Chapter 3 Part B of the Wealth of Nations, Book 5. In Great Britain, from the time that we had first recourse to the ruinous expedient of perpetual funding, the reduction of the public debt in time of peace has never borne any proportion to its accumulation in time of war. It was in the war which began in 1668 and was concluded by the Treaty of Rhyswick in 1697 that the foundation of the present enormous debt of Great Britain was first laid. On the 31st of December 1697, the public debts of Great Britain, funded and unfunded, amounted to 21,515,742 pounds, 13 shellings, eight and a half pence. A great part of those debts had been contracted upon short anticipations and some part upon annuities for lives. So that, before the 31st of December 1701, in less than four years, there had partly been paid off and partly reverted to the public the sum of 5,121,041 pounds, 12 shellings, and three-quarter pence. A greater reduction of the public debt than has ever since been brought about in so short a period of time. The remaining debt therefore amounted only to 16,394,701 pounds, one shelling, seven and a quarter pence. In the war which began in 1702 and was concluded by the Treaty of Utrecht, the public debts were still more accumulated. On the 31st of December 1714, they amounted to 53,681,076 pounds, five shellings, six and a half pence. The subscription into the South Sea Fund of the short and long annuities increased the capital of the public debt, so that, on the 31st of December 1722, it amounted to 55,282,978 pounds, one shelling, three and five sixth pence. The reduction of the debt began in 1723 and went on so slowly that, on the 31st of December 1739, during 17 years of profound peace, the whole sum paid off was no more than 8,328,554 pounds, 17 shellings, 11 and three twelfths pence. The capital of the public debt at that time amounted to 46,954,623 pounds, three shellings, four and seven twelfths pence. The Spanish War, which began in 1739 and the French War, which soon followed it, occasioned a further increase of the debt, which, on the 31st of December 1748, after the war had been concluded by the Treaty of Ex La Chapelle, amounted to 78,293,313 pounds, one shelling, ten and three quarter pence. The most profound peace of 17 years' continuance had taken no more than 8,328,354 pounds, 17 shellings, 11 and a quarter pence from it. A war of less than nine years' continuance added 31,338,689 pounds, 18 shellings, six and one sixth pence to it. During the administration of Mr. Pelham, the interest of the public debt was reduced, or at least measures were taken for reducing it, from four to three percent. The sinking fund was increased and some part of the public debt was paid off. In 1755, before the breaking out of the late war, the funded debt of Great Britain amounted to 72,289,675 pounds. On the 5th of January 1763, at the conclusion of the peace, the funded debt amounted to 122,603,336 pounds, eight shellings, two and a quarter pence. The unfunded debt has been stated at 13,927,589 pounds, two shellings, two pence. But the expense occasioned by the war did not end with the conclusion of the peace. So that, though on the 5th of January 1764, the funded debt was increased, partly by a new loan and partly by funding a part of the unfunded debt, to 129,586,789 pounds, ten shellings, one and three quarter pence. There still remained, according to the very well informed author of Considerations on the Trade and Finances of Great Britain, an unfunded debt, which was brought to account in that and the following year of 9,975,017 pounds, 12 shellings, two and 15,44 pence. In 1764, therefore, the public debt of Great Britain, funded and unfunded together, amounted, according to this author, to 139,561,807 pounds, two shellings, four pence. The annuities for lives, too, which had been granted as premiums to the subscribers to the new loans in 1757, estimated at 14 years' purchase, were valued at 472,500 pounds, and the annuities for long terms of years, granted as premiums likewise in 1761 and 1762, estimated at 27.5 years' purchase, were valued at 6,826,875 pounds. During a piece of about seven years' continuance, the prudent and truly patriotic administration of Mr. Pelham was not able to pay off an old debt of six millions. During a war of nearly the same continuance, a new debt of more than 75 millions was contracted. On the 5th of January, 1775, the funded debt of Great Britain amounted to 124,996,086 pounds, one shelling six and a quarter pence. The unfunded, exclusive of a large civil list debt, to 4,150,236 pounds, three shillings, 11 and 7 eighths pence. Both together, to 129,146,322 pounds, five shillings, six pence. According to this account, the whole debt paid off, during 11 years of profound peace, amounted only to 10,415,476 pounds, 16 shillings, nine and seven eighths pence. Even this small reduction of debt, however, has not been all made from the savings out of the ordinary revenue of the state. Several extraneous sums, altogether independent of that ordinary revenue, have contributed towards it. Amongst these, we may reckon an additional shilling in the pound land tax for three years. The two millions received from the East India Company, as indemnification for their territorial acquisitions, and the 110,000 pounds received from the bank for the renewal of their charter. To these must be added several other sums, which, as they arose out of the late war, ought perhaps to be considered as deductions from the expenses of it. If we add to this sum the balance of the Earl of Chathams and Mr. Calcrus accounts and other army savings of the same kind, together with what has been received from the bank, the East India Company and the additional shilling in the pound land tax, the whole must be a good deal more than five millions. The debt therefore, which, since the peace, has been paid out of the savings from the ordinary revenue of the state, has not, one year with another, amounted to half a million a year. The sinking fund has, no doubt, been considerably augmented since the peace, by the debt which had been paid off, by the reduction of the redeemable four percents to three percents, and by the annuities for lives which have fallen in, and if peace were to continue a million perhaps might now be annually spared out of it towards the discharge of the debt. Another million accordingly was paid in the course of last year, but at the same time a large civil list debt was left unpaid, and we are now involved in a new war which, in its progress, may prove as expensive as any of our former wars. The new debt which will probably be contracted before the end of the next campaign may perhaps be nearly equal to all the old debt which has been paid off from the savings out of the ordinary revenue of the state. It would be altogether chimerical, therefore, to expect that the public debt should ever be completely discharged by any savings which are likely to be made from that ordinary revenue as it stands at present. The public funds of the different indebted nations of Europe, particularly those of England, have, by one author, been represented as the accumulation of a great capital, super-added to the other capital of the country by means of which its trade is extended, its manufacturers are multiplied, and its lands cultivated and improved, much beyond what they could have been by means of that other capital only. He does not consider that the capital which the first creditors of the public advanced to government was, from the moment in which he advanced it, a certain portion of the annual produce turned away from serving in the function of a capital to serve in that of a revenue, from maintaining productive laborers to maintaining unproductive ones, and to be spent and wasted generally in the course of the year without even the hope of any future reproduction. In return for the capital which they advanced, they obtained indeed an annuity of the public funds in most cases of more than equal value. This annuity, no doubt, replaced to them their capital and enabled them to carry on their trade and business to the same, or perhaps to a greater extent than before. That is, they were enabled, either to borrow of other people a new capital upon the credit of this annuity, or by selling it to get from other people a new capital of their own, equal or superior to that which they had advanced to government. This new capital, however, which they in this manner either bought or borrowed of other people, must have existed in the country before, and must have been employed, as all capitals are, in maintaining productive labor. When it came into the hands of those who had advanced their money to government, though it was in some respects a new capital to them, it was not so to the country, but was only a capital withdrawn from certain employments in order to be turned towards others. Though it replaced to them what they had advanced to government, it did not replace it to the country. Had they not advanced this capital to government, there would have been in the country two capitals, two portions of the annual produce instead of one employed in maintaining productive labor. When, for defraying the expense of government, a revenue is raised within the year from the produce of free or un-mortgage taxes, a certain portion of the revenue of private people is only turned away from maintaining one species of unproductive labor towards maintaining another. Some part of what they pay in those taxes might, no doubt, have been accumulated into capital and consequently employed in maintaining productive labor, but the greater part would probably have been spent and consequently employed in maintaining unproductive labor. The public expense, however, when defrayed in this manner, no doubt hinders, more or less, the further accumulation of new capital, but it does not necessarily occasion the destruction of any actually existing capital. When the public expense is defrayed by funding, it is defrayed by the annual destruction of some capital which had before existed in the country, by the perversion of some portion of the annual produce which had before been destined for the maintenance of productive labor, towards that of unproductive labor. As in this case, however, the taxes are lighter than they would have been, had a revenue sufficient for defraying the same expense been raised within the year, the private revenue of individuals is necessarily less burdened, and consequently their ability to save and accumulate some part of that revenue into capital is a good deal less impaired. If the method of funding destroys more old capital, it, at the same time, hinders less the accumulation or acquisition of new capital, than that of defraying the public expense by a revenue raised within the year. Under the system of funding, the frugality and industry of private people can more easily repair the breaches which the waste and extravagance of government may occasionally make in the general capital of the society. It is only during the continuance of war, however, that the system of funding has this advantage over the other system. Were the expense of war to be defrayed always by a revenue raised within the year, the taxes from which that extraordinary revenue was drawn would last no longer than the war. The ability of private people to accumulate, though less during the war, would have been greater during the peace than under the system of funding. War would not necessarily have occasioned the destruction of any old capitals, and peace would have occasioned the accumulation of many more new. Wars would, in general, be more speedily concluded and less wantonly undertaken. The people feeling, during continuance of war, the complete burden of it would soon grow weary of it, and government in order to humor them would not be under the necessity of carrying it on longer than it was necessary to do so. The foresight of the heavy and unavoidable burdens of war would hinder the people from wantonly calling for it when there was no real or solid interest to fight for. The seasons during which the ability of private people to accumulate was somewhat impaired would occur more rarely and be of shorter continuance. Those on the contrary during which that ability was in the highest vigor would be of much longer duration than they can well be under the system of funding. When funding, besides, has made a certain progress, the multiplication of taxes which it brings along with it sometimes impairs as much the ability of private people to accumulate, even in time of peace, as the other system would in time of war. The peace revenue of Great Britain amounts at present to more than ten millions a year. If free and un-mortgaged, it might be sufficient with proper management and without contracting a shilling of new debt to carry on the most vigorous war. The private revenue of the inhabitants of Great Britain is, at present, as much encumbered in time of peace, their ability to accumulate is as much impaired as it would have been in the time of the most expensive war had the pernicious system of funding never been adopted. In the payment of the interest of the public debt, it has been said it is the right hand which pays the left. The money does not go out of the country. It is only a part of the revenue of one set of the inhabitants which is transferred to another, and the nation is not a farthing the poor. This apology is founded altogether in the sophistry of the mercantile system, and, after the long examination which I have already bestowed upon that system, it may, perhaps, be unnecessary to say anything further about it. It supposes, besides, that the whole public debt is owing to the inhabitants of the country, which happens not to be true, the Dutch as well as several other foreign nations having a very considerable share in our public funds. But though the whole debt were owing to the inhabitants of the country, it would not, upon that account, be less pernicious. Land and capital stock are the two original sources of all revenue, both private and public. Capital stock pays the wages of productive labor, whether employed in agriculture, manufacturers, or commerce. The management of those two original sources of revenue belongs to two different sets of people, the proprietors of land and the owners or employers of capital stock. The proprietor of land is interested, for the sake of his own revenue, to keep his estate in as good condition as he can, by building and repairing his tenants' houses, by making and maintaining the necessary drains and enclosures, and all those other expensive improvements which it properly belongs to the landlord to make and maintain. But, by different land taxes, the revenue of the landlord may be so much diminished, and by different duties upon the necessaries and conveniences of life, that diminished revenue may be rendered of so little real value, that he may find himself altogether unable to make or maintain those expensive improvements. When the landlord, however, ceases to do his part, it is altogether impossible that the tenant should continue to do his. As the distress of the landlord increases, the agriculture of the country must necessarily decline. When, by different taxes upon the necessaries and conveniences of life, the owners and employers of capital stock find that whatever revenue they derive from it will not, in a particular country, purchase the same quantity of those necessaries and conveniences which an equal revenue would in almost any other they will be disposed to remove to some other. And when, in order to raise those taxes, all or the greater part of merchants and manufacturers, that is, all or the greater part of the employers of great capitals, come to be continually exposed to the mortifying and vexatious visits of the tax gathers, this disposition to remove will soon be changed into an actual removing. The industry of the country will necessarily fall with the removal of the capital which supported it, and the ruin of trade and manufacturers will follow the declension of agriculture. To transfer from the owners of those two great sources of revenue, land and capital stock, from the persons immediately interested in the good condition of every particular portion of land, and in the good management of every particular portion of capital stock, to another set of persons, the creditors of the public who have no such particular interest, the greater part of the revenue arising from either, must, in the long run, occasion both the neglect of land and the waste or removal of capital stock. A creditor of the public has no doubt a general interest in the prosperity of the agriculture, manufacturers and commerce of the country, and consequently in the good condition of its land, and in the good management of its capital stock. Should there be any general failure or declension in any of these things, the produce of the different taxes might no longer be sufficient to pay him the annuity or interest which is due to him. But a creditor of the public, considered merely as such, has no interest in the good condition of any particular portion of land, or in the good management of any particular portion of capital stock. As a creditor of the public, he has no knowledge of any such particular portion. He has no inspection of it. He can have no care about it. Its ruin may in some cases be unknown to him and cannot directly affect him. The practice of funding has gradually enfeebled every state which has adopted it. The Italian republics seem to have begun it. Genoa and Venice, the only two remaining which can pretend to an independent existence, have both been enfeebled by it. Spain seems to have learned the practice from the Italian republics, and, its taxes being probably less judicious than theirs, it has, in proportion to its natural strength, been still more enfeebled. The debts of Spain are a very old standing. It was deeply in debt before the end of the sixteenth century, about a hundred years before England owed a shilling. France, notwithstanding all its natural resources, languishes under an oppressive load of the same kind. The Republic of the United Provinces is as much enfeebled by its debts as either Genoa or Venice. Is it likely that, in Great Britain alone, a practice which has brought either weakness or dissolution into every other country should prove altogether innocent? The system of taxation established in those different countries, it may be said, is inferior to that of England. I believe it is so, but it ought to be remembered that when the wisest government has exhausted all the proper subjects of taxation, it must, in cases of urgent necessity, have recourse to improper ones. The wise Republic of Holland has, upon some occasions, been obliged to have recourse to taxes as inconvenient as the greater part of those of Spain. Another war began before any considerable liberation of the public revenue had been brought about, and growing in its progress as expensive as the last war, may, from irresistible necessity, render the British system of taxation as oppressive as that of Holland or even as that of Spain. To the honour of our present system of taxation, indeed, it has hitherto given so little embarrassment to industry that, during the course even of the most expensive wars, the frugality and good conduct of individuals seemed to have been able, by saving and accumulation, to repair all the breaches which the waste and extravagance of government had made in the general capital of the society. At the conclusion of the late war, the most expensive that Great Britain ever waged, her agriculture was as flourishing, her manufacturers as numerous and as fully employed, and her commerce as extensive as they had ever been before. The capital, therefore, which supported all those different branches of industry, must have been equal to what it had ever been before. Since the peace, agriculture has been still further improved. The rents of houses have risen in every town and village of the country, a proof of the increasing wealth and revenue of the people, and the annual amount of the greater part of the old taxes, of the principal branches of the excise and customs in particular, has been continually increasing, an equally clear proof of an increasing consumption, and consequently of an increasing produce, which could alone support that consumption. Great Britain seems to support with ease a burden which, a half a century ago, nobody believed her capable of supporting. Let us not, however, upon this account rashly conclude that she is capable of supporting any burden, nor even be too confident that she could support, without great distress, a burden a little greater than what has already been laid upon her. When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of there having been fairly and completely paid. The liberation of the public revenue, if it has ever been brought about at all, has always been brought about by a bankruptcy, sometimes by an avowed one, though frequently, by a pretended payment. The raising of the denomination of the coin has been the most usual expedient by which a real public bankruptcy has been disguised under the appearance of a pretended payment. If a sixpence, for example, should, either by active parliament or royal proclamation, be raised to the denomination of a shilling, and twenty sixpences to that of a pound sterling, the person who, under the old denomination, had borrowed twenty shillings, or near four ounces of silver, would, under the new, pay with twenty sixpences, or with something less than two ounces. A national debt of a hundred and twenty eight millions, near the capital of the funded and unfunded debt of Great Britain, might in this manner be paid with about sixty four millions of our present money. It would indeed be a pretended payment only, and the creditors of the public would really be defrauded of ten shillings in the pound of what was due to them. The calamity, too, would extend much further than to the creditors of the public, and those of every private person would suffer a proportional loss, and this without any advantage, but in most cases with a great additional loss to the creditors of the public. If the creditors of the public, indeed, were generally much in debt to other people, they might in some measure compensate their loss by paying the creditors in the same coin in which the public had paid them. But in most countries, the creditors of the public are, the greater part of them, wealthy people, who stand more in the relation of creditors than in that of debtors, towards the rest of their fellow citizens. A pretended payment of this kind, therefore, instead of alleviating, aggravates, in most cases, the loss of the creditors of the public, and, without any advantage to the public, extends the calamity to a great number of other innocent people. It occasions a general and most pernicious subversion of the fortunes of private people, enriching in most cases the idle and profuse debtor at the expense of the industrious and frugal creditor, and transporting a great part of the national capital from the hands which were likely to increase and improve it to those who are likely to dissipate and destroy it. When it becomes necessary for a state to declare itself bankrupt, in the same manner as when it becomes necessary for an individual to do so, a fair, open, and avowed bankruptcy is always the measure which is both least dishonorable to the debtor and at least hurtful to the creditor. The honor of a state is surely very poorly provided for when, in order to cover the disgrace of a real bankruptcy, it has recourse to a juggling trick of this kind so easily seen through and at the same time so extremely pernicious. Almost all states, however, ancient as well as modern, when reduced to this necessity, half, upon some occasions, played this very juggling trick. The Romans at the end of the First Unic War reduced the as, the coin or denomination by which they computed the value of all their other coins from containing 12 ounces of copper to contain only 2 ounces. That is, they raised 2 ounces of copper to a denomination which had always before expressed the value of 12 ounces. The republic was, in this manner, enabled to pay the great debts which it had contracted with the sixth part of what it really owed. So sudden and so great a bankruptcy we would in the present times be apt to imagine must have occasioned a very violent popular clamor. It does not appear to have occasioned any. The law which enacted it was, like all other laws relating to the coin, introduced and carried through the assembly of the people by a tribune, and was probably a very popular law. In Rome, as in all other ancient republics, the poor people were constantly in debt to the rich and the great, who, in order to secure their votes at the annual elections, used to lend them money at exorbitant interest, which, being never paid, soon accumulated into a sum too great either for the debtor to pay or for anybody else to pay for him. The debtor, for fear of a very severe execution, was obliged, without any further gratuity, to vote for the candidate whom the creditor recommended. In spite of all the laws against bribery and corruption, the bounty of the candidates, together with the occasional distributions of coin which were ordered by the senate, were the principal funds from which, during the latter times of the Roman Republic, the poorer citizens derived their subsistence. To deliver themselves from this objection to their creditors, the poorer citizens were continually calling out, either for an entire abolition of debts or for what they called new tables, that is, for a law which should entitle them to a complete acquittance, upon paying only a certain proportion of their accumulated debts. The law which reduced the coin of all denominations to a sixth part of its former value, as it enabled them to pay their debts with a sixth part of what they really owed, was equivalent to the most advantageous new tables. In order to satisfy the people, the rich and the great were, upon several different occasions, obliged to consent to laws, both for abolishing debts and for introducing new tables. And they probably were induced to consent to this law, partly for the same reason, and partly that, by liberating the public revenue, they might restore vigor to that government of which they themselves had the principal direction. An operation of this kind would at once reduce a debt of 128 million pounds to 21,333,333 pounds, six shillings, eight pence. In the course of the Second Punic War, the as was still further reduced, first from two ounces of copper to one ounce, and afterwards from one ounce to half an ounce, that is, to the 24th part of its original value. By combining the three Roman operations into one, a debt of 128 millions of our present money might in this manner be reduced all at once to a debt of 5,333,333 pounds, six shillings, eight pence. Even the enormous debt of Great Britain might in this manner soon be paid. By means of such expedience, the coin of, I believe, all nations, has been gradually reduced more and more below its original value, and the same nominal sum has been gradually brought to contain a smaller and a smaller quantity of silver. Nations have, sometimes, for the same purpose, adulterated the standard of their coin, that is, have mixed a greater quantity of alloy in it. If the pound weight of our silver coin, for example, instead of 18 penny weight, according to the present standard, there were mixed eight ounces of alloy, a pound sterling, or 20 shillings of such coin, would be worth little more than six shillings and eight pence of our present money. The quantity of silver contained in six shillings and eight pence of our present money would thus be raised very nearly to the denomination of a pound sterling. The adulteration of the standard has exactly the same effect with what the French call an augmentation or a direct raising of the denomination of the coin. An augmentation or a direct raising of the denomination of the coin always is, and from its nature must be, an open and a valid operation. By means of it, pieces of a smaller weight and bulk are called by the same name, which had before been given to pieces of a greater weight and bulk. The adulteration of the standard on the contrary has generally been a concealed operation. By means of it, pieces are issued from the mint, of the same denomination, and, as nearly as could be contrived, of the same weight, bulk, and appearance with pieces which had been current before of much greater value. When King John of France, in order to pay his debts, adulterated his coin, all the officers of his mint were sworn to secrecy. Both operations are unjust, but a simple augmentation is an injustice of open violence, whereas an adulteration is an injustice of treacherous fraud. This latter operation, therefore, as soon as it has been discovered, and it could never be concealed very long, has always excited much greater indignation than the former. The coin, after any considerable augmentation, has very seldom been brought back to its former weight, but after the greatest adulterations it has almost always been brought back to its former fineness. It has scarce ever happened that the fury and indignation of the people could otherwise be appeased. In the end of the reign of Henry VIII, and in the beginning of that of Edward VI, the English coin was not only raised in its denomination, but adulterated in its standard. The like-frauds were practiced in Scotland during the minority of James VI. They have occasionally been practiced in most other countries. That the public revenue of Great Britain can never be completely liberated, or even that any considerable progress can ever be made towards that liberation, while the surplus of that revenue, or what is over and above defraying the annual expense of the peace establishment, is so very small, it seems altogether in vain to expect. That liberation, it is evident, can never be brought about without either some very considerable augmentation of the public revenue, or some equally considerable reduction of the public expense. A more equal land tax, a more equal tax upon the rent of houses, and such alterations in the present system of customs and excise as those which have been mentioned in the foregoing chapter, might, perhaps, without increasing the burden of the greater part of the people, but only distributing the weight of it more equally upon the whole, produce a considerable augmentation of revenue. The most sanguine projector, however, could scarce flatter himself that any augmentation of this kind would be such as could give any reasonable hopes, either of liberating the public revenue altogether, or even of making such progress towards that liberation in time of peace, as either to prevent or to compensate the further accumulation of the public debt in the next war. By extending the British system of taxation to all the different provinces of the empire, inhabited by people either of British or European extraction, a much greater augmentation of revenue might be expected. This, however, could scarce perhaps be done consistently with the principles of the British constitution without admitting into the British parliament, or if you will, into the state's general of the British empire, a fair and equal representation of all those different provinces, that of each province bearing the same proportion to the produce of its taxes as the representation of Great Britain might bear to the produce of the taxes levied upon Great Britain. The private interest of many powerful individuals, the confirmed prejudices of great bodies of people, seem indeed at present to oppose to so great a change, such obstacles as it may be very difficult, perhaps altogether impossible, to surmount. Without, however, pretending to determine whether such a union be practicable or impracticable, it may not perhaps be improper in a speculative work of this kind to consider how far the British system of taxation might be applicable to all the different provinces of the empire. What revenue might be expected from it, if so applied, and in what manner a general union of this kind might be likely to affect the happiness and prosperity of the different provinces comprehended within it. Such a speculation can, at worst, be regarded but as a new utopia, less amusing certainly, but no more useless and chimerical than the old one. The land tax, the stamp duties and the different duties of customs and excise constitute the four principal branches of the British taxes. Ireland is certainly as able, and our American and West India plantations more able, to pay a land tax than Great Britain. Where the landlord is subject neither to tithe nor poor's rate, he must certainly be more able to pay such a tax than where he is subject to both those other burdens. The tithe, where there is no modus and where it is levied in kind, diminishes more what would otherwise be the rent of the landlord than a land tax which really amounted to five shillings in the pound. Such a tithe will be found, in most cases, to amount to more than a fourth part of the real rent of the land, or of what remains after replacing completely the capital of the farmer together with his reasonable profit. If all moduses and all appropriations were taken away, the complete church tithe of Great Britain in Ireland could not well be estimated at less than six or seven millions. If there was no tithe either in Great Britain or Ireland, the landlords could afford to pay six or seven millions additional land tax, without being more burdened than a very great part of them are at present. America pays no tithe, and could therefore very well afford to pay a land tax. The lands in America and the West Indies indeed are, in general, not tenanted nor leased out to farmers. They could not therefore be assessed according to any rent roll. But neither were the lands of Great Britain, and the fourth of William and Mary, assessed according to any rent roll, but according to a very loose and inaccurate estimation. The lands in America might be assessed either in the same manner, or according to an equitable valuation, in consequence of an accurate survey, like that which was lately made in the Milanese and in the dominions of Austria, Prussia, and Sardinia. Stamp duties it is evident might be levied without any variation, in all countries where the forms of law process and the deeds by which property, both real and personal, is transferred, are the same or nearly the same. End of Book 5, Chapter 3, Part B. Chapter 3, Part C of The Wealth of Nations, Book 5. This is a LibriVox recording. All LibriVox recordings are in the public domain. For more information or to volunteer, please visit LibriVox.org. Recording by Stephen Escalera. The Wealth of Nations by Adam Smith. Book 5, Chapter 3, Part C. Of Public Debt. The extension of the Custom House laws of Great Britain to Ireland and the plantations, provided it was accompanied, as injustice it ought to be, with an extension of the freedom of trade, would be in the highest degree advantageous to both. All the invidious restraints which at present oppress the trade of Ireland, the distinction between the enumerated and non-enumerated commodities of America, would be entirely at an end. The country's north of Cape Finasterra would be as open to every part of the produce of America, as those south of that Cape are to some parts of that produce at present. The trade between all the different parts of the British Empire would, in consequence of this uniformity in the Custom House laws, be as free as the coasting trade of Great Britain is at present. The British Empire would thus afford, within itself, an immense internal market for every part of the produce of all its different provinces. So great an extension of market would soon compensate, both to Ireland and the plantations, all that they could suffer from the increase of the duties of customs. The excise is the only part of the British system of taxation which would require to be varied in any respect, according as it was applied to the different provinces of the Empire. It might be applied to Ireland without any variation, the produce and consumption of that kingdom being exactly of the same nature with those of Great Britain. In its application to America and the West Indies, of which the produce and consumption are so very different from those of Great Britain, some modification might be necessary, in the same manner as in its application to the cider and beer counties of England. A fermented liquor, for example, which is called beer, but which, as it is made of molasses, bears very little resemblance to our beer, makes a considerable part of the common drink of the people in America. This liquor, as it can be kept only for a few days, cannot, like our beer, be prepared and stored up for sale in great breweries. But every private family must brew it for their own use, in the same manner as they cook their victuals. But to subject every private family to the odious visits and examination of the tax-gatherers, in the same manner as we subject the keepers of alehouses and the brewers for public sale, would be altogether inconsistent with liberty. If, for the sake of equality, it was thought necessary to lay a tax upon this liquor, it might be taxed by taxing the material of which it is made, either at the place of manufacture, or, if the circumstances of the trade rendered such an excise improper, by laying a duty upon its importation into the colony in which it was to be consumed. Besides the duty of one penny a gallon imposed by the British Parliament upon the importation of molasses into America, there is a provincial tax of this kind upon their importation into Massachusetts Bay and ships belonging to any other colony of eight pence the hogshead, and another upon their importation from the northern colonies into South Carolina of five pence the gallon. Or, if neither of these methods was found convenient, each family might compound for its consumption of this liquor, either according to the number of persons of which it consisted, in the same manner as private families compound for the malt tax in England, or according to the different ages and sexes of those persons, in the same manner as several different taxes are levied in Holland, or, nearly as Sir Matthew Decker proposes, that all taxes upon consumable commodities should be levied in England. This mode of taxation, it has already been observed, when applied to objects of a speedy consumption, is not a very convenient one. It might be adopted, however, in cases where no better could be done. Sugar, rum, and tobacco are commodities which are nowhere necessaries of life, which are become objects of almost universal consumption, and which are therefore extremely proper subjects of taxation. If a union with the colonies were to take place, those commodities might be taxed, either before they go out of the hands of the manufacturer or grower, or if this mode of taxation did not suit the circumstances of those persons, they might be deposited in public warehouses, both at the place of manufacture and at all the different ports of the empire, to which they might afterwards be transported, to remain there under the joint custody of the owner and the revenue officer, till such time as they should be delivered out, either to the consumer, to the merchant retailer for home consumption, or to the merchant exporter, the tax not to be advanced till such delivery, when delivered out for exportation to go duty-free upon proper security being given, that they should really be exported out of the empire. These are perhaps the principal commodities with regard to which the union with the colonies might require some considerable change in the present system of British taxation. What might be the amount of the revenue which this system of taxation, extended to all the different provinces of the empire, might produce, it must, no doubt, be altogether impossible to ascertain with tolerable exactness. By means of this system, there is annually levied in Great Britain, upon less than 8 millions of people, more than 10 millions of revenue. Ireland contains more than 2 millions of people, and, according to the accounts laid before the Congress, the 12 associated provinces of America contain more than 3. Those accounts, however, may have been exaggerated in order, perhaps, either to encourage their own people, or to intimidate those of this country, and we shall suppose therefore that our North American and West Indian colonies, taken together, contain no more than 3 millions, or that the whole British empire, in Europe and America, contains no more than 13 millions of inhabitants. If, upon less than 8 millions of inhabitants, this system of taxation raises a revenue of more than 10 million sterling, it ought, upon 13 millions of inhabitants, to raise a revenue of more than 16 million 250,000 pounds sterling. From this revenue, supposing that this system could produce it, must be deducted the revenue usually raised in Ireland and the plantations, for defraying the expense of the respective civil governments. The expense of the civil and military establishment of Ireland, together with the interest of the public debt, amounts, at a medium of the two years which ended March 1775, to something less than 750,000 pounds a year. By a very exact account of the revenue of the principal colonies of America and the West Indies, it amounted, before the commencement of the present disturbances, to 141,800 pounds. In this account, however, the revenue of Maryland, of North Carolina, and of all our late acquisitions, both upon the continent and in the islands, is omitted, which may perhaps make a difference of 30 or 40,000 pounds. For the sake of even numbers, therefore, let us suppose that the revenue necessary for supporting the civil government of Ireland and the plantations may amount to a million. There would remain, consequently, a revenue of 15,250,000 pounds to be applied towards defraying the general expense of the empire and towards paying the public debt. But if, from the present revenue of Great Britain, a million could, in peaceable times, be spared towards the payment of that debt, 6,250,000 pounds could very well be spared from this improved revenue. This great sinking fund, too, might be augmented every year by the interest of the debt which had been discharged the year before, and might, in this manner, increase so very rapidly as to be sufficient in a few years to discharge the whole debt and thus to restore completely the at present debilitated and languishing vigor of the empire. In the meantime, the people might be relieved from some of the most burdensome taxes, from those which are imposed either upon the necessaries of life or upon the materials of manufacture. The laboring poor would thus be enabled to live better, to work cheaper, and to send their goods cheaper to market. The cheapness of their goods would increase the demand for them and, consequently, for the labor of those who produced them. This increase in the demand for labor would both increase the numbers and improve the circumstances of the laboring poor. Their consumption would increase, and, together with it, the revenue arising from all those articles of their consumption upon which the taxes might be allowed to remain. The revenue arising from the system of taxation, however, might not immediately increase in proportion to the number of people who were subjected to it. Great indulgence would, for some time, be due to those provinces of the empire which were thus subjected to burdens to which they had not before been accustomed, and even when the same taxes came to be levied everywhere exactly as possible, they would not everywhere produce a revenue proportion to the numbers of the people. In a poor country, the consumption of the principal commodities subject to the duties of customs and excise is very small, and in a thinly inhabited country, the opportunities of smuggling are very great. The consumption of malt liquors among the inferior ranks of people in Scotland is very small, and the excise upon malt, beer and ale, produces less there than in England in proportion to the numbers of the people and the rate of the duties which upon malt is different on account of a supposed difference of quality. In these particular branches of the excise there is not, I apprehend, much more smuggling in the one country than in the other. The duties upon the distillery and the greater part of the duties of customs in proportion to the numbers of people in the respective countries produce less in Scotland than in England, not only on account of the smaller consumption of the taxed commodities, but of the much greater facility of smuggling. In Ireland, the inferior ranks of people are still poorer than in Scotland, and many parts of the country are almost as thinly inhabited. In Ireland, therefore, the consumption of the taxed commodities might, in proportion to the number of the people, be still less than in Scotland, and the facility of smuggling nearly the same. In America and the West Indies, the white people, even of the lowest rank, are in much better circumstances than those of the same rank in England, and their consumption of all the luxuries in which they usually indulge themselves is probably much greater. The blacks indeed who make the greater part of the inhabitants both of the southern colonies upon the continent and of the West India Islands, as they are in a state of slavery, are no doubt in a worse condition than the poorest people either in Scotland or Ireland. We must not, however, upon that account imagine that they are worse fed, or that their consumption of articles which might be subjected to moderate duties is less than that even of the lower ranks of people in England. In order that they may work well, it is in the interest of their master that they should be fed well, and kept in good heart, in the same manner as it is his interest that his working cattle should be so. The blacks accordingly have almost everywhere their allowance of rum and molasses or spruce beer, in the same manner as the white servants, and this allowance would not probably be withdrawn, though those articles should be subjected to moderate duties. The consumption of the taxed commodities, therefore, in proportion to the number of inhabitants, would probably be as great in America and the West Indies as in any part of the British Empire. The opportunities of smuggling indeed would be much greater, America in proportion to the extent of the country being much more thinly inhabited than either Scotland or Ireland. If the revenue, however, which is at present raised by the different duties upon malt and malt liquors were to be levied by a single duty upon malt, the opportunity of smuggling in the most important branch of the excise would be almost entirely taken away, and if the duties of customs, instead of being imposed upon almost all the different articles of importation, were confined to a few of the most general use and consumption, and if the levying of those duties were subjected to the excise laws, the opportunity of smuggling, though not so entirely taken away, would be very much diminished. In consequence of those two apparently very simple and easy alterations, the duties of customs and excise might probably produce a revenue as great in proportion to the consumption of the most thinly inhabited province as they do at present, in proportion to that of the most populous. The Americans, it has been said, indeed have no gold or silver money, the interior commerce of the country being carried on by a paper currency, and the gold and silver which occasionally come among them being all sent to Great Britain in return for the commodities which they receive from us. But without gold and silver it is added there is no possibility of paying taxes. We already get all the gold and silver which they have. How is it possible to draw from them what they have not? The present scarcity of gold and silver money in America is not the effect of the poverty of that country, or of the inability of the people there to purchase those metals. In a country where the wages of labor are so much higher and the price of provisions so much lower than in England the greater part of the people must surely have wherewithal to purchase a greater quantity if it were either necessary or convenient for them to do so. The scarcity of those metals therefore must be the effect of choice and not of necessity. It is for transacting either domestic or foreign business that gold or silver money is either necessary or convenient. The domestic business of every country it has been shown in the second book of this inquiry may at least in peaceable times be transacted by means of a paper currency with nearly the same degree of convenience as by gold and silver money. It is convenient for the Americans who could always employ with profit in the improvement of their lands a greater stock than they can easily get to save as much as possible the expense of so costly an instrument of commerce as gold and silver and rather to employ that part of their surplus produce which would be necessary for purchasing those metals and purchasing the instruments of trade the materials of clothing several parts of household furniture and the ironwork necessary for building and extending their settlements and plantations and purchasing not dead stock but active and productive stock the colony governments find it for their interest to supply the people with such a quantity of paper money as is fully sufficient and generally more than sufficient for transacting their domestic business some of those governments that of Pennsylvania particularly derive a revenue from lending this paper money to their subjects at an interest of so much percent others like that of Massachusetts Bay advance upon extraordinary emergencies a paper money of this kind for defraying the public expense and afterwards when it suits the convenience of the colony redeem it at the depreciated value to which it gradually falls in 1747 that colony paid in this manner the greater part of its public debts with the tenth part of the money for which its bills had been granted it suits the convenience of the planters to save the expense of employing gold and silver money in their domestic transactions and it suits the convenience of the colony governments to supply them with a medium which though attended with some very considerable disadvantages enables them to save that expense the redundancy of paper money necessarily banishes gold and silver from the domestic transactions of the colonies for the same reason that it has banished those metals from the greater part of the domestic transactions as coland and in both countries it is not the poverty but the enterprising and projecting spirit of the people their desire of employing all the stock which they can get as active and productive stock which has occasioned this redundancy of paper money in the exterior commerce which the different colonies carry on with great britain gold and silver are more or less employed exactly in proportion as they are more or less necessary where those metals are not necessary they seldom appear where they are necessary they are generally found in the commerce between great britain and the tobacco colonies the british goods are generally advanced to the colonists at a pretty long credit and are afterwards paid for in tobacco rated at a certain price it is more convenient for the colonists to pay in tobacco then in gold and silver it would be more convenient for any merchant to pay for the goods which his correspondence had sold to him in some other sort of goods which he might happen to deal in then in money such a merchant would have no occasion to keep any part of his stock by him unemployed and in ready money for answering occasional demands he could have at all times a larger quantity of goods in his shop or warehouse and he could deal to a greater extent but it seldom happens to be convenient for all the correspondence of a merchant to receive payment for the goods which they sell to him in goods of some other kind which he happens to deal in the british merchants who trade to virginia and maryland happen to be a particular set of correspondence to whom it is more convenient to receive payment for the goods which they sell to those colonies in tobacco then in gold and silver they expect to make a profit by the sale of the tobacco they could make none by that of the gold and silver gold and silver therefore very seldom appear in the commerce between great britain and the tobacco colonies maryland and virginia have as little occasion for those metals in their foreign as in their domestic commerce they are said accordingly to have less gold and silver money than any other colonies in america they are reckoned however as thriving and consequently as rich as any of their neighbors in the northern colonies pennsylvania new york new jersey the four governments of new england etc the value of their own produce which they export to great britain is not equal to that of the manufacturers which they import for their own use and for that of some of the other colonies to which they are carriers a balance therefore must be paid to the mother country in gold and silver and this balance they generally find in the sugar colonies the value of the produce annually exported to great britain is much greater than that of all the goods imported from thence if the sugar and rum annually sent to the mother country were paid for in those colonies great britain would be obliged to send out every year a very large balance and money and the trade to the west indies would by a certain species of politicians be considered as extremely disadvantageous but it so happens that many of the principal proprietors of the sugar plantations reside in great britain their rents are remitted to them in sugar and rum the produce of their estates the sugar and rum which the west india merchants purchase in those colonies upon their own account are not equal in value to the goods which they annually sell there a balance therefore must necessarily be paid to them in gold and silver and this balance too is generally found the difficulty and irregularity of payment from the different colonies to great britain have not been at all in proportion to the greatness or smallness of the balances which were respectively due from them payments have in general been more regular from the northern than from the tobacco colonies though the former have generally paid a pretty large balance and money while the latter have either paid no balance or a much smaller one the difficulty of getting payment from our different sugar colonies has been greater or less in proportion not so much to the extent of the balances respectively due from them as to the quantity of uncultivated land which they contained that is to the greater or smaller temptation which the planters have been under of over trading or of undertaking the settlement and plantation of greater quantities of wasteland then suited the extent of their capitals the returns from the great island of jamaica where there is still much uncultivated land have upon this account been in general more irregular and uncertain than those from the smaller islands of barbatos antigua and saint christophers which have for these many years been completely cultivated and have upon that account afforded less field for the speculations of the planter the new acquisitions of granada, tobacco, saint vincenzo and dominica have opened a new field for speculations of this kind and the returns from those islands have of late been as irregular and uncertain as those from the great island of jamaica it is not therefore the poverty of the colonies which occasions in the greater part of them the present scarcity of gold and silver money their great demand for active and productive stock makes it convenient for them to have as little dead stock as possible and disposes them upon that account to content themselves with a cheaper though less commodious instrument of commerce than gold and silver they are thereby enabled to convert the value of that gold and silver into the instruments of trade into the materials of clothing and to household furniture and into the ironwork necessary for building and extending their settlements and plantations in those branches of business which cannot be transacted without gold and silver money it appears that they can always find the necessary quantity of those metals and if they frequently do not find it their failure is generally the effect not of their necessary poverty but of their unnecessary and excessive enterprise it is not because they are poor that their payments are irregular and uncertain but because they are too eager to become excessively rich though all that part of the produce of the colony taxes which was over and above what was necessary for defraying the expense of their own civil and military establishments were to be remitted to great britain and gold and silver the colonies have abundant wherewithal to purchase the requisite quantity of those metals they would in this case be obliged indeed to exchange a part of their surplus produce with which they now purchase active and productive stock for dead stock in transacting their domestic business they would be obliged to employ a costly instead of a cheap instrument of commerce and the expense of purchasing this costly instrument might damp somewhat the vivacity and order of their excessive enterprise in the improvement of land it might not however be necessary to remit any part of the american revenue in gold and silver it might be remitted in bills drawn upon and accepted by particular merchants or companies in great britain to whom a part of the surplus produce of america had been consigned who would pay into the treasury the american revenue and money after having themselves received the value of it in goods and the whole business might frequently be transacted without exporting a single ounce of gold or silver from america it is not contrary to justice that both ireland and america should contribute towards the discharge of the public debt of great britain the debt has been contracted in support of the government established by the revolution a government to which the protestants of ireland owe not only the whole authority which they at present enjoy in their own country but every security which they possess for their liberty their property and their religion a government to which several of the colonies of america owe their present charters and consequently their present constitution and to which all the colonies of america owe the liberty security and property which they have ever since enjoyed that public debt has been contracted in the defense not of great britain alone but of all the different provinces of the empire the immense debt contracted in the late war in particular and a great part of that contracted in the war before were both properly contracted in defense of america by a union with great britain ireland would gain besides the freedom of trade other advantages much more important and which would much more than compensate any increase of taxes that might accompany that union by the union with england the middling and inferior ranks of people in scotland gained a complete deliverance from the power of an aristocracy which had always before oppressed them by a union with great britain the greater part of people of all ranks in ireland would gain an equally complete deliverance from a much more oppressive aristocracy an aristocracy not founded like that of scotland in the natural and respectable distinctions of birth and fortune but in the most odious of all distinctions those of religious and political prejudices distinctions which more than any other animate both the insolence of the oppressors and the hatred and indignation of the oppressed in which commonly render the inhabitants of the same country more hostile to one another than those of different countries ever are without a union with great britain the inhabitants of ireland are not likely for many ages to consider themselves as one people no oppressive aristocracy has ever prevailed in the colonies even they however would in point of happiness and tranquility gain considerably by a union with great britain it would at least deliver them from those rancorous and virulent factions which are inseparable from small democracies and which have so frequently divided the affections of their people and disturb the tranquility of their governments in their form so nearly democratical in the case of a total separation from great britain which unless prevented by a union of this kind seems very likely to take place those factions would be 10 times more virulent than ever before the commencement of the present disturbances the coercive power of the mother country had always been able to restrain those factions from breaking out into anything worse than gross brutality and insult if that coercive power were entirely taken away they would probably soon break out into open violence and bloodshed in all great countries which are united under one uniform government the spirit of party commonly prevails less in the remote provinces than in the center of the empire the distance of those provinces from the capital from the principal seat of the great scramble of faction and ambition makes them enter less into the views of any of the contending parties and renders them more indifferent and impartial spectators of the conduct of all the spirit of party prevails less in scotland than in england in the case of a union it would probably prevail less in ireland than in scotland and the colonies would probably soon enjoy a degree of concord and unanimity at present unknown in any part of the british empire both ireland and the colonies indeed would be subjected to heavier taxes than any which they at present pay in consequence however of a diligent and faithful application of the public revenue towards the discharge of the national debt the greater part of those taxes might not be of long continuance and the public revenue of great britain might soon be reduced to what was necessary for maintaining a moderate peace establishment the territorial acquisitions of the east india company the undoubted right of the crown that is of the state and people of great britain might be rendered another source of revenue more abundant perhaps than all those already mentioned those countries are represented as more fertile more extensive and in proportion to their extent much richer and more populous than great britain in order to draw a great revenue from them it would not probably be necessary to introduce any new system of taxation into countries which are already sufficiently and more than sufficiently taxed it might perhaps be more proper to lighten than to aggravate the burden of those unfortunate countries and to endeavor to draw a revenue from them not by imposing new taxes but by preventing the embezzlement and misapplication of the greater part of those which they already pay if it should be found impracticable for great britain to draw any considerable augmentation of revenue from any of the resources above mentioned the only resource which can remain to her is a diminution of her expense in the mode of collecting and in that of expending the public revenue though in both there may be still room for improvement great britain seems to be at least as economical as any of her neighbors the military establishment which she maintains for her own defense in time of peace is more moderate than that of any european state which can pretend to rival her either in wealth or in power none of these articles therefore seem to admit of any considerable reduction of expense the expense of the peace establishment of the colonies was before the commencement of the present disturbances very considerable and is an expense which may and if no revenue can be drawn from them ought certainly to be saved altogether this constant expense in time of peace though very great is insignificant in comparison with what the defense of the colonies has cost us in time of war the last war which was undertaken altogether on account of the colonies cost great britain it has already been observed upwards of 90 millions the spanish war of 1739 was principally undertaken on their account in which and in the french war that was the consequence of it great britain spent upwards of 40 millions a great part of which ought justly to be charged to the colonies in those two wars the colonies cost great britain much more than double the sum which the national debt amounted to before the commencement of the first of them had it not been for those wars the debt might and probably would by this time have been completely paid and had it not been for the colonies the former of those wars might not and the latter certainly would not have been undertaken it was because the colonies were supposed to be provinces of the british empire that this expense was laid out upon them but countries which contribute neither revenue nor military force towards the support of the empire cannot be considered as provinces they may perhaps be considered as appendages as a sort of splendid and showy equipage of the empire but if the empire can no longer support the expense of keeping up this equipage it ought certainly to lay it down and if it cannot raise its revenue in proportion to its expense it ought at least to accommodate its expense to its revenue if the colonies not withstanding their refusal to submit to british taxes are still to be considered as provinces of the british empire their defense in some future war may cost great britain as great and expense as it ever has done in any formal war the rulers of great britain have for more than a century past amused the people with the imagination that they possessed a great empire on the west side of the atlantic this empire however has hitherto existed in imagination only it has hitherto been not an empire but the project of an empire not a gold mine but the project of a gold mine a project which has cost which continues to cost and which if pursued in the same way as it has been hitherto is likely to cost immense expense without being likely to bring any profit for the effects of the monopoly of the colony trade it has been shown are to the great body of the people mere loss instead of profit it is surely now time that our rulers should either realize this golden dream in which they have been indulging themselves perhaps as well as the people or that they should awake from it themselves and endeavor to awaken the people if the project cannot be completed it ought to be given up if any of the provinces of the british empire cannot be made to contribute towards the support of the whole empire it is surely time that great britain should free herself from the expense of defending those provinces in time of war and of supporting any part of their civil or military establishment in time of peace and endeavor to accommodate her future views and designs to the real mediocrity of her circumstances end of book five chapter three part c end of the wealth of nations by adam smith recorded by steven escalera


If U.S. allows Putin to win in Ukraine, they might see Russia attack a NATO member, Yellen. The United States cannot allow Ukraine to lose the war against Russia due to the lack of funds according to the U.S. Treasury Secretary Janet Yellen. Yellen considers President Joe Biden's request for assistance to Ukraine and Israel critical to the national security of the United States. The Treasury Secretary added that she cannot predict the schedule of the U.S. Congress voting on this bill but expressed approval of the fact that Congress passed a law allowing the government to remain open and operational. But it really is essential that this aid be provided both to Israel and to Ukraine. We can't allow Ukraine to lose a battle on the home front because it lacks enough money to keep school teachers in the classroom and first responders on the job when it's fighting valiantly on the battlefield. So, Ukraine is utterly dependent on this aid, said the minister. She believes that the U.S. needs to join others as their European partners have provided Ukraine with assistance of 50 billion euros over the next four years and the IMF has provided over 15 billion. Yellen emphasises that if the U.S. allows Russian President Vladimir Putin to win in Ukraine, they might see Russia attack a NATO member afterward.