expenses of soliciting and receiving it.) In this state of things, it would appear, at first sight, that the bounty does neither good nor harm: the public gains by the reduction of price as much as it loses by the tax, which is the effective cause of this reduction.

This would be true, if the individuals who paid the tax in the one case were the same who profited by the bounty in the other—if the measure of this profit were exactly the measure of their contribution—if they received the one at the same time that they paid the other, and if all the labour lost in these Edition: current; Page: [61] operations had not cost anything. But all these suppositions are contrary to fact. There are not two taxes which affect all the members of the state—there is not one which affects them all equally. The tax is paid a long time before the indemnification by the reduction of price is received, and the expenses of this useless circulation are always considerable.

After all that can be said, it is clear that a bounty upon production cannot, in the long run, produce an increased abundance of the article in question, whatsoever may be the diminution of price which may result from it. The profit which the producer will obtain is not greater than before—the only difference is, that it comes to him from another hand. It is not individuals who give it him in a direct manner—it is the government. Without the bounty, those who pay for the article are those who enjoy it: with the bounty, they only pay directly a part of the price—the rest is paid by the public in general; that is to say, more or less, by those who derive no advantages from it.*

Although a bounty upon production adds nothing to the abundance of any article of general consumption, it diminishes the price to the buyer. Suppose that, in Scotland, there were a bounty upon the production of oats, and that the bounty were paid by a tax upon beer brewed from this grain, oats would not be more abundant than before; but they would be sold at a less price to the buyer, (though the merchant would make the same profit) whilst the beer brewed with this grain would be proportionally dearer: the consumer of oats would not find himself richer than before, but for the same price he would have a greater quantity of this grain in the form of food, and less in the shape of drink.

I speak here of relative abundance, in proportion to the ordinary consumption: I speak of superfluity, compared with habitual wants. The lower this commodity is in price, compared with others, the greater will be the demand for it: more will be produced in consequence of the increased demand, but more will not be produced than is demanded; the commodity, as it respects abundance, will remain upon the same footing as before. If a superfluity be required—if a quantity be required exceeding what is commonly produced, other measures must be resorted to than a bounty on production.

If a bounty upon production could be justified, it would seem that it ought to be so in the case where the article thus favoured was an article of general consumption—as corn in England, oats in Scotland, potatoes in Ireland, and rice in India; but it would only appear so as a means of producing equality, and not under any other point of view. In fact, this measure does not tend to produce abundance: what it does, is to take the money out of the pockets of the rich, to put it into the pockets of the poor. A commodity of general consumption is always the most necessary of all the articles of life—it is always that of which the poor make the greatest use. The richer a man is, the more he consumes of other commodities besides this universal commodity. Suppose, then, a bounty upon the production of oats in Scotland: if nothing be consumed there but oats, or if there be only a tax upon oats, the persons who reap the advantage of the bounty would be those who bear the burthen of the tax, and that in the same proportion, inasmuch as the expense of levying the tax would be the only result of this measure. But commodities of all kinds are consumed in Scotland, and taxes are there levied upon a great variety of commodities. Oats, the commodity of the poor, being the object not of a tax but of a bounty, and the articles consumed by the rich being the object not of a bounty but of a tax, from the produce of which the bounty upon the production of oats is paid, the result will be, that the poor will obtain the commodity of which they make the greatest use at a lower price.

I agree to this: but does it follow that their condition will be bettered? Not at all. Oats will be sold to the poor at a lower price, but they will have less money wherewith to buy them. All the means of subsistence in this class resolve themselves into the wages of labour; but the wages of labour necessarily depend upon the degree of opulence which a country possesses; that is, upon the quantity of capital applicable to the purchase of labour, in connexion with the number of those whose labour is for sale. The low price resulting from the bounty will produce no advantage to the labourers whilst the wealth of the country remains the same: if the commodity be lowered in price, they will be less paid; or, what comes to the same thing, as they work for a ration of oats, they will be obliged to give more labour for this ration if oats are at a lower price.

All that relates to this mode of encouragement may be summed up in a few words:—

The natural course of things gives a bounty upon the application of industry to the most advantageous branches—a bounty of which the division will always be made in the most equitable manner. If artificial bounties take the same course as the natural, they are superfluous—if they take a different course, they are injurious.

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§ 13.: Non-agenda—Narrow measures.

Example 4. Exemptions from taxes on production.

An exemption from a tax capable of being imposed upon any article in the hands of the maker or seller, is a modification of a bounty upon production: it is a disguised bounty.

This kind of negative favour may be extended to every species of tax upon trade. The methods of encouragement in this way are as numerous as those of discouragement. If, of two rival manufactures, the one be weighed down by a tax, and the other free, that which is taxed is, in respect of that which is not, in the same situation as if both were free from taxes, and a bounty were bestowed upon one.

But each manufacture is a rival to every other. If this rivalry be not special, it is at least general and indirect. For what reason? Because the power of purchasing is limited, as to every individual, by his fortune and his credit. Every article which is for sale, and which he can desire, is in a state of competition with every other; the more he expends for the one, the less can he spend for the others.

Exemption from taxes upon production cannot be blamed absolutely; for it is to be wished, if the thing were possible, that there were no taxes. But, relatively, any particular exemption may be blamed, when the article exempted has nothing which justifies this particular exemption. If it were equally fit for taxation, the favour granted to it is an injury to other productions.

That an object fit for taxation be exempt, is an evil: it renders necessary some other tax, which by the supposition is less proper, or it allows some injurious tax to remain.

Whilst, as to advantage, there is none. If more of this untaxed merchandise be produced, less is produced of that which is taxed.

The evil of an unjust tax is all the difference between a more or less eligible tax, and the worst of those which exist.

§ 14.: Non-agenda—Narrow measures.

Example 5. Bounties on Exportation.

In the case of bounties upon exportation, the error is not so palpable as in that of bounties upon production, but the evil is greater. In both cases, the money is equally lost: the difference is in the persons who receive it. What you pay for production, is received by your countrymen—what you pay for exportation, you bestow upon strangers. It is an ingenious scheme for inducing a foreign nation to receive tribute from you without being aware of it; a little like that of the Irishman who passed his light guinea, by cleverly alipping it between two halfpence.

As a bounty upon production may sustain a disadvantageous trade, which would cease without it, by forming its sole profit, it is also possible that it may for a short time increase the profit of an advantageous trade, which would support itself without this aid.

Does the bounty support a disadvantageous trade? It does not produce a farthing of profit more than would have existed without it. Left to itself, this trade would have ceased and made way for a better; and the community loses the profits of a capital better employed in lucrative undertakings.

Does the bounty support an advantageous trade? The evil, in the end, will be greater, because the extra profit drawing more rivals into this career, their competition will reduce the price so low, that the bounty will constitute at last the whole profit of this trade.

However, till the price be thus reduced, the bounty is a net gain for the first undertakers; and the consumers being our fellow-countrymen, a part of this ill-employed money turns to their advantage by the low price of the commodity.

But in the case of a bounty upon exportation, the nation which pays it never receives any advantage: everything is lost, as if it were thrown into the sea, or at least as if it had been given to foreigners.

Without this bounty, the article would have been exported, or it would not: it would have been exported, if foreigners were willing to pay a price which would cover the expense of the manufacturing, of exporting, and the ordinary profit of trade; it would not have been exported, if they did not offer a sufficient price. In the first case, they would have obtained the article by paying its worth; in the second case, this disadvantageous commerce would not have been carried on.

Suppose a bounty upon exportation: what are its effects? The foreigners who heretofore had found the article too dear, become disposed to purchase it. Why? Because you pay them to induce them to do so. The more government gives to the exporter, the less need the foreigner give. But it is clear that he will not pay more than the lowest price which will satisfy the exporter: he need not give more; since, if one merchant refuse to supply him at this price, another will be quite ready to do it.

Suppose an article of our manufacture, already purchased by foreign nations without a bounty upon its exportation; what will happen if a bounty be given? Solely the lowering of its price to the foreigners. A bounty of one penny for every pound in weight is given upon an article which sold for fivepence per pound; the manufacturer would not have found it worth while to have sold it for less than fivepence per pound; he will now, however, find the same profit in selling it for fourpence, because his own government makes Edition: current; Page: [63] up the difference. He will sell at fourpence, because, if he do not, some other will; and because, in this case, instead of selling for fivepence, it may happen that he will not sell at all. Thus the whole which government gives is a net saving to the foreigners: the effect in the way of encouragement is nothing. The whole which is exported with the bounty is neither more nor less than would be without it.*

Though a bounty do not render such a branch of trade more flourishing than it would otherwise have been, it will not render it less flourishing; but the more flourishing it becomes, the greater will be the loss to the nation.

Disadvantageous branches of trade are often spoken of. People are uneasy—they fear that certain manufactures, left to themselves, will be unprofitable. It arises from error. It is not possible that any branch of trade, left to itself, can be disadvantageous to a nation: it may become so by the interference of government, by bounties, and other favours of the same nature. It is not to the merchant himself that it can become disadvantageous; for the moment he perceives there is nothing to be gained, he will not persevere in it: but to the nation in general it may become so—to the nation, in its quality of contributor; and the amount of the bounty is the exact amount of the loss.

The Irishman who passed his light guinea was very cunning; but there have been French and English more cunning than he, who have taken care not to be imposed upon by his trick. When a cunning individual perceives you have gained some point with him, his imagination mechanically begins to endeavour to get the advantage of you, without examining whether he would not do better were he to leave you alone. Do you appear to believe that the matter in question is advantageous to you? He is convinced by this circumstance that it is proportionally disadvantageous to him, and that the safest line of conduct for him to adopt, is to be guided by your judgment. Well acquainted with this disposition of the human mind, an Englishman laid a wager, and placed himself upon the Pontneuf, the most public thoroughfare in Paris, offering to the passengers a crown of six francs for a piece of twelve sous. During half a day he only sold two or three.

Since individuals in general are such dupes to their self-mistrust, is it strange that governments, having to manage interests which they so little understand, and of which they are so jealous, should have fallen into the same errors? A government, believing itself clever, has given a bounty upon the exportation of an article, in order to force the sale of it among a foreign nation: what does this other nation in consequence? Alarmed at the sight of this danger, it takes all possible methods for its prevention. When it has ventured to prohibit the article, everything is done. It has refused the six-franc pieces for twelve sous. When it has not dared to prohibit it, it has balanced this bounty by a counter-bounty upon some article that it exports. Not daring to refuse the crowns of six francs for twelve sous, it has cleverly slipped some little diamond between the two pieces of money—and thus the cheat is cheated.

A strife of this nature, painted in its true colours, and stripped of the eclât which dazzles by the magnitude of the object and the dignity of the agents, appears too absurd to be possible; but for one example among a thousand, we may refer to what has happened between England and Ireland respecting the trade in linens.

§ 15.: Non-agenda—Narrow measures.

Example 6. Prohibition of rival productions.

This pretended mode of encouragement can never be productive of good; but it may produce evil:—hurtful or useless, such is the alternative.

1. I say useless. It is a particular privilege of this exercise of power, to be employed in certain cases without doing any harm; and these cases occur when the branch of production or trade which is prohibited would not have been introduced, even had there been no prohibition. In former times, it was declared felony in England to import pollards and crocards, a kind of base coin at that time. This prohibition is yet in existence, without producing any inconvenience. If, with the intention of encouraging the increase of poultry, or with any other similarly patriotic view, the importation and increase of phœnixes were prohibited, it is clear that the trade in poultry would neither gain nor lose much.

Among all the species of manufacture which England, with so much anxiety, has prohibited to her colonies, there are many which, in comparison with agriculture, are no more suitable to the Americans than the breeding of phœnixes, the cultivation of pine-apples in their fields, or the manufacture of stuffs from spiders’ webs.

Were the articles of foreign manufacture, loaded with the expenses of importation, neither better in quality nor lower in price than the articles of home manufacture, they would not be imported: the prohibition exists in the nature of things.

2. Hurtful. By the prohibition of a rival manufacture, you wish to insure the success Edition: current; Page: [64] of a favoured manufacture, and you at once create all the mischiefs of a monopoly. You enable the monopolists to sell at a higher rate, and you diminish the number of enjoyments; you grant them the singular privilege of manufacturing inferior articles, or of ceasing to improve them; you weaken the principle of emulation, which exists only when there is competition; in short, you favour the enriching of a small number of individuals, at the expense of all those who would have enjoyed the benefit; you give to a few bad manufacturers an excessive degree of wealth, instead of supplying the wants of ten thousand good ones; you also wound the feelings of the people, by the idea of injustice and violence attached to the partiality of this measure.

Prohibitions of foreign manufactures are most frequently applied to those objects which foreigners can supply less expensively, on account of some peculiar advantage arising from their soil or their industry. By such prohibitions, you refuse to participate in this natural advantage which they enjoy; you prefer what costs you more capital and labour; you employ your workmen and your capital at a loss, rather than receive from the hands of a rival what he offers you of a better quality or at a lower price. If you hope by this means to support a trade which would otherwise cease, it may be supported, it is true; but, left to itself, capital would only leave this channel where its disadvantages are unavoidable, to enter upon others where it would be employed with greater advantage. The greatest of all errors is to suppose, that by prohibitions, whether of foreign or domestic manufactures, more trade can be obtained. The quantity of capital, the efficient cause of all increase, remaining the same, all the increase thus given to a favoured commerce is so much taken from other branches.

The collateral evils of this prohibitory system ought not to be forgotten. It is a source of expense, of vexation, and of crimes.

The expense most evidently lost, is that of the custom-house officers, the inspectors, and other individuals employed; but the greatest loss is that of labour—both of the unproductive labour of the smuggler, and of those who are, or who appear to be, employed in the prevention of smuggling.

To destroy foreign commerce, it is only necessary to sell everything, and to purchase nothing:—such is the folly which has been passed off as the depth of political wisdom among statesmen.

Among the transactions between nation and nation, men have consented, at great expense, to support disadvantageous manufactures, that they may not buy of their rivals. We do not see such monstrous extravagance on the part of individuals. If a merchant were to act thus, we should say he was hastening to ruin. But his interest guides him much better: it is only public functionaries who are capable of this mistake, and they only when they are acting on account of others.

Covetousness desires to possess more than it can hold: malevolence likes better to punish itself than to allow a benefit to an adversary.

To have its eyes greater than its belly, is a proverb which nurses apply to children, and which always applies to nations. An individual corrects this fault by experience: the politician, when once affected by it, never corrects himself.

When a child refuses physic, mothers and nurses sometimes induce it to take it by threatening to give it to the dog or the cat. How many statesmen—children badly educated—persist in supporting a commerce by which they lose, that they may avoid the morfication of allowing a rival nation to carry it on!

The statesman who believes he can infinitely extend commerce, without perceiving that it is limited by the amount of capital, is the child whose eyes are larger than his belly.

The statesman who strives to retain a disadvantageous commerce, because he fears another nation will gain it, is the child who swallows the bitter pill, for fear it should be given to the cat or the dog.

These are not noble comparisons, but they are just ones:—when errors cover themselves with an imposing mask, one is tempted to set them in a light which will show them to be ridiculous.

§ 16.: Non-agenda—Narrow measures.

Example 7. Prohibition of rival imports.

In regard to the prohibition of rival imports, simply inefficacious or mischievous is here the alternative.

If the foreign article cannot when imported, after payment of the expense of importation, be had as cheap in comparison of its quality as the home article meant to be favoured, it will not be imported;—so long as that is the case, a prohibition is put upon it by nature. If, had it not been for the prohibition, it could have been sold here cheaper, the prohibition is in point of burthen a tax upon us to the amount of the difference in price. I say, in point of burthen: for as to that benefit which it is the property of a real tax to produce, viz. a supply for expenditure, or a relief to an equal amount from the burthen of other taxes, it has no existence. It is upon the same footing with a tax the produce of which, as soon as collected, should be thrown into the sea.

As to the increase of wealth in general, the particular encouragement in question is, for the general reason so often given, of no avail. The quantity of capital, the efficient cause of wealth, remaining the same, whatever is added in consequence to the favoured trade, is so much taken from the rest.

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§ 17.: Non agenda—Narrow measures.

Example 8. Taxation of rival branches of home manufactures.

The natural and only original object of taxation is revenue: but, considered merely as confined to that object, it does not belong to our present purpose. Measures are however to be considered with regard to their eventual effects of all kinds—as well those which were not designed (if there be any) as those which were.

A tax upon one of two rival branches of trade can have no effect in favour of the other, but in so far as it operates as a prohibition. If the same quantity of the commodity meant to be discouraged, be sold notwithstanding the tax, as would have been sold without the tax, the advantage gained by the commodity meant to be favoured, amounts to nothing.

So far as it operates as a prohibition, we have seen that good it can do none—it only transfers capital from one employment to another, without producing any increase of wealth: harm it may do, and is likely enough to do—though we have seen that it may also happen not to do any.

As a tax, it may do good or harm according to its particular nature:* good, if it stand instead of a worse—harm, if it stand instead of one less burthensome.

§ 18.: Non-agenda—Narrow measures.

Example 9. Taxation of rival imports.

Whether the article thus taxed in the view of favouring another, be an article of home production or an article of import, makes in point of advantage no sort of difference. As far as it prevents the import, it has the effect of a prohibition: in which capacity we have seen, that with regard to the general increase of wealth, it is of no use. As far as it fails of preventing the import, it gives no encouragement to the particular trade in question; nor consequently to the particular portion of wealth employed in that trade: its effect is to levy money on the subject, in quality of a tax; but the persons on whom the money is levied are our own people, as much as if it were among the articles produced at home. As such, it may either be a good or a bad tax as it may happen;—though in regard to its temporary consequences, it cannot be productive of all the mischief of which a tax on a home manufacture is capable of being productive.

§ 19.: Non-agenda—Narrow measures.

Example 10. Drawbacks on exportation.

What is called giving a drawback on exportation, is the restitution of a tax already levied;—from the amount already levied in way of a tax, a man is permitted to draw back so much of what he has disbursed.

What a bounty on exportation is to a bounty on production, a drawback is to a simple exemption from a tax levied on produce. In the first case of each pair, foreigners come in for their share of the boon indiscriminately with our own people; in the other case, they get the whole of it. In all cases, the expected advantage is equally imaginary.

In one point of view, however, the drawback is a more expensive way of throwing away money than the bounty. In the case of drawback, the money is received with one hand in order to be given back again with the other; and each operation is attended with a separate expense. To this public expense is to be added the private expense, which the individual must be at to pay the money, and get it back again—an expense of which the trouble and loss of time (which in the account of the financier go for nothing) always form a very considerable part, often the most considerable: instances have not been wanting, in which the value of the supposed favour has been reduced literally to nothing by the trouble of obtaining it.

§ 20.: Non-agenda—Narrow measures.

Example 11. Non-importation agreements.

Non-importation agreements, as far as they extend, have the effect of prohibitions:—happily they are not so extensive in their action, so frequent, so steady, so well executed.

Good they do none: happily, wanting the force of prohibitory laws, the mischief they do is seldom so extensive.

§ 21.: Non-agenda—Narrow measures.

Example 12. Premiums for the importation of foreign arts and hands.

That there are cases in which it would be extremely well worth the while of individuals to pay extraordinary prices to get workmen from abroad, is not to be doubted. Meaning to employ my money to the best account in the way of trade or manufacture, and looking round as far as my reach of thought, and faculties and opportunities, will carry me, if I observe a branch of manufacture, for instance, new as yet to my country, and which, if imported from some country abroad, would pay me, for example, five per cent. interest for my capital, more than any other branch I have been able to find,—this five per cent. would be so much more gained to me, and through me to the nation I belong to, than if I had embarked my capital in that one of the old-established trades, which, of all that have fallen Edition: current; Page: [66] under my cognizance, would be the most advantageous. Extra expenses there doubtless are, and difficulties, incident to the business of getting workmen from a foreign country, even if there are no laws in that country or our own to add to the amount; but all difficulties and expenses of this nature I suppose provided for and surmounted, as in many instances they actually have been.

Still, then, the same argument, and still with undiminished force: the more evidently advantageous for the individual the employment of his money in this way, the more evidently unnecessary is it for government to employ that of the nation in this way.

In the first case, the burthen is borne by him who receives the benefit—in the other case, by those who receive no part of it: in the first case, the probability of success in the project, and the security against unnecessary expense, are at their highest pitch—in the other, at their lowest.

On the part of governments in general, the passion for getting arts and hands from abroad does not appear so conspicuous as the dread of losing their own.

§ 22.: Non-agenda—Narrow measures.

Example 13. Fixation of prices.

The limitation of the price of commodities may have two opposite objects—1. The rendering them dearer; 2. The rendering them cheaper.

The first of these objects is least natural: so many commodities, so many means of enjoyment; to put them within the reach of the largest number, is to contribute to the general happiness. This motive, however, is not unexampled; and intoxicating liquors are an instance of its exercise. Legislators have often endeavoured, and not without reason, to increase their price, with the design of limiting their consumption on account of their dearness. But imposing a tax upon them suffices to increase their price; there is no necessity for resorting to the method of direct limitation.

Is the design of these limitations the obtaining of the article at a low rate,—the method will scarcely answer its end. Before the existence of the law, the article was sold at what may be called its average or natural price, that is to say, it was confined within certain limits—1. By the competition between the buyers and the sellers; 2. By a competition between the branch of trade in question, and that of other branches to which the merchant might find it to his advantage to transfer his capital.

Does the law endeavour to fix the price at a lower rate than this average or natural price—it may obtain a transient success, but by little and little this branch of trade will be abandoned. If the constraint be increased, the evil will grow worse; the constraint, in fact, can only act upon the existing stock: this being sold at a forced price, the merchant will take care not to replace it. What can the law effect? Can it oblige him to replenish his storehouse with the same commodities? No legislator has ever attempted it, or at least no one has ever attempted it with success. This would be to convert the officers of justice into commercial agents; it would be to give them a right to dispose of the capitals of the merchants, and to employ the merchants themselves as their clerks.

The most common fixation has been that of the rate of interest. It has already been discussed. (See Ch. III. §§ 6 & 7.)

The fixation of the price of wages (especially with regard to agriculture) has often been proposed, and even carried into effect, for the most opposite reasons: to prevent what is considered as an excess—to remedy what has been regarded as a deficiency.

In this latter point of view, this measure is liable to great objection. To fix the minimum of wages, is to exclude from labour many workmen who would otherwise have been employed; it is to aggravate the distress you wish to relieve. In fact, all that can be done is limited to determining, that if they are employed they shall not receive less than the price fixed; it is useless to enact that they shall be employed. Where is the farmer, where is the manufacturer, who will submit to employ labourers who cost them more than they yield? In a word, a regulation which fixes the minimum of wages, is a regulation of a prohibitory nature, which excludes from the competition all whose labour is not worth the price fixed.

The fixation of the rate of wages, in order to prevent their excess, is a favour conferred on the rich at the expense of the poor—on the master at the expense of the workman. It is a violation, with regard to the weakest class, of the principles of security and property.

§ 23.: Wealth—Means of Increase.

If we trace the progress of wealth in its natural channel, we shall clearly perceive that the interposition of government is only beneficial and necessary when employed in the maintenance of security, in the removal of obstacles, or the dissemination of knowledge.

Wealth may be increased—

I. By increasing the efficacy of labour.

II. By increasing the number of labourers.

III. By the more advantageous employment of capital.

IV. By increasing the mass of capital.

V. By means of trade.

I. By increasing the efficacy of labour.

This subject might furnish most interesting and instructive historic details: we shall confine ourselves to a simple enumeration of the means whereby it may be accomplished.

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The efficacy of labour may be augmented—

1. By increase of skill and dexterity.

2. By saving the time occupied by superfluous movements.

3. By the invention of machines.

4. By employing, instead of human labour, more powerful and less costly prime movers,—as water, air, fire, explosive powders, and beasts of burthen.

The two first advantages are obtained by the division of labour; the third necessarily results from it. Adam Smith has developed this grand means of attaining perfection with great diligence, and, so to speak, particular affection. He relates, that the process of converting a morsel of brass wire into a pin requires eighteen operations, and employs as many different workmen, of whom the greater part borrow the assistance of machines;—whereby, although ten workmen would not separately have been able to make more than 240 pins a-day, they are enabled to make 4800. It is hence that this little branch of national wealth, which affords a more commodious adjustment than the buckles of the Romans and the skewers employed by Queen Elizabeth, has increased in proportion. What our country people throw away, would have been luxuries in the court of Darius.

5. By the simplification of intermediate processes.

6. By the saving of materials. The extension given to the quantity of gold employed in gilding silver wire, is an example equally suited to astonish the natural philosopher, and to charm the political economist.

Chemistry has introduced a multitude of economical processes into all the arts: it has taught the means of economically applying fuel—of producing great effect with little expense; it has substituted less costly for more expensive materials; it has imitated, and even rivalled, the productions of nature.

7. By the improvement of the products, that is to say, in proportion to the price. It is thus that porcelain has supplanted the coarse pottery of former times:—the potteries of Wedgwood and Bentley have excelled the porcelain of China.

8. By the diminution of the expense of carriage, by the multiplication of roads, canals, and iron railways. The advantage which the Low Countries have derived from their canals is incalculable. Governments may often usefully interfere in respect to these objects, either by advancing the capitals and sharing in the benefit, or by granting to the individuals interested the powers necessary for making arrangements among themselves, and defraying the expense. When, however, it is necessary for a government to take charge of these works, it is a proof that confidence does not exist; I mean confidence in the stability of the actual order of things, and in the protection of the laws. No other circumstance speaks so highly in praise of the British government, as the disposition of individuals to unite in carrying on great undertakings in canals, docks, ports, &c. A disposition to undertake such works denotes the prevalence of a feeling of security, which unites the future to the present, and embraces an horizon of large extent.

The advantage of machines consists in the increased efficacy of labour. To reduce the number of men employed upon any species of labour by half, without diminishing the quantity of the product, is in fact the same thing as doubling the number of men employed, with the same degree of efficacy as before. That which required two thousand men for its performance, being performed by one thousand, there remains one thousand men who may be employed either upon similar or other works.

But this supposes that the workmen, no longer required in the production of a given quantity of labour, are otherwise employed; for if they were without employment, the quantity of wealth produced would remain the same after the invention as before.

If a manufacturer found himself thus in a condition to execute, with one thousand workmen, what had heretofore required two thousand, it appears, at first sight, that the natural result would be, that he would employ the two thousand workmen to produce a double quantity of work. But unless his pecuniary capital be augmented, it will be impossible for him to employ the same number. The new machines, the new warehouses required for this increase of produce, require a proportionate increase of capital. The most ordinary case, therefore, will be the reduction of the number of workmen; and, as it respects them, the consequence is a temporary distress.

It is upon this circumstance that the popular opposition to the improvement of machines depends. It is a very reasonable opposition on the part of the handicraftsmen. It is they who suffer, whilst the benefit is, in the first instance, for the manufacturer, and in perpetuity for the public, who obtain a better article at a less price.

There are two kinds of countries where this objection has no force—countries badly peopled, and countries where the people are slaves. Do you desire an increase of population—do you desire children who may become workmen in future,—I give you fullgrown men—workmen actually prepared: you would charge yourself with the expense of their education,—I relieve you of it: you are willing to receive foreigners, and I give you natives. Such is the language an inventor may address to a sovereign; whilst to the individual proprietor he may say,—With one hundred slaves you are now able to raise a Edition: current; Page: [68] certain quantity from your mines; with fifty you will in future be able to raise the same quantity. If it were necessary to support the others in idleness, where would be the evil?

In stationary or retrograde countries, where the dismissed workman cannot easily find a new employment to which to apply himself, where there exists no capital ready to furnish him employment that suits him, this objection would not be without force. It is, however, a transient evil, to which transient remedies ought to be applied.

II. By the increase of the number of labourers.

I have nothing further to add upon this subject to what is said in the chapter on population (Ch. IV.;) but I shall point out those things which, in an indirect manner, tend to produce this effect.

1. By the banishment of all prejudices unfavourable to labour. Honour has tied the hands of some—religion of others. Some have been kept in a state of perpetual idleness—others in a state of periodical idleness. In some Catholic countries, the saints’ days occupy more than one hundred working days. The loss of these days alone ought not only to be considered, but also the bad habits which this idleness encourages. They have not worked upon the saint’s day; they do not work on the day following, because they were intoxicated the day past.

2. The amount of labour may be increased by giving productive employments to those classes of men who, owing to their station in life, produce nothing—to prisoners, beggars, monks, and soldiers. It has been pretended that, to make a good soldier, an individual ought to follow no other trade: an exception ought at least to be made in favour of those kinds of labour which may be useful in war, as the digging of ditches, the construction of bridges, the throwing up of embankments, and the formation and repair of roads.* These employments afford an inexhaustible means of increasing the most permanent part of the capital of a nation.

3. Substitute alluring for coercive motives—reward for punishment; with suitable precautions, abolish all services in kind, all forced labour and slavery. A country peopled with serfs will be always poor. Pay for labour in money, and the reward, mingling drop after drop with the labour, will sweeten its bitterness: every free labourer is worth two slaves. This reflection is often presented in this work, but it is so just and favourable to humanity, that it cannot be too often repeated; we ought not to be afraid to repeat it.

III. The more advantageous employment of capital.

We have already seen, that under the guidance of individual interest, capital of itself takes the most advantageous direction—at least certainly more advantageous than when under the guidance of government.

Of all employments of capital, the most advantageous for the state is the cultivation of the earth. It is, at the same time, as has been demonstrated by Adam Smith, the most beneficial in itself, and the most attached to the state. Most advantageous: the capitalist must find it nearly as advantageous as any other, since, unless this be the case, he will not engage in it; and this after he has deducted the rent he pays to the landlord, and which often amounts to a third of the produce. It is thus that the state gains by this employment more than it can possibly gain by any other. More attached to the state: the workman may carry away his industry, the money-lender his capital, the merchant may change his warehouses, but the farmer cannot carry away the land.

For the encouragement of this most advantageous employment of capital, what ought government to do? Nothing: that is to say, nothing in the way of positive encouragement; for it cannot too completely remove the clogs and obstacles to the free alienation of landed property, or too greatly favour the conversion of goods held in common, into individual property.

The condition most favourable to the prosperity of agriculture exists when there are no entails, no unalienable endowments, no common lands, no right of redemption, no tithes, or taxes or dues which punish industry, and levy a contribution upon agriculture, increasing in proportion to the expenses incurred, and the greater care paid to cultivation.

Generally speaking, the great landed proprietors give themselves little care about the improvement of their domains. Some leave large tracts of country, sufficient for the maintenance of hundreds of families, in a state of nature, that they may enjoy the pleasures of the chase; others, prodigal in proportion to their wealth, expend everything in present enjoyments, and trouble themselves but little with the future. Where the system of leases and farms is upon a good footing, the evil is not great; but it is altogether otherwise when the administration is in the hands of a superintendent, still less interested than his masters in the increase of the rent. Were Edition: current; Page: [69] large properties divided into three or four parts, the proprietors would be animated with an entirely different spirit. The spur of necessity would render them intelligent and industrious. Where a nobleman employs twenty gardeners in raising pine apples and taking care of bowling greens. Five manufacturers would employ twenty husbandmen in producing corn for themselves and a hundred workmen. But let it not be supposed that I recommend agrarian laws and forced divisions: this would be to cut off an arm, in order to avoid a scratch.

In the scale of public utility, so far as it depends upon the general wealth, after agriculture come those manufactures whose products are sold within the country; after these, the manufactures whose products are exported; and in the last place, the carrying trade. Adam Smith has demonstrated this. Thus much for theory: it does not follow that in practice it would be proper to favour a branch of industry higher in the scale, at the expense of one which is placed below it. They all exercise a reciprocal influence upon one another, and benefits are divided among them with sufficient equality. If for a moment one branch become more advantageous than the others, a greater number of adventurers are soon drawn towards this side, and the equilibrium is not long in re-establishing itself. If any species of industry be more constantly useful to a nation, it is because the benefit more certainly remains—because the wealth which it produces is more secure.

IV. By increasing the mass of capital.

The mass of capital is increased when the products of labour exceed the amount of products consumed.

The addition made to the wealth of a nation in one year, is the total amount of the savings of all the individuals composing that nation in that year: it is the difference between the values produced or imported, and the values destroyed or exported in the course of the same year.

The addition made to the pecuniary wealth of a community is, in the same manner, the difference between the sum produced or imported, and the sum destroyed or exported in the period in question.

In the case of an individual, increase of money is increase of wealth. If his fortune consist to-day of one thousand guineas, and he has two thousand to-morrow, he will be twice as rich as he was the day before: he can command twice the quantity of the products of all kinds of labour.

The case is not the same with a nation. If its coin be to-day £1,000,000 sterling, and to-morrow it were to be £2,000,000, its wealth would not be doubled as was that of the individual. As it respects its internal condition, the nation would not be richer than before: instead of having at its command a double quantity of productions, it would only have the same.

It is true, that in exporting to other nations this suddenly acquired mass, the community in question would obtain an addition to the mass of its non-pecuniary wealth: but in proportion as this exchange is made, the case which we have supposed does not continue the same; it ceases to possess the additional million of coin.

This apparent contradiction between the two cases is easily removed. When an individual finds the quantity of coin which he possesses suddenly doubled, the value of the coin is not diminished by this addition: the community to which he belongs does not possess more than before, supposing that the amount has not been received from abroad. The proportion between the amount of coin and the things to be sold remains exactly the same.

The value of all the things sold in the course of a year is equal in value to the sum of the coin given in exchange for them; that is, to the value of the actual quantity of the coin, multiplied by the number of times it has been exchanged. Each of these masses is equal in value to the other; since, by the supposition, the one has been exchanged for the other.

This equality exists, whatever may be the difference in quantity between these two masses. When the million of coin, circulating three times during the year, has purchased the whole mass of goods which were to be sold, it has given to all its successive possessors the enjoyment of this mass. When, taking the same course, the two millions of coin have produced the same effects, they have only performed what the single million had performed before; since, by the supposition, the mass of goods has not been increased. In other terms, that is to say, the new mass of coin is swallowed up in the general mass of coin, and as much as it has increased its quantity, so much has it diminished its value.

The addition made to the coin of the community produces a proportional increase in the price of all vendible commodities—in the pecuniary price of all commodities not pecuniary; and consequently, it may be, in the price of every article—it may be, in that of the greater number of articles.

If an addition made to the coin of a community be employed in creating a portion of wealth not pecuniary, which would not have been created without it—if it produced by labour or exchange an increase of real wealth, the result is no longer the same. In proportion as the real wealth is increased, the addition made to the coin ceases to produce a diminution of relative value.

In order to simplify the case, and render it Edition: current; Page: [70] more striking, I have supposed a large and sudden addition. It is very seldom that an addition of this nature takes place with respect to the precious metals; but it has often happened with respect to paper money.

Thus the increase of the price of commodities, all other things remaining the same, is a proof of an addition to the coin, and a measure of its quantity.

This defalcation of value is equivalent to an indirect tax upon pecuniary revenues—a tax which may continually increase in amount—a tax which benefits those who issue the paper money, and of which the weight presses entirely upon the possessors of fixed revenues. There is a compensation for this tax to producers and merchants, who may raise the price of their commodities to all those who have part of this new money; but those whose fortune consists in a pecuniary revenue which cannot be increased, bear all the burthen.*

When this diminution of revenue takes place gradually, although it be an evil, this evil may result from the general prosperity, and may be compensated by a greater benefit. Losses which occur in the ordinary course of affairs, are experienced and hardly felt; they may be provided against. But when the government itself interferes, by operations whose effects are as great as they are sudden, in order to give a sudden increase to the mass of pecuniary capital, whether metallic or otherwise, it confounds all the calculations of prudence; it ruins one part of its subjects, and its imaginary wealth becomes the instrument of its destruction. This is what was experienced in France under the system of Law, and again under the reign of the assignâts.

V. By means of trade.

Some advantage results from every exchange, provided it be made intentionally and without fraud: otherwise such exchange would not be made; there would be no reason for making it. Under this point of view, the two contracting parties receive an equal benefit: each one of them surrenders what suits him less, that he may acquire what suits him more. In each transaction of this kind there are two masses of new enjoyments.

But though all trade be advantageous, a particular branch may be more advantageous to one of the parties than to the other. It is more advantageous to you than it is to me, if for an article which only costs you one day’s labour, you obtain from me an article which has cost me two. The real balance of trade is the quantity of labour received, exceeding the quantity of labour given in exchange.

It is not necessary in this place to examine to what degree soil, climate, situation, natural circumstances, &c. may give this advantage to one state over another; since this knowledge can have scarcely any influence upon practice. It is of greater importance to observe, that it may in a certain degree be acquired by art, and that the superiority of workmanship or of instruments is a species of monopoly established by fortune in favour of genius. Time is saved by ingenuity. The greater the number of new inventions in a country whose productions are carried into foreign lands, the more favourable will the real balance of commerce be to that country. The advantages belonging to dexterity are more permanent than those resulting from knowledge. The discoveries of chemistry are speedily disseminated: the skill of the Bengalese workmen will remain peculiar to them for ages.

The great politicians who so much value foreign commerce, consider it as a means of obtaining a balance in gold, and they hasten to interfere to prevent those exchanges which require an expenditure of the precious metals. If a merchant wish to send coin from London to Paris, it is to make a payment which will cost him less in this manner than any other, or that he may obtain some kind of merchandise which he values more than the coin. The politician is more clever than this. He is not willing that this gain should be made, because, he thinks, thus to gain would be to lose. Preventing the profits of every one, is the method he has discovered of preventing loss to all. He has therefore been employed in heaping one law upon another, that he may prevent the exportation of the precious metals: success would be a great misfortune, but it has never been obtained. Want of success in diminishing the evil has only increased the folly: I say in diminishing the evil, for it never entirely disappears. There will, for example, always be a greater or less expense on the part of the government in endeavouring to execute the law; more or less vexation, more or less restraint, a larger or smaller number of individuals punished for having rendered service to the country (by the breach of the law.) People will be accustomed to elude the prohibitions, and to escape the vigilance of government. Money being more or less lowered in value, the price of manufactures will be raised in proportion, and the exportation of manufactures diminished. Such has been the folly exhibited in Spain and Portugal; yet are they too happy only to have half succeeded. Grant to Midas his wish, he will die of hunger upon a heap of gold.

In recommending freedom of trade, I suppose the minds of merchants in their sound, that is, their ordinary state. But there have Edition: current; Page: [71] been times when they have acted as though they were delirious: such were the periods of the Mississippi scheme in France, and the South Sea scheme in England. The other classes of people would have had ground for seeking to divert their fellow-citizens from the purchase of the smoke sold by Law, or of the bubbles of the South Sea. What is here said, may be compared with the observations in § 8 of the present chapter, upon emigration. In laying down general rules, fortuitous and transient cases ought not to be forgotten.

What has been said respecting the precious metals is true respecting every article of trade and commerce, considered as general wealth. There cannot be any incompatibility between the wealth of each and the wealth of all. But the same rule does not apply to subsistence and defence. Individuals may find their individual profit, in commercial operations which may be opposed to the subsistence of all, or the defence of all. This particularly may happen to a small community in the neighbourhood of a large one. Establish an unlimited freedom of trade in the small community, the great one may ruin it by means of gold. In case of famine, it might purchase all its provisions; at the approach of war, it might purchase all its arms.

The conduct to be pursued, to insure the possession of the means of subsistence and defence, are infinitely diversified by the situation, the soil, the climate, and the extent of the country to which it may refer.

The great difficulty to be overcome as it respects subsistence, is the difference between good and bad harvests. If the produce be less than the consumption, the evil is evident: if it be greater, the abundance lessens the price, the farmer is ruined or discouraged, and the year of plenty may be followed by one of dearth. For the production of equality, some have established public granaries for storing up the superabundance of years of plenty; others have encouraged cultivation as much as possible, depending upon foreigners for drawing off the excess. Were we to judge from abstract reasoning alone, the first plan would appear best calculated to prevent accidents; but, forming our judgments from facts, the second appears least subject to abuse. It is from the adoption of this plan that England has enjoyed an abundance sufficiently regular. Freedom of trade, therefore, appears the best method for insuring an abundance of the means of subsistence.

In respect to subsistence and defence, there is no better security than that which results from the general prosperity. A superabundance is the best security against want.*

After the examination we have given to the different methods by which real wealth may be increased, we see that government may rely upon the intelligence and inclination of individuals for putting them in operation, and that nothing is necessary to be done on its part but to leave them in possession of the power, to insure to them the right of enjoyment, and to hasten the development of general knowledge. All that it can do with success may be ranged under this small number of heads:—

1. To encourage the study of different branches of natural philosophy. The difficulties of science form a barrier between practice and theory, between the artisan and the philosopher.

2. To institute prizes for discoveries and experiments.

3. To cause the processes employed in every branch of trade to be published. The French government, rising above little jealousies, has distinguished itself in this manner, and has rendered itself a benefactor to the human race.

4. To cause everything of the same nature in foreign countries to be observed with attention, and to give the knowledge they obtain the same publicity.

5. To cause the price of different articles of trade to be published. The price of an article is an extra reward for whoever can manufacture or furnish it at a cheaper rate.

6. To grant patents for a limited number of years.

With respect to a great number of inventions in the arts, an exclusive privilege is absolutely necessary, in order that what is sown may be reaped. In new inventions, protection against imitators is not less necessary than in established manufactures protection against thieves. He who has no hope that he shall reap, will not take the trouble to sow. But that which one man has invented, all the world can imitate. Without the assistance of the laws, the inventor would almost always be driven out of the market by his rival, who finding himself, without any expense, in possession of a discovery which has cost the inventor much time and expense, would be able to deprive him of all his deserved advantages, by selling at a lower price. An exclusive privilege is of all rewards the best proportioned, the most natural, and the least burthensome. It produces an infinite effect, and it costs nothing. “Grant me fifteen years,” says the inventor, “that I may reap the fruit of my labours; after this term, it shall be enjoyed by all the world.” Does the sovereign say, “No, you shall not have it,” what will happen? It will be enjoyed by no one, neither for fifteen years nor afterwards: everybody will be disappointed—inventors, workmen consumers—everything will be stifled, both benefit and enjoyment.

Exclusive patents in favour of inventions Edition: current; Page: [72] have been long established in England. An abuse, however, has crept into the system of granting them, which tends to destroy the advantage derivable from them. This privilege, which ought to be gratuitous, has afforded an opportunity for plundering inventors, which the duration of the custom has converted into a right. It is a real conspiracy against the increase of national wealth.

We may picture to ourselves a poor and timid inventor, after years consumed in labour and uncertainty, presenting himself at the Patent Office to receive the privilege which he has heard that the law bestows upon him. Immediately the great officers of the crown pounce upon him together, as vultures upon their prey:—a solicitor-general, who levies four guineas upon him; a keeper of the privy seal, four guineas and a half; a keeper of another seal, four guineas; a secretary of state, sixteen guineas; the lord chancellor, who closes the procession, as the first in dignity, so also the first in rapacity,—he cannot take less than twenty-six guineas.* Need it be added, that in carrying on this process of extortion, recourse is had to fraud—that the individual applying for a patent is referred from office, to office, that different pretexts may be afforded for pillage—that not one of these officers, great or small, takes the trouble to read a single word of the farago of nonsense which they sign, and therefore that the whole parade of consultation is only a farce.

Suppose a law, granting the patent as at present, without condition;—suppose another law, prohibiting the obtaining of a patent under a penalty of fifty guineas: what exclamations should we not hear against such contradictory laws and such folly! And yet this supposed folly is only half as great as the folly actually displayed. People always allow themselves to be duped by words. The law, or rather the customary abuse which has the force of law, instead of a permission, is, as it respects the greater number of inventors, a real, although masked prohibition. If you wish to strip off this mask, translate the language of each into the language of the other.

These insults and oppressions have sometimes been approved as tending to repress the temerity of projectors; in the same manner, taxes upon law proceedings have been applauded as tending to repress the temerity of suitors: as if poverty were synonymous with temerity—as if the rich only had need of the assistance of the laws, or that they only were worthy of it—as if, indeed, this reason for only half opening the doors of the temple of justice were not equally conclusive for closing them altogether!

7. To class with the crime of forgery the injustice done by the artisan who puts upon his own productions the mark of another.—In order to prevent the commission of this crime through ignorance, it would be necessary to establish a register, in which every artisan might make an entry of his mark. This would tend to secure the privilege which nature has established in favour of skill, and which the legislator ought to maintain. It can never be obtained without labour, and it can never be abused.


§ 1.: Sponte Acta.

With regard to increase of population by births, everything may be left to the spontaneous action of individuals.

§ 2.: Agenda.

With regard to increase of population, next to nothing is required to be done by government: all that governments need do is to prevent decrease by deperition.

To prevent deperition is to afford security—security against the extremity of all mischief, the destruction of man’s life. The sources of danger are—external hostility, internal hostility, and calamity. With regard to the two first, the interference of government is required for the purposes of defence and police. The following are examples of institutions for preventing deperition from calamity:—

1. Hospitals for the use of curable sick and hurt among the poor.

2. Hospitals for the incurable sick and helpless.

3. Establishments for the occasional maintenance and employment of the able-bodied among the poor, viz. of such by whom either the one or the other is unobtainable from the Edition: current; Page: [73] ordinary sources. By their maintenance, population is preserved; by their employment, wealth may be increased or not: crimes of idleness are prevented.

4. Establishments for the prevention or mitigation of contagious diseases—establishments in former times for inoculation, now for vaccination. Much may be done on the part of government under this head, as well as so many others, by instruction: more or less requires to be done, in proportion as by the ignorance of the people, operations of this class are excluded from the class of sponte acta, and thence placed among the agenda.

§ 3.: Non-agenda.

Institutions on the part of government, having for their end in view the causation of an increase of population by births, may best be characterized by a parallel example: institutions punishing men for not eating, or for eating food not sufficiently nourishing; institutions paying all mankind for eating, with premiums for those who eat most and oftenest.

Many volumes have been written upon the subject of population, because the means of promoting its increase have generally been the subject of examination. I shall be very short upon this subject, because I shall confine myself to showing that all these means are useless.

If anything could prevent men from marrying, it would be the trouble which is pretended to be taken to induce them to marry. So much uneasiness upon the part of the legislator can only inspire doubts respecting the happiness of this state. Pleasures are made objects of dread when converted into obligations.

Would you encourage population,—render men happy, and trust to nature. But that you may render men happy, do not govern them too much; do not constrain them even in their domestic arrangements, and above all, in that which can please only under the auspices of liberty: in a word, leave them to live as they like, under the single condition of not injuring one another.

Population is in proportion to the means of subsistence and wants. Montesquieu, Condillac, Sir James Stewart, Adam Smith, the economists, have only one opinion upon this subject.* According to this principle, there is also a means of increasing population, but there is only one: it consists in increasing the national wealth, or, to speak more correctly, in allowing it to increase.

Young women, says Montesquieu, are sufficiently ready to marry. How should they not be? The pleasures, the avowed sentiments of love, are only permitted in this condition: it is thus only that they are emancipated from a double subjection, and that they are placed at the head of a little empire. It is the young men, he adds, who need to be encouraged.

But why? Do the motives which lead men to marry want force? It is only by marriage that a man can obtain the favours of the woman who, in his eyes, is worth all others. It is only by marriage that he can live freely and publicly with an honest and respectable woman, and who will live only for him. There is nothing more delightful than the hope of a family, where proofs of the tenderest affections may be given and received—where power blended with kindness may be exercised—where confidence and security are found—where the consolations of old age may be treasured up—where we may behold ourselves replaced by other selves—where we may say, I shall not entirely die. A man wants an associate, a confidant, a counsellor, a steward, a mistress, a nurse, a companion for all seasons: all these may be found united in a wife. What substitute can be provided?

It is not among the poor that there is any aversion to marriage; that is to say, it is not among the labourers—that class, in the increase of which alone the public is interested—that class which constitutes the strength and creates the wealth of a nation—that class which is the last in the senseless vocabulary of pride, but which the enlightened politician regards as the first.

It is in the country especially that men seek to marry. A bachelor does not there possess the resources he can find in a town. A husbandman, a farmer, require the assistance of a wife, to attend to their concerns at all the hours of the day.

The population of the productive classes is limited only by their real wants; that of the unproductive classes is limited by their conventional wants.

With regard to these, instead of inducing them to marry by invitations, rewards, and menaces, as did Augustus, we ought to be Edition: current; Page: [74] well pleased when they live in celibacy. The increase of the purely consumptive classes is neither an advantage to the state nor to themselves: their welfare is exactly in the inverse ratio of their numbers. If they should insensibly become extinct, as in Holland, where there is scarcely one citizen who does not exercise some occupation, where would be the evil? A workman may in a moment be converted into an idle consumer. A good workman is not so soon made: he needs skill and practice. Habits of industry are slowly acquired, if, indeed, after a certain age they can ever be acquired. On the other hand, when a consumer passes into the class of labourers, it is generally owing to a reverse in fortune, and he is in a state of suffering. When a labourer is transported into the class of consumers, he is exalted in his own eyes and in the eyes of others, and his happiness is increased. On all these accounts, it is desirable that the class of idlers be not increased: their own interest requires it, and it is also a great good when their number is diminished, whether by celibacy or their conversion into labourers.* Convents have been constantly accused of hurting population. Poor convents, and the mendicant orders, injure it, without doubt, since they add to the number of idle consumers. It is not so with rich convents; they add nothing to this number. He who possesses the rent of land can command labour without working himself; but what matters it whether a fund, destined to the support of idlers, be transmitted from father to son, or from stranger to stranger?

Large cities are decried: they are the gulphs, it is said, in which the population of the country is lost. That which is furnished to the towns is visible to all the world: what is received from them, is less apparent. It is the ancient quarrel of the belly and the members. Cultivation increases in proportion to the consumers. People live longer in the country; but that a greater number of persons may be born there, it is necessary that the capital of the towns, which animates labour, should be sent thither.

This imaginary evil, the increase of towns, has excited the most extravagant fears. Absurdity has been carried so far, as to make rules for limiting their bounds: they should rather have been made for extending them. Contagious disorders would thus have been prevented; the air would have been rendered more salubrious. The opposite regulations do not diminish the number of inhabitants, but oblige them to heap themselves up within close habitations, and to build one city upon another.

Are emigrations disadvantageous to a state? Yes, if the emigrants could have found employment at home;—no, if they could not. But it is not natural that labourers should exile themselves, if they could live at home. However, if they desire so to do, ought they to be prevented? Cases must be distinguished. It is possible that this desire may have been produced by some momentary distaste, by some false idea, some whim, which may mislead a multitude of men before they have leisure to undeceive themselves. I will not therefore affirm, that circumstances may not happen in which emigration may not be forbidden by a law of short duration: but to convert this prohibition into a perpetual law, is to change the country into a prison—is to publish, in the name even of the government itself, that it is not good to live there. It Edition: current; Page: [75] would be proper that such a law should commence thus—“We, &c., ignorant of the art of rendering our subjects happy, and well assured that, if we give them an opportunity to escape, they will go in search of countries less oppressed, hereby prohibit,” &c.

Would not this be to aggravate the evil? Could all the frontiers of a great country be guarded? Louis XIV. with all his authority, could he accomplish it? As many persons as were thus enchained, so many discontented and unhappy persons, who would be looked upon with distrust—whom it would be necessary perhaps to repress by violence, and who would become enemies when they found themselves treated as such. Others, who had never thought of quitting their country, would become uneasy when they found themselves obliged to remain; whilst others, who might have thought of establishing themselves there, would take care not to do it. For those individuals retained against their will, you lose those who would have come among you voluntarily.

England has sustained temporary losses of men and capital, by emigrations to America. But what has happened? She has received from that country, a mass of productions which have more than compensated the loss. The men and capitals carried away, employed upon new lands, have produced a benefit more considerable for England itself, than if they had been employed upon her own. To exhibit this clearly, would require a multitude of facts and calculations; but it may be presumed to be the case, from the vast extent of this new commerce.

On the subject of emigration, the wisest part, then, is to do nothing. Under the guidance of liberty, the benefit is certain; under the guidance of constraint, it is uncertain.

After this, the advantages of immigration are easily estimated. In order to people a country as yet untilled, it will be advisable to invite thither strangers who depend upon their labour alone. It may even be advantageous to make them advances for their support, in order to establish them.

In respect to methods of preventing the destruction of the species, they belong to that branch of police which is employed about the means of subsistence and the public health. We may be tranquil, therefore, upon the subject of population. There will be everywhere an abundance of men, provided they are not deprived, by a hard and tyrannical government, of what is necessary for subsistence and enjoyment, of which contentment constitutes a part.*


§ 1.: General Observations.

Under the head of sponte acta, there is nothing except by accident: there remain, therefore, agenda and non-agenda. Finance operates in toto in diminution of wealth: the object or end in view, should be to render the diminution as small as possible, and as pure as possible from collateral vexation and inconvenience in every shape.

The operations of finance are reducible to receipt and disbursement, or say expenditure.

Receipt may be—1. Without condition of return; 2. On condition of return; i. e. on the footing of a loan.

Disbursement is accordingly—1. Disbursement at large; 2. Disbursement in discharge of loans. Expenditure supposes; in all cases, previous receipt; and in cases of loans, necessitates future receipt for the purpose of replacing the money borrowed.

Receipt and expenditure are either—1. Of money; 2. Of particular articles for service.

Every sum expended supposes therefore a correspondent amount already raised, or to be raised, by taxes.

The practical rule which ought to be observed in judging of the expendiency of any branch of expenditure is,—compare the benefit of it with the burthen of a correspondent portion of the produce of the most burthensome tax. By striking off so much expenditure, you may save so much tax.

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Taxes take from present enjoyment: they diminish comfort in proportion as they are paid by each contributor out of that portion of his wealth, which, had it not been for the tax, would all of it have been spent within the year in the way of maintenance, as money is spent by a man who is said to spend his income.

Taxes diminish future wealth in proportion as they take from capital; viz. by being taken from that portion of a man’s money, the whole of which, had it not been for the tax, would have been spent on articles by the production of which real capital is increased; or even by being taken from that portion of his money which is expended in the way of maintenance, in so far as the money, had it not been taken from him by the taxes, would have been employed in the shape of pecuniary capital, by which real capital is increased.

Taxes, therefore, take from growing wealth—1. In as far as they are levied on capital; viz. on money destined for employment in the shape of capital, or on goods or labour, of which real capital is composed;—2. In as far as they are levied on income, or expenditure in the way of income, of men who lay up money to be employed as capital, or would have laid it up, had it not been for the tax.

Borrowing money to defray war expenses, takes from pecuniary capital, thence from growing wealth, in the amount of the sum so raised—minus the amount of mercantile profit upon such part of the expense as consists of purchased articles.

Repaying money formerly borrowed for war or other expenses, adds to pecuniary capital—thence to real capital—thence to growing wealth, to the amount of the money so employed in such repayment or discharge; deducting such part, if any, as is exported without return to foreign countries; which is the case with such part as is exported by the proprietor, to be employed abroad by him or on his account without being reimported,—that or the profit made by it.

By the mere discharge of a million worth of debt, as much, or more, is therefore done towards the increase of wealth, as by a million given in the way of bounties for the encouragement of this or that particular branch of trade.

Those who in the one case receive the amount of the debts respectively due to them, give up the future interest, and the rest of the community is exonerated from the payment of it: those who in the other case receive the million on the score of bounty, give up nothing in return for it.

When money is to be borrowed, borrowing it, in part at least of foreigners, is attended with two advantages. At the time of borrowing, it diminishes the consumption of home capital, the consequent check to production, and the loss to private borrowers as well as to government by the sudden rise in the rate of interest. At the time of paying off, it diminishes the loss produced to moneyed men at home, by the sudden pouring in of capital into the market (money which must be laid out in the shape of capital,) and by the sudden fall in the rate of interest which is the consequence. By moneyed men, understand here—not the opulent only, but all, to the very poorest, whose incomes arise out of the interest of money, and that interest reducible.

Some men grieve on this occasion, at the thoughts of the money that goes out of the nation to pay foreigners. A housekeeper might as well grieve at the thoughts of the money that goes out of the house to pay the baker. If to-day the money goes out of the house, it is because the other day the bread came into it. Do without bread, or bilk the baker, the money will be saved.

Taxes are either on property, or on presumption of property. In both cases, they are either on income or on capital.

Taxes on property in the shape of income, are either direct, or on consumption,—called of late years, from the French, indirect taxes.

Taxes on capital diminish present capital, and thence future and growing wealth, by the whole of their amount: taxes on income by the amount of the savings that would have been made out of income, and added to capital, instead of being spent in maintenance, had it not been for the tax.

The fault of direct taxes on presumption of property is inequality—that of direct taxes on property is vexation. Indirect taxes have no fault beyond the mere privation, which must be undergone at any rate: the vexation which in the case of direct taxes on property extends to everybody, is confined in the case of indirect taxes to the fabricators and venders of the article taxed, who make themselves amends for it in the price.

§ 2.: Of direct and indirect Taxation.

When a tax is imposed upon any commodity, a proportionable discouragement—intended or not intended—is applied to the corresponding branch of profit-seeking-industry, and thence a proportionable encouragement to the most immediately rival branches. In this way the branch of political economy which belongs to finance is unavoidably, though often perhaps undesignedly, entangled in practice and effect with the other branches.

To an indirect tax, each man pays no more than he pleases;* and the vexation attendant Edition: current; Page: [77] on the collection of it is confined to the makers and venders of the commodity taxed.

To a direct tax, each man pays what the imposer of the tax pleases; and the vexation attendant upon its collection embraces every man who pays it.

Indirect taxation, as far as it will go, is therefore preferable to direct; but the length to which it can be made to go depends, in the instance of each nation, upon its degree of relative opulence.

Of France, England, and Holland, in the scale of absolute wealth, France is at the top, Holland at the bottom. In the scale of relative opulence, France is at the bottom, Holland at the top.*

Comparatively speaking, England, till of late, made little use of direct taxes: France, little use of any other. Her abstinence from indirect taxes has been chiefly the result of necessity, though in some degree of choice.

A tax on imports is borne by our own people—a tax upon exports to foreign countries, is borne by the inhabitants of foreign countries. Whatever imposition of this kind foreigners can be made to bear, is so much gain to us. If, indeed, when a fresh tax is imposed upon an article of export, the quantity of it produced is considerably diminished by the tax, a temporary distress is thereby produced; and the suffering may be less or greater than the suffering saved by the saving in the amount of taxes borne by ourselves. But if the quantity produced be merely prevented from increasing, no such suffering is produced, and the benefit by the saving in home-paid taxes is pure. The addition which, had it not been for the tax, would have been made to the quantity of the commodity thus taxed, spreads itself among other commodities of all sorts.

The direct effect of the sort of tax called indirect, is to make a man pay for the use of the article taxed, and go on using it as before:—an indirect effect is—to make him cease to use it, to avoid the paying of the tax. This indirect effect is the same as that of a prohibitive law,—prohibiting the use of the article,—viz. under a penalty equal to the amount of the tax. So far as the one effect takes place, the other does not. Commonly they take place together, in proportions infinitely diversifiable.

In the way of prohibition, a tax seldom falls on the article taxed, so exclusively as might be supposed. The prohibition falls—not merely upon the article taxed, but upon whatever article each man can best spare. When a fresh tax is imposed upon wine, a man who, having been used to buy wine and books, is fonder of wine than of books, reduces the quantity, not so much of his wine, as of his books. By a tax upon gin, many a man, instead of being sobered, has been starved.

The best sort of indirect tax is that which, by its effect in the character of a prohibition, diminishes the consumption of an article the use of which is pregnant with future misery,—the dregs of the cup of present pleasure. Such, above all, are the pabula of drunkenness. The fiscal, is in this case crowned by a moral use.

The worst sort of indirect tax is that which, in the character of a prohibition, lessens the use of an article to which a man’s attachment is apt not to be so great as it were to be wished it were, considering what is the produce of it in the shape of permanent good, over and above the evanescent pleasure. The fiscal use is in this case clogged with an antimoral tendency. Books, especially of the instructive kind, music, instruments of pastime of all sorts, not to speak of public entertainments—everything—morality is served by everything of this nature that calls a man off from drunkenness.

The mischief done in the way of prohibition by that species of direct tax which is imposed upon produce, is frequently but too real, but is apt to be exaggerated. Though my profit would be greater if I had nobody to share it with me, my having somebody to share it with me, does not make me deny myself all profit. Few men are so spiteful as to hate others more than they love themselves:—especially, the government, which is nobody, quarrels with nobody, and protects everybody. A man without a partner has the whole profit to himself;—yet many men submit to saddle themselves with partners. The government which imposes proportional taxes on produce, is a partner who furnishes protection, though nothing else.

I have elsewhere spoken of the best of all financial resources, and the worst. The best Edition: current; Page: [78] (supposing public opinion to admit of it,) as well as the most copious, seems to be that which gives to the public a share in property become vacant by death, on failure of near relations. The formation of counter-expectations being prevented by pre-established law, receipts from this source need not be attended with that vexatious sense of privation which is the inseparable accompaniment of a tax.

The worst is that tax called direct or indirect, which, as often as it acts as a prohibition, deprives a man of everything, by depriving him of justice—the tax, I mean, upon law proceedings, by which the poor, that is, the bulk of the community—especially the oppressed and afflicted part of it—are put out of the protection of the law.

Abstractedly considered, the tax upon medicine might be stated as still worse:—the prohibition in this case bearing more immediately and exclusively, as well as extensively, upon health and life. But the tax is not apt to be so heavy upon medicine as upon justice. There are, moreover, hospitals and dispensaries for the relief of the poor who want medicine; but there are none for the relief of poor and helpless suitors who want justice.

Indirect and direct taxation are limited by the patience of the people. The ne plus ultra is variable and unascertainable, depending upon events and the temper of the times. Not knowing how soon it may arrive, governments are anxious to pay off debt—because, in proportion as debt is paid off, taxes, by which the interest is paid, may be taken off; and being taken off, may in case of need be laid on again. A tried tax will always be a more secure dependence than an untried one.

In the case of indirect taxes, a common notion considers the ratio of the tax to the price of the article as limited to a maximum;—limited, viz. by the effect of smuggling. If the ratio be increased, it is supposed that more will be lost by the quantity that escapes the tax, than will be gained by the addition to the amount of the tax on the quantity that pays it. This notion, supposing it just, as applied to the aggregate of taxable articles, will be apt to be illusive, as applied to this or that sort of article, considered by itself. In respect of difficulty of evasion and facility of collection, the scale of variation is stretched to a great latitude by the bulkiness of the article, by the local circumstances of the place at which the tax is collected, and by a variety of circumstances. But other causes of variation, and these very powerful ones, are,—the organization of that part of the financial system which concerns the mode of collection;—and thence the vigilance or remissness—the sufficiency or insufficiency in number, and the probity or improbity of the functionaries employed;—the good or bad contrivance of the taxation laws, in respect of the obligations imposed on the contributors for the prevention of evasion; the amplitude or scantiness, the good or bad choice made,—of the powers given to the collectors for the prevention of evasion;—and the apposite or inapposite construction of the system of judicial procedure on this subject, including the rules of evidence.

The limits thus set to indirect taxation, are set—not by the nature of things, but by the imperfection of the laws. It is to this imperfection that men are indebted for the inequality and vexation attendant on direct taxes, in comparison with indirect ones.

§ 3.: Taxes—Effects on Production.

Taxes ought to have no other end than the production of revenue, with as light a burthen as possible.* When it is attempted to employ them as indirect means of encouragement or discouragement for any particular species of industry, government, as we have already seen, only succeeds in deranging the natural course of trade, and in giving it a less advantageous direction.

The effects of particular taxes may appear very complicated and difficult to trace. By considering the subject in a general point of view, and distinguishing the permanent from the temporary effects of taxes, this complexity will be disentangled, and the difficulty disappear.

First question: What are the effects of a tax imposed by a foreign nation upon the articles of our manufacture?

Permanent consequences:—1. If the exportation be not diminished, the tax makes no difference with respect to us: it is only paid by the consumers in the state which imposes the tax.

2. If the exportation be diminished, the capital which was employed in this branch of manufacture withdraws itself and passes into others.

Temporary consequences:—This diminution of exportation occasions a proportional distress among the individuals interested in this species of industry. The workmen lose their occupations; they are obliged to undertake labours to which they are unaccustomed, and which yield them less. As to the master manufacturer, a part of his fixed capital is rendered useless; he loses his profits in proportion as the manufacture is reduced.

Second question: What are the effects of a tax imposed by ourselves, upon the manufactures we ourselves consume?

Permanent consequences:—1. If the consumption Edition: current; Page: [79] be not diminished, no other difference is produced than the disadvantage of the tax to the consumer, and a proportional advantage for the public.

2. If the consumption be diminished, individuals are deprived of that portion of happiness which consisted in the use of this particular article of enjoyment.

3. Capital, in this as in the preceding case, retires from this branch, and passes into others.

Temporary consequences:—If the consumption be not diminished, the tax makes no difference: if it be diminished, similar distress, in proportion, as in the case above.

Third question: What are the consequences of a tax imposed by ourselves, upon the manufactures of our own country consumed by foreigners?

Permanent consequences:—1. Whilst the consumption is not diminished, the operation produces so much clear gain for us. The burthen of the tax is borne by the foreigner, and the profit is reaped by ourselves.

If the consumption be diminished, the capital which loses this employment passes into others.

Temporary consequences:—Consumption not diminished, no difference to us: consumption diminished, similar distress in proportion, as in the former cases.

It results from hence, that the permanent effects of these taxes are always of little importance as to commerce in general; and that their temporary effects are evil in proportion to the diminution of the consumption. The evil is greater or less, according as it is more or less easy to transfer capital and labour from one branch of industry to another.

The least hurtful of these taxes are those which bear upon our own productions consumed by foreigners. If the same quantity be exported after the tax as before, so far from being prejudicial, it yields us a clear benefit: it is a tribute levied upon them precisely as if it were raised out of the bowels of the earth.

The tax imposed by us upon foreign importations is paid by ourselves, and burthensome as any other tax would be to the same amount. If the consumption be not diminished, it would be better that the tax upon this article should be imposed by us, that we might profit by it, rather than by the country which produced it, and which would then enjoy the benefit.

A nation which has a natural monopoly of an article necessary to foreigners, has a natural means of taxing them for its own profit. Let us take tin for an example: England is the only country which has mines of this metal—at least, all others are too inconsiderable to satisfy the demand. England might therefore lay a considerable tax upon the exportation of tin, without danger of smuggling, because it might be levied at the mine, or at the foundry. France could not impose an equal tax, because it would give too great an allurement to the smugglers.

These principles are easy of application to commercial treaties. Everything which is permanent, whether it be called encouragement or discouragement, has but little effect upon trade and commerce in general; since trade and commerce are always governed by the capital which can be employed on them. But international precautions may be taken for the prevention of rapid changes, from which temporary distresses result. Let every nation make a sacrifice by refusing to impose taxes, or to augment them, upon articles of its own exportation: every nation would then receive indemnification by a reciprocal sacrifice. Commerce would thus acquire stability; and that petty fiscal warfare would no longer be carried on, which produces a dangerous irritation among the people, always greatly disproportioned to the importance of the object.

The object of the first chapter of the commercial code ought to be to show the reciprocity of international interests, to prove that there is no impropriety, during the continuance of peace, in favouring the opulence of foreigners—no merit in opposing it.

It may happen to be a misfortune that our neighbour is rich: it is certainly one that he be poor. If he be rich, we may have reason to fear him; if he be poor, he has little or nothing to sell to, or to buy of, us.

But that he should become an object of dread by reason of an increase in riches, it is necessary that this prosperity should be his alone. He will have no advantage, if our wealth has made the same progress as his own, or if this progress has taken place in other nations equally well disposed with ourselves to repress him.

Jealousies against rich nations are only founded upon mistakes and misunderstandings: it is with these nations that the most profitable commerce is carried on; it is from these that the returns are the most abundant, the most rapid, and the most certain.

Great capitals produce the greatest division of labour, the most perfect machines, the most active competition among the merchants, the most extended credits, and consequently the lowest prices. Each nation, in receiving from the richest everything which it furnishes, at the lowest rate and of the best quality, would be able to devote its capital exclusively to the most advantageous branches of industry.

Wherefore do governments give so marked a preference to export trade?

1. It is this branch which exhibits itself with the greatest show and eclat: it is this which is most under the eyes of the governors, Edition: current; Page: [80] and which therefore most strongly excites their attention.

2. This commerce more particularly appears to them as their work: they imagine they are creators; and inaction appears to them a species of impotence.

All these pretensions fall before the principle, that production is subordinate to capital. These new branches of trade, these remote establishments, these costly encouragements, produce no new creations; it is only a new employment of a part of one and the same capital which was not idle before. It is a new service, which is performed at the expense of the old. The sap which by this operation is strained through a new branch being diverted from another, gives a different product, but not an increase of produce.


The establishment of an effective and undivertible sinking fund, has been productive of effects in respect of increase of wealth, such as (to judge from any indications I have met with) had not presented themselves to those by whom the plan was adopted, or by any of those by whom it had been proposed.

Money borrowed for and applied to war expenses, is so much taken from productive capital and growing wealth. Money employed in discharge of such debt (whether by paying it off at par, or by buying it in, at an under price,) is so much given to productive capital and growing wealth.

If in a season of reimbursement, viz. peace, the space of time employed in the discharge of the debt were no longer than the space of time employed in the contracting of it, and the money employed in the reimbursement were no greater than the money borrowed, the quantity added to wealth would be equal to the quantity taken from it, bating only the loss of the interest at compound interest upon the several years’ instalments during the expenditure of it: as, if ten millions were borrowed every year for four years of war, and ten millions were paid off every year for the four succeeding years, being years of peace, there would be forty millions taken from wealth, forty millions added to wealth: but to put the nation into the same plight in respect of wealth, as if there had been no money raised for the war, it would require the interest of the first years’ ten millions for the four years, plus that of the second for the three years, plus that of the third for the two years, plus that of the fourth for one year, supposing the whole debt to be paid off at once on the first day of the year of peace; and as by the supposition it would be paid off not so, but by instalments as above, this would require a further addition on the score of the correspondent retardations.

On this supposition, it is evident that a nation could never be put by reimbursement in a plight exactly as good as what it would have been in had there been no borrowing for unproductive purposes.

But, in point of fact, a circumstance attending the borrowing system is, that the money paid and given to productive capital at the period of reimbursement, is upon the whole considerably greater than the money borrowed and spent, and taken from productive capital at the period of expenditure. When money is borrowed in three per cents. at six per cent., that is, when for every £100 borrowed of the individual, government gives him a nominal capital of £200 stock, each £100 carrying an annuity of three per cent., to discharge this annuity of £6 in the way of paying off (buying in under par being supposed out of the question,) £200 must at the time of reimbursement be put into his hands.

In the course of the late wars, greater interest than this has actually been given by the British government. If, then, the circumstance of time were laid out of the account, the consequence would be, that in so far as mere wealth were concerned, a nation with a fixed sinking fund might be—and, in a word, that Britain would be, a gainer by a war to a very considerable degree. If, for example, in the first year of a war, ten millions were borrowed on these terms, and on the first day of the second year, being a year of peace, the money borrowed were repaid at par, for which, on the above terms, twenty millions would be necessary, the gain to wealth would be ten millions, minus a year’s interest upon ten millions.

The above supposition is given only for illustration; for, as everybody knows, neither is money on the first year of a war borrowed on terms of such disadvantage, nor is it so soon repaid.

It may, however, serve to show thus much, viz. that the more disadvantageous the terms are on which money is borrowed, the greater is the restitution made to wealth.

This would not, in my view of the matter, be any recommendation of war, or borrowing for that or other purposes upon disadvantageous terms; because comfort, including security, is the immediate and only direct object in any estimate with me—and wealth only in so far as it contributes to comfort, which, without due provision made for security, it cannot do.

But in a view of the matter, which to me appears much more common than my own, this consideration should be a very important one, and should go a great way towards reconciling men to war and bad bargains.

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The answer to it is, that if it be wealth—future wealth, you want, and you are willing to pay the price for it in present comfort, you have no reason to seek for it through any such disadvantageous measure as that of war: raise the money, and instead of spending it in war, spend it in any other way,—you will have still more wealth.

If this be just, it will enable us the more clearly to appreciate two opinions which have been advanced on the subject of national debts.

One is, that a national debt is, to the whole amount of it, or at any rate to a certain part of it, not a defalcation, but an addition to the mass of wealth.

The other is, that admitting the debt to be a defalcation from the mass of national wealth, yet the discharge of it would be, not an addition to that mass, but a defalcation from it.

Both these opinions have had their partisans; for in the whole field of national economy, there is not a proposition, how clear soever, the contrary of which has not had its partisans.

As to the first opinion, one way in which it is maintained is, by looking exclusively to one side of the account—by looking at the income coming in to the annuitants, and not looking at the income going out of the hands of those by whose contributions the money for the payment of these annuities is supplied.

Another way is, by imagining the existence of a capital equal to the capital borrowed and received by government in exchange for the annuities granted—borrowed, and spent as fast as it is borrowed, not to say faster still. This being a new capital created, goes, according to the reckoning of these politicians, in addition to whatever may have been the amount of the old one.

This notion appears to have had for its ground and efficient cause, the language used by the man of finance and the man of law, in describing transactions of this nature. Can a thing have been created, and yet never have existed? Fiction is the parent of confusion and error in all its shapes. False conception generates false language: false language fixes false conceptions, and renders them prolific and immortal. Such as opinions have been, such is language: such as language is, will opinions be.

Would not the nation be the poorer, if a sponge were passed over the national debt? Would not there be so much property destroyed? Not an atom more than would be produced at the same instant. Would not the nation be less wealthy? No: not, at least at the instant of the change. Would it be less happy? Yes: wretched in the extreme. Soon after, would it be less wealthy? Yes: to a frightful degree, by reason of the shock given to security in respect to property, and the confusion that would ensue. Thirty millions a-year that used to be received by annuitants, no longer received—thirty millions a-year that used to be paid in taxes by all classes, and all individuals together, for the payment of those annuitants, no longer paid. National wealth would no more be diminished by the sponge, than it is when a handkerchief is transferred from the pocket of a passenger to the pocket of a thief. Sum for sum, however, the enjoyment produced by gain is not equal to the suffering produced by loss. In this difference, traced through all its consequences, lies the mischief, and the sole mischief, of bankruptcy or of theft.

Annuities paid by government are paid with a degree of regularity (not to speak of certainty) which would in vain be looked for to any extent in annuities paid out of particular funds by individual hands. In the loss of this species and degree of convenience, consists the whole of the loss that would be incurred by the complete discharge of the national debt. This convenience is certainly worth something in the scale of wealth; but it can scarcely be considered as any real tangible addition to the mass of those tangible things, of the mass of which the matter of wealth is composed. There is also inconvenience attending the payment of taxes—(those taxes by the produce of which the matter of these annuities is supplied)—an inconvenience superadded to that which consists merely in the privation attendant on the parting with the money paid in taxes.

On this convenience attending the receipt of the annuity, is grounded another convenience in respect of the facility attending the purchase and the sale of it—attending the process of converting capital into income, and reconverting income into capital, when capital happens again to be the thing wanted.

As to the ground of the other opinion—it appears to be, that if the money taken in taxes, to be applied in discharge of the debt, had not been so taken, but had been left in the pockets of those to whom it belonged, it would have been spent by them, each in his own way, and by that expenditure an addition would have been made to the mass of national wealth—but not so if applied in discharge of debt. But the fact is, that whatever is so applied is given, received, and employed;—the whole of it in the shape of capital;—whereas, had it been left with the parties by whom it is paid in taxes, it would have been employed, more or less of it, as income is employed, when it is said to be spent, without return or hope of return. What the proportion may amount to between the part spent as income, and the part employed as capital, and thereby employed in making a growing Edition: current; Page: [82] addition to the mass of national wealth, will be considered presently. For the present, it is something, not to say sufficient, that in the one case it is only a part that is employed in making an addition to the mass of wealth, and in the other case the whole.

The support given to this opinion is given in two ways. One is, by thinking nothing of what becomes of the money taken in taxes, and made over to the annuitants in discharge pro tanto of the national debt, but considering it as annihilated or thrown away.

The other is, by considering the labour paid for by the money when spent by the proprietor, instead of being taken from him in taxes, as being employed, all of it, in the shape of pecuniary capital, in making a correspondent addition to real capital—just as would have really been the case with the labour paid for by that money, had it been been made over to annuitants in discharge of so much debt.

That a part of it would really have been so employed, does not admit of doubt:—the error consists in considering what is true only of this part, as if it were true of the whole. Let us observe the difference between this part and the whole.

Admitting an increase of wealth, and that a gradual and regular one, the productive capital of the country, taken together with the growing mass of consumed and reproduced wealth continually produced by it, must be considered as increasing at compound interest. The rate of interest can scarcely be taken as so high as 2 per cent.; for at 2 per cent. compound upon the capital, whatever it may amount to in any year, the quantity of it would be rather more than doubled in thirty-five and a half years. The most sanguine estimator will not, I imagine, regard the increase of national wealth to have been, even for the last thirty-five years, increasing at nearly so rapid a rate. If the quantity and value of productive capital have gone on increasing at this rate, the quantity of growing income must have gone on increasing at the same rate; since it is only from the income of that or the preceding year, that the addition made to the capital of any year can be made. If the quantity of growing income have gone on increasing at this rate, the mass of population must have gone on increasing at the same rate, save and except in so far as an increase has taken place in the degree of relative opulence, i. e. so far as an average individual of the posterior period has been richer than an average individual at an anterior period—so far as wealth has gone on increasing faster than population. That wealth has gone on increasing faster than population, is what I should expect to find to be the case; but that the increase should be anything like as much as double, i. e. half as much again, seems too much to believe. The half, or thereabouts, of the aggregate wealth, will be that which is shared among individuals of the poorest class:—and in the case of that class, the wealth of an average individual appears, within the period in question, to have rather diminished than increased.

I take therefore two per cent. for the rate of accumulation—not as the true rate, but for a rate which, though considerably too high, is near enough to the true rate to answer the purpose of illustration. Taking, then, 20 per cent. as the gross ratio of the real income produced by that real capital, to the real capital by the employment of which it is produced,—this two per cent. would constitute one-tenth part of the gross income:—and the part out of income added to capital every year is one-tenth part of the whole mass, of which the other nine parts are partly consumed for maintenance, partly employed in keeping up the real capital in statu quo: that is, in a condition to give birth to the same quantity of real income in each subsequent as in each preceding year.

The whole income, then, of an average individual, may for this purpose be considered as divided into ten parts:—of which nine parts go for present maintenance, added to the expense of providing for reproduction without decrease or increase, and the other tenth to positive increase.

This being the case with the whole income of the average individual, the same division in idea may be made of any part of that income; and, for instance, of that part which he is made to pay in taxes: if he had had none of it to pay in taxes, one-tenth is the part which would have been employed by him in making a net addition to the capital, and thence to the growing wealth of the country, as above.

On this supposition, the addition made to wealth by a million taken from national income by taxes, and employed in the discharge of the national debt, is to the addition that would be made to it by the same million if left in the pockets of those to whom it comes in the shape of income, and left to be employed by them, each in his own way, as ten to one. I say, for illustration, as ten to one; but twenty to one is the proportion I should expect to find come nearest to the truth.


Noscenda:* by this term I understand those matters of fact, forming the subject of the Edition: current; Page: [83] science, termed statistics;—including data* and danda, between which the field of noscenda is divided, in portions which of course would be found different as yet in each community, and in each portion of time.

Statistical matter being food for curiosity, many derive amusement from the perusal of it—some, consequently, a profit from the furnishing of it. On this account, so far as depends upon inclination, the operation of furnishing it belongs constantly, and, so far as depends upon knowledge and power, occasionally, to the head of sponte acta:—agendum, therefore, on the part of government, the completion of the requisite stock of knowledge and power, by furnishing the data to individuals, or even collecting them itself, whensoever that operation can be performed without preponderant vexation and expense. In every walk of life, public and private,—public more especially,—publicity—publicity—is the best guardian of virtue.

The collection and publication of statistical facts being attended with expense, no institution should be set on foot for the furnishing any such articles, without a previous indication of the benefit derivable from such knowledge, and a conviction that it will pay for the expense. The expense necessary for one purpose, may however be sufficient for the accomplishment of many purposes.

The following are among the subjects on which the aid of government appears desirable in collecting the facts:—

I. Forensic steps, documents and costs, i. e. the steps taken—the documents exhibited, in each cause, with the expenses regularly attendant upon each.

Uses to the administrator, the judge:—1. Showing the ground afforded for each successive step and document by the several preceding ones; 2. Costs to be stated,—that in each instance, so far as justice requires, and ability extends, the burthen may be thrown upon the party in the wrong.

Uses to the legislator:—1. By the operation of publicity, check upon injustice, as well collateral as direct, on the part of the judge;—2. In the way of instruction,—view of the price paid for direct justice, in the shape of collateral, and in some degree unavoidable injustice; viz. in the triple shape of vexation pecuniary expense, and delay,—paid in each case individually, and thence in each class of causes collectively,—the causes being for this purpose divided into classes;—3. Ultimate use to the legislator—and the public, reducing continually, and finally keeping to its minimum, by successive improvements, the quantity of injustice in both shapes, collateral as well as direct.

The expense of registration will be amply paid for, by the first of the uses to the legislator, added to the two uses to the judge. The expense of publication might be much reduced, as well as the utility in the way of instruction increased, by throwing the matter into a tabular form, abridged in bulk, and digested under heads.

II. Births, marriages, and deaths.

Use to the judge:—Use of the several documents in the character of evidences constituting the basis of the most important, because most extensive, class of rights and obligations—rights of property derived from succession—rights and obligations of various sorts derived from condition in life.

Use to the legislator:—Indications of the state of population,—increasing, stationary, or declining;—thence, in case of check or decline, general or local, indication of the extent of the causes and the remedies; indications of the amount of profit and loss by war,—loss real in every case—net profit, seldom more than ideal (wealth taken into the account,) from the most successful war.

In every line of management, private or public, a necessary guardian to good economy is good book-keeping.

Mode of publication abridged, digested, and tabular, as above.

To the ecclesiastical function, wherever established, the business of registering and transmitting noscenda of this class (not to speak of others) seems a natural appendage. How can the shepherd feed his flock, if he know them not?—how know them, if he cannot number them?

III. Contracts of all sorts; viz. such as by their importance are worth registering. Mode of registration, in some cases, transcription;—in others, abbreviation—in others, simple mention of existence.

Use to the administrator, the judge:—Uses of these documents in the character of evidences, as above.

Uses to another sort of administrator—the collector of the revenue—in the case where documents of this sort have been taken for the subject of taxation:—1. Check to Edition: current; Page: [84] fraud on the part of the intended contributor; 2. Check to pecculation and negligence on the part of the sub-collectors.

Uses to individuals at large:—1. Prevention of fraud by forgery—whether in the way of fabrication or alteration; 2. In the case of contracts of conveyance, viz. of specific articles of immoveable property inter vivos, prevention of fraud, viz. of fraud commissible by the repeated sale of the same article to different purchasers.

Uses to the legislator:—Various, according to the nature of the contract. Examples:—1. For the purpose of finance, see above, uses to the collector of the revenue;—2. In the case of contracts circulating as money, and constituting a species of paper money,—view of the quantity of it, in comparison with the quantity of metallic money; thence of its influence on the aggregate prices of goods, and on public, or say rather general, credit; i. e. view of the actual depreciation of money, and the danger of general bankruptcy;—3. View of the state of the nation in respect of improvement—progressive, stationary, or declining—in the several lines of action which constitute the subject of the several classes of contracts, and the number of contracts of each sort entered into within a given period of time, compared with the several preceding periods of the same length.

Mode of publication,—abridged, digested, and tabular, as above. In the case of such contracts as are considered as proper to be kept secret, the publication may extend to all points but the particular ones in respect of which the secrecy is required; and aggregate quantities may be given at any rate.

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Leave us alone.


(originally printed in 1821.)

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Correct views of the changes which it is desirable to introduce into our present plan of commercial policy, do not appear to the writer to have been in all respects well condensed, or satisfactorily developed; and he was not a little gratified, when the ill-judged decree of the Spanish Cortes, dated in July last, induced his venerable friend Mr. Bentham, whose profound and discerning mind had been for some time directed to the interesting events of the Peninsula, to record his opinions of that baneful anti-commercial system which has too long blinded the eyes and contracted the habits and feelings of so large a portion of society.

It will not be the least, though it has been one of the latest, practical lessons which has been taught us,—and taught us, too, by that best of instructors, suffering experience,—that no system of commercial policy can be ultimately beneficial, which is reared upon the selfish principle alone. To sacrifice the interests of the dependent many to the ambition or the avarice of the privileged few—to build a theory of successful scheming on the mere usurpations of fraud or violence—to make the pursuits and the profits of commerce depend on the intolerant dictation of military or of naval power, without any reference to the wants or wishes or interests of those concerned,—would seem, if now for the first time projected, as idle in the conception, as impracticable in the execution. Yet such a system has been but too long in vogue. Flattering to our but too prevalent feeling of national pride, this system (in defiance of the benign counsel of the moralist) has made us deem it excellent, because we have the strength of a giant, “to use it like a giant.” Almost necessary, perhaps, to a constantly drained treasury, it has ever refused to sacrifice a penny in possession to obtain a pound in reversion. It has retained the salt-duties, by which millions are lost, because through them thousands are gained;* it has, for the miserable produce of a tax on wool (miserable even in calculation, and how much more so in the result!) driven us from some of the most important sources of commercial profit, and abandoned large classes of industrious hands to hopelessness and the poor-laws. We have too long and lamentably been pursuing our path of error. Retract, return we must, sooner or later; and to-morrow we shall retract with a worse grace, and with a greater bulk of suffering, than to-day.

Spain is a country which possesses immense mines of agricultural wealth, and offers in consequence the strongest motives for the direction of her capital to agricultural improvement; since it might be so employed in the perfect security of a profitable and a prompt return: while, on the other hand, this new commercial system will as certainly prove calamitous as a better system might be beneficial. To Spain, it must be confessed, having little of that fictitious influence which has too often succeeded in compelling nations to unwarrantable self-sacrifices, that system will be more fatal than it has been to England. But the system is radically bad: it is bad everywhere. It is a poison that may act differently upon different subjects: its progress may be concealed, may be delayed; it is poison still,—and it is deadly.

The writer had originally intended the reorganization of the following pages, by keeping the case of Spain entirely out of view: but he found every attempt to increase, by any arrangement of his own, the effect he seeks to produce, frustrated by the constantly recurring conviction, that that effect would be most assuredly produced by allowing the Spanish decree still to occupy a prominent place. That decree is a fair specimen of the anti-commercial spirit. It does not go quite so far as some of our sweeping prohibitions—prohibitions made in all the wantonness of uncalculating arrogance: but it goes far enough for our arguments; and for anything beyond it, fewer arguments would of course suffice.

The writer cannot, however, in this place forbear expressing his astonishment at the reproaches and indignation with which, he is given to understand, the decree of the Cortes, which prohibits so many British manufactures, has been received in different parts of this country. Spain will punish herself—is punishing herself but too severely—by her erroneous policy; and interested as is the writer in the well-being of that country—the witness as he has been of so much of her suffering, and so much of her glory—bound by strong ties of personal affection to many of the illustrious actors in the late momentous and exhilarating changes,—he feels, and powerfully feels, disappointment and regret that her legislators should have committed an error so fatal: but he may be allowed to ask, on what plea of honesty or consistency can England object, who so inexorably shuts her ports to the manufactured produce of foreign hands? aye, even of those of her own subjects—of Edition: current; Page: [87] her own colonies! Is it for us, forsooth, to complain that high duties or severe interdictions prohibit the circulation of our fabrics, while the cheap linens of Russia, the fine ones of Germany, the cambrics of France, the carpets of Turkey, the cottons of India, and the silks of China, implore an admission to our markets, with all the claims of superior cheapness and superior excellence, and are met with a stern unyielding No?* We imagine—complacent souls!—that other countries will give a welcome to the works of our looms, because we offer them so honest an equivalent—the prohibition of everything produced by theirs. Their wool and their fruit, their oil and wine, their drugs and dyewoods, we will receive from them in our abundant generosity, as we are not able to produce them. But what right have we to complain, if they copy the example we have given them, and sullenly turn our manufactures away? They show how they value, and how well they can apply, the good lessons we have given them. We would persuade them, perhaps, that it is for their interest to take our goods: they are cheaper, better—nothing more reasonable. But, in common justice, if they have a word to say to us on that score in favour of their own, let us, pray let us listen to them. Shall our answer be—No, never?

It would tend greatly to facilitate the fair consideration of this most important question, if, in reckoning up the sources of national wealth, we were more accustomed to generalize, and less prone to draw a broad line of demarcation between commercial and agricultural interest. The prosperity of a nation is to be judged of from its aggregate productions; and in our general relations, if the commercial and the agricultural representatives of wealth be as two to two, and if by any changes they should fluctuate in the proportions of three and one on either side, the sum total of benefit remains the same. Such great fluctuations are no doubt calamitous in their progress, and can only take place where an excessive momentum is given by the application or removal of restrictive or impelling measures, from that ever-eager disposition to patch up temporary evils by permanent legislatorial enactments: but the habit of looking at different sources of riches and strength with an exclusive and narrow vision, has impelled men to the most fatal conclusions, and led in a thousand instances to the most mischievous of all attempts; to apply apparent remedies to the necessities of separate interests, without any reference to their connexion with or proportion to the common, the universal interest.

Satisfactory it is, however, to observe the rapid progress which sound notions of commercial policy have made in the world; and it is peculiarly satisfactory to notice their prevalence in those high quarters from whence (if at all) relief must ultimately come. The generally correct views which have been developed in the recorded opinions of the President of the Board of Trade; the acknowledgment from the lips of Ministers, that many and grievous evils have resulted from the present system; the reports of the Select Committee of the House of Commons; the representations of the merchants of the metropolis, which have been re-echoed by the intelligent merchants of the outports, and which have found a concordant voice even on the other side of the Atlantic; everything gives room to hope that most important changes must soon and certainly be introduced.

It has generally been the fate of those who have pointed out the errors, defects, and dangers, of any long-established institutions, to be met with the taunting defiance—“Give us something better;” and though there has been generally more art than honesty in such an evasion, it has too often produced the intended effect, by turning men away from the honest effort at melioration which would be necessarily called into action by a conviction of the mistakes of the existing system. On this question, however, that which nations have most earnestly to entreat from governments is, that the latter would cease to honour them with any officious interference: “Their tender mercies,” however well intended, “are cruel.” The best boon they can give is to let the stream of commerce flow as it will: its tide is strong enough to bear away all impediments; and governments are but too much the victims of self-deception, when they imagine that their decrees of prohibition or of encouragement do really produce the effects they contemplate. Those decrees are erected against and opposed to the natural tendency of things, and are in the end as absurd and as ineffective as it would be to direct the winds by an order in council, or to manage the tides by act of parliament. The evils of such interference are produced, uncontroulably produced,—they attach necessarily and invariably to it; but the good intended is not of such a character that it can be condensed into a cornucopia, whose tangible riches are to be distributed or withheld at the caprice of those who fancy themselves privileged to grant or to deny them.

In making these observations, let it not be imagined that the writer deems it practicable or desirable, by any one measure, violently and suddenly to shake and overthrow the now established commercial fabric. He would have the great principle of the freedom of Edition: current; Page: [88] commerce recognised by some public act, and by degrees, but as soon as may be, everything brought into that great principle. In many branches of commerce, the transit would be easy: with these we might begin, and step by step trace back the mistaken road.

And finally, let it not be forgotten, as a motive for reverting to a better system, that England no longer possesses the physical power of enforcing submission to her desires, when those decrees are friendly to nations whose local circumstances formerly made them so much dependent on the protection or forbearance of our government. Our ships cannot now blockade their ports, nor assume the exclusive right of conveying to them the foreign commodities they need. They are no longer compelled to receive their supplies from our warehouses; nor is that state of things likely to return. Franklin spoke like a practical philosopher, when he said that the best plan of policy would be to make England one free port. With her immense resources, of mind, of wealth, of industry—with everything, indeed, which can contribute to her commercial superiority—could she be spared the interference of those who, intending perhaps to protect, manage constantly to wound and injure her, what might she not become?

Of the following tract, everything that is emphatic in its style, or irresistible in its reasonings, belongs to its distinguished author. He has seized on, and applied with singular felicity and energy, all the great bearings of this interesting and important subject; and the writer has only ventured to blend with the original matter a few practical and local observations which have come under his personal cognizance.



Just as the period was expiring, beyond which, according to the Spanish constitution, the Cortes had no power to continue their sittings—at a moment when affairs the most urgent, and interests the most important, necessarily distracted and divided their attention—the outline of a law was precipitated through its several stages, prohibiting manufactured woollens, cottons, linens, and silks, and attaching heavy duties to the introduction of many other manufactured articles.* So hurried was this measure, that its details were obliged to be referred to the finance minister; and so unexpected, that all the correspondence which communicated to this country the first news of the decree, breathed nothing but surprise or disappointment, regret or anger. Yet there can be no doubt the real, as the averred object was, to give encouragement and increase to the manufacturing branch of national industry, by compelling the employment of home productions, in lieu of those which Spain had been accustomed to receive from other manufacturing countries. It was certainly not intended to do mischief to those countries, either by interfering with their trade, by lessening their wealth, or by exciting their feelings of hostility. It was, indeed, neither more nor less than an application of the system of factitious encouragement of the domestic production in the indirect mode; that is, by discouragement applied to the same articles when produced by foreign countries.

The expediency of such a measure may be conveniently considered in two points of view:—the general, in its application to all countries; the particular, as especially affecting Spain.

It may be laid down as a universal maxim, that the system of commercial restriction is always either useless or mischievous; or rather mischievous in every case, in a less degree, or in a greater degree. In the judgment of the purchaser, or the consumer, the goods discouraged must be either better than those which are protected, or not: if not better (of course better for a fixed equivalent,) they will not be bought, even though no prohibition exist: here then is usefulness, or mischief in the lesser degree. But the case, and the only probable case, in which the fictitious encouragement will be applied, is that where the goods excluded are better, or in other words cheaper, than those sought to be protected: here is unqualified mischief, mischief in the greater degree.

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It may be desirable here to explain that the word better, when used, means better at the same price—i. e. cheaper. Price is, in truth, a more convenient standard, because an unfluctuating and determinate standard; quality not. Better, means, then, that in the opinions of the purchasers or the consumers, the article is more advantageous, or more agreeable; and it is better in the proportion in which it is more advantageous or agreeable.

This premised, we proceed more satisfactorily to consider the results of a prohibitory law of this sort in all the points of view of which it is susceptible.

When, in the view of favouring home commodities, a prohibition inhibiting the introduction of foreign rival commodities is obtained, that prohibition is either obeyed or disobeyed: obeyed, if the home article be purchased instead of the foreign one, or if neither the one nor the other be purchased; disobeyed, if instead of the home article, the foreign one be purchased. In the case of such prohibition, obedience takes place in some instances; disobedience in other instances.

Case I. The prohibition obeyed, and the purpose answered, by the purchase and use of the home article instead of the rival foreign article.—The price paid for the home article is greater than would have been paid for the rival foreign article, had the prohibition not existed; if not, the prohibition would be without an object. What, then, is the result to the consumer? The difference between the one price and the other; the injury or loss which he sustains, is equivalent to the imposition of a tax of the same amount.

But the pocket into which the produce of this sort of tax goes, whose is it? that of the public? No! but that of the individual producer of the article thus taxed. To the people at large, without diminishing the amount of other taxes, the effect is no other—the benefit no greater, than that of a tax to the same amount would be, if, instead of being conveyed into the national treasury, it were pocketed by the individual collectors.

If, instead of the prohibition in question, a tax to the same amount had been imposed on the rival foreign article, the produce, instead of being thus given to the collectors, would have been conveyed into the public purse, and by the whole amount have operated as a saving to the people, in diminution of the contribution that would otherwise have been exacted through other channels. Not to the whole amount, it may be said; for in case of the tax, the expense of collection would have been to be deducted. Yes, to the whole amount; for the expense of enforcing the prohibition would assuredly be as much as, probably more than, the expense of collecting the tax.

Case II. The prohibition obeyed; the rival foreign article not purchased, but the home article not purchased.—Here, though the law is obeyed, the purpose of it is not answered.

This will be the effect, insomuch as the advance of price caused by the prohibition deprives the consumer of the power of purchasing it: the home article too bad in quality; the foreign too dear, from the excess of price produced by the risk of evading the prohibition. The home article is then neglected, in consequence of the disgust produced by its comparative bad quality—the foreign is not purchased, on account of its dearness; which dearness is the result of the prohibiting law.

In this case, though no loss in a pecuniary form is produced to those who, antecedently to the prohibition, were accustomed to purchase and to enjoy the article in question—though no loss in a tangible and measurable form is suffered,—yet in the form of comfort—in the form of that wonted enjoyment on which the article depends for the whole of its value, the loss is not less real, and the loss is incalculable.

True it is, that whatsoever the consumers in question would have expended, but for the prohibition, on the articles in question, is left in their hands unexpended, to be employed in other articles; and therefore the loss is not total. True; but there is a loss: a loss is implied in their being compelled to purchase articles which they would not otherwise have chosen. The amount of loss is not within the reach of calculation; but where it is possible to erect a comparative standard of price or quality between the goods which would be purchased but for the prohibition, and those which are purchased on account of the prohibition, the loss presents itself in a tangible and measurable shape.

Case III. The prohibition disobeyed: the purpose not answered; the home article not purchased for consumption; the rival and foreign article purchased and consumed, notwithstanding the prohibition.—Then not only is the law disobeyed, but its purpose is more manifestly frustrated than in either of the foregoing cases.

Under our present supposition, the price of the foreign article to the purchaser and consumer cannot but be raised above the current price it held before the prohibition; for the prohibition cannot be evaded without extra labour employed, and risk incurred, by those engaged in the conveyance of it from the hands by which it is exported from the foreign country to the hands of the consumer;—and fraudulent labour is of all labour the most costly. Here, too, in respect of the loss and burthen to the consuming purchaser, the difference between the price of the foreign article when allowed, and the foreign article when prohibited, has, by the whole amount Edition: current; Page: [90] of it, the effect—the bad effect—of a tax: and by every increase given to the severity, or in any other way to the efficiency of the law, a correspondent increase is given to the amount and burthensomeness of this unproductive substitute to a government tax.

And into whose pockets is the produce of this worse than useless, this baneful substitute to a tax, conveyed? Into the pockets of the public? No! Into the pockets of the home-producers, whom, at the expense of all their fellow-countrymen, its endeavours are thus employed to serve? No! but into the pockets of those whose labours are employed, whose lives and liberty hazarded, in effectually causing the prohibitory law to be disobeyed, and the design of it frustrated.

The persons for whom this favour is intended,—what title have they, what title can they ever have, to such a preference—to a benefit to which a correspondent injury, not to say injustice, to others,—an injury, an injustice to such an extent,—is unavoidably linked?

And in point of numbers, what are the favoured when compared with the disfavoured? Answer: The few; the few always served, or meant to be served, at the expense of the many.

This one observation attaches inevitable and unanswerable condemnation to the measure, unless it can be shown that the sum of profit to the few is more than equivalent to the sum of loss to the many.

But in favour of such a supposition no reason whatever presents itself. If any one believes he can discover such a reason—if any one imagines it falls within the possibilities of the case, to him it belongs to produce it.

The loss sustained by those on whom the burthen of the measure most immediately presses—who are, as it were, in actual contact with the measure, is not the only loss. Antecedently to the prohibition, the articles now prohibited were furnished by foreign producers, to whom home articles to an amount regarded as a fair equivalent were supplied in return, and were in fact the means of purchasing. Deprived now of the means of paying for the goods of the country which issues the prohibition, the foreign producer is driven from the market. And here, on the very face of the transaction, is another set of men on whom a burthen is imposed—or, which is the same thing, to whom a profit is denied—equivalent at least to the expected benefit, supposing it received, and at whatever calculation it may be taken.

Here, then, in addition to the injury done to the universal interest, is an injury done to a particular interest, equal to the benefit contemplated to the other particular interest for whom the prohibition was made.

Not so, it may be objected—not so; for what they before purchased with the prohibited goods, they will continue to purchase with other not-prohibited goods, or with money, which is still better.

Vain, however, is this objection. In money perhaps they would have paid for these our goods, rather than have gone for the like to some other country; in money they would have paid for them, could they have got it. But they could not have got it except by selling their goods. If they have sold their goods and realized their profit, why should they bring the money they have produced to you?

But they will pay in other goods. If we want those goods, and can pay for them, and will allow them to be brought to us, we shall have them in any case, whether the others be prohibited or not: so that the question remains as it was before.

This is the point at which any person who, being determined to justify the prohibitory system at all events, though at the same time conscious of its unjustifiability, would be apt to attempt a diversion by leading the debate into the subject of the balance of trade. But, without going into the details of that controversy, a demonstration of the reality of the loss, founded on universal experience, may satisfy even the malâ fide adversary.

After having been accustomed to sell the whole or a part of his produce to this or that particular customer, no man who knows that that customer is prevented from sending the only goods he was used to send in return, but would understand himself, feel himself, to have sustained a loss. A loss he would necessarily sustain, and by the whole value of the goods, supposing him not to find another customer—and if a less advantageous customer than before, the loss, though less in amount, not less real in fact: and if in the case in question it be alleged, that in the room of every person so prevented by the prohibition from giving for the goods the usual equivalent, another customer comes of course—he who makes the allegation that such a second customer comes of course, is bound to produce him—to provide him—for his argument at least.

The general result would be more clearly perceived from an individual case in point:—Spain sells to England wine, wool, oil, fruits, &c.; she takes in return a great variety of manufactured and other articles. On a sudden, a prohibitory degree is passed;—Spain is no longer allowed to buy the foreign manufactured articles. Of the surplus of Spanish produce not sold and consumed at home, a great proportion was bought for England in return for the English articles sent to Spain. Where are the Spaniards now to find customers for that produce? Not from England; for they have deprived England of the means Edition: current; Page: [91] of buying: not from other countries, at least from those to whom the same prohibitions apply.

Add to these necessary ill consequences the probable ill consequences produced by counter restrictions and prohibitions against your goods, in countries the introduction of whose goods you restrict or prohibit, and the quantum of loss or suffering will be greatly increased.

Thus, then, must the question be finally put:—The burthen to those who are injured,—what is its amount? The benefit to those who are meant to be favoured,—what is its amount?

Persons, human feelings, pounds, shillings, and pence, in English, in Spanish reals of Vellon—to all these subjects must the arithmetical calculation be applied, before we can come to any just and well-grounded conclusion:—and when there are two parties to the question—two contending parties—the arithmetical operation must be applied with equal correctness to both sides of the account; otherwise it will be no more an honest account, than if, in a statement of account between A and B, all the items on one side were omitted.

Yet, in the account kept of the pretended or supposed encouragements in question, the unreciprocal operation is the sort of operation that is performed—that has been commonly performed.


The prohibitory measure is introduced, then, into the country in question, in order to compel the sale within itself of its own productions, in opposition to foreign productions, under the notion of their being rival productions. Reader, whoever you may be, to avoid difficulties in the expression, we will call that country your country.

Mischief I. Dearer commodities are forced upon your countrymen, instead of cheaper; and all are sufferers by whom the cheaper article was, anterior to the prohibition, bought or consumed: in many cases, the whole population of the country, excepting such as were disabled by poverty from becoming purchasers. The gross sum of injury will be the difference of price between the home-produced and the foreign-prohibited article, calculated on the whole amount of consumption.

The loss in Spain immeasurably great;—probably not less than a fourth on all the manufactures consumed. Amount of imports of manufactured articles is about £500,000 yearly, from England only. (See Table A.)

Mischief II. Mischief, by commodities of inferior quality being forcibly substituted to commodities of superior quality. Sufferers, as before, all those who, antecedently to the prohibition, employed or consumed the good article, and who now are compelled to employ the bad one, or who employ none.—Amount of loss unsusceptible of calculation—incalculable.

In Spain, as before, peculiarly great. With the exception of a few silk manufactures, and some of fine woollens, which have lately been brought to a state of great excellence without the prohibitory system, and which, for their continued improvement and ultimate perfection, require no prohibitory system to protect them—with the exception of a few manufactured articles of silk and wool—the manufactures of Spain are in a state of wretched imperfection. Many excluded fabrics cannot be produced there. Bombazines, for instance, an article of very general consumption—an article so peculiar and beautiful in its perfect form, that it has not yet been manufactured even in France, where the silk-fabrics are in such an advanced state. So, again, the articles produced by the coarse long wool of this country; this wool being peculiar to England. Inferiority applies necessarily more or less to all home-encouraged articles compared with foreign prohibited articles. Manufactures become cheap and good in proportion to the advantages possessed in their creation; and the state of the mechanical arts in Spain being exceedingly backward, the production of articles moderate in price and excellent in quality cannot be contemplated. Another contingent mischief then follows the prohibition—an evil even to the few producers. The strongest motives to emulation being removed, the home-goods will not be improved as they would be when impelled by the rivalry of the superior foreign goods. Permanent inferiority is therefore likely to be entailed on a nation by the prohibitory system, and misdirection of capital from objects leaving certain and larger profit, to objects promising only uncertain and lesser profit.

Mischief III. Mischief, by the cessation or diminution of the demand for the home-produced commodities; such as before the prohibition were taken by the foreigners in exchange for the commodities now prohibited. Sufferers, those who antecedently to the prohibition were engaged in the production of the commodities so taken in exchange. Amount of this suffering uncertain. It will have place in so far as the prohibition takes effect: so also when it is evaded, for it cannot be evaded without a rise of price proportioned to the risk regarded as attached to the endeavour to evade. Suppose, then, the price to the customer in your country doubled, the quantity of commodities that can be employed in the purchase of your home-produced commodities is reduced one-half.

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In Spain, again, this third mischief singularly great. Of some of her exporting produce, the greater part is bought for foreign markets by foreigners. Distress produced by the prohibition proportionably great. In 1819 an instance in point occurred, when in the interior provinces (particularly La Mancha and Castille) great distress was occasioned among the agricultural producers, by the excess of produce remaining unsold on their hands: in some districts the harvest was left to perish on the ground. But this was under the reign of the restrictive system only: how much would the evil have been augmented under the prohibitory system? It appears by Table C, that the amount of produce yearly imported into England from Spain varies between £1,500,000 and £2,000,000 sterling.

Mischief IV. Mischief by the loss of the tax, which antecedently to the prohibition was paid by the commodities now prohibited; i. e. of the correspondent supply received from that source by the government for the use of the people. Sufferers, all payers of taxes; i. e. all the population. Amount of the suffering, the annual amount of the supply received from this source.

In Spain, again, the mischief eminently great; the duties on imported goods being one of the most important sources—nearly a fourth of the whole revenue. The net amount of custom-house revenue from June 1820 to June 1821, is calculated 80,000,000 reals de Vellon. The expense of collecting the custom-house revenne is nearly 25 per cent.; its gross amount is about 100,000,000 reals, or one million sterling.*

Mischief V. Increase given to the number of smugglers, in consequence of the prohibition, and the increase of price which the persons habituated to consume or otherwise use the now prohibited commodities, will determine to give, rather than forego the use of them.

This mischief is of a very complicated nature, and branches out into a variety of evil consequences pernicious to the moral feeling—pernicious to pecuniary interests.

Of the government functionaries, whose labour, previously to the prohibition, was employed in the collection of the tax paid on the introduction of the commodities in question, the labour will now be employed in securing the exclusion of them from the hands of the intruded purchasers—or in depriving such purchasers of them, should they have reached their hands.

Suppose them to be thus seized, what is to become of them? Are they to be destroyed? Here is dead and absolute loss to everybody. Are they to be sold for government account? The benefit intended for the home producers of the rival commodity is prevented from coming into their hands. If sold with permission to be employed at home (as has been usually the case in Spain,) then is suffering created to the amount of their value to the holder, and not an atom of benefit obtained for the home producer. If sold with an obligation to export (as is the practice in England,) the loss is diminished, but not less certain:—loss of the extra value given by the labour of smuggling—loss consequent on non-adaptation to other markets—and other contingent loss, unsusceptible of calculation. At all events, all loss attaches to your own people. The commodities having passed from the hands of the foreigner whose profits have been secured, into yours,—with you the risk of the adventure now lies.

Of a part of the people, whose labour antecedently to the prohibition may have been, and, until reason appear to the contrary, ought to be presumed to have been, employed in some profit-seeking and productive operation, that labour is now, under the temptation afforded by the expected increase of price obtainable for the prohibited commodities, employed in the endeavour to introduce them and convey them to the hands of the venders, in spite of the counter-exertions of the functionaries of government;—there too is the additional loss of the amount of that labour.

We have thus, under the prohibitory decree, two contending bodies, not to say armies, engaged in constant conflict;—the customhouse officers, having for the object of their exertions to give effect to the decree, and to prevent the introduction of the prohibited articles,—and the smugglers, having for their object to evade the decree, by promoting and effecting the introduction of those articles. The government functionaries are paid voluntarily by the government rulers, out of the contributions paid involuntarily by the people: the smugglers are paid voluntarily by the people.

In the course of this conflict, lives will be lost, and other bodily harm will be sustained on both sides. Destruction of property will also have place; particularly of such articles as are the subject of the contest thus set on foot.

Nor can the calculations under this head of mischief be closed, without reverting to another mischief procured by the giving execution—the enforcing submission to the prohibition-ordinance, as against those by whom that ordinance is disregarded;—i. e. by the Edition: current; Page: [93] execution of the law against, or upon, such delinquents.

Under this head must be considered two perfectly distinguishable masses of evil:—1. The evil of expense, attached to the officer created and paid, and to the other arrangements of all sorts, having for their objects the punishment of offenders, the prevention of the offence; 2. Evil of punishment, composed of the suffering of those in whom, whether justly or unjustly, under the supposition of delinquency on their parts, the punishment is caused to be inflicted.

And when—(it is a supposition due to all who have in any instance benefited by the lessons of experience, and from whom we have reason to hope that there will be no obstinate persisting in a system fraught with evil)—when erroneous views shall be succeeded by correct ones, and these prohibitory decrees be repealed accordingly,—these smugglers, what becomes of them? A return to honest labour is neither so agreeable nor so easy as, but for the improvident law, continuance in it would have been. Some by choice, some by necessity, the smugglers are transformed into free-booters. Corruption is thus spread over the morals of the people, and those who should have been the guardians are the corruptors.

Universally applicable as are the objections ranged under this head, to Spain they apply with a cogency little imagined by those who are unacquainted with the localities of the peninsula, and the long-established habits of its people. The immense extent of coast, the badness of the cross roads, the mountainous character of the country, are likely to be permanent auxiliaries to those immense bodies of organized smugglers, who from time immemorial have carried on a large proportion of the commerce of Spain. The adventurous and danger-defying character of the Spanish mountaineer, seems to have peculiarly fitted him for enterprises of this sort. Little reproach attaches to the profession of the smuggler; and the frequent representation of his bold feats on the stage, is witnessed generally with great interest, often with admiration, sometimes with envy. The popular song, “Yo soy un contrabandista,” which recounts some of his deeds of heroism, has been long a favourite at the court of Madrid, and especially a favourite of the monarch himself.

The impracticability of carrying the prohibitory decrees of Spain into effect, is already pretty generally recognised there. As if nature had provided for its certain evasion, Gibraltar becomes the great depôt for the south, Lisbon and Oporto for the west, and the hundred passages of the Pyrenees will supply the northern and eastern provinces. Every merchant knows, that at the principal commercial ports of Spain a great part of the duties has been habitually evaded, and large portions of goods constantly introduced without the payment of any duty at all. Except on articles of considerable bulk, of peculiarly difficult transport, or of trifling value, the advance of price in consequence of the prohibition has been scarcely perceptible in any of the principal markets of Spain; and the idea is treated with ridicule, that, in case the system of prohibition should be persisted in, the enforcement of it to any considerable extent can be practicable. The amount of restrictive duties, in some cases not very high ones, was always deemed more than a sufficient price for the labour and risk of the smuggler: the harvest will now be extended, and the labourers will be abundant—the profits greater. The disbanded Guerillas will furnish recruits enough for the army of smugglers—recruits, too, who will require but little training. Even in the province (Catalonia) which it is intended particularly to favour by the interdicting system, there is scarcely a village without its contrabandista—scarcely a creek which does not daily witness the exploits of its smuggling adventurers—scarcely an animal which has not borne the unlawful merchandise—and scarcely an individual who does not wear part of it.

The frequent and bloody frays between the armed custom-house officers or the military, and the armed and desperate bodies of smugglers, in Spain, are notorious to every individual who has had the desire and the opportunity to obtain information on the subject. Every year numerous lives are lost; and the sympathy of the public is, where it ought not to be,—with the criminals, and not with the agents of public justice.

As to loss of liberty and comfort, the prisons under the old regime were always full even to overflowing. Of the poor mendicant abandoned children who solicited charity in the streets, the short tale of nine-tenths of them was, “I have no father.” “What! is your father dead?” “No: in prison; in prison for life!” “And why?” “Por el tabaco”—“For smuggling tobacco,”—was the constant answer.

Mischief VI. National discord: discord between the provinces for which the benefit is designed on the one part; and on the other, the provinces by which, while the burthen is sustained in its full weight, no share in the benefit will be received or can be looked for. Sufferers, the whole people, on the one part and on the other.

This mischief, too, bears most heavily on Spain. In the provinces of no country is the rivalry so strong—it might even be said, the enmity so active—as among the Spanish provinces. Different languages, different habits, different forms of local government, different provincial privileges; here, total exemption from taxation—there, excessive burthen of taxation; in some, feudality—in others, the proudest and most universal individual independence;—everything, Edition: current; Page: [94] in fact, seemed to demand from the Spanish legislator plans for general conciliation,—especially where the Constitution professed to level all the inhabitants of all the provinces to universal equality. But these prohibitions are introduced, it is avowed, solely or mainly for the benefit of Catalonia; a small part of Valencia may be perhaps included. The whole population of the former is 850,000; of the latter, 800,000; that of Spain, 10,500,000. But of the population of the two provinces referred to, a very small proportion is engaged in manufactures: the number engaged in the fabrication of piece goods, which the prohibition is principally meant to encourage, is probably not greater than a hundredth part of the whole population of the peninsula. And even though it be shown—but this cannot be shown—that the interest of every labouring manufacturer is encouraged or advanced by the prohibitory laws, we have a fearful account against the legislator;—for every individual’s interest protected, the interests of more than a hundred are sacrificed. And this is a government professing to have for its object “to preserve and protect, by wise and just laws, civil liberty, property, and all other legitimate rights, of all the individuals who compose it.”*

Mischief VII. Ill-will produced and directed towards you by foreign rulers and people, from the suffering or loss produced by the prohibition of their commodities, and the consequent deprivation of the sale for them.

The danger may not perhaps be great, that, by a measure which does not appear to have had for its cause any hostile affection, nor anything but a mistaken calculation of self-regarding interest, any affection decidedly unfriendly—any positive act of hostility—should be necessarily produced. Mischiefs short of positive hostility may still, with but too much probability, in every case be apprehended, from wounds inflicted in the course of the contest between self-regard on the one side, and self-regard on the other—wounds inflicted by the hands of mere self-regard though unattended with ill-will, especially where no reasonable cause for ill-will can be found. But if ill-will be kept off from a sense that no injury was intended, contempt will probably occupy its place in proportion as the impolicy of the system is manifest.

In most cases, however, the prohibitory system produces a retaliatory operation; and the power of retaliation possessed against Spain is unfortunately very great. What if other countries, whose wares are excluded from Spain, load with excessive taxation, or exclude by total prohibition, the surplus of her produce, for which she has no consumption at home? for this plan of retorting injury has been too long current. To Spain it would be a great calamity, whatever the result of the struggle might be, if the question of commercial policy should resolve itself into the question of politically weaker or stronger.

Mischief VIII. Ill-will on the part of your own people, exerted towards the ruling and influential few, by whom the burthens thus imposed have had their existence. Antecedently to the prohibition, in whom, as to the matter in question, did your people in general behold their friends? In the people of that nation, in those people—foreigners as they were and are—by whom, though not without reciprocal and equivalent benefits, such additions were made to their comfort: if not in point of affection their friends, at the least and at the worst their actual benefactors;—whether in intention or not, at any rate in effect.

Subsequently to the prohibitory system, in whom, in consequence of it, will they behold, though not their intended, yet not the less their real adversaries—the authors of their sufferings—of all the sources of suffering above enumerated?—in whom but in their rulers, these—for so it is hoped it may by this time be allowable to call them—these their misguided rulers?

At the same time, still looking at home, in whom will the people behold, in addition to their foreign friends as above, a set of domestic ones? Even in the smugglers—in those men by whose industry and intrepidity they will have been preserved (in so far as they will have been preserved) in the enjoyment of those comforts, of which, had the endeavours of their rulers been effectual, they would have been deprived.

Thus, while on the one side they will be beholding in the character of adversaries and injurers a comparatively small portion of their fellow-subjects in confederacy with their rulers; on the other side they will see in the character of friends a nation of foreigners and a body of malefactors—friends linked to them by community of interest—friends, in whose good offices they behold their only resource against the ill offices done to them by those who should have been their friends.

Upon Spain the eyes of the world have been fixed full of hope: already they begin to turn away, full of disappointment. Not new authorities for error, not fresh instances of the reckless abandonment of the interests of the greater number to the usurpations of the lesser number, did we anticipate from that land of promise. Alas! we have been deceived.

A circumstance from which the evil connected with the encouragement of smugglers is liable to receive peculiar aggravation, is the state of the system of judicial procedures. Decision being always tardy and often unobtainable, and, from the want of publicity on Edition: current; Page: [95] the part of the evidence, the grounds of it never known, and therefore never satisfactory, the connexion between delinquency and punishment is wholly broken. For the benefit of the lawyers, official and professional together, persons suspected of being malefactors—justly and unjustly suspected—are apprehended and mingled together in jail: jails are filled with them; when they can hold no more, they are emptied of necessity. In this state of things, what is done is done not by the hand of justice outstretched from her elevated station to give execution to the law upon offenders; not so much in the way of judicial procedure, by the exercise of authority by superiors over inferiors,—but in the way of warfare between contending armies; one army composed of revenue officers and their privates—the other composed of smugglers and their auxiliaries. If in the course of a battle smugglers are taken prisoners, it is only as prisoners that they suffer,—a sort of prisoners of war; not as malefactors. Infamy-attaching punishment at the bar of public opinion is not their portion; infamy is more generally attached to the function of the revenue officer than to the function of the defrauder of the revenue. In every country, the obtainment of good from the administration of the law depends on the excellence of the law itself. In Spain, nothing can be worse: to Spain, then, the foregoing observations specially apply.

Thus much as to the mischiefs attendant on such a state of things. Is there any percontra good?

The greater and more manifest the sum of mischief produced to all others, the less will be the benefit to those on whom it is sought to confer that benefit: the greater the mischief, the more surely manifest; and the more surely manifest, the greater the security for the removal of the mischief-producing ordinances; which if removed, the benefit for the sake of which the mischief was introduced will be removed with them. Thus on the part of the individuals for whom the favour was intended, prudence will interdict all expensive arrangements for taking the benefit of it: it will interdict the acceptance of a favour—a favour only to be obtained by perilous pecuniary adventure, whose continuance depends solely on the continuance of human blindness; the loss of which will accordingly be an assured consequence following the removal of the film of error.

But as great expectations may be excited by the promise of the exclusive benefits to be given to the home-producer as opposed to the rival-foreigner, it may be found that many will be so misguided as to stake their hopes and fortunes on the expected advantages. What wonder, then, if the influx of competition produce a further diminution of the promised benefit? If the legislating body, who are engaged by such powerful motives to take an accurate view of the situation in which they stand—if the legislating body deceive themselves, and err under the influence of their self-deception, what wonder that others less well-informed—less intellectually distinguished—fall into the same or similar errors?

Before the tribunal of public opinion, the prohibition-system in question having nothing but misrepresentation for its support,—misrepresentation in all imaginable shapes is accordingly sure to be employed.

The sort of misrepresentation most trusted to is that by which the whole question is stated to be altogether and merely a question between natives and foreigners—between national and anti-national interests: the notion sought to be conveyed being, that whatever suffering is produced, it is by foreigners, and only by foreigners, that it is sustained—that whatever benefit is produced, it is byy natives, and by natives alone, that it is reaped and enjoyed. Then comes the interrogation which is meant to impose silence:—Will you sacrifice your own interests to the interests of these foreigners? who therefore are represented to view in as unfavourable a light as can be found for them; and thereupon comes the parade of patriotism displayed, at a cheap rate,—at the expense of only a few pompous words.

But the truth has been already sufficiently unveiled—the truth, of universal application, and in an unanswerable form.

In the case of Spain, the benefit of it has been shown to be little—next to nothing: the mischief great—and greater, much greater, to Spaniards themselves, than to those whom they would call foreigners.

Thus, as towards foreigners in general—towards all the inhabitants of the globe with the few exceptions of those we call our fellow-countrymen, antipathy is excited and propagated; a foolish and degrading antipathy, not less adverse to the dictates of self-regarding prudence, than to those of benevolence and beneficence. And what is the result—the melancholy result? Every effort which a man makes to excite his countrymen to hate foreigners, is an effort made, whether designedly or not, to excite foreigners to hate them: by every attempt in which he thus labours to bring down upon his countrymen the fruits of the enmity of these foreigners, he more effectually and certainly labours to deprive his countrymen of those fruits of good-will which they might otherwise have enjoyed.

The enmity which cannot but be produced on the part of those foreigners, even by the calm pursuit of their own interests—the Edition: current; Page: [96] enmity necessarily produced by the frequent and unavoidable competition of interests—is surely quite enough, without making any new and needless addition; without exerting and letting loose the angry passions in any other direction, and giving to ill-will—already too active and too prevalent—auxiliaries at once so unnecessary and so dangerous.

When, for the purpose of encouraging home-industry, a prohibition is imposed on the produce of foreign industry when directed to the same object, the branch thus meant to be encouraged is either a new one or an old-established one.

It is in the former case that the impolicy and absurdity of the measure is at its maximum: it is as if, a tax being imposed, the produce of it—the whole produce of it—should be thrown into the deep. If left to itself, personal interest would direct both labour and capital to their most profitable occupation: if the new favoured occupation be the most profitable, it needs not this artificial support—if it be not the most favourable, the effect, if any, of the prohibition, is to call capital and labour from a more profitable to a less profitable employment. At all events, the consequence of the prohibition is this: it leads to nothing, or it leads to detriment; if not useless, it is calamitous.

In vain would it be said; Aye, but it is only intended to apply this extra-encouragement to the new occupation while in its infancy; it is only in its infancy that it will stand in need of it: the time of probation past, and its time of maturity arrived, the wealth that will then be added to the wealth of the nation will, and for ever, be greater than the wealth which for a time it is proposed to subtract from it.

By no such statement can the prohibitory measure be justified. In the infancy of any such employment, it is only by actual wealth, in the shape of additional capital, that any effectual assistance can be given to a new branch of industry. By removal of competition, increase may indeed be given to the rate of profit, if profit be the result of the newly directed labour: but it is only by the employment of capital, which must necessarily be taken from other sources, that this result can be obtained; the prohibition of existing rival establishments will not create that capital.

The case in which the impolicy is less glaring, and the intervention most excusable and plausible, is that of an old-established branch of industry; the object being, not to bestow on it factitious encouragement, and on those concerned in it factitious prosperity,—but only to preserve it from decline, and those connected with it from being destitute of the means of subsistence.

But still the former objections irresistibly apply. If the establishment be prosperous, factitious encouragement is needless: if it be unprosperous, encouragement is baneful, serving only to give misdirection to capital and labour—to give permanent misdirection; since without that factitious encouragement, interest and common sense would correct the mistakes of miscalculation as soon as discovered.

In the next place comes the objection, that if in this shape encouragement be given to any particular occupation, it must, if impartial justice be done, be in like circumstances afforded to every other. In whatsoever instance, therefore, a branch of industry should be going on in a prosperous state, any rival branch of industry, that found itself in a declining or less prosperous state, would have right to claim the interposition of the prohibitory principle—the diminution or destruction of that rival’s prosperity. On this supposition, a great part of the business of government would be to watch over the whole field of productive labour, for the purpose—not the ultimate purpose, but still the purpose—of lessening the value of the produce; diminishing prosperousness, for the relief of unprosperousness; preventing A from selling cheap goods, in order that B may be enabled to sell dear ones; prohibiting A from producing superior articles, for the purpose of helping B to get rid of his inferior articles.

Here, then, is a vast proportion of the time and labour of the constituted authorities employed to no better purpose, in no higher aim, than to check prosperity as it proceeds—to sacrifice success to the want of success—to diminish the mass of habitual wealth, instead of increasing it.

Whatever be the effect of accident in this or that particular instance, operating against the general principle, the general principle may be safely assumed and laid down, that the prosperity of every branch of industry will increase and decrease in the ratio of the degree of aptitude—of moral, intellectual, and active aptitude—on the part of the persons engaged in it; on the degree, absolute and comparative, of prudence, vigilance, exertion, appropriate information, and industrious talent, possessed by them. Among the effects of the mode of supposed encouragement in question, will be its operating in the character of a prohibition on superior appropriate aptitude, and giving to inferior appropriate aptitude the advantage over it.

It is, in a word, a contrivance for causing everything to be done as badly as possible—for giving to evil the encouragements due to good.

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The system of injustice and impolicy thus extensively pursued,—to what causes shall its existence and its domination be ascribed? In this case, as in others, the cause will be found in the comparative strength of the producing influence, concurring with the comparative weakness of the opposing and restraining influence.

The efficient causes—the causes of the prohibition—are—

I. Combined public exertions.

II. Secret or corrupt influence.

III. Non-existence of counter-efficient influence.

IV. Legislative blindness.

I. In proportion as an individual, engaged in any one branch of industry, sees or fears to see his performances outdone by any competitor, whether foreign or domestic, he is interested in putting a stop to such rival labour, if possible—or to lessen its produce as far as he is able. The individual feeling is necessarily communicated to any body of individuals in the same situation: their common bond of union against those who are prejudiced by the employment of these productions, is much stronger than the motives to rivalry against one another. Hence, to obtain benefit for themselves and each other, individually and collectively considered, at the expense of all but themselves, is of course at all times the wish, and, as far as any prospect of success presents itself, at all times the endeavour, of all persons so connected and so situated.

By combined public exertion, what is meant to be designated is neither more nor less than the aggregate of the exertions made by all such individuals as deem themselves likely to receive benefit in any shape from the prohibitory measure in question. The following are the principal circumstances on which the success of such exertion will naturally depend:—

1. The apparent, and thence the real number of the persons thus confederating, of whose individual interests the particular interest in question is composed.

2. The aggregate quantity of capital engaged in the particular interest in question.

3. The apparent, and thence the real magnitude of the loss that would be produced to that particular interest, for want of the prohibitory measure in question.

4. The facility which, by local neighbourhood or otherwise, they possess for combining their efforts, and for concerting measures for employing them with the greatest possible effect.

5. The ability with which such representations are framed, as are intended to convey their case to the cognizance of the constituted authorities, or others on whom they depend for the ultimate success of their exertions: ability accompanied by energy and clearness, in so far as correct conception would be favourable to their cause—with obscurity and confusion, in so far as correct conception would be unfavourable to their cause.

6. The useful extent given to the circulation of such their communications; which extent will have for its measure the difference between the whole number of the persons on whose cognizance of the matter the success of their exertions will have to depend, and the number of those by whom, in consequence of their receipt of these communications or otherwise, cognizance of the matter comes to be actually taken.

II. By secret influence, the idea intended to be conveyed is, that influence which on the occasion in question is applied to the one or the few on whose will the success of the exertion depends, by the one or the few who, by habitual intercourse, possess in relation to them more or less facility of access in private.

On the part of the individual in question, be he who he may, the quantity of time it is possible for him to apply to the business in question, be it what it may, is a limited quantity—a quantity which, with reference to that necessary for the reception of the whole body of information, is most commonly and most probably insufficient even when the faculties of the person in question are, in the highest degree possible, well adapted to the prompt and correct reception of it.

If in any instance it happens that a person who, by any consideration, be it what it may, stands engaged to give support to the measure, is in habits of adequate familiarity with those on whom the adoption of it depends, the consequent advantage possessed by the measure is great and manifest. An additional and extra quantity of the arbiter’s time is thus applied to the subject, and applied on that side. The only portion of time habitually applied to the business of the office in question, taken in the aggregate, will be the only portion of time, a part of which can in general be allotted to the particular business in question, in the regular and established way. If, then, so it be, that amongst those who have habitual access to the official person, amongst his ordinary companions and intimates, should happen to be a person thus interested in the measure, a portion of the time allotted even for refreshment will in this particular instance be added to the time allotted to official business; and thus the force of that sympathy which is produced by social enjoyment of this sort is added to whatsoever force the case may afford on that side, in the shape of appropriate and substantial argument.

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Thus it is, that whatsoever of just representative fact and argument together is afforded by the measure in question, is capable of receiving, in one way or other, from secret influence, an incalculable degree of force.

The influence, let it be supposed, is in the case in question no other than that which may be deemed legitimate influence—influence of understanding on understanding—influence operating no otherwise than by the direct force of such facts and arguments as the case may furnish.

But by the same private opportunities through which, in conjunction with and addition to those of a public nature, facility is given to the application of this legitimate influence—by these same private opportunities, and by these alone, facility is also given to the application of sinister and corruptive influence: influence of will on will, applied in a pecuniary or other inviting shape to the official person’s private interest.

III. In every such case of prohibition of one branch of industry for the encouragement of another—of prohibition, for example, of foreign produce for the encouragement of domestic analogous produce,—there are, as above, two distinct interests—interests opposed to each other: the interest of producers, the particular interest—the interest of consumers, the universal interest. Of these opposite interests, it is the lesser interest that always operates, as above, with peculiar force—with a force which is peculiar to every particular interest, as contra-distinguished from and opposed to the greater, the universal interest. The individuals who compose the particular interest always are, or at least may be—and have to thank themselves and one another if they are not—a compact harmonizing body—a chain of iron: the individuals making the universal interest are on every such occasion an unorganized, uncombined body—a rope of sand. Of the partakers in the universal interest, the proportion of interest centred in one individual is too small to afford sufficient inducement to apply his exertions to the support of his trifling share in the common interest. Add to which the difficulty, the impossibility, of confederacy to any such extent as should enable the exertions of the confederates fairly to represent the amount of the general interest—that general interest embracing, with few exceptions, the whole mass of society. In a less degree, the same observations apply to the case of the producers of the commodities with which, antecedently to the prohibition, the now prohibited goods were purchased.

Much greater, however, is the advantage which the lesser sinister interest possesses over the greater common interest, as far as secret influence is concerned.

Of the two modes of secret influence, that which is exercised by understanding on understanding, comes in only in aid of the legitimate influence of appropriate facts and arguments: the demand for it is, therefore, not altogether exclusive. But in so far as that influence is exercised only on one side—in so much as that influence is misdirected, by the combined means of persuasion employed by the confederated few who compose the particular interest, against the diffused means of persuasion possessed by the unrepresented or imperfectly represented many, who compose the general interest,—in so far it is clearly pernicious.

But it is the exclusively-possessed attribute of a particular interest, at once to require and to create facilities for the supply of sinister and corruptive influence. The universal interest—the people at large—the subject many—never see, never can see, engaged in support of their interest—of that universal interest—a friend and advocate established in habits of intimacy with the official person, at the table of the official person; an intimate whom, by any favour in their power to bestow, they can induce to engage that same official person to support, by his individual exertions, that general interest against which the particular interest is waging war. For any purpose of corrupt influence, the official person himself and his table-companion are equally inaccessible to the general interest: the particular interest can come at both.

The consequence is, that whenever the general interest is sacrificed to the particular interest, a probability has place that the sacrifice has been obtained, not from the sincerity of honest delusion, but from the perversity of corrupt intention. This probability will be more or less, according to the more or less obvious impolicy of the measure, and to the facilities afforded, under the circumstances of the case, for the introduction of corruptive influence among those who occupy the high places of authority.

These causes, in fact, apply to the whole field of government; they account for the universal domination of the interests of the few over the interests of the many; they account for the largest portion of the aggregate mass of misrule.

But it may be retorted, this prevalence of particular over universal interest being, according to yourself, so general, the necessary consequence is, that no ultimate mischief ensues—everything is as it should be; for what is the universal interest but the aggregate of all particular interests?

This is evading, not meeting the argument. The desire indeed exists universally to give prevalence each man to his own particular interest; but not the faculty. The wish is everywhere—the power not so.

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Even of the manufacturing interests, it is not every class that has the power to associate and combine in support of the common interest of the class: that power only exists where similar manufactures are concentrated in small districts—where means of intercourse are frequent and easy—or where large numbers are employed by large capital lodged in the hand of a single individual, or of a single partnership. What facilities of general association or combination are possessed by individuals employed as general shopkeepers, bakers, butchers, tailors, shoemakers, farmers, carpenters, bricklayers, masons, &c.? None whatsoever.

Had every one individual in every one of these classes his vote in the business, all would indeed be as it should be: the sum of all the several distinguishable interests being thus framed and ascertained, would constitute the universal interest; in a word, the principle of universal suffrage would be applied.

Very different, however, is the state of things. Separate and particular interests start up, solicit and obtain protection, by the exercise of the influence referred to, to the danger and the detriment of the common prosperity. Of these the aggregate body of the influential interest is mainly composed. The concentration of immense capital in single hands, great facilities for combination, and sometimes an union of both, furnish a power of evil which is but too commonly allowed to immolate the general good. Against its gigantic influence, appeal would seem in vain. A number of small fraternities exist, who, if they were able to unite, might maintain themselves against one large one equal to them all; but as it is, standing up separately, separately they are opposed and crushed by the overwhelming influence, one by one.

Of the baneful effects produced by the concentrated efforts of a coalition of those individual interests which form the particular interest, as opposed to the general national interest, the Spanish prohibitory decree is a remarkable illustration. In this case, a few clamorous manufacturers and a few short-sighted self-named patriots united their forces, and besieged the Cortes with their representations. Compared to the amount of counter-interest, they were, as we have shown, as one to a hundred; but their forces were organized—their strength was consolidated. Where, then, were the representatives of the thousand, when the representatives of the ten were drawn out in battle array? Nowhere! So the law was passed: it was declared to be eminently popular; for the people who had petitioned, had petitioned in its favour: the truth being that the people, the immense majority of the people, had not petitioned at all; nobody was sufficiently interested. The law was passed; and now it is that the public injury begins to be felt, and now it is that the public voice begins to be heard. Spain has had but too long and too calamitous an experience of the injury done by that ever-busy meddling with the freedom of commerce which has for ages distinguished her short-sighted legislators, and which, in spite of natural advantages almost peculiar to herself, has eternally involved her in financial difficulties, distress, and poverty.

In England, all other particular interests are overborne and crushed by one great particular interest, named in the aggregate the agricultural interest. By a system of prohibition, foreign grain is excluded, with the avowed intent of making home-produced grain dearer than it would be otherwise—dearer to the whole population in the character of consumers and customers; and for the avowed purpose of securing to a particular class of persons a pecuniary advantage, at the expense of the whole population of the country.*

But the class of persons meant to be favoured, and actually favoured, by this undue advantage, are not any class of persons employed in any beneficial operation; but a class of persons who, without any labour of their own, derive from the labours of others a share of the means of enjoyment much greater than is possessed by any who employ their labour in the purchase of it. They are land proprietors, deriving their means of enjoyment Edition: current; Page: [100] or of luxury from the rent of land cultivated by the industrious: they are, in a word, not labourers, but idlers—not the many, but the few. While, for the support of war, paper-money was issued in excess, they let their lands at rates which, if neither too high nor too low at that time, taking into account the then value of money, would necessarily be too high when, by the diminution of the issue of that money, the difficulty of obtaining it was increased, and its value increased from the same cause: and this evil is accumulating, if the amount of taxes paid by the occupier of the land, on account of the land, or on any other account, increases also.

In this case—the case as it now exists—the difficulty of coming to a right judgment, of feeling that we have come to a right judgment, is great indeed; so great, that in the determination of many an individual, in whose breast particular interest is in operation, regard for the universal interest might and would have been productive of the very line of conduct which has been determined by the more potent force of individual interest.

But of this difficulty, wherever it exists, what should be the consequence? Not that prohibition should be resorted to, but that it should be abstained from. So long as nothing is done in relation to the object by government, whatever happens amiss is the result of the nation’s will, and government is not chargeable with it. But when, and if, and where, government takes upon itself to interfere and apply to the subject its coercive power, whatever mischief results from the exercise of that coercive power, is the result of the agency of government, and the rulers stand chargeable with it.

Whichever course is taken,—action or inaction—interference or non-interference—liberty, or coercion in the shape of prohibition,—distress to a vast extent—distress verging on ruin—distress on one side or the other—must be the inevitable consequence. If the importation of foreign grain be left free, ruin is entailed on the farmer, distress on the landlords: prohibit foreign grain, and ruin falls not only upon the manufacturer, but upon the labouring class; that is, the great majority even of agriculturists. Such is our miserable situation. Its cause is excessive taxation—excessive taxation, the consequence of unjust war;—unjust war, the fruits of the determination formed by the ruling few to keep the subject many in a state of ignorance and error—in a state of dependence something beneath the maximum of degradation and oppression. In England, the primal and all-sufficient cause of misgovernment, and consequent misery, the corruption of the system of national representation; in every other country, the want of a system of adequate national representation, or rather the want of a representative democracy, in place of a more or less mitigated despotism: the want of the only form of government in which the greatest happiness of the greatest number is the end in view.

The mischiefs, then, of this system of partial encouragement being in all its shapes so vast, so incalculable, and their sum so plainly predominant over the sum of good, to whom or to what shall we attribute the existence, the prevalence of such a system?

To the general causes of misrule—to the want of the necessary elements of good government—to a deficiency of appropriate probity, or intellectual aptitude, or active talent: in other words, to a want of honesty, or ability, or industry.

One cause bearing upon the question of appropriate intellectual aptitude or ability, and likely to mislead it, is this:—The good which constitutes the ground of the prohibitory measure, the reason that operates in favour of it, is comparatively prominent—the evil not equally so; its place is comparatively in the back ground. Hence it is, as in too many other instances,—a good, however small, is by its vicinity to the eye enabled to eclipse and conceal the evil, however large.

When, reckoning from the day on which a measure has received the force of law, a certain period of time has elapsed, custom covers it with its mantle; and, regarding it as an unauthorized act of daring to look into the nature of the measure, men inquire no further than into the existence of the law; habit gives it a fixed authority: and thus it is that, in every country, worship is bestowed on laws and institutions vying in absurdity with any scheme of extravagance which the imagination of man could produce.

Thus things go on—evil is piled upon evil—till at length the burthen of evil is absolutely intolerable. Then it is that men’s eyes are opened, and a desire to retrace their erroneous steps is conceived. But no sooner has the legislator turned round, than he finds the way barred against him by a host of difficulties. And thus, when nothing would have been easier at first than to prevent the disease—that is, to forbear creating it—the cure becomes ineligible, insufferable, not to say impossible; and error and folly become immoveable and immortal.

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TABLE A. VALUE of BRITISH PRODUCE and MANUFACTURES exported from Great Britain to Spain in the years 1817, 1818, and 1819.
1817. 1818. 1819.
Brass and Copper Manufactures, £10,170 £7,642 £9,077
Cotton Manufactures, 42,292 25,718 65,056
Glass and Earthenware, 14,843 15,125 12,200
Iron, Steel, and Hardwares, 52,893 58,925 61,618
Linen Manufactures, 116,267 100,622 95,623
Silk Manufactures, 74,813 68,790 62,926
Tin and Pewter Wares, 20,059 12,489 13,992
Woollen Goods, 186,849 164,479 124,517
Sundries, consisting principally of Fish and other Provisions, Apparel, Plate, Jewellery, and Household Furniture; Musical and Mathematical Instruments, Lead, Copperas, and Painters’ Colours, 70,635 65,055 64,269
Total, £588,821 £518,845 £509,278
TABLE B. An ACCOUNT of the QUANTITY of the principal Articles imported into Great Britain from Spain in the years 1817, 1818, and 1819.
1817. 1818. 1819.
Almonds of all sorts, cwts. qrs. lbs. 1,534 : 3 : 6 3,086 : 3 : 25 2,384 : 2 : 10
Barilla, cwts. qrs. lbs. 6,437 : 0 : 22 16,027 : 2 : 21 14,505 : 3 : 21
Cochineal, lbs. 118,105 50,104 37,217
Cork, cwts. qrs. lbs. 9,973 : 2 : 10 13,896 : 2 : 4 16,725 : 2 : 22
Cortex Peruvianus, lbs. 32,338 30,282 4,544
Jalap, lbs. 54,607 29,946 98,863
Indigo, lbs. 82,189 85,265 3
Lead Black, cwts. qrs. lbs. 2,019 : 2 : 16 4,221 : 0 : 23 1,611 : 2 : 7
Lemons and Oranges, number 6,902,775 7,443,475 12,066,880
Nuts, small, bushels, 66,360½ 87,922 50,743¼
Quicksilver, lbs. 698,830 1,156,783 449,965
Raisins, cwts. qrs. lbs. 42,536 : 1 : 21 69,232 : 1 : 3 61,815 : 0 : 25
Shumac, cwts. qrs. lbs. 5,310 : 3 : 10 7,816 : 2 : 26 2,894 : 0 : 27
Wine, tuns, hhds. gals. 4,246 : 0 : 112/5 6,805 ; 2 : 13 4,115 : 3 : 362/5
Wool, sheeps’, lbs. 6,282,033 8,760,627 5,528,966
TABLE C. An approximative ESTIMATE of the VALUE of the principal Articles of Merchandise imported into Great Britain from Spain in the years 1817, 1818, and 1819.
* The above Table is not official, and the value probably not very accurately calculated.
1817. 1818. 1819.
Almonds of all sorts, £6,140 £12,348 £9,538
Barilla, 8,046 20,035 21,881
Cochineal, 147,631 62,630 46,522
Cork, 24,932 34,736 41,815
Cortex Peruvianus, 3,235 3,028 755
Jalap, 2,785 1,498 4,944
Indigo, 24,657 25,579 1
Black Lead, 3,026 10,865 2,416
Lemons and Oranges, 8,054 8,685 14,079
Nuts, small, 53,300 73,265 42,285
Quicksilver, 52,412 86,759 58,497
*Shumac, 5,315 7,816 2,898
Wine, 582,100 544,450 569,238
Wool, Sheeps’, 785,254 1,095,078 691,120
*Raisins, 108,804 103,848 92,723
Total, £1,815,691 £2,090,620 £1,598,712
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TABLE D. ACCOUNT of FOREIGN GRAIN, &c. imported into Great Britain from 1792 to 1812 inclusive.
Years. Barley. Barley Meal. Beans. Indian Corn. Indian Meal. Malt. Oats. Oatmeal. Pease. Rye. Rye Meal. Wheat. Wheat Flour.
Quarters. Cwts. Quarters. Quarters. Cwts. Quarters. Quarters. Cwts. Quarters. Quarters. Cwts. Quarters. Cwts.
1792 113,080 36,605 5,677 450,976 4,793 12,536 18,931 7,757
1793 142,884 26,408 2 429,994 18,553 55,564 415,376 211,588
1794 111,370 88,396 1,600 484,370 40,368 24,058 3,705 316,086 9,308
1795 18,070 13,823 20,586 105,168 8 20,263 11,507 37,595 274,522 86,726
1796 40,033 34,327 22,410 20,651 459,932 15 32,711 160,583 11,611 820,381 205,855
1797 51,930 16,807 107 14 274,490 2 17,818 8,258 420,414 2,769
1798 66,705 8,540 21 411,456 21,632 6,925 378,740 1,734
1799 19,387 3,237 2 170,233 8,750 22,051 2,650 430,274 61,584
1800 130,898 15,796 8,436 9,471 542,603 7 26,796 138,713 22,025 1,174,523 312,367
1801 113,966 16,246 44,472 113,141 582,628 63 44,218 99,847 177,494 1,186,237 833,016
1802 8,136 4,138 737 15,513 241,848 10,558 14,889 1,162 470,698 236,061
1803 1,148 85 669 146 254,799 14 23,381 3,347 224,055 309,409
1804 9,074 2 8,868 242 8 500,369 2 18,570 2,438 386,194 17,060
1805 27,645 8,727 16 27 275,105 8,583 24,032 821,164 54,539
1806 2,058 1,045 108 18 183,428 171 683 2 136,763 248,907
1807 3,043 9,997 1,062 4 420,032 4,680 7,309 215,776 504,209
1808 4,601 216 8,674 4,307 5 1,228 34,630 73 12,807 4,724 3 33,780 19,642
1809 13,341 31 27,297 1,262 533 296,911 861 33,071 13,047 541 245,774 497,314
1810 17,953 153 11,685 36 3 893 115,916 3 12,053 90,116 3,206 1,304,577 472,633
1811 39,900 778 357 13 12 1,493 11,446 410 4,994 27,765 166 179,645 31,215
1812 40,375 103 16 17 356 14,826 445 661 71,771 3,296 115,811 49,194
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TABLE E. An ACCOUNT of the Quantity of CORN and GRAIN of all sorts, MEAL, FLOUR, and RICE, exported from Great Britain from 1792 to 1812 inclusive: distinguishing the Quantity of each Year; the Price of the Year being the real Value, and the total Export of each Year in Value.
Years. Barley. Barley Meal. Beans. Indian Corn. Indian Meal. Malt. Oats. Oatmeal. Pease. Rye Rye Meal. Wheat. Wheat Flour. Total Quantities exported. Total Value at the average market prices.
Corn & Grain. Meal & Flour. Rice.
Quarters. Cwts. Quarters. Qrs. Cwts. Quarters. Quarters. Cwts. Qrs. Quarters. Cwts. Quarters. Cwts. Quarters. Cwts. Cwts.
1792 29,110 11,636 20,021 23,940 2,195 5,629 16,151 250,982 172,534 357,469 174,729 174,959 £1,063,753
1793 1,529 9,771 1,993 16,237 3,728 4,582 512 44,866 112,012 79,490 115,740 96,172 361,053
1794 2,964 7,520 1,448 6,473 13,388 4,196 3,280 1,919 116,273 135,713 153,265 139,909 79,336 579,487
1795 1,789 3,235 465 4,627 5,420 2,274 1,315 115 603 677 63,567 17,643 66,444 25,809 149,393
1796 7,204 8,613 3,289 5,929 10,072 3,093 2,112 122 677 84,008 38,018 87,101 76,692 266,171
1797 5,253 8,486 6,419 5,711 7,870 18,869 4,502 2,835 108 1,436 23,076 110,071 72,916 121,720 69,730 310,909
1798 2,856 16,092 580 23 12,220 23,600 5,748 3,415 680 22,138 131,757 81,581 137,528 73,532 344,340
1799 24,901 9,508 500 16,485 17,633 6,590 2,311 40 396 16,960 78,409 88,338 85,395 44,626 365,607
1800 3,393 7,146 2,415 9,505 3,951 1,822 37 1,448 7,866 49,515 32,184 54,914 6,422 234,578
1801 1,614 5,476 378 1,988 2,111 12,278 4,774 1,508 25 6,926 5,227 81,126 28,617 94,814 20,947 297,094
1802 4,727 6,792 1,328 400 3,148 15,482 3,300 2,370 6,484 104,414 157,113 144,745 160,813 210,899 807,060
1803 32,756 4,885 11,032 14,047 3,907 2,626 1,030 47,630 101,326 114,006 105,233 57,163 393,560
1804 115,102 2,125 5,918 58 12,747 17,168 3,098 2,999 3,798 30,229 114,956 188,019 120,179 50,292 536,092
1805 6,555 5,490 6,902 14,000 3,720 3,886 3,808 54,243 82,994 94,884 86,714 41,734 505,102
1806 16,820 6,734 6,805 27,764 12,938 4,682 4,020 4,716 86,973 71,541 99,911 49,371 337,222
1807 6,360 7,374 7,202 22,702 13,619 2,325 956 2,634 76,058 49,553 89,677 30,810 259,892
1808 2,936 1,207 6,519 210 7,493 21,620 9,480 3,556 3,907 300 8,495 241,752 54,736 252,739 15,359 484,231
1809 5,061 30 2,827 5,830 16,085 7,576 2,610 708 13 4,866 92,442 37,987 100,061 28,738 298,699
1810 11,348 83 2,804 8,218 19,199 9,651 3,059 8,154 2,944 61,488 50,040 114,270 62,718 139,054 716,923
1811 53,246 156 2,175 10,982 40,047 7,260 3,603 35,235 1,091 73,249 85,806 218,537 94,313 83,698 893,469
1812 53,205 100 1,956 9,562 21,398 14,229 2,918 21,400 1,548 27,091 67,318 137,530 83,195 32,141 760,130
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  • Introduction, . . . . . . . page 107
  • CHAPTER I. Plan of the Measure, with Explanations, . 108
  • CHAPTER II. Form of an Annuity Note, with Explanations—(See Table II.) . . . . . . 116
  • CHAPTER III. Comparison of the proposed, with the existing, Government Securities, . . . . . ib.
  • CHAPTER IV. Grounds of Expectation with regard to the proposed Measure, . . . . . . . . 118
  • CHAPTER V. Financial Advantages.
    • § 1. Period I. . . . . . . . . 123
    • 2. Period II. . . . . . . . . 126
    • 3. Period III. . . . . . . . 127
    • 4. Period IV. . . . . . . . . 128
    • 5. Concluding Period, . . . . . ib.
    • 6. War Loans, . . . . . . . 131
  • CHAPTER VI. Advantages by addition to National Capital, 132
  • CHAPTER VII. Advantages by addition to Commercial Security, . . . . . . . . . . . . 133
  • CHAPTER VIII. Particular Interests concerned, . . . page 136
  • CHAPTER IX. Rise of Prices—how to obviate, . . . . 139
  • CHAPTER X. Reduction of Interest—Proposed Mode compared with Mr. Pelham’s, . . . . 141
  • CHAPTER XI. Moral Advantages, . . . . . . . . 144
  • CHAPTER XII. Constitutional Advantages, . . . . . 145
  • CHAPTER XIII. Recapitulation and Conclusion, . . . . 146
  • APPENDIX A. Government ought to have the monopoly of Paper Money as well as of Metallic Money, . . . . . . . . . . . 148
  • APPENDIX B. Paper Money—Causes why not circulated by Government without Interest, as well as by Individuals, . . . . . . . . 149
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The main principle of the proposed measure consists in the opening the market for government annuities, on terms of profit to government—viz. at a reduced rate of interest to a mass of money, which, by existing circumstances, is either excluded from the faculty of yielding interest to the owners altogether, or, in the hands of bankers or otherwise, they are obliged to accept, on inferior security, a rate of interest inferior, all things considered, to that which, with a very considerable degree of profit, might be allowed by government. The annuities, thus created, to be charged upon the existing fund; and the money thus raised to be employed, as it comes in, in the redemption of debt, and thence in exoneration of that fund. The result and benefit of the measure, taking it on the smallest scale, will, besides the above profit to government, consist in the affording to the least opulent and most numerous class of individuals (friendly societies included)—in a word, to the great bulk of the community—the means of placing out small hoards, however minute, with a degree of advantage unattainable by any other means, and this, too, even at compound interest—a mode of accumulation which, familiar as it is in name, is not in effect capable of being realized by any other means in favour of individuals, though so happily brought to bear in favour of the public in the instance of the sinking funds;—not to speak of the collateral advantage obtained, by creating on the part of the lower orders, in respect of the proposed new species of property, a fresh and more palpable interest in the support of that government, on the tranquillity of which the existence of such their property will depend.*

On the larger scale upon which it may be expected to expand itself, the measure, after accelerating the otherwise rapid ascent of government annuities to the par price, and clearing away the 4 and 5 per cents., would afford the means of bringing the further reduction of the rate of interest on those annuities to its maximum in point of effect, rate of reduction, and rapidity, taken together; reduction of interest accelerating, too, in this way, redemption of principal, instead of taking place of it and retarding it, as on the plan pursued in Mr. Pelham’s days.§

Other paper currencies have been either (like the French assignats and mandats, &c.) engagements for money in unlimited quantity, and without funds for performance; or promises of minute portions of a species of property (for example lands and houses) incapable of being reduced into such portions; or, like some of the American currencies, promises of metallic money, payable at a period altogether indefinite, dating, for instance, from a fixed day posterior to the conclusion of a war.

By the proposed currency, nothing is engaged for but to pay such monies as there are already funds for paying, and at such times at which there are funds for paying them; and this in a quantity which, by the terms of the engagement, has its ne plus ultra, and can in no case add to the existing amount of the engagements it finds charged upon those funds: reimbursing immediately, and with profit, the fund on which it draws, it stands distinguished by this prominent feature, from all currencies as yet exemplified.

The losses, experienced or apprehended, from rash or penniless issuers of promissory notes, gave birth to the restrictions imposed on issues of sums below a certain magnitude. But this reason has no application to notes expressive of engagements, of the sort proposed, on the part of government. Issuing from such a source, the sums of the notes cannot be too minute: incapable of increasing, certain even of diminishing, the amount of the engagements they find existing, the influx of them cannot be too great. The smallness of the notes adds to the multitude of the customers; the multitude of the notes divides the mass of the engagements, and does not add to it. Confined within those bounds, the magnitude Edition: current; Page: [108] of the emission adds not only to the profit of the measure, but to the security of the fund.

A species of notes was not long ago proposed, whereby government annuities were to stand mortgaged, and yet (it was supposed) without diminution of their value:—and which were expected to pass, and be paid for as if they had engaged for the payment of so much money, though without binding any assignable individual to the payment of it. But the now proposed plan engages for no payment for which adequate funds are not already in existence; nor without imposing on a determinate individual the obligation of making the payment out of those funds; nor yet burthens those funds, without immediately disburthening them to a superior amount.

By taking from the load of government annuities which is found pressing on the market, the sale of the land tax for stock has bettered the terms of all succeeding loans. On the measure now proposed, hangs a profit the same in kind, superior in degree.*

Reducing the mass of the national debt, the operation on the land tax takes nothing from the mass of national capital;—the proposed measure adds to it. The former borrows from capital, but refunds immediately, with 10 per cent. to boot; the latter adds still more to capital, and that as speedily, without having borrowed anything.

Every penny of the national debt redeemed, if redeemed with money not borrowed from capital, is so much added (it will be shown) to that part of the national capital which does not consist of money. The addition made by the sinking fund to the mass of national capital, is little inferior to the defalcation it makes from the mass of national debt. So many years as, by the aid of the proposed measure, may come to be struck off from the period which would otherwise have been occupied in the redemption of the debt, so many years’ interest, upon the sum equal to the greatest amount of that debt, will therefore have been added, and that at compound interest, to the amount of national capital, by the operation of the proposed measure.

A sort of discovery in political economy has been made of late (for such it seems to be,) that commercial security is not less liable to suffer by deficiency than by excess, in respect of the customary quantity of paper in circulation. Among the advantages attendant on the proposed paper, will be found that of affording a remedy, and that of the preventive kind, against the shocks which commercial security might otherwise have to sustain from such deficiency or excess.

Shocks of that kind are not, however, the only mischief to which the community stands exposed, not only by the abuse, but even by the use, of every species of circulating paper as yet known. Rise of prices is another mischief, less heeded, but not less real. By gold and silver money to the same amount, the same mischief would (it is true) be produced, and in the same degree; but the magnitude of the mischief is in proportion to the suddenness of the addition, not to the absolute quantum of it; and, in the shape of cash, the influx is not susceptible of any such suddenness as in the shape of paper. To be capable of opposing an effectual barrier to a torrent of this sort, will be found to be among the properties of the proposed paper. To point out measures adequate to that end, is among the tasks undertaken in the plan of the proposed measure.

The extent of the proposed emission being given, neither the efficiency nor the utility of the measure will be found open to dispute: the only room for uncertainty regards the extent. As to that point, cases are collected, presumptions offered: but nothing short of experience can determine.


§ 1.: Creation, Emission, and Payment.

Art. 1. That there be issued from his Majesty’s exchequer, in whatever quantity[1.] it shall be applied for by purchasers, on the conditions hereinafter mentioned, through the medium of such local or sub-offices as are hereinafter mentioned, and the interest or dividends paid in such manner as is also hereinafter mentioned, a competent number of transferable promissory notes, to be termed annuity notes; importing, each of them, the grant of a perpetual redeemable annuity, payable to the purchaser or other holder of the note, in consideration of the principal sum, on the repayment of which such annuity is made redeemable, and which accordingly constitutes the denominative value or principal of such note; such interest to be paid half-yearly,[2.] immediately after the expiration of each half-year.

Edition: current; Page: [a]


Exhibiting divers particulars relative to a proposed series of Notes, carrying the same rate of Interest, and having for their values sums rising one above another in a series of terms, 19 in number with 2 for their common measure; of which magnitudes more or fewer may be employed as may be found convenient. Also another corresponding series of principal sums, which (they being raised in their amounts, while the corresponding amounts of interest continue unchanged) give an inferior or reduced rate of Interest, with reference to the series first mentioned. The sums proposed are in columns V. VI. VII. VIII. IX. X. XIII.;—those used for illustration, in columns I. II. III. IV. XI. and XII.

b In the series marked thus the fractional parts of a farthing are omitted, as not capable of being paid, nor requiring for any other purpose to be taken into account.
i In this series the fractional parts of a farthing are inserted, as being requisite to be taken into account in respect of payment of interest by government, or allowance of interest, as between individual and individual in the way of circulation. For though on the lowest note (the sixpenny note) the interest will not amount to so much as a farthing by the end either of the first or second half-year, yet by the end of the third half-year it will amount to a farthing with a fraction over, and consequently, on three such notes taken together it will amount to a farthing by the end of the first half-year, and on two by the end of the second half-year.
k The reduction being from £2 : 19 : 4¾ per cent. to £2 : 7 : 6¼ (fractions of a farthing neglected,) viz. a trifle more than 2⅜ per cent.
d Magnitudes, inserted in the series for uniformity, but supposed to be superfluous.
f By putting together the five sizes marked thus, the sum of £1,000 exactly may be made up; likewise by ten £100 notes, if £100 notes are admitted.
e By putting together the six sizes marked thus, the sum of £100 exactly may be made up.
l By putting together the three sizes marked thus, the sum of £100 exactly may be made up.
c Rate of interest reduced thereby to £2 : 19 : 4¾ per cent., fractional parts of a farthing being neglected.
a STANDARD NOTE, or UNIT, to which the other Notes bear reference; those above it in the scale being multiples of it and of each other; those below it submultiples. Common measure, 2.
g The notes marked thus may be termed SILVER NOTES; all above them being styled GOLD NOTES. It is proposed that the paper for the GOLD NOTES shall, for distinction sake, be yellow.
m The two series or scales here given, with their respective halves and doubles, &c. will be found to be the only convenient series for a currency on which daily interest is to be computed. The series which has the £12 : 16s. note for its standard note, giving for the rate of yearly interest £2 : 19 : 4¾, being a trifle less than £3 per cent.; the series which has the £16 note for its standard note, giving for the rate of yearly interest £2 : 7 : 6¼, being a trifle more than 2⅜ per cent.
By each of these series or scales even sums (sums having a certain number of pieces of existing coin exactly corresponding to them) are given for the amount of the several notes respectively exhibited by them; in any other series that could be interposed fractional sums (sums not having any number of existing coins exactly corresponding to them) would present themselves in several places.
By altering the principal sum (or purchase money for the standard amount of interest, viz. a farthing a day,) from £16 to no more than half as much, viz. £8, the rate of interest would be doubled; that is, raised from a trifle more than 2⅜ per cent. to a trifle more than 4¾. But, were this to be the rate allowed at the present period (viz. anno 1800,) instead of profit there would be loss. The rate given by the last loan (21st February 1800) being no more than £4 : 14 : 2¼ per cent., instead of £4 : 15 : 0½, which would be the rate allowed, if no more than £8 were taken for the above standard amount of interest.
By altering the principal (or purchase money of the said standard amount of interest) from £12 : 16s. to as much again, viz. £25 : 12s., the rate of interest corresponding to that amount would be reduced by one-half; i. e. reduced from almost £3 per cent. to £1 : 9 : 8¼—being a trifle less than 1½ per cent.
If, instead of being reduced by one-half as above, the purchase money of the said standard amount of interest were to be doubled, i. e. raised from £16 to £32, the rate of interest corresponding to that amount would be reduced by one-half—reduced from a trifle more than 2⅜ per cent. to a trifle more than 13/16 per cent.
For all these rates of interest, as well as for any number of multiples or aliquot parts of them, this same table (it is evident) may be made to serve; viz. by conceiving the series of principal sums to be shifted so many degrees higher or lower, the corresponding series of amounts of interest remaining unmoved; or, vice versâ, by conceiving the series of amounts of interest to be shifted so many degrees higher or lower, the corresponding series of principal sums remaining unmoved—the number of series or scales which differ in such a manner from one another as to give the amounts of the several sums comprised in them throughout, and which in both instances give none but even sums, being (as above mentioned) but two, viz. that which has £12 : 16s., and that which has £16 for the price of the standard note.
h In the DAILY AUGMENTATION TABLE on the back of each note, the periods will vary in number according to the magnitude of the note. In the Standard Note it is proposed they should be periods of eight days; and so in the double, quadruple, octuple, and half of it—amount of increase by the end of such period in the standard note, 8 farthings (=2d.) On any intermediate day the exact sum will be made up by adding 1, 2, 3, 4, 5, 6, or 7 farthings, half-pence, twopences, or half-farthings, according to the distance of the day in question from the last tabular day (i. e. day mentioned in the table.) In the higher notes the periods might be more numerous; in the lower notes they would of course be less numerous, since a period indicating an increase under a farthing would be of no use. Among the silver notes, in the 4s. note the year could contain but four such periods; in the 2s. note but two; in the 1s. note but one; and in the sixpenny note but a part. To give a whole farthing will here require a whole year and part of another. In this there will be no Daily Augmentation Table; and in the other silver notes the daily and yearly table will be combined into one. In the four intermediate notes between the silver notes and the half of the standard note, periods of 32 days will suffice.
No. in the series Ratio to the Unit or Standard Note. Daily Interests, answering to a Farthing per Day on the Standard Note. Principal Sums corresponding to those Daily Interests, at £3 per cent. precisely. Principal Sums as proposed at £3 per cent. nearly for the sake of even Money. Amounts of Interest, proposed to be allowed on the proposed Principal Sums for Correct Amounts of yearly Interest on the proposed Principals. Differences between the proposed and correct Amounts. Principal Sums corresponding to the same daily Interests at the reduced rate of 2⅜ per cent. nearly.k
One Day. One week nearly; viz.—Eight days One month nearly; viz.—32 days.h One half-year nearly; viz.—182 days.i One year nearly; viz.—364 days.i
s. d. f. £ s. d. f. £ s. d. s. d. f. £ s. d. f. £ s. d. f. £ s. d. f. £ s. d. f. £ s. d. f. £ s. d. f. £ s. d. f.
1 512 10 8 0 6,488 17 9 1 d 6,553 12 0 10 8 0 4 5 4 0 17 1 4 0 97 1 4 0 194 2 8 0 196 5 4 0 2 2 8 0 8,192 0 0 0
2 256 5 4 0 3,244 8 10 2 d 3,276 16 0 5 4 0 2 2 8 0 8 10 8 0 48 10 8 0 97 1 4 0 98 2 8 0 1 1 4 0 4,096 0 0 0
3 128 2 8 0 1,622 4 5 1 d 1,638 8 0 2 8 0 1 1 4 0 4 5 4 0 24 5 4 0 48 10 8 0 49 1 4 0 0 10 8 0 2,048 0 0 0
4 64 1 4 0 811 2 2 2 f 819 4 0 1 4 0 0 10 8 0 2 2 8 0 12 2 8 0 24 5 4 0 24 10 8 0 0 5 4 0 1,024 0 0 0
5 32 0 8 0 405 11 1 1 d 409 12 0 0 8 0 0 5 4 0 1 1 4 0 6 1 4 0 12 2 8 0 12 5 4 0 0 2 8 0 512 0 0 0
6 16 0 4 0 202 15 6 2 d 204 16 0 0 4 0 0 2 8 0 0 10 8 0 3 0 8 0 6 1 4 0 6 2 8 0 0 1 4 0 256 0 0 0
7 8 0 2 0 101 7 9 1 f 102 8 0 0 2 0 0 1 4 0 0 5 4 0 1 10 4 0 3 0 8 0 3 1 4 0 0 0 8 0 128 0 0 0
8 4 0 1 0 50 13 10 2 fe 51 4 0 0 1 0 0 0 8 0 0 2 8 0 0 15 2 0 1 10 4 0 1 10 8 0 0 0 4 0 l64 0 0 0
9 2 0 0 2 25 6 11 1 fc 25 12 0 0 0 2 0 0 4 0 0 1 4 0 0 7 7 0 0 15 2 0 0 15 4 0 0 0 2 0 l32 0 0 0
a10 1 0 0 1 12 13 5 2 e 12 16 0 0 0 1 0 0 2 0 0 0 8 0 0 3 9 2 0 7 7 0 0 7 8 0 0 0 1 0 16 0 0 0
11 ½ 0 0 0 ½ 6 6 8 3 e 6 8 0 0 0 0 ½ 0 0 1 0 0 0 4 0 0 1 10 3 0 3 9 2 0 3 10 0 0 0 0 2 8 0 0 0
12 ¼ 0 0 0 ¼ 3 3 4 1 e 3 4 0 0 0 0 ¼ 0 0 0 2 0 0 2 0 0 0 11 1 256/512 = ½ 0 1 10 3 0 1 11 0 0 0 0 1 l4 0 0 0
13 0 0 0 1 11 8 0 f 1 12 0 0 0 0 0 0 0 1 0 0 1 0 0 0 5 2 384/512 = ¾ 0 0 11 1 256/512 = ½ 0 0 11 2 - - - - 2 0 0 0
14 1/16 0 0 0 1/16 0 15 10 0 e 0 16 0 0 0 0 1/16 - - - - 0 0 0 2 0 0 2 3 192/512 = 0 0 5 2 384/512 = ¾ 0 0 5 3 - - - - 1 0 0 0
15 1/32 0 0 0 1/32 0 7 11 0 g 0 8 0 0 0 0 1/32 - - - - 0 0 0 1 0 0 1 1 352/512 = 11/16 0 0 2 3 192/512 = - - - - - - - - 0 10 0 0
16 1/64 0 0 0 1/64 0 3 11 2 g 0 4 0 0 0 0 1/64 - - - - - - - - 0 0 0 2 432/512 = 27/32 0 0 1 1 352/512 = 11/16 - - - - - - - - 0 5 0 0
17 1/128 0 0 0 1/128 0 1 11 3 g 0 2 0 0 0 0 1/122 - - - - - - - - 0 0 0 1 216/512 = 27/64 0 0 0 2 432/512 = 27/32 - - - - - - - - 0 2 6 0
18 1/256 0 0 0 1/256 0 0 11 3 g 0 1 0 0 0 0 1/258 - - - - - - - - 0 0 0 0 364/512 = 91/128 0 0 0 1 216/512 = 27/64 - - - - - - - - 0 1 3 0
19 1/512 0 0 0 1/512 0 0 5 3 g 0 0 6 0 0 0 1/516 - - - - - - - - 0 0 0 0 182/512 = 91/256 0 0 0 0 364/512 = 91/128 - - - - - - - - 0 0 7 2m
Edition: current; Page: [109]

Art. 2. That the interest be in such sums as to be capable of being computed daily, as in the case of exchequer bills. That the daily interest allowed upon the standard note (so termed with reference to any smaller or larger notes that may come eventually to be added to the circulation upon the same principle) be a farthing;[3]—and that the principal or denominative value of such standard note be £12 : 16s; and that the interest, in order to afford a profit to government, be inferior to the current rate borne by government annuities at the opening of the issue, say £3 per cent. nearly[4]—a small sum being added to the principal sum, corresponding precisely to that rate, for the sake of making the sums the more even, especially at the bottom of the scale.[5]

Art. 3. That each note contain, on the face or back of it, a table, whereby the value of it, as increased by daily interest, may be seen for every day in the year, by inspection, without calculation; also a table, whereby in case of forbearance[6] to receive the interest, the value of a note of that magnitude, as increased by daily interest, added to yearly interest so forborne to be received, may be seen, for any number of years, by a single addition; together with an indication, by means of which it may be seen (also by simple inspection) for what number of years, if any, the interest on the particular note in question continues unreceived.

Art. 4. That the interest on each note, whenever issued, commence on the first day of each year of our Lord; and that, on notes issued on the several days after such first day, the interest to the day of issue be added to the purchase money.[7]

Art. 5. That no such annuities be ever issued at a less price,[8] (i. e. so as to bear a Edition: current; Page: [110] greater rate of interest) than the first issue, and accordingly, that as often as any money comes to be raised at a higher rate of interest by perpetual annuities, it shall be by the creation of stock annuities, &c. as at present; and that a clause to this effect be a fundamental article in the contract made with the purchasers on the part of government, and be inserted accordingly in the tenor of the note.

Art. 6. That, at that price, the issue be kept open, so long as any of the redeemable stock annuities existing at the commencement of the issue, continue unredeemed, and no longer; and that this be another such fundamental article. (See Art. 20.)

Art. 7. That no such note annuity be paid off till the whole mass of stock annuities existing at the commencement of the issue, or created subsequently, shall have been paid off,[9] and that this be another such article.

Art. 8. That for every £3 a-year annuity thus created, an equal portion of stock annuities be forthwith bought in and extinguished within a time to be limited; and that this be another such article.

Art. 9. That the profit resulting from the difference between the price at which each such annuity shall have been sold, and the price at which an equal mass of annuity shall have been bought in, be carried to the sinking fund, subject to such other dispositions, if any, as from time to time may be thought fit to be made by parliament with respect to a predetermined portion or portions of it.

Art. 10. That, at the outset, no other note be issued than the standard note (£12 : 16s.) with the half, or with the half and quarter of it.

Art. 11. That, by degrees, the series of notes be extended downwards, each successive note being the half of the one immediately preceding it (with or without the omission of any term or terms in such descending series) until it has descended to the lowest piece of silver coin in common currency, viz. a sixpence; and that it be then considered whether to give it a further extension downwards, viz. to the level of the copper coinage.[10]

Art. 12. That the notes having for their respective values, sums not exceeding the largest silver coin in use (viz. 5s.) be distinguished by the appellation of silver notes, all above being for the same purpose termed gold notes; and that to facilitate the discrimination, a corresponding peculiarity of colour be given to the gold notes.

Art. 13. That, moreover, as convenience may suggest, the series be extended to a correspondent length, or otherwise upwards;[11] Edition: current; Page: [111] in which case the series will, if complete, consist of nine terms below the standard note, and as many above it—total, nineteen; having two for their common difference: values as by the annexed table.

Art. 14. That when the credit of this paper has been established, or even from the first, notes already taken out by individuals be received (as bank-notes are at present) at the several government offices[12] in the country as well as in the town, and re-issued from thence in the way of circulation, as they would be between individual and individual, charged with the intervening interest, to as many as may think proper to receive them at that value.

Art. 15. That the offices from whence the proposed paper is issued to the purchasers, be, in the first instance, the several local post-offices[13] in town and country, with the Edition: current; Page: [112] eventual addition of any of the other local government offices (such as the stamp and excise offices,) or in case of need, other offices to be established for the purpose, in such situations and numbers as may be found necessary.

Art. 16. That to save trouble in the issue of the smaller notes, especially the silver notes, government reserves to itself the power of fixing the least quantity[14] of annuity-note money, which an individual shall be allowed to take out at once; as also to prescribe the composition of that quantity, taking care to leave to the customer the choice of the composition, as far as it may be a matter of indifference to government.

Art. 17. That powers be given to the king in council, or to the treasury, from time to time to declare, whether any and what fee, not exceeding a certain amount, shall be paid by the purchaser, on the emission of each note or parcel of notes constitutive of such or such a sum; as also on the exchange of an old note for a fresh note, at the instance of the holder—regard being had in both cases to the magnitude of the sum constituting the value of the note or mass of notes; as also to call in at any time any such note or notes, so it be without expense to the holder, for the purpose of their being examined or exchanged; and, by suspension of interest, or other penalties, to enforce obedience to such calls; as also to declare whether any and what fee shall be paid by the holder on the receipt of the interest due on each note or parcel of notes.[15]

Edition: current; Page: [113]

Art. 18. That periodical accounts be published of the progress of the issue,[16] as regularly, and circulated as extensively, as the prices of stocks are at present, under heads expressive of the day, the place, the number of notes of each magnitude, and the total amount issued on each day at each place; together with the increase or decrease of the amount, as compared with former periods; and any such other particulars as may be of use.

§ 2.: Eventual Extension.

Art. 19. That if, by this and other means, three per cent. stock annuities should ever have risen to par, the produce of the issue of note annuities be thereupon applied to the paying off, instead of buying in stock annuities; and so toties quoties, buying in whenever they are under par, paying off whenever they are at or above par.

Art. 20. That inasmuch as the paying off stock annuities, the greatest part thereof carrying three per cent., will lead to a rapid and almost simultaneous conversion[17] of Edition: current; Page: [114] the whole amount thereof into note annuities, bearing nearly the same rate of interest;—and inasmuch as, upon the redemption of the last parcel of redeemable stock annuities, the Edition: current; Page: [115] emission of note annuities at this rate of interest must (according to article 6) immediately cease;—and inasmuch as the mass of government annuities will in the meantime Edition: current; Page: [116] have already been much reduced, and by the continued operation of the continually increasing powers of the existing sinking funds, the scarcity will be growing greater and greater every day (notwithstanding that, being continually exposed to be paid off at par, they will be incapable of bearing any considerable premium) the offices be opened thereupon for the emission of a second issue, at a reduced rate of interest, say £2 : 7 : 5—i. e. 2⅜ per cent. nearly—(viz. by raising the price of the standard note from £12 : 16s. to £16;)—the produce of such second issue to be applied to the paying off the notes of the first issue, and the second issue to close as soon as the redemption of the notes of the first issue shall have been completed.

Art. 21. That the amount of all interest saved, as well by the redemption of stock annuities redeemed by the produce of the existing or other future funds (and, therefore, without the preparatory emission of a mass of annuity-note paper to the corresponding value) as by the progress made in the reduction of the rate of interest in the way just mentioned (viz. by the preparatory emission of a mass of annuity-note paper, at a lower rate of interest, followed by the redemption of a correspondent mass of stock annuities, or note annuities, at the higher rate,) be carried (immediately) to the sinking funds—on the principle of the provision made, in the like behalf, in and by the existing act (viz. the New Sinking Fund Act, 32 Geo. III. c. 32, § 2.)

Art. 22. That, immediately upon the redemption of the last parcel of note annuities of the first issue, the offices he again opened for the emission of a third issue at the next lowest rate of interest suitable to the nature of note annuities on which interest is computed daily, say £1 : 9 : 6—i. e.per cent. nearly[18];—viz. by raising the price of the standard note from £16 to £25 : 4s.;—the produce of such third issue to be appropriated to the redemption of the note annuities of the second issue as above: with like provision as above in favour of the sinking funds: and so toties quoties, in so far as any such farther reduction may be deemed eligible.

Art. 23. That inasmuch as, so long as any portion of the redeemable annuities remain unextinguished, there may remain two parcels of annuity-note paper, bearing two different rates of interest—the higher closed, the other open—provision be made, that in case of the creation of any portion of capital in stock annuities, at any time thereafter, by reason of money borrowed for the support of a war or otherwise, powers be given for extending the issue of note annuities to the extent of the capital so created, and at the rate of interest the then last or open issue of note annuities shall receive.

(See Table II.)


§ 1.: Features possessed in common with other securities.

1. Rate of interest low, inferior to that afforded by money laid out in the purchase of stock annuities. Exemplified in the notes of country bankers.

Edition: current; Page: [b]



By Statute Geo. III. c. , counterfeiting the Portrait of any Public Officer on an Annuity Note is Forgery. The having in one’s possession, without special licence, any Drawing or Plate, &c. designed to represent such Head, is presumptive evidence of such Forgery: Punishment Death.[23] Like provision in respect of the counterfeiting this type.[24]


I.: Daily Interest, or Augmentation Table:[25]

Showing the Value of this Note for every Day in the Year, as the same is increased by the addition of daily Interest. No Interest for the last day of any Year:[26] Nor for the 29th of February in a Leap Year:[27] Nor for the day on which the Note is passed.[28]

Jan. 8 £12 16 2
16 12 16 4
24 12 16 6
Feb. 1 12 16 8
9 12 16 10
17 12 17 0
25 12 17 2
Mar. 5 12 17 4
13 12 17 6
21 12 17 8
29 12 17 10
April 6 12 18 0
14 12 18 2
22 12 18 4
30 12 18 6
May 8 12 18 8
16 12 18 10
24 12 19 0
June 1 12 19 2
9 12 19 4
17 12 19 6
25 12 19 8
July 3 12 19 10
11 13 0 0
19 13 0 2
27 13 0 4
Aug. 4 13 0 6
12 13 0 8
20 13 0 10
28 13 1 0
Sept. 5 13 1 2
13 13 1 4
21 13 1 6
29 13 1 8
Oct. 7 13 1 10
15 13 2 0
23 13 2 2
31 13 2 4
Nov. 8 13 2 6
16 13 2 8
24 13 2 10
Dec. 2 13 3 0
10 13 3 2
18 13 3 4
26 13 3 6
30 13 3 7

II.: Underneath is the Register of Yearly Payments of Interest:[29]

In which are set down the several Years of our Lord (if any) for which Interest upon this Note has been paid by the Government:—

If upon the face of the above Register, the Interest on this Note, for any number of Years, appears to remain unpaid, to find the total value of it, add to its value for the Day, according to the above Table, the amount of the Interest for the aforesaid number of unpaid years, according to the following

III.: Yearly Interest, or Augmentation Table.[30]

1801 £0 7 7
—02 0 15 2
—03 1 2 9
—04 1 10 4
—05 1 17 11
—06 2 5 6
—07 2 13 1
—08 3 0 8
—09 3 8 3
—10 3 15 10
—11 4 3 5
—12 4 11 0
—13 4 18 7
—14 5 6 2
—15 5 13 9
—16 6 1 4
—17 6 8 11
—18 6 16 6
—19 7 4 1
—20 7 11 8
—21 7 19 3
—22 8 6 10
—23 8 14 5
—24 9 2 0
—25 9 9 7
—26 9 17 2
—27 10 4 9
—28 10 12 4
—29 10 19 11
—30 11 7 6
—31 11 15 1
—32 12 2 8
—33 12 10 3
—34 12 17 10


No _____[2] Daily Yearly Rate of Interest Issued
Price and Value, Interest, Interest, Interest, commences to the
besides One £0 : 7 : 7. 3 per Cent. from Purchaser,
£12 : 16 : 0. Farthing. nearly. 1st January ad 18
ad 18

This Note, price and value Twelve pounds sixteen shillings, besides interest, entitles the Bearer[3] to a Farthing per day, from the first of January last for ever, out of the Consolidated Fund; but subject to redemption, on payment of the above sum, with interest.

The above interest is paid half-yearly;[4] and the interest of each half-year may be received any time not earlier than[5] [] days after the last day of such half year, through the medium of any Local Annuity-Note Office[6] in town or country; previous application having been made at the same office not less than[7] [] days, nor more than[8] [] days before such last day, and such conditions being observed as may be seen at every such office.

The Fee to be paid at the office on the purchase of this Note, is [],[9] and no more; on exchanging the same for a fresh Note, [].[10]

Issued at the General Annuity-Note Office in St. Margaret’s Street, Westminster, this __________ day of __________ 18 by order of me _______________ Auditor[11] of his Majesty’s Exchequer; and by[12] the hands of me _______________ Issuing Clerk.[13]


No __________

Issued at my Local Annuity-Note Office in _______________ this __________ day of _______________ One thousand eight hundred and __________ by me _________________________ Office-Keeper,[18]

By Statute Geo. III. c. the faith of Parliament is pledged, that no Annuity Note, conveying a perpetual redeemable Annuity payable to Bearer, shall ever be issued at such price as to give a higher rate of interest than is given by this Note;[19] and that no such Annuity Note shall ever be paid off without the consent of the holder, while any redeemable Stock Annuities continue unredeemed.

For security, in cases of Trust, Conveyance by Post, &c., the Head-piece of this Note may be separated from the body[20] by cutting it across through the waved line. An account of the uses and purposes of such division[21] may be seen at the said several offices.

By Statute Geo. III. c. counterfeiting, &c., the Portrait of any Public Officer on an Annuity Note is Forgery; the having in one’s possession, without special licence, any drawing or plate, &c. designed to represent such head, is presumptive evidence of such Forgery, — punishment Death.[23] Like provision in respect of the counterfeiting this Type.[24]


I.: Daily Interest, or Augmentation Table:[25]

Showing the Value of this Note for every Day in the Year, as the same is increased by the addition of Daily Interest.

No Interest for the last Day of any Year:[26] nor for the 29th of February in a Leap Year:[27] nor for the Day on which the Note is passed.[28]

II.: Register of Half-Yearly Payments of Interest:[29]

In which are set down the several Years and Half-Years of our Lord (if any) for which Interest upon this Note has been paid by Government.

N.B.—The Figures 1 and 2 distinguish the First and Second Half-Years of each year.

Day. Value.
Jan. 8 £12 16 2
16 12 16 4
24 12 16 6
Feb. 1 12 16 8
9 12 16 10
17 12 17 0
25 12 17 2
Mar. 5 12 17 4
13 12 17 6
21 12 17 8
29 12 17 10
Apr. 6 12 18 0
14 12 18 2
22 12 18 4
30 12 18 6
May 8 12 18 8
16 12 18 10
24 12 19 0
June 1 12 19 2
9 12 19 4
17 12 19 6
25 12 19 8
July 1 12 19
Day. Value. Value.
July 3 £12 19 10 £12 16
11 13 0 0 12 16
19 13 0 2 12 16
27 13 0 4 12 16
Aug. 4 13 0 6 12 16
12 13 0 8 12 16 10½
20 13 0 10 12 17
28 13 1 0 12 17
Sep. 5 13 1 2 12 17
13 13 1 4 12 17
21 13 1 6 12 17
29 13 1 8 12 17 10½
Oct. 7 13 1 10 12 18
15 13 2 0 12 18
23 13 2 2 12 18
31 13 2 4 12 18
Nov. 8 13 2 6 12 18
16 13 2 8 12 18 10½
24 13 2 10 12 19
Dec. 2 13 3 0 12 19
10 13 3 2 12 19
18 13 3 4 12 19
26 13 3 6 12 19
30 13 3 7 12 19
1 2 1 2
2 1 2 1
1 2 1 2
2 1 2 1
1 2 1 2
2 1 2 1
1 2 1 2
2 1 2 1
1 2 1 2
2 1 2 1
1 2 1 2
2 1 2 1
1 2 1 2
2 1 2 1
1 2 1 2

III.: If, upon the face of the above Register, the Interest on this Note, for any number of Half-years, appears to remain unpaid, to find the total value of it, add to its value for the Day, according to the above Table, the amount of the Interest for the aforesaid number of unpaid Half-years, according to the following

Half-Yearly Interest or Augmentation Table:[30]
1801 { 1 £0 3
{ 2 0 7 7
1802 { 1 0 11
{ 2 0 15 2
1803 { 1 0 18 11½
{ 2 1 2 9
1804 { 1 1 6
{ 2 1 10 4
1805 { 1 1 14
{ 2 1 17 11
1806 { 1 2 1
{ 2 2 5 6
1807 { 1 2 9
{ 2 2 13 1
1808 { 1 2 16 10½
{ 2 3 0 8
1809 { 1 3 4
{ 2 3 8 3
1810 { 1 3 12
{ 2 3 15 10
1811 { 1 3 19
{ 2 4 3 5
1812 { 1 4 7
{ 2 4 11 0
1813 { 1 4 14
{ 2 4 18 7
1814 { 1 5 2
{ 2 5 6 2
1815 { 1 5 9 11½
{ 2 5 13 9
1816 { 1 5 17
{ 2 6 1 4
1817 { 1 6 5
{ 2 6 8 11
1818 { 1 6 12
{ 2 6 16 6
1819 { 1 7 0
{ 2 7 4 1
1820 { 1 7 7 10½
{ 2 7 11 8
1821 { 1 7 15
{ 2 7 19 3
1822 { 1 8 3
{ 2 8 6 10
1823 { 1 8 10
{ 2 8 14 5
1824 { 1 8 18
{ 2 9 2 0
1825 { 1 9 5
{ 2 9 9 7
1826 { 1 9 13
{ 2 9 17 2
1827 { 1 10 1 11½
{ 2 10 4 9
1828 { 1 10 8
{ 2 10 12 4
1829 { 1 10 16
{ 2 10 19 11
1830 { 1 11 3
{ 2 11 7 6
1831 { 1 11 11
{ 2 11 15 1
1832 { 1 11 18 10½
{ 2 12 2 8
1833 { 1 12 6
{ 2 12 10 3
1834 { 1 12 14
{ 2 12 17 10
Edition: current; Page: [c] Edition: current; Page: [117]

2. Perpetuity, of the mass of interest granted, subject to redemption.—Taken from stock annuities;—agrees with Irish debentures and India bonds;—differs from Exchequer bills.

3. The principal not demandable.—Taken from stock annuities;—agrees with Irish debentures and India bonds: also with navy, victualling, transport bills, and ordnance debentures;—differs from bank, bankers, and private notes and bills.

4. Interest without special fund, over and above the general consolidated fund.—Taken from Exchequer bills;—differs from the former practice in the creation of stock annuities;—agrees with all the other above-mentioned government engagements.

5. The quantity issued, incapable of exceeding the quantity demanded at the original price.—Agrees with bank paper, and in practice with bankers’ paper;—differs from stock annuities, Irish debentures, exchequer bills, and navy, &c. bills.

6. The evidence of the engagement consigned to a portable instrument instead of a fixed book.—Taken from exchequer bills;—differs from stock annuities;—agrees with Irish debentures, and the now disused navy, victualling, transport, and ordnance bills or debentures:—also with India bonds, bank notes, bankers’ promissory notes, and private promissory notes, and bills of exchange.

7. The paper, by its size, shape, texture, and thinness, particularly fitted for circulation.—Taken from bank paper;—agrees more or less with bankers’ paper, and with the French assignats—differs from all the other above-mentioned engagements, except from some late issues of exchequer bills, in respect of size.

8. Application of the profit of the measure towards the reduction of the national debt.—Taken from the sale of the land tax—i. e. the exchange of so many portions of the annual produce of that tax for portions of stock annuities;—differs from all the other engagements above mentioned.

§ 2.: Features altogether new.

9. Secure provision for the instant extinction of the debt created by it.

10. The amount of it incapable of exceeding the amount of the existing debt.

11. Funds, no other than those already provided for the existing debt; but the security better, in respect of the appropriation of the profit to the exoneration of the fund, by the continual redemption of a greater mass of the debt than the mass continually created.

12. Interest receivable, with scarcely any trouble or expense, wherever letters are receivable.

13. The note or instrument serving as security for the interest, purchasable of government with scarcely any trouble or expense wherever letters are receivable.

14. Ditto, receivable in the course of circulation, and with the interest, without any trouble or expense. N.B. Exchequer bills, India bonds, &c., are not obtainable in the course of circulation, without the expense of brokerage; to which is added, out of London, the expense of postage, and the expense of professional, or obligation of gratuitous agency.

15. Quantity obtainable, adapted to every purse, from the largest to the smallest.—Bankers’ notes, limited as they are, on the side of diminution by law, and in point of variety of magnitude by the narrowness of the market, &c., in the instance of each banking-house, share this advantage in an imperfect and inadequate degree.

16. Facility afforded for ascertaining by inspection, without calculation, the amount of interest due, &c.

17. Securities against forgery.—See Ch. II. Table II. Form of a note. [Notes 14, 22, and 24.]

18. Facility thence afforded for ascertaining the value in respect of genuineness—an advantage it has over gold and silver coin, and which is shared with it in but an imperfect degree by bank and bankers’ papers, &c., for want of the securities against forgery.

19. Means afforded of making compound interest, without hazard, trouble, or expense. Shared in an imperfect degree (being attended with hazard, trouble, and expense) by stock annuities—completely impracticable by any other means.

20. Security against depreciation.—The price can never rise, because any quantity may be had at the original price, so long as any portion of stock annuities remains unredeemed. In the ordinary state of things, no man need take an inferior price in the way of circulation, when men are giving the full price for it in the way of issue. As to the probability of any state of things so extraordinary as to produce a discount, see Ch. IV. Grounds, &c. Bank and bankers’ paper are incapable of rise; but, in several instances, the one has experienced a partial, and the other a total loss of value.*

Edition: current; Page: [118]


What is expected of the proposed currency is:—

1. That it will be taken out in the way of issue,
2. - - at the fixed price put upon it;
3. - - be received in circulation
4. - - at the same price;
5. - - with the addition of the interest,
6. - - and without undergoing any subsequent depreciation;
7. - - and will thus continue to circulate among individuals of all classes.

That it will be taken out in the way of issue, and pass in the way of circulation, at 3 per cent. nearly (the rate of interest put upon it,) notwithstanding the higher interest yielded by stock annuities, Irish debentures, exchequer bills, and India bonds, is proved by the example of bankers’ paper, the interest on which runs from 2 to a nominal 3 per cent.; but really not so much, by reason of divers conditions, which reduce the value of it; besides that, in these instances, the engagement is not perpetual, nor the security so good.

That the interest due will be allowed for in circulation, is put out of doubt by the usage in the course of exchequer bills, navy bills, and India bonds; though none of these papers are provided with the tables, which do away the trouble of computation altogether, however small the sum, and however short the time.

The following may serve as a view of the masses of money (cash or bank paper,) capable of being employed in the purchase of this paper, whether in the way of issue, or in the course of the circulation—the time when the paper is capable of being taken in hand, being the time when the several masses of money respectively come in hand; and the time for parting with the paper, being the time when the money must or would have been parted with.

I. Monies capable of being employed in the purchase of the proposed paper, for the purpose of perpetual or permanent income, without any view to circulation; and that would thereby afford to the note-holder, so long as the paper were kept in hand, a mass of perpetual annuities on a small scale.

1. Money actually kept up in the form of a petty hoard, or hoard upon a small scale, with or without accumulation, to serve as a fund for demands, more or less remote and certain, but determinate; such as marriage, apprenticing out, or portioning children—provision for widowhood or superannuation—purchase of articles of stock in agriculture or manufactures, building, or furniture of such a price as to require a persevering course of frugality to raise the amount.

2. Money, the amount of which would be kept up in the shape of the proposed interest-bearing paper, if the proposed encouragement were to be held out.

3. Money actually kept in reserve for contingent and indeterminate expenses.

4. Money that would be kept in reserve for such purposes.*

II. Monies that could not, or would not, have been employed in the purchase of the proposed paper, but with a view to circulation; the amount being destined to be otherwise employed or spent within a smaller or larger compass of time, in masses or in driblets, as the money (cash or bank paper) would have been employed or expended.

5. Money coming in the shape of fixed income, i. e. to an amount certain, and destined for current expenditure.

6. Money coming in the shape of casual income, i. e. to an amount uncertain, and whether in driblets or large masses, and destined (as above) for current expenditure.

7. Money received in the shape of income in trust on private account: ex. gr. by land stewards, army and navy agents, guardians, receivers of the estates of corporations, of estates thrown into Chancery, &c. See Ch. XI.

8. Money received in trust on public account, in its passage to or from the exchequer: ex. gr. by collectors and receivers of the land tax, customs, excise, stamps, assessed taxes, boards and individuals receiving impress money for various services. See Ch. V.

9. Money already in capital sums (whether received on the score of debt, or by sale of lands, houses, government annuities, shares in a joint stock company, succession, testament, or gradual accumulation) under engagement to be laid out, on a day certain or uncertain, in a mode of permanent investment: ex. gr. purchase of land, houses, or government annuities; shares in a joint-stock company, Edition: current; Page: [119] loan on mortgage or bond, stocking of a farm, or establishment of a manufactory.

10. Money already in capital sums not under engagement, but waiting for opportunities of being laid out, as above.

11. Money already in capital sums, not under engagement, but waiting for opportunities of temporary employment—such as loan by discount of bills, purchases in the above ways on speculation, purchases in the way of trade, &c.

12. Money, as yet in small sums (whether saved from fixed or casual income,) kept in hand for accumulation.

13. Money received in the shape of capital, in trust on private account: ex. gr. by assignees of bankrupts and insolvents, prize agents, executors, and administrators, turning effects into money, &c.

14. Money destined for the discharge of debts, and kept in hand while accumulating into the sum due, or waiting for the time when due, or for their being demanded.*

The ground of the expectation thus entertained on behalf of the proposed currency, will appear the stronger, the more closely the advantages conferred by the possession of it are compared with the advantages afforded by the several other sorts of securities, or modes of placing out money, considered as coming in competition with it;—viz. stock annuities, exchequer bills, and the market constituted by the demands of individual borrowers, country banking-houses included, as well as those afforded by cash itself, and by Bank of England notes.

I. Compared with the market afforded by stock annuities, we shall find it possessed of the following advantages:—

I. In regard to purchase

1. No trouble or expense on the score of journeys to London, or attendance there; 2. No expense on the score of agency, 3. Brokerage, 4. Stamp duties, 5. Fees for powers of attorney, or, 6. Postage; 7. No danger of loss by buying to a disadvantage.

II. During custody

1. Interest daily—not so much as a day’s interest need ever be lost; 2. Interest receivable without trouble; 3. Compound interest capable of being made with certainty and facility; 4. Settlements of money in trust may be made by this means, without trouble or expense.

III. In regard to transfer

1. No expense or trouble on the score of journeys or attendances; 2. No expense on the score of agency, 3. Brokerage, 4. Stamp duties, 5. Fees for powers of attorney, or, 6. Postage; 7. No danger of loss by selling to a disadvantage; 8. The capitals of the mass of notes, employable in the shape of circulating capital, in whatever portions may from time to time be requisite—just like so much cash—without trouble or expense.

Edition: current; Page: [120]

II. To money circumstanced as in the case last supposed—viz. to be laid out either in small parcels or parcels of any magnitude for a short time—the purchase of exchequer bills is in some measure free from the objections to which the purchase of stock annuities is exposed, but it is open to others:—

1. The period for which they are issued is limited in general to a time of war; besides which, their existence is at all times precarious.

2. The quantity of them is continually liable to increase, as well as the time of payment to retardation, and thence their marketable value to depreciation to an unknown amount.

3. Exchequer bills are never issued for sums less than £100; by which circumstance every mass of money less than that considerable amount is excluded from this branch of the market.

III. Circumstances of comparative disadvantage attending the private market may be reckoned as follows, viz.—

1. Trouble and expense and loss of time attending the inquiry necessary in many cases to the meeting with a fit opportunity of placing out money at interest.—N.B. In the case of the proposed market, this circumstance of disadvantage is altogether wanting.

2. Want of coincidence between the quantum of the sum wanted to be borrowed and that of the sum ready to be lent.—Wanting altogether.

3. Want of coincidence between the time for which money is wanted to be borrowed, and the time for which it can conveniently be lent.—Wanting altogether.

4. Difficulty of obtaining sufficient assurance respecting the competency of the security in its several points of view.—Wanting altogether.

5. Trouble, expense, loss of time and interest, attendant on the adjustment of the pecuniary part of the security.—Wanting altogether.

6. Trouble, sometimes expense, loss of time and interest, attendant on the process of demanding and obtaining payment of the interest alone, or of principle and interest together, as the case may be.—Trouble and loss of time—reduced to next to nothing: Expense and loss of interest.—Wanting altogether.

7. Danger of loss, and particular incidental inconvenience, by unexpected delay in regard to payment—wanting altogether.

8. Danger and fear of the necessity of litigation.—Wanting altogether.

9. Unwillingness to deal with a stranger, Edition: current; Page: [121] in consideration of the uncertainty respecting his trust-worthiness in respect of moral character and pecuniary sufficiency.—Wanting altogether.

10. Unwillingness to deal with the individual, if a stranger, in respect of the risk of being eventually obliged either to distress him by pressing for payment, or to submit to loss for want of such importunity in many cases. In the instance of a friend, in case of any apprehension of solvency, still more if on that of moral trustworthiness, unwillingness still greater.—Wanting altogether.

11. Unwillingness to accept of interest from a friend, especially if it be on a small sum, or for a short time.—Wanting altogether.

12. Unwillingness, through shame, to accept, and much more to demand, interest for sums and times separately trifling, how considerable soever in their collective amount.—Wanting altogether.

13. Embarrassment, disputes, and loss of time in the computation of interest on small or fractional sums, or for short and fractional periods.—Wanting altogether.

14. Danger of loss by death, marriage, or other change of condition on the part of the borrower, whereby, as far as mere personal security is concerned, a security originally sufficient may become bad or precarious.—Wanting altogether.

That it should continue to circulate without any depreciation, is not essential to the existence of a paper currency—witness the case of exchequer bills and other government paper. But though the property of circulating without depreciation may not be essential to the circulation of this annuity-note paper, it will at any rate be highly conducive to it.

Depreciation proof, it must be confessed, it cannot be, any further than the government, of whose promises it is the vehicle, is destruction proof: by any cause, therefore, that threatens immediate danger to the government—such as invasion, for example, or civil war—its value will be liable to be diminished. These cases can never be urged as an objection specially applicable to the proposed measure.

The measure would not impair, but rather add to the solvency of the government: by the profit it would afford, additional means would be afforded for the reduction of the debt of government.

To the security of government it would add by the multitude of hands it would engage by the tie of interest in the support of government. To create and maintain an interest of this sort is a most happy property common to all government securities: but all the government securities yet known in this country are confined in their circulation to the superior and least numerous classes. It is among the characteristic properties of the proposed new government security, to spread itself among the poorer and most numerous classes, and thus to engage them to give their support to government.

Against depreciation from any sudden demand for payment, the proposed paper is not only as secure as the existing government papers, but more so: those other papers engage to pay the principal and interest; the proposed paper, the interest only. In the one case, the fund drawn upon is the revenue of a single year, or some small number of years; in the other case, the fund drawn upon is the revenue of thirty-five successive years.

Setting aside the extreme cases here in question, there is but one cause of depreciation to which government paper stands exposed, and that is the forcing of the market. The proposed paper alone is not exposed to this cause of depreciation: it will be issued only in proportion to the demand, and is rendered for ever incapable of exceeding it. The produce also will be employed in strengthening the security and lightening the load of the same commodity at market.

It may, however, be urged, that though the proposed paper can never be sold under the par price, it may, in consequence of the demand for its correlative hard cash, cease to bear that price. That such would be the effect in the event of a civil war or serious invasion, will scarcely admit of doubt; and that an effect of the same nature, though to a less amount, should be liable to be produced by other causes, can hardly be regarded as improbable.

To this it may be answered—

1. That admitting (for argument’s sake) that such a result would occasionally take place to a certain degree, still this would not operate as an argument against the institution of the proposed plan, unless such a result were to appear more likely to take place, or likely to take place in a greater degree with regard to it, than with regard to any other circulating government securities.

2. That though such a state of things as the objection supposes be conceivable, yet no ground can be stated, either in point of reason or experience, for regarding it as likely ever to be realized. To whatever extent the amount of the proposed paper may have arrived at the time of the supposed extra demand for cash, it cannot have attained to it but in consequence of a proportionable preference given to it in comparison with hard cash. And the cause of that preference is a circumstance not exposed to change. It consists in this, viz. that principal with interest amounts to more than principal alone: £103 is more than £100, and the ratio is not less at one time than another.

For the purposes of expenditure within Edition: current; Page: [122] the limits of the British empire, the proposed paper could never lose its superiority; and as to so extraordinary a demand for the precious metals for exportation to foreign countries, no such case appears ever yet to have been realized;—the scarcity of bullion in 1796, in the opinion of the most competent judges, being referable not to the extent of the foreign demands, but to the constitution of the existing private paper, payable on demand; to the experienced brittleness of some of the country paper; to the occasional scantiness of the paper of the great chartered company, coupled with its preceding copiousness, and the excess of the advances made by the company to government,—causes which after all would not have been adequate to the production of the effect, had it not been for those alarms of invasion which were prevalent at the time.

3. That no such extra demand for cash, supposing it to exist, could produce any depreciation in the price of the proposed paper till after it had put an entire stop to the purchase of it in the way of issue; since the progress of the issue, being matter of universal notoriety, it could never (in virtue of Art. 18) happen, that in any one part of the country (the expense of postage being out of the question) a man should give £100 for such a quantity of this paper as might in any other part of the country be had for £99. 19s. But in the nature of things, setting aside the influence of the supposed extraordinary and temporary causes, the amount of the demand for this paper cannot but be regularly receiving a regular and very rapid increase.

4. But if, in a case thus void of probability, it were worth while to look out for a remedy, a remedy, and that of the preservative kind, might easily be provided for it: I mean that of a cash fund (not to exceed, suppose a million) formed by a reserve made of a part of the profits of the operation (as per Art. 9,) to be employed in case of need in the support of the price of the proposed paper, by either buying it in with cash, or taking it in pawn for cash, from the time that the discount upon it had risen to an amount worth regarding.

In consideration of this steadiness of price, the proposed paper would become everybody’s paper; all persons possessing any of the masses of money above enumerated—that is, all classes of the community—are likely to be included among the holders of the proposed paper, either as customers for permanent or temporary annuities upon large or small scales; and as it would possess a value in use superior to that of gold and silver, inasmuch as it would yield a profit whilst it was retained; and inasmuch as it would possess a solidity of value far exceeding the paper of any private banker, or even the paper of the bank of England—a solidity only to be destroyed by destroying the power of the government, to pay the interest promised to be paid—a solidity increasing with the amount issued—it would be secure of constant circulation from hand to hand.

Being the holder of an annuity note, there is not a person living on whom I have any right to call upon to give me value for it:—but had it not been for the advantage accruing from the holding of the note, I should not have become the holder of it: and as the advantage thus accruing to me from the holding of this note is no greater to me than it will be to thousands of other people—in a word, to every man without exception, to whom it can be in my way to offer it—in the event of his becoming the holder of it in my stead, the certainty of my obtaining value for it at any time wants nothing of being entire.

No one living is bound to give me silver for the guinea I have in my pocket; yet who is there that ever hesitated to receive a guinea, under the apprehension of not being able to get change for it? Not only the self-regarding advantage of making profit by goods sold for part of the value, engages my neighbour, the shopkeeper, to change it for me, on my laying out to the value of a few halfpence with him, but the social consideration of amity and neighbourhood is sufficient to procure for me the same accommodation at his hands, without any such personal advantage. In the case of the annuity note, the social consideration not only operates with equal force, but has the personal consideration of the advantage to be gained by the holding of the note to back and strengthen it.

The material question is,—Will it be received? This being answered, and answered satisfactorily, the other question,—Why will it be received? how comes it that it will be received?—is matter only of curiosity and speculation.

It may further be observed, that no man will ever have obtained any such note in the way of issue (I mean at the office,) who would not have preferred obtaining it in the course of circulation, and in that way would have obtained it, if he could have got it; because the trouble and expense of taking it out in the way of issue, reduced as it is to the lowest term, will always be something; and in the way of circulation he obtains it without either that trouble or expense. The necessary consequence is, that in the ordinary state of the market, there must exist at all times a disposition to receive a greater quantity of this article than is ever found in it.

The practice of taking out annuity notes can never have become general, without the practice of receiving them in the course of circulation having become universal, and the disposition so to receive them have grown Edition: current; Page: [123] into a confirmed habit—a habit as determinate as that which engages a man without reflection, without thought or deliberation, to receive bank paper, as he would gold.

The value of these notes would be depreciated or destroyed, if the taxable powers of the nation were to such a degree exhausted as not to suffice for the payment of the whole of the annuities with which it stands chargeable, and consequently not for the whole of this proposed branch of annuities. If the whole island became a province of France, or were swallowed up by the sea,—if the globe of which it forms a part were carried off by a comet, were frozen, drowned, or burnt.—But we have no need on the present occasion to take any account of any of these calamities, and that not so much on account of their improbability, for there is not one of them that can be pronounced impossible, as because, bank paper being the assumed standard of comparison, any one of them would be equally fatal to the credit of such paper.


The advantages of a financial kind that may be expected from the proposed measure, will require to be distinguished according to the periods or stages above marked out, in regard to the progress of it.

§ 1.: Period First,

From the opening of the first issue of annuity notes, to the arrival of the 3 per cent. stock annuities at par.

The branches of profit or advantage that may be looked for in the course, or at the conclusion of this first period, may be stated as follows:—

1. Profit on sale by the difference between the price for which a 3 per cent. annuity, as secured by an annuity note, is sold, and the price at which an annuity to the same amount, as secured by an entry in the books of the stock annuities, is bought in with cash raised by the above sale; in a word, profit by difference between the selling price of note annuities and the buying price of stock.—N.B. This branch of profit ceases altogether on the termination of Period I.*

2. Profit by interest forborne to be received on annuity notes.

3. Profit by notes in hand;—profit by interest on annuity notes received by government in the course of circulation, while kept in the hands of government.

4. Profit by notes lost under circumstances which either do not admit of, or do not call for compensation.

5. Profit by reduction of the rate of interest paid by government for such money as it is in the habit of borrowing by annual anticipation, by the issue of exchequer bills.

Profits peculiar to Periods II. and III.

6. Profit by saving upon the expense of management.

7. Profit by fractional interest; i. e. by the 7d. per £100, the difference between the £3 per cent. yielded by stock annuities, and the £2 : 19 : 5 yielded by £100 worth of note annuities.

8. Profit by the redemption of all stock annuities yielding more than 3 per cent., and thereupon by extinction of the masses of extra interest.

Profit peculiar to Period III.

9. Profit by reduction of the rate and quantum of interest upon the mass of the national debt.

10. Profit peculiar to a state of war; i. e. to those years in which money is to be raised by the creation of fresh masses of government annuities;—profit on loans: profit or saving by lessening the loss by those transactions, by raising the price of government annuities as compared with money, and thereby lessening the loss by the difference between money on the creation and sale of government annuities, and money paid on redemption of the same.

11. Profit by yearly interest instead of halfyearly—a profit mentioned as being obvious, and capable of being realized, but not (it is supposed) to advantage.

If to prove the proposed measure to be an advantageous one, and advantageous to a sufficient degree to give it a claim to be carried into practice, it were necessary to prove the quantum of the advantage, or even to give a calculation that had pretension to exactness, its chance for adoption would be weak indeed. Happily for the plan, no such proof can reasonably be required:—whether the profit be £10,000,000, or no more than £10,000, still, although that advantage stood alone, yet supposing it to stand clear and not to be attended with any degree of disadvantage capable Edition: current; Page: [124] of counterbalancing it, the conduct indicated would be just the same: it would be worth adopting, though the advantage were worth no more than £10,000; and it could but be adopted, though the advantage were equal to 100 millions.

Profit I. Profit by the difference between the selling price of a £3 a-year annuity note, and the buying price of a do. stock annuity.

This profit will depend upon the average price of 3 per cent. stock taken out of the market upon the buying-in plan, before the commencement of the period during which, these annuities being at or above par, the paying-off plan will have taken place of the buying-in plan, and the quantum of annuity-note paper issued, and thence the quantity of stock bought in with the produce of such annuity-note paper.

Profit II. The expectation of profit by interest forborne to be received, is grounded on the following proposition, viz.—That in general a man will not bestow either trouble or expense, much less both, how inconsiderable soever the quantity, in compassing an end which he has it in his power to compass to equal perfection without any such trouble or expense.

The trouble (not to speak of the expense) attendant on the receipt of the interest on these annuities, has been reduced to the smallest amount possible; because, the greater it is, the greater the danger lest, by the contemplation of it, individuals should at the outset be repelled from the purchase of these annuities. But be the reduction ever so great, still the remainder will be something; and this remainder, it may reasonably be expected, would, in the ordinary state of things, be sufficient to turn the scale. On the other hand, suppose the circulation of the paper to be once established, upon the terms on which government paper is in the habit of being received—(I speak of exchequer bills, navy victualling, transport and ordnance debentures, not to mention India bonds)—viz. the allowing for it, in addition to the amount of the principal, the amount of the interest that has become due upon it. A man, by simply paying away an annuity note upon that footing, will receive, from the individual who takes it of him, the amount of such interest, without the trouble of applying for it elsewhere.

The smaller the amount of interest or other money to be received, the greater the ratio which the trouble of receiving, whatever it be, will bear to it; accordingly, if there be any difference, it is in the instance of the smaller notes; and the more certainly, the smaller the note, may the dependence on this forbearance be assured.

But the disposition to forbearance will be the more steady, the more perfect and unbroken the facility of receiving the money, in the event of its being thought fit to receive it, appears to be. It is on the strength of the persuasion entertained by a man, that the amount of a banker’s note which he has taken in payment would, if demanded, be paid at any time, that his forbearance to demand it is grounded.

It is on this account, that whether or no the payment of the interest upon a fresh note be deferred till after the end of the year, or be divided into two payments, the first of them to take place at the end of the first half-year—at the end of the year it seems most advantageous, upon the whole, that the even amount of the year’s interest should be made demandable at any time.

1. In regard to the proportion of interest that would be likely to be forborne, thus much may be to be observed:—in regard to whatever portion continued to be employed as currency, the forbearance would probably be general and continual.

2. In regard to whatever part was hoarded for the purpose of furnishing compound interest, it could not take place. To obtain an interest upon a year’s interest due on any note, it would be necessary for a man to receive that interest, and with the money take out a fresh note or assemblage of notes: a second year’s interest is a year’s interest, and no more, in addition to its own amount; it does not give him the interest he might have made on the amount of the same year’s interest, by receiving it in the shape of money, and employing that money in the purchase of a fresh note carrying its interest; or (what would come to the same thing) by receiving it at once from the office, if upon his application the office were to furnish him with it in that shape.

3. In the case of a mass of annuity-note paper kept in hand for the purpose of income, but without any determinate plan of accumulation in the way of compound interest, it seems difficult to say whether receipt or forbearance would be most apt to take place. The purpose of receipt might be equally answered by forbearance; viz. by paying away at each period a mass of paper of an amount equal to what the whole mass had gained in value on the score of interest by that time. But this would require provision to be made accordingly in the composition of the sums constituted by the notes: and which of the two masses of trouble would be the greater,—that of making the provision in question, or that of receiving the interest at an office,—would depend upon circumstances.

In the meantime, this consideration operates as a reason for rendering the composition of the series of notes as favourable as possible to the purpose of affording interest in the way of simple circulation as above described, Edition: current; Page: [125] without the necessity of coming upon government for the payment of it; that is, to render the gradation of the series more regular, and the terms or degrees in it more numerous, than might otherwise be necessary or desireable. The more complete the series of notes, the greater the chance it has of meeting the demand of each individual with reference to this purpose.

As to the quantum of this branch of profit, the principal part—that which may be regarded as certain—will depend upon the quantity of the paper thus employed, and upon the time during which each parcel of that quantity remains in circulation. It will depend consequently on the duration of this first period.

Should this period prove a short one, the probable length of it (according to a supposition that will be stated a little further on) not exceeding two or three years, the branch of profit will be proportionably inconsiderable; but whenever it vanishes, it vanishes (as will be seen) only to make way for a branch of much superior importance. So long as stock annuities are to be purchased under par, none of those persons whose circumstances it suits to become customers for stock annuities, will, in respect of that portion of their money, become customers for note annuities, which will not be to be had but at par price. But no sooner are stock annuities arrived at par price, than these note annuities will be at least as well suited to the circumstances of the customers for stock annuities: and inasmuch as the mass of stock annuities will be lessened every day by the operation of the sinking fund, while the mass of note annuities cannot be increased without diminishing by at least an equal amount the mass of stock annuities, the owners of the continually increasing mass of money seeking to be employed in the purchase of government annuities, to serve as a source of permanent income, will have no other resource than to lie in wait for annuity notes as they pass from hand to hand, and so impound them and take them out of the circulation.

Profit III. The third head of advantage consists in the saving or profit that may be made to accrue on the score of interest upon annuity notes, which, after being received by government from individuals on the score of taxes or otherwise in the way of circulation, remain at the command of government till wanted to be re-issued.

This head of profit will again require to be distinguished into three branches:—

1. Profit by annuity-note paper lying in the exchequer.

2. Profit by do. lying in the hands of receivers of all classes in its way to the exchequer.

3. Do. by do. lying in the way of imprest in the several offices of expenditure, waiting till re-issued.

1. As to the first of these three branches of profit, what the probable annual amount of it may be, is completely out of the knowledge of the writer of these papers, but as completely within the knowledge of those to whom they are addressed: I mean in so far as the past is capable of serving as a guide to the future. Add together the 365 sums respectively existing in the exchequer on the 365 days of the year, and divide the sum by 365; the quotient will be the principal, the interest of which will thus in the course of the year be gained or saved to government, supposing the whole of the money to be in the shape of annuity notes. From this gross amount of principal will require to be deducted, the amount of that proportion of money which is upon an average in the shape of cash.

2. As to the second of the above three branches of profit, it will rest with government whether to take it into its own hands, or to leave it in the hands of the receiver.*

3. In regard to the last of the above three branches, little need be said. The money being already, in the shape of annuity-note paper, yielding an interest to government,—so long as it is in the hands of government, all difficulty in regard to the conversion of it into that shape is out of the question here.

Under the existing plan, much anxiety has every now and then been entertained to prevent this or that subordinate officer of expenditure from getting inordinate sums by way of imprest into his hands. Under the proposed plan, the money being in the shape of paper, that paper yielding its interest to government,—so long as it is in the hands of any office or officer keeping it on the account of government, though the quantity issued from the exchequer to this or that office, upon this or that occasion, should happen to be more than sufficient—in other words, to be excessive—it would be no matter, since not only the temptation to produce the excess, but even the mischief of the excess if produced, would, in the proposed state of things, be done away.

Profit IV. Profit by notes lost under circumstances which either do not admit of, or do not call for compensation.

As this source of profit will go on increasing as the quantity of annuity-note paper increases, and will consequently be inconsiderable in this first period, even at the close of it, in comparison with what it will be at the close of the second period, at which time the conversion of the whole mass of stock annuities into annuities secured by annuity notes will have been completed,—it is to the second period, Edition: current; Page: [126] that what there may be to say in regard to this source of profit, may with most propriety be referred.

Profit V. Profit by reduction of the rate of interest paid on other government paper.

With the fall in the rate of interest yielded by stock annuities, the fall in the rate of interest paid by government on exchequer bills will at least keep pace. As to the absolute quantum of profit on this head, that will of course depend on the amount of exchequer-bill paper issued within the time: a quantity, in regard to which, any calculations or conjectures that could be given would be of little use.

Profit VI. Profit (if taken) by difference between yearly and half-yearly interest. This branch of profit would not attain its maximum until the close of the second period; but I have already stated that my leaning is not to assume this head of profit, and for what reasons. It may, however, be observed, that it would yield a rateable profit of £225 per million, whilst the interest upon the national debt remained at three per cent.

§ 2.: Period Second,

From the arrival of stock annuities at par, to the redemption of the last portion of stock annuities; whereupon follows immediately the opening of the second issue of annuity notes at the reduced rate of 2⅜ per cent.

1. Profit (in the shape of principal-money) by sale of notes ceases; but, in the event of the creation of a fresh parcel of stock annuities, revives and continues till the redemption of such stock annuities.

2. Profit by interest undemanded will continue, and with increase. The profit above mentioned as produced by the notes in circulating hands will increase as the quantity of paper taken out with a view to circulation increases. To this will now be added the profit produced by the notes in hoarding hands; viz. the expelled stockholders who take this paper with a view to permanent income, as they held their stock. This branch may be termed the casual branch: it will arise out of such casual forbearances only as take place at present in the case of dividends on stock. The probable rate of it might be estimated from the course of the payments on this score made at present at the bank.

The quantity of government annuities, stock and note annuities taken together, will, it is true, be growing less and less every day; while the quantity of money capable of being employed in the purchase of them will be growing greater and greater: so that the scarcity will be growing at both ends. But inasmuch as the issue being open all the while, everybody will be at liberty to supply himself with whatever quantity of this paper he chooses, whether for the purpose of hoarding or with a view to circulation, the diminution will fall exclusively upon the stock annuities, the quantity in circulation will not be absorbed in any degree by the demand for the purpose of hoarding; and the only effect of the increasing scarcity, even when the issue is at the point of closing, will be to make the demand, and consequent emission, the more rapid to the last.

3. Profit by notes in hand. This inconsiderable source of profit seems likely to continue from the first period without any variation worth inquiring into. It admits of no increase from the increased amount of annuity-note paper produced by the conversion, that part only which is circulation, being capable of finding its way into government hands.

4. Profit by notes lost. During the whole of this second period, this source of profit will be on the increase; a quantity of annuity-note paper equal to the whole amount of stock annuities, being in the course of it added to the mass.

5. Profit by reduction of interest on exchequer bills. This source of profit will probably have begun to manifest itself in the course of the former period, but it is not till now that the amount could easily be submitted to calculation.* During the whole of this second period, the rate of interest will be that reduced rate towards which it will have been moving on during the first period.

This head of profit will be an enduring one. No plenitude on the part of the exchequer will warrant the disuse of exchequer bills: it would be bad economy to make and keep on foot a perpetual loan to a certain amount, in order to save occasional loans to the same amount, at the same or nearly the same rate of interest: and to keep in hand a sum in cash to the same amount, would come to the same thing. The maximum of advantage under this head is therefore what results from keeping the rate of interest on such loans from rising more than one step above the level of the rate paid on perpetual loans. Upon the adoption of the proposed measure, it would be requisite to examine whether the plan of the present exchequer bills would be the most advantageous plan for borrowing money on such temporary loans.

6. Profit by saving in the expense of management—transfer and allowance of interest, as between individual and individual, being performed without expense—and the expense attached to the issue, and to the payment of interest on government account, being defrayed in part, or in the whole by fees. See Ch. I. Plan, Art. 17. This profit, being a rateable profit on the amount of debt, will of course Edition: current; Page: [127] diminish in amount, as the amount of the debt diminishes.

7. Profit by reduction of interest from £3 to £2: 19s. This profit results from the conversion of stock annuities into note annuities at the par price of both, which will be the price throughout this second period. It amounts to exactly 1-60th part of the interest at 3 per cent. It comes in a manner without design, the difference being the unavoidable result of the defalcation of a few fractions, which it was necessary to get rid of, in order to leave even and commensurable sums.* The amount of annual profit on this score, on each million of capital in stock annuities converted—i. e. on each £30,000 of interest on the said capital—is £500.

8. Profit by reduction of interest on stock annuities at higher rates than 3 per cent. The amount of this profit might easily be made the subject of calculation.

§ 3.: Period Third,

From the opening of the second issue at 2⅜ths nearly (viz. £2 : 7 : 5) per cent., to the redemption of the paper of that second issue;—whereupon follows immediately the opening of the third issue at £1 : 9 : 6, being a trifle less than 1½ per cent.

I. Profit by reduction from £2 : 19s. per cent. to £2 : 7 : 5 per cent.

Rate of interest on the closed issue during this period, £2 19 0
Rate of the open issue, 2 7 5
Difference, constituting the rate of profit by the operation, £ 0 11 7

This result constitutes the characteristic profit of this third period. The proportionable amount of it is nearly the fifth part of the interest on the mass of annuities remaining, at the commencement of this third period, viz. £5791 : 13 : 4 per annum for each million of capital of annuity notes.

II. Profit on sale, i. e. by difference between selling price of annuity-note paper, and buying price of stock annuities, remains as in Period II., extinct by the extinction of stock annuities;—subject to revival in the event of a fresh creation, as before.

III. & IV. Profits by interest undemanded, and by notes in hand, continue as in Period II. with little change.

V. & VI. Profits by notes lost, and by saving in respect of the expense of management, being rateable profits, their amount per million’s worth of paper continues unchanged, but their total amount diminishes of course in some degree, as the amount of annuity notes (which, from the commencement of this third period, are the only redeemable government annuities remaining) is diminished by the operation of the sinking fund.

For some time at least, the paper of this second issue carrying but £2 : 7 : 5 a-year interest, the demand for it, with a view to circulation, will be more certain than the demand for the purpose of permanent income on the footing of stock annuities: because to the former set of customers, the whole amount of interest, reduced as it is, will be as so much gain; being a profit which, but for this species of paper, they would not have made—perhaps at all—certainly not in this commodious way, and by government annuities:—whereas the reduction will sit heavy on the customers for permanent income, who, if they continue their money upon government security, must submit to see their incomes reduced to this amount, and whose capitals to a considerable amount will accordingly, for the purpose of escaping such reduction, be withdrawn from this employment, and either laid out upon other securities, or embarked along with the owners in some branch of trade.

The progress of the operation may, notwithstanding, not be diminished upon the whole; for to the amount of the demand with a view to circulation, no assignable limits can be found.

Profit VII. Profit in respect of Exchequer bills. During this third period, in compariison with the second, the rate of profit will receive an increase.

For the money wanted for occasional purposes during the second period, it will (as has been seen) have been necessary to give a rate of interest one step higher than that which, by the continual emission of annuity Edition: current; Page: [128] notes at that rate to all customers, it was in the power of everybody to make. But the first issue being now closed, it is no longer in the power of everybody or anybody to obtain government annuities at that rate; since, though paper of the first issue will still be to be had of individuals, it will not be to be had but at an advanced price. The profit by the saving of this advanced price will be sufficient to engage customers to take exchequer bills, at the par price of the closed issue, to an amount adequate to any money that can be wanted on the footing of a temporary loan.

§ 4.: Period Fourth,

From the opening of the third issue at 1½ per cent. nearly (viz. £1:9:6 per cent.,) to the redemption of the last portion of paper of that issue;—whereupon follows immediately the opening of the fourth issue at £1 : 3 : 8½ per cent., being a trifle more than 1⅙ per cent.

Rate of the closed issue during this period, £2 7 5
Rate of the open issue, 1 9 6
Difference, constituting the profit of the operation, £0 17 11

The annual amount of this head of profit, for this fourth period, is, for each million of capital remaining in the hands of individuals, i. e. for each £30,000 of interest at the original rate of 3 per cent., £8958 : 6 : 8;—the total amount of profit by reductions of interest up to this period inclusive, on each million of capital, £15,259.

Profits by notes lost, and by expense of management saved, will continue as before, with little change in regard to the rate, but in respect of the total amount, reduced in course as the quantity of the annuities in question is reduced.

So in regard to profit by interest undemanded, and profit by notes in hand.

Profit in respect of exchequer bills, will at this period, if not before, be so far fixed, as that the rate of interest upon these temporary loans will never be higher, but more likely lower, than that of the closed issue. For although the reduced rate of the open issue should not be accepted of by the expelled annuitants of the closed issue, nor even by any more of the customers for note paper with a view to circulation; yet, for the reasons given with reference to Period III., the premium given for the paper of the closed issue will, notwithstanding, be considerable: the more so, as the drop from the rate given by the closed issue (the second issue) to the rate given by the third issue (being the issue that remains open till the very close of this fourth period) is so great. Between the two amounts in question, a profit sufficient to draw purchasers for exchequer bills cannot but find room to place itself; and the interest on exchequer bills during this period may be expected to be considerably less than £2 : 7 : 5.

§ 5.: Concluding Period.

The precise number of reductions which the rate of interest upon this paper might be destined to experience, is what it would be too much to attempt to fix. But a picture of the last moments of the expiring debt, at whatever stage the reduction of interest may then be, may be not without its use.

It will present the profit by interest undemanded in an enlarged and interesting point of view: it will strike off in effect the last 10, or 20, or 30 millions of the debt; and strike off perhaps the value of a year or two or more from the duration of that load.

After the exoneration thus effected in the course of the fourth period by the reduction of the rate of interest to the £1 : 9 : 6 which is the rate given by the paper of the third issue,—is it or is it not likely that the reduction of interest should have descended lower before the redemption of the last portion of the principal of the debt?

The reduction of the rate of interest on the money that had been thus lent to government will stop short of this mark, or stop at it, or go beyond it, according to the influence which the rate thus allowed by government turns out to exercise over the rate of interest in general. That the influence which the government rate of interest has in its rising state maintained over the general rate of interest, has been considerable, is matter of known experience—though the operation of the restrictive laws which stop the rise at the point of five per cent. even on the slenderest security, has rendered the amount of this influence scarcely capable of being measured. The influence of the rate of interest paid on the debt cannot but increase with the magnitude of the debt, to which the magnitude of the mass of capital poured into the market (as will be seen) by the redemption of that debt, will be proportioned. The effect of 200 millions thus poured in cannot but be double (it should seem) to that of 100 millions, at least if poured in within the same compass of time.

The influence of the capital poured in by the redemption of the national debt at the time the reduction of the interest on that debt is going on, will (it is true) not depend solely on the quantum of capital thus poured in, but also on the magnitude of the growing mass of national capital into which it flows. But the general mass of national capital is also of itself in a rapid state of increase; and to such a degree on the increase, as to be of itself in a way to effect a reduction in the Edition: current; Page: [129] rate of interest in general, without any aid from this or any other factitious source. Accordingly, the factitious cause of reduction—the factitiously accumulated capital which is thus poured in by government, so far from finding any obstruction in the magnitude and vis inertiæ of the mass into which it flows, finds a powerful assistance in the operation of that mass, acting as it is already, in a direction tending to the same end.

If, then, while the two forces, the natural and the factitious, are thus acting in this direction, the influence of the factitious should be strong enough to bring the other to the same pace, things will continue on in the same state as already depicted in the account of the fourth period: paper of a closed issue, in a quantity which cannot be increased;—paper of an open issue, in a quantity which will be continually and rapidly on the increase, till, by the produce of it, the paper of the closed issue has been paid off, when a fresh issue will be opened, at a still lower rate, and the now open issue closed, and so on: always paper of two issues, at two rates of interest, till the last applied portion of redemption money comes and sweeps them both out of the market at once.

If, then, the reduction of the rate of interest go on to the last year of the debt without stopping, the state of the paper during that last year, in respect of its being divided into paper of two issues (viz. a closed issue, and an open one,) will be the same at that supposed last period of the existence of this paper, and of the redeemable part of the national debt, as is exhibited in speaking of the advantages belonging to the fourth period of its existence: the paper swept off by the last mass of redemption-money will be paper of two different issues.

On the other hand, if the emission and consequent reduction have stopped anywhere, there will, at that last stage, be but one rate of interest paid by government on the redeemable part of the debt: the annuity-note paper remaining at the time will be, all of it, of the same issue—viz. the then closed issue:—there being at that time another issue opened, but no paper of that proffered issue in existence,—nobody having purchased any at that price.

For illustration’s sake, let the last issue which meets with customers be the above-mentioned third issue,—the issue at £1 : 9 : 6, with the opening of which the fourth period commences: let thirty millions, at this time, be the amount of the whole remainder of the debt, of which let ten millions be the amount of the paper of the second issue now closed, bearing interest at £2 : 7 : 5 per cent.: and let the other twenty millions be paper of the third, or open issue, bearing interest at £1 : 9 : 6 per cent.: and let the ten millions at £2 : 7 : 5 per cent. be all of it in the hands of persons who keep it in hand as a source of permanent income; while the 20 millions at £1 : 9 : 6, is all of it in a state of circulation more or less rapid, being all of it in hands that took it out, or received it with that view.

The sinking funds, taken altogether—the sinking funds present and future—being now in a condition to pay off (suppose) ten millions in the course of a year, let such payment be made accordingly. This extinction, falling of course upon those ten millions, strikes off the whole of the hoarded paper, and leaves only that part which, being in circulation, constitutes so much of the circulating capital of the country. Upon the redemption of the last parcel of these ten millions, the opening of the fourth issue follows of course, by article 22. If any purchasers presented themselves at the rate of this fourth issue (£1 : 3 : 8½ per cent.) the reduction of the rate of interest would go on. But by the supposition, no such purchaser does present himself. The persons who had been keeping their capitals in the shape of annuity-note paper of the second issue at £2 : 7 : 5, are, by the redemption of the remaining paper of that issue, put to their option—either to cease letting their capital lie on that sort of security, or to accept of £1 : 3 : 8½ per cent. By the supposition, they all reject the paper bearing this new and lowest rate: they will not meddle with it, not even for a time, and with a view of putting it into circulation by employing it in the ways in which they determine to employ the capital thus thrown upon their hands.

When the two masses of paper that had till now been in the market, are thus reduced to one, that one will, all of it, be in the hands of noteholders who take it with a view to circulation. For, whatever rate of interest is accepted on the footing of permanent income, there will be always persons in abundance to whom it will be worth while to accept of the next lowest rate, with a view to circulation. If, by the growth of national opulence, a rate so low as £2 : 7 : 5 appears now, is raised to such a pitch of relative value as to be worth acceptance in the character of a source of permanent income, the next lowest rate, though so low as £1 : 9 : 6, will be raised along with it in the scale of importance, and will become not less worth acceptance in the character of a source of such temporary profit as could not with equal security and convenience be made by any other means. And if the £1 : 9 : 6 itself come to be thought worth acceptance in the character of a permanent provision and sole dependence, the next lowest rate, though now reduced to £1 : 3 : 8½, will no more be regarded with contempt in the character of a Edition: current; Page: [130] source of temporary profit, than the £1 : 9 : 6 was before. If, then, the demand for annuity-note paper should stop altogether at any period prior to that of the complete extinction of the debt, it is with the customers for permanent income that it will stop, and not with the customers for temporary income with a view to circulation.

Compared with cash, the interest afforded by the annuity-note paper to those who take it or keep it with a view to circulation, will, be it ever so small, be so much profit. Compared with the preceding higher rate of interest, the reduced rate afforded by the annuity-note paper will, to those who take it, and who, to the extent of their respective capitals so invested, have nothing else to depend upon for their respective incomes, present itself as a loss to the amount of the difference.

Under these circumstances (though, for illustration’s sake, the supposition has been that the fresh issue would at some period remain open without customers) it seems not very easy to abide by it. At the time the sinking fund came with its ten millions, and swept off all the paper of the second issue—all the paper that was in the hands of customers for permanent income—the demand on the part of the customers for temporary income with a view to circulation, had got no farther than the remaining 20 millions. But, under the accumulation of wealth inseparable from the state of things thus supposed, it is scarcely possible that the demand, from that class of customers, should for any length of time be altogether at a stand. If, in a twelvemonth, but a single £100 worth more than could be met with without giving such a premium as would make it dearer than the paper of the open issue, were wanted by any person for a few weeks or months, he would betake himself to the open issue.

Even in the case of the last group of now expelled note-holders, by whom this paper had been held as a source of permanent income, the supposition of their rejecting the paper of the fresh issue altogether appears scarcely tenable. They would still, to a certain degree, be customers for annuity-note paper, though with different views: before their expulsion, for the purpose of permanent income—after their expulsion, for the purpose of temporary income, till a better income or better prospects could be obtained from some other source.

True it is, that by the paper taken out of their hands they made £2 : 9 : 6 a-year; while by the paper of the fresh issue they would make not half the money—£1 : 3 : 8½. But £1 : 3 : 8½, which they might begin making from the very instant of their expulsion, would be £1 : 3 : 8½ better than nothing—which is what the interest of a considerable part of their 10 millions of capital would be reduced to, for a time more or less considerable, if it rejected this accommodation. And though no more than a single £100 of the expelled 10 millions were to betake itself to this employment, though it were but for a day, from thence would be to be dated the birth of the paper of the fourth issue.

If, however, at the period in question, there remain no paper but of one issue, it is all of it (as we have seen) in the hands of the customers for temporary income with a view to circulation, who would, generally speaking, betake themselves to the circulation for the interest of it,—upon which, the demand for interest at the office would nearly cease. But the same cessation might take place although there were to be paper of two issues—and would take place, if the paper of both issues were to be in the hands of the customers for temporary income with a view to circulation. Nor is this any more than what might well enough take place; since the paper of the closed issue would bear a premium corresponding to the superior rate of interest it afforded;* and it would be seen by government to be the case, if the interest upon the paper of the closed issue were seen to remain undemanded.

In this state of things, many millions of government paper still in circulation, and little or no interest demanded on it, there seems nothing to be gained and something to be lost by carrying the redemption any further. As to so much interest as continues to be undemanded, the debt ceases to be a burthen;—the taxes, from which the redemption money would have to come, would be a burthen; and the paper taken out of the circulation by the redemption would be so much taken from the mass of circulating capital—as much so as if gold to that amount, after having been received by government on the score of taxes, were to be thrown into the sea. A defalcation made to any such amount as the supposed 20 millions in the course of two years, might, by its suddenness, be productive of inconveniences such as it would not be easy to estimate;—similar, in a word, to those which have been attributed to the diminution in the quantity of Bank of England paper in circulation.

Were the redemption thus to cease, it might be of use to declare, at the time that such cessation were declared, that from thenceforward, Edition: current; Page: [131] as often as a note were sent in for payment of interest, interest and principal should be paid together,* as is the practice at present in the case of exchequer bills; and at the same time to declare a respite of the redemption for a certain time.

The advantages would be—

1. The continuance of the source of profit in question (profit by interest undemanded) would be more steady and assured. For in proportion to the length of the respite declared, the paper thus respited would come to bear in circulation a premium; the amount of which premium, though limited by the rate of interest yielded by the open issue (resorted to or not resorted to) would not be prevented by it from taking place. This premium a man would lose, by sending in his paper to be paid off at par: in general, then, paper would not be sent in for that purpose, nor consequently any interest be paid by government.

2. No payment could thenceforward be made upon the proposed paper, but that a payment to a far greater amount would go in redemption of principal; whereas, without such regulation, no part of the money paid could take that profitable course.

The undemanded interest (it might be thought) might in this way come to accumulate to such a mass as might be productive of inconvenience, if by a sudden turn of affairs it were to become a matter of advantage to the whole body of annuitants to claim payment of it at once. But on a second glance, the inconvenience would be seen to vanish altogether. Supposing, as before, the amount of the paper twenty millions—rate of interest £1 : 9 : 6;—the whole amount of a year’s interest would thus be short of £300,000. Being simple interest, not compound, the whole amount of it in twenty years would be short of six millions, supposing the whole of it to remain undemanded, and the principal undiminished all that time. No issue can carry more than its own interest; because, as the open issue fills, the paper of the closed issue is paid off, interest and principal together. Respite is indeed proposed; but the term of respite need not be so long as to preclude government from providing such a course of redemption as should ward off any inconvenience that might ensue from a too sudden diminution of this part of the currency, and at the same time prevent the interest from swelling to any such amount as to become formidable. At the worst, at such a period, interest so low, money so abundant, £6,000,000 would be but a trifle to raise by an immediate and temporary loan, as now by exchequer bills.

§ 6.: War Loans.

By so many per cent. as the market price of old annuities is raised by any cause, by so many per cent. (it is well known) is the price of new annuities raised to those who give money for them to government (i. e. the terms of the loan bettered) by that same cause:—since, as between old and new the value is just the same, it would be in vain for any man, or set of men, to insist upon any considerably greater price in annuities for their money (allowance made for depreciation by increase of quantity and for dealer’s profit) than people in general are disposed to take for theirs.

Whatever takes stock out of the market, without taking out or keeping back the equivalent in money, adds in proportion to the price of stocks. The proposed measure takes stock out of the market without taking out or keeping back money: it therefore adds in proportion to the price of stocks.

True it is, that even previously to the absorption of stock annuities which it takes out of the market, it has created other annuities to a considerable part of the amount; for it is only with the money received for those new annuities, that the old are taken out. But of the money thus received for the new annuities, there is not any part that would have gone to market for old annuities; because, while stocks are under par, no money that can be employed with advantage in the purchase of stocks, can be employed otherwise than to a manifest disadvantage in the purchase of the inferior rate of interest afforded by the proposed note annuities.

Any melioration thus produced in the price of stocks, and thence in the terms of the loan for any given year, will operate (it should be remembered) not only on the loan of that year, but on all succeeding loans during the existence of the existing debt; since, whatever additions the debt may come to experience in the course of any number of succeeding years, it will always be the less by the amount of all the defalcations that have been ever made from it.

Were it not for the operation of the sinking fund, the profit on this account would be so much clearer; but inasmuch as, to the extent of the stock purchased in the year by that fund, government loses exactly as much as it gains on the stock sold in that same year in and by the loan, the amount of the loss by Edition: current; Page: [132] the purchase will be always to be deducted from that of the profit by the sale.

To calculate the probable amount of profit on this score, for one, two, or more years, would require two sets of data;—viz. 1. Amount of the several other causes of elevation, together with those of depression, in each year;—2. The amount of annuity-note paper sold in each year. The former would scarcely yield to calculation; the latter bids defiance to it altogether.


Among the advantages promised by the proposed measure, may be reckoned the addition it promises to make to the mass of national productive capital, and thence to the mass of national wealth; viz. by the acceleration it will give to the operation of the existing funds, in respect of the redemption of the national debt.

That an addition to the mass of national capital—an addition to the value of £100—is the result of every £100 paid in discharge of the national debt, is a proposition which, though hitherto it seems to have engaged but little if any attention, will be assented to almost as soon as mentioned. That the putting of money into men’s hands on this occasion in lieu of the income they are obliged to part with, has no tendency to increase the ratio of the amount of money expended in the way of prodigality, to that of the money expended and employed in the way of thrift, is evident enough. But if, employing the money put into his hands in lieu of a source of income of which he is deprived, a man employ it otherwise than in the view of making it productive of a mass of income to equal amount, he employs it in the way of prodigality; and if he employ it with the view of making it productive of income, it must be either by expending it himself in the production or improvement of such articles as constitute a mass of capital to the amount of such expenditure, or by lending it directly or ultimately to somebody else, by whom it will be applied to that same purpose.

If the money thus put into the hands of the expelled annuitant in lieu of his annuity were taken from the mass employed in the shape of capital, there would be neither loss nor gain by the operation, on the score of addition to the mass of national wealth.* But the money thus employed by the existing sinking fund is not taken from any such mass. It is the produce of taxes—of taxes levied on income, either directly or through the medium of expenditure, and is taken out of that fund, the whole of which (after a small deduction on account of savings) would otherwise have been expended within the year, in the way of current expenditure: that is, in the purchase partly of unproductive labour, such as that of servants, coaches, horses, players, musicians, and the like—partly in the purchase of articles consumed mostly within the year, or some other such short periods of time, without having produced any equivalent increase.

Of the money thus put in the shape of capital into the hands of the public creditors on the redemption of their respective portions of the public debt, that part which is received by British subjects, will in general be employed in adding to the mass of capital contained within the limits of the British empire: on the other hand, that part which is received by foreigners, will as naturally be employed in adding to the mass of capital contained within the dominion of the states to which they respectively belong—in adding to the quantity of foreign, not of British capital.

Deducting, then, from the whole amount of the money payable on the redemption of the redeemable, but unredeemed portion of the funded debt, that part of it which is in the hands of foreigners, the remainder will be the sum that, in the year in which the last portion of the debt comes to be redeemed, will have been added to the mass of national capital from this source, independently of any effect produced by the proposed measure.

Whatever amount of profit the proposed measure may be attended with, this profit being also applied in aid of the other sinking funds to the redemption of the debt, will act in acceleration of that effect. It will therefore, in proportion to the acceleration, be productive of a distinguishable addition to the mass of national capital in proportion to the acceleration thus produced by it. In a rough way, the amount of this addition may be Edition: current; Page: [133] stated as equal to the interest at compound interest, at the rate at which the national capital is accumulating, upon the amount of the debt redeemed for the term of years struck off by the acceleration.

From the amount of restitution* thus made to capital, in any accurate computation would come to be subtracted that proportion of the national income, which, had it not been taken by taxes, and thence in the shape of redemption money added to capital, as it were by force, would have been saved up, and, without changing hands, have gone to capital of its own accord, and from the amount of profit by acceleration of the redemption of the debt, a similar proportion of the amount of such profit.

To the account of the addition thus promised to the mass of national capital, in respect of freed capital, and such other parts of the mass as are of an intrinsically productive nature, it may naturally enough be expected that I should add the augmentation promised in the shape of circulating capital;—viz. to that branch of it which consists of money.

That in certain circumstances an augmentation of this sort would be among the natural consequences, and even, unless prevented by special care, among the necessary consequences of the measure, is a proposition, the truth of which will, I think, appear with sufficient evidence: but far from taking credit for any such result in the account of advantages, probity requires that I should give warning of it as a source of danger. To point out the means of obviating this danger, will be the business of an ensuing chapter.


Another advantage expected from the proposed paper, is—the addition it promises to make to commercial security—the support it holds out to commercial solvency. It presents itself, not only as being itself exempt from those shocks to which the ordinary species of paper money are essentially exposed, but as affording to the community a remedy, and that of the preventive kind, against the disorders to which it stands at present exposed by the constitutional weaknesses of those papers.

For a property thus valuable, it is indebted to two features belonging to it. One is—the making no addition by its quantity to the quantity of cash engaged for. It is by this, that it is itself preserved from that brittleness which is of the essence of those other papers. The other is—the faculty of being employed in either of two capacities at pleasure:—1. As a permanent source of income—like so much stock—so long as it is kept in the same hand; 2. As a circulating medium—a species of money, as often as it is passed on from one hand to another. It is by this latter feature that it is enabled to fill up whatever gaps may come to be made in the quantity of money in circulation, by a deficiency in the quantity of those other papers.

That in point of security, commercial wealth is liable to suffer from an excess in the comparative quantity of paper money, is a truth but too often felt, and sufficiently understood. That in point of quantity it is liable to suffer a kind of negative loss from a deficiency in the quantity of paper money, is a truth rather understood than felt, but equally out of doubt; because, inasmuch as every fresh £100 worth of paper money is so much added to the mass of circulating capital, to the amount of the value at which it passes, the national capital is of course so much the less for every accession of this kind which it might have received consistently with commercial security, and fails to receive. That by a deficiency in the quantity of paper money, commercial wealth is liable to suffer—not in point of quantity only, but even in point of security, is a sort of discovery in political economy, seemingly of very recent date. Till the pressure upon the Edition: current; Page: [134] Bank of England in 1797, it seems to have been generally understood, that in the article of paper money, deficiency was the safe side:—but on that occasion it became apparent, that in regard to paper money of the kind in view, there is no safe side.

While there is stock to sell, and in such abundance, how (it may be asked) can commercial wealth be liable to suffer in point of security by a defalcation (which can never be a very large one) from the quantity of paper money? When by selling stock, a man who has either stock enough, or credit to borrow stock, may at any time raise as much money as he pleases: he will be a loser, it is true, by the interest of the stock sold out, from the time when sold to the time when replaced, and so far wealth suffers in point of quantity: but there ends the damage: security remains entire. Yes, doubtless;—so a man may:—but on what terms? On the terms of taking the precise amount from some one else: the deficiency is shifted only, not lessened.

Stock may be sold for money, and in that figurative sense it may be converted into money:—but in the literal sense, it cannot be converted into money: and it is in the literal sense that an article must be capable of being converted into money, to answer the purpose in question here. Stock convertible into money? Yes, in the same figurative sense in which lands and houses and goods are convertible into money—and no other. Annuity-note paper is convertible into money, paper-money, in the literal sense.

Stock is one thing—paper money (the sort at present in use) is another:—annuity-note paper, and that alone, is both in one. It has two natures, and is at all times either the one thing or the other, whichever is most wanted.*

The defalcation made from commercial security by the defalcation of a given mass of money (cash or paper, makes to this purpose no difference,) would upon examination be found greater than might have been supposed. The annual receipts of the country, on the score of income and capital taken together, may (without any error capable of affecting the argument) be stated as not much over or under three times the amount of the money of the country, cash and paper taken together. Call, then, the quantity of Bank of England paper habitually issued and kept in circulation, £10,000,000: and of that habitual 10 millions, suppose, at a particular time, one million cancelled or kept back,—for instance, by a defalcation to that amount from the usual discounts. Here, then, is produced already, by the defalcation of this single million from the quantity of money in circulation, a defalcation to the amount of three millions from the mass of money that should have been received Edition: current; Page: [135] in the course of the year:—and this without any allowance made for the proportion of the money of both sorts (cash and paper) that will always be hoarded and kept out of the circulation in the shape of capital waiting for employment, or the cash that must always be kept up in the same way as a fund of reserve for answering the engagements contracted by that part of the currency which is in paper.

Call the amount of money kept up on both these accounts in the shape of capital, one-fourth part of the whole;—then will a defalcation, as above, from the mass of money by a defalcation to that amount from the quantity of bank paper issued and kept out, produce, instead of the above supposed defalcation of three millions, a defalcation of four millions from the mass of money receipts.

Suppose, again, that by reason of the alarm excited by this defalcation from bank paper, whatever was the cause of such defalcation, another million (cash and paper together) is hoarded up and kept out of circulation, out of the portion which otherwise would have continued in the circulation:—on this supposition, the defalcation from the mass of the year’s money receipts swells, from the four millions above spoken of, to eight millions.

But it is on the quantity of money ready to be transferred to those to whom it is due, or by whom it is otherwise expected, whether out of the portion which is kept in general circulation in small masses, and which serves as a vehicle for income, or out of the portion kept up in large masses, in the shape of capital, that the body of commercial men, in their capacity of debtors, depend for their ability to fulfil the aggregate mass of their engagements. If, then, the influx of money in the course of the year into commercial hands be thus diminished by the amount of eight millions on the score of income and capital taken together, eight millions, or some such large sum, will be the amount of engagements broken in the course of that year, by reason of the defalcation of a single million’s worth of bank paper (unless in as far as the deficiency may have been made up from other sources;)—and to this amount will the commercial wealth of the country have suffered, not only in point of quantity, but in point of security.

I speak of security, in contradistinction to quantity; i. e. to actual wealth to a liquidated amount; for if to the above liquidated loss be added the loss by failure following failure in consequence of the shock given to security, the ultimate loss may rise above the supposed eight millions, to an indefinite amount.

The want of a circulating medium as such, that deficiency, of which so much was said in 1797, may recur at any time. By the united wisdom of all parties interested, it received a cure at that time from a number of concurrent measures, all of them well adapted to the production of the effect. From true wisdom it received, for the time, a perfect cure:* but, by any other means than the sort of remedy here proposed, to prevent the evil from recurring again and again at any time, is not within the reach of the most perfect wisdom: and prevention is still better than the most perfect cure. To be liable at any time to become the instrument of mischief, and that in either of the two opposite ways, by being in too great quantity, or in too little, is of the essence of all such promissory paper: for its not being in too small a quantity, it depends upon the wisdom and even humour of a few individuals; for its not being in too great quantity, it depends not only upon the wisdom and humour of individuals, but upon contingencies of the day, and the humours and prejudices of the uninformed and ill-informed, and hasty and impetuous multitude: upon the former, as to their not exceeding in their issues the amount warranted by the rules of Edition: current; Page: [136] prudence—upon the latter, as to their not frustrating and setting at default all the rules of prudence, by crowding in to demand for their paper without need, such a quantity of cash as is not in existence.

The sort of promise given by bank and bankers’ paper, is that sort of promise, the fulfilment of which, taken in the aggregate, is physically and constantly impossible: the promise given by the proposed annuity-note paper, is that sort of promise, the fulfilment of which, whether taken in the aggregate or in parcels, has never yet been found to fail—which possesses all the certainty that is to be found anywhere in human affairs; and which becomes less and less liable to fail, the greater the quantity of money of which it conveys the promise.

Were the proposed paper the only paper money, national wealth would not be liable to suffer either in point of quantity or in point of security—either from excess or from deficiency in the quantity of paper money in any degree; since, even without the exercise of human reason on the part of anybody (except on the part of each note-holder, in so far as his own particular interest, and that the interest of the moment, were concerned:) it would adjust itself, as it were of itself, as to what concerns the demand for circulating money, to the exact quantum of the demand: it would be stock one moment, and cash the next, whichsoever were most wanted.

In the other case, were it but one ingredient amongst others in the composition of the currency of the country, it would, as far as it went, and to the extent of the quantity kept in hand, principally with a view to income,* act as an occasional supplement to other paper money, and as a remedy of the preventive kind to whatever inconveniences might otherwise have arisen from a deficiency of that article.

Against an excess in the quantity of other paper money, its operation would not be quite so efficient or so manifest. But by presenting to every eye a species of paper money unsusceptible either of excess or depreciation, it would at once and at all times take the pretence of necessity from the rashness that might otherwise be disposed to hazard an excessive issue; and it would render the public in general the less disposed to accept, in an excessive quantity, a paper essentially hazardous, seeing that a paper essentially exempt from hazard was at their command, to any amount, at any time.


Of the four distinguishable effects looked for from the proposed measure, that which will probably be regarded as the principal, is the degree of acceleration and assurance promised by it to the redemption of the national debt. To the accomplishment of so desirable an object in a way consistent with existing engagements, no damage accruing to particular interests has ever been considered as opposing any bar that ought to be regarded as insurmountable. That a reduction, say from £4 to £3 per cent. is a tax, and that a proportional one, to the amount of 25 per cent. upon the income of a particular class of men, is a proposition too obvious to be overlooked. Yet the design of effecting a reduction of the same sort, and that to an undefined amount, is a design rooted in the mind of the legislature, evidenced by the practice of preceding parliaments, and by the express declarations of others.

The nation at large, and the stockholder, are borrower and lender. When the money is to be raised, it is the lender’s harvest; and he takes advantage of the borrower and his necessities to the utmost of his power. When debt comes to be paid off, it is the debtor’s turn; and it is neither unnatural nor unjust, nor illaudable, nor ought it to be unexpected, that he, by his agents, should take the like advantage.

The stockholder of the paying-off season is not (it is true) in every instance the same individual as the stockholder of the borrowing season. He is, however, either the very same, or one who, with his eyes open, and for valuable consideration, has put himself in the other’s place:—succeeding to all his rights, it would be in vain to repine at the thoughts of having succeeded to any of his obligations. From a creditor in some cases, and on the score of humanity, mercy may, with more or less reason, be expected—but from a debtor, what mercy was ever looked for? The words merciless and debtor are words scarcely to be coupled with a grave face.

Expressions, however, and the momentary effect they may have on the imagination, are not the proper standards of right and wrong in this case any more than in any other. Human feelings, and the effect of measures upon those feelings, do constitute that standard, in so far as they can be ascertained. A stockholder is as much a member of the community—as Edition: current; Page: [137] great a part of the community—as any other man. Such as his expectations have been, such will his feelings be, when the event takes place. But what have been his expectations? It is from his situation, and that only—from the terms of the contract by which his situation in that respect is constituted—that any judgment can be formed.

Thus stands it with regard to the public creditor—the stockholder, who, on the comparative return or increase of general prosperity and opulence, has in former instances seen that part of his income reduced by one half; and who, within a period already in prospect, may be doomed, by the like cause, to a reduction to the like amount.

But in comparison with the interests of this vast branch of the community, what can be the amount of all the other particular interests put together! and in comparison with the degree of sufferance in this case, how trifling will be the degree of sufferance in any of those other cases!

The destiny of the stockholders is not hypothetical: it originates not in the proposed measure; it has been fixed and made known by the legislature, and built upon for years and years, by determinations several times repeated and brought to view, without a doubt from that or any other quarter on the head of perseverance. It is for want of means, and not of determination, that the redemption with all its consequences has not long ago been accomplished.

In comparison of such interests, whatever lighter interests may be found to stand in the way might therefore appear as scarcely worth a glance. But though all particular interests put together will not prevail for the rejection of a measure beneficial in a superior degree to the whole, yet a view of the particular ways and degrees in which they may respectively come to be affected by it, will not be without its use, were it only by way of warning of the probable sources and grounds of opposition, and of the nature of the obstacles which may be to be combated in the course of the exertions necessary to bring the measure into effect.

During Period I., while no part of the mass of government annuities is taken, but on terms on which the holder is desirous to part with it, benefit to particular interests will run along with, and probably preponderate over the damage. From the commencement of the period when the species of property in question is taken from unwilling hands, the damage, as far as particular interests are concerned, will be apt to outweigh the benefit.

The only interests that belong in strictness to the present inquiry, are those which are affected by the particular mode of operation employed by the proposed measure. The consideration of any such interests as would equally be affected, whatever other mode were employed, is foreign to the present case.

The particular interests on which it bears are of course the several interests concerned in the species of paper money already in circulation. The parties in question are, therefore—1. The Bank of England;—2. The country banking-houses; to which will be to be added (although not concerned in the emission of paper money, but on another account;)—3. The banking-houses of the metropolis.

1. If the paper of the Bank of England should be accepted by government in payment for annuity-note paper issued at the annuity-note offices, on the footing of cash, as it is at present at the other existing government offices, the circulation of bank-notes would not (it should seem) experience any diminution from the proposed measure. It might even receive assistance, since, in virtue of the same properties by which bank paper is rendered preferable to cash for all other purposes, it will be no less so for this purpose.

Should the public in general testify the expected preference for annuity-note paper as compared with cash, the Bank, by keeping that paper as the stock in reserve to answer calls for change for their own notes, might keep so much the less cash, and derive £2: 19s. interest from a portion of their stock which at present yields them none. But the profit from the present state of things is simple and certain: the result of the proposed measure, as touching its effects upon the affairs of the company, would appear wrapped in clouds. The Bank, according to their intelligent censor, Mr. Allardyce,* have not been forward to step out of the beaten track, where the step has been ever so obvious, and increased emolument ever so certain a fruit of it: the probability, therefore, seems to be, that the plan of the proposed rival paper would not be viewed from that superb edifice but with a rival’s eye.

Should damage eventually accrue to the corporation, and should the case be regarded as calling for compensation, the profit would afford an ample fund, and the situation of the party damnified is such as would render it easy to reserve compensation in a variety of shapes. But to put the public to any expense in rendering any such compensation, would be a departure from former practice. When by threats of forced redemption government has compelled the Bank to accept of a reduced rate of interest, and made a defalcation to the amount of 25 per cent. upon the greatest part of its income, compensation has Edition: current; Page: [138] neither been granted by one party, nor demanded by the other.*

To government, whose own manufactory of paper money is of no less standing than that of the bank, it will be difficult to say why it should be forbidden to follow the example of the bank, and cut down its paper into as many smaller sizes as it found convenient. To government which for the benefit of the community at large has made no scruple of restricting the dealings of other manufacturers of paper money, it would be strange, if in the same view it were not allowable to take its own course in the manufacture of its own paper, in the management of its own affairs.

But the resource afforded by loans from the bank (it may be asked,) shall government deprive itself of such a resource? The answer is short and simple. The resource cannot be taken away by the measure, till profits have been produced to a greater amount than the fee-simple of it. Bank paper need not—would not begin to be withdrawn out of the circulation, till the paper of the country banks had been driven out of it altogether. But before this would have happened, a profit would have been made by the sale of annuity-note paper, more than equal to the usual advances made by the bank.

It is only in time of war that the resource is of any value. The quantity of money in the country will not be lessened at any rate by the proposed measure: the great and only danger is, lest it be increased too much. Upon any emergency, the same quantity of money would therefore be to be had, and always to be had only through a channel perhaps different, and at a rate of interest possibly, though not certainly, a little higher. At the worst, to set against the gain of the twenty, thirty, or forty millions, two or three times in the course of ten or twenty years, an extra expense to the amount of £50,000 or £100,000, might be incurred. Upon these occasions, a quantity of money might come to be raised upon bills in the nature of exchequer bills, under powers previously and regularly obtained from parliament, instead of being raised by treasury bills without powers from parliament.

The resource, such as it is, might or might not be reduced; but at the worst, would be but reduced. Even now, profit by paper issued is but a part of the profit of the bank.

2. As to the country bankers, the effect of the measure upon their interests appears by no means clear. On the one hand, if the quantity of cash in the country be not lessened by the proposed government paper, the demand for banker’s service in keeping that cash will not be lessened. Should the proposed government paper come to be universally received in preference to cash, the supply of cash kept by these banks for answering draughts may be made to assume that form, yielding £2 : 19s. per cent. while kept at home, while an equal amount in cash is sent abroad in the way of discount in exchange for bills. On the other hand, the money which is now attracted to a country bank by the nominal 3 per cent. or whatever interest it is that is paid for it at present will no longer find its way thither, being turned aside by the full £2 : 19s. a-year, with so many other advantages that attend the proposed paper in comparison with the paper of country bankers.

The loss, if there be any, to which this species of trader would be thus exposed, is at any rate among the slightest and least to be regretted of any to which man is exposed by the vicissitudes of trade. It is a mere cessation of gain, or rather of gain in this particular shape. A banker’s capital is all in money. It is not with a banker as with a manufacturer: no loss by removal of stock, or by forced sale in the lump, and thereby to a disadvantage, to avoid another greater loss. A banker steps into his trade without trouble, and goes out of it without loss.

In November 1792 (according to Mr. Chalmers,) the number of country banks was upwards of 400 before the month of March 1793; according to the evidence given on the 1st April 1797, to the Committee of the House of Lords, they had decreased to about 280: on that same 1st of April 1797, according to the same evidence, they did not exceed 230. If, in consequence of the proposed measure, the numbers of these banks should experience a further reduction, or were to be swept away altogether, the change is of a sort that threatens not to be either preceded or followed by distress. Failure cannot be among the consequences. The banks will have had ample warning, time for getting in their debts, and contracting their issues. Of the issue of the proposed paper, the progress, from the very opening of it, will be known day by day, the whole island over, to a penny.§ Months at any rate, not to speak of years, will have intervened between the first authentic mention of the measure, and the establishment of it.

From withdrawing without failure—from withdrawing, should it take place in consequence of the advancement of the proposed annuity-note paper—little damage would ensue to the few individuals particularly concerned, and none to anybody else. From failure, Edition: current; Page: [139] as often as it happens, ruin ensues to the individuals concerned, and much mischief to the community at large. An entire substitution of the proposed government paper to the paper of country bankers, would prevent the recurrence of this mischief, and that ruin. It is no light matter—out of the four hundred and odd country banks above spoken of (according to an account taken by Mr. Chalmers,) a full fourth had failed:* of more recent failures I say nothing, having nobody to quote.

By expulsion from this branch of trade the whole body of the trade would thus be secured from failure. By the failure of a part, though it were but a tenth part, more distress would at any time be produced, reckoning that of the trade alone, than by the expulsion of the whole.

3. For the banking-houses of the metropolis, there seems less cause of apprehension than for the country banks. They have no paper for the government paper to annihilate. True it is, that on the one hand many persons who now keep their money at a banker’s, because, by keeping it themselves, they could make no interest, would not keep their annuity-note paper at the banker’s, if by keeping it there they could make no interest on it, while by keeping it at home they could make £2 : 19s. per cent. of it. But the inducement to keep money at the banker’s does not consist solely in the consideration of safe custody, but in that and other advantages put together: in the saving in point of time and trouble in regard to the counting of money, and doubts and disputes about the goodness of money offered, together with the convenience of a man’s having the account of his expenditure kept by other hands. For these remaining conveniences, some might be willing to waive their claims to the small and unusual gain of 2d. per £100 per day upon expenditure: others, though unwilling to give up the whole, may be willing to give up some part of it; and in this way a man might keep his annuity-note paper at his bankers, as he does his cash, but upon terms; and the profit by interest on the paper might thus come to be shared between the owner of the paper and the keeper of it. Capital sums, however, which now are in so many instances suffered, through indolence, and while waiting for a distant and undetermined employment, to lie dead to the owner at a banker’s, would not be quite so apt to lie there, when in the shape of annuity notes they might be productive of interest to the owner, without prejudice to such their destination, and without any increase of trouble.

Here, then, we see two new sources of profit opened by the measure to the banking-houses of the metropolis:—1. Profit by interest of annuity-note paper kept in reserve, instead of cash to answer drafts; and 2. Profit by annuity-note paper kept for customers upon terms. Suppose the quantity of cash in the metropolis to be undiminished by the measure, the amount of the above profits will even be neat. Will it remain undiminished? The affirmative seems highly probable.

Among the effects of the measure is one, that to a certain degree cannot fail to increase that quantity. The cash which now remains, and would otherwise have remained in the hands of the frugal poor—in unproductive hands, being now poured into the hands of the commissioners for the redemption of the national debt in return for annuity-note paper, will be restored to the circulation, and add to the quantity put into the hands of bankers.


I have already stated an extra rise of prices as among the conceivable results of the proposed measure. Taken by itself, it is evidently an undesirable result: it is a tax on income to the amount—a tax which comes out of everybody’s pocket, and goes into nobody’s. Being, with reference to the proposed measure, an unfavourable result, I may be believed with the less difficulty when stating it as a probable one.

Supposing the influx of the proposed paper not to be followed, or rather kept pace with, by an efflux of other money to an equal amount; and supposing it too sudden to be productive of an influx of vendible commodities, to an amount worth regarding in this view, within the assumed space of time; the result presents itself as a demonstrable one. For the price of the whole mass of vendible articles taken together, sold within the year, is, in other words, the same thing as the quantity of money given or undertaken for in exchange for them within that time; so that the quantity of those articles remaining the same, the greater the quantity of the money is that has been given for them, the higher has been the price.

It has already been observed, that it seems impossible to say with any precision to how small or how great a length the emission of the proposed paper may eventually be found to extend previously to the arrival of stock 3 per cents. at par: That, at some part or other of that interval, a small quantity at least can, however, scarcely fail to find acceptance; and that a small quantity, a very few millions for example, issued previously to the conclusion of it, would be sufficient to operate the conversion indicated, and thereby give the form of the proposed paper to the whole of the remaining mass of annuities composing the national debt: That, although the quantity of that species of property will be continually Edition: current; Page: [140] and rapidly on the decrease, while the demand for it will be as continually and rapidly on the increase, it will nevertheless be difficult, if not impossible, to prescribe any determinate limit to that portion of it which in this way may come to have introduced itself into the circulation, on the footing of current money; for the open issue will remain equally open to the customers for temporary income (who, when they have kept it as long as they can afford, will throw it into the circulation) as to the customers for permanent income; and it seems impossible to say in what proportions, at any given time, the quantity of annuity-note paper remaining at that time, will find itself distributed between the two classes.

On these considerations, it will be matter of prudence to be prepared for the several possible cases and degrees in which it may happen to constitute a clear addition to the mass of money in circulation, to any such amount as to be in a sensible degree productive of the apprehended inconvenience.

Of such preparation, the practical result will be, to take such measures as shall be effectual for the prevention—not of the rise of prices, which is impossible—but of any addition to that degree of rise, or rate of increase, which would have taken place in the natural course of things, independently of the proposed measure.

If after having expelled of itself the whole amount of paper money of other sorts, it were to keep on increasing without expelling metallic money to an amount equal to its own, it would thence forward, if not restrained, make a proportionable addition to the quantity of money of all sorts in circulation, and thence to the prices of vendible commodities. In this case, it would be necessary to apply the check to the proposed paper itself, by limiting the quantity that should be suffered to enter into the composition of the mass of money in circulation: for example, by stopping the issue of all annuity notes below a certain magnitude; say, for instance, the £102 : 8s. notes. By an expedient thus simple (the requisite powers being given to the executive government ab initio) the end might be accomplished, in the possible event supposed, without any fresh interference on the part of the legislature. That the means thus proposed would be adequate to the end, will appear clear enough (it is supposed) from what has been said on this subject in a former Chapter.*

That in proportion as the proposed paper advanced in circulation, country bankers’ paper and Bank of England paper would quietly withdraw themselves, is a result that appears more probable than the contrary, according to what has already been observed.

Should it fail of taking place in the requisite degree of itself, it would require to be produced by means directed expressly to that end.

The first of the two species of paper attacked, would naturally be the paper of the country banks. Collectively modern, individually changeable, they have no such claims on government as those which plead in favour of the great incorporated bank.* Express prohibition would not be necessary: by taxation the same effect precisely might be produced—by a simple extension of a tax already imposed for other purposes. By this means, if necessary, about half the utmost possible amount of the supposed redundant mass of paper would be chased away.

Secondly, and lastly, would come the paper of the Bank of England. In this case, as in the other, the same means would be sufficient to the same end. Perhaps, however, in this case, they would not be necessary. A simple refusal on the part of government, to receive at its own offices any other than its own paper, might be adequate to the effect.

It may be asked—to what end throw the whole burthen of the measure upon the two particular classes in question, instead of letting it spread over the community at large in the shape of a rise of prices?

My answer is—to reduce the amount and pressure of it to its minimum. At an estimate greater than any possible one, the former loss would not be to the latter in so high a proportion as that of interest to principal. To the banking class, it is not clear (as hath already been shown) that the loss would in fact amount to anything. But put an extreme case, and take it, in the instance of each individual, at the utmost possible amount it could rise to in the instance of any one. Call the total amount of bank and bankers’ paper 25 millions, and upon the whole of this paper suppose a real profit of 5 per cent. annually made. Upon a supposition in a variety of points thus excessive, the total loss is but £1,250,000 a-year. Call, on the other hand, the total quantity of money of all kinds taken together 75 millions;§—and suppose (according to the position brought to view at Edition: current; Page: [141] the commencement of this chapter) that the addition made to the prices of vendible commodities, taken together, is in the exact proportion of the supposed sudden addition to the mass of money; viz. as 25 to 75—as 1 to 3. On this supposition, the rise of prices being supposed equable, and therefore universal, every income which did not receive a rateable increase from the supposed sudden influx of 25 millions, would in effect be diminished by a fourth—the whole income of a man so circumstanced producing him no more than three-fourths of the quantity of vendible commodities it produced to him before. Call, with Dr. Becke, the annual income of the country (including income from day labour without stock) £217,000,000—or for round numbers £210,000,000; then will the annual burthen on the country, by rise of prices on the nonexpulsion of the paper money in question, be £70,000,000.* Per contra, the utmost possible annual loss to the bankers and bank proprietors by the expulsion, not so much as £1,250,000; the probable loss, scarcely so much as the odd £250,000.

The amount of the loss would, it is true, be made good in money, in a certain degree, to every person whose circumstances enabled him to make in money an addition to his income equal to the degradation thus sustained by it;—for although the real value of the total mass of money—its value in respect of the quantity of vendible commodities it purchases and conveys—is not greater after the supposed addition to the mass of money, yet on the other hand, neither is it less. The misfortune is, that although the pressure from the defalcation would be felt in all its force—and felt by all parties, indemnified as well as unindemnified—the indemnity would in comparison be scarcely perceived. The loss by the rise of prices would be felt as so much loss:—the gain by the share in that extra influx of money by which the loss had been produced—this gain not being coupled and set down per contra in the mind of the party, and confronted with the loss, would present itself in the shape of an independent gain, unconnected with any such effect:—and by an indisputable law of the sensible faculties of man, sums and circumstances equal, the enjoyment produced by gain is never equal to the suffering produced by loss: if it were, the main reason for affording protection to property would cease.

That an increase in the quantity of real wealth, i. e. of vendible commodities, has been produced by an increase in the quantity of nominal wealth—viz. current money, cash and paper together—seems by no means clear of doubt. But what seems not exposed to doubt is, that the quantum of such addition, if real, accruing in the compass of a year, cannot amount to more than the produce of the fresh quantity of unemployed capacity for labour brought into employment by the application of a proportionable quantity of the supposed fresh influx of money over and above that which would have been brought into employment:—so that if at the commencement of the year all hands capable of employment were full of employment, and so would have continued during the whole course of it, no addition could in the course of that time be made to the quantity of real wealth or vendible commodities by the influx of the money in question, howsoever copious. But whatever quantity of money being introduced into the circulation has not the effect of producing a correspondent quantity of vendible commodities, cannot but have the effect of producing a correspondent degradation in the value of the existing mass of money into which it flows, thereby producing, what is in truth no more than the same effect expressed in other words, a correspondent rise of prices.


Reduction of Interest is a declared object with Parliament:—the only question is as to the mode.

To exhibit the comparative eligibility as between the two plans—(the one here proposed Edition: current; Page: [142] for the future, and the one pursued in time past by Mr. Pelham)—I shall consider them together under the several heads of expense—celerity of operation—previous assurance of success—and gentleness of operation:—not forgetting, with respect to Mr. Pelham’s, the possibility of applying it at the present time to the immensely increased mass of debt.

I. As to Expense—viz. as compared with profit.—In Mr. Pelham’s time, the profit consisted in reducing to 3 per cents. the whole amount of the then existing quantity of 4 per cents.; that is, reducing the quantum of interest paid on the nominal capital of £57,703,475, from about £2,308,136 to about £1,731,102.

When the operation was first mentioned by him in parliament, it was a sign that then at least the state of the money market was ripe for it; otherwise he could not have obtained the requisite assurance of the money for paying off in case of refractoriness:—how much longer it might have already been ripe, it would be in vain to attempt to calculate. This being assumed, whatever respite he allowed—whether as to the whole or as to a part of the interest proposed to be struck off—is to be considered as a price, or bonus, which under the plan proposed it was looked upon as advisable in point of prudence to allow to the stockholders, in order to purchase their acquiescence, and insure the plan against the hazard of failure. I say, to prudence; for as to sympathy for the sufferings of the individuals damnified, the professedly vindictive measures pursued afterwards against the repugnants are a sufficient proof that no such motive was consulted in the arrangements of the terms.

1. A year’s interest was allowed in the first plan without reduction:—i. e. the amount of the one per cent. that was to be afterwards struck off by the reduction, £577,034, was allowed for the first year.*

2. Half of the one per cent. ultimately struck off was allowed for seven years more. This for one year was £288,517;—for the seven years £2,019,619. Adding the one per cent. for the first year, makes the total price paid for consent, £2,596,653;—deducting £426,980 discount for the several years to come, leaves the amount of the money paid for the £577,034 a-year thus saved, £2,169,673.

This £2,169,673 (thus paid for consent to the reduction) amounts to a little more than 1-27th of the amount of the capital of £57,703,475, upon which the reduction of the 4 per cent. to 3 per cent. was thus effected: a little less than £2,308,136, which would be the exact amount of four year’s purchase of the perpetual annuity thus struck off. Such, then, was the price that on Mr. Pelham’s plan was given for a consent, which upon the proposed plan would be obtained gratis.

On the proposed plan, the quantum of interest that would be struck off by the first reduction (meaning the reduction effected in the course of the two first periods, by conversion of 4 and 5 and 3 per cents. into capitals bearing £2 : 19s. per cent.) by means of the paper of the first issue, would be £1,212,608.

That, upon any proposed reduction to be effected at this time of day, the same terms precisely should be offered as were offered at that time of day, would, under the vast difference of circumstances, be a supposition altogether untenable; but as it would be a fruitless attempt to determine what would be the terms now offered, the only terms on which any argument can be grounded are the above.

On that supposition, the price to be paid for a consent to the striking off a mass of permanent annuities to the above amount of £1,212,608 a-year, would be a little less than four times that sum: it would be £4,559,458: exactly four times would be £4,850,432.

3. A sacrifice which may be added to the expense attending the reduction of interest, as above, is—that of going on with the redemption of the principal of the debt. By Mr. Pelham’s plan, this latter mode of liberation was given up: even in point of right, for eight years—and in intention, perhaps for ever. Since the establishment of the existing sinking funds, it could not now be given up upon any terms; and supposing it possible, and deemed eligible, to adopt the principle of Mr. Pelham’s reduction plan to a certain extent, it could not be adopted without such modifications as would be necessary to render it compatible with the institution of those redemption funds.

On the proposed plan, reduction of interest and redemption of principal afford assistance Edition: current; Page: [143] to each other: reduction to redemption, by the supplies it pours into the fund;—redemption to reduction, by the sums which, by expelling them out of the old annuities, it drives into the new.

4. Another sacrifice that would be to be made upon Mr. Pelham’s plan was—of the eventual advantage of ulterior reductions:—the very right given up for eight years as before—and for any subsequent period, no foundation laid, nor prospect opened, for anything that appears.

On the proposed plan, issue follows issue—reduction, reduction—as wave follows wave,—execution treading without respite upon the heels of possibility. What space of time each reduction would occupy, is scarcely open to conjecture:—thus much is certain, that there is not a moment’s interval between the completion of one reduction and the commencement of the next.

II. Celerity of Operation constitutes a head of comparison different in name, but in effect carried to account already, under the head of Expense. A given sum is worth the less, as the time for receiving it is more distant. Acceleration is profit—retardation, loss.

III. Previous Assurance of Success.

That Mr. Pelham’s plan was practicable, was proved by the event. But for a long time it was likely to have failed: and had it failed, it would have failed in toto; since, if the reduction had not been submitted to in respect of nearly the whole mass, it could not have taken place as to any part. Had not the quantity of uninscribed stock (about 3¼ millions) been small enough to admit of its being paid off, the submission, testified in respect of the subscribed stock, could hardly have been accepted: nor could the plan have taken place in any degree, without a joint and simultaneous operation on the part of one or other of two numerous sets of parties—viz. the stock holders, who were called upon to submit to the reduction—or the monied men, from whom, as far as the expected submission failed of taking place, the money was to come for paying off the repugnants.

But though practicable then, in respect of the 57 or 58 millions in question then, it does not follow that it would be practicable now, in regard to the amount of debt now in question, not even although stocks should arrive at par.

In regard to reduction on the proposed plan, success is, as we have seen, independent of contingencies. In each year—month—day, the process will go on to the utmost extent consistent with the state of the money market at that time. By the proposed subscription plan—by the consequent competition for respite from further deductions—the first reduction might be rendered in a manner instantaneous; and a very short space of time would be sufficient for the accomplishment of it, even without any such aid. The 5 or 6 millions (which would by that time be the amount of a year’s produce of the sinking fund,) call it 5 millions—this vibrating without ceasing between the stock market and the annuity-note market, would be sufficient to dispatch the reduction, and with prodigious rapidity, although the subscription plan were untried, or tried without effect. In the machinery thus put in motion, no part is liable to stop of itself for want of the assistance of any other—and as it is at the beginning, so is it at the end.

During the first issue, every note then issued pays off by the money it produces, and thus, converts into note annuities, a corresponding portion of stock annuities. During the second issue, every note then issued converts in the same way, into paper bearing the reduced rate of interest of that second issue, a correspondent portion of the paper of the first issue:—and a single note thus taken out in the way of issue, would bring about the reduction upon that portion of capital, and in a determinable time even upon the whole capital, although not another note were ever to be issued on the same terms.

Once put in motion, the machine keeps going of itself, without any fresh winding up, so long as there remains a particle of the debt for it to act upon and cut down:—nothing is left to depend on circumstances of the moment—nothing on the humours of individuals;—no interval between reduction and reduction—no pausing, deliberating, negotiating, debating, fumbling:—nor yet is the process exposed to the charge of precipitation or excess,—government having it in its power to stop or retard the operation at any time, by stopping or retarding the influx of the primum mobile from the sinking fund.*

IV. Lastly, as to Gentleness of Operation. Of Mr. Pelham’s plan, it is upon record that it experienced much opposition, and created much dissatisfaction. It was in the nature of it so to do. It brought forward the minister in an obnoxious attitude, calling upon men to Edition: current; Page: [144] submit to a loss to the amount of a perpetual tax of 25 per cent. upon income, subject only to an abatement to the amount of about four years’ purchase, on the condition of their lending their hands to a sacrifice of which they were the sole victims.

Accordingly, though on the ground of justice nothing could be more unimpeachable, ill-humour on one side appears to have begot ill-humour on the other—on the part of the authors of the suffering, as well as on the part of the sufferers themselves. On those who stood out at first, harder terms were afterwards imposed; and, to judge from the debates, the professed motive was not merely economy but vengeance.*

By the proposed plan, no such invidious task is put into the hands of any one. Before anything of hardship shows itself (at least to the great class of individuals here in question—the stockholders,) the measure will have been known—known for years as a measure of universal accommodation. Every man’s money will have been breeding money in his pocket—every man who has sold out, will have sold to an advantage. When hardship comes at last, it will be at the end of a long chain of causes and effects, the first link of which has been removed by time, almost out of the reach of observation. The immediate cause, being everybody’s act, is nobody’s. No new act—none at least that carries anything of compulsion on the face of it, is required at this (or indeed at any time) on the part of government.

On Mr. Pelham’s plan, everything turning upon subscription, a man knew not but that he was subscribing to his own loss. On the proposed plan, the loss takes place at any rate, and the effect of a subscription is all gain to him. The quantity of this gain depends upon his own exertions; and the bustle of competition serves to call off his mind from the suffering which is to come.


To the head of moral advantages may be referred two very distinct results:—prevention of improbity, and promotion of frugality: prevention of improbity, by furnishing (as we shall see) a new means or instrument of prevention; promotion of frugality, by the offer of a new species of property, which, by annexing an unprecedented remuneration to the exercise of that virtue, operates at once as an incentive and as a means.

I. As to prevention of improbity. The class of persons in whose instance it may operate to this effect, consists of trustees of every description, to whom it belongs to receive money on account of their principals—executors and administrators, guardians, stewards and receivers, assignees of bankrupts, prize-agents, factors, and the like.

To cause trust-monies, as often as a suitable case presents itself, to be laid out in the purchase of government annuities for the benefit of the principals, is, in the court of Chancery, matter of long-established practice—a practice which, by an act of very recent date, has received express support from parliament. The credit of the proposed new government annuities having been previously established by sufficient experience, let a similar investment of all trust-monies, as they come in, be rendered a matter of general obligation by an act of the legislature. A trust-receipt book to be kept with a trust-till. In the book, an entry to be made of each sum received, with the day on which it was received; the statement of the day to be indispensable. The money, if not received in the shape of annuity notes, to be sent to the office on that day or the next, to be changed into annuity notes; the notes received to be entered by their numbers; if the day be not entered, the first day of the year to be presumed, for the purpose of charging the trustee with the interest. The trust-paper, as received, to be deposited in the trust-till, to save it from being confounded with money of his own. This not to prevent the disposal of the amount to superior advantage (i. e. at a higher rate of interest than what is afforded by annuity notes) in as far as the nature of the trust admits of it.

What is thus proposed to be rendered obligatory for the benefit of the principal, is no more than what a careful trustee would do spontaneously, either for the benefit of the principal or for his own, according to the texture of his conscience. Should a precaution thus simple and unexceptionable be neglected, the institution of annuity notes will be but too apt to operate as a premium for vice as well as virtue—a premium for improbity in the one situation, as well as for frugality in the other.

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II. Lastly, as to promotion of frugality. We have seen the peculiar advantages which the proposed new species of property holds out to the acquirer. Within a trifling and unavoidable fraction, 2d. a-day: £3 for every £100 by the year—not for risk of lending, but for mere self-denial in not spending. Income, receivable without expense, and without stirring from his home. No attendance, no agency fees, no brokerage fees, no stamp-duty, either on purchase or on sale. No loss, on either occasion, by fluctuation of price. Not a day without its profit—profit by keeping, for the minutest as well as for the largest portions of time: conveyance obtainable for it by the post in the minutest portions as well as to the most distant parts of the island. Security afforded by division against misadventures of all sorts—against accidents and against crimes—in the house or on the road—by fire, water, or forgetfulness—from theft, robbery, burglary, or breach of trust. Compound interest brought within the reach of individuals for the first time.

In proportion to the degree in which it presents these several accommodations, in that same proportion does it act as an incentive to frugality:—in all classes in a certain degree, and in as far as current expenditure is concerned; but in a more especial degree, in those humble, and at the same time most numerous walks of life, in which it is of most importance to prudence, probity, and happiness.*

In the existing state of the money-market, the hoards of the opulent are prolific and accumulating: the hoards of the poor alone are dead and unproductive. By the proposed measure, the condition of the poor in this respect would be raised to a level—in the first instance not much below, and in process of time (as the price of stock annuities rose, and the rate of interest obtainable by the purchase of them diminished) altogether upon a par with, the condition of the rich.

A result not to be viewed without regret is, that in every period after the second, and in proportion as the rate of interest afforded by government annuities comes to be reduced, the encouragement thus given to frugality will thus be reduced likewise: for though, after the reduction, the remainder will be gain, as compared with the present period, yet the difference will be loss, in comparison of the period then last in experience. But in the meantime, the condition of the poor in this respect will, at any rate, have been raised to a level with that of the rich, and will so continue. The habit of frugality will have taken root, and having so done, may derive strength, rather than weakness, from the increased exertions it will be called upon to make.


Among the effects resulting from the national debt in the early stages of its existence, was the security it afforded to the old established constitution, by engaging the purses and affections of the monied interest in the service and support of the new-established government. That was the great-monied interest. In other points of view, the institution of that debt has found many disapprovers: in this it has found none—among those, at least, by whom the existing constitution is regarded as fit to be preserved. The advantage resulting from the transmutation of that debt into the proposed form would be—the security to the constitution and government now grown into one, arising from its engaging the support of what may be called the little-monied interest by the same powerful tie.

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The body politic, not less than the body natural, is subject to its constitutional diseases. Tyranny was the grand disease in prospect then: anarchy now. The danger then was, from a single person in respect of the sentiments of submission pointed to that person, and carried to excess: the danger now is from the great multitude—in respect of the disposition to unruliness which has been, and continues to be propagated with but too much success among the lower orders—among those (let it never be out of mind) of whom is composed the vast majority of the people.

If the name of great-monied interest, employed above for distinction’s sake, be well applied, it is with reference to money, and by reason of the greatness of the shares, but with reference to men, meaning multitude of men—and even with reference to money, if the magnitude of the total be the object of consideration—it is the little-monied interest that should be termed great.

As the disease changes its form, so should the remedy. Stock, in its large doses, served for the disorder of that time: paper, in its small doses, is the specific for the present.*

Admirable are the remedies that have already been applied: admirable, not more for their efficiency than for their gentleness. There remains this one—and perhaps another that might be named—remedies, not less efficient, and still more gentle.

Turning to Ireland, the demand for the remedy will be found the same in kind, but much more urgent in degree: the proportion of petty to great money-holders much greater: the bias to turbulence and anarchy (not to speak of idleness and drunkenness) beyond comparison more prone.

Turn, lastly, to British India:—What a sheet-anchor to British dominion—to the mildest, the most upright, the steadiest of all governments—if by insensible and voluntary steps the population of that remote, most expanded, and most expansive branch of the British empire, should be led to repose the bulk of their fortunes and their hopes on a paper bearing the image and superscription of a British governor! What a reduction in the rate of interest paid there by government!—what a remedy to the risks and embarrassments attendant on the interchange of so many debaseable and incommensurable modifications of metallic currency!—what an augmentation to the general mass of currency, capital, and wealth!

But all these are trifles in comparison with the additional pledge of popular attachment, and the increased assurance of internal peace. From the Zemindar to the Ryot, every Hindoo, every Mussulman, who possessed this money—every individual, in a word, who possessed money—might thus, by his own money, and to a great part of the amount of his own money—might thus, and without impeachment of probity—be converted into a pensioner of the British government. For a premium equal to the interest the paper yields, he would be underwriting—perpetually underwriting his allegiance to the amount of the principal.


Upon the whole, the proposed measure, it is believed, will be found to promise, with some degree of assurance, the following connected, but perfectly distinct advantages:—

1. Advantage of financial profit, by contributing Edition: current; Page: [147] in so many various, and to such considerable amounts, to the redemption of the principal of the national debt, as well as to the reduction of the rate of interest—and by affording an instrument more advantageous than any other for the application to that end of such means as are or may be provided from other sources.

2. Moral advantages, by the encouragement of frugality, and thence of temperance, among the inferior and most numerous ranks of the community.

3. Constitutional advantages, by constituting an additional bond of connexion with the government, and thence affording an additional safeguard to internal tranquillity.

4. Politico-economical advantage, by addition made to the mass of national productive capital, and thence to the mass of growing wealth.

Each of the above four masses of advantage appears sufficient to warrant an experiment, even should it be attended with some risk. Shall they not all of them together be deemed sufficient to give birth to an experiment altogether free from risk?

Few measures have ever been brought to view pregnant with such high advantages—none in which, in case of success, the degree of success has been beforehand so precisely ascertainable—none in which the deviation from the path of safety, as marked out by experience, is so slight and imperceptible.

Were the proposal expressed in these words—“Make your exchequer bills for small sums,”*—this, though not completely nor correctly expressive of the measure, would express all the innovation of it.

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The only feature in the proposed plan, which, separately taken, can be called new, is, the bringing into the market portions of government currency less than heretofore—portions less than have been issued by government in this country, but not less than than what have been issued by governments in other countries, and in this country by individuals.

The other leading features are collected altogether from established institutions. The annuity engaged for is perpetual, but redeemable—the paper containing the evidence of its sale by government, light and transferable—the produce of the sale appropriated to the extinction of the national debt.

If the experiment be tried, the earlier the success the greater;—but sooner or later, and to a certain extent, success is infallible, and even failure would be unattended with loss.

APPENDIX A.: Government ought to have the Monopoly of Paper Money, as well as of Metallic Money.

Bank Notes, though bearing no interest, circulate at par. Even private notes—the notes of country bankers, do the same:—Government paper not without interest, and even when carrying interest, not at a corresponding premium.

To what causes are we to attribute a contrast thus striking, and so much to the disadvantage of government? Is the disadvantage remediable, or irremediable? If remediable, are there any efficient reasons against employing a remedy? If a remedy can be found, is it not an event to be wished for upon the whole? Instead of bearing a share comparatively so minute as that which government bears in the business of issuing paper currency, and that upon terms comparatively so disadvantageous, ought it not rather to possess the whole?—is it not to be wished that it did possess the whole? How stand these questions with reference to general constitutional principles?—how stand they upon the footing of particular expediency—of expediency with reference to the circumstances of the particular case in question, independently of the general expediency of adhering to constitutional principles? If obtainable and desirable, by what means can such an extension of the government currency be attempted with the greatest prospect of advantage and success? Of what nature are the advantages to be derived from it, and to what length are they capable of being carried?

The advantage is the first object in the order of importance. Whatever may be the present amount of paper circulating without interest,—upon the supposition that government possessed the monopoly of the issue of such paper, the saving of the interest upon such amount, whatever be the current rate of interest, would be the advantage accruing from such monopoly.

If, then, the whole of this advantage, or any part of it, could be gained, would there be any harm in gaining it? Let us open, in the first place, the great book of the constitution. To be the same in principle at all times, constitutional laws must vary as the times, and adapt themselves to the times.

Among the most unquestioned, innocent, and unobjectionable prerogatives of the crown, acting in this as in all other instances under the controul of parliament, is the monopoly of the coinage.* When there was no currency Edition: current; Page: [149] but metal, the crown had the sole issuing of that currency. To metal currency is now added paper currency: the crown, therefore, to preserve the prerogative in statu quo, ought to have the sole issuing of that currency; at any rate, unless the extension of the monopoly to this modern branch be attended with greater inconveniences than what accompany its application to the old one.

Nor let it be thought that the expediency of this extension rests upon the mere general ground of adherence to established principles, sanctioned by general acquiescence—upon the propriety of keeping matters in respect of government as they are—in a word, of keeping up the vis inertue of government. If the prerogative had utility for its support in its original shape, it is recommended by equal utility in the proposed supplemental one. The use of the prerogative in respect of metal money, was to guard the people against loss by the suppression of counterfeits: in the instance of paper currency, the use and reed of it are the same.

The loss to which the subject was exposes by metal money coined by individuals, was that of the difference between genuine metal and of full weight, and the coin of light weight and base alloy, which it might be apprehended would be issued by individuals. The loss to which the subject is exposed from bad paper currency is of the same kind, but much heavier in degree. Loss by bad metal currency distributes itself in small parcels, and by the minuteness of the portions to which it adheres, falls with a gentle and almost imperceptible stroke. Loss by bad paper falls in much larger masses. Loss by bad copper is as nothing—loss by bad silver is no great matter—even loss by bad gold is light, in comparison of the average rate of loss upon bad bills.

The justification of the monopoly in the new case is stronger than in the old one, in every point of view. By the monopoly of the metal coinage, the government succeeds but very imperfectly in saving the subject from loss. Coiners were punished as traitors; and yet the country swarmed with coiners. A few years ago, and the copper was three-fourths bad:—the pretended silver, a great deal of it base, and scarcely a piece of genuine silver that was not either counterfeit or light. By the monopoly of the paper currency, government might most perfectly protect the subject from bad paper. Let it but supply the market with its own paper, and a simple prohibition will keep all other paper out of the market most effectually. Against the fabrication of bad coin, capital punishment has been expended in vain: against the fabrication of paper, which under the danger of its turning out so much worse than bad coin, it seems expedient to prohibit, a pecuniary penalty would be perfectly sufficient.

If, then, in the whole scheme of government, there be an instance in which it is expedient to bring back institutions to the standard of first principles, the present will, I believe, be found among the number. Compare the advantage resulting to the community from the monopoly in the respective instances of the two species of currencies, we shall find it in every point of view greatly superior in the instance of the paper currency of fictitious value, to what it is in the instance of the currency of natural value, the metallic currency. Will the prerogative be abused? No more when extended to paper, than it is now that it confines itself to coin. Good faith as towards subjects is a jewel so deeply set in the British crown, that it can as little be expected to shake in any one part, as to drop out altogether.

APPENDIX B.: Paper Money—Causes why not circulated by Government without interest, as well as by Individuals.

The contrast between the terms on which bank paper is received, and those on which government paper is received, has been already brought to view. The inferiority of the latter cannot, however, be owing to any inferiority in point of credit. The credit of the Bank of England can never be greater than that of the government of Great Britain;* yet a man who would trust government with his whole fortune, to the amount of hundreds of thousands of pounds, will not give a premium of more than a few shillings per £100 for an exchequer bill bearing interest, though he will give £100 for a bank note to that amount, for which he will receive no interest. The same man, too, will not only take a promissory note from the great company, of whose opulence the opinion is so universal and so high, for its nominal value, but perhaps even the note of some country banker, of whom, except from such his note, he has no knowledge. The cause of this inferiority can never, therefore, consist in any inferiority in point of credit. It must be looked for, therefore, in some other circumstance.

There are several circumstances which cooperate towards giving to the bank paper the aptitude it possesses with respect to circulation. The want of any of these properties, Edition: current; Page: [150] or the possession of it in an inferior degree, will account pro tanto for the inferiority of the terms upon which the government paper obtains the degree of circulation it has obtained.

These properties are—1. The being payable to the bearer on demand; 2. The being transferable, like coin, from hand to hand, without indorsement or any other formality; 3. The being issued for such small sums as £20, £10, and £5; 4. The being impressed on paper which, in point of size, is neither so large as to take up much room, nor so small as to be liable by its minuteness to escape observation, and be lost; and in point of texture is thin enough to bear folding without cracking, and yet not so thin but that it will bear to be written upon, by which means any proprietor may put his mark upon it, to enable him to vindicate his right to it in case of loss; 5. The having been so long in possession of the national confidence, and that to such a degree as to be the only paper which individuals all over the kingdom are universally in the habit of accepting upon the same terms as the current coin.*

An exchequer bill bears a daily interest, and is made payable to bearer. Upon hearing this, one should suppose that it should bear a premium to the amount of the interest;—since a bank note for that sum, payable to bearer and carrying no interest, bears no discount, but is received at par. An exchequer bill does indeed bear a premium, but that premium is very far short of being equal to the interest.

The difference, we have seen, does not arise from difference in point of security and credit, but may perhaps be traced to the combined influence of several causes; viz.—1. The want of bills for small sums of a size adapted to the general run of the demand; 2. The not being made payable to the bearer at any time, but only after the interval of about half a year after its issue; 3. The want of that simplicity, in respect of the terms and mode of payment, which is observable in the paper of the Bank of England;—to which may perhaps be added, something (of which presently) in the sensible properties of the instrument itself by which the engagement is conveyed.

That the want of sufficient division has a very considerable share in the production of the effect, can scarcely be a matter of doubt. Exchequer bills are not for a less amount than £100; they are never issued for a less sum. Bank notes are for various amounts less than £100, viz. £50, £40, £30, £20, £15, £10, and £5. In the instance of exchequer bills, the magnitude of the sum is itself sufficient to render this species of paper unfit for the ordinary course of circulation—it is of itself sufficient to throw it out of the ordinary current of private dealings. It is a commodity for which comparatively so few are qualified to bid, that those few cannot but enjoy considerable advantage in their biddings. It is the money of so few men, that that circumstance is of itself sufficient to prevent it from being generally known. Accordingly, the circulation of exchequer bills is confined in great measure, for aught I know, to the metropolis:—it is confined to the neighbourhood of the Alley—to bankers, stock-brokers, and the other classes of money dealers. A man may have enjoyed a large income—a man may have had very extensive dealings in the way of trade, and yet go out of the world without having ever set eyes on an exchequer bill.

The bank, it may be said, issues notes for sums as large as £100—indeed, for sums to a prodigious degree larger; and yet there is no more discount upon these large notes or the bank, than upon the very smallest ones. True: but then, along with these larger notes, the bank issues, and that in great plenty, the smaller notes above mentioned—and that in such plenty, as to be in readiness for change of the larger notes, wherever and by whomsoever such change is wanted: nor are such larger notes ever issued to any one who chooses rather to have the smaller notes.

The small notes of the bank, it may be observed in reply, afford no facility to the circulation of the large notes of the same company, that the exchequer bills of government do not equally possess: for, admitting that the value of an exchequer bill of £100 would not be quite so great, setting aside the article of interest, as that of a bank note to the same nominal amount, still the exchequer bill has a known value in the market, as experience shows, not much less than that of the bank note. It ought, therefore, to be as easy, were this all, to find change for a £100 exchequer bill in bank notes, as for a £100 bank note.

To this it may be rejoined, that the facility in the two cases is not in truth alike. Everybody being equally acquainted with bank notes, anybody who has £100 to keep for a little while before he will have to change it, will as readily take it in a single bank note for £100, as in ten notes for £10; for though he may never have seen such a thing as a bank note for £100 before in his life, yet the perfect resemblance it bears in every respect but the quantity of paper, engraving, and writing, to the ten £10 notes, makes it, so long as he does not want to change it, exactly the same thing to him:—the security is the same,—the conditions and time of payment are the same,—and what is no small matter, the Edition: current; Page: [151] appearance of the instrument is exactly the same, the variation in respect of the sum excepted—a sort of variation which he is already accustomed to by the smaller notes. A man who has a £100 bank note, need not fear, therefore, the getting smaller bank notes to the same amount from any one who has them, and is in no immediate want of such lesser notes in the way of change:—whereas a man who has only a £100 exchequer bill, may see good grounds for doubting whether he shall be able with equal facility to get such change for such exchequer bill; since, among twenty people to whom he may offer it, every one may perhaps be altogether unacquainted with it, and if not absolutely decided in regarding it as a species of paper of less value, may still be unwilling to give himself the trouble of satisfying himself whether it be of equal value or not.

The want of efficient assurance of putting off this species of paper with as much facility as a bank note to the same amount, gives this species of paper a disadvantage, or at least it may be reckoned among the causes which contribute to give this paper a disadvantage in point of prompt circulation, in comparison with bank notes. But since, accordingly, the exchequer bill is not, like the bank note, everybody’s money, the consequence is, that in order to find out a person whose money it is, it must be sent to the great market for money in different shapes,—the Alley: it must go into the hands of a broker; and the expense, but much more the time (for the expense is but 1/2000 per cent.) places it thus on a ground of considerable disadvantage in comparison with a bank note.

So far as this disadvantage goes, instead of operating as current cash, it has the effect only of so much capital in the funds, operating in the shape of principal money, as carrying interest, and serving as a source of income. In this quality, the price it bears will approach to that of stock—to that of a government annuity given in exchange for so much money rather than to the price of so much money receivable at any time. It will, however, have the advantage, in point of price, of such an annuity, and that on several accounts: it is transferable with so much less trouble and expense—the value of it rises by keeping, according to a visible and certain law, in a visible and certain proportion, day by day;—whereas the price of so much stock, though it may rise in much the same degree upon the whole as the period of payment approaches, yet as it can rise by no interval less than ⅛ per cent., amounting in three per cents. to 1/24 [Editor:?] of the whole, it can rise by no shorter steps than one step of at least fifteen days; and even then, the rise is so liable to be disturbed by fluctuations, as to be, in the character of a rise proportioned to lapse of time and the consequent accrual of interest, in a manner imperceptible.

It might be thought, that though the £100 exchequer bill is, for the reasons above pointed out, not everybody’s money—not the money of so many people as the £100 bank note, still it might be worth so many people’s money, as to bear the same price, or nearly the same price. It would, for example, be the money of bankers and money-dealers in general. It certainly is the money of bankers to a degree: yet still not in the same degree as the bank note. It is their money upon a footing more nearly approaching to that in which so much stock is their money, than that in which the bank note is their money. A banker may lay out his money in this way for the purpose of making it produce an interest; and thence he may lay out in this way such part of his receipts as be allows himself to lay out for his own benefit: but he cannot lay out in this way, as he may in bank notes, any part, or at least any considerable part, of the money which he deems it necessary to keep by him in readiness to answer drafts; because, as has already been observed, he cannot be equally sure of the exchequer notes being accepted of by a person who comes with a draft, as he can of the bank notes being so accepted of. He can keep it, therefore, upon no other footing than that of an evidence of his being entitled to a principal sum bearing interest,—in a word, as a source of interest. But in the capacity of a source of interest, it must bear the interest it purports to give, or at least a very considerable part of it: if it did not, it would not answer the purpose; it therefore cannot bear, in this quality, a premium eating out that interest, or any considerable part of it. It may indeed be worth his while to take somewhat less interest upon such a security than he could make of the same money in the funds; because it will cost him rather less time, and at at any rate less money, to convert it into cash at any time, than to convert into cash so much stock. And this accordingly is the case:—a man makes almost one per cent. less in this way than by buying into the funds.

As to the circumstance of the exchequer bill not being payable on demand, till half a year after the time of its being issued, this circumstance is not sufficient of itself to account for the depreciation. Taken by itself, it seems in fact to have but little or no influence. If this were the sole cause of depreciation, this cause being removed, the effect would cease: before the time when principal and interest became payable, or at least at the time of issuing, an exchequer bill would indeed bear no premium; but no sooner were that period arrived, than it would bear a premium, and that equal to the interest. This, however, is so far from being true, that, as Edition: current; Page: [152] far as I can learn, the arrival of this period makes in this respect no perceptible change. At the time of issuing, the exchequer bill bears a small premium, thereby reducing the rate of interest that can be made of it; at the arrival of the time of payment, it continues to bear that premium, but does not bear any more. The truth is, that the inconvenience of its not being payable for half a year is foreseen, and so far as it is reckoned for anything, allowed for from the first; and the exchequer bill takes its station among the commodities of the Alley, as a paper better adapted for a source of income than for general circulation; and this station the change in its nature, operated by the arrival of the time for payment, is not able to raise it from.

The comparative want of simplicity in respect of the terms and mode of payment, in comparison with a bank note, cannot but have some share in the comparative depreciation of an exchequer bill. To be adapted to general circulation, an engagement of this sort, as to the contents of it, ought to be so simple, that, if possible, everybody of a condition high enough to have property to such an amount pass through his hands, may be able without effort to apprehend them. The engagement taken by the bank—a promise on the part of an individual to pay the sum in question on demand, and that to the bearer by whom the instrument of engagement shall be produced—possesses this property in the highest degree of perfection that can be conceived. In the instance of the exchequer bill, several circumstances concur in keeping down the terms of the engagement considerably below this point of perfection. It is to be paid indeed to the bearer—that is, if it be paid at all. But will it be paid at all? This appears to depend upon a variety of contingencies;—viz. l. If aids happen to be granted for the service of the next year, then out of the first of such aids. But will any such aids be granted? This is expressly stated to be a matter of uncertainty:—it is stated, that perhaps no such aids may be granted before a certain date in the next year,—and provision is made accordingly for that contingency, that if no such aids be granted, that the money is to be paid out of the consolidated fund. But if paid out of this consolidated fund, when is it to be paid?—and by whom? These are questions it leaves in utter darkness. Is it, too, in other respects, a good bill? Grounds of suspicion, and those of the strongest kind, present themselves upon the face of it. A period is expressed, during which it will not be accepted of as such by the very government that issues it. It is not to be current, or pass in any of the public revenues, aids, taxes, or supplies whatsoever, or at the receipt of the exchequer, before a certain day in the next year,—that is, for half a year and upwards. Before that period, then, it will not be treated as a good bill;—this it expressly says. Will it afterwards? and when? Of this nothing is said; it is left entirely to conjecture.

Nor is this all:—another ground of uncertainty and suspicion. It does not state how soon it is to be paid; but it does state that it is not to be paid till another sum, amounting perhaps to several millions, has been paid. “Registered and payable after 1,754,400,” says a bill, No. 17545, I have before me. When is it, then, that this £1,754,400 will be paid? This again is all in darkness.

To a person acquainted with the mechanism of government, all these points are in a state of perfect clearness: he knows, that with all these apparent difficulties and uncertainties, the bill that presents them is at least as good as a bank note. But among persons who are not unaccustomed to the simple language of a bank note, not one out of a hundred, or perhaps a thousand, has any such acquaintance with the mechanism of government.

Even the introductory words, inserted with the view of indicating the authority on which the bill is issued, are of a nature more likely to excite doubt and difficulty in an unlearned mind, that is, in the mind of the bulk of readers, than to command confidence. “By an act of Parliament, Tricesimo quarto Geo. III. Regis. For raising a certain sum of money by loans or Exchequer Bills for the service of the year 1794.” In this formidable mixture of English and Latin, interlarded with terms of art and the language of finance, a man is sent to an act of parliament, to know whether the bill will be paid or no, and if paid, when and how and by whom—the rather as in the bill itself no answer to any of these questions is to be found:—and upon his putting a right construction upon a revenue act of parliament—he who perhaps never read an act of parliament in his life, and almost certainly (if not a lawyer) is not in the habit of trusting himself to find out the sense of an act of parliament—depends his knowing whether the bill will or will not be paid, and so forth. It is a case for him to consult his lawyer upon, as he would think it necessary to do upon other acts of parliament, where property to much less amount than £100 (the amount of an exchequer bill) was at stake. But the occasion does not allow time for consulting a lawyer;—and if it did, the expense of consulting him would eat a good way into the profit to be made by the interest of which the bill holds out the prospect, in addition to the principal that would be promised by a bank note to the same amount.

The fourth and last of the causes that have been mentioned as appearing to concur in the production of the depreciation in question, is the character of the instrument in respect of Edition: current; Page: [153] its sensible qualities—the size and texture of the paper. A bank note is perhaps, in respect of these properties, as convenient for circulation as can be imagined. In point of size and thickness neither so large as to take up an inconvenient quantity of room in the pocket or pocket-book, not even when a considerable number are taken together;—nor yet, on the other hand, so small as to be liable to escape notice and be lost: while, by reason of its extraordinary thinness (besides being so much the better guarded against fraudulent alteration, which is the principal object,) it is better adapted to bear folding to reduce it to a size fit for the pocket and pocket-book, without cracking at the edges, and so coming to pieces.

In these particulars, the difference between the bank note and the exchequer bill is not great—though, as far as it goes, it is rather to the disadvantage of the exchequer bill. In point of size, the exchequer bill is much upon a par with the bank-note—not quite so long—a little broader: these differences are not at all material. But the paper is a great deal thicker—rather of a thick and brittle sort than otherwise—so much so as to be in appearance more exposed to crack than any of the papers commonly used as writing papers.

In the bank note, too, there is something in the meatness of the engraving, and the conspicuous and emphatic display of the sum, that cannot but be particularly attractive and fascinating to an ordinary eye. In the exchequer bill, there is no such display of the sum; and the style of the impression of the long-winded explanation of the conditions of payment has nothing particular to recommend it.

Upon these combined causes, then, it appears most probable that the depreciation of government paper depends; and not till they are removed, can it be expected that this comparative depreciation will disappear.

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  • Chap. I. General Division.
    • § 1. Customary Divisions, page 157
    • 2. New Divisions, . . . . 158
  • II. Relations between the Laws concerning Offences, Rights, Obligations, and Services, . . . ib.
  • III. Relation between the Penal and Civil Code, . . . . . . . 160
  • IV. Of Method, . . . . . . . 161
  • V. Plan of the Penal Code, . . . 163
  • VI. Of the Division of Offences, . ib.
  • VII. Advantages of this Classification, 171
  • VIII. Titles of the Penal Code, . . . 174
  • IX. First General Title. Of the Civil Code: Of Things, . . . . 176
  • X. Second General Title: Of Places, 178
  • XI. Third General Title: Of Times, ib.
  • XII. Fourth General Title: Of Services, 179
  • XIII. Fifth General Title: Of Obligations, . . . . . . . . . 180
  • XIV. Sixth General Title: Of Rights, 181
  • XV. Seventh General Title: Of Collative and Ablative Events, . . 186
  • XVI. Eighth General Title: Of Contracts, . . . . . . . . . 190
  • XVII. Ninth General Title: Of the Domestic and Civil States, . . 192
  • Ch. XVIII. Tenth General Title: Of Persons capable of Contracting and Acquiring, . . page 193
  • XIX. Of the Particular Titles of the Civil Code, . . . . . ib.
  • XX. Of Elementary Political Powers, . . . . . . . . 195
  • XXI. Subject continued, . . . . 198
  • XXII. Plan of the Political Code, . 199
  • XXIII. Plan of the International Code, 200
  • XXIV. Plan of the Maritime Code, . 201
  • XXV. Plan of the Military Code, . ib.
  • XXVI. Plan of the Ecclesiastical Code, 202
  • XXVII. Plan of Remuneratory Laws, 203
  • XXVIII. Of Political Economy, . . ib.
  • XXIX. Plan of the Financial Code, . 204
  • XXX. Plan of Procedure Code, . . ib.
  • XXXI. Of the Integrality of the Code of Laws, . . . . . . 205
  • XXXII. Of Purity in the Composition of a Code of Laws, . . . 206
  • XXXIII. Of the Style of the Laws, . 207
  • XXXIV. Of the Interpretation, Conservation, and Improvement of a Code, . . . . . . . 209

asterisks The following Work is edited from the French of Dumont, and the original MSS. and printed works of Bentham.

In his advertisement to the edition of 1802, Dumont states, that “Bentham only regarded this work as a sketch for his own guidance, and as too little developed to be offered to the public. Indeed, the manuscripts have in some chapters only presented me with fragments, and tables of matter to be inserted; but as the route was everywhere marked out, I have not been afraid that I should lose the road. The spirit of philosophy and invention have not yet been applied to this general geography of the law. It is a subject upon which there have as yet been no human traces. In the following work, a luminous and regular plan will be found succeeding to this state of confusion and disorder.”

  • “Jam mare littus habet: plenos capit alveus amnes;
  • Flumina subsidunt: colles exire videntur,
  • Surgit humus.”
  • Metamorphoses, lib. i.
Edition: current; Page: [157]



A Code of Laws is like a vast forest; the more it is divided, the better it is known.

To render a code of laws complete, it is necessary to know all the parts which should be comprised in it. It is necessary to know what they are in themselves, and what they are in relation to one another. This is accomplished when, taking the body of the laws in their entirety, they may be divided into two parts, in such manner that everything which belongs to the integral body may be found comprised in the one or the other part, and yet nothing shall at the same time be found in both parts. This is the only case in which the division is complete.

§ 1.: Customary Divisions.

The customary divisions are—

First Division: 1. Internal law; 2. Law of Nations.—The first is National law, which takes its name from the country to which it refers; as English law, French law, &c. &c.

A detached part of this law which only concerns the inhabitants of a town, of a district, or of a parish, forms a subdivision which is called municipal law.

The second is that which regulates the mutual transactions between sovereigns and nations. This might be called exclusively international law. This division is complete, but its parts are unequal and slightly distinguished.

Second Division: 1. Penal law; 2. Civil law.—When this division is given as complete, international law has at least been forgotten.

Third Division: 1. Penal law; 2. Civil law; 3. Political law.—To distinguish this latter from international law, it would be better to call it constitutional law. If the second division is complete, what must be thought of this? Its third part must, in some shape or other, have been comprised in the other two.

Fourth Division: 1. Civil or Temporal law; 2. Ecclesiastical or Spiritual law.—A complete division, but unequal, and one of which the parts are much intermixed.

Fifth Division: 1. Civil law; 2. Military law.—Another division apparently limited to internal law.

This unfortunate epithet civil, opposed alternately to the words penal, ecclesiastical, political, military, has four different meanings, which are incessantly confounded with each other. It is one of the most unmeaning protean terms in all jurisprudence.

Sixth Division: 1. Written law; 2. Unwritten, or Customary law.

Laws may exist in the form of statutes or in the form of customs. The statute law is called written positive law; custom is a conjectural law which is drawn by induction from the former decisions given by the judges in similar cases.

Seventh Division: 1. Natural laws; 2. Economical laws; 3. Political laws, to which correspond,—the duties devolving upon an individual, family duties, and the duties of man in society. But where does man exist without society?—and if there be any such place, whence are its laws derived? What are these natural laws, which nobody has made, and which everybody supposes at his fancy? What are these economic laws, which are not political? The making of such divisions may be parodied by distributing zoology into the science of chimeras, of horses, and of animals! Such, nevertheless, is the nomenclature of legislation, according to the noblest spirits of the age, the D’Alemberts, the Diderots, and the principal of the economists. What, then, must be the condition of the science?

They also withdraw from the body of the law considerable portions which do not give rise to the idea of division, because the words which respectively express them have no correlative terms to express the residue of the mass of the laws. Maritime law—law relating to police, finance, political economy, procedure, &c.: these portions being extracted, what relation have they with the more formal divisions?—in which ought they to be placed?

Criminal law is a portion altogether undetermined of penal law. It is a law directed against an offence which has been called a crime. This distinction is the result of many Edition: current; Page: [158] indeterminate circumstances: odious procedure—enormous evil or reputation of enormity—evil intention—severe punishment.

Canon law. This is a sufficiently determinate portion of ecclesiastical law:—That portion of this law which is derived from a certain source.

§ 2.: New Divisions.

The divisions which follow are either altogether new—have only received a semidenomination—or have been but little considered at present. I announce them in this place, because of the light they shed upon the theory of the laws, and because of their practical utility.

Eighth Division: 1. Substantive laws; 2. Adjective laws.—This last is the name which I give to the laws of procedure, for the purpose of designating them by a word correlative to the principal laws from which it will be so often necessary to distinguish them. The laws of procedure could neither exist nor even be conceived of, without these other laws, which they cause to be observed. Whoever understands the meaning of these two words, as applied to grammar, will understand the meaning which I would attach to them when applied to jurisprudence.

Ninth Division: 1. Coercive and Punishing laws; 2. Attractive or Remuneratory laws.—The former employ punishments—the second employ rewards as their sanctions.

Tenth Division: 1. Direct laws; 2. Indirect laws.—I call those direct, which reach their end in the most direct manner, by directing or prohibiting the act to which they would give birth, or which they would prevent. I call those indirect, which, for accomplishing a purpose, employ distant means, attaching themselves to other acts, which have a more or less immediate connexion with the first. Prohibition of murder under pain of death, is a direct method of preventing assassinations: prohibition against carrying offensive weapons an indirect method* of preventing them.

Eleventh Division: 1. General laws; 2. Particular laws.—In the first are included those in which everybody is interested—in the second those which are directly interesting only to certain classes. This division is of great practical utility in facilitating a knowledge of the laws.

Twelfth Division.: 1. Permanent Laws; 2. Laws necessarily Transitory.—There are some laws which die of themselves, when the circumstance which gave birth to them has ceased. A law which refers to the conduct of a certain individual must die with him. Among transitory laws, the greater number are called regulations. Such are particular orders, laws which must and which ought to be changed, and which only correspond with a certain state of things.

Thirteenth Division: 1. Code of the Laws; 2. Code of Formularies.—A formula constitutes a part of the laws when it is directed by the legislature: a patent of creation, a record, a certificate, a deed, a form of petition, may all become part of the law.

Of all these divisions, the third into Penal Law, Civil Law, Constitutional Law, is the most complete, the most usual, and the most convenient. It is therefore the centre from which I shall cause all the parts to diverge.

As to writers on matters of jurisprudence, they may be ranged into two classes. Some treat of the laws of one country, explaining, commenting upon, and reconciling them; as Heineccius on the Roman laws, and Blackstone with reference to the laws of England.

The others treat of the art of legislation itself, either by explaining its preliminary notions, the terms of universal jurisprudence, such as powers, rights, titles, contracts, obligations, crimes, &c.; or seeking out the general principles upon which they ought to be founded, or examining the legislation of a certain country, to show whether it be feeble or strong.

Few works of law are of a unique and distinct character. Grotius, Puffendorf, Burlamaqui, assume successively, and sometimes at one time, all these characters. Montesquieu, in his “Esprit des Lois,” at first proposed to make a treatise upon the art; but in his last books the legislator assumes the antiquarian and the historian; and he can only be compared to the river, which after having traversed and fertilized noble countries, never reaches the sea, but is lost in the sand.

Hobbes and Harrington, who have treated only of the principles of constitutional law, have so done in a general manner, but with a view to local application. Beccaria, in his Treatise on Crimes and Punishments, has attended exclusively to them as a branch of philosophy.


In a code of laws, everything turns upon offences, rights, obligations, services. Clear ideas of the meaning of these abstract terms are therefore desirable, and on this account it is necessary to know how these different notions are formed, and what are their reciprocal Edition: current; Page: [159] relations. To show their mode of generation, is to show their nature.

A period may be easily imagined when men existed without laws, without obligations, without crimes, without rights. What would they then possess? Persons, things, actions; persons and things, the only real beings; actions, which exist only for a fleeting moment, which perish the instant that they are born, but which still leave a numerous posterity.

Among these actions, some will produce great evils, and the experience of these evils will give birth to the first moral and legislative ideas. The strongest will desire to stop the course of these mischievous actions—they will call them crimes. This declaration of will, when clothed with an exterior sign, will receive the title of law.

Hence, to declare by a law that a certain act is prohibited, is to erect such act into a crime. To assure to individuals the possession of a certain good, is to confer a right upon them. To direct men to abstain from all acts which may disturb the enjoyment of certain others, is to impose an obligation on them. To make them liable to contribute by a certain act to the enjoyment of their fellows, is to subject them to a service. The ideas of law, offence, right, obligation, service, are therefore ideas which are born together, which exist together, and which are inseparably connected.

These objects are so simultaneous that each of these words may be substituted the one for the other. The law directs me to support you—it imposes upon me the obligation of supporting you—it grants you the right of being supported by me—it converts into an offence the negative act by which I omit to support you—it obliges me to render you the service of supporting you. The law prohibits me from killing you—it imposes upon me the obligation not to kill you—it grants you the right not to be killed by me—it converts into an offence the positive act of killing you—it requires of me the negative service of abstaining from killing you.

It is only by creating offences (that is to say, by erecting certain actions into offences) that the law confers rights. If it confer a right, it is by giving the quality of offences to the different actions by which the enjoyment of this right might be interrupted or opposed. The division of rights ought therefore to correspond with the division of offences.

Offences, inasmuch as they concern a determinate individual, may be distributed into four classes, according to the four points in which he may be injured:—Offences against the person—offences against honour—offences against property—offences against condition. In the same manner, rights may be distributed into four classes:—Rights of security for the person—rights of security for honour—rights of security for property—rights of security for condition.

The distinction between rights and offences is therefore strictly verbal—there is no difference in the ideas. It is not possible to form the idea of a right, without forming the idea of an offence.

I imagine to myself the legislator contemplating human actions according to the best of his judgment: he prohibits some, he directs others: there are others which he equally abstains from commanding or prohibiting. By the prohibition of the first, he creates positive offences: by the injunction of the second, he creates negative offences. But to create a positive offence, is to create an obligation not to act—to create a negative offence is to create an obligation to act. To create a positive offence, is to create a negative service (the service which consists in abstaining from a hurtful action.) To create a negative offence is to create a positive service (the service which consists in the performance of a useful action.) To create offences, is therefore to create obligations or forced services: to create obligations or forced services, is therefore to confer rights.

With reference to actions, with respect to which the legislator neither pronounces a prohibition nor an injunction, he neither creates an offence, an obligation, nor a forced service. Still he creates a certain right, or leaves you a power you already possessed, that of acting or not acting as you like. If, with respect to these same actions, there had previously existed an injunction or a prohibition, and this injunction or prohibition had been revoked, it might be said without difficulty that the right which was restored to you, the law conferred or restored it. The only difference is, that in the one case you hold the right through the activity of the law; in the other case, you hold it through its inactivity. In the actual state, it appears as if you owed it to the law alone, whilst beforehand you appeared to be indebted partly to the law and partly to nature.

You owe it to nature, inasmuch as it is the exercise of a natural faculty;—you owe it to the law, inasmuch as it might extend the same prohibition to this as well as to other actions.

With respect to those actions which the law refrains from directing or prohibiting, it bestows a positive right,—the right of performing or not performing them without molestation from any one in the use of your liberty.

I may stand or sit down—I may go in or go out—I may eat or not eat, &c.: the law says nothing upon the matter. Still the right which I exercise in this respect I derive from the law, because it is the law which erects into an offence every species of violence by Edition: current; Page: [160] which any one may seek to prevent me from doing what I like.

This, then, is the connexion between these legal entities: they are only the law considered under different aspects; they exist as long as it exists; they are born and they die with it. There is nothing more simple, and mathematical propositions are not more certain. This is all that is necessary for obtaining clear ideas of the laws, and yet nothing of this is found in any book of jurisprudence; the contrary is, however, everywhere found. There have been so many errors of this kind, that it may be hoped that the sources of error are exhausted.

The words rights and obligations, have raised those thick vapours which have intercepted the light: their origin has been unknown; they have been lost in abstractions. These words have been the foundations of reasoning, as if they had been eternal entities which did not derive their birth from the law, but which, on the contrary, had given birth to it. They have never been considered as productions of the will of the legislator, but as the productions of a chimerical law—a law of nations—a law of nature.

I shall only add another word upon the importance of clear ideas respecting the origin of rights and obligations. They are the children of the law; they ought never, therefore, to be set in opposition to one another: they are the children of the law; they should, like the law itself, be subordinate to general utility.

The fundamental idea, the idea which serves to explain all the others, is that of an offence. It possesses clearness by itself; it presents an image; it addresses itself to the senses, it is intelligible to the most limited mind. An offence is an act from which evil results. To do a positive act, is to put one’s self in motion; to do a negative act, is to remain still. Now, a body in motion, or a body at rest, presents an image; an individual wounded, an individual suffering, in consequence of any action, presents an equally familiar image. It is not the same with the fictitious entities called rights and obligations. They cannot be depicted under any form; they may, however, be connected with sensible images, but they then cease to be abstractions; they are united to real things, as in the expressions, the right to do a certain act—the obligation to perform it or not to perform it. The more nearly such expressions convey the idea of an offence, the more easily are they understood.


If the distinction between the civil and penal code be inquired for, the greater number of jurisconsults reply, that the civil code contains the descriptions of rights and obligations, and the penal code those of crimes and punishments.

If the meaning of the preceding chapter be clearly understood, it will be perceived that there is no foundation for this distinction. To create rights and obligations, is to create offences; to create an offence, is to create the right which corresponds therewith: it is one and the same law, one and the same operation.

If you say, that the right which you have to be supported by me belongs to a certain class of laws which ought to be called civil, and that the offence which I commit by neglecting to support you, belongs to a different class of laws which ought to be called penal, the distinction would be clear and intelligible.

There exists between these two branches of jurisprudence a most intimate connexion; they penetrate each other at all points. All these words—rights, obligations, services, offences—which necessarily enter into the civil laws, are equally to be found in the penal laws. But from considering the same objects in two points of view, they have come to be spoken of by two different sets of terms:—obligations, rights, services, such are the terms employed in the civil code: injunction, prohibition, offence, such are the terms of the penal code. To understand the relation between these codes, is to be able to translate the one set of terms into the other.

Such being the intimate connexion between these two codes, it seems extremely difficult to draw a distinction between them: I shall, however, attempt it.

A civil law is that which establishes a right: a penal law is that which, in consequence of the establishment of a right by the civil law, directs the punishment in a certain manner of him who violates it. Thus, a law which should confine itself to the interdiction of murder, would be a civil law; the law which should direct the punishment of death against the murderer would be a penal law.

The law which converts an act into an offence, and the law which directs the punishment of that offence, are, properly speaking, neither the same law nor parts of the same law. Thou shalt not steal: there is the law creating an offence. The judge is directed to imprison those that steal: there is the law which creates the punishment. These laws are so distinct, that they refer to different actions—they are addressed to different persons. The first does not include the second, but the second implicitly includes the first. Say to the judges, “You shall punish thieves,” and a prohibition of stealing is clearly intimated. In this point of view, the penal code would be sufficient for all purposes.

But the greater number of laws include Edition: current; Page: [161] complex terms, which can only be understood after many explanations and definitions. It is not only necessary to prohibit theft in general: it is necessary to define what is property, and what is theft. It is proper that the legislator should form two catalogues: the one containing the events which confer a right to the possession of each thing—the other containing the events which destroy this right.

These matters of explanation belong principally to the civil code: the commanding part, contained in penal laws, properly constitutes the penal code.

All laws which have no penal clauses, or which only prescribe the obligation of restitution when any one has become possessed of the property of another without evil intention, may be placed in the civil code. All laws which direct a punishment over and above simple restitution—for example, imprisonment, forced labour, fine, &c.—may be reserved for the penal code.

In the civil code, the attention is chiefly demanded by the description of the offence, or of the right. In the penal code, the prominent point is the punishment.

Each civil law forms a particular head, which ought to rest upon a penal law. Each penal law is the consequence, the continuation, the termination of a civil law.

In the two codes, there should be general heads. They should have for their object the explanation of everything which belongs to the particular titles:—definitions, amplifications, restrictions, enumeration of sorts and individuals;—in short, expositions of all sorts.

It ought, however, never to be forgotten, that these two codes are one as to their nature and their object; that they are divided only for the convenience of distribution, and that we might have arranged all the laws upon one plan, upon one map.

If a legislator have given a complete description of all the acts which he is desirous should be regarded as offences, he will have formed a complete collection of the laws: he has referred everything to the penal code. If he have established all the obligations of the citizens, all the rights created by those obligations, and the circumstances which shall cause those rights to begin and end, he will again have formed an entire code: but here he will have referred everything to the civil code.

A code of laws under this point of view ceases to be a bugbear by its immensity. We see that there are means of ascertaining its dimensions—of surveying the whole, and referring every part to a common centre.


In what order should the different parts which compose a complete code of legislation be arranged?

There are some persons who have occasion to know the whole system of the laws; viz. those who are charged with their maintenance and application. Others have occasion only to know the part which concerns them, and of which it would be dangerous for them to be ignorant: these are the individuals who are bound to obey the laws.

In the arrangement of the laws, that which is best adapted for the generality of the people ought to be regarded. The multitude have not leisure for profoundly studying the laws: they do not possess the capacity for connecting together distant regulations—they do not understand the technical terms of arbitrary and artificial methods. The matter of a code ought therefore to be disposed in the order which will be most easily understood by the least skilful—in the order which is most interesting from the importance of the subjects—in a word, in the most natural order.

But what is the most natural order? It is the order according to which the law would be most easily consulted—in which the text which applies to a given case would be most easily found, and its true meaning understood. The best method is that which gives the greatest facility in finding what is sought.

Rules concerning Method.

1. That portion of the laws which most clearly bears the impression of the will of the legislator, ought to precede those portions in which his will is shown only indirectly.

For this reason, the penal code ought to precede the civil code, and the constitutional code, &c. In the first, the legislator exhibits himself to every individual; he permits, he commands, he prohibits; he traces for every one the rules of his conduct; he uses the language of a father and a master. In the other codes, he has less to do with commandments than with regulations and explanations, which do not so clearly address themselves to everybody, and which are not equally interesting to those concerned at every period of their lives.

2. Those laws which most directly promote the chief ends of society, ought to precede those, the utility of which, how great soever, is not so clearly evident.

In obedience to this rule, the penal code ought still to precede the civil code, and the civil to precede the constitutional code. There is nothing that tends more directly to promote the great ends of society, than the laws which Edition: current; Page: [162] prescribe the manner in which the citizens should behave towards each other, and which prevent them from doing mischief. Besides, since the idea of an offence is fundamental in legislation, and everything emanates from it, it is the first upon which the public attention should be fixed.

3. The subjects which are most easily understood, should precede those of which the conception is less easy.

In the penal part, the laws which protect the person, as the clearest of all, ought to precede those which protect property. After these may successively be placed those which concern reputation; those which relate to the legal condition of individuals; those which embrace a double object, as the person and property, the person and reputation, &c.

In the civil code, those titles which relate to things, objects material and palpable should be placed before those which relate to rights, objects immaterial and abstract. The titles which relate to the rights of property before those which relate to the condition of individuals, &c.

In the code of procedure, in virtue of this rule, the most summary courts would stand first.

4. If, in speaking of two objects, the first may be spoken of without referring to the second—and on the contrary, the knowledge of the second supposes a knowledge of the first,—it is right on this account to give priority to the first.

Thus, in the penal code, offences against individuals should be placed before offences against the public—and offences against the person before offences against the reputation.

In the civil code, notwithstanding another principle of arrangement, more apparent but less useful, it will be proper to place the condition of master and servant—the condition of guardian and ward, before that of father and child—husband and wife; because a father and husband are in certain respects the master, and in others the guardian, of the children and wife.

In virtue of this rule, the penal and civil code ought to precede the code of judicial organization and procedure.

To institute a process, is to demand satisfaction for an offence, or to require a service in consequence of a right. But the catalogue of offences, of services, of rights, will be found in the penal and civil codes; with these, therefore, we ought to begin.

Procedure is a means for attaining an end: it is the method of employing the instrument which is called law. To describe the means of using the instrument, before describing the instrument itself is an almost inconceivable reversal of order.

To establish a new system of procedure, and allow misshapen laws to subsist, is to build upon foundations which are crumbling, it is to rebuild a falling house by beginning at the top. Everything should be consistent and harmonious between the different parts of the code. It is impossible to establish a good system of procedure without good laws.

5. Those laws the organization of which is complete—that is to say, which possess everything necessary to give them effect, to put them in execution—ought to precede those of which the organization is necessarily defective.

A certain part of the political code is necessarily in this latter condition. There must be a stop somewhere in the establishment of laws. Quis custodiet ipsos custodes?—The laws which govern the subjects ought to precede those by which it is attempted to restrain the sovereign power. The first—the laws for the people in populum—form a complete whole; they are accompanied by penalties, and a procedure which insures their execution. But the laws in imperium respecting the governors, unless they change their nature, cannot have for their assistance either the one or the other of these auxiliary laws. A punishment cannot be assigned for the offences of the sovereign, or of the body which exercises the sovereignty: no tribunal and no forms can be prepared for their trial;—all that human wisdom has been able to devise is reduced to a system of precautions and indirect means, rather than a system of legislation. The power of removal, for example, is employed to obviate the corruption of a representative body. The nature of the case does not admit of any judicial methods, any regular procedure.

International law is in the same condition. A treaty between two nations is an obligation which cannot possess the same force as a contract between two individuals. The customs which constitute what is called the law of nations, can only be called laws by extending the meaning of the term, and by metaphor. These are laws, the organization of which is still more defective and incomplete than that of political law. The happiness of the human race would be fixed, if it were possible to raise these two classes of laws to the rank of complete and organized laws.

The only point which is common to every existing body of laws, is, that they are all equally strangers to all these rules.

Justinian, in the Pandects and Institutes has followed two independent and incommensurable plans, which have determined the plans of all posterior jurists. Those who have been desirous of correcting Justinian, have only ventured to correct him by himself. Heineccius, the most sensible of the Romanists, has sought to refer everything to the order of the Pandects; and Beger has sought to bind up everything to that of the Institutes. Both methods are equally vicious.

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Does not the idea of an offence govern everything in matters of law? Who would believe it? In the vast system of Roman law there is not a single entire chapter which treats of offences. The whole has been distributed under the three divisions—rights of persons, rights of things, suits at law: offences are incidentally mingled here and there. Those which are most connected by their nature, are often the farthest removed from one another, whilst those that are the greatest strangers touch each other.

Modern codes are not more methodical. The Danish code begins with civil procedure—the Swedish code begins with that part of the civil code which regards the condition of persons.

The code of Frederic, which bears the pompous title of universal, begins with the civil part, to which it confines itself and leaves it incomplete.

The Sardinian code presents at first certain penal regulations, but the first offences of which it treats refer to religion. Parts of the civil and constitutional codes follow, mingled with each other in continual disorder.

The code of Theresa is purely penal, but where does it commence?—first blasphemy, afterwards apostacy, afterwards magic. In the first part it treats of procedure.

Blackstone, who confined himself to making a picture of the laws of England, has only sought commodiously to arrange the technical terms most frequently used in English jurisprudence. His plan is arbitrary, but it is preferable to all those which have preceded him. It is a work of light, in comparison with the darkness which previously covered the whole face of the law.


Penal laws, as we have already seen, are those alone which follow in a regular train, and form a complete whole. What are called civil laws, are only detached fragments belonging in common also to the penal laws. Laws deprived of all factitious sanction exercise so feeble an influence, that they ought not to be relied upon, if it be possible to do otherwise. Remuneratory laws, beside their weakness, are too costly, so that it is not possible ever to trust them with the rough work of legislation. There remains penal law, the only matter of which it is possible to construct the principal portion of the edifice of the laws. It is proper, therefore, to take the penal law, which alone embraces all, as the foundation of all the other divisions of the law.

To make a penal law, is to create an offence. The distribution of the penal laws will therefore be the same as that of offences. By determining, naming, arranging, numbering offences, we shall have determined, named, arranged, and numbered the penal laws. If this arrangement be well made, all the other kinds of laws will have been well arranged at the same time: order will have been fixed upon a manifest and unalterable foundation: the reign of Chaos will be at an end.

I shall begin with the arrangement itself. I shall afterwards show the considerations which suggested it, and the advantages to be derived from it. In order to understand the commentary, it is necessary to have seen the text.


Upon the principle of utility, such acts alone ought to be made offences, as may be detrimental to the community.

An act cannot be detrimental to a community but by being detrimental to some one or more of the individuals that compose it. These individuals may either be assignable* or unassignable.

When there is any assignable individual to whom an offence is detrimental, that person may be either the delinquent himself, or some other person.

When there are persons to whom the act in question may be detrimental, but such persons cannot be individually assigned, the circle within which they may be found is either of less extent than the whole state, or not. If of less, the persons comprised within this lesser circle may be considered for this purpose as composing a body of themselves, comprised within, but distinguishable from the greater body of the whole community.

From a consideration of these circumstances, offences may be divided into four classes:—

1. Acts detrimental in the first instance to assignable individuals other than the delinquent himself. These are private offences.

2. Acts detrimental in the first instance to the delinquent and not to others, except in consequence of the evil he has done to himself. These may be called, for the purpose of contrasting them with the other classes, personal offences, or self-regarding offences.

3. Acts which may be detrimental to certain unassignable individuals comprised within a particular circle less than that of the state—as a trading company, a corporation, a religious sect. These offences against a portion of the community may, for the purpose of Edition: current; Page: [164] contrasting them with the other classes, be called semi-public offences.*

4. Acts which may be detrimental, or which threaten a danger more or less remote to an indeterminate number of unassignable individuals, without it being apparent that any one is more exposed than another. These may be called offences against the state, or public offences.

The four classes of offences are—

  • 1. Private offences.
  • 2. Self-regarding offences.
  • 3. Semi-public offences.
  • 4. Public offences.


1.: Subdivision of Private Offences.

In the present period of his existence, the happiness of a man, and his security—in a word, his pleasures, and his immunity from pains—depend, primarily, upon the condition of his person, and secondly, upon the exterior objects which surround him. If, therefore, a man suffer in consequence of an offence, it must be either in an immediate manner in his person, or in a relative manner by reason of his relation with exterior objects. But these exterior objects are things or persons: things, which he employs for his own advantage, in virtue of what is called property; persons, from whom he derives advantages in virtue of services which they are disposed to render to him. This disposition to render those services may be founded simply upon the general connexion which binds all men together, or upon a connexion which unites certain individuals more particularly with others. These more close connexions form a kind of fictitious and incorporeal object of property which is called condition: domestic condition, connexion between a parent and child, a husband and wife; political condition, connexion between the citizens of the same place, &c.

When the general connexion among all men is alone considered, their disposition to render services to one another is called good-will. This good-will is a favour, and the chance of obtaining this favour is a fictitious property, which is called honour or reputation. Reputation is therefore a species of wealth, a security for the obtaining those free and gratuitous services which depend upon good-will.

It appears, therefore, that if by any offence an individual becomes a sufferer, it must be in one or other of these four points—person, reputation, property, or condition.

Hence simple private offences may be subdivided into—

Offences against the person.

Offences against the reputation.

Offences against the property.

Offences against the condition.

Offences are called simple, when the individual is affected only in one of these points; complex, when he is affected in more than one at one time, as—

Offences against the person and property.

Offences against the person and reputation.

Order I.: Offences against the Person.

As a man is composed of two different parts—his body and his mind, acts which exert a pernicious influence upon him, may operate upon him either immediately without affecting his will, or mediately through the intervention of that faculty. The constraint which may be produced by such acts may be either positive, compelling him to do what is disagreeable to him—or negative, preventing him from doing what is agreeable to him:—the evil resulting from them mortal or not; if it be not mortal, it will either be reparable or temporary, or irreparable or perpetual.—Again, the pain which a man experiences in his mind will either be a pain of actual sufferance, or a pain of apprehension. Hence we have nine genera or kinds of personal injuries, which, when ranged in the order most commodious for examination, will stand as follows:—

1. Simple corporal injuries, producing uneasiness or temporary suffering.

2. Irreparable corporal injuries—species, disfiguration, mutilation, deterioration of an organ as to its essential functions.

3. Simple mental injuries; that is, directly affecting the mind without affecting the body—or vexation.

4. Wrongful restraint or hindrance.

5. Wrongful constraint.

6. Wrongful banishment.

7. Wrongful confinement.

8. Wrongful imprisonment.

9. Wrongful homicide.

Order II.: Offences against Reputation or Honour.

In point of reputation there is but one way of suffering, which is by losing a portion of the good-will of others. An individual may be a loser in this respect in either of two ways:—1. By the manner in which he behaves himself; and 2. By the manner in which Edition: current; Page: [165] others behave, or are thought to behave, towards him. To cause people to think that a man has been guilty of those acts which cause a man to possess less than he did before of the good-will of the community, is what may be styled defamation. When this is done by words, or by such actions as have no other effect than inasmuch as they stand in the place of words, the offence may be styled vilification. But this is not all: as a man may be made to lose the good-will of others, he may also be prevented from acquiring it, either by the interception of the honour which was his due, or by depriving him of the means of obtaining it. Hence we have four species of offences, viz.:—

1. Defamation.

2. Insulting language, or insulting gestures.

3. Usurpation of the reputation of another.

4. Prevention of the acquisition of deserved reputation.

Order III.: Offences against the Person and Reputation.

Attacks upon the person and reputation may spring from different motives, and may have for their object either the immediate pleasure to be derived from sensual gratification, or that sort of reflected pleasure which in certain circumstances may be reaped from the suffering of another.

If the pleasure to be derived from sensual gratification be obtained by consent freely given, if not fairly obtained, the offence may be called seduction; if not freely, it may be called forcible seduction; if consent be altogether wanting, it is called rape. If neither of these offences have been consummated, the offence may be included under the denomination of simple lascivious injury.

When the person and reputation are attacked for the sake of that sort of pleasure which will sometimes result from the contemplation of another’s pain, the offence may consist either of actual corporal injury, and may be styled corporal insult, or it may come under the name of insulting menacement. Hence we have six generator kinds of offences under this head:—

1. Corporal insults.

2. Insulting menacement.

3. Seduction.

4. Forcible seduction.

5. Rape.

6. Simple lascivious injuries.

Order IV.: Offences against Property.

Offences against property are so various, that it is extremely difficult to make an analytical table of them, which shall not itself form a large work. Besides, these offences have received in common use denominations which are so little determinate and uniform, that any definition given of them by a private individual can never be exact. It requires the aid of the legislature to fix their meaning.

Offences of this kind may affect either the right to property, or the enjoyment or exercise of that right.

Offences which affect the possession of property may relate either to an actual possession or to a future possession.

A contingent or future possession may be taken away by two kind of offences:—1. By the omission of an act necessary to be done before the party enters upon his right: this may be called non-investment, or non-collation of property. 2. By the commission of some act for the interception of your right—for taking it away, for example, in its transition from the actual possessor, to you the intended possessor; this may be called interception of property.

If the possession of an object of which the party is actually in possession be disturbed by the offence, the object of the offence may be his exclusion from the enjoyment of his property without substituting any other person. In this case, it is simply wrongful divestment or spoliation of property. It may be, that the object of the offence is, that the delinquent may obtain possession of the property himself: it is then usurpation of property. It may be, that he intends that it should pass to a third party: it is then wrongful attribution, or collation of property.

With respect to offences against property which only affect the enjoyment of the object in question; this object must be either a service, or a set of services, which should have been rendered by some person, or else an article belonging to the class of things. In the former case, the offence may be styled wrongful withholdment of services. In the latter case, when any object of which any individual has had the enjoyment, ceases so to be enjoyed, it may be either from a change in the intrinsic condition of the thing itself, or in its exterior situation with respect to such individual, which has removed it out of his reach. If the change in the nature of the object be such that no further use can be made of it, it is destroyed; if the change have only diminished its value, it is damaged. If it be simply removed beyond his reach without alteration, it is wrongfully detained.

The object detained may have been obtained from the proprietor, with or without his consent. In the first case, its detention is the non-payment of a debt. In the second case, if the detaining party, knowing that he has no right, intend to detain it always, and, at the same time, not to be amenable to the law, such detention is commonly called theft. If he have employed force or threats against the proprietor or other persons who would have prevented his wrongful occupation of the property, in this case the offence takes the name of robbery. If the consent of the proprietor have been obtained, but if he have been deceived by false appearances, it is Edition: current; Page: [166] an act of sharping or fraud. If such consent be obtained by the fear of evil resulting from an abuse of power, it is what is commonly called extortion.

The foregoing analysis, though imperfect, will suffice to explain the principal genera of offences contained in the fourth and fifth order.

  • Offences affecting the right of Property.

  • 1. Wrongful non-investment of property.
  • 2. Wrongful interception of property.
  • 3. Wrongful divestment of property.
  • 4. Usurpation.
  • 5. Wrongful investment of property.
  • 6. Wrongful withholding of services.
  • Offences affecting the use of Property.

  • 7. Wrongful destruction or endamagement.
  • 8. Wrongful occupation.
  • 9. Wrongful detention.
  • 10. Wrongful imposition of expense.
  • 11. Wrongful hindrance of occupation.
  • 12. Theft.
  • 13. Fraudulent acquisition, under false pretences. Sharping.
  • 14. Embezzlement.
  • 15. Extortion.
  • 16. Non-payment of debts.

Order V.: Offences against the Person and Property.

If constraint be applied to the person of the proprietor in the commission of one of the foregoing offences against property, there results from it the following complex offences:—

  • 1. Forcible interception of property.
  • 2. Forcible divestment of property.
  • 3. Forcible usurpation.
  • 4. Forcible investment.
  • 5. Forcible destruction or endamagement.
  • 6. Forcible occupation of moveables.
  • 7. Forcible entry.
  • 8. Forcible detainment of moveables.
  • 9. Forcible detainment of immoveables.
  • 10. Robbery.

Order VI.: Offences against Condition.

A man’s condition in life is constituted by the legal relation he bears to the persons who are about him; that is, by duties, which by being imposed on the one side, give birth to rights or powers on the other. These relations, it is evident, may be almost infinitely diversified. Some means, however, may be found of circumscribing the field within which the varieties of them are displayed. In the first place, they must either be such as are capable of displaying themselves within the circle of a private family, or such as require a larger space. The conditions constituted by the former sort of relations may be styled domestic; those constituted by the latter, civil.

Domestic conditions are founded upon natural relations, or upon relations purely legal.

In the institution of purely legal conditions, the party favoured may be styled a superior; and as both parties are members of the same family, a domestic superior, with reference to the party obliged; who in the same case may be styled a domestic inferior, with reference to the party favoured. These domestic conditions have generally been constituted by powers rather than rights.

If the power thus vested in the superior be a beneficial one, and for his own advantage, such superior is called a master, and the inferior is called a servant. If it be for the sake of the inferior, the superior is termed a guardian, and the inferior his ward.

The natural relations founded upon the cohabitation of men and women, and upon the fruits of their union, have served for a basis upon which to fix their legal relations; that is to say, the rights and obligations of the husband and wife, of the parent and child.

These rights and obligations are the same as in the preceding cases. The husband is in certain respects the guardian, and in other respects the master of his wife: the parent is in some respects the guardian, and in others the master of his children.

We come now to civil conditions. These it may well be imagined, may be infinitely various: to make a complete enumeration of them, would be to enumerate every possible mode by which powers and rights may be established; for to be subject to a certain power, or to possess a certain right, is what constitutes a civil condition.

This variety, or rather this infinity of conditions, may however be reduced to three classes:—1. Fiduciary charge; 2. Rank; 3. Profession.

A fiduciary charge takes place between two or more interested parties, when, one of the parties being invested with a power or a right, is bound, in the exercise of this power and this right, by certain rules, for the advantage of the other party. This relation constitutes two conditions—the trustee, and the trustor, called in lawyers’ language cestui que trust.

Rank is often combined with the circumstance of a fiducial trust, but there are certain cases in which it can be considered as altogether distinct. The rank of knighthood is constituted—how? By prohibiting all other persons from performing certain acts, the performance of which is the symbol of the order, at the same time that the knight in question and his companions are permitted to perform them;—for instance, to wear a ribbon of a certain colour, or in a certain manner—to call himself by a certain title—to use an armorial seal with a certain mark upon it. The law creates a benefit for these individuals, by subjecting all others to the negative duty of abstaining from these acts.

The condition of a professional man stands Edition: current; Page: [167] upon a narrower footing. To constitute this condition there needs nothing more than a permission given him on the part of the legislator to perform those acts, in the performance of which consists the exercise of his profession: to give or sell his advice or assistance in matters of law or of physic—to give or sell his services as employed in the executing or overseeing of a manufacture or piece of work of such or such a sort. The permission in the greater number of cases is not even expressly granted—the law merely does not prohibit, &c.; but there are cases in which the law, whilst it permits certain persons to follow certain trades, prohibits those who have not received the same permission. This is called in certain circumstances monopoly—in others, privileged profession.

By forbearing to subject you to certain disadvantages to which it subjects an alien, the law confers upon you the condition of natural subject—by subjecting him to them, it imposes upon him the condition of an alien. By conferring on you certain privileges or rights which it denies to a roturier, the law confers on you the condition of a gentilhomme—by forbearing to confer on him these privileges, it imposes on him the condition of a roturier.*

This analysis, which is only a sketch of the subject, may serve to explain what is a condition, and what offences may be committed against a condition. In order fully to analyze all these offences, it would be necessary to take each condition separately, to enumerate all its benefits, or all the charges of which it is composed, and to show every method by which it is possible to avoid those charges, or to be deprived of those benefits. But this process would lead to a great number of repetitions, for the avoidance of which it will be more advisable to exhibit the different kinds of offences which are common to all conditions, and afterwards the incidental offences peculiar to certain conditions.

Species of Offences against Condition.
1. Wrongful non-investment of condition.
2. Wrongful interception of condition.
3. Wrongful usurpation of condition.
4. Wrongful investment of condition.
5. Wrongful divestment of condition.
6. Wrongful abdication of condition.
7. Wrongful refusal of condition.
8. Wrongful imposition of condition.
9. Wrongful disturbance of rights.
  • Offences incident to conditions which imply Powers.

  • 10. Abuse of powers.
  • 11. Non-rendering of due service.
  • 12. Misbehaviour.
  • 13. Passive corruption.
  • 14. Active corruption.
  • 15. Peculation.
  • Offences incident to conditions which imply Subordination.

  • 16. Flight.
  • 17. Disobedience.
  • 18. Non-rendering of required services.
  • Offences incident to the Married Condition.

  • 19. Adultery.
  • 20. Polygamy.


Subdivision of Self-regarding Offences.

Self-regarding offences are, properly speaking, errors, or acts of imprudence. We have already seen, in examining the limits which separate morals and legislation, that there are strong reasons for not treating these offences in the same manner as offences of the other classes. To subject them to punishment, would be for the laws themselves to cause a greater evil than those which they would pretend to prevent.

It is, however, useful to class these offences:—1. To show in general what are the offences which ought not to be subject to the severity of the laws; 2. That those offences may be discovered with respect to which exception should be made for particular reasons.

The subdivision of these offences is exactly the same with that of private offences. The evil which we may experience from others, we may produce for ourselves.

Genera of Personal or Self-regarding Offences.

Order I.: Offences against the Person.

1. Simple corporal injuries—Ex. Fasting, extreme continence, self-mortification, intemperance.
2. Irreparable corporal injuries—Ex. Mutilations, loss of members by negligence or temerity, or in consequence of excess.
3. Simple mental injuries—Ex. Religious fears arising from other causes than acts hurtful to society; ennui from indolence; weakness of the intellectual faculties from excess or inaction.
4. Restriction. { Ex. Privations or ascetic practices in consequence of religious vows.
5. Constraint. {
6. Banishment. { Ex. Constrained abode in a religious house in consequence of monastic vows—forced pilgrimage in consequence of religious vows.
7. Imprisonment. {
8. Confinement. {
9. Suicide.—Death in consequence of a challenge given or accepted.
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Order II.: Offences against Reputation.

1. Indiscreet imprudent confessions.

2. Invectives against one’s self.

3. Neglect of reputation.

Order III.: Offences against Reputation and Person.

1. Loss of virginity before marriage.

2. Indecent practices in sight of another.

Order IV.: Offences against Property.

1. Waste of his own property.

2. Neglect of the means of acquisition.

3. Prodigality, Ex. gaming.

4. Burthensome acquisition.

5. Imprudent agreement.

Order V.: Offences against Person and Property.

1. Mutilation which prevents the exercise of a profitable trade.

2. Diseases brought on by intemperance or excess, and which are productive of expense and loss.

Order VI.: Offences against Condition.

1. Investment with a condition injurious to one’s self;—improvident marriage.

2. Divestment of a condition beneficial to one’s self;—rash divorce.


Subdivision of Semi-public Offences.

It is neither an evil which is past, nor one which is present, which can constitute a semi-public offence. If the evil were present or past, the individuals who had suffered, or were suffering from it, would be assignable: it would become a private offence. What, then, is the evil which constitutes a semi-public offence? It is a future evil; that is to say, an evil not yet realized, but which is probable, and takes the name of danger.

This danger may threaten all the points in which an individual can suffer. Hence the subdivision of offences of this class must be the same with that of private offences.

Order I.: Semi-public Offences against the Person.

1. Simple corporal injuries, { Ex. 1. Manufactures injurious to the health. 2. Sale of unwholesome food. 3. Artificial famine.
2. Irreparable corporal injuries, {
3. Simple mental injuries.—Ex. Exposure of ulcers or disgusting diseases; obscene exhibitions; false reports of disasters in time of war, or other public misfortunes; publication of frightful tales of sorceries, ghosts, vampires, &c.
4. Menaces.—Placards, writings; letters containing threats against a certain class, profession, party, sect, &c. &c.
5. Restriction. { Ex. Speeches, hand-bills, placards designed to constrain or restrict individuals with regard to actions in themselves left free, as illuminations, processions, assemblies, &c.
6. Constraint. {
7. Banishment. { Ex. Communication interrupted by the destruction of roads, bridges, inns, &c.
8. Confinement. {
9. Imprisonment.—There is no offence corresponding with this in the third class.
10. Homicide.—Ex. Murder committed in a party quarrel (a private offence with regard to the individual, a semi-public offence with regard to the party.)

Order II.: Offences against Reputation.

  • 1. Defamation.—Ex. Criminal or dishonest proceedings attributed to certain classes, as protestants, catholics, monks, &c.
  • 2. Invectives.—Ex. Speeches, writings, prints tending to express hatred or contempt against a certain class of individuals without real and clearly ascertained cause.

Order III.: Offences against Person and Reputation.

There are no offences corresponding with this order in this class.

Order IV.: Offences against Property.

The same denominations as for private offences. An offence is semi-public—1. When the thing, or the service which it affects, belongs in common to societies of individuals, or to the officers of an entire class; 2. When the number of persons hurt, or exposed so to be, is too great for the individual to be held liable to render a separate account to each one; as in the case of a fraudulent lottery, false reports affecting the public funds, &c.

Order V.: Offences against Person and Property.

List of physical calamities—

1. Collapsion or fall of large masses of solid matter, such as decayed buildings, rocks, masses of snow, and mines.

2. Inundation.

3. Drought.

4. Tempest.

5. Conflagration.

6. Explosion.

7. Earthquake.

8. Pestilential winds.

9. Contagious maladies.

10. Famine and other species of dearth.

11. Evils produced by destructive animals, beasts of prey, locusts, ants, insects, &c.

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12. Evils produced by children, maniacs, idiots, &c.

An individual may be guilty of an offence of this kind—1. In as far as any imprudent act of his may contribute to give birth to any of these calamities, as by breaking quarantine, by importing merchandise from infected places, &c. 2. In as far as he may fail to do what he ought to do towards preventing them, such failure may be an offence.

N.B. These calamities do not always fall upon the person and property, so that these offences do not exactly correspond with those of the fifth order; but this is most frequently the case.

Order VI.: Offences against Condition.

Offences against the matrimonial condition: Ex. Attacking the validity of marriage among persons of a certain class or religious sect, as Protestants, &c.

Offences against the parental or filial condition: Ex. Attacking the legitimacy of children born in a certain class, as Protestants, &c.

Offences against civil conditions are all in one sense semi-public, inasmuch as the possession of a certain condition belongs to a certain class.


Subdivision of Public Offences.

The offences by which the public interest may be affected, are of very various and complex kinds. The following subdivision is incomplete, but an attempt to make it complete, by following out the exhaustive method, would have been too wearisome. Upon the present occasion, one of the great difficulties presented by the subject arises from the fact, that many offences of this class have not yet received names, and that a recurrence to long and obscure periphrases would therefore be rendered necessary.

The science of legislation being extremely imperfect, the nomenclature cannot be good; and with a bad nomenclature, it is not possible to make a good distribution.

Order I.: Offences against External Security.

Such offences as have a tendency to expose the nation to the attacks of a foreign enemy:

1. Treason, either negative or positive, in favour of foreign enemies.

2. Espionage in favour of foreign rivals, not yet enemies.

3. Injuries to foreigners at large, including piracy.

4. Injuries to privileged foreigners, such as ambassadors.

Order II.: Offences against Justice.

The direct object of the tribunals ought to be to maintain the laws, that is to say to punish those offences which violate them.

Offences against justice are of two sorts—

I. Those which may be committed by the officers of justice in opposition to their duties.

II. Those which may be committed by other persons, in opposition to, or to mislead the tribunals.

1. Improper exercise of judicial office.

2. Abuse of judicial power.

3. Usurpation of judicial power.

4. Collusion, syn. corruption on the part of judicial officers.

5. Peculation by judicial officers.

6. Exaction, syn. extortion on the part of judicial officers.

7. Non-rendering of services due to judicial officers.

8. Non-denouncing of offences to judicial officers.

9. Disobedience to judicial orders.

10. Contumacy.

11. Breach of banishment.

12. Prison breach.

13. False oaths, syn. perjury.

14. Rebellion against justice.

15. Disturbance of judicial powers.

16. Judicial vexation.

Order III.: Offences against Police.

Police is in general a system of precaution, either for the prevention of crimes or of calamities. It is destined to prevent evils and provide benefits.

The acts which oppose the police, or which oppose the precautions which it institutes, form as many offences as there are kinds of precautions; but as their nature is varied according to times and circumstances, so must the particular enumeration of them be.

The business of police may be distributed into eight distinct branches:—

1. Police for the prevention of offences.

2. Police for the prevention of calamities.

3. Police for the prevention of endemic diseases.

4. Police of charity.

5. Police of interior communications.

6. Police of public amusements.

7. Police for recent intelligence and information.

8. Police for registration, for preserving the memory of different facts interesting to the public, such as births, marriages, deaths, population, number of houses, situation and qualities of different properties, contracts, offences, procedure, &c.

Order IV.: Offences against the Public Force.

Such offences as have a tendency to oppose or mislead the operations of the military force destined for the protection of the state either against its enemies from without or from within, which the government could not overcome without an armed force.

1. Offences affecting the titles and functions of military officers.

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2. Desertion.

3. Offences affecting the several sorts of things appropriated to the purposes of war: such as arsenals, ammunition, military magazines, fortifications, dock-yards, ships of war, and so forth.

Order V.: Offences against the National Wealth.

The national wealth is the total of the wealth of all the nation. Those acts which tend to diminish the wealth of individuals, tend to diminish the national wealth. But what are the specific offences—what are the actions of this kind, which ought to be prohibited? The science of political economy leads to the conclusion, that government ought only to interfere for the protection of individuals in the acquisition and enjoyment of property, and seldom to direct as to the manner of acquiring and enjoying; the greatest obstacles to the increase of national wealth having almost always been found in those laws which have sought to increase it.

The most conspicuous offences of this order are—

1. Idleness.

2. Prodigality.

Order VI.: Offences against the Public Treasure.

Such acts as have a tendency to diminish the public revenue, by opposing its collection, or misdirecting the employment of the funds destined to the service of the state:—

1. Non-rendering of services.

2. Non-payment of taxes—smuggling.

3. Destruction of the goods of the community, roads, public buildings, &c.

The state, considered collectively, may have possessions, and consequently suffer in these possessions, in the same manner as an individual.

Order VII.: Offences against Population.

Such offences as tend to diminish the number of members in the community:—

1. Emigration.

2. Suicide.

3. Prevention of births.

The influence of these things upon population has at all times been nearly imperceptible; the amount of population having, in nearly all circumstances, been found to correspond with the means of subsistence.

Order VIII.: Offences against the Sovereignty.

It is hardly possible to describe these offences, unless the constitution to which they refer have been previously laid down. There are many constitutions in which it is difficult to resolve the question, Where does sovereign power reside?

The following is the simplest idea which can be formed of it. The collective name of the government is commonly given to the total assemblage of persons charged with the different political functions. There is commonly in the state one person, or a body of persons, which assigns and distributes to the members of the government their departments, their functions, and their prerogatives—which exercises the legislative power—which directs and superintends the administrative power. The person or the body which exercises this supreme power, is called the sovereign. Offences against the sovereignty are those which tend to oppose or mislead the operations of the sovereign, those things which cannot be done without opposing or misleading the operations of the different parts of the government.

1. Rebellion, offensive or defensive.

2. Political defamation—political libels.

3. Conspiracy against the person of the sovereign, or the form of government.

Order IX.: Offences against Religion.

For combating every species of crime which can be committed by man, the state has only two great instruments—rewards and punishments:—punishments applicable everywhere, and on all ordinary occasions—rewards necessarily reserved to a small number of extraordinary occasions. The distribution of rewards and punishments is often opposed or misdirected, or rendered useless, because the state has neither eyes which can see everything, nor hands which can attend to everything. Religion is calculated to supply this deficiency of human power, by inculcating upon the minds of men the belief that there is a power engaged in supporting the same ends, which is not subject to the same imperfections. It represents the Supreme Invisible Being as disposed to maintain the laws of society, and to reward and punish according to infallible rules, those actions which man has not the means of rewarding and punishing. Everything which serves to preserve and strengthen in the minds of men this fear of the Supreme Judge, may be comprehended under the general name of Religion; and for the purpose of clearness of discourse, we may often speak of religion as if it were a distinct being, an allegorical personage, to whom certain functions are attributed. Hence, to diminish or pervert the influence of Religion, is to diminish or pervert, in the same proportion, the services which the state might derive from it, for the repression of crime or the encouragement of virtue. Everything which tends to weaken or mislead the operations of this power, is an offence against Religion.*

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Offences which tend to weaken the force of the religious sanction are—

1. Atheism.

2. Blasphemy.

3. Profanations—syn. actions directed against any object of religious worship.

Offences which tend to pervert the employment of the religious sanction, may be comprehended under the name of caco-theism, and are divisible into three branches:—

1. Pernicious dogmas: dogmas attributing to the divinity dispositions opposed to the public welfare; for example, that he has created sources of suffering in greater abundance than sources of pleasure: dogmas imposing misseated, excessive, or useless punishments: suborning dogmas, which grant pardon where punishment has been deserved, and which offer rewards for actions which deserve none, &c.

2. Frivolous dogmas: dogmas which respect belief alone, and from which no moral good is derivable, and from which many ill effects result between those who admit and those who reject them.

3. Absurd dogmas: another means of attributing malevolence to the divinity, making him the author of an obscure and unintelligible system of religion.

Caco-theism has been productive of atrocious crimes. It has degraded the populace, persecuted the wise, and filled the minds of men with vain terrors; has forbidden the most innocent pleasures, and is the most dangerous enemy of correct morals and legislation. Punishments directed against the propagators of these errors would be well deserved, for the evil which results from these errors is real: but such punishments would be inefficacious, superfluous, and ill-adapted. There is but one antidote to these poisons—that is, truth. These dogmas, once exposed as false, cease to be pernicious, and are only ridiculous. The opinion which supports them ought to be attacked like every other opinion. It is not the sword which destroys errors, but the liberty of examining them. Persecution for opinion’s sake exhibits the monstrous union of folly and tyranny.

The same things must be admitted with respect to atheism, though atheism may be an evil in comparison with a system of religion conformable to the principle of utility, consoling the unhappy, and propitious to virtue. Yet it is not necessary to punish atheism: the moral sanction is sufficient for its condemnation. An opinion only is here stated, but the proofs of that opinion will be produced elsewhere.


Omitting others of minor importance, the following appear to be the principal advantages of this classification:—

1. It is the most natural, that is to say, the most easy to be understood and remembered. In what does a natural classification consist? In reference to a given individual, it is that which first presents itself to his mind, and which he comprehends with the greatest facility. Hence, when an individual invents a classification for himself, it appears, and is, in respect to himself, the most natural one. But with reference to men in general, the most natural classification is that which presents objects to them according to their most striking and interesting qualities. Now there is nothing more interesting or striking to a sensible being, than human actions considered in reference to the mischief which may result from them to himself or others.

2. This classification is simple and uniform, notwithstanding the multiplicity of its parts, because they are all analogous, one following the other, allowing the bonds which connect them, and their points of contact and resemblance, to be perceived at the first glance.

To know the first class, is to know the second and the third. The fourth rests upon the same foundation, though the points of connexion are less apparent than in the others. If the offences of the first three classes were not mischievous, those of the last would not be so either.

3. This classification is best adapted for discourse; best adapted for announcing the truths connected with the subject.

In every species of knowledge, disorder in language is at once the effect and the cause of ignorance and error. Nomenclature can only be perfected in proportion as truth is discovered. It is impossible to speak correctly, unless we think correctly; and it is impossible to think correctly, whilst words are employed for registering our ideas, which words are so constituted that it is not possible to form them into propositions which shall not be false.*

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4. This classification is complete. There is no imaginable law to which it is not possible by its means to assign its proper place. If this law be directed against an action mischievous in any kind of manner whatsoever: if it be a capricious law—a mischievous law, it will also have its place, but it will be among acts which are mischievous—it will be itself classed among offences.

5. It displays intention. It is so contrived that the very place which any offence is made to occupy, suggests the reason of its being put there. It serves to indicate not only that such and such acts are made offences, but why they ought to be so. By this means, while it addresses itself to the understanding, it recommends itself in some measure to the affections. By the intimation it gives of the nature and tendency of each obnoxious act, it accounts for, and in some measure vindicates the treatment which it may be thought proper to bestow upon that act in a way of punishment. To the subject, then, it is a kind of perpetual apology, showing the necessity of every defalcation, which, for the security and prosperity of each individual, it is requisite to make from the liberty of every other. To the legislator, it is a kind of perpetual lesson, serving at once as a corrective of his prejudices, and as a check upon his passions. Is there a mischief which has escaped him?—in a natural arrangement, if at the sametime an exhaustive one, he cannot fail to find it. Is he ever tempted to force innocence within the pale of guilt?—the difficulty of finding a place for it, advertises him of his error. An imaginary crime cannot escape among a crowd—it cannot be classed under such a methodical arrangement. Such are the uses of a map of universal delinquency laid down upon the principle of utility;—such the advantages which the legislator as well as the subject may derive from it. Abide by it, and everything which is arbitrary in legislation vanishes. An evil-intentioned or prejudiced legislator durst not look it in the face. He would proscribe it, and with reason: it would be a satire upon his laws.

6. This classification is universal. Governed as it is by a principle which is recognised by all men, it will serve alike for the jurisprudence of all nations. In a system of law framed in pursuance of such a method, the language would serve as a glossary, by which all systems of positive law might be explained, while the matter would serve as a standard by which they might be tried. Thus illustrated, the practice of every nation might be a lesson to every other, and mankind might carry on a mutual intercourse of experiences and improvements as easily in this, as in every other walk of science.

It might thus possess a utility independent of the use which might be made of it by the governments of the world. If the different penal laws in the world were arranged according to this method, all their imperfections would become visible: without argument respecting them, they would be discovered by inspection. Here would be offences omitted, there imaginary offences; here redundant laws containing numerous descriptions of different kinds of theft, or personal offences, &c. instead of one general law. This classification would therefore prove, in legislative science, what instruments of comparison, such as the barometer and thermometer, have been found in physical science.

I must, however, recur to the principal advantage of this classification. Under it all offences of the same class are ranged under the same head, in virtue of some common quality which unites and characterizes them. Offences which compose one class have therefore among them like properties; and they have, at the same time, properties differing from those of offences of a different class. It hence results, that it is possible to apply general propositions to each of such classes, which may serve as the characteristics of such classes.

A collection of these characters it may here be proper to exhibit. The greater number of them we can bring together, the more clearly and fully will the nature of the several classes, and of the offences of which they are composed, be understood.

Characters of Class 1—composed of private offences, or offences against assignable individuals:—

1. When arrived at their last stage (the stage of consummation) they produce, all of them, a mischief of the first as well as of the second order.

2. The individuals whom they affect in the first instance,* are constantly assignable. This extends to all—to attempts and preparations, as well as to such offences as have arrived at the stage of consummation.

3. They will admit of compensation.

4. They admit also of retaliation.

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5. There is always some person who has a natural and peculiar interest to prosecute them.

6. The mischief they produce is obvious.

7. They are everywhere, and must ever be obnoxious to the censure of the world.

8. They are less apt than semi-public and public offences, to require different descriptions in different states and countries.

9. By certain circumstances of aggravation, they are liable to be transformed into semi-public, and by certain others, into public offences.

10. In slight cases compensation given to the individual affected by them, may be a sufficient ground for remitting punishment; for if the primary mischief has not been sufficient to produce any alarm, the whole of the mischief may be cured by compensation.

Characters of Class 2—consisting of self-regarding offences—offences against one’s self:

1. In individual instances, it will often be questionable whether they are productive of any primary* mischief at all; secondary, they produce none.

2. They do not affect any other individuals assignable, or not assignable, except in as far as they affect the offender himself, unless by possibility in particular cases; and in a very slight and distant manner they affect the whole state.

3. They admit not, therefore, of compensation.

4. Nor of retaliation.

5. No person has naturally any peculiar interest to prosecute them, except in as far as, in virtue of some connexion he may have with the offender, either in point of sympathy or interest, a mischief of the derivative kind may happen to devolve upon him.

6. The mischief they produce is apt to be unobvious, and in general more questionable than that of any of the other classes.

7. They are, however, apt many of them to be more obnoxious to the censure of the world than public offences, owing to the influence of the two false principles of ascetism and antipathy.

8. They are less apt than offences of any other class, to require different descriptions in different states and countries.

9. Among the inducements to punish them, antipathy against the offender is apt to have a greater share than sympathy for the public.

10. The best plea for punishing them is founded on a faint probability there may be, of their being productive of a mischief, which, if real, will place them in the class of public offences, chiefly in those divisions which are composed of offences against population, and offences against the national wealth.

Characters of Class 3—composed of semi-public offences, or offences affecting a whole subordinate class of persons:—

1. As such, they produce no primary mischief. The mischief they produce, consists of one or other or both branches of the secondary mischief produced by offences against individuals, without the primary.

2. The persons whom they affect in the first instance, are not individually assignable.

3. Offences of this class are apt, however, to involve or terminate in some primary mischief of the first order, which, when they do, they advance into the first class, and become private offences.

4. They admit not of compensation.

5. Nor of retaliation.

6. There is never any one particular individual whose exclusive interest it is to prosecute them. A circle of persons may however always be marked out, within which may be found some who have greater interest to prosecute, than any who are out of that circle have.

7. The mischief they produce is in general pretty obvious, but less so than that of private offences.

8. They are rather less obnoxious to the censure of the world than private offences.

9. They are more apt than private and self-regarding offences, to require different descriptions in different countries, but less so than public ones.

10. There may be ground for punishing them before they have been proved to have occasioned, or to be about to occasion mischief to any particular individual. The extent of the evil makes up for the uncertainty of it.

11. In no cases can satisfaction given to any particular individual affected by them, be a sufficient ground for remitting punishment; for by such satisfaction, it is but a part of the mischief of them that is cured.

Characters of Class 4—consisting of public offences, or offences against the state in general:—

1. As such, they produce not any primary mischief; and the secondary mischief they produce, which consists frequently of danger without alarm, though great in value, is in specie very indeterminate.

2. The individuals whom they affect in the first instance are constantly unassignable, except in so far as by accident they happen to involve or terminate in offences against individuals.

3. They admit not of compensation.

4. Nor of retaliation.

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5. Nor is there any person who has naturally any particular interest to prosecute them, except in as far as they appear to affect the power, or in some other manner the private interest of some person in authority.

6. The mischief they produce is comparatively unobvious.

7. They are comparatively little obnoxious to the censure of the world.

8. They are more apt than any of the other classes to admit of different descriptions in different states and countries.

9. They are constituted in many cases by some circumstances of aggravation, superadded to a private offence. They are, however, even in such cases, properly ranked as public offences, inasmuch as the mischief they produce, in virtue of the properties which aggregate them to that class, eclipses and swallows up those which they produce in virtue of those properties which aggregate them to the first class.

10 and 11. These characters are the same as in the case of semi-public offences.


These may be distinguished into particular and general titles.

Each head of offence constitutes a particular title.

Those are called General titles, under which matters which belong in common to a great part of the particular titles are contained. The first advantage is—repetitions avoided; the second advantage—views extended and confirmed.

The following is the catalogue of the general titles which ought to be treated of in the penal code:—

1. Of persons subject to the law.

2. Of negative and positive offences.

3. Of principal and accessory offences.

4. Of co-delinquents—that is, associates in committing crimes.

5. Of grounds of justification.*

6. Of grounds of aggravation.

7. Of grounds of extenuation.

8. Of grounds of exemption.

9. Of punishments.

10. Of indemnification, and other satisfactions to the party injured.

With respect to the particular titles, they are all formed upon the same model: if the first is known, all the others are known also.

Here follows an example:—

Title I.: Of Simple Corporal Injuries.


There is simple corporal injury, when, without lawful cause(a) an individual has caused(b) or contributed to cause to another,(c) suffering or corporal uneasiness,(d) which is not followed by any ulterior(e) corporal evil.


It is here that the following matters should Edition: current; Page: [175] be placed, that reference may be made to them:—

1. Right or power of resistance against an unjust attack.

2. Right, or power and obligation, to lend assistance to another against an unjust attack.

3. Right, power, and obligation to the officers of police to lend assistance.

4. Right and obligation for individuals to call for the assistance of the officers of police to cause an unjust attack to cease.

Punishments.—1. Fine (h) at option (i) and discretion (k), which shall not exceed the—th (l) part (m) of the property of the delinquent.

2. Imprisonment (n) at option and discretion, which shall not exceed the term (for example) of one year. (o)

3. Security for good conduct (p) at option and discretion.

4. In serious cases (q), banishment from the presence (r) of the injured party for a time or for ever.

5. Costs of suit at option and discretion.

As many letters, so many references to different sections of the general title of punishments. There, for example, would be explained the expressions at option and discretion. At option is a concise phrase for expressing that it is lawful for the judge to employ or not to employ this punishment. At discretion, signifies that the judge ought to employ a certain quantity of this punishment, but that he may employ so much or so little as he may judge proper, provided that he keep within the limits prescribed by the general rules under the title of punishments.

Indemnifications.—As to what regards indemnifications, reference may be made to the general title which treats of them; reserving the details of those particular dispositions which may be judged convenient, for this place.

It is here that reference may be made to procedure. Procedure ad compescendum, which consists in putting an end to an offence, can have no place here, unless the crime be complicated with one of those which attack the liberty of the person.

Procedure ad puniendum et ad satisfaciendum, are the two branches of which the application is the most universal, especially the first.

Whilst as to procedure ad præveniendum, reference should be made to the general title of punishments, which treats of security to be required for good conduct.

Reference to the title Grounds of Exemption.

Reference to the title Grounds of Aggravation.

I place—1. The grounds of aggravation, which do not cause the offence to be referred to another name; 2. Those which add to it the qualities designated by some appellation of the same class; 3. Those which transfer it to the class of semi-public offences; 4. Those which transfer it to the class of public offences.

Reference to the Grounds of Extenuation.

If there be in an offence any circumstance of aggravation, the quantity of the ordinary punishment may be in consequence increased, or an ulterior punishment of a different kind may be permitted. This new punishment may be called by the technical name of extra punishment. In the same manner, in the case of extenuation, there might be established an infra punishment.

Another Example:—In order to continue to give an idea of the plan, let us take an example from among offences which relate to property. Here a new order of things presents itself. That which has been considered, appeared only to relate to what is penal—the following article will recal the idea of the civil code. We must not, however, forget that an offence is still under consideration.

I choose waste, as presenting the most simple case.


There is injurious waste, when, without lawful cause(a), an individual destroys, or contributes(c) to destroy or injure(d) a thing(e) of some value.(f)

In order to simplify the case, I leave out that part which concerns evil intention:—hence, in the supposition, the hurtful act only draws the quality which renders it punishable from some inadvertency, or some error in what respects the right.

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It is of no consequence whether the value be constant or occasional, provided, at the time of its destruction, it possessed an actual value, or would have had it in future: as, if it were a fence which preserved a plantation, or a bank of earth raised for a momentary service.

In following out the plan, the meaning of the word value would be explained in such manner that it will not be doubtful whether it extends to a value which does not exist, except by reference to a certain place as a bo