cr Digitized by the Internet Archive in 2007 with funding from IVIicrosoft Corporation http://www.archive.org/details/doctrineofequivaOOcraurich THE JDOCTMIJVE O F EOmiVAJLENTS, &c. PART I, -. •, i H CONTENTS. ^r-f-J-H-H-H--*-* PART I. Page INTRODUCTION 1 CHAPTER I. On the proportional or relative Value of different Objects, he- fore the Introduction of the precious Metals as a representative Sign 13 CHAPTER II. On the Principles ly which the specific Quantity of the pre- cious Metals, due to each Object, is re- gulated CHAPTER III. On the Effects of Tax- ationin Money ^ ^ ^ 4i 91 M508306 CONTENTS. *4- -?--{-*«- 4- -<-* PART II. Page CHAPIER IV. On the Nature and Fa- lue of Gold and Silver Coins, and on the Principles of Variation in Foreign Exchanges 123 CHAPTER V. On the Interest or Trice of Money ; on its Power of precluding all Sinking Fund Systems ; and on the Nature of public and private Mq- ney Debts 147 CHAPTER VI. On the most perfect System of public Finance 2S4 1'. ■ '">T Ti_:-J. — INTRODUCTION. Although the developemeiit erf this intricate subject has been attended with considerable application on my part, yet a great degree of attention will be re- quired from my reiadierS, in order to sup- ply that want of perspicuity, which may appear in the explanation of many ab- struse points, and which I hope they will in 5ome measure attribute to the nature of the enquiry, thef consideration of niy incapacity to do the subject thatjustice^ which its imr portanrce naturally claiiDS, would indeed have 'deterred tne from publishing the rest|!t of my meditations, had I not been A 4 INTRODUCTION. . An investigation of this kind would have shewn to them, that the quicker and slower motion or circulation of money from hand to hand^ which in its cifects is of the same consequence as increase or decrease of quantity, must of course de- stroy their assurned hypothesis, and'that the pdssibility of an increase or decrease of objects to be represented, would in- fallibly subvert the position above-men- tioned, if proved to be dependent on^, df concomitant with the increase or de* crease of money. By adhering , therefore too imuch to the principles of Writers in an earlier age,' they deceived and per- plexed themselves, as well as their Rea- ders, and have unfortunately left the subject to be further explained. I say unfortunately, because in refu- ting the opinions of such celebrated Au- thors, I feel niy own want of talents as a Writer; while it must be acknowledged, diat their superior abilities would have INTRODUCTION. 5 made the truth appear more conspi- cuous. I flattei* myself, however, with every in- dulgence from the Public, as a return for my zeal in attempting to correct errors, which have not only been received as truth, but which, from the reputation of their Authors, and from the indiffe- rence of mankind to investigations of this nature, have been adopted as funda- mental pjiinciples in the policy of States, I must at the same time observe, that it is become of the utmost importance in the present state of increasing taxation, to ascertain, in the fullest extent, the na- ture, the value, and the power of the precious metals; and I therefore consi- der It incumbent on mt (as profejising some knowledge of tlie subject) *to trace the origin and progress of their use, as well as their operations in fixing the mo- ney-value of every object, which human A3 6 INTRODUCTION. industry can either obtain or produce; with the causes that contract or extend the industrious exertions of man, in or- der to shew the inconsistency of the re- ceived opinions, and the political errors which have resulted from the admission of false principles. It must doubtless appear very extraor- dinary to men of reflection, that no con- clusive arguments, or consistent theories, are to be found in any Wol'k hitharto written on this important subject, and that every publication has been confined to some partial explanations respecting industry and commerce, to some assumed and vague principles concerning Mone^r as well as public credit, and to some vain attempts to reconcile contradictory ef- fects, which the Aiithors of such Works were under a necessity of stating, and with the causes of which they were un- acquainted. INTRODUCTION. / This appears evidently to be the case even in Sir James Smdx^s political econo- my^ which successfully combats the opi- nions of Messrs. Montesquieu and Hume^ by proving; them inconsistent in their reasoning ; but it unfortunately does not develope any fixed principles or ideas for the purpose of obtaining more uniform and comprehensive consequences. I mention in particular the Writings of Mr. Harris, Mr. Hume, Sir James Stuart, and Dr. Adam Smith, because they must be in the recollection of every enquirer into this subject: and as Dr. Smith's Work on the Wealth of Nations has met with almost universal appkuse, on ac- count of the perspicuity of his style^ it becomes tlie more necessary to shew the fallacy of his ideas; and especially in those parts of his Enquiry, winch either tend to establish an improper and nowise existing distinction between gold andsilver^ by affixing to the latter only A 4 8 INTRODUCTION. the denomination oi ftandard^ or which attempt to prove, that the natural price^ of every commodity increases by the greater abundance of the precious metals, which is to say, in other words, " that '^ gold and silver^ from the circumstance '^ of their greater relative abundance com- " pared with other objects^ lose in their ^' comparative valu£ with those object s^ I cannot indeed deny, that the pre- cious metals have lost in their value within tliis century; but this appears only in the decreafed rate of interests which con- stitutes their real and I may say only price. It \^ not less true^ that the piice or specific value in the precious metals, which is really due to almost every com- modity, has been much increased during the same period; hut the accumulation of taxes on various objects, and their extensive influence oyer all the necessa- ries of life, easily explain the cause of INTRODUCTIOK, cy this enhanced value, without havin^^re-" course to the increased quantity of m^ ney, which must infallibly have prnduj- ced the contrary effect, if that ^ccnmi> lation of taxes had not taken place. There would indeed be a great impro^- priety of expression in saying, that the fluc- tuating specific value in money of diffe- rent objects, should be considered as the price of the metals; because experience sufficiently demonstrates;, that this fluc- tuation in value is for ever partial, and nowise uniform on all objects, which precludes ths possibility of applying it to indicate a change in the general medium called Money; neither can the metals, when representing every object, be consi- dered in any other light, than as a measure or equivaknt, of which more or less is ultimately jQfqmxQd for the production of each object, from a combination of cau- ses, that are to be traced in this Work. A 5 K> INTRODUCTION. The necessity of making this distinction between the interest of Money as its price ^ and the specific quantity of it due to each object, when exchanged for Money, ^^ its measure^ will, from the nature of the in- vestigation, appear in a very conspicuous point of view ; as well as that of the further distinction which I shall make between the causes of such specific value , when they are entirely independent of all taxa- tion, and when they are combined with it ; in order to shew, in the clearest pos- sible manner, the mode in which the rise and fall of interest alfcd ultimately the price of every object. A very little reflection would indeed i)oint out, that the fall of interest from the abundance of Money, admits of a di- minution in the specific value or price of all industrious productions, to which di- minished value the manufacturer could, on selling them, chearfully consent without injury to himself; while a rise of INTRODUCTION. tX interest, from a scarcity of money, produ- ces on the contrary an increase in that spe- cific value, which the manufacturer could not possibly dispense with on disposing of his productions. But mankind do not hesitate to main- tain, and all Authors who have written on the subject, flatter the idea, ^^ that the ^^ relative abundance of the meters tends ^^ simpl^j to increase the specific value of ^^ every oh ject; and their relative scarcity **' to diminish that specific value^ on ac- *^ count of the faculty which the possessors ^* of money have to give more or lessT This position may, to superficial enqui- rers, appear conclusive; but a thorough investigation of the subject will shew its fallacy, and that the effects which they point out, could only be temporary^ be- cause in the one case there must neces- sarily arise an encouragement to produce more objects; and in the other case a dis- ^d JtNTROPUCTION. ipDuragement from ; the production even of >the s^e nurnber of objects which had tefore been usually produced ; as will be demonstrated in explaining the prin- ciple by which this increase or decrease of industry is directed. rjjp y/ill certainly not be denied, that Some varying cause directs the promotion or the destruction of industry, indepen- dent of that degree of security in pro- perty which is alforded by each Go- vernment, and which, by being gene- rally in the same state for a long pe- riod, cannot in itself have either a pro- gressive or a changeable influence on the mass of industry ; neither can it be dispu* ted, that the principle of taxing any ob- ject must infallibly add to its specific va- lue in money ^ which shews the necessity of examining each cause and each effect separately and distinctly, before any ge- neral and positive conclusion, respecting finance, can be universally admitted. I propose tberefolt' to examine tht primkive and immutable causes of the different degrees ' # ' vaMe " ' atSehcS'ifo cviery ©ii^'ect; t^e-'i)rtm which 'tfe- gulate -that specific quart tity' of the ^t*^- cious^ metals, to whi^H-'ak- things areeri- titled ; the fiiQ^hsy^hf %hich those prd-^ portions are always keptup ; arid the origin of the multiplicatioid of objects in each class of industry. ' ' I shall also add such observations on the writings of other Authors, and on the application of my own principles, as may appear useful and necessary. Whatever relates to Money, will be more or less, touched upon ; and I trust that the important truths which I en- deavour to explain, will, sooner or later, be generally understood, and bring about an entire new system of policy respec- ting finance, not only for the purpose of extending the population, the agri- 14 INTRODUCTION. culture, , the industry and the commerce of Great Britain^ but also for the still more important object of diminishing the specific value of every thing, and consequently the enormous expence to which the nation is become subject for Jhcr protection in time of peace, as well ,as for her defence in time of war; an ex- ^pence. which no economy can sufficiently counteract, because the services required are not otherwise attainable. i^iJi^ THE Doctrine of Equivalents ; OR, A N EXPLANATION OF THE NATURE^ THE VALUE, AND THE POWER OF MONEY, 6cc. CHAPTER I. On the proportional or relative Value of dif- ferent Objects J;eforc the Introduction of the Precious Metals as a representative ^i^n, IN the first stages of society,'when hunting and fishing were the only em- ployments of man, and the means of his support, the relative value of all commo- dities was in proportion to the labour employed in procuring them. l6 THE DOCTRINE Let us suppose, for instance, that the taldiig '(yfitn birds" required' Ho niore time than was necessary .to catch one hare; thapriCQ Qf b^ter became then 9S|:a\)}ished at the rate of one hare for ten birds. A little experience shewed the different decrrees and kinds of labour which were neceis'sary for procuring every' object; and upQn this principle a general scale of value took place. This necessary ^ and, to ^^pearance, re- gulated proportion, was indeed some- times disturbed by a more general consump- troh of one afticte fri prefereiiee tbano- therjas we may suppose, for instance, that fisHlnigtit in nianj^'/piaces liave been pre- 'I^Md 'to hards ; such a clrcurnstance would "MfuMly discourage the hunters^ and en- f^burage the fishcrtnen, 1>y the latter being 6verpaid, and the former underpaid in this general barter of labour against la- bour. Self-interest, however, prompts the ge- nerality of mankind to follow the most lucrative employment, and to increase their exertions, wherever they are most Wanted : ,the greatest quantity of food, cloathing, and conveniences^ procured by the least trouble, was at that time, as at present, the price or lucre to be derived from the possession of any object that was much wanted ; and being a suffi- cient inducement to alter the mode, or to increase the quantity of labour, a greater number of persons would natu-^ rally take to fishing, and restore by those means the necessary proportions! df value for keeping up both employ- ments; In this manner did a tendency to '^1^- brder produce the remedy itself, by encouraging a greater production of the object that had been overpaid,' and this tmerring principle will always continue to be the groundwork of human W B iS THE DOCTRINE dustry;! whenever the number of objects is not lihiited by ilatiirej, as may frequently be tbe case. The precious metals derived also their relative value from the labour exerted in procuring them; and were at first only employed as ornaments and uten- sils. It may be here necessary to observe^ that a contribution in kind on every pro- duction for the purposes of Government, could not in any degree alter these regulated proportions, because the act of levying a twentieth, a tenth, or any other moderate proportion of each man's industiy, produced simply the conse-^ quences of diminishing the stock of each individual (whether his own production or what he procured by barter), and of inducing him to increase his labour for th€ purpose of supplying the deficient cy, In case his wafnts should require it* OP EQUlVAtEflTSa ^^9 Public contributions, therefore, were at that tinle rather incentives to further labour^ and did not check the progress of industry, as at present appears to be the case, from t\itix partial exaction and comphcated effects. When civilisation advanced, a relative value established itself between mental aiid corporeal labour, solely by means of competition, as there could be no fixed standard of value between them. This competition was, however, well- poised by counteracting principles ; ^' too high evaluation of the mental pow^ ers was prevented by a more general cultivation of the mind ; while the Iimit?ed inental endowments of by far thd gTeatest number of individuals prevented a too great depreciation of those powers. A new -sort of property- miisiai^d have arisen in an early period of soHet^T no ttiE DOCTRINE from the cultivation of certain spot^ of* ground, which became annually produc- tive, alid to which the established rules would not apply, because Nature acted her part as well as Labour, in producing the objects required. The more enlightened part of fnankinct. must at the same time have discover-' ed that there existed a general inconveni-- ence with a consequent impediment to the further extension of industry, from the want of a medium, by which every ob- ject might be more quickly exchanged, and retained at its due proportion of value. Cattle and bides were consequently first thought of as proper intermediate signs of value for the purpose of facili- tating every kind of exchange. It ttiay seem extraordinary, that sucU unwieldy objects should have been pre- OF EQUIVALENTS. CLl ferred to others; but it must be consi- dered, that every thing, excepting the metals, or some object of as small volume, and of equal durability, would have beeu equally troublesome ; that cattle and hides were oh]ects of general use ; were easily transported from one place to another^ and that the first, in jrarticular^ had a great affinity to land, with respect to its na- turally productive povv^ers. The evident distinctions, which existed between corporeal and mentitl labour, as well as between either of those sorts of laboiu: and the prockice of nature, made it then necessary to adopt several new considerations in ascertaining the relative value of one thing with another; and particularly when both objects to be exchanged, had the quality of annual pro- duction adherent to their nature; in which case, the three following circum- stances required a very attentive in- vestigation, viz* B3 ist. The relative difnCLilty of procuring each object, whether by labour or by pompetitiQn; 2d. the probable ratio of this, annual increase from its natural powers, and i&iependcnt of tliat assistance from labour or other materials, which are re- quired in. order to give its general pro- duce ; and, lastly;, the probable term 0^ -possession. All these considerations might be ab- solutely necessary for ascertaining the relative valu^ of different objects; in the first place, because if, of the same na- ture, their quantities might differ, as also, their produce; while the circumstance of their being naturally different (as cat- tle and land) would of course subject them to a competition - value betweei] themselves : in the second place, because the labour and other materials to be added yearly in order to obtain the gene- ral produce, might be of different pro- portions : and, lastly, because the period OT EQ^yi VALE NTS. 2^ ©f possession might be of longer or of shorter duration. • Cattle, for instance, ran wild, and were at first to be caught by labour; while un- cultivated land was to be procured every where. The latter cannot certainly be said to be created:, or obtained, by any particu^ lar exertion or degree of labour in man,, (although exchangeable against such la- bour) ; and from its abundance it would be of little comparative value, (as is yet the case in many places), had not the as* semblage of many individuals on one spot of ground, and the general tendency of human nature to increase in numbers^ wherever the necessary means of existence can be procured, occasioned an almost uuivei'sal demand for it. Competition may therefore be said to constitute the price of land, when consi- B 4 184 '^HE DOCTRINE dered relative to labour, (the point be- ing duly ascertained to whom the soil' originally belongs); and to local circum- stances must be further attributed the va- rious and widely-diflering values for the. ;?amc kind of ground. Such competition -value must conse.- qucntly be determined by the relative quantity of land compared with the quan- tity of labour or number of inhabitants; and the local differences, by the advan- tages to be derived by assembling in large bodies on commodious spots of ground, compared with the disadvantages that arise from living at a distance, or in pla- ges of difficult access. Those differences must naturally be very great, while uncultivated land is to be procured, and that the produce of its. cultivation must be transported to any distance. or EQUIVALENTS. ^g It becomes useful, therefore, to ob- serve, and to keep in view, tliuc it is not possible to ascertain the just proportion either of the relative value of uncultiva- ted land, or of that of mental exertions as compared with corporeal labour, in the same manner as may be done where corporeal labour is alone employ- ed; but there can be no doubt, at the same time, that the above mentioned competitions have certain bou.nds, be- yond which they cannot proceed, and which depend on a variety of circum- stances too numerous and complicated to be stated with any degree of preci- sion. The second consideration of the probable ratio of the annual increase of m object from its natural powers, meets with less difficulty. Some part of the natural produce was, indeed, always supposed to depend ai6: XH^J O0CTU.INB; on chance, or on the uncertain degree of effects which arise frofti the . seasons, and against which no human industry could provide ; but the experience of - former years estabhshed at least data fur some calculation, and the distinction between the natural and the artificial effects required particular attention, for the fol- lowing reasons^ viz^ Every soil has more or less the; power of producing spontaneously ^ but by adding labour and other materials to it, this produce is considerably increased. In one case, j^^^ of such produce might be attributed to natural causes, and fths to labour, and other ingi-edients. In anotlier case, f^u only might be attributed to the latter, and j"^'' to the former. These proportions of labour and other materials, remained always to be OF EQUIVALENTS^ 47 ^ddecj yearly, in order to obtain the g£^ iieral produce ; and it . became tlierefore necessary, in the first instance, to deduct such required proportions from the re- spective values of annual produce, in order to ascertain what was done by na^ ture ; as it made a material difference to the owners, whether they had to pur- chase in future f^i^* pr |^^^ of the real value. This additional labour^ and those ma- terials, wliich I have been endeavouring to point out as absolutely necessary ta obtain any production, must however be understood as independent of what may be further added for the purpose of in- creasing its future spontaneous power's, or what is called improving an estate*, which giyts it] an additional value afteV its produce is disposed of. There remains, then, ultimately to be considered, the probable term of enjoying such produce, which depended on its i^ THE DOCTRINE limitation by agreement ; or, if nowfse limited from that cause, either on the uncertain events of nature, as in cases of life and death, or on the liability of Government, together with its due ob- servance of justice in enacting, as well as executing, such laws as were neces- sary towards the security of property. la order to form a clearer idea of these different causes of relative value, by the proportion of numbers, I shall suppose, that two annually productive objects, limited to a certain number of years, are to be mutually exchanged: ^ C)ne shall be as looo in natural or competition-value ; 8 pr. ct. its productive powers by natui*e; and 2 pr» ct. more by artificial exertions : in all, 10 pr.ctw and 10 years its duration. OF EQUIVALENTS. Ctr^ The Gtlier shall be as 1200 in natural or comi^etition-value ; f pr ct. annually its productive pow- ers by nature ; and 4 pr. ct. more its artificial powers; in all 1 1 pr. ct. and II years its duration. The general result in comparative vsf- ^ue of these varying causes in different objects, will be as 800 for the first, to 924 for the last. 8 pr. ct. on 1000 is 80; multiplied by 10 years, is 800. 7pr. ct. on i2co is 84; multiplied by ii years, is 924. There" might also arise a further dis- tinction between these two capital stocks, should the produce of the one be inert and consumable, and that of the other reproductive; in which case the latter ^ould be further entitled to the com- pound ratio of its natural produce during ■the term of its duration, in the same •manner as compound interest is calculated On money. The joint powers of nature and of la- bour, may therefore be said to have for- med the component parts of every thing produced^and although a relative value sub- sisted even in an early period of society between both, upon the principles alrea- dy described, yet no determinate medium .or price could be said to exist for defining each, excepting that of numbers. Dr. Adam Smith has indeed endeavou- red to prove, that the real price of every thing, is the labour employed in producing it. It appears, however, beyond a pos» sibility of contradiction, that Nature acts her part also^ which destroys his jbypothesis. There does not even (in tliis st^fe OF EQUIVALENTS. ^I of things) appear a possibility of tra- cing any foundation of value in many cases, excepting the competition -value between Nature and Labour, according to their respective bounds and powers; and although a specific measure in the pre- cious metals, under the denomination of Money, has since that time been ge- nerally adopted, yet such measure, when considered in its original abstract situa- tion of a commodity procured by labour, would still have been subservient to the same principles, did not its univer-, sality, and consequent powers of pro- duction, called Interest, give it a new character, which will be further ex- plained in a subsequent Chapter. To trace, in the mean time, how a cotn- parative value was established between land, cattle, and other property of a nature to return an annual produce, and those objects which return no such produce, it is necessary for me to ob- 3^ TttE DOCTRINE serve, that the foundation from whence arose all produce whatever, consisted in natural and in artificial labour, represen- ted by soil^ cattle^ slaves^ and freemen^ jointly or separately, the possessors of which considered them as so much stock in hand, of which the annual produce was to be afterwards exchanged for what- ever their exigencies might from time to time require. A productive and an unproductive object, had therefore the same kind ol* origin or foundation ; and the relative oi competition- value of every foundation was ascertainable in the manner already defined. The natural or competition-value of ^ productive stock, and its consequent Tiatural produce^ became then to be compared with one year's general produce of the natural or competition- value of 'some other vStock; OF E Q IJ.I V A jL K N T S. 33 Suppose, for instance, that the corripe- I'ition- value of the former was looo; 8 pr. ct. annually its natural produce ; 2 pr. ct. its artifi- cial powers-, and 10 years its duration. The full value must be 80O5 or 10 years purchase of So, being 8 pr. ct. on 1 000. If this produce should however be naturally reproductive, the rate of that 7}atiiral produce must still be compound- ed witii . it, as Before stated. Let the rompetition -.value the.^,,pf the latter, from ,\vlience the unproduc- tive object arose^ be as 120a, and. 10 pr, ct. the general producje. The full value of the consumable object must be 120, or one year's pur chase. The power of thus convertino-, or C 34 THE DOCTRINE exchanging an unproductive object by a fiiir barter into a stock, or founda- tion, giving an annual and independent income for a certain number of years^ until an equal value was returned, in- duced individuals to be more industri- ous, and particularly so, when, through the wisdom of Government, security in property- became better ascertained. It must appear evident^ that however much mankind Avere inclined to pro- duce such objects only as would re- produce, yet the necessity that must have existed for producing consumable objects of indispensible use to each in- dividual^ V/ould at all times prevent the farmer being over-rated when ex- changed against the latter; while there €anbe no doubt at the same time, ,that, from the naturally reproductive quahty of many objects, and the general de- sire of mankind to accumulatej the mass of stock reprodueitig annually^ wouldi OF EQUIVALENTS. 35 €ontiniie yearly to increase from the general savings, until a complcat ma- turity, or that degree of population and industry, which any given tract of country would admit of, had taken place. The impediments, which often arose to this increasing principle in industry, could formerly only be traced to the want of proper protection^ . tb Which may now be added, tlie want bf iaii ad- ditional quantity of the medium of re- presentation, which will soon appear to be a necessary cement in every in- crease. We must not however, from this circumstance, lament the introduction of a medium of representation ; as^ had it not existed^ the nature of a mature state would have been very different from what it now is, an account of the physical * impossibility of promoting the C ^ cfi Til ^^ I) P-C T R I N B same degree ^Gf-j)opiilation' and. indj.istry on any given tract pf. ground, without the facility " which arrises fr,oin suph me- dium. Before I proceed^, however, to ,this tiew order of things, which took place on, the introduction of the metals as re- presentative signs, it is necessary to re- capitulate \vhat I have said, as I wish to impress very strongly on thq minds of my -readers the first principles of re- lative value. It has- been stated above, that those objects, which were procured by cor- poreal labour only, were exchanged ac- cording to the nature and degree of itj which each required, and that any de- viation fromj^uch principle, occasioned by the desire of man for one thing in preference to another, was checked by the encouragement which immediately arose to produce more of the objects or E Q u I V A le'n T s. ;;7 preferred,' excepting in cases where lui- tiire Miteci'tlie- riuinber of 'objects," a:nd r in' wliifch' therefore the coirpetitidA price' coTtlS have no toimds set to Sr The same principle applied also ^ in some degree to establish^ or at least t;o check, lac relative \yakic between corporeal, and mental labour, although competition was the foundation of thcii* primary value. It has a'so been stated, that the com- parative value ' between 'tinciiltivated soil and labour arose from the relative quan- tities of each, or the given nuinber of inhabitants on any particular tract of land; and that great local distinctions arose from' the assemblage of many in- dividuals on one spot;, and the advan- tages resulting from that assemblage, compareii with those to be obtained in a more solitary and distant situation. C ^ $3 THE, POCTKINE I have also mentioned, that a.i inter- mediate sign was found necessary, in order to facilitate ynd multiply ex- changes; and that cattle and hides^ though inadequate to the objects in view, were first adopted for that pur- pose. My readers will further recollect;, that three considerations were necessary to ascertain the relative value of each spe- cies of property, which produced in- dependent incomes, viz. The* labour, to be employed, or the competition difficulty to be surmounted in procuring each of these objects; their probable annual produce from na- tural causes ; and, lastly, the positive or probable terra of years, during which each property would be possessed. The first proceeded from the soil and its natural powers, as also from OP EQUlVAiiENTS; 3^ different kinds of bodily and mental la- bour combined together: and brought to consistency; the second depended on the species of object with the ex- perience of its naturally productive ixjwers ,. in former years, and the last on a limitation by positive engagement to a period of years, or, if unlimited, on the uncertain events of nature in the cases of pife and death, together with the stability of Government and the proper, administration of justice. The further principles necessary to trace a comparative value between ob- jiTcts, that were to produce, and others which were not to produce, consisted in tracing the comparative or competi- tion-value of the stocks or foundations from whence each arose. The rate of the natural produce of the productive stock, multiplied by the term or years of its duration, was thea C 4 4<^ THE DOCTRINE to be compared with the absolute value ascertained to have arisen in producing the consumable object either by nature or art. By means of all .these principles, it was in xho power of. eveiy man to trace a relative value between all things, e>J- ccpting only those- parts in which nature was concerned, and which therefore must necessarily have - been left -to chance: and all objects were even ex- changeable with each other, without the intermediate and incompetent signs of cattle and hides; but the introduc- tion of the precious metals, as a general medium of representation, procured more completely the object of greatly facilitating and multiplying every kind of exchange^ while .they, simplified,- at the same time, the first principles of re- lative value. It. will also be found, that they pos- fvf^> $essed, from their natural and acquired qualifications, the most unbounded powers in organising public finance ; their vir- tues have, hoWet^er, •unfortunately been so much misrepresented by mankind, as to have occasioned the introduction of the most petrplexing and dangerous^ theories, which huinan ingenuity could invent. • • --'^ • -^ v-^- -^ ' - jt ^ -» ^ ■ ! . :^: :;.';o ari: b-iVM -yjAil y "^l ./ lu K ^^* J^-v /£ t^t. C'5 4Z THE DOCTRINE CHAPTER U. On the Principles by which 4ht specific Quantity of the Precious Metals du^ io ca-ch object is regulated, IN the preceding Chapter* I have stated the cause and the nature of a relative value, which subsisted be- tween all things; and although it ap- pears, that when the objects to be ex- changed were not of the same nature, the great principle or ground-work of such relative value was Competition : yet it is equally evident, that this competition was always counterpoised and regulated by the interest and in- dustry of individuals ; from whence we may conclude^, that there has always been traceable, from experience, a just and re- lative value for all things, excepting in \y OP E (;^U I V A LE N T S. 4$ those cases where nature limited the number of objects^ To retain all things^ at that just and relative value with one another, is- con- sequently an unening .principle^ which, self-interest implants in the mind of man, and no human laws can so effqc- tually operate to that purpose, as the natural pursuit of Uie whole commmu- iiity. It has been already observed, that the metals deriv^ originally their relative value from the labour required in pro- curing them, and that they were at first only employed as ornaments or uten- sils. The reasons which induced mankind to adopt them, as the properest repre- sentative signs, were, no doubts because they were divisible to the smallest pur- poseSj sulEciently durable in their na- 44 THE DOCTRINE ture, and easily transported"^ from one place to another. A rebtive value being already esta- blished for these precious metals^'it is natural at first to conclude, that the specific quantity -of them to be given for any particular object, was ascertain- able upon the original principle of their being an iinproduetive property, procu- red out of the soil by labour, and that there was of course no necessity for taking ' any new principle of value into consideration. When we reflect, however, on the great demand which inevitably took place in consequence of their adoption, as a medium of representation^ we shall find no difficulty in tracing the neces- sity of admitting a new principle of value, and at the same time discover in what manner interest or annual pro- duction ai'ose, as well as the wonder- F E QUI V A LE N T S. 45; fill arrangement of power and profit ia^ ^^ ^ , that, ensued to every community. f>**#'*'^^ •"*• It iS;, in reasoning on this point, that all Writers on the subject of Money de-ijf part from the fii^st principles bf its in- stitution as a representative sign ; arid to their imperfect suggestions, may be attributed a series of errors, which have produced many superficial, confused, and discordant theories. To trace, then^ the origin of Interest of Money, we have only to suppose, that many individuals perceived a great advantage in the possession of pieces of copper^^ silver, or gold, for the pur- pose of exchanging them, upon the principles already established, for what things they might want in sowing, su- perintending, and gathering in their yearly crops, or in carrying on their manufactories ; and that they were therefore willing to procure a quantity 46 THE DOCTRINE «^ -^••g..^.. , thing, but on the shnple condition of 5ri|j*^ their being returned again to the pro- ^''••*'*^i » prietor wit/i a certain additional niim^ f*'^*!^ her^ (from ten to fifteen per cent pos- ^*^''*| • sibly in those -days) after the realisa- tion of their ci^ps. • It is evident that, as those indivi- duals who had occasion for these me- tals, could on the one hand afford to add this premium to the sum bor- rowed, on account of its having been the means of extending considerably the general produce of their industry ; so these metals, on the other hand, were fully entitled to this new consideration of annual liire for their use, from the generally good effects which they pror ^uced. The metals became then, of course, classed with that kind of property which produces annually, and, from OF EQUIVALENTS. 47 their universal utility, they obtained the right of precedency in estimating all things. They, indeed, soon lost their origi- nal principles of relative value; but the reproductive power of interest, which they had obtained, gave ample encouragement to raise a greater quan- tity of them by labour. By the attraction also of this an- nual premium, money was constantly moving from hand to hand, as every person lost so much increase by re- v taining possession of more than was necessary for his daily occurrences. The most common observer will per- ceive, that this constant and ineyitahh activity in the metals^, enabled a ^all ma.':s of money to transact the business, of a great community, and that each time it moved was tantamount in its 4|5 -THE DOCTRINE ^ener^il effects to doubling the quan- The rapidity, therefore,' with which inoney moves fruiii hand . to hand, ./onus a material part of its powers- and it conseqiiently becomes necessary tp state . every principle which affects that cii-cul'ation, before I proceed to explain those causes which, by raising or lowering the money value of the objects to be represented, occasion a .relative scarcity or plenty .of mo;iey, in as great a degree,, , as it the num- ber of objects . had been increased or diminished. It has been observed, in the pre xeding Chapter,, that security in pro- perty was the primary cause of all in- dustriou3 activity ; and this principle applies, with peculiar propriety, to the activity of moneys because the inte- rest of individuals requires, that Vv'hat- O? iSQUtVALfiNtS, 49 6V«ir ■ m ' exchanged for: monty should be ^ess^'sse^^ with as "great a degree of i^'^ Airity, as hmmn justice can^ upon general principles of policy, contrive to establish. -if: all Governments then differ -fi^oni each other, as to the degree, of .se- curity which they afford to property: from ' the nature - of their laws, ' and from ±e. -degree of justice o'bserved in carrying them into; execution^, there must naturally exists at" all times, in different countries^, a considerable v^-' xiation in the rapidity with which mbiley either circulates from hand to hand upon simple cte^it^ ' or is exv: changed for other property prodllcing annually, as well as - iii the premium* demanded '-for its Hire* '• A moment of gr^ndral donfiisidnf '^f discredit, will also produce a partial suspension in the circuletion of th^ D 5© THEDOCTRINB representative signs, but tranquillity Will restore it again, provided those signs> have not been sent out of thft eountry, 1"he high or Io\v rate bf interest;; arising from the relative scarcity ot plenty of money, may further occa- sioh sbme change in the rapidity of circulation, as mankind ai*e more or less disposed to part with their rhoney^ in proportion as they are tempted tvith a high or low premium for it^ BSe; Thi5 cir'CumstanGe can, however, on- ly be considered as a trifling check to the full conseqoiences of plenty, or of scarcity 6f money ; and we have there- fore only to atteiid to the two first- mentioned causes of the variation of which 1 am treating.. iri fonning an idea 6f the plenty OF EQU IVALEjJfTS. -gl ortfie scarcity of any commodity^ k is in general to be Understood, as meaning the quantity of that com- modity compared with. the quantity of some other object, which can only be ascertained by the demand for the one as oiFeted to that for the others but;, in tracing the cause of a relative plenty or scarcity of money, compa- red with other objects, there appear to exist the additional considerations of the . degrees of motion inherent t6 the first, and of. the specific or nd- tninal value of the last; both which circumstances seem to have been entire- ly overlooked b^^ every Statesman, and Philosopher, in their reasonings on that point. . Wliate\^er adds therefore to the rapir dity of the circulating medium, or takes off from the specific valne of any object to be represented^ is in eflfect the same as if a greater quan- i) 2 tity. ..of money .were 'produced, or a less ■ k^ttiber - of objects were' to be re- •prc'sented, arid vlu nrsa. Frofti the^e combined 'circumstances, naturally arises tliie rate 6f ihtei*est, or ■pftc^" of monfey; and' no huitian^ laws can possibly alter it in tlie smallest de- It- becomes, therefore, not only an act of injustice, but even impolitic in f^^Jpvx^rnnient, jlq, fiXr.it, in any, manner wijiiitever, (because every person has a ^t Tight to sell-h^,,monGy5 as well as A)^\y^'^\^\'' iiis estate, - or JiQU&e, for VKhateyer, »il^ I ^^^"^ ^^ situation of things, he can ^yv*^'*^ " obtain for it; and, money being a inoveable property, the projuietor can ■always contrive to send it ip^ those -^countries where a better price is .to be obtained, if he should be -.ebstrj.ic-' ted at, home in- hi^u natural rights. OF EQUIVALENTS. 53, " The most nisiterial principle, in the security of all possessions, is cer-. tainly founded on this, freedom Jto make the most of every Ici>nd of pro- perty; and the reasoning . 'of a iiiora- list can no ways controvert it, as the u^/i^»- principles of money, and the princi- / pics of morality, have no sort of af- finity with one another, whatev^er Philosophers may pretend to have dis- covered in the vicious tendency of money, as the engine of corrupt tion ; which corruption equally ex- isted, by means of all other pro- perty, before the introduction of gold and silver. Laws, which limit the interest of money, will also not be obeyed, "if contrary to the natural situation'^ of things, and will be easily evaded by means of premiums privately givenr"" - Government itself evaded the ex- D3 5iJ. THE DOCTRINE isting laws in raising money for the public service during the last war, while a Court of Equity thought it- self obliged, at that time, to sanc- tion the breach of a money - contract between man and man, because the law would not permit money to be borroAved at the rate of interest then existing (above 5 pr. ct.) for the pur- pose of paying off a mortgage, which had been granted at a lower rate, on condition of being .redeemed at a sti- pulated time. :';"^ ' It is impossible to conceive any thing more unjust, or impolitic, than this mpde of proceeding ; first, in pre- venting any individual from borrow- ing money at any rate he pleases; and, secondly, in favoring a breach of contract, by not granting a foreclo- sure on a mortgaged estate. The proprietor of money is cer- OF EQ'xriViiLENTS. ^j^ tainiy entitled to high ^nterCst^ when- ever it is obtainable, if on lending it at low interest,' he stipulates at what time his right of b(;ing r.epaid is. to take place ; while it is evident, on the contrary, that whoever has occasion fot the use of money, and has the ad- vantage of low interest, when money is plentiful, cannot complain of the necessity he is under of borrowing at high interest, when money is scarce. The fundamental error in this bur siness, consists in the having enacted a. positive and invariable law against what is in its nature re-lative and va- riable ; and the futility of this law is evident from the facilit;y of evad- ing it. The evil,^ however, that has arisen, from the decisions of the Court of Cliancery, is a discouragement to all loans on mortgage, because it is now D 4 c6 TH£ pp.qTRIN^ ■€ are unworthy of a moment-s considera- tion, since this law can be evaded, and since low. or indeed^ any interest, can- not be the just price for a property, tbe caipitai of which the proprietor has at, that time .by his contract a right to claim. ' r. Laws for the protection ^6f Minors, ^rid" for the 'conduct of Executors,' and Tutors, are, on the contraty, founded in ;policy and justice ; and may 'be''"'^ifectua], without' any limitar tion df 'interest, or any "violation of natural principles. In-; Gfdej , : then, to point out , tlie> principles -;;by; , which .tlieh specific -YaTr lue :of jlj; -pbjects in money is go-r verned, 'I shall begin by stating, that all ■ mankind agree in qx changing inori ney for .otbex/pxopeity, of a nature to retain an annual product on suchc terms as will procure an income ade- quate, ui3on due consideration of /all circumstances, to> tjie exfetjng rate..^:g interest, as. produced by- a relative plen.-^ ty or scarcity of money. The productive power of money, or the rate of interest, is consequently become the standard price, by which all other capitals are exchanged against it. It will also be found to be the regulator of . the price, due to the produce of all such capitals as arc not limited in their extent by nature. These tw6 points contain the great D5 5B THE DOCTRINE secret of tire operations of money, in fixing the price of all things; and I must therefore claim the inmost atten- tion, on the part of my Readers, to the following very material explanation of the process to which they give rise. With regard to the first circum- stance of the rate of interest being the competition -price, by which odier capitals are exchanged, it will be easily understood, when I state that, if interest is about 4 pr. ct. 25 years purchase of the stated income of a productive property (such as public funds, (Sec. ) is the fair relative va- lue, at which such property might be obtained ; and, if interest is about 5 pr. cr. 20 years purchase would Ijeqome that value, and so on pro- gressively. I do not, indeed, mean to assert. OP EQUIVALENTS. 5^ by this position, that all capitals^' whether public funds, houses or landy &c. '&c. should givQ the same degreci of income as money will give , wheit lent on simple security, because each property may have qualities which are peculiar to itself, and be consequently subject to, great variation in price. It may also not be improper to remark, that the rate of interest is at na time fixed to any particular pointy hut is subject to numberless gradations, as* well as constant variations in the ave- rage price. These gradations arise from the col* lateral circumstances of trouble and risk attending the receipt of annual income^ the degree of security, and term of possessing the object exchanged* It is therefore improper to state, at any time, a fixed rate of interest, as it 6a TH£ DX)€TRINB^'> has various prices, in proportion to the quality of the object obtained in return for money, and can only be said to run from 3 to 3 J a 4 pr. ct. or from 4 to 4i a 5 pr. ct. and so on. I can however affirm, that every gra- dation has a connexion with the average rate of interest; and that, if .certain circumstances produced, for instance, a difference on a particular income of J pr/ct. either higher or lower than the average rate of 3§ pr. ct. when inte- rest was at that price., there would, on the principles of equity and relative va- lue, arise on that same income a differ- ence of I pr. ct. either higher or low- er than the average rate of interest, s.upposing such average price to iri^e to 5j pr^^cL; that is to say, i that the .point of variation must be in unison with the average scale, provided nothing should jnte'rvene , to ^^tzt- partially . that piuti^ ; From'whiit I have said respecting the acqiiisitioiv of ; property at 25 or 20 years purchase of its income, in the •ease, of interest being at 4 or at 5 pr. ct.ic.is to be inferred, that the capital rises or falls y in a kind of 1/2^ yerse ratio to the rise or fall of interest, that is to say, that a^^^ 100 rent in per- petuity ought to sell for £2500 sterl. when, .interest is about 4 pr. cent, and for £ 2000 sterl. only, when interest is at 5 pr ct. ; thus retaining the in- come at the very same nominal value as before. This is no doubt the process of na- ture with rqspect, to all fixed and im- mutable incomes m money ; but incomes arising from industry, are of so different a natufd, that those principles do not apply: these incomes^ Will, - on- the contrary, appear to be regulated by the rate of interest in a direct ratio, ^hat *is' to' say, thfit "their itioney va- 6a THE DOCTRINE lue will be. either higher or lower, according as interest may rise or fall. An exatnination into tlie component pattis of .all estates or capitals (money excepted) will evidently prove this point, by shewing of what they con- sist, and how they may be multiplied or diminished by a disproportion of value in some of their parts, with re- spect to the rate of interesto It will also explain, in what manner this augmentation or diminution in their quantity, will reduce or increase their nominal value in money, as also that of their produce, called Rents, All estates or capitals, exchangeable iiMT moneys are composed of land, an- nually and perpetually producing; of- productions of land, either producing again, or only useful for a certain OF EQUIVALENTS. I5j tinie ; and of labour, as performed ' by animals or man. Every production of industry is there- fore an income from some capital^ held either in perpetuity, or for a limited time, or on a life-rent ♦ * The possession of land may be bon- sidered as a perpetuity ; its produc- tions, which reproduce, or are found useful in building, and in manufac- tures, &c. must perish in al certain time, and the value of labour i^ a life - rent, by being the incoiie for supporting animal existence. .JLandtheti;. taken abstractedly from the other parts of capital, is subject to the competition of its quantity, against the relative plentj^ or scarcity of money; that is to say, when all the land of a given country is cultivated to the highest degree, there can be f'l54. THE- DDCTRINB '-no principle to; coiinteradt its coirt- petidon - value relative^' to-nioney; and should interest of money flill, in that ^mate of things, from 5 to .4 pr.ct. pr. i^aiiiuuM, -a £1^0 rent, which in -one ^'case would; sell for £ 2000 sterling, would, in the "other case, 'seli for £ 2500 stcrl. .'•f ■". ---.While rie\v: ground, however, i-eniaks it6'' be cultivated, .or that ground which isf:. already la:- a .state of culti\?ation, rcafP'-be ^improved.' by .labour 5uid. other -'inaterials, there must necessarily arise ■^'> counteracting cause to > th« propor- tional increase in the in-ioney -price of land^ corresponding^ to the dimi- aiished fate of interest ; in the first place, because the new grbund <^ome« in competition- \vich the old; and in the second- plac^,' because the addition of materials and labour makes the old ground more productive, which is in ef- fect equal to an increased quantity of land. 8:?' Equivalents. 6$ '"feutin admitting^, even for argument'^ stike, that the full value should be given for the l&nd, in proportion to the rate of interest, there can be no necessity that the rent should rise also^ in order- to do justice to all parties, since tha money- paid for -the land would still retain its proportion of income relative to the rent of money. The long period, indeed, for Whfth leases 4i-e '4ield, puts a general change' ill the old established rents entirely out of the question, though neW leases might admit of variation. In order to explaiii these principled more -fully, I will suppose, that an tin- cultivated spot of ground would, if assisted by labour, and other materials^ produce what wouy sell for £ f o st6rh annually, but that £ 50 sterl. only of that produce could be attributed to it^ natural powers* R ^ . T,H£ DOCTRINE If the full value, then, of the natural productive power of this piece of land^ giving :^*5o^,ster}. annually, is ^f looo sterl. when interest is about 5 pr. cent, there would certainly be no further en- couragement to cultivate that ground, if the proprietor insisted on obtaining ^1250 sterL in case interest should have fallen to about 4 pr. cent. A mone3^-holder would, however, be well pleased to ;give 3^1150 sterl. if interest fell to 4 pr.cenr, as a ^f 50 rent would return to him in that case 43V pr. ct. interest for his money ;. and should the competition arising from an increased quantity of produce, lower the price of jt,;a|id force him ultimately to lower his rent (suppose; to ^ 48) he would «till retain more than 4 pr. cent, interest for the money, which he had employed in the purchase. • This.^rg-ument is nowise. weakened by OF EQUIVALENTS. 6? supposing the full value of ^1250 sted. to be given for a ^50 annual rent, which might be immutable for a great number of years, as the lease- holder remains in that case exposed to the diminished money-yalue of the produce, from its quantity being increased; nor will it make any difterence^ if the origi- nal proprietor should prefer the culti- vation to the sale of the new ground, ns he thereby puts himself into the si- tuation of a money-holder* It appears then, that land, considered by itself, will acquire an additional no- minal value, in consequence of a relative increase of money, though not in the full proportion to that increase; but that the rent of that land which belongs to its natural powers of annual production, has a tendency to diminish in pricC:, not only in conformity to the diminished rate of income arising from money, but also in consequence of the quantity of C'\ THE. dox:trine , oth'jr rents, whjch will . be continually increasing till the .whole countrywide cul- tivated to the highest. degree,' If this were not^the ^ehse, \tre 'should have ver>' great I'Srt^tt 'fof corri^deting the introduction of r^pre'^chtative signs as injurious to the liapphiess of society, by • perpeturilly increasing the nominal value of their Avants, instead 'b'f" multi- plying their comfortji; and tlie public at large Would then ha\fe'm6rfe cause fdir censuring, than for applauding," the'^cbil- duct of those Statesmen who, by com- ifiercial treaties, or ally bthcr ifiisin^, -^jtre cbiistantly aiming at acquiring a greater balance in money than the Scare had 'fcdforc obtained in its 'general "transactions mth o'flier nations. The second component part of all capitals, or; estate?, as consisting of mtural produtcions, has by implication beeli already fully explained ;''f6rtho5e productions constitute, in fact, the rents OF EQUIVALENTS. 69 of land, and by multiplying the one or the other, their money-value will natu- rally dimipish, without doing any injury Vvhatever to the proprietors; in the first place,' hecause they still remain in unison with the diminished rent of the general representative sign; and, secondly, be- cause every consumer (^including the proprietors themselves ) will find his daily wants of natural produce more cheaply supplied. It becomes apparent, from tliese de- ductions, that, by increasing either the quantity or the velocity of .the circula- tii^g medium, an inqreased mass of na- tural productions and. artificial labour is promoted; and tliat tliose individuals who are exposed to a diminution in the money-value of their incomes, by this superabundant quantity, are at the' "same time fully compensated by the diminu- tion in their annual expences. yo THE DOCTRINE This reflexion may, perhaps, lead man- kind to contemplate these characteristics of money in a more favorable point of view, than they have hitherto done, and particLilarly ^s they cannot controvert a i^elf-evident proposition relative to its powers; which is, that, by increasing such mediums as arc acknowledged to facili- tate and extend, industry, a correspon- dent progress must naturally ensue^ if the country be capable of improve- ment. I come now to the last component part of all estates, called Labour, as performed by animals or man, and as regulated in its money-value by tlie price of whatever may be necessary for their support, as well as that of their helpless offspring. ■ / Animal life is prone to increase, where- ever the mean§ of preserving it are to be obtained, and the price of labour k OF EQUIVALENTS. *ft genei-ally something above what is im^ mediately necessary for subsistence. The proprietor of the animal requires some hire for the use of his property, in- dependent df what he must pay for his food; and man requires some little sav- ings from his labour, for the future exigencies of his family. Should the necessaries of life be therefore reduced in their money-value, on account of a decrease in the value of refits^ and o^ natural produce arising from the causes above stated, a competition- amongst the labourers, for procuring only as much as might be necessary for their food, cloathing, and conveniences, as well as for their reasonable little sav- ings, would naturally reduce the price of their hire. The price of labour being of course a necessary and ' material part of the E4 75^ THEJ I^OCT.B.IKe money-value of,dll..ge72eral production^ , of nature, from which new capitals or estates are constructed, we can find no difliculiy in ascertaining, that such part receives a sensible diminution in price from a decrease in the money- value of the other part^ called re^us ox natural prqduce. It is also very evident, that rents and labour form a very considerable part of all capitals, and that their tendency t(>, decrease. in .money^value must coun- tei;act the consequences of the increas- ing value of the other part, called.Land, w];iich appqars to take place when mo- ney becomes more plentiful. Capitals have therefore, upon the whole, when they are connected with or arise iti 'any degree from industrious incomes or natural productions, the same tendency to fall in_ money- value, when interest falls, 'as those incomes oi pro- OP EQUIYA CENTS. -Jj ductions have ; and these consequences are considerably increiised bythe action and re-action between the capital and the income, which seem necessarily and inevitably hnked together by nature, and influence one another^ for the following- reasons. The lower nominal value of the capita^ requires less income in money, besides the deduction which we suppose to have before taken place in consequence of the decline of the rate of interest; and this additional diminution of income has again a temdency to diminish the nominal value of the capital, and so on repeat- edly, though in a less degree each time,' until the decrease becomes unworthy of further attention. In proceeding further to state the effects produced on the price of manu- factures, by a greater plenty of money, or a lower rate of interest, it is not only E5 74 THE DOCTRINE necessary to take into consideration the diminished value of the raw materials, as well as of labour, from the very pow- erful causes above stated, but also that the capital in money^ employed for car- rying the business into effect, or pur- chasing the raw materials, will not only be less, but even procured at a cheaper rate. Suppose, for instance, that a manu- facturer employs in his trade a capital of 3^100,000 sterling, when interest is at 5 pr.cent, he will naturally expect it to produce him 9- or 10 priccnt. an- nually, which is of course to be drawn out of the price of his merchandize. If interest, then, fell to about 4 pr. ct. and he continued to receive the same price for his merchandize, a threefold advantage would immediately accrue to him^- first, from the diminution in the money-value of the raw materials, and of labour; secondly, from their requiring OF EqUIVALEMTg. IS' less capital than before ; and, tliirdly, from his obtaining that smaller capital at a lower rate of interest* All these circumstances would carry his profits much beyond all principles of relative value; and although' I by no means deny his compleat riglit to obtain as much as he can, yet it is obvious that, if the consumers indulged him in his demands, he would be the very first to think of extending this profitable business ; and if indolence^ or any other motive, prevented him from doing it, his neighbours would not fail to begin the, same trade in opposition to him, so that a sufficient stock would St last be produced, and the price of his merchandize lowered to a scale of value, more consistent with the effects naturally resulting from a diminished rate of interest. If, on the contrary, a still higher price than when interest was at 4 pr. ct. should be given for his merchandize, a '/d THE DOCTRINE very extensive encouragement to the^ progress of manufactures would inevita- bly ensue, and the greater abundance must necessarily produce the consequen- ces I have been pointing out, viz. a reduction in price, more or less border* ing on the diminution of interest. I flatter myself, that I have now established the two leadiUjO; principles, which I have been endeavouring to prove, viz. thnt the natural relative value of all things is regulated, through cir- cuitous operations, by the rate of inte- rest, and that the encouragement to fur-^ ther industr)^ arises from the market-price ♦ of its productions being higher than die current rate of interest absolutely demands, or than the principle of Equi^ valents will justify. It is however. necessajy for me to state, that there are accidental and lo- cal bounds to probable and natural ef- OF EQUIVAI.ENTS. .77 tects^ as well as particular deviations from general principles, to which all na- ture, from its great complication, is sub- ject; but that these accidental bounds^ and particular deviations, are of no ma- terial consequence in the general eflfects; and should therefore not be kept in view by an enlightened mind; because ther^x danger of obscuring the first and gene- ral principlv^s would then become as great to the present and future ages, as has evidently been the case with the past. But, in order to remove every doubt which might still remain in the breasts of my Readers, I shall examine the con- sequences to which the industrious exertions of individuals are exposed in. the. taking place of a relatively greater scarcity; of money; which will form the counter- part of iivhat has been stated with re- spect to the effects of a relatively greater 7^ THE DOCTRINE plenty of money, and cannot fail of producing the conipletest possible con^ viction respecting the truth both of the one: and the other. Let us suppose, then, that interest of money rises fi'om 4 to 5 pr.cent. itnd that every landholder loses in the capital value of his estate in the pro- portion of 25 to £0 years purchase, or of 5 of its former amount; that is to say, that upon an income -of 3^ 50 sterl. pr.. annum, he loses ,f 250 sterJ. out- of the 3^*1250 sterl. which was the arijount of its former capital xaiue. There aviII,- in that case, exist no inducement whatever to buy or culti- vate new ground, because the old will not only have lost considerably in its value, but will also, from the circum- stance of its being already in a state of cultivation, be universally preferred. OF FQUIVALENTS. yg If we calculate further, t^e land- holdei "s chances of supporting, at the for- iner valuer, those rents which are not. fixed for any distant period^, we shall find, that the scarcity of money will not admit of so many purchasers of pro- duce at the old prices, and that the mar- ket-price of natural produce may on that account immediately fall, notwith- standing that it reasonably might, and indeed ought;, to lay claim to an^ increase, if the value of the capital was not lowered in such a degree as to cor- respond with the increased rate of in- terest. As this decrease of capital value cannot on all occasions ensue, a still greater discouragement to cultivation must take place^ until rents not 'only return to their old price, but even in- crease in their, value (by a fieglcctcd cultivation) in conformity to tlie princi- 8b '>HE liOCTklNE ^le-- of ^^n i^qiiivalent increase from ino- ■ ne.y; 'since otherwise they would not b^ MenewecU Nor can this advance in the price of . rents, nor even thepower of supporting -them at tlieit former rates, exist un- xier the circumstance of a diminished quantity of representative signs, without a diminution in the mass of general proj ductions, from its being mathematically impossible that a lesser number shpuld represent a greater. Suppose, for instance^ ' thai ICO guineas represented igo objects at a guinea each, IJo guineas certainly could not represent the same number at the same Value ; and therefore it follows, that a diminution either in the quantity of objects, or in their value, must take place, in order to restore the powers' of representation; It niay pt^rhaps bethought, that an additional motion in the representative OF EQUIVALENTS. ?I signs would supply the deficiency in their quantity, but unfortunately there can exist no motive for such increased acti- vity, excepting in the purchase of capi- tals;, and that only to a small degree, on account of the increased rate of interest, as stated above. If the accelerated movement of the representative signs became equal, or nearly so, in its effects, to the loss sus- tained in their quantity, the interest would remain at the same rate as before^ and no change of consequence would be perceptible, either in the price or quantity of general productions. It must be observed also^, that the diminished value of many capitals (pro- ducing, fixed incomes), which takes place on a rise of the interest of money, will not sufficiently relieve the representation of money, so as to render it possible that the annual produce of other c3pi- F 82 TH E DOCTRINE tals should be represented at the same price as before ; because the representation of capitals is only a small part of the duty of representative signs, and is confined either to the transactions of those per- sons who are exchanging the nature of their property, or to new acquisitions of capital arising from general savings; while the representation of incomes calls for a daily transfer, to an immense amount, nmongst producers and consumers of all articles whatever. It should also be further recollec- ted, that capitals consist in part of pro- ductions, and that such productions will not admit of being so much reduced in price, as to correspond, while in the form of capital, with the increased rate of interest, because they are ultimately not to be procured, unless purchased at their just value considered as incomes; notwithstanding that land in itself might be subject to the full effects of competition OF EQUIVALENTS. £[3 between its quantity, and the relative plenty or scarcity of money. The bad effects, therefore, wliicli arise in any society from a diminution of its representative signs^ are not only very conspicuous in the neglected culti- vation of its land, as well as in the di- minished quantity of its annual industry^ but ultimately in the increased price of annual produce necessary for the sup- port of animal life. This circumstance must naturally af^ feet the price of labour; and the in- creased price of labour (as forming a component part in all general produc- tions) will again re-act, and increase the price of annual produce ; they both affect dach other repeatedly (though in asrhaller degree each time), to the very great dis- advantage of the whole community. The population of a coniatry must Fa 84 ITHE DOCTRINE then inevitably diminish ; and although the reduced numbel* of individuals may- have nominally higher rents from money, and higher wages from industry, yet their expenditure will unfortunately be increa- sed in the same degree, ^ If we trace also the effects of higher interest of money on the price of manufactureSi, we shall find, that the ca- pital employed must not only be increa- sed, in order to purchase the raw mate- rials, and labour, at advanced prices, but that a higher annual premium must be paid for the use of money, and that this threefold accumulated charge must be made good, by the higher price .43i* the manufactured goods. We shall also perceive, that since the 'higher wages of the labourer, the advanced price of raw materials^ .the in- creased interest of money, and extension of capitalj together with ail their action^ or :E QU I-V A LJI NTS. dS and re-actions, must ultimately form a great accumulation of expence to be em- ployed in producing only the same quantity -pf goods as before^ it would become impossible for the manufacturer to continue his business, (unless prices were to rise in proportion to those increased char- ges) without a compleat^sacrifice of his rights;- and it must in that case be more for his interest to content himself with the higher income, obtainable from, money, and to divest himself of all trouble and risk attending the prose- cution of business* Whichever- way, therefore, this subject is considered, the general result will alwa^^s correspond with the recapi- tulation, which I shall here make in as few words as the nature of the discus- sion will admit. Self-interest must, in general, be M' OMIE DOC TRINB Considered as tiiQ J>rm urn molile of all liuwah industr}\ ^ " ^Tliis self -interest was origfnally gratified 'b^'- the maintenance of a proper relative valiie between all objects founded oft-' 'those principles which have been stiitcS in the preceding Chapter: but it is 'n5\v excited by the ^preservation of a superior propoi^iori in the money- value 6f dbj-cts, either according to the rate of interest, if the object be a production,, of" ac'cording to its competition-value, as opposed to money; if it be land, mental labour^ or any other object, the quantity pf: which is limited by nature. These distinctions are indeed so much blended together, through a vailety of circuitous openmons, that the propor- tion of their separate effects, or the pre- ponderance of either, has never be'en properly traced, or ascertained, so as to determine the general result, whenever money becomes either scarcer or more plentiful It appears, however^ from the fore- going-investigation, that productions, arising either from nature or from cor- poreal-- labour, form the most material part of all capitals, as well as of all ob- jects of general use; and although the price of land, mental labour, or any other object, whose quantity is limited by nature, will be influenced by competi- tion arising from the relative plenty or scarcity of money; yet it is very evident, that this competition does nor, upon the whole, counteract the general principle, that a diminished rate of interest pro- duces a diminution in the price of almost every object, as well as an increase in their quantity, znd^per contra,, xK^x. ^n increased rate of interest produces an augmentation in the price of those objects, with a decrease in their quantity. F4- .^ THJS JDGCTiilNJB, This increase .or decrease in the quan* tity of industry, from an increase or decrease of that medium, which was in- d-'oduced for the purpose of facilitating, and of course extending, the mass of industry on a given spot of ground, appears indeed to be self-evident, be- cause it naturally follows, that, by in- creasing or diminishing the powers of an engine, there must also arise an in- crease or decrease in its general effect. The circuitous^ operations of mo- ney have, indeed, hitherto so much puzzled the human understanding, that this self-eviden!: proposition ha« been entirely overlooked: I flatter myself, however, that it will be soon generally acknowledged, and that the following axioms will be found to contain the whole mystery of the proceedings of money, with respect to increasing the quantity of industry, and diminishing its price, whenever a relatively greater plenty of mqmy ecQg^ions a diminution of interest, aicl for those productions of indus- try, than was before paid for them; and a further evil would arise from the prin- ciple, according to which all the compo- nent parts of industry act and re-act upon each other, while the liigher money-value of all objects must, also occasion a rela- tively greater scarcity of money, without any further diminution in the number of representative signs* To sum up the whole : it appears, that a grentcr plen ty of money, by lower- ing interest, becomes a very active and OF EQUIVALENTS. ^J powerful engine in lowering the price and increasing the quantity of industry^ and of population on a given spot, if well governed, and capable of improve- iment; and that meliorations, which thd ingenuity of man is for ever contriving in agriculture;, in manufactures, in chy- mistry, and in the mode of conveying goods from one place to another, pro- duce also the eifects of lowering the price of indtistry, and thereby occasion a fur- ther relatively greater plenty of money, with all its happy consequences, with- out the Introduction of an increased quantity of representative signs. It appears also, per contra^ t\\tt a greater scarcity of money, and conse- quent increase of interesi:, is an active and powerful engine in augmenting the price and diminishing the quantity of industry and of population; and although no arts of improvement are likely to b^ lost, and thus occasion the reverse of what 94 THE DOCTRINE the invention of those arts had produ- ced, yet something analogous (in effect at least^ has arisen in the political ad- ministration of ail societies, by the in- troduction of money-taxeS:, which has produced much confusion in several States, and which will be fatal to many more, if those who govern the different empires in Europe, do not lay aside the prejudices of their education, and aban- don the unimportant discussions of mere forms of finance, to make way for the thorough investigation of its principles, as well as of the baneful effects of taxes. These effects, together with tlic means of providing against them, will be fully developed in the succeeding Chapters. OP EQUIVALENTS. 55 CHAPTER HI. On tht Effects of Taxation in Money. THE! preceding Chapters will, I hope, have sufEciently explained the principles of the relative value which 30 evidently subsists between every object and money, as well as the general ef- fects which arise from a relative plenty or scarcity of money, independent of those which may further accrue from taxation. An examination into the nature and effects of money-taxes. Will, however, throw a new light on eveiy system of public finance, which has hitherto been brought forward, and probably urgfc p6 THB DOCTRINE either the Resent or the future genera- tion to consider, if there be not a more consistent plan of relief to be traced^ than that of increasing the evil of taxa- tion by creating a sinking fund. I have already stated, that when taxes were levied in kind, and that all things were exchanged against each other, no inconvenience whatever arose to society at large, as every man gave a propor- tion of what his labour produced. It induced him, indeed, to be more industrious :, as otherwise the surplus might not be . sufficient, eitlier for his immediate wants, or for his plans pf annual saving. This motive, it must be owned, continues still to operate on the mind of man, whenever any new tax is levied m money; but the uncertainty of his obtaining an adequate number of nddi- OF E Q "o I V A LE I^ T S. 97 rfpnal signs to represent his additional labours, is perpetually thwarting his ul- timate views ; for^ without this increa- .;?ed power oi' representation^ hi3 addi- tional labour is not only lost, but even a part of his ordinary efforts is posi- tively absorbed by the representation of the tax; and from thence results the iti^ evitablc necessity of selling his extra- ordinary and ordinaiy labour for a less sum, than he before obtained for the ordinary labour only. To prove this^jwe need only anar lysc the nature and effects of a tax, whether it be considered in the light? of interest on nione^^, raised for thd public service, or as an annual expen- diture for the peace -establishment. If considered as iht^'rest on money l5orrowed by the pubHc, it is then a part of the money- \faluc of an antiut^t jH'oditceji demanded by the public jri O 9fi THE B^OCTIUN^ order to pay that interest; and requires of course the annual reproduction of a new nioney-cflpital, added to' that which was previousij'- necessary isowards l^rodircing the object taxed. Thi5 bein^^ tbe case, it is impossi- ble for -that object to be produced at the same price as before ; neither could the person who gave his money, be secured in his annual income, if this additional vahie (equal to the tax} was jiot absolutely linked to the object, solely and independently for his use, as the interest of the capital he had fur- nished.' It would be ridiculo.iis to urge, that the producer of the object taxed could relinquish a parr of tli^ pre-existing va- lue for the benefit of the money-lender, as that idea would militate against the principle of a just value being due to, all things, so fully established in the OF EQUIVALENl^S, i0t) preceding Chapters; and experience suf- ficiently proves, that the producer al- ways exacts more than the tax levied on him; which will be further Explained on tracing the progress of the eviL 'If we consider also the tax as a prdvision for the peace- establishment, it then becomes equally a part of the mottey-value of ain annual produce cte- inanded by the State for the purpose of purchasing some other income or pro- duction, annually necessary for its sup- port. Should therefore the object taxed Hot -be immediately raised^ in its nomi- nal value, in a superior degree even to the p^n required, the reproduction of it must sooii cease; ^nd the whole sys- tem of taxation would in this case, as well as when intended to furnish an annual in* terest to the money-lender, become a. miere fiction. This matter may be brought very G a loo THE DOCTRINE clearly to the comprehension of any -man, by supposing the tax to be as two, while the former cost of the object, considered as an income from a capital, should also have been as two* To cbntinu^ the object, in that case^ . ^t its former price, must annihilate ei- ther the first cost;, or the tax, to the detriment either of the producer, or of . the public service. The stating this case in a Iqss strong degree, would by no means alter the principle, or be 1qs3 intelhgible to en- lightened minds; neither is it necessary • to add, that ,tiije contrary effect must be produced, whenever a tax is taken off, ^s it diminishes, tlic- capital employed in producing the object relieved, v/hether such tax existed; for interest on money raised, or was levied to exchange against some other produce, wanted annually by the State, OF EQUIVALEJfTS. TOl 1 shall now proceed to state the, ag- gravation of the evil coinphined of; first, by observing, that the producer of the object Dixed, claims a profit on the tax, in proportion to the income he receives from the other Ccipitals em- ployed in his business; and, secondly, by recurring to the principle in which it has been shewn that the additfonal price of one production acts immediately upon the price of others, and that these au ce- mentations of price re-act afterwards up- on each other, particularly if the object taxed should be necessary to human existence. This principle zcts so imperceptibly, yet at the same time so powerfully, in raising the price of all objects^ that it may not be unnecessary to state a case in pointy by supposing the materials of 'which cloathing is made, to be t?xed', at the very same time witli the G 3 ICSJl 'fHE DOCTRINE. materials from which shoes are manu- factured. The taylor makes the shoemake? pay dearer for his cloaths, and the shoemaker equally makes the taylor pay dearer for his shoes ; of course "both feel themselves taxed by eacl^ other in their wearing apparel, consider- .ably. beyond what Government levied*, and both have again recourse to raising their price, though in a less deg;rec each time, acting and re-acting in this manner tipon the wants of each other, until the degree of increasing price becomes so small, as not to be woithy of further notice* It may be asked, what mode of tax- ation produces the smallest degree of prejudice of the sort above described 'i* * Not alone as a profit on the tax, but also oh Eocount of a necessary ariick being increased in price^ altliough made by thcniselves. OF EQUIVALENTS. IO3 To this it can only be answered, that taxes laid on luxuries do less mis- chief in increasing the price of all things, than those laid on the necessaries of life; but that all capitation-taxes, or whatever even may be classed under that denomination, come nearer to the original plan of taking the tax in kind, than any other mode that can be adop- ted; because it then levies a part of each person's profits, and levies it of course upon the last stage of their pro- ductions, which considerably diminishes the action and re-action of one tliin^i- upon another. It must however be allowed, that no tax (which can be denominated a capitation^ will ever fall impartially and according to the fatuity of each indi- vidual^ which occasions its being ge- nerally reprobated; but as partial evil often produces general good, Nations would do well to- give the preference 104 THE DOCTRINE to that system of taxation, because (how- ever partially the advantages might bo distributed) every individual would reap solne benefit by it, and a very consider- able increase of prosperity would ensue t-o th^ eoniinunity at large. If v/e take into consideration the niultitudti of taxes impofed in Great Bri- tain witliin this century, and the accu- mulated evil consequences which have ensued, ^from them, with respect to the price of a]l articles, we shall be nowise •4t a: Joss, to; account for the great in- crease of expence to which all ranks of people are exposed. ., : 'W.e-.roayi 0Ji< tlie contrary, be sur- prised, that Great Britain should have, continued yearly to increase in her pp-r puiation and industry, under such an j^ccumuJating opprcssioUj, and that many articles of general use should still be obtainable at a moderate price. OF E QUI VALE NTS. IcJ^ This win, however, not appear so extraordinary, vdicn we recur to the good effects oi'' decreasing interest on money, and of improvements in cultiva- tion, in conveycince from place to place, in mechanism, and in cheniiicry, with all their favorable actions and re -action*, so fully developed in the preceding Pages, A great part of the annual impor- tations of gold and silver from the' mines of South Americn, are naturally drawn into Great Britain from Spain and ^ Portugal, either directly or circuitously^ from a general balance due to. trade with foreign nations, or as the purqli^ise- iponey; of cur public funds ^ in which foreigners think it adviselable to lay out a part of their annual savings. This increase of representative signi has of course provided, not only for the increasing mass of industry, which has annually arisen^ but also for the increased prices produced by taxation"; G5 106 THE D0CTRIN2 while those increased prices have, on the other hand, been considerably checked by the good effects of the lower rate of interest, as well as by the daily improve- ments in cultivation, in conveyance from place to place, in mechanijsm and in chemistry, which have tended to the production of many objects with much less materials and labour. These circumstances, however, will not justify any unnecessary extension in. the number of taxes, because it produ- ces the inevitable consequence of dimi- nishing the produce of pre-existing taxes, or at least of checking their natural in- crease, and of keeping the price of all objects higher than they would other- wise have been : for the increasing quan- tity of representative signs is not al- lowed by such aggravation to produce its ftiU effect in the reduction of interest^ in the increase of industiy, and in the decrease of its price. It maybe urged that, notmthstand- ing all my assertions respecting the ac- cumulated evils of taxation^ our pro- gress in industry has beqn astonishing since the year ifB5, while the accumu« lation of taxes since the year 1783 is almost as great as during ^ny other period. The answer to this is^ that the in- crease of paper-money has also been greater during that time^, than any for- mer period: but how f:;r that system of increasing representative signs was con- structed upon proper principles^ the com- mercial disasters of the yc^r 1793, will sufficiently explain. The unfortui^ate situation of France has, however, t^irown a greater quantity of gold and silver into other countries; and we may therefore hope, that a part of the loss lately sustained by rhe anni- liilatxon of a grea^niass of paper- money^ Jo8 THE DOCTRINE will be supplied in bullion from abroad, and prevent, in some degree, the bad ef-. fects which Great Britain had to ap- prehend in her future revenue, from this diminution in her representative signs. As the great increase of money, with its attendant good consequences on the revenue since the year 1784, has been improperly attributed to the wis- dom of Administration, and that the bad effects of its decrease will now be equally attributed, with as little propriety, solely to the war with France*, it becomes * Notwithstanding that_ large sums have been expended by our armies abroad, yet a balance is stin coming into Great Britain, by such expendi- ture being returned on loan in the purchase o^ Stock. After the peacq^ of 1783, the contrary happenecl, at foreigners called for their money, by selling out of the funds, which threatened the industry and the revenues of Great Britain with ruin, until the revived importation of gold and silver from Mex- ico and Peru spread its benif^n influence over Eu- jopc, and enabled foreigners to sendoack thesums previously wanted. of EQUIVALENTS. lO^ necessary for mc to state^ that the whole money- system is in n manner entirely foreign to the administration of public albirs; and that its particiilr.r situation, respecting quantity^ must be regulated by the interest and operations of indivi- duals, as well as by their confidence in one another; which last i^ very often carried beyond all bounds in Great Britain, and after producing conspicuous advantages to the con:uiuinit3^ at large, ends in great individual distress, and dimini- $lies for some time the public revenue. But if Ministers have no right to interfere in forcing a greater importation ' of gold and silver, as well as in increa- sing or diminishing the confidence be- tween man and man^ on which paper- money is principally founded , and that they must submit to every temporary evil that arises from the want of those addi- tional signs in coin, or from a diminu- tion of that paper-money froin which T)3I THE DOCTRINE their operations had been deriviijg con- siderable advantages, they are certainly bound to examine with attention, and to promote with becoming zeal, any plan which is found to produce the perma- nent and solid advantages of diminishing the price and irxtending the mass of in- dustry, without the assistance even of additional representative signs. The first step towards this object can only be founded on their dereliction bf every idea of a sinking-fund, which $9 evidently tends to increase the an-, tiital expences of the Public, as U'^ll as of individuals and checks the growing raass of industry. _ , The pi*ogres§ive " ^nH a^ttilmiViating ^ad consequences of both these circum- stances, are so very conspicuous, that 'it will almost 6e needless to add,- that no future good, from ultimately taking off taxesj equal to the sinking futid^ as well OF EQUIVALENTS, HI as to the amount of interest redeemed^ can compensate for those evils. The future repeal of the sinking- fund taxes certainly cannot be consi- . dered as a benefit, .since it l& obvious that they might have been spared in the grst instance; and for the interest re- deemed^ we have in return a much grea- ter annual expenditure, with its permit- nent consequences*, and a less mass of industry^, ' as well as a suspension in its powers of progressive and comjiound increase, during the term of this fatal operation. Nothing can be alledged in itt fa- i^cur, as the advantages proposed are ren- dered nugatory from the immediate and pei-manent effects of taxes in money; and it may not be improper also to re- collect, that if the unnecessary taxes * Greater loans tlaring win t\1 THE D C T III :? E ehetk the progress of the necessary (>nc, circumstances of an influx of riioney, or of improvements of any sort; must be considered as a distinct opera- tion, producing di^-^rent effects, which, would have been fully developed j if dther destructive principles had not taken place at the same time. Pernicious principles have, however, but too often been permitted to ckini merit from a mitigation of evil, arising in truth from other higlily salutary cau- H 114 ^THE DOCTRINE ses; for we must keep in recollection^ that the effect i^ exactly the same, whe- ther,- by means of the adoption of a false system, the existing mass of indus- try is positiydy diminished, and the price Of all things really increased ; or whether such effects are only ns;iatively produ- ced, by the absorption of what would otherwise have created a greater increase of that industry, and a decrease in its price* To be consistent, then^ we must also admit, that the plan of taking oif money-taxes will produce fourfold good consequences; first, by diminishing the nominal value of the object relieved; secondly';, by the actioii and te-aetion of the diminished price of that object upon othfers of general use ; thirdly, by these combined good effects of decreased no- minal value on all objects demanding a less quantity of tin existing representa^ tjive rsignsj by which means a greater OF EQUIVALENTS, 3Ig plenty of money is produced; and, fourth- ly and lastly, by the action and re-acnon between interest of money and the price of all objects, which must conside* rably reduce the price of borh, and ine*' vitably augtnent the general mass of in- dustry and populatiouo A counteraction -to these happy con* sequences may indeed arise from some other circumstances ; such as an exporta- tion of the metals, fmnihilation of paper- money, or partial commotions in the Em- pire : but it will be some consolation iri that case to think, that the effect is ei- ther annihilated or mitigated by the sa- lutary consequences which arise from taking off taxes. i am persuaded, that any attempt to establish other principles, respecting the operation of money-taxes^ must in- evitably tend to every sort of inconsis- tency ; and it seems to me that this would be particularly the case with ie- H 3 Ii6 THE X>OC TRINE. spect to nny justification that might be set up in favour of sinldng-fund taxes. For if the person maintaining this doc- trine, should be of opinion that money- taxes do no mischief, it .is obvious that he could have no motive for trying to get rid of them ; and if he should, on the contrary^ allow that some evil arises from such taxes, it would b'e very difficult for him to shew, tliat the immediate pres- sure of this evil, produced by the crea- tion of ti sinking fund, by means of /7n excess of taxation^ does not far over- balance any good that this creation may be expected to produce hereafter. I am, for iny part, fully convin- ced^ that a permanent and aniiually iw- creasing evil of great magnitude is genera- ted by suc/i excess of taxation, and that tl>e ultimate good|, wliich is supposed to en- sue, is perfectly delusive. Having no power, howeverj to al- OP EQUIVALENTS, 117 cr the present unfortunate system^ and seeing the general indifference rewards any enquiry into the nicrits or demerits of it, I can only seriously lament, that neither the wisdom of our ancestors, nor the enlightened understandings of the present age, have suiiiciently directed their efforts to the comprehension or- to the explanation of this \ ery important- subject. Much has indeed been written on industry, on commerce, and on parti- cular forms of finance and taxation ; but the elementary principles of all these have been misunderstood, and the sub- ject has even been thought unworthy the notice of elevated minds, as well as too speculative to be traced with any degree of accuracy. How far the suppositions of those who neglect this science, or the errors of thoiie who have mistaken its prinr H3 Il8 THE DOCTRINE ciples, are justifiable, I must leave to Biy Readers to determine. The accumul?.tion of taxes, for the purpose (>f redeeming public annuities, being thus reprobated as ineffectual, and at the same time as cruel and oppres- sive, I shall probably be accused of de- stroying every hope of redemption from the great mass of debt with which the nation is burdened ; and it therefore be- comes me to point out some other re- iPiCdy, The following Chapters will, I flat- ter myself, unfold the efficient resources of every State ; and shew, by the clear- est mathematical demonstration, as well as by the application of established prac- tice^ *that all public annuities carry na- turally (upon the principle of an equi- valent value being returned) their extinc- tion along with them, whether created for a limited number of years, or grant- OP EQUIVALENTS^. 119 ted in perpetuity, but in that case ca- pable of being redeemed whenever Go- vernment can substitute a new creation on more favorable terras for the Public, My Readers will then perceive, that any attempt to redeem annuities by means of taxes, becomes in fact a double^ nay even a triph reimbursement ; and by thus adding gratuitously to the public bur- thens, produces the very contrary elfect to what is intended. The wonderful financial resources of every State, not yet fiiatured in po- pulation and industry, as well as the possibihty of rendering indefinite those of an infant State, must naturally arise to our view from an examination of the nature and power of money, combined with those principles of equivalent value, which so evidently form the ground- work of every transaction, or exchange between ton and man. H4 lao DOCTRINE OT EQUIVALENTS. " The particular application of those principles must, however, be more or less regulated by the circumstances oif the moment, which will of course pro- duce frequent alterations in the secon- dary plans' of finance, such as the extent of annuities to be granted, the change iri their form, and the modification of par- ticular taxes. The relief to be procured for a country compleatly ipatured, must fur- ther depend on the additional knowledge of the' nature and extent of its public annuities, as well as of its taxes and annual expenditure, to be apphed in lightening each by new ^iqdifications. The political, existence of such ^ country may, by those means, . be con- sidercably prolonged, although prospe- rity cannot be expected in any great degree^ END OF THE FIRST PART. ^nno 1794. THE o p EOF-IVA LENTS, &;c. PART IJ, ia% C H A P T E R IV. Ofj the Nature and Vdluff of Gold and Silver CGins^ and on the Principles of Variation in Foreign Exchanges, IT has been stated in the pre- ceding P^it of this Work, that the du- lability and the divisibility of the niecals^, together with the facility of transporting them from one place to another, indu- ced mankind to adopt them as the most convenient representative signs, and that they immediately changed their original comparative value, as objects of use and ornament;, to that of a real estate, from their annual reproductive value^ called Interest, which may not improperly be Ii24 THE DOCTRINE compared to an annual hire for their labour, on account of their active utility in extending industry, snd promoting the general good of a whole commu- nity, , These metals circulated at first from hand to hand by weight; but '43 the de- gree of fineness or purity of the metal was not always easily discovered^ it be- c^imc necessary to simphfy the business, by forming them into coins of various denominations, which should contain spe- cific quantities of pure metal. The expence of this, coinage ought naturally, and is in general made, to fall on the national treasury, as the Public obtain many conveniences and advanta- ges towards the extension of their in- dustry by this operation. The diminu- tion of value, which arises from fric- tion, or from clipping, must however full on the individual possessors, as they OF EQUIVALENTS. I25 are indemnified for any loss by the first- mentioned depreciation through the in- terest received for the mc of it; and the person.. who clips it can certainly have no right to offer it as a legal tender. It is also necessary to observe, how the ingenuity of man (under the influence of a well-regulated Government} has contrived to extend their powers of re- presentation^ without any increase in their quantity. Public arid private Societies, under the denomination of Banks, after acquir- ing a sufficient degree of the confidence of their fellow- citizens 'm their probity and in their wealth, have been induced to issue their promissory- notes, for sti- pulated sums of money, payable on dt- wand. These notes were of course taken in payment, and circulated from hand to hand as money, for which they wer« 126 TITE DdCTRINC considered as a convenient rihd solid suo- Stitute, and which immediately increa- ised the mass of representative signsc It behoved the^e Banks, however^ to be at all times, prepared for the imrh'ediate payment of a considerable number of their notes; and the greatest part of the metals^ received in return for the paper thus issued, remained therefore locked tip, to answer any sudden demand. The difference between the sum so locked np^, Jitid the sum issued in pro- missory-notes, circulating from hand to hand as money, produces evidently so much, increase in tlie mass of represen- tative signs ; and the Banks are indem- nified for their expences-, and for their trouble, by laying out this difference at annual or monthly interest. It is impossible to state any propor- tion of money which ought to be locked xip^ in order to answer any sudden d^- OF fiQlTIVALB NTS. tZf tiiand; but it is evident, that the grentei^ this proportion is, the more will the pro- prietors of such Bank be entitled to the confidence of their fellow-citizens. Money accounts kept between two individuals, for goods reciprocally deli- vered^ facilitate also exchanges of every kind, without the assistance of any sort of representative signs: but the extent of such facility is naturally very much limited, and resembles^ in some degree, the anciept mode of barter, without the great inconvenience and the trouble which attended that system. Bills of exchange come under the same denomination, and are more exten- tivQ in their operations' but we fre- quently see great disorders arise in com- mercial affairs by such bills having no other caiise of existence, than the mu- tual cohvetiience of the drawer and ac- f-^ ceptor, for raising money upon fictitious V' iri^> THE DOCTRINE ^ dchtSy from one to the other, whichi in mercantile language, is called a paper eire Illation. Foreign bills of exchange are also greatly liable to this charge, although their general foundation, or principle, is the debtor and creditor sides of accounts with foreigners. The creditor abroad A draws upon his London debtor B, while the foreign debtor C take^ the bill in order to send it to his London creditor D^ and vice ^ versa. By these means the great mass of foreign accounts is settled, without the interference of money. . The balance, however, which may be still due on one side, and for which no bills, are procurable, is sent in the raetals J either to or from the foreigners. OP EQUIVALENTS. liiQ at the expence of the debtor. If this exportation of the metals be transacted by an intermediate agent, he grants an equivalent sum in bills, while he takes a profit for his trouble and risk ; and as the Jews transact this sort of business fof a very small profit, the mercantile world consider them as the most useful agents in those negociations, for restoring the equilibrium in foreign exchanges. The balance thus due to or by fo- reigners^ is constantly changing, which of course occasions a constant variation in foreign exchanges* In stating the further causes of va- fiation in these exchanges, it is necessary to observe, that all nations have a money of account, (sometimes distinct from their coins** so as a pound sterling in .England, and a I/yre Tournois in France) and that the Government of each coun- try lias at different periods fixed the J30 THE DOCTRINE quantity of pure silver and of pure gold, which such money of account; was to contain. This is called fixing the standard of money, and applies as much to gold as to silver, because it fixes invariably tlie price of one against the other, when converted into coin; although such legal decision is perfectly inconsistent with the principles of nature, and will in the course of this investigation appear com- pletely nugatory, on account of the per- petual variation in price of one metal against the other. It shews, however, the incorrectness, and even the fallacy, of Mr. Harris's and Dr. Adam Smith's ideas, that such stan- dard, is confined to silver only, and that gold is a mere commodity or object of commerce. This mistake may have arisen from Off* EQUIVALENTS. 131 their perceiving that the metals very soon lost that price against each other which Government enacted should exist be- tween them in the respective gold and silver coins^ when it declared, for in- stance^ that fifteen ounces of pure silver should*, when coined, have the same value in pounds, shillings, and pence sterling, as one ounce of pure gold, or that the gold and silver coins of Great Britain should be legal tenders in that or any other proportion. Such decision of Government mighty ho doubt, be founded on the then exist- ing relative value of gold with silver, (bought as bullion, or objects of com- merce against each othdr 'J but this rela- tive value was perpetually liable to vari- ation, in direct contradiction to this per- manent laWj respecting what was turned into coin, and became regulated accord- ipg to the imported quantity and demand I 2 ^^.p THE • DOCTRINE fur each nicuil towards their conversion into phites ornainent;, or coin. Mr. Harris adds further, that silver was more liable to change its value than goldj which is inconsistent with the na- ture of a relative value^ as one object must fall when tlie other rises, not un- like the operation of two buckets in a well, because gold per ss can have no price in money, except with relation to silver , and silver j)er se^ no price in money, except with relation to gold, al- though money, which is the general term for both, has a general price, called In- terest, or Annual Hire. It appear$ extraordinary, that the Legislature did not take into considera- tion the constant variation in the quan- tity of each metal imported and expor- ted, as well as in the demand for plate, ornament, and coins^ which naturally pro^ duced very frequeirtly a change in tie OF EOUiVALiNTS. 133 relative price of one against the other; neither did they perceive that the neces- * sary consequence which ensued from this change in price vi^as the sale of the under- valued metal in coin, (melted down privately in a crucible ) and the payment of all legal demands in the overvalued metal in coin. Government, also, could not conti- nue to coin the undervalued metal, or a certain loss would ensue. It is unnecessary to state the differenc changes, which the standard of gold and silver has undergone in Great Britain, and I shall therciVre confine ^^myself to observing, that ^? parts of the, quantity of pure gold, which a guyiea contains, is the exact quantity which the law has declared shall exist in our money of account or pound steriing, and that as silver is become dearer, relatively to gold, since the period when the pro- 13 134' "i'l^E DOCTRINE portion of pure silver metal, which twen- ty shillings or a pound sterling was to contain, became fixed by law, it has dis- appeared in coin, (^excepting light silver) and our currency is of course stamped a gold and not a silver pound sterling. There however exists a possibility, that both metals may be above their coinage price. When a balance, for instance, is to be paid to foreigners, and that silver bul- lion is too dear, or not procurable to send to foreign markets, gold bullion may then be purcliased above its coin- value, to avoid the possibility of incur- ring the penalty for melting down gui- neas, in order to pay that balance. This is, in fact, purchasing so many ounces of pure goid-metal with more ounces of pure gold coin, and can only be considered as a premium of insur- OF EQ ^71 VALE NTS. IgJ ance against an evident risk, without which it would be an absurdity. The right, indeed, which each in- dividual possesses of paying his debts in either metal, takes away the most ma- terial inconveniences of the law, which establishes a standard for each metal, and the facility of throwing coin into a hot crucible, without detection, admits of selling the undervalued metal for its full value as bullion. Any change then, which takes place, by law, in the standard of gold and sil- ver coins, must naturally occasion a va- riation in the rate of exchange with other countries. We may suppose, for instance^ that if, by a new law, a pound sterling was made to contain as much pure gold as there is now m a guinea, it would be- come more valuable by one in twenty; 14 13^ THE DO e TRINE and we should, on that account, receive in exchange five per cent more of the money of account in other countries, because all exchanges in money must be ultimately regulated by the quantity of pure metal which the respective coins •of each country contain, and the debase- ment by alloy is of no use whatever, but, on the contrarj^ very improper beyond a certain degree, for preventing too much friction, and may be considered as so many folds of paper or linen wrapt about pure gold or silver, in order to (Tonceal what "a few hours will always bring to light. ' It may be asked, what effect the changing of the standard, or adjudging more or less" pure gold and silver to the circulating coins of a counti-y, would have on the internal money-operations of that country? At first sights it would seem to pro- OF FQUIVALEN'I r. j^^ duce a general increase or decrease- in the scale of value attached ta ail things ; that is to say, that as all incomes would be proportionably increased or decreased- in the quantity of pure metal received, those who. gained or sufi'ered thereby, would be equally aggrieved or benefited in their expenditure, according to the increase or decrease of pure gold and silver adjudged to the money of account and respective coins. This position of a general rise or fall in the value of all things, v/hen compared with pure gold and silver, unr der the denomination of a Pound Ster- lings «\rould also convey the idea.^ that if the pound sterling was made to con- tain less pure metal than is actually the case, the diiferent coins, or representa- tive signs, would become more plentiful, and produce the same .good consequen- ces as an increased import?.tion of the iiactals. I 5 138 THE DOCTRINS But these consequences, however plausible in argument^ would not result from it; and it therefore becomes neces- sary to give further explanations on this subject, as the simplicity of such a plan might otherwise captivate superficial en- quirers, and urge Statesmen to very false operations, respecting a material point in political economy. It will be easily understood, that a pound sterling, for instance, is given for a particular object, not on account of the name of a pound sterhng, but because a pound sterling contains a cer^ tain quantity of pure gold or silver metal. The quantity of pure gold or silver ^ constitutes, therefore, the price of an object; and if, by law, it was reduced, no person -would-be satisfied ;vvith the same number of pounds sterling as be- fore, in exchange for the same object. OF E Q U I V A L EI* T'S, 12s 140 THE DOCTRINE which were expected from it, in de- creasing the value of all things ; while it was, in fact, an act of bankruptcy in Government, because its nioney»debts di- minished in their intrinsic though not in their nominal amount. The revenue suffered also the same degradation; so that nothing but a ge- neral discontent attended this plan ; while^ at the same time, there arose a great degree of confusion, as well as injustice, between individuals, with respect to their money-debts and their bargains previously made. ^ It becomes unnecessaiy to add more, hi order to shew, that all changes in the standard of money, mu^t affect foreign exchanges; and I shall therefore only observe, that it is of no consequence whatever, how the standard of money or the degree of alloy in coins, has been established in any country, because Qvery OF EQUIVALENTS. T4I person has the power of calculating the exact value in pure metal, and of coun- teracting any error, .which the variation in value between the two metals may oc- casion. The permanency, therefore, of any regulation respecting the coins, or mo- ney of account, is all that is required (if they were eveil erroneously con- structed) because however small, or even to appearance proper, the reduction of the standard or diminution of the quan- tity of pure metal might be, it immedi- ately alters the settled scale of value for all things ; and every individual }vill en- deavour to counteract it, by asking a higher nominal value for *his goods, in |)roportion to such reduction in the coins, which cannot fail to produce much con^ fusion in the whole community^ I shall not speak of the effects which Would ensue from raising the standard .142 TIIS DOCTRINE of money, by making a pound sterling contain more pure metal, as such aa operation will not. enter into the head of any Statesman, but proceed to state another cause of variation in foreign ex- changes. 1 have already liientioned, that sil- ver has of late years become dearer, re- latively to gold, than was fixed by law, and that consequently the money of ac- count in Great Britain is now a gold coin, while our silver has been sold for bullion. The reverse of this has taken place in other countries ; and we therefore find, that gold has there been fi.ied at a lower rate than in Great Britain, rela- tively to silver when converted into coin ; and being become dearer in bullion, and melted down x)r sold with a premium^ their silver coin has become their cur- rency. I OF EQUIVALENTS. 143 A pound sterling, then, being a gold money of accountj as our current coin is gold only, -(excepting light silver) and the money of account in other coun- tries (Holland and Germany) being sil- ver, there must necessarily arise a vari- ation in the exchange with those coun- tries, whenever a change in the relative value of silver to gold takes place; be- cause^ if silver becomes dearer, more gold will be given in exchange, and vice versa. No par exchange can therefore be established, excepting between two coun- tries whose current coin is of the same metal, and of course invariable. The imaginary par of eleven gilders in Holland for a pound sterling in Eng- land, is of course the greatest absurdity which ever entered into the human mind". ^ l\\ THE i:)OCTrvlNfe The act of rendering pnper-money ^ legal tender, will also affect the foreign exchanges of a country^ and will pro- ceed in the exact ratio of the deprecia- tion of that paper-currency. This depreciation rnay arise froni the quantity of circulating p?per-money, compared with the quantity of circula- ting gold and silver coins, and settle itself in that proportion, or from the want of confidence in the security of such paper-money. The first mentioned cause will always have its natural limits; but the last-men- tioned may become urihmited in its effects; and as both causes are generally com- bined in tljose depreciations, it is impos- sible to trace the degree which each of these causes occasions. The principles, therefore, of varia- tion in foreign exchanges, are fourfold. be' EQUIVALENTS. ^40 First, the balance of all transactions, pay- able ia money, bein-g for or against a country, because the cost of transport- ing the metals must be either received or paid for in the exchanges- Secondly^ an alteration hi the standard of money in either of the exchanging countries. Thirdly, the variation in price of* one metal against the other. And^. fourthly, the depreciation of paper money in either country, supposing it to be made a legal tender. Having now stated the nature and value of gold and silver coins, and the principles of. variation in foreign exchan- ges, it becomes necessary to proceed to an examination of the extensive power of the precious metals, and of all their substitutes and assistants, under the ge- neral term of Money, or Representative Signs. This power arises from their utility I 4^ T H £ D O C T Kl N L having acquired a new price, called In- terest, or annual hire^ which immediately led to the possibility of forming;, by a very simple combination, u safe, coni- pleat, and never - failing system of public finance, depending on the liatural and certain concurrence of the whole communit^^, and not liable to be deran- ged by the private views of any indivi- dual or individuals whatever. OF EQUIVALENTS. I47 CHAPTER V. On the Interest or Price ef Moneys on its Power of precluding all 6inh' g Fund Systems; and on the Nature of pub lie and private Money Debts, THE foregoing Chapter will have sufficiently explained what is meant by the price of gold and by the price of silver; which appears to be perfectly distinct from the money-price of all ob- jects, or from the price of money in ge- neral, called Interest, or annual hire, and relates merely to the comparative value of one metal against the other. In this point of view, gold and silver may be called objects of eom- K 2 H^ THE* DOCTRINE merce against each other: but this com- " raercial character between the metals is lost in their qualification of money, or representative signs, to measure the va- lue of ev^ry- object, because tlie com. mercial consideration arises, in that case, from the combination of value, which may be due to each object thus pur- chased, or measured with a certain quan- tity of those metals. ■• ^This combination pf value has been ^hewn to arise from the favorable or unfavorable state of the seasons, render- ing many objects more or less plenti- • ful, from the further expences incurred in producing each object, and from the accumulation of taxes, " with all their consequences; v/hich totally subverts the idea of Dr. Adam Smith, '^/to tk price of grain is th criterion of the price of money'* The price of graiO;, or of any other OF E QUt'VAURKTS. I.49 object, appears, on the. contrary, to lie a. circuitous process of comfnerce^ and ultimately the measure of value naturally due to such object, as the interest of all the combined capitals and other expen- ces (taxes included,) which were em- ployed in producing it. It is true, that the competitien ^xicq of an object may^^from a greater or less demand, be sometimes carried beyond the namral price, ^vhich is due to it 5 but as a greater or less* number of that object would be afterwards produced in consequence of this competition price not being in unison with the natural price, there muse ultimately arise a fair and equitable price to the producer, and also an increase or decrease in the quantity of objects, in consequence of their h:iving been overpaid or underpaid. This circumstance makes all fore- fifallin^*, or monopolizing, for any length K % J5Q THE DOCTRINE of time, impracticable; because all de- mands which might be deemed more ex- orbitant than the situation of each object required^ would be speedily counteracted^ to the great detriment of the extortioner. The argument of forestalling and monopolizing is^ however, frequejitly resorted to with great impropriety, in prder to account for the increasing price of provisions, which might, with more justice, be attributed to the errors of Statesmen, in unnecessarily accu- mulating tax upon tax. The circuitous, and consequently slow, yet nof less certain and baneful effects of taxation, seQxn indeeid to have totally escaped the penetration of Phi- losophers and Statesmen; which is the more to be lamented, as theii* progress is undermining the happiness of those individuals, whose incomes are so limit- ed, as not to admit of increase upon OF EQUIVALENTS. . IJl every increased charge, ftom taxation and its consequences ; while a- further ex- tension of this individual distress, will produce not only a more general, dis- content against Government, and aug- ment the number of those who aim at its, overthrow, but also create a very alarm- ing emigration to foreign countries. It is indeed evident to me, that the errors of finance will be the re^l cause of any resistance which may be made to the established Government, of Great Britain, although defects in the constr- tution may be the watchword, because the distressed individuals would be look- ing up to a new constitution for relief from .their misery^, and attach them- selves, on that account, to the disaf- fected. * The ultimate effect would, .indeed^ be contrary to their expectations, as ^U political convulsions destroy the first K4 c JS!i THE DOCTRINE principles of finance, which is public credit, and render^ by those means, tlic evil irreparable for a certain time. But to return from this digression^ in order to discuss the price or interest, of money, we must consider gold and silver, bank-notes payable on demand, or any other generally admitted repre- sentative sign, as a reproductive pro- perty, by means of the annual hire- given in money for their ser\dces, and of course bought and sold at so many years purchase (in the same manner as land and houses) according to their relative scarcity or plenty. This reasoning is perfectly applicar b1e, whether they are returned again to the proprietor after a certain period with the annual interest, or that they are im- mediately exchanged for an object wjiich, produces an annual income. OF EQUIVALENT8. 153 In either case, an annual :/eproduc- tion arises to the possessor, as ^ pr.cen^ interest k equal to ao years Aufchase, and land bought at 20 years j^urchase, gives equally 5 pr. cent for the money ■Dpaid for it. Land, however, seldom gives so high an income as money laid out at interest; and it is therefore of material importance to discuss the principle from whence this difference arises. It may possibly be imagined, that mo- ney is, in every point of view, entitled to a higher capital -value, or lower rate of income, than other property produ-^ cing an anmial increase, on account of its being the general representative of all things as their measure of value, and also the general director of this, mea-. sure of value, by its price or rate of in!^| terest producing an effect (equal to every variation) on the income of all capitals. t34 THE DOCTRINE Thic general superiority of value^ when bd^ight at so many years purchase, dots r. : however exist, as money is defective in point of perpetual duration, from the effect of clipping, as well as from constant friction^ and is also expo- * «ed to accidental loss ; none of which circumstances take place with respect to mi.- ' ' Tfiepenodofexistcn.ee cannot, in- deed, be ascertained in money; and the lenders of it at interest;, or annual hire, requii-e therefore* that an ample indem- nification, or life-rent, be given for its use, on account of this imcertainty res- pecting its duration. The indemnifiGation, which is natu- rally resorted to, consists in money ob- taining a higher annual price^, or* in- terest, than the purchase-money of land gives in annual income. OP EQUIVALENTS i^ When moneyj for instance^; is gran- ted at 5 pr. cent interest, or jao year$ purchase, land may probably s^i'2it 25 years purchase; and, of course, givQi only 4 pr« cent income to the pro- prietor. This diiference, or superiority, of I pr.ct. pr.ann. laid out at compound in- terest, procures, in a certain number of years, a sum equal to the capital; and should the original money-capital be lost in that period, the proprietor, or his heirs, will still be enabled, by the above- mentioned accumulation, from the grea- ter income, to purchase a perpetuity ia land. Theory and practice are therefore consonant to each other ; and prove, in the most unequivocal manner, that mo- ney-debts are not in their nature perpe- tual, as their superior annual interest furnishes die means of extinction. J^ THE DOCTRINE Th^s principle is also completely «stablishM in public finance, by the crea- tion oblong and of short annuities, as the reimbursement of thejr purchaser money takes irs rise from their superior interest with its compound accumula- tion* This mode of raising money, by lir mited annuities, may no doubt be con- sidered as creating a sinking fund for the gradual repayment of the capital re- ceived; but the process is at any rate very slow on the long annuities; and as neither the long nor the short an- nuities admit of a reduction in income during the term of years for which they are granted, it is in the power of every person to calculate their value, and pre-, eludes the possibility of the public suf- fering a Very considerable loss by selling 3 pr. cents at 5<$5 of even lower, and re- purchasing them during peace at 85, and even at 96 pt. cent, whick is in fiict re- OF £QUIVALfiNTS. 15? turning above i8o for loo received, and has actually taken place in our fiiiancial operations during the period of nine years, or between the years 1784 and 1792; as 3 pr. cents were sold by Go- vernment, in the first-mentioned year, as low as ^2, and repurchased by the sinking fund as 97 in the last-mentioned year. As a proof of this destructive sy- stem of reimbursement being delibe- rately adopted and publicly avowed by the Government of Great Britain, we need only peruse with attention Mr. Rose's publication in the year 1799, wherein is stated^ that, by applying I pr.cent annually towards the extinc- tion of every hundred pound sterling, 3 pr. cent stock created by Govern- ment, a compleat redemption will take place in the course of 39 yesfirs, sup- posing the redemption-price to be on an average 85 pr. cent for every £ idb 3 pr. cents. jb2 the doctkinb The loan of that year was made by the sale of 3 pr. cents at about 5^ pr. ct» net after deducting the discount for prompt payment, and even much lower in the preceding years; so that the sinking fund of i pr.ct. on every ^100 3 pr. cts. created, became in fact nearly 2 pr. ct. on every hundred pound sterling received in money by Government, and the interest paid was about 51 pr. cent per annum. The Public will therefore have to pay above r pr. cent pr. annum during the very long term of 39 years, if con- sidered as an annuity, or if calculated as a reimbursement, which it really is, (the average purchase-price being 85 pr.ct. for the 3 pr. cents} not less than ^^150 sterling for every ^f 100 received, be- sides 5^ pr. cent interest. Such transactions, between indivi- duals, would be branded with infamy ; but ^ OF E(iUI VAI.^NTS. I5p they seem to pass unnoticed, or to meet with silent approbation, in a Ministe- rial Speech and Treasury Pamphlet. I can however assert, without any fear of contradiction, that the financial annals of no country afford an example of such destructive reimbursements, and that Great Britain is not likely to owe her prosperity (^as great Statesmen have asserted^ to a system of reimbursing ^150 sterling for every ^ 100 sterling received during her expensive wars, bur that her downfal is, on the con- trary, inevitable from excessive expence, and that she has hitherto not had it in her power even to pay off 3^100 for every ^^loo sterling received. With what right, then, do we pre- sume to boast of the goodness of our public credit, or express our surprise that mone^y-lenders should, with such i^O THE DOCTRINE prospects of gain before thcm^ offer to subscribe so much more than is wanted ? It is fdrtunate, indeed, that natural c:.useS operate in such a manner as not to admit of very extensive reimburse- ments of this nature with impunity, and that we shall at last, through impotence, be checked in this determination to ruin ourselves, by returning much more mo- ney than was received, after paying a very high interest for what was actually obtained. The creation of short annuities iS;, however, by no means to be recom- mended, as it is in fact a too rapid reim- bursement of the capital received ; and^ although justice demands that the mo- ney-lender should, by some means or ether, receive his capital back, yet the national interest requires also, that the money be kept as long as possible, in OF EQUIVALENTS. l6l order to produce the most possible pub- lic good; which is best obtained by a- dopting the most slow and imperceptible . mode of reimbursement, without losing sight of the principle of returning only what has been really received, and of benefiting the public by a possible fall in the rate of interest. The long annuities afford a corn- pleat proof of the perfect practicability of this system, as those now existing^ which have only 58 or 59 years to run, are equal in value to a 4^ pr.cent per- petual annuity, redeemable at pleasure* In practice^ therefore, we discover a most effectual method of extinguishing i €1 public debt at the end of 6^ or 70 years^ as may be agreed upon, without paying a higher interest than at present^ and without creating any sinking fund. The reasons for that equality Itx j6a THB DOCTRINE value between a 4^ pr. cent perpetual annuity, redeemable at pleasure, and an annuity for 58 or 59 years, are ob- vious. All annuity for a term of years, can- not be reduced during that period, while a pei-pctual annuity of 4i pr. cent be- comes redeemable^ and of course reduce- able to 4 pr.cent* whenever a fall in the rate of interest allows Government to borrow at that rate ; and in the same manner tlie 4 pr. cents may be reduced to 3§9 and eveir lower, if interest of mo- ney should continue to fall. The proprietor of a 4^ pr. cent, re- deemable at pleasure, would therefore be exposed to receive less interest during many years of the 65 a 70 years, for which a limited annuity might be gran- ted to the same amount, on the payment of one hundred pounds sterling, sup- OF EQUIVALENTS. 16^ posing interest of money to be at that rate. No person coiiid hesitate in giving a decided preference to the limited an- nuity, when interest of money is high, because^, on the supposition that the per- petual annuity should be reduced only 1 pr. cent during 45 or 50 years, the holder of the limited annuity would, by the one pr^cent laid out at compound interest, procure, in that number of years, a sum equal, nay even superior^ to the capital paid ; and thereby, on the expiration of the annuity, stand upon an equal or even better footing than the holder of the perpetuity* 1 have here stated a moderate in- terest for money raised by Government on long annuities ; but in order to sub- ject myself to no observations on the impracticability of raising morley in that way, I must observe^ that a 5^ or 6 pr. ct. l6l THi: DO C THIN E perp.etual annuity, however extravagant it might at first appeal*, would probably be subject to 2 pr.ct. reduction in the course of 10 years; and the long annuity might therefore be established with perfect justice to the Money-lender and to the Public, either at a lower interest, or for a shorter period than 65 or 70 years, if the disadvantage arishig from a probable fall in the rate of interest on the perpetual annuity be kept in view, and allowed for in a reasonable manner on both sides, Itis this consideration alone which gives an equal value to a perpetual and to -a limited annuity, as also a propor- tional higher value to 3 pr. cents than to 4 and 5 pr. cents perpetuities ; as, for instance, 3,pr. cents bought at 65 pr.cent. give less interest than 4 pr. cents bought at; 80 pr. cent, and the latter purchased at 805 give less interest than 5 pr. cts^ purchased at 94 pr. cent. OF EQUIVALENTS, X(^ This, or some other proportional dif- ference in price, generally exists, because 5 pr. cents are more liable to a reduction of interest than 4 pr» cents, and that these are also liable to a diminution, while 3 pr. cents are in no degree subject to this loss* The lesser interest therefore aris-. ing from the proportional dearer pur- chase of the 3 pr.cent. annuities, than the. 4 and 5 pr. cent annuities, is amply com- pensated by the impossibility of receiving ks§ interest in future. As mankind may be led to suppose^, from the destructive mode adopted in raising money for the Public, which renders it necessary to reimburse 150 for every . iqo received, besides paying above 5 pr. cent, interest, that public security is inferior to^ private security, it becomes necessary to prove^ that the contrary is the case, ■ ' T « I65 THE -DOCTRINE Public debts, or annuities^ are foun- ded on the security of every individual's property; while private mortgages are only founded on the property of the individual possessor. Government has the riglit, and the power, of raising annually on individuals, by taxe?, the amount of all annuities granted, and of course bankruptcies are unnecessary. PubUc debts can be subject to no litigation in law; but private mortgages, are perpetually exposed to it, and occa- sionally to ultuLate loss of property by defective deeds. PubHc debts can always be converted into money by a sale, at such prices as the current rate of interest warrants. Private mortgages cannot be turned Into cash, until the period of payment OF EQUIVALENTS. 16/ agreed on arrives; and a tedious process of foreclosing is often resorted to, in order to compel payment, even wit!iOut success in time of war. Great sums of money are also lent, in every community, upon the personal security of the borrowers, of which a part is annually lost by the insolvency of some of the debtors. I shall suppose, that 2 pr. cent, of the whole mass of money, which is lent annually on" personal securit^^, is lost by bankruptcies ; it follows of course that, in 50 years, a whole capital is extin- guished. It must not, however, be under- stood, that the whole of the first year s^ loans is lost in 50 years, but only a sum equal to it, on the whole transactions of that period. L 4 I68 THE DOGTRINK Some of the' proprietors may cve!i be lucky enough to lose nothing, dur- ing the 50 years; while others m^y lose, during that period, more than their share of the first year's capital ; which makes it a kind of lotery for perpetuating mo- ney-debts to some individuals, at the ex- pence of othcvs; .^s, in that case, the fortunate save more, and the unfortu- nate lose more, than the nature of pri- vate money-debts warrant. Private money-debts are therefore entitled to a higher interest than public 5ebts, under the denomintitioii of Piibhc Annuities, because the former " cannot be so secure as the latter. It is evident then, that money-pro- perty, lent upon personal security, is not in its nature a perpetuity^ and that the security, even of mortgages, is also much inferior to that of public debts, as the niortgagees are not only exposed to ©eta- OF EQUIVALENTS. I^p sional loss, but. also, to ■ much trouble and inconvenience, as well as to the sanje variation in the rate: of interest to be received for their money oh a reim- bursement being made to them. Experience, has shewn, that these reimbursements are not procurable, with the best-founded cjaims^ before a Court of Chancery, when interest is high ; and are of course only to be expected when interest is low. The most perfect security for mo- ney-property, consequently exists in the possession of Public annuities; ; and -as. no other mode of lending money .at linte- rest, can extend its duration beyond a longer or. shorter term of years, accord, ing to intervening accidents, there can be no reason for a nation paying eter- nally for the use of money, and parti- cularly so as the interest paid h gene- rally much superior to the income of a L5 MP THB DOCTlifNE perpetuity in land^ and, in most instan- ces, equal to what is paid for those pri-. (vate loans, which are subject to annual loss by bankruptcies; yet the granting of 3 pr. cents, so much under par, for the money received, is still more repre- hensible, and openly avows this system of eternal duration without the advan- tage of very low interest, to which it is natunflly entitled, as it holds out no 'prospect- of ^extinction in the course of time, nor partial relief from a diminution of interest;, but exposes the nation to a perpetual burthen, or to the still more destructive operation of repurchasing these 3 pr. cents at a much higher price than was obtained for them; either of which circumstances must, at: one time or other, produce inevitable ruin, as will be hereafter shewn. Having thus explained the soVid foundation of public credit, under a well- regulated Government, and a properly or EQUIVALENTS. I7I constructed system of public finance, it will be superfluous to add, that it is not easily shaken, and that those great varia- tions which take .place in the price of public funds, are more to be attributed to a wrong system of finance, and to the re- lative plenty or scarcity of money, than to en increase or decrease of confidence in public securities. Fears and hopes, respecting political events, may produce temporary impres- sions, which will soon yield to the efi'ect^ of a relative scarcity or plenty of money; but interior insurrections, the invasion of an enerny^ or the impossibility of rais- ing annually the amount of taxes for in- terest of debts already incurred, or for those that may be further required, will no doubt produce the most serious ef- fects on the price of public funds. As long, however, as none of these events take place in Great Britain, her 17a THE DOCTRINE ipublic credit will remain unsullied, and every lasting rise or fall in the price of her public funds will proceed from the rela- tive plenty or scarcity of ijioney, to which a- right or a wrong system of finance will greatly contribute". As a proof that this relative plenty or scarcity of representative signs, has n very considerable influence, we find iliat the price of our funds was lower after the peace in 1783 and 1784, than dur- ing the war which preceded it» :: • This could only arise from the im- mense exportation of the metals 'in- the year 1783; and if we should have again to lament the same- <:^use^ and thfe same effects, it will -be attributed, by unin- formed men, to want of credit for the Public, to diffidence in the INIinistry, or to some trivial and unfounded cause. Public credit is also generally sup- OF EQUIVALENTS. ly^ posed to depend very much on the crea- tion of a sinking fund, and consequent reimbursements: but this idea falls to the ground;, by the simple consideration, that no engagement whatever has hither- to been specifically entered into with the pubhc creditors, as Parliament is at full liberty to retract its resolutions re- specting a sinking fund, whenever it is fully convinced of its impropriety. An examination into the origin of ptibhc loans, will also convince us of the impolicy, as well as of the impro- priety, of ever redeeming public debts in any other way than by the sale of new annuities at a more favorable rate of in- terest ; that is to say, by selhng 4^ pr. cts. at par, in order; to pay off 5 pr. cents at par, and continuing such operations a';^, far as the falling rate of interest will admit of. When taxes were made payable in ?74 THE DOCTRINE money, they naturally increased consi^ derably the money- price of every arti- cle, and also the interest or price of mo- ney, as this additional value required re- presentation in money, and made it re- latively scarcer. This produced naturally a very sen- sible diminution in the quantity of in- dustry, or at least a considerable check to its annual increase in times of peace. In times of war, these effects became so very intolerable^ on account of the lai'ge sums immediately wanted, that they could not escape the notice of the most ignorant of mankind. It was, indeed, so perfectly impos- sible to raise a large sum by new taxes, within the time it was wanted, that some mode of anticipating the receipt became necessary, and an immediate loan for the amount of the tatcs intended to be levied within tlie year, was consequently re- sorted to, under the poiitive engage- ment of redeeming such loan with in- terest at the expiration of a year* But the enormity of taxes to be levied in the course of the year, for the purpose of carrying on war, produced such violent effects on the mass of exist- ing industiy, that the produce of those taxes fell infinitely short of what they were calculated at, and the pre-existing taxes experienced also a considerable di- minution in their produce^, from so great a multiplication of their number. The security given to the holders of the loan^ became therefore imperfect? and the repayment of it within the course of a year impracticable ; while the Public funds experienced a general discredit, and so great a diminution in their value, as to give a most enormous yearly in- terest to the purchasers. 1^6 TME DOCTRINE This destructive system of raising the war-supplies within the year, and of making loanS;; to bereimbursed also within the year, wtis however still perseve- red in, until the mischief had ari&en to such: a height, as to threaten a general convulsion; when the Statesmen of that day were forced to look out for some other resource. It occurred to some of the most en- lightened, above a century past, that to extend the term of paying back the capi- tal until convenient, and to pay the in- terest regularly, was the only plan that could be adopted. The funding system, therefore,' took its rise from this circumstance of necessity, and not from the con- viction of mankind, respecting its virtues and its powers, whenever it became sub- stituted for taxes to be raised within the year : nor does there seem to have existed OP EQUIVALENTS, 1/7 sn idea:, that it required no fund for li- quidation, on account of its self-extin- guishing principles, as the knowledge of these circumstances Avould have prevented the intrusion of a sinking fund, or redemp- tion system, which has so evidently oc- casioned the premature ruin of many flourishing nations. From the moment of protracting the repayment of all loans, (until it proved convenient to the Pi^blic, which seems not to have been thought practicable until lately) Great Britain experienced the happiest effects in the rise of her public funds, in die diminution of the interest of money, and in the rapid in- crease of her industry, which has enabled her not only to go on prosperously in times of peace, but also to carry on very expensive wars; proving thereby, that neither policy nor public credit demand- ed any reimbursements. It remains, therefore, a duty in the M 17^ THE DOCTRINE supporters of a sinking fund plan, to explain, upon mathematical principlCvS, the necessity for Great Britain recurring ngain, in support of her public credit, to that system which formerly occasion- ed her distress, and which our ancestors were forced to abandon, in order to prevent' a general confusion. We have indeed been informed, in general terms, by very high Parliamen- tary Authority, that the ordinary means of raising the supplies for war;, were become insulScient against the revolu- tionary means employed by France, and that it wa$ therefore become necessary to levy, for the service of the year 17 ^^^ only 15 millions by loan, and 10 millions by an extraordinary tax, payable within the year, which was further to be con- tinued for two years after the peace, in order to redeem the loan of 15 mil- lions. OF EQUIVALENTS. l7p All my argnments, on the subject of taxeS;, have sufficiently developed the inevitable consequences of this extraor- dinary measure of fin^ince, which was for- merly exploded; and I shall therefore con- fine myself at present to observing, that there certainly could exist no difficulty in raising the interest of these lo millions by taxes, as it was thought very practicable to levy the whole capital in that way, and there could ^Iso be no difficulty in extending the loan to 25 millions, as those persons who are called upon to give the 10 millions in taxes, would in any ev^ent have preferred giving it on loan upon the same terms as the 15 mil- lions, and have chcarfully submitted to their share of a general tax for the in- terest. I must furthel' obser\T, that the rise in the price of our public funds, during the year I799> preceded in part this iinantial operation, aud cannot therefore be at- M 2 l8o THE DOCTRINR tributed thereto, but solely to the additi- onal coinage of gold from the bullion im- ported in 1797 and 17985 with its conco- mitant attendant, an increase of paper- money, both of which circumstances produced a considerable augmentation in the number of representative signs, as well as in the mass of industry and in the public revenue. Should it hereafter prove, by ex- pcrience, to be a well-founded opinion, that the redemption of near ^^^ mil- lions sterling of 3 pr. cent stock by the purchase-money of the land-tax, and possibly as much more by the old and new sinking funds, aided by the conti- nuation of 10 millions extraordinary taxes^ after the peace, would considerably raise our public credit^ and consequently the price of our public funds, Mr. Rose's opinion respecting the average price of 3 pr. cents v/ill probably be incorrect, "in stating it so Jow as 85 pr. cent. OF EQUIVALENTS, l8x though it would sufficiently shew the * finantial powers of Great Britain^ byre- purchasing, with impunity, at 85 pr. cent, what she sold at 56, giving thus, in an ' unequivocal manner, nearly 20 pr. ct. in- terest pr. annum, during three or four years, for monies levied during war. If on the contrary, however, the price of our pubhc funds should, notwith- standing these immense eflbrts by taxa- tion, continue low after the peace, we shall then have to lament the very heavy burdens so inefficaciously laid on the in- habitants of -Great Britain, 'and particu- larly on the landholders, for the purpose of raising public credit, which could, even in the event of success, only produce the f\ital efltect above-mentioned^, of paying an enormous interest during peace, under a different form, for monies borrowed during war. Our ancestors do not appear to Ms j8a THE DOCTRINE have considered the funding system as niathemutically right, and at all times ex- ' pedient, practicable, and necessary, but only to have adopted it as a temporary expedient;, because they professed an in- tention of ultimately reimbursing the loans, whenever it proved convenient to the Public to make the necessary efforts by taxation. The progress of this plan, for a cen- tury xpast, has been so slow, as to indi- cate;, in a very satisfactory manner to every profound investigator of the business, that it is .utterly impossible to diminish, by these means, the public burdens to the amount of one fiuthing annually. This will perhaps be called a very strong, and even a very erroneous asser- tion, because above 60 millions have been actually redeemed by means of taxes npphed solely to that purpose. OF EQUIVALENTS. 183 But how can this apparent diminu- tion of debt, and of annual burdens in interest, be admitted as a reality, when it can be proved mathematically^ that this effort towards redemption has not only been carried on during war, by ex- tending the new debt to the sanie amount, but has crushed a mass of growing in- dustry, which would have produced a much greater increase of revenue to the Public, than the amount of interest re- deemed, and also enhanced the price of every article^ as well as the interest of money, to such a degree as to augment^ considerably the pubhc expences, and to occasion a much greater increase of the debts contracted during war, and at a higher interest, than would other- wise have been the case, independent of the increased expence in our peace- establishment and in our poor-rates, which become perpetual annual bur- dens, and of a much more serious na- ture even than interest on debt, as they M*4 l84 THE DOC TRINE contain no possible means of extinction or redemption. The Finantial Committee, in the Pfouse of Commons, corrected, in 1 791, tlie estimate of the annual peace- esta- blishment made in 1786, by increas- ing it some hundred thousand pounds pr. ann.: but it will be discovered here- after, that this increase was not adequate to the real expenditure, and that a fur- ther correction, to a very considerable amount, is necessary. The Committee of i^O^), state also, that, if the permanent taxes produced 13 millions pr.ann. there would be one million surplus towards paying off the national debt. It appears, however, that these taxes produced^ in the years 1/90 and 1791, much more, and in 1792 upwards of ;f 14,000,000 sterling pr.ann. yet no OF EQUIVALENTS. I85 greater surplus than one inillion pr.ann. ever appeared to public view, after pro- viding for the necessary exigencies of a peace-establishment. Mr. Rose states, indeed^ that extraor- dinaiy and accidental expences, to, a con- siderable amount above the peucc-e^ra-, blishment were provided for ; but he omits to add, that extraordinary receipts to a con- siderable amount:, independent of the ordi- nary receipt, equally took place, which provided for these accidental expences. An increase of one mihion annually, in the peace- establishment, is not much attended to, although equal to the in- terest of above 33 millions of 3 pr. cts. The bad effects, therefore, of all sinking futids^, and of all plans towards raising tlie supplies within the year by taxes^ are not limited to the annual loss of industry, and the consequent lesser produce of each tax, in some proportion M 5 l26 THE DOCTRINE to die number which are added, but in- crease considerably the burdens of each succeeding vvar^ as well as the expences of a peace-establishment; branching out, at the same time, to a variety of expen- ces by their actions and re-actions, and occasioning much-greater future debt and annual burdens, than the interest re- deemed by paying off the capital. I must indeed admit, that the loss on the old taxes is much inferior to the produce of any new tax which is levied, so that every nation may, at any time, increase its revenue by accumi;lating taxes. To account for this circumstance, I have only to state, that the 'representa- tion in money, required by the new tax, can only be supplied by suppres- sing the representation of some indus- try, which would otherwise have exist- ed; and therefore the new tax is "not OF EQUIVALENTS. 1^7 only supplied by the tax lost on such sup- pressed industry, bur also by the mo- ney-value, of that industry, as both are combined together, since it is impossi- ble to suppress, in part, the produce of a tax without suppressing, at the same time, the industrious source of s\kh tax ; nor is it possible to increase industry by a new tax, although it prove ever' so productive. It is impracticable, indeed, to trace the loss wliich arises in the old taxes from the circumstance of levying new burdens, because this depends on the nature of the new taxes; some of which produce very little effect in augmenting the price of industry; while others produce very great effects in that way. • As this difference refers to the Fis- cal S^^stem^ or art of levying in the iijQSt efficacious and in the least dctri- l88 THE DOCTRINE mental manner to the whole comniiinity, such taxes as are absolutely necessary^ which is not • immediately connected with my present plan, I shall only .^tatc, that capitation -taxes, or such as come under that qualification, do the least mischief in increasing prices, and in de- manding additional representation, which' makes them come nearer to the original design of levying contributions in kind ; and it is particularly fortunate for Great Britain, that necessity obliges her to re- sort, at present, to that kind of taxes f(jr levying large sums. Admitting, then, that there is no oc- casion for the existence of the sinking- fund, taxes, it follows, that their re- peal would proipote the principle of in- creasing the produce of the xemaining taxes. This increasiiig produce being equal- ly unnecessary, would admit of a fur- OF EQUIVALENTS. 189 ther reduction in the number of taxes, in the price oF all necessaries of life, and of course in the public expendi- ture. We should then enjoy, in a twofold manner, an annual diminution of taxes and expences, from the increased pro- duce of the former, as well as from our diminished wants towards the lat- ter, and experience a rapid increase in the mass of industry ; so that, in tha course of a few years, ten taxes would produce as much revenue as twelve or thirteen of similar extent do at this mo- ment. In this manner is one relief from tax- ation follpwed immediately after by ano- ther relief, as also one diminution in the annual pubhc expences towards the peace-establishment, followed by ano- ther diminution ; and, per contra^ one additional burden of taxation is the 190 THE DOCTRINZ source of another burden, as well as of increasing cxpences ; both which go on in a dreadful progression, until finantial ruin ensues. In examining, further, the operations of Great Britain^ with respect to finance, we. find, that she has liitherto perseve- red in raising the peace - establishment expences within the year by taxes, and the war -supplies by the sale of limited or perpetual annuities, under the deno- mination of Loans. However practicable the former mode may be, it will not be improper to state, in a new point of view, the su- perior advantages of the latter mode, even for the peace-establishment, and how those advantages are totally lost sight of, whenever a sinking fund sy- stem is adopted. Raising the supplies by taxes within OB* Equivalents. 191 the year-, is taking from individuals the ^/t4^'7f^ ' , whole capital wanted ; whereas, by 1^^^ ^ ^^^* raising those supplies through the means Vj^» %4i^^ r* ^ of public loans, is only taking ^^^"^^^^^^^""S^j^ individuals, iw taxes^ an annual interest ^^^'''^/ /^m^^ on the same amount. The last griev- ^ ^^^w^ ') y^l^^ ance is no doubt annual; but it certain- ji^Ay^-^ ^^ ly will be admitted, that, by leaving ^ ^ ^w*^/W*^ the capital to individuals, they are not ^^^^ iM^^^ only enabled, by an industrious apphca- CT^H •'*' "T/"^ tion of \U to pay the interest annually, *^^ '' ' ^ ^^Jy^ but also* to procure some profit to them- ^*^ t/"^^ Y^ / selves^ as long as the nation is capable ^/'^l^ /^>7 of improvement in various branches of * "^ industry. It follows then, that, in desisting from levying, by taxes, one milHon wanted, and substituting an annual levy of fifty thousand pounds in taxQs for the interest of a million loan, the general estate would be improved, in annual in^ come, to a much greater amount than fifty thousand pounds. iy2 THE DOCTRINB I shall be within bounds^, when I ^ state this improvement at thr^e hundred jt^:,, thousand pounds during each year that ^ ^ J this plan is adopted, either negatively or » , 4 positively; that is to say, either by not HI levying the million by taxes if wanted, '* *? or by taking off unnecessary taxes to that amounts * Of these three hundred thousand pounds, the public revenue would of course receive a share, and thus be more than fully indemnified, because the re- maining tax for the interest provides for what the million would annually cost in interest. But, under the supposition even that this annual increase to individuals, was only one hundred thousand pounds pr. ann. they would cheerfully give, and indeed could well afford to give, a part of it, if the fifty thousand pounds pr.ann. left in taxes, for the interest of the mil- lion loan were equally suppressed. qFEQUIVALEJfTS. J93 By applying the argument also to an fi4^f»^^^J* gTi individual -who iiad raised ten tliousand *U ^^ t^^^^^^^i/Zl pounds on an improveable estate at 5pr.ct. '^/!7^^^^ ^ Uf^ interest^ we must allow, that he would be M J>y i^v^^ ^^^/< justly accused of doing himself, and his '^^Zy*^^^ ^*^^ posterity', a very material injury, if he ^U-^^-^'t*^ t^ «*M^ voluntarily piFered to pay off the debt 'TJC^ '' V^ J^^ with the prospect before him of improv- ^^«*^7 ^ ^ ^ ing his estate by means of these ten ^^^^^f^J^^ m thousand pounds, as, far as lo pr. cent J* — — annually, or 5 pr. et. above the interest A^^ . to be paid, and that his annual expences increased also by such misconceptions and such miscalculations. Let ingenious calculators of the ef- fects of compound interest, state th0 magnitude of such compound accumula- tion of e vil in the course of 50 or 60 years^ and they will then produce to the world an effectual antidote to that delusive and bewitching p^oison, infused into the un- derstanding of man by former czlcuh- to's, on the wonderful efxec: N 194 THE DOCTRINE ;^ * •^ •V-*%vVl'^ lion sinking fund with its compound ■fc jij» ii*i*^ 'V^j/**'' ^ operations, in paying off a national debt. ^ ^ ^"^^4 v*-\^ The advantages are evidently double, ^^ ~"'^*^-^-Hi> in the former case, to what they are m •^ ^^ tl: ''* ^'' the latter; for the act of paying off 50 -^"*^,^^ X * '- \1 millions of the national debt occasions » ' r-Jin * ' T^^^ •^^ the loss of 100 millions to individuals, •S* iSTv^^A^ '-H^ ^ ^^^ to the revenue a share of the annual , income on that property, during its ac- ' cumulation. The analogy of reasoning between the affairs of a nation and that of an individual, is indeed very imperfect, and can only be resorted to for partial elu- cidation; for when a nation commits die error of paying off its useful debts, or of raising taxes within the y^ear for what might, with more advantage to the Community, be levied by a loan, it is further subject to increased annual ex- pences, in times of peace, as well as in times of war, and to higher interest OF EQUIVALENTS. Ip^ for the necessary loans in the latter period. Whoever doubts these consequen- CQSy may examine the progressive increase of our public expences, in consequence of every war, and reflect afterwards on the probable annual expence of a future war. On reading Mi\ Chalmers's compa- rative estimates of the prosperity of Great Britain at different periods, I was anx- ious to know if internal industry and population was increased in any propor- tion with that of exterior commerce and shipping, and immediately applied myself to a critical examination of the different branches of our public revenue. This examination convinced me, that some internal branches of industry must have sunk, in order to make way for foreign commerce, as I could perceive N 2 1^6 THE DOCTRINE no increase of consequence in our public revenue since i;'749 but what arose from the accumulation of above 6 niilhons of new taxes during, the American war. The permanent taxes (^inchiding those 6 mil- lionsj levied before 1785, produce at this moment no more than 14^ millions, and those levied before 1775^ (exclusive of those 6 millions) produced in that year about 2 millions , consequently the general increase, on the old and new revenue is not great during 25 years, and can have only arisen from the increase of exterior commerce between if 86 and 1802. We have therefore no proof of in-? ternal prosperity during that period, and have to lament, that our accumulated wealth in money^ during 25 years ^from annual balances with foreign couutries, has been mostly absorbed in the repre- sentation of new taxes, and in the con- sequent additional nominal value given to all things; which is, in fact? accu- OF E Q U Iv . . .- .- N T S, 197 • mulating a fictitious wealth of money only, and not acquiring an addition of objects, internally consumable, paying an annual revenue, which can alone give aix independant and solid strength to a nation. Instead then, of benefiting poste- rity, by accumulating taxes for the pur* pose of creating sinking funds, as is too generally asserted to be the case, we are laying the foundation of complicated finantial distress, and of ultimate ruin, not alone by checking the improvement of the public estate, but also by caus- ing greater expences to be incurred than our income will admit of; while a con- trary system, which is now so much reprobated, would infallibly increase the reveniie much more annually tkin the sinking fund could pQSsibly redeem, im- prove very considerably the national estate, or groundwork for taxation, and subject ourselves, and our posterity, to much less annual expenditure. N3 198 THE DOCTRINE • This contrary system of increasing the public debt for a certain tennj, and of diminishing the number of taxes, which will be the object of the follow- ing Chapter, may therefore with justice be called true political economy; while our present system is entitled to the appellation of political Extravagance. Having now explained < the reasons for preferring, on every possible occa- sion, the system of raising the supplies by loans in stead of taxes, and for desist- ang from all sinking fund plans, it re- mains for me to destroy an existing ider? that the price of stocks is considerably increased b}^ the aniuial application of 3 large sum of money towards their re- demption. I have already observed that, where no obligation to reim.burse has been en- tered into, no diminution of confidence can arise from the circumstance of not OF EQUIVALENTS. ' IP9 redeeming public debts, and particularly when the operation is detrimental to the improvement of the general estate, and productive of increasing annual expences. In this point of view, a sinking fund . may even be considered as destroying public credit, because those persons who are injuring their estare, and increasing their expences, are certainly less entitled to the confidence of money-lenders, than those who are pursuing a plan for im- proving their estate, and for diminishing their expences. But it will be still urged, by those ^who see no salvation excepting in the redemption of debt, without any regard to objects of much more importance, that the annual application of a large sum to a particular object, must inevi- tably raise the price of that object. In order to discover the fallacy of N4 aOO THE DOCTRlNir this position^ we must enquire into the Jiiode of obtaining this large sum, as well as what eifect it has on th'^ .elative scarcity or plenty of money;, and sflso investigate the process of its application. There, can be no difficulty in admitting, that the scarcity of money is considera- bly increased by raising a large sum in taxes; for, although the money received is returned again into circulation in the same manner as if received from indi- viduals in the form of a loan, yet the increased prices of various objects may require, in some cases, the additional representation in money of twenty-five times the amount of those taxes, on ac- count of the additional price of the object taxed, the profit taken on it by the producers,, all the actions and re- actions upon other objects, as well as the repetition of all these increased values in money, as often as the ob- jects go from hand to hand until con. sumed. OP EQUIVALENTS. aoi Returning the money again into circulation, does not therefore produce a general good, equal to the general evil arising from its being levied, as is the case with money raivSed by a loan, when the representative signs return again im- mediately to the same situation with respect to quantity, because twenty-five times the amount may be required for ad- ditional representation, if raised by taxes* The genera[ scale of interest h consequently raised, and the price of stocks lowered. This is the first effect, and will be better understood by the following de- lineations. No. I. No, 2. I I ! f f //III No. 2, No. 4. / f ( I f I / f / I 3i, i\, 4, 4^, 4i- 8l. 4» 4*> 4i 4^ No. 5. No. 6. ////-/_ f I f ' [ A, A\* Ah n^. 3- 44, \h 44, S> 5*' a02 THE DOCTRINE Here are six different scales of in- terest, increasing each ^ pr. ct. according to the relative plenty or scarcity of money. The five variations in each scale, denote the different objects which give degrees of interest, according to their character for security, duration, &c. I shall suppose, then, that the sink- ing fund taxes produce the effect of changing the scale of interest on money from No. i to No. 2. An impression is imm'ediately made on each object, producing an annual in- terest; and of course the public stocks, which form a part of those objects, fall in capital value, so as to give i pr. ct. more annual interest or income. But, on the supposition even that the sinking fund taxes produced no ef- fect whatever- on the scale of interest, it will soon appear, that no particular ob-. OF EQUIVALENTS. 203 ject, giving an annual income, can be ultimately more benefited than any other object in the same scale, by the appli-' cation of a large sum towards its pur- chase. . It must be recollected, that the duty of money consists in representing the objects of daily consumption, the an- nual or daily hire of man and of ani- mals, and the transfer of all property giving an annual income. • • ■ The power of any given quantity of money, in thus representing all things, is of course naturally limited; and if an extraordinary service is occa- sionally required for any particular ob- ject, there must arise a deficiency of power to represent other objects. IF the price of stocks then should be-'Carried by the purchases, through the sinking fund taxes, higher than the ficale establi.^hed by the relative plenty or 204 THE DOCTRINE scarcity of money entitled them to, a discordance with the other objects in that scale would immediately ensue, and all the principles of relative value be immediately destroyed. It must then become the interest of every individual, who wishes to ap- propriate his money to the purchase of an annual incbme, to neglect the public stocks, and to apply such money to those objects which are proportionably lower in price than their chttracter, for security, duration, &c, demands, until every object giving an annual income finds again its level iii the natural scale of interest, established by the existing relative plenty or scarcity of money. Raising large sums of money by public loans, increases no doubt, in some degree, the general seilo of inte- rest, because it is, in fact, creating ad- ditional money-wealth, giving annual OF EQUIVALENTS. SOJ* interest; but this eflfect is trifling when compared with that which is produced by raising the same sum in taxes ; and as Government expend the whole sum bor- rowed within the year,^ the general consumption of all objects is conside- rably increased, and makes full amends for all capitals being, temporarily de- creased in their money- value. But if, on the contrary, lo pr.ct. is taken from eyery person's income to pay off a public debt, the money-wealth is diminished at the expence of the ge- neral consumption and of ^tii6f ppblic revenue^ and the operation of* the tax hurts the scale of interest much more than the diminution of so much money- wealth can have benefited it. The influx of money prevents these -effects being generally perceived; but they are not less mathematically true, ^whether positive m negative; that is ro say, whether the evil really' takes place, or 205 THE DOCTRINE that the good resulting from the influx of money is lost by simply repairing the mischief. Having now fully combated the de- lusive ideas of those who support sink- ing fund systems, in every point of view in which the subject can be pre- sentedj ic behoves me to add a few words on the imaginary consequences of an ever-increasing debt, and of the supposed difficulty of finding money to support it. I have already stated, that there exists, in practice, a mode of raising money on annuities for 65 or 70 years, which create no greater charge of in- terest than perpetuities, and become extinguished without any reimburse- ment. Had that mode therefore hQen solely adopted for 100 years past, wc or EQUIVALENTS. 207 should at present only be burthened with the annuities created during the last 65 or 70 years, and have an an- nuity falling annually into the public Treasury, upon which a new annuity for 65 or 70 years might be annually and perpetually granted, while we should enjoy, unincumbered, the natural in- crease in the yearly produce of existing taxes., as a collateral resource and secu- rity against future .events. No situation in finance could be more enviable, and the financial machine might then be 'said to revolve upon its own axis, formed by taxes leyied oft the national industry' arid prosperity during ^5 or 70 years, with the addi- tional security of a farther increase in the produce of those taxes from increa- sing prosperity, promising thus eternal duration without further burdens. As modern nations have prospered "HCB THE DOCTRINE •during a much longer period, under ^the most pernicious systems of public finance, it follows of course that no "greater difficulty could have arisen re- 'ipecting the representation of an increa- sing debt, than has actually existed during the last 65 or 70 years. But this fear of there not being a •sufficient quantity of money for the support of an increasing debt, is equally applicable to increasing estates, houses, ^and industry; as neither the one nor the, other can conveniently take place •without additional representative signs. The increase of public debts, when substituted for a more pernicious mode of raising money for the use of tlie PubHc, is as useful and necessary tQ the prosperity of a nation^ as. the increase of estates, houses^ and industry, because those debts are in that case the means of promoting all those objects of national riches, or of preventing their decrease. OP EQUIVALENTS. a09 The complaints therefore, which are incessantly made against public debts, are frivolous as well as groundless, and should be levelled against raising the supplies within the year, in order to avoid public debts, against taxes for rhe pur- pose of paying oiF existing debts, and even against the mode of constructing many of those debts, as well as against that kind of taxes C levied even for the interest^ which produces the greatest ef- fect in raising the price of all objects of consumption. Nations who accumulate money ift their public treasury during peace, in order to carry on future wars, act much more erroneously; and cannot much in- crease in wealth and strength, as the source of prosperity is locked up by those means. Philosophers attribute, in general, every incapacity in point of public finance^, O 210 THE DOCTRINE to the form of government, in place of tracing it to a pernicious form in their financial systems, which may be rectified under a despotic as well as under a free government. The construction of all our public debts, ought to have been confined to long annuities, which extinguish them- selves ; or to perpetual annuities^ redeem- able at pleasure. These perpetual annuities should have been granted at such a rate of in- terest, according to the relative scarcity or plenty of money, as to procure par, or 100 pr.cent, in order to have the ad- vantage of redeeming them, when inte- rest of money fell; a temporary high in- terest not being an object of consideration to a nation. We shall suppose^ for argument sake. OF 15QUIVALENTS. a|I that 3 pr. cents might be sold at 64 pr.ct. and 5 pr. cents at loo. In the former case, money is no doubt obtained at a fraction less interest than in the latter; but of what moment is such saving, when compared with the possible reduction of those 5 pr. cents in a few years to 4 pr.cent. and perhaps to 3i and even to 3 pr. cent, in the course of a more considerable number of years. This reduction becomes at least a partial extinction of perpetual annuities, and arises naturally from the principle of paying a low interest for the use of money, when it is relatively plenty, after having paid a high interest for it, whe^ it was relatively scarce. These reductions of interest have already been established by ; practice, and it therefore becomes unnecessary O 2 ftia THE DOCTRINE for roe to ad^ more on the subject, or to observe, that 3 pr.cents cannot, with- out some equivalent consideration, or without consent, of the proprietors, be further reduced. But it is necessary to remark that, under this diminution of interest to 3 pr. cent, our public debts would seem to acquire a new character for durability equal to that of land ; and although it may be thought unfair, that the proprie- tor can never claim his capital at any future period, and that he remains sub- ject to the disposing of it much below par when interest of money is high, yet it must be considered, that every pur- chaser of land, houses, &c. when inte- rest of money is low, becomes equally exposed to tliis loss when interest of money is high, should his wants oblige him to alienate his property. This dispensation in Government OF EQUIVALENTS. 21^ from ever returning the capital, is fully compensated to the proprietor of the an- nuity, by its being perpetual and always saleable ; by the superior security of all public debtS;, and by the facility of re- ceiving the interest half yearly. I have however asserted, in the First Part of this Work, that all public debts, properly constructed, will extinguish themselves without any reimbursement, arising from a sinking fund: but this appears, as yet, only to be the case with the long and the short annuities, as the partial extinction of the 5 and 4 pr.cts. is confined to their reduction as low as 3 pr. cent* and it therefore now becomes necessary for me to develope a new jiiode of proceeding with those 3 pr, cts. by which they may be further reduced, and be at last fully extinguished without a sinking fund, and without any injury v;hatever to the money proprietors. This may seem paradoxical; but it 03 214 THE DOCTRINE arises naturally out of the power of mo* ney, combined with the principles of re- lative value, on which all financial ope- rations must be founded, in order to produce strict justice to all parties, and at the same time certain as well as salU" tary effects to the whole community. It is a well known fact, that our greatest loans are made in times of war; and as the scarcity of money is in ge- neral relatively greater during that period, than in times of peace, on account of the treasures of Spain remaining in Mexico japd Peru, the 3 pr. cent annuities are considerably below par, or 100 pr.ct. Suppose^ for instance, chat they are at 62 pr. cent, and that a new loan was ne- cessary. Government might offer to take the 5 pr. cents at 70 pr. cent, provided that thirty pound sterling in money be added. or EQUIVALENTS. 2'5 and for this one hundred pounds value so received, the Stockholder might be given the choice of a five pound an- nuity redeemable at pleasure, or a five pound sterling annuity for 70 years cer- tain^ and then to cease altogether. No Stockholder would object to 5Uch conversion, as his property would be increased by ^^ 8 sterhng on every 3^62 sterling, and his interest or yearly income 10 shillings on every £62 value, that is to say, above 4 pr. cent, on the capital value of that moment ; nor could Government hesitate at sacrificing 10 shillings or h pr. ct. pr. annum on every £ rco sterling 3 pr. cents, which it re- deemed in this manner from perpetual existence. If these converted 3 pr. cents were originally 5 or 4 pr. cents, it is in fact only giving back for a time some part of a previous extinction, in order to ex- 04 Cl5 THE DOCTRINE onerate the proprietors for the conse- quences of further reductions, and the advantages given, might serve also for a part of the bonus on the new loan* In these points of view, the sacrifice could admit of no regret; but when simply adopted, as a reparation for error: commimd^ in granting originally 3 pr.cts. much below par, it becomes a subject of grief, on account of the additional burthen, not unlike a sinking fund:, which Jt creates. The I pr. cent additional interest on each 5^ 100 sterUng stock, which the proprietor obtains, will, with compound interest, procure him more than his ca- pital in 70 years^ if he takes the long an- nuity ; and if he prefers the five pound perpetual annuity redeemable at pleasure, a reduction to 4 pr cent would only diminish his original 3 pr. cent t0 2 li, and if ultimately reduced to 3 pr. cent, there OF EQUIVALENTS. 217 would Still remain about nk pr. cent, of the original 3 pr. cent stock's interest. Several conversions therefore are ne- cessary, if perpetual annuities are granted before the whole can be extinguished ; but the new debt is also diminishing in an- nual burthens at each reduction of in- terest. Should these repeated conversions take 100 years to extinguish fully the perpetual annuities, they would still be less burthensome to the nation than a 70 years annuity, because a partial relief of § pr. cent, might, take place in a few years after their ^creation, whereas the whole burthen of a long annuity must remain dufing its existence of 70 years. If ic happened that the perpetual annuities could not be reduced lower than to 3§ pr. cents, the same principle may still be adopted towards their con- O 5 2lB THE DOCTRINE version into 5pr.ct. perpetuities or long annuities; nor must it be understood, that I have stated the exact proportion to be observed between those differently constructed annuities, as their relative price must depend on a variety of ex- isting circumstances, to be considered by the Minister^ and by the Money- lender, when any financial operation takes place. It is sufficient for me to have shewn the general and unerring principles of finance, as well as the solidity of my ar- guments, and the practicability of the doctrine so repeatedly urged by me, that all public debts are extinguishable with- out a sinking-fund, and without paying a higher interest than the current rate of money demands. As the terms of all money transac- tions are constantly varying, the Minis- ter of 'Finance has not only to attend to OP EQUIVALENTS, 219 the general principles, in constructing all public debts^ but also to the existing rate of interest, and to the principles of equivalent value in diiFerently con- structed annuities. The Money-lenders are by education sufficiently instructed how to attend to their own interest; but the education of Statesmen has hitherto been ill-sui- ted to acquiring that degree of know* ledge, respecting the interest of the Public, when money is to be raised, which would put him on a footing witli his antagonist, and give him a perfect idea of his undoubted power to give such a form to bis loan as he thinks proper, and ro enforce,, at the same time, reaso- nable terms. It is to this disparity of knowledge, that the doctrine of equivalents has been entirely lost sight of in public finance, and that the monied men in almost every 220 THE DOCTRINB country, have made bold assertions^ with- out any proof on tliis intricate subject, and have enormously enriched themselves at the expence of a deluded, impove- rished, and ruined Public. In order to prove an assertion, which I made in the former part of this Work, that a reimbursement by means of a sinking fund is in fact paying the ca- pital twice, nay even three times, I must observe, that a bonus from 3 to 5 pr. ct. is given on each loan, which indemnifies the money-lender against a possible fall in the price of Stocks, while any advan- tage vvl]ich might proceed from a rise in the price, is lost sight of, although it has sometimes, from the influx of money from abroad, been so considerable, as to bring the bonus to 10 a 12 pr. cent. I do not pretend to find fault with this principle, as I believe it to be neces- sary for securing the money against the time it is wanted, and in order to ena- OP EQUIVALENTS, Sal ble the Minister giving. such a form to his loan as he /may think most beneficial for the public interest, in conformity to the principles of equivalent value, and the natural powers of money. This advantage is, however, unheard of in all private money transactions, and if laid out at compound interest, procures to the money-lender, in a certain number of years, a sum equal to the whole ca- pital lent. The higher income given for mo- ney, beyond what is obtained for a per- petuity in land, procures also to the lender, in a certain number of years, when laid out at compound interest, a second sum equal to the whole capital lent. A reimbursement, therefore, of the capital at a distant period, by means of a sinking fund, gives a thii'd time the ca- pital borrowed. SM THE DOCTRINE But what shall I say respecting the sale of 3 pr. cents, at 55 a 56, and the repurchase of them at 96 a 97 pr.ct. that is to say, giving above 170 for 100 received, over and above the annual in- terest. When the one and the other operation takes place within the course of 8 or 10 years, as was lately the case in Great Britain, the advantages to . the money-lender arc superior to any I have enumerated, and admit of no apo- logy or justification whatever. Having now shewn the insufficien- cy of our present system, and collected all the materials for raising a tiew finan- cial machine, it remains for me to ex- plain the arrangement of its component parts, in order, to produce the greatest possible advantage to the whole com- munity. OF EQUIVALENTS. a!23 As this new financial machine will have no decomposing principles in its construction, it will require no repairs ; and if not adopted too late, I will ven- ture to assert, that it will last from age to age, in every country which is not yet matured in industry and po- pulation, or which is not yet reduced to an irremediable state of financial distress. 22^ THE DOC TRINE CHAPTER VI. Off the most perfect System of Public Finance, ALTHOUGH the preceding Chapters contain very ample explana- tions of every point necessary towards the formation of my financial system, yet it will be necessary to recapitulate shortly, the several parts, in order to bring them together into one point of view, For this purpose, my Readers must recollect, that as each money-tax in_ creases necessarily the price of every object upon which it is levied^ as well as of many other objects, by action and OF EQUIVALENTS. ang reaGtiofij the system of money-taxes has' in its progress to this day, considerably enhanced the money-price of labour, and of every thing necessary for human existence. It must further be kept in view, that as the same quantity of money, ot representative signs, becomes relatively less by the objects to be represented, demanding more of them as their measure or price, the interest of money is also considerably increased by money-taxes* This interest, or price of money, has been proved to be the director and the regulator of what each capital ought to give in annual rate of income; and all productions being the annual income of a capital representable by money, it follows, of course, that a further in- crease in the income of all cnpitals^ and in the price of all productions and of labour must ensue from this greater aaS THE DOCTRINE relative scarcity of inoiiey, producing a higher rate of interest. I shall not here enumerate all the actions and reactions which these two causes give rise to, but confine myself to saying, that they are m.unberless ; that their accumulating consequences are more and more distressing to each succeeding generation^ and that they operate in a kind of geometrical progression. Every Statesman admits, that taxes are oppressive ; but none think it neces- sary to examine into all the operations of the disorder which they occasion, and mankind have thereby been left entirely in the dark with respect to the ultimate effect, being -necessarily a de- creased mass of industry, as well as an increased rate of interest^ and a decreased produce in the amount of each tax on every accumulation which takes place, cither in their number, or in the ex- tension of any one specifically. (f- ^ , OF EQUIVALENTS. ^27 Neither could it possibly be disco-. vered under the general admission of oppression, divested of all explanations whatever, that money-'taxe-s increased also very considerably ^ and in a kind of geo* metrical progression the national expen- ces, so that every new tax created a new expence, as well as a new deficie'iiCT^ in the old revenue, at the very moment that an increase in the last, or a decrease in the first, became so essentially ne- cessary. These being then the consequences of adding tax upon tax, it follows, that the taking off taxes must produce the direct contrary effect; and no person can doubt, that the future prosperity of Great Britain calls for that measure in the most urgent manner. If the consequences which I have stated, should not be admitted by my readers, it becomes necessary that the P a 9ii3 THE DOCTRINE truth be explained by those persons who pretend to have a better knowledge of the nature of the oppression, in order to- prevent its being said, that the com- plaints of mankind respecting money- t^xes are groundless, and that the system pf taxation may be pursued without dread or without limitation whatever. If we do not shew the mode in which money-taxes create mischief to a community, or prove any bad consequen- ces which arise from them, we thereby ^ither acknowledge our incapacity for the investigation^ or we tacitly confess that they do no mischief whatever : and to this extraordinary idea, I am confident the most ignorant as well as the most enlightened of mankind, will not give their assent. Many Statesmen have indeed at- tempted to account for the increasing price of the necessaries of life, from the OF EQUIVALENTS. Sip general prosperity of the country, and consequent influx of money, raising many individuals from a state of competency - to a state of affluence. In this^ manner do they produce a speculative cause, in order to account for the mathematical effects of taxation. Their speculative reasoning is also divested of any depth of argument, be- cause those who rise to affluence put out their surplus money at interest, and do not give higher prices in the market for the necessaries of life, Amongst those individuals also, who become rich^, there are many that obtain their wealth at the expence of others who are becoming poor; and of course, in this case, one set supplies the other in those markets where the necessaries of life are procured. The additional money, also, which P3 230 THE DOCTRINE the Nation in general acquires annually, flows in gndually, and is absorbed by the increased representation of an addi- tional quantity of capital stock, and of productions, which constitute jointly, tha^ national prosperity so much boasted ofj and requires to be supported by addi- tional money or representitive signs, as forming a component part, which can- not possibly be dispensed with. The obscurity in which this subjec-". has been hitherto enveloped, may be justly attributed to Philosophers having applied Speculative reasoning to a mathematical subject. They constantly neglected to trace the mathematical operations of taxation, which would have rendered the subject perfectly intelligible,.and confined them- selves entirely to the simple idea, that every thing became dearer on money becoming plentier. OF EQUIVALENTS. 231 Every investigation will, howevev', prove the contrary to be the case, from the diminution which takes place in the rate of interest. The number of objects to be re- presented, are also so much increased by a circuitous process, under the influence of this diminished rate of interest, that the additional quantity of money, or re- presentative signs, brought into circula- tion, as well as that which is saved in the representation of all objects at their diminished money- value, is thereby com- pletely absorbed. In this manner does one part of the money system answer to the other part ; so that plenty of money produces plenty of all objects ; and as plenty of money causes a lower interest, or price to be given for it^ so does plenty of all objects ^occasion a lower price to be given for these objects, without any iu- P 4 . . 43^ THE DOCTRINE justice being done to the industrious pro- ducers: for, in the same manner as the efFccrs of any machine will be in pro- portion to the diameter of its wheels^ so is the quantity of industry in proportion to the quantity and movement of money, or representative signs; and the price of such industry, when divested of taxes, in proportion to the price or interest of money. Such is the course of nature, when not interrupted in its proceedings by money-taxes. Let it for the present, then, be taken for granted, that I have truly ex- plained all the intricacies of the perni- cious effects which arise from taxation, and that I have proved the price of money to consist solely m- the rate of interest; while the money price of any object is the measure due to it, as the interest of all the combined capitals OP EQUIVALENTS. 233 employed to produce it, with the ad- dition of taxes and their effects, and that the price of gold and silver is merely the relative value of one metal with the other. With these fundamental principles to guide our enquiry, we can be at no loss to discover how there arose so much finan- cial distress by levying the yearly wants of the public through money taxes only* as well as the consequent necessity of resorting ultimately to the liinding or loan system, which was so reluctantly pursued, although so salutary in its ef- fects. The imperfection of our loans in their construction, is -another object which claims our particular attention, and arises from the ignorance of man- kind respecting their self-extinguishing principle. In admitting, then^ that the interest p 5 334 THE DOCTRINS of all loans is subject to certain bounds foT its period of existence, without reim- bursement;, that the fatal consequences of taxation are a less mass of industry than would otherwise exist, and that we^ subject ourselves to a less produce from each tax, as well as to an increase in the price of all thhigs, and consequently in our public expenditure, there can be no doubt, that the true system of finance must consist in such practical opera- tions as will check, in the greatest pos- sible degree, these pernicious conse- quences, and procure, at the same time^ all the necessary supplies for the State. How easily would this object have been attained, had Government enacted, on the introduction of money-taxes^ that loans should annually take place for the whole of the public expences, and that the interest of such loans should be fhe only object of monej^- taxes. O^ EQUIVALENTS. 335; Such a system would have proved adequate to the highest expectations that could have been formed of it, and would have had the certainty of endless dura- tion, supposing no revolution took place in the Government, by which pubhc credit could be injured or annihilated for a time. The funding' system, therefore, con- structed on self- extinguishing principles, is the most advantageous, solid, and just plan for raising the public supplies ; and ought in the very first instance to have taken place for the pe^ce-establishment ^s well as for "the war-expences. Supposing the interest, at that time, to have been 15 pr.cent. pr. annum, ic would still have taken near 7 years to have brought the amount of taxes re- quired for the interest of loans, to what was really levied the first year by a contrary system.' 2^6 THE D©C THINE The second, third, and further years, would have had the advantage of a rapid declension in the rate of interest, b3^ the adoption of this plan. The progress of industry, and the growing produce of each tax, would then have assumed a very different appearance than what really took place at that re- mote period; and the price of every thing, as well as our public expences, would have been kept down in such a manner, as would hardly now be credited. The taxes levied for the interest of loans during 6$ a 70 years, would have formed an axis for the financial machine, upon which it might have perpetually revolved, whether such loans were foun- ded on long annuities ceasing after a cer- tain period, or on perpetual annuities re- deemable at pleasure, and, after reduc- tion of interest, ultimately extinguishable by conver^^'^^-ns, as has been alreadj'^ ex- OF EQUIVALENTS. £137 plained: the last-mentioned would evi* dently have been preferable to long an- nuities, while interest remrdned so very high. Industry would then have been no more subject to any check from new taxes, and the price of every object pro- duceablein Great Britain, would have been no further increased from that cause. The first loans would doubtless have been subject to the highest inte- rest; but, on their reduction to a lower rate, there would have ariseh a pro- vision of interest for further annual loans* Three grand resources would have been operating together, during those f o yeai's, in which the financial machine was to be compleated for perpetual dura- tion, if the Government was not anni' hilated at one time or other. I. The progressive increase of industry. ft38 THE DOCTRINfE and consequent]}^ of the produce of exist- ing taxes. 2. The power which Government possessed of raising yearly a new tax for the interest of loans. 3. The gradual reduction of inte* rest, by paying off the loans at high in- terest, when the rate became lowered. These annual loans would naturally Become at first greater, in consequence of so many years accumulating taxes, and of the high interest of loans increasing the price of every object, as well as the public expenditure. It is however probable, that a con- siderable number of the 65 or 70 years> would have passed without laying on a new tax for the interest of the annual loan, because the natural increase upon an established number of taxes, and the OF EQUIVALENTS. H^g reduction from high to low interest, would have been more than sufficient for the annual loans during peace. We must indeed detach from our ideas of the annual wants of the Public, either for a peace or for a war-esta- blishment, the scale of their present mag- nitude, as it is no ways applicable to the price of every thing for the first 70 years after the introduction of money- taxes; and the low prices which then really existed, would not have acquired even that height, if the idea of making loans had originated at the same moment as that of taking taxes in money, and that the latter had also been solely con- fined to the interest of loans, and to the Civil List, as an annual debt due to the Crown. Unfortunately for mankmd, the sys- tem of public debts was adopted some centuries too late; and the present high a^O THE DOCTRINE ' price of European productions:, as well as the actual incapacity of many States to raise money, have originated from that circumstance, and from the general ignorance respecting money, and money taxes. Great Britain has hitherto supported the increase of taxation, by means of her increasing industry, her insular situa- tion, her superior constitution of go- vernment, and her mechanical improve- ments, which have procured her many advantages over other nations. Whenever she could not obtain, by the balance of her foreign trade, the necessary augmentation of representa- tive signs, in order to support her in- creasing industry, and her foreign ex- pences in times of war, as well as the consequences of her accumulating taxes, she has itcver failed to acquire it by her. punctuality in all money con- I OF EQUIVALENTS. 241 , cerns ; and consequently by her credit^ from the individuals of other nations, through her public loans. These purchases in our funds have been carried to such lengths by foreigners, that at this moment they have claims nearly equal to all the circulating coins of Great Britain. .. However alarming this claim may ap- peari yet it is far from being so in reality, because any attempt to sell a considera- ble part of the public funds, in order to receive the amount in coin or bullion., would reduce thq price of Stocks so considerably, as to make Foreigners desist from further proceedings of that kind. The possibility of raising money by loans, was probably, on account of the ignorance of mankind^ treated as chime- rical some centuries ago, as well as the possibility of having a never- failing pnper-money, or Bank-notes, in circula Q 242 THE DOCTRINE tion^, yet we see that both have taken place, and that Great Britain could not have existed without them. But the progress of truth has, in all agesj been impeded and even opposed by those men who had the greatest re- putation for wisdom. This cannot arise from their want of capacity for investigation, and can only be accounted for by the bad ef- fects of early prejudices, or to their want of candor in adopting the disco- veries and superior combinations of those who do not enjoy the same reputation for wisdom. The resistance which the Copernican System experienced by a tenacious adher- ence to the erroneous ideas of Ptolemy, affords a strong proof of this predilection for received opinions, and should be a warning against implicit confidence in men OF EQUIVALENTS. 243 of reputation, who are peculiarly endow- ed with the gift of writing or speaking. Mathematical truths must, indeed, at last prevail over all difficulties or resist- ance; and with whatever indiiFerence my ideas on finance may' be at present received, the time is not very distant when necessity will call for their being partially if not completely adopted, as the only means left for saving the nation from ruin, and healing those wounds which the errors of Statesmen have given to the financial sinews of Great Britain, and to the peace of many families of small income. The inconsistency of the human un- derstanding, in reasoning upon public fin- ance, and in supporting the plan of a sink- ing fund, is inconceivable. We complain of the national debt, because the interest must be annually paid by taxes. 244 ' THE DOCTRINE Tnxation is of course the disease wc are labouring under ; and we wish to get re- lieved from a part, because we think that it is gradually undermining the State. But the mode in which taxes ope- rate to the detriment of a nation, is never considered or examined into, although it is the only means of acquir- ing a knowledge of what would operate either as a cure, or as a partial relief. We confine ourselves, on the con- trary, to the popular idea that;, by creating a sinking fund, in order to pay off the national debt, the interest^ or the disease, will of course cease. Infatuated human nature! Is it not evident, f/^at the sinking ftmd^ raised hy taxes! and the supplies raised by taxes 'ivithin the year^ in order to avoid loans^ are not only the self -same dfsease as the interest raised hy taxes^ of which so OF EQUIVALENTS. C45 HUich is complained, but also a dreadful aggravation of twenty times as much as is either attempted to be cured or avoided by these operations for suppressing an- nunl interests! The pretended cure, as well as the precaution of avoiding any further disease of interest on loans, by raising the supplies within the year through taxes, are con- sequently mere delusions of the human brain, which lead to the most fatal con- sequences. We cannot even boast of the ulti- mate relief which must ensue, when a part of the debt is extinguished, and that the sinking fund taxes, as well as others to the amount of the' interest re- deemed, will be taken off, as the pohti- cal body will be reduced to a dreadful state of debility by this important aggra- vation of the disease during so great a number of years. Q3 S4^ THE DOCTRINE By this state of debility, must be understood the enornious prices of every thing, and the consequent increased an- nual expence, without any adequate income. Fatal symptoms of declining indus- try, and even of insurrection, may also appear, and become incurable, before the period of relief arrives. T.et us then reflect on the subject before it be too latC;, and commence by immediately desisting from that desperate expedient of a sinldng fund. It is evident, that no good can pos- sibly arise from it, and the act of aban- doning this unfortunate and erroneouf; system will insensibly lead us into all the paths of financial wisdom. The dread hitherto experienced re- specting an ever-increasing and eternally OF EQUIVALENTS. 247 existing debt is now entirely ^'amoved by a knowledge of the practicability of making those debts completely extin- guishable after a period of 60370 years, or reduceable in their interest in pro- portion to the reduction which might take place in the annual income or price of money, with the possibility of ultimate annihilation by repeated con- versions* As our ancestors have most undoubt- edly deviated from the true principles of finance, on the introduction of mo- ney-taxes, and that every succeeding ge- neration has thus been involved in greater expences, in greater debts, and in grea- ter difEculticS;, it becomes our immediate duty to check and to mitigate those evils as much as lays in our power, by the most extensive adoption of the grand panacea, called pubhc Loans, wherever their application can be substituted for ^an annual levy in taxes. Q4 24^ THE DOCTRINE This substitution will at once reduce such part of the disease to about one-twen- tieth of what it would otherwise be. No nation can po5sibly dispense with that degree of taxation which is ne- ces5;ary for the annual interest of all lo^ns^ because the annuity must rest on the increased value, and of course on a component part of the money-price given for the objects r^nnually taxed for tiiat purpose. The annual settlement on the Crown, as well as . some other inferior annual settlements, should also repose on tlie same security. Great Britain is no doubt sufficiently capable of providing for the interest of her national debt, and for those annual settle- ments by means of taxation ; and it would even be a matter of great consolation to the Nation, that this annual -interest was or EQUIVALENTS. C49 gradually diminishing from a proper con-- struction of the public debt, than by means' of further taxation, because an additional annual fund would .be then naturally arising, in order to provide for the interest of new loans* But as the interest of this public debt has become so very considerable from the erroneous system of finance which has been, hitherto pursued, and that the improvident construction and present form of those debts admit of very little extinction by natural means, we are called upon not to admij; of any aggravation to the disease of taxation, when it can possibly be avoided. This leads me to state that the peice- establishment might also be raised by loans in the same manner as the war- expences* It would be absurd to suppose that 25* THE DOCTRINE there was any necessity for levying the cxpences of the army, the navy, and of the raiscelJaneous services during peace, in any other manner than the war ex- pences with which they are often blen- ded, as the regular payment of the ob- jects furnished, is all that requires to be attended to, and the Nation has of course the right of raising the money in such a way as may be found most beneficial to the whole community. The true principles of finance-there- fore, as well as the necessity of reducing the disease of taxation to the lowest pos- sible state, demands that the expences of the peace-establishment be provided for by annual loans, instead of taxes within the year, in the same manner as dire ne- cessity has already called for the provi- sion of the war- expences. Hovf fortunate then for the inha- bitants of Great Britain, that the very OF EQUIVALENTS. 251 simple combination of self- extinguishing loans can still be applied as a substitute towards relieving us from that part of our present taxes, which form a provi- sion for our peace-establishment, and that no substitute whatever is necessary for the present amount of our sinking-fund whenever its destruction is resolved on. Supposing the former to be 5 mil- lions and the latter 6 millions, it follows of course that the nation may be imme- diately relieved of 1 1 millions of annual taxes; though prudence will, no doubt, suggest its being done gradually, in or- der to avoid any bad consequences from too great and too sudden a change in the relative value, of every thing. To supply the wants of 5 million annually for the peace -establishment, an annual loan to the amount gradually taken oS^ must necessarily be resorted U). :?52 THE DOCTRINE The annual interest on each year's loan, when fully taken off, may be cal- culated on an average at 4 pr, cent, or :^ 200,000 sterling. That additional charge, or accumu- lating expence, every succeeding year, will be found in the naturally growing produce of the remaining taxes every succeeding year. This increasing produce in taxes has been proved, in genera], to be the eftect of an increasing importation of the me- tals in Spain and Portu'gal, from whence they arc dispersed throughout Europe to the most industrious nations, amongst which Great Britain is so conspicuous. But the act of taking oif gradually 1 1 millions of taxcs^, being tantamiount in effect to the introduction of several million sterhng in specie, would produce so rspid zn increase of industry, and so OF EQUIVALENTS^ rJ53 considerable a diminution in the price of all things, that a further increased produce in all the taxes would take place annually, to the amount of several hun- dred thousand pounds, independant of what arose from the increase of the metals and the whole ti millions would be again forth-coming in the course of a certain number of years, on a lesser number of taxes, by means of a more extensive in- dustry. The public expences for the peace- establishment, would also be so much di- minished by the reduced price of every thing that a 41 million loan, or even less, would soon be substituted for the 5 million annual loan ; and as there would be no use for the extraordinary increase in the produce of taxes amount- ing asabovementioned, to several hundred thousand poundssterling,every succeeding year;, until the whole effect had taken place, a tax or t?J.xes might further be 254 THE DOCTRINE annually taken oiF to a very great amount, and particularly if the natural or ordi- nary increase was equal to the interest on the annual loans» The distinction between the ordi- nary and the extraordinary increase, will no doubt be lost^ as they must of course appear blended together; but the ge- neral excess will be easily ascertained. The good consequences which would arise from this plan, would be so nume- rous, and succeed one another so rapidly, as to astonish mankind, and make our present system appear in that dangerous and destructive light, .which it so pecu- liarly^, merits. It may however be thought neces- sary to put a part of our national debt into a state of gradual extinction, in jor- der to secure with more certainty the perpetuity of our^ financial resources, to OF EQUIVALENTS. 2SS which the mode of making loans in the 3 pr. cents, during the two last wars, has given a very sensible shock. My readers will easily perceive, that a conversion of the 3 pr. cents into a 70 years annuity, would notsalFord a very speedy relief, and that it therefore be- comes necessary to convert a considera- ble part, at least, into a 4I a 5 pr cent, fund redeemable at pleasure. In this case, a part of the extra- ordinary increase of the produce of taxes, might be appropriated towards the temporary increase of interest, from 'the conversion, and will of course form that sacrifice which is so necessary to be made for our past errors. The precaution of converting a con- siderable part of the 3 pr. cents, into a 4i a 5 pr. cent, may perhaps not be ab- solutely necessary towards the permar||ncy 555 THB DOCTHINE of our financial system, but the public debt cannot with propriety be left in its present state ; and it behoves us to add every sort of security, in support of a fabric, which has been built upon very unsafe principles, and to vvhich no atten- tion has been paid, until it was upon the point of giving way. ^The large sums of interest to be provided for in times of war, present themselves also for political consideration, as- the natural increase in tlie produce of taxes is no ways adequate to such a provision* Hitherto the interests of war-debts have been raised i)y new taxes; but as those times are not the most favourable for such an operation of finance^ it may not- be improper to allow the extraor- dinary increase in the produce of the tkxes to accumulate to 2* or 3 millions, during peace, and by applying it during^^^^^H OF EQUIVALENTS. ^S7 that time to defray in part the peace establishinent, reduce thereby the neces- sary annual loan of 4^ or 5 millions in- proportion as that superfluity of produce arose. These 3 millions, in addition to the annually growing produce of taxes, will supply the interest of loans during war j and for any deficiency that might exist, some of the old taxes may be renewed, until a peace takes place, when the grow- ing produce of taxes will be again suf- ficient for the interest of the loans to be made annually for the peace-establish- ment* As thtre will probably^ during that se- cond period of tranquilhty, arise some re- ductions in high interest, or some extinc- tion of annuities granted, an annual fund may again be established, to be expended in interest on loans during war j and the loans for the peace- establishment wilJ, ia R 258 THE DOCTRINE consequence of this annual fund, be again so much less. I have now stated how far a nation may go, with propriety and justice to all parties concerned, in substituting loans for taxes, and even howpublic loans may be so constructed, as to disappear in the course of a considerable number of years, with- out any reimbursement of the capital, or injustice to the money-lenders. I only wish, however, to urge for the present, the absolute necessity of taking off taxes to the amount of the sinking fund, and also the right which the Public has to demand it from the Legisla- ture, as a contrary system is so repugnant to good sense, and extremely injurious to the future welfare of the Nation. - This relief from taxation will nlone i;educe, very considerably, our expences below what they otherwise will be. OF E QUI VALE NTS« 25^ and occasion an extraordinary increase in the produce of our taxes, suppo- sing even a war to take place next year. This extraordinary increase, joined to the ordinary increase, will pro- vide for the interest of the loans in the first years of the war^ and when that resource is exhausted, it will be still expedient and practicable to avoid new taxes, by encroaching on the an- nual peace- establishment fund of 4I or 5 millions, making of course the an- nual war loan so much more as may be expended in interest, until the war shall cea^e. For that part of the annual peace- establishment (supposing even that it amounted to almost the whole) which might be thus consumed in interest of loans during war, it will be necessary to continue annual loans during peace, R 2 a6o THE DOCTRINE imtil the ordinary increase in the pro- duce of existing taxes, the falling in of annuities, and the probable reductions in the interest of the loans made dur- ing war, shall have again provided for them. On the supposition, however, that the resources which I have enumerated were not adequate to the exigencies of the State, or that it was deemed politi- cally expedient to have the deficient part of the annual peace - establishment immediately forthcoming from taxation^, recourse may be had to levying a cer- tain annual sum in taxes^ say 2 or 3 millions after peace is established. The same mode of proceeding, as above sta- ted, may again be followed during fu- ture wars; and it is necessary to ob- serve, that whatever disappointments might occasionally arise, either in the growing produce of taxes, in the reduc- tions of interests during peace, or ^n OF EQUIVALENTS. Q.Sl the increase of our public expences, that it may at all times be provided for through the mode which is now adopt- ed; that is to say, by laying on new taxes, or by levying again some of those which were taken off, which every Go- vernment has the right as well as the power to do. It is evident, that the system which I have endeavoured to explain, destroys no resource whatever ; but on the contrary protracts, by a happy combination of the powers of money and of taxesy for the interest of loans onl'^^ that accural*.' ration of burdens, which produce such confusion in the economy of States, as well as of individuals. I am fully aware^, that I have ap- plied my studious hours to a very un- grateful subject, of which few indivi- duals will attempt an investigation; and of which a model cannot be made, as is R '- St6a THE DOCTRINE the case in mechanics, so ns to convince even the most ignorant man of its ef- fects, without giving him the trouble of examining the different parts by which the whole is constructed, I have however done my duty to the Public, in communicating what know- ledge I have acquired by reflexion and deefj meditation ; and if the inhabitants of Great Britain persist in following a system that leads to evident ruin, I can only silently lament their infatuation. They must not imagine, however, that these principles are exclusively ap- plicable to Great Britain, and that no other nation can adopt them. The principles I have explained are applicable to the finances of all countries, whatever may be the errors which they have already committed. r OF EQUIVALENTS. 263 HoILuid inay be golisiderably re- lieved in times of peace, although she has hoimd herself to annual reiniburse- nienw, which form a part of her an- nual deficiency; and this error can only be repaired by new annual loans, on proper principles, to the same amount, on which a sacrifice for boiTOwing with one hand, at high interest^ to pay off with another hand what" was con- stituted at lower interest, mu5t nam* rally ensue^ because public credit calls imperiously for the rigid performance of all engagements which are entered into. This error proceeded from thpir Statesmen supposing, very imjMroperly, that an ohligation to reimburse was ije* cessary to obtain the money wanted on loan, or that a fractional part of the annual interest would be saved by sul;^-: mittiuix to this inconvenience of reitH- biirsernent. R4 264 THE DOCTllINE It is in my opinion more excuse- able th^n that of gratuitouslf^^'mg off without any obligation whatever to do it, and at the rate of ^ 140," or more, for every £,100 sterling received, as will take place in Great Britain ; though, I must confess^ that the impracticability of paying off public debts has been self- evident, in Holland, so long ago as 1795, since which time this system has been mostly adopted. Holland is not eyen able to bear her present taxes ; and she will there- fore be at hst compelled to relieve her inhabitants from the grievous oppres- sion of paying annually, as a gratuitous gift, 7 pr. cent, on their incomes, and 5 pr. cent, on their capital, for the pur- pose of specific reimbursements, and to substitute, in lieu of it, annual and voluntary loans, on proper principles, to that amount, as well as for the remain- ing annual deficiency. O F EQUIVALENTS. 26^ The interest on the general annual deficiency of, perhaps, 14 a 15 millions of gilders in times of peace, would in- deed appear to be an increasing annual charge every succeeding year, which the increase of her industry would probably not be equal to, and of course that the additional annual interest would not be forthcoming in the annual increased produce of her taxes. But the decrease of interest on her debt, which might, by a proper con- struction, take place in afewyears, would more than provide for it; and, by eco- nomy in her annual expences, she may even in part provide for this annual interest on 14 a 15 millions annual loan, particularly if she attends to the regu- larity of her payments; as every irre- gularity on this point produces -a great waste of public money. If the East Indi^ Company, or their R 5 266 THE DOCTRINE settlements, and theii* commerce, could also provide for the annual sum of 5 or 6 millions of gilders^ which her debts and her civil-establishment cost the nation at present^ the general deficiency would be considerably diminished. I consider her, however^, as hardly able to bear future wars, from the great- ness of her debt, and of her expences, as well as from her state of maturity, with respect to internal industry and external commerce, until the interest jof the national debt is considerably di- minished by voluntary reductions, so as ^ to provide again for large annual loans without new taxes. Her breach of faich \s also at pre- sent much complained of, and of course her credit much impaired, by taking a surrt's^ or not liquidating what was due according to the obligation entered into with the .Piiblic, on taking over the OF EQUIVALENTS. C67 effects and engagements of the East India Company, and confirmed by an article of the Constitution of 1801, which only required the sacrifice of borrowing with one hand to pay off with the other; and, like the first-mentioned re- imbursements, demanded no very im- portant neAV provision of interest. It \^ to be hoped, that this surus will not degenerate into a permanent act of bankruptcy, which would put an ehd to all financial resources for a very long course of time ; as the in- crease of taxes, either ordinary or ex- traordinary, to any great amount, is im- practicable, and the resource of public credit cannot exist without juscice. Necessity must therefore ultimately en- force fair-dealing, and repel the false economy of a partial bankruptcy. The financial situation of France has never been an object of enquiry 26S THE DOCTRINE with me ; but I know that she has, in imitation of the errors of Great Britain, created a sinking-fund^ of no great importance indeed; though she has not hound herself to any reimburse- ments since the act of bankruptcy which reduced her debt to | of its amount. An act of bankruptcy is no doubt attended with serious consequences ; but it must not be supposed, that the real principles of finance do not afford the means of repairing the machine, as the sacrifice necessary, \^ only a very heavy interest on the loans made for the first years of diflidence, after a breach of faith has taken place, and until confidence be again restored. These breaches of faith originated from an ignorance of the true princi- ples of finance; but a knowledge of these principles will make it w^ehss in OF EQUIVALENT $• &69 future, and they are of course no more to be apprehended. The French nation possesses so many men of quick comprehension, and of ready combination, that I have no doubt they will make the pbject of finance their particular study, and discover that such portion of their annual revenue which is now applied to the interest of their debt, is all that is required of the nation in taxes, and that the remainder, supposing it even 400 millions of francs, migh be annually raised by loans, pay- able by instalments of 10 pr. cent, monthly. As England and Holland have al- ready demonstrated the right and the power to take 10 pr. ct. on every per- son's income as a free gift, there can be no shadow of doubt respecting the right and the power of tacking to this bur- den the current interest, so as to make 270 THE DOCTRINE it a favorable loan to those who are taxed in this manner, should voluntary loans not succeed. But the French nation will na- turally commence with loans for a small part only, in order to be certain of the practicability of this system; and will gradually extend it more and more, from the great prosperity which they will find to arise from it;, as well as on account of the sensible diminution which will take place in the ratio of interest on their public funds, and in their ex- pences, by the regularity of their pay- ments, and by the diminished price of various objects. That they must now pay about lo pr. cent interest for what they may think proper to borrow, is mostly to be ascribed to their having broke their fnith with their creditors; but the for- I OF EQUIVALENTS, a^£ feit of increased interest will only exist for a few years, if they attend to the proper construction of their debts. I doubt if their national interest amounts to four millions sterling, in- cluding that on arrears and on anticipa- tion of revenue ; and as their former er- rors and their past bad conduct, in break- ing their faith, will in a few years be repaired and effaced, they will have many advantages over Great Britain, in point of finance, since their taxes and their debts will be both relatively and positively much less. Should both nations persist in fol- lowing their present systems, they will even ultimately be in the most favoura- ble situation, because they are not fol- lowing the system of reimbursement tp any extent, and can at all times relieve themselves from a great portion of their % Z7H THE DOCTRINE present taxes, by substituting loans, either voluntary or forced, while we^ are bur- dened with an immense debt, and are in- volving ourselves in more taxes and more expences, from our sinking-fund $ystem^ to an enormous amount. It will perhaps be said, that I act improperly in talking so favourably, and in so explanatory a manner, respecting the finances of France: but it must be considered, that the inhabitants of Great Britain are kept in the dark upon this subject ; that science is intended by Na- ture to be for the benefit of all mankind ; and that when a new and eligible system is adopted by one country^ it will natu- rally be imitated in other countries. The British nation has hitherto neglected this science^ and amuses her- self with the paltry progressive increase in the produce of her old taxes, as a OF EQUIVALENTS. 27^ proof of her prosperity, and also with the false idea, that the want of public credit in France renders that nation in- capable of any financial efforts. ' This new system will therefore^ most probably,* make its way first in other countries, whose inhabitants have not this increasing resource to amuse themselves with, and be afterwards adop- ted by Great Britain from dire necessity; although it might have taken root there eighteen years ago, and have produced a very different political situation, with . respect to other countries, than at present exists. I shall now conclude with some general observations, applicable to all countries. Every Government has the right and the power to levy on the inhabitant?, by taxes or by loans, as may be found S a74 THE DOC THINE most beneficial to the community, what- ever may be necesssay for its internal defence, and for its external attacks in the case of war. Loans are, in all cases, (except for interest) to be preferred to taxes. Those loans may be voluntary or forced, at the current rate of interest, without prejudice to any individual what- ever; and may be so constructed, as to be subject ro ultimate extinction in the course of a given number of years, without any greater bm*den in taxes for the interest, than those levied in the first 6s or 70 years. These principles give the power of establishing public finance with such security, that it may move on its own axis, as long as Government continues to exist ; and be even continued under a succession of governments, as long as the world exists* \ OF EQUIVALENTS. ^75 The resource of bankruptcy, by not fulfilling every engagement, produces greater burdens and inconveniences than it attempts to remove ; and is the height of injustice. *♦- It acts, in the first instance, as a vio- lently oppressive tax, solely upon those individuals whom it injures; and, in the result, becomes a very heavy tax upon the whole community, by destroy- ing public credit. This is evident, in the depreciated state of the remaining funds, and in the high interest which a nation is afterwards obliged to give ; both wWch circumstan- ces are injurious to the whole commu- nity, and particularly distressing to those who are divested of their just claims upon the Public* It is therefore for the interest, as well as for the honour of the Public, ro ^7^ THE DOCTRINE submit to a general tax, in order to avoid these conseqiiences. National bankruptcy, or national incapacity^ in point of finance, is of cblirse national nonsense; an^ takes its rise equally with the financial distresses of some countries, and the approaching danger of others, from the want of a ^JufTident knowledge of the iiibject. FINIS. GENERAL LIBRARY UNIVERSITY OF CALIFORNIA— BERKELEY RETURN TO DESK FROM WHICH BORROWED This book is due on the last date stamped below, or on the date to which renewed. Renewed books are subject to immediate recall. MAR2 31954,L NOV ^^0 LD 31-100to-1,'54(1887s16)476 m SC 93512 MSOSSOG //6^?6 - m