 Chapter 2 Part G of the Wealth of Nations, Part G of the Sources of the General or Public Revenue of the Society. Malt is consumed not only in the brewery of beer and ale, but in the manufacture of low wines and spirits. If the malt tax were to be raised to 18 shillings upon the quarter, it might be necessary to make some abatement in the different excises which are imposed upon those particular sorts of low wines and spirits, of which malt makes any part of the materials. In what are called malt spirits, it makes commonly but a third part of the materials. The other two-thirds being either raw barley or one-third barley and one-third wheat. In the distillery of malt spirits, both the opportunity and the temptation to smuggle are much greater than either in a brewery or in a malt house. The opportunity, on account of the smaller bulk and greater value of the commodity, and the temptation, on account of the superior height of the duties, which amounted to three shillings, ten and two-thirds pence, upon the gallon of spirits. By increasing the duties upon malt and reducing those upon the distillery, both the opportunities and the temptation to smuggle would be diminished, which might occasion a still further augmentation of revenue. It has, for some time past, been the policy of Great Britain to discourage the consumption of spiritous liquors, on account of their supposed tendency to ruin the health and to corrupt the morals of the common people. According to this policy, the abatement of the taxes upon the distillery ought not to be so great as to reduce, in any respect, the price of those liquors. Spiritous liquors might remain as dear as ever, while at the same time the wholesome and invigorating liquors of beer and ale might be considerably reduced in their price. The people might thus be in part relieved from one of the burdens of which they at present complain the most, while at the same time the revenue might be considerably augmented. The objections of Dr. Divinot to this alteration in the present system of excise duties seem to be without foundation. Those objections are that the tax, instead of dividing itself as at present, pretty equally upon the profit of the maltster, upon that of the brewer and upon that of the retailer, would so far as it affected profit, fall altogether upon that of the maltster. That the maltster could not so easily get back the amount of the tax in the advanced price of his malt as the brewer and retailer in the advanced price of their liquor, and that so heavy a tax upon malt might reduce the rent and profit of barley land. No tax can ever reduce, for any considerable time, the rate of profit in any particular trade, which must always keep its level with other trades in the neighborhood. The present duties upon malt, beer and ale, do not affect the profits of the dealers in those commodities, who all get back the tax with an additional profit in the enhanced price of their goods. A tax indeed may render the goods upon which it is imposed so dear as to diminish the consumption of them. But the consumption of malt is in malt liquors, and a tax of eighteen shillings upon the quarter of malt could not well render those liquors dearer than the different taxes amounting to twenty-four or twenty-five shillings due at present. Those liquors, on the contrary, would probably become cheaper, and the consumption of them would be more likely to increase than to diminish. It is not very easy to understand why it should be more difficult for the maltster to get back eighteen shillings in the advanced price of his malt than it is at present for the brewer to get back twenty-four or twenty-five, sometimes thirty shillings, and that of his liquor. The maltster, indeed, instead of a tax of six shillings, would be obliged to advance one of eighteen shillings upon every quarter of malt. But the brewer is at present obliged to advance a tax of twenty-four or twenty-five, sometimes thirty shillings, upon every quarter of malt which he brews. It could not be more inconvenient for the maltster to advance a lighter tax than it is at present for the brewer to advance a heavier one. The maltster does not always keep in his granaries a stock of malt, which it will require a longer time to dispose of than the stock of beer and ale, which the brewer frequently keeps in his cellars. The former, therefore, may frequently get the returns of his money as soon as the latter. But whatever inconvenience he might arise to the maltster from being obliged to advance a heavier tax, it could easily be remedied by granting him a few months longer credit than is at present commonly given to the brewer. Nothing could reduce the rent and profit of barley land which did not reduce the demand for barley, but a change of system which reduced the duties upon a quarter of malt brewed into beer and ale from twenty-four and twenty-five shillings to eighteen shillings would be more likely to increase than diminish that demand. The rent and profit of barley land, besides, must always be nearly equal to those of other equally fertile and equally well-cultivated land. If they were less, some part of the barley land would soon be turned to some other purpose, and if they were greater, more land would soon be turned to the raising of barley. When the ordinary price of any particular produce of land is at what may be called a monopoly price, a tax upon it necessarily reduces the rent and profit of the land which grows it. A tax upon the produce of those precious vineyards, of which the wine falls so much short of the effectual demand that its price is always above the natural proportion to that of the produce of other equally fertile and equally well- cultivated land, would necessarily reduce the rent and profit of those vineyards. The price of the wines being already the highest that could be got for the quantity commonly sent to market, it could not be raised higher without diminishing that quantity, and the quantity could not be diminished without still greater loss, because the lands could not be turned to any other equally valuable produce. The whole weight of the tax, therefore, would fall upon the rent and profit, properly upon the rent of the vineyard. When it has been proposed to lay any new tax upon sugar, our sugar planters have frequently complained that the whole weight of such taxes fell not upon the consumer, but upon the producer, they never having been able to raise the price of their sugar after the tax higher than it was before. The price had, it seems, before the tax been a monopoly price, and the arguments adduced to show that sugar was an improper subject of taxation demonstrated perhaps that it was a proper one. The gains of monopolists, whenever they can be come at, being certainly of all subjects the most proper. But the ordinary price of barley has never been a monopoly price, and the rent and profit of barley land have never been above their natural proportion to those of other equally fertile and equally well-cultivated land. The different taxes which have been imposed upon malt, beer, and ale have never lowered the price of barley, have never reduced the rent and profit of barley land. The price of malt to the brewer has constantly risen in proportion to the taxes imposed upon it, and those taxes, together with the different duties upon beer and ale, have constantly either raised the price or, what comes to the same thing, reduced the quality of those commodities to the consumer. The final payment of those taxes has fallen constantly upon the consumer and not upon the producer. The only people likely to suffer by the change of system here proposed are those who brew for their own private use, but the exemption, which this superior rank of people at present enjoy from very heavy taxes which are paid by the poor laborer and artificer, is surely most unjust and unequal, and ought to be taken away even though this change was never to take place. It has probably been the interest of this superior order of people, however, which has hitherto prevented a change of system that could not well fail both to increase the revenue and to relieve the people. As such duties as those of custom and excise above mentioned, there are several others which affect the price of goods more unequally and more indirectly. Of this kind are the duties which in France are called pages, which in old Saxon times were called the duties of passage, and which seem to have been originally established for the same purpose as our turnpike tolls, or the tolls upon our canals and navigable rivers for the maintenance of the road or of the navigation. Those duties, when applied to such purposes, are most properly imposed according to the bulk or weight of the goods. As they were originally local and provincial duties, applicable to local and provincial purposes, the administration of them was in most cases entrusted to the particular town, parish, or lordship in which they were levied, such communities being in some way or other supposed to be accountable for the application. The sovereign, who is altogether unaccountable, has in many countries assumed to himself the administration of those duties, and though he has in most cases enhanced very much the duty he has in many entirely neglected the application. If the turnpike tolls of Great Britain should ever become one of the resources of government, we may learn, by the example of many other nations, what would probably be the consequence. Such tolls, no doubt, are finally paid by the consumer, but the consumer is not taxed in proportion to his expense, when he pays, not according to the value, but according to the bulk or weight of what he consumes. When such duties are imposed, not according to the bulk or weight, but according to the supposed value of the goods, they become properly a sort of inland customs or excise, which obstruct very much the most important of all branches of commerce, the interior commerce of the country. In some small states, duties similar to those passage duties are imposed upon goods carried across the territory, either by land or by water, from one foreign country to another. These are, in some countries, called transit duties. Some of the little Italian states which are situated upon the Po, and the rivers which run into it, derive some revenue from duties of this kind, which are paid altogether by foreigners, and which, perhaps, are the only duties that one state can impose upon the subjects of another, without obstruction in any respect, the industry or commerce of its own. The most important transit duty in the world is that levied by the King of Denmark upon all merchant ships which pass through the sound. Such taxes upon luxuries, as the greater part of the duties of customs and excise, though they all fall indifferently upon every different species of revenue, and are paid, finally, or without any retribution, by whoever consumes the commodities upon which they are imposed, yet they do not always fall equally or proportionally upon the revenue of every individual. As every man's humor regulates the degree of his consumption, every man contributes, rather, according to his humor, then proportion to his revenue. The profuse contribute more, the parsimonious less than their proper proportion. During the minority of a man of great fortune, he contributes commonly very little, by his consumption towards the support of that state from whose protection he derives a great revenue. Those who live in another country contribute nothing by their consumption towards the support of the government of that country in which is situated the source of their revenue. If in this latter country there should be no land tax nor any considerable duty upon the transference either of movable or immovable property, as is the case in Ireland, such absentees may derive a great revenue from the protection of a government to the support of which they do not contribute a single shilling. This inequality is likely to be greatest in a country of which the government is, in some respects, subordinate and dependent upon that of some other. The people who possess the most extensive property in the dependent will, in this case, generally choose to live in the governing country. Ireland is precisely in this situation, and we cannot therefore wonder that the proposal of a tax upon absentees should be so very popular in that country. It might perhaps be a little difficult to ascertain either what sort or what degree of absence would subject a man to be taxed as an absentee, or what precise time the tax should either begin or end. If you accept, however, this very peculiar situation, any inequality in the contribution of individuals which can arise from such taxes is much more than compensated by the very circumstance which occasion is that inequality, the circumstance that every man's contribution is altogether voluntary, it being altogether in his power either to consume or not to consume the commodity taxed. Where such taxes therefore are properly assessed and upon proper commodities, they are paid with less grumbling than any other. When they are advanced by the merchant or manufacturer, the consumer, who finally pays them, soon comes to confound them with the price of the commodities and almost forgets that he pays any tax. Such taxes are, or may be, perfectly certain, or may be assessed so as to leave no doubt concerning either what ought to be paid or when it ought to be paid concerning either the quantity or the time of payment. Whatever uncertainty there may sometimes be, either in the duties of customs in Great Britain or in other duties of the same kind in other countries, it cannot arise from the nature of those duties, but from the inaccurate or unskillful manner in which the law that imposes them is expressed. Taxes upon luxuries generally are, and always may be, paid piecemeal, or in proportion as the contributors have occasion to purchase the goods upon which they are imposed. In the time and mode of payment, they are, or may be, of all taxes the most convenient. Upon the whole, such taxes therefore are perhaps as agreeable to the three first of the four general maxims concerning taxation as any other. They offend in every respect against the fourth. Such taxes in proportion to what they bring into the public treasury of the state always take out, or keep out, of the pockets of the people more than almost any other taxes. They seem to do this in all the four different ways in which it is possible to do it. First the levying of such taxes, even when imposed in the most judicious manner, requires a great number of custom house and excise officers, whose salaries and perquisites are a real tax upon the people, which brings nothing into the treasury of the state. This expense, however, it must be acknowledged, is more moderate in Great Britain than in most other countries. In the year which ended on the fifth of July, 1775, the gross produce of the different duties under the management of the commissioners of excise in England amounted to 5,507,308 pounds, 18 shillings, eight and a quarter pence, which was levied at an expense of little more than five and a half percent. From this gross procedure, however, there must be deducted what was paid away in bounties and drawbacks upon the exportation of excisable goods, which will reduce the neat produce below five millions. The levying of the salt duty and excise duty, but under a different management, is much more expensive. The neat revenue of the customs does not amount to two millions and a half, which is levied at an expense of more than 10 percent in the salaries of officers and other incidents. But the perquisites of custom house officers are everywhere much greater than their salaries, at some ports more than double or triple those salaries. If the salaries of officers and other incidents, therefore, amount to more than 10 percent upon the neat revenue of the customs, the whole expense of levying that revenue may amount, in salaries and perquisites together, to more than 20 or 30 percent. The officers of excise receive few or no perquisites, and the administration of that branch of the revenue being of more recent establishment is in general less corrupted than that of the customs, into which length of time has introduced and authorized many abuses. By charging upon malt, the whole revenue which is at present levied by the different duties upon malt and malt liquors, a saving it is supposed of more than 50,000 pounds, might be made in the annual expense of the excise. By confining the duties of customs to a few sorts of goods, and by levying those duties according to the excise laws, a much greater saving might probably be made in the annual expense of the customs. Secondly, such taxes necessarily occasion some obstruction or discouragement to certain branches of industry. As they always raise the price of the commodity taxed, they so far discourage its consumption and consequently its production. If it is a commodity of home growth or manufacture, less labor comes to be employed in raising and producing it. If it is a foreign commodity, of which the tax increases in this manner, the price, the commodities of the same kind which are made at home may thereby, indeed, gain some advantage in the home market, and a greater quantity of domestic industry may thereby be turned toward preparing them. But though this rise of price in a foreign commodity may encourage domestic industry in one particular branch, it necessarily discourages that industry in almost every other. The dearer the Birmingham manufacturer buys his foreign wine, the cheaper he necessarily sells that part of his hardware with which, or what comes to the same thing, with the price of which he buys it. That part of his hardware, therefore, becomes of less value to him, and he has less encouragement to work at it. The dearer the consumers in one country pay for the surplus produce of another, the cheaper they necessarily sell that part of their own surplus produce with which, or what comes to the same thing with the price of which they buy it. That part of their own surplus produce becomes of less value to them, and they have less encouragement to increase its quantity. All taxes upon consumable commodities, therefore, tend to reduce the quantity of productive labor below what it otherwise would be, either in preparing the commodities taxed, if they are home commodities, or in preparing those with which they are purchased, if they are foreign commodities. Such taxes too always alter, more or less, the natural direction of national industry and turn it into a channel always different from, and generally less advantageous, than that in which it would have run of its own accord. Thirdly, the hope of evading such taxes by smuggling gives frequent occasion to forfeitures and other penalties, which entirely ruin the smuggler, a person who, though no doubt highly blameable for violating the laws of his country, is frequently incapable of violating those of natural justice, and would have been, in every respect, an excellent citizen, had not the laws of his country made that a crime which nature never meant to be so. In those corrupted governments, where there is at least a general suspicion of much unnecessary expense, and great misapplication of the public revenue, the laws which guard it are little respected. Not many people are scrupulous about smuggling when, without perjury, they can find an easy and safe opportunity of doing so. To pretend to have any scruple about buying smuggled goods, though a manifest encouragement to the violation of the revenue laws, and to the perjury which almost always attends it, would, in most countries, be regarded as one of those pedantic pieces of hypocrisy, which, instead of gaining credit with anybody, serve only to expose the person who affects to practice them to the suspicion of being a greater naïve than most of his neighbors. By this indulgence of the public, the smuggler is often encouraged to continue a trade which he is thus taught to consider as in some measure innocent, and when the severity of the revenue laws is ready to fall upon him, he is frequently disposed to defend with violence what he has been accustomed to regard as his just property. From being at first, perhaps rather imprudent than criminal, he, at last, too, often becomes one of the hardiest and most determined violators of the laws of society. By the ruin of the smuggler, his capital, which had before been employed in maintaining productive labor, is absorbed either in the revenue of the state or in that of the revenue officer, and is employed in maintaining unproductive to the diminution of the general capital of the society and of the useful industry which it might otherwise have maintained. Fourthly, such taxes by subjecting at least the dealers in the tax commodities to the frequent visits and odious examination of the tax gatherers expose them sometimes, no doubt, to some degree of oppression and always to much trouble and vexation, and though vexation, as has already been said, is not strictly speaking expense, it is certainly equivalent to the expense at which every man would be willing to redeem himself from it. The laws of excise, though more effectual for the purpose for which they were instituted, are, in this respect, more vexatious than those of the customs. When a merchant has imported goods subject to certain duties of customs, when he has paid those duties and lodged the goods in his warehouse, he is not, in most cases, liable to any further trouble or vexation from the custom house officer. It is otherwise with good subject to duties of excise. The dealers have no respite from the continual visits and examination of the excise officers. The duties of excise are, upon this account, more unpopular than those of the customs, and so are the officers who levy them. Those officers, it is pretended, though in general perhaps they do their duty fully as well as those of the customs, yet as that duty obliges them to be frequently very troublesome to some of their neighbors, commonly contract a certain hardness of character, which the others frequently have not. This observation, however, may very probably be the mere suggestion of fraudulent dealers, whose smuggling is either prevented or detected by their diligence. The inconveniences, however, which are, perhaps in some degree, inseparable from taxes upon consumable communities, fall as light upon the people of Great Britain, as upon those of any other country of which the government is nearly as expensive. Our state is not perfect and might be mended, but it is as good or better than that of most of our neighbors. In consequence of the notion that duties upon consumable goods were taxes upon the profits of merchants, those duties have, in some countries, been repeated upon every success of sale of the goods. If the profits of the merchant importer or merchant manufacturer were taxed, equality seemed to require that those of all the middle buyers, who intervened between either of them and the consumer, should likewise be taxed. The famous Alcavula of Spain seems to have been established upon this principle. It was at first a tax of 10 percent, afterwards of 14 percent, and it is at present only 6 percent upon the sale of every sort of property, whether movable or immovable, and it is repeated every time the property is sold. The levying of this tax requires a multitude of revenue officers, sufficient to guard the transportation of goods, not only from one province to another, but from one shop to another. It subjects, not only the dealers in some sorts of goods, but those in all sorts, every farmer, every manufacturer, every merchant and shopkeeper, to the continual visit and examination of the tax gatherers. Through the greater part of the country in which a tax of this kind is established, nothing can be produced for distant sale. The produce of every part of the country must be proportioned to the consumption of the neighborhood. It is to the Alcavula accordingly that Usteritz imputes the ruin of the manufacturers of Spain. He might have imputed to it, likewise the declension of agriculture, it being imposed not only upon manufacturers, but upon the rude produce of the land. In the Kingdom of Naples there is a similar tax of 3 percent upon the value of all contracts, and consequently upon that of all contracts of sale. It is both lighter than the Spanish tax, and the greater part of towns and parishes are allowed to pay a composition and lieu of it. They levy this composition in what manner they please, generally in a way that gives no interruption to the interior commerce of the place. The Neapolitan tax, therefore, is not near so ruinous as the Spanish one. The uniform system of taxation, which, with a few exceptions of no great consequence, takes place in all the different parts of the United Kingdom of Great Britain, leaves the interior commerce of the country, the inland and coasting trade, almost entirely free. The inland trade is almost perfectly free, and the greater part of goods may be carried from one end of the kingdom to the other, without requiring any permit or a lent pass, without being subject to question, visit, or examination from the revenue officers. There are a few exceptions, but they are such as can give no interruption to any important branch of inland commerce of the country. Goods carried coast-wise indeed require certificates or coast cockets. If you accept coals, however, the rest are almost all duty-free. This freedom of interior commerce, the effect of the uniformity of the system of taxation, is perhaps one of the principal causes of the prosperity of Great Britain. Every great country being necessarily the best and most extensive market for the greater part of the productions of its own industry. If the same freedom and consequence of the same uniformity could be extended to Ireland and the plantations, both the grandeur of the state and the prosperity of every part of the empire would probably be still greater than at present. In France, the different revenue laws which take place in different provinces require a multitude of revenue officers to surround not only the frontiers of the kingdom, but those of almost each particular province in order either to prevent the importation of certain goods or to subject it to the payment of certain duties, to the no-small interruption of the interior commerce of the country. Some provinces are allowed to compound for the gabel or salt tax. Others are exempted from it altogether. Some provinces are exempted from the exclusive sale of tobacco, which the farmers general enjoy through the greater part of the kingdom. The aides, which correspond to the excise in England, are very different in different provinces. Some provinces are exempted from them and pay a composition or equivalent. In those in which they take place and are informed, there are many local duties which do not extend beyond a particular town or district. The traits, which correspond to our customs, divide the kingdom into three great parts. First, the provinces subject to the tariff of 1664, which are called the provinces of the five great farms, and under which are comprehended Picardie, Normandy, and the greater part of the interior provinces of the kingdom. Secondly, the provinces subject to the tariff of 1667, which are called the provinces reckoned foreign, and under which are comprehended the greater part of the frontier provinces. And thirdly, those provinces which are said to be treated as foreign, or which, because they are allowed a free commerce with foreign countries, are in their commerce with the provinces of France subjected to the same duties as other foreign countries. These are Alsace, the three bishoprics of Mintz, Toul and Verdun, and the three cities of Dunkirk, Bayonne, and Marseille, both in the provinces of the five great farms, called so on account of an ancient division of the duties of customs into five great branches, each of which was originally the subject of a particular farm, though they are now all united into one, and in those which are said to be reckoned foreign, there are many local duties which do not extend beyond a particular town or district. There are some such, even in the provinces which are said to be treated as foreign, particularly in the city of Marseille. It is unnecessary to observe how much both the restraints upon the interior commerce of the country, and the number of the revenue officers must be multiplied in order to guard the frontiers of those different provinces and districts which are subject to such different systems of regulation. Over and above the general restraints arising from this complicated system of revenue laws, the commerce of wine, after corn, perhaps the most important production of France, is, in the greater part of the provinces, subject to particular restraints arising from the favor which has been shown to the vineyards of particular provinces and districts above those of others. The provinces most famous for their wines, it will be found, I believe, are those in which the trade in that article is subject to the fewest restraints of this kind. The extensive market which such provinces enjoy encourages good management both in the cultivation of their vineyards and in the subsequent preparation of their wines. Such various and complicated revenue laws are not peculiar to France. The little duchy of Milan is divided into six provinces, in each of which there is a different system of taxation with regard to several different sorts of consumable goods. The still smaller territories of the Duke of Parma are divided into three or four, each of which has, in the same manner, a system of its own. Under such absurd management, nothing but the great fertility of the soil and happiness of the climate could preserve such countries from soon relapsing into the lowest state of poverty and barbarism. Taxes upon consumable commodities may either be levied by an administration of which the officers are appointed by government and are accountable to government, of which the revenue must, in this case, vary from year to year according to the occasional variations in the produce of the tax. Or they may be let and farm, for a rent certain, the farmer being allowed to appoint his own officers, who, though obliged to levy the tax in the manner directed by the law, are under his immediate inspection and are immediately accountable to him. The best and most frugal way of levying a tax can never be by farm. Over and above what is necessary for paying the stipulated rent, the salaries of the officers and the whole expensive administration, the farmer must always draw from the produce of the tax a certain profit, proportion at least to the advance which he makes, to the risk which he runs, to the trouble which he is at, and to the knowledge and skill which it requires to manage so very complicated a concern. Government, by establishing an administration under that which the farmer establishes, might at least save this profit, which is almost always exorbitant. To farm any considerable branch of the public revenue requires either a great capital or a great credit, circumstances which would alone restrain the competition for such an undertaking to a very small number of people. Of the few who have this capital or credit, a still smaller number have the necessary knowledge or experience, further. The very few who are in condition to become competitors find it more for their interest to combine together, to become co-partners instead of competitors. And when the farm is set up to auction, to offer no rent, but what is much below the real value. In countries where the public revenues are in farm, the farmers are generally the most opulent people. Their wealth would alone excite the public indignation the foolish ostentation with which they commonly display that wealth excite that indignation still more. The farmers of the public revenue never find the laws too severe, which punish any attempt to evade the payment of tax. They have no bowels for the contributors who are not their subjects and whose universal bankruptcy if it should happen the day after the farm is expired would not much affect their interest. In the greatest payment for the exact payment of his revenue is necessarily the greatest they seldom fail to complain that without laws more rigorous than those which actually took place it would be impossible for them to pay even the usual rent. In those moments of public distress their commands cannot be disputed. The revenue laws therefore become gradually more and more severe. The most sanguinary are always to be found in countries where it is levied under the immediate inspection of the sovereign. Even a bad sovereign feels more compassion for his people than can ever be expected from the farmers of his revenue. He knows that the permanent grandeur of his family depends upon the prosperity of his people and he will never know only ruin that prosperity for the sake of any momentary interest of his own. It is otherwise with the farmers of his revenue whose grandeur may frequently be the effect of his people. A tax is sometimes not only farmed for a certain rent but the farmer has besides the monopoly of the commodity taxed. In France the duties upon tobacco and salt are levied in this manner. In such cases the farmer instead of one levies two exorbitant profits upon the people. The profit of the farmer and the still more exorbitant one of the monopolist. Tobacco being a luxury every man is obliged not to buy as he chooses but salt being unnecessary every man is obliged to buy of the farmer a certain quantity of it because if he did not buy this quantity of the farmer he would it is presumed buy it of some smuggler. The taxes upon both commodities are exorbitant. The temptation to smuggle consequently is to many people irresistible participation almost certainly ruinous. The smuggling of salt and tobacco sends every year several hundred people to the galleys besides a very considerable number whom it sends to the gibbet. Those taxes levied in this manner yield a very considerable revenue to government. In 1767 the farm of tobacco was let for 22 millions 541 278 leavers a year that of salt millions 492,404 leavers. The farm in both cases was to commence in 1768 and to last for six years. Those who consider the blood of the people as nothing in comparison with the revenue of the prince may perhaps approve of this method of levying taxes. Similar taxes and monopolies of salt and tobacco have been established in many other countries particularly in the greater part of the states of Italy. In France the greater part of the actual revenue of the crown is derived from eight different sources. The tail, the capitation, the two wingtimes, the gabels, the aides, the traits, the domain and the farm of tobacco. The five last are in the greater part of the provinces under farm. The three first are everywhere levied by an administration under the immediate and it is universally acknowledged that in proportion to what they take out of the pockets of the people they bring more into the treasury of the prince than the other five of which the administration is much more wasteful and expensive. The finances of France seem in their present state to admit of three very obvious reformations. First by abolishing the tail and the capitation and by increasing the number to the amount of those other taxes the revenue of the crown might be preserved the expensive collection might be much diminished. The vexation of the inferior ranks of people which the tail and capitation occasion might be entirely prevented and the superior ranks might not be more burden than the greater part of them are at present. The wingtime I have already observed is a tax very nearly of the same kind of capital it is acknowledged falls finally upon the proprietors of land and as the greater part of the capitation is assessed upon those who are subject to the tail at so much a pound of that other tax the final payment of the greater part of it must likewise fall upon the same order of people. Though the number of the vexations therefore was increased so as to produce an additional revenue many individuals no doubt would on account of the great inequalities with which the tail is commonly assessed upon the estates and tenants of different individuals the interest and opposition of such favorite subjects are the obstacles most likely to prevent this or any other reformation of the same kind secondly by rendering the gabel the aids the traits the taxes upon tobacco all the different those taxes might be levied at much less expense and the interior commerce of the kingdom might be rendered as free as that of England thirdly and lastly by subjecting all those taxes to an administration under the immediate inspection and direction of government the exorbitant profits of the farmers general might be added to the revenue of the state the opposition arising from the private interest of individuals is likely to be as effectual for preventing the expansion scheme of reformation the French system of taxation seems in every respect inferior to the British in Great Britain 10 million sterling are annually levied upon less than 8 millions of people without its being possible to say that any particular order is oppressed from the collections of the abbey ex-pele and the observations of the author of the essay upon the legislation and commerce of corn it appears probable that France including the provinces of Lorraine and Bar contains about 23 or 24 millions of people three times the number perhaps contained in Great Britain the soil and climate of France are better than those of Great Britain the country has been much longer in a state of improvement and cultivation and is upon that account better stocked with all those things which it requires a long time to raise up and accumulate such as great towns and convenient and well built houses both in town and country with these advantages it might be expected that in France a revenue of 30 millions might be levied for the support of the state with as little inconvenience as a revenue of 10 millions is in Great Britain in 1765 and 1766 the whole revenue paid into the treasury of France according to the best though I acknowledge very imperfect accounts which I could get of it usually run between 308 and 325 millions of leavers that is it did not amount to 15 million sterling not the half of what might have been expected had the people contributed in the same proportion to their numbers as the people of Great Britain the people of France however it is generally acknowledged are much more oppressed by taxes than the people of Great Britain France however is certainly the great empire in Europe which after that of Great Britain enjoys the mildest and most indulgent government in Holland the heavy taxes upon the necessaries of life have ruined it is said their principal manufacturers and are likely to discourage gradually even their fisheries and their trade in shipbuilding the taxes upon the necessaries of life are inconsiderable in Great Britain and no manufacturer has hitherto been ruined by them the British taxes which bear hardest on manufacturers are some duties upon the importation of raw materials particularly upon that of raw silk the revenue of the states general and of the different cities however is said to amount to more than five million two hundred and fifty thousand pound sterling and as the inhabitants of the united provinces cannot well be supposed to amount to more than a third part of those of Great Britain they must in proportion to their number be much more heavily taxed after all the proper subjects of taxation have been exhausted if the exigencies of the state still continue to require new taxes they must be imposed upon improper ones the taxes upon the necessaries of life therefore may be no impeachment of the wisdom of that republic which in order to acquire and to maintain its independency has in spite of its great frugality been involved in such expensive wars as have obliged it to contract great debts the singular countries of Holland and Zealand besides require a considerable expense even to preserve their existence or to prevent their being swallowed up by the sea is needed to increase considerably the load of taxes in those two provinces the republican form of government seems to be the principal support of the present grandeur of Holland the owners of great capitals the great mercantile families have generally either some direct share or some indirect influence in the administration of that government for the sake of the respect and authority which they derive from the situation they are willing to live in a country where their capital will bring them less profit and if they lend it to another less interest and where the very moderate revenue which they can draw from it will purchase less of the necessaries and conveniences of life than in any other part of Europe the residents of such wealthy people necessarily keeps alive in spite of all disadvantages a certain degree of industry in the country any public calamity which should annihilate all together the importance of those wealthy merchants would soon render it disagreeable to them to live in a country where they were no longer likely to be much respected they would remove both their residents and their capital to some other country and the industry and commerce of Holland would soon follow the capitals which supported them End of Book 5 Chapter 2 Part G Chapter 3 Part A of the Book 5 Chapter 3 Part A of public debts in that rude state of society which precedes the extension of commerce and the improvements of manufacturers when those expensive luxuries which commerce and manufacturers can alone enter into the world in the book 5 Chapter 3 Part A of public debts in that rude state of society which precedes the extension of commerce and the improvements that manufacturers can alone introduce are altogether unknown the person who possesses a large revenue I have endeavored to show in the third book of this inquiry can spend or enjoy that revenue in no other way than by maintaining nearly as many people as it can maintain a large revenue may at all times be said to consist in the command of a large quantity of plain food and coarse clothing and corn and cattle and wool and raw hides when neither commerce nor manufacturers furnish anything for which the owner can exchange the greater part of those materials which are over and above his own consumption he can do nothing with the surplus but feed and clothe nearly as many people as it will feed and clothe a hospitality in which there is no luxury and a liberality in which the principal expenses of the rich and the great but these I have likewise endeavored to show in the same book are expenses by which people are not very apt to ruin themselves there is not perhaps any selfish pleasure so frivolous of which the pursuit has not sometimes ruined even sensible men a passion for cock fighting has ruined many but the instances I believe are not very numerous of people who have been ruined by a hospitality or liberality though the hospitality of luxury and the liberality of ostentation have ruined many among our feudal ancestors the long time during which estates used to continue in the same family sufficiently demonstrates the general disposition of people to live within their income though the rust of hospitality constantly exercised by the great landholders may not to us in the present times seem consistent with that order which we are apt to consider yet we must certainly allow them to have been at least so far frugal as not commonly to have spent their whole income a part of their wool and raw hides they had generally an opportunity of selling for money some part of this money perhaps they spent in purchasing the few objects of vanity and luxury with which the circumstances of the times could furnish them but some part of it they seem commonly to have hoarded they could not well indeed do anything else but hoard to trade was disgraceful to a gentleman and to lend money at interest which at that time was considered as usury and prohibited by law would have been still more so in those times of violence and disorder besides it was convenient to have a hoard of money at hand that in case they should be driven from their own home they might have something of known value to carry with them to some place of safety the same violence would conceal the hoard the frequency of treasure trove or of treasure found of which no owner was known sufficiently demonstrates the frequency in those times both of hoarding and of concealing the hoard treasure trove was then considered as an important branch of the revenue of the sovereign all the treasure trove of the kingdom would scarce perhaps in the present times make an important branch of the revenue of a private gentleman of good estate the same disposition to save and to hoard prevailed in the sovereign as well as in the subjects among nations to whom commerce and manufacture are little known the sovereign it has already been observed in the fourth book is in a situation which naturally disposes him to the parsimony requisite for accumulation in that situation the expense even of a sovereign cannot be directed by that vanity which delights in the gaudy finery of a court the ignorance of the times the view of the trinkets in which that finery consists standing armies are not then necessary so that the expense even of a sovereign like that of any other great lord can be employed and scarce anything but bounty to his tenants and hospitality to his retainers but bounty and hospitality very seldom lead to extravagance though vanity almost always does all the ancient sovereigns of Europe accordingly it has already been observed had treasures that are chief in the present times is said to have one in a commercial country abounding with every sort of expensive luxury the sovereign in the same manner as almost all the great proprietors in his dominions naturally spends a great part of his revenue in purchasing those luxuries his own and the neighboring countries supply him abundantly with all the costly trinkets which compose the splendid but insignificant pageantry of the same kind his nobles dismiss their retainers make their tenants independent and become gradually themselves as insignificant as the greater part of the wealthy burgers in his dominions the same frivolous passions which influence their conduct influence his how can it be supposed that he should be the only rich man in his dominions who is insensible to pleasures of this kind if he does not what he is very likely to do spend upon those pleasures to facilitate very much the defensive power of the state it cannot well be expected that he should not spend upon them all that part of it which is over and above what is necessary for supporting that defensive power his ordinary expense becomes equal to his ordinary revenue and it is well if it does not frequently exceeded the amassing of treasure can no longer be expected and when extraordinary exigencies for an extraordinary aid the present and the late king of Prussia are the only great princes of Europe who, since the death of Henry IV of France in 1610 are supposed to have amassed any considerable treasure the parsimony which leads to accumulation has become almost as rare in republican as in monarchical governments the Italian republics the united provinces of the Netherlands are all in debt the canton of burn is the single republic in Europe which has amassed any considerable treasure the other swiss republics have not the taste for some sort of pageantry for splendid buildings at least and other public ornaments frequently prevails as much in the apparently sober senate house of a little republic as in the dissipated court of the greatest king the want of parsimony in time of peace imposes the necessity of contracting debt in time of war when war comes there is no money in the treasury but what is necessary for carrying on the ordinary expense of the peace establishment in war an establishment of three or four times that expense becomes necessary for the defense of the state and consequently a revenue three or four times greater than the peace revenue supposing that the sovereign should have what he scarce ever has the immediate means of augmenting his revenue in proportion to the augmentation that still the produce of the taxes from which this increase of revenue must be drawn will not begin to come into the treasury till perhaps ten or twelve months after they are imposed but the moment in which war begins or rather the moment in which it appears likely to begin the army must be augmented the fleet must be fitted out the garrison towns must be put into a posture of defense that army that fleet those garrison towns must be furnished with arms ammunition and provisions an immediate and great expense must be incurred in that moment of immediate danger which will not wait for the gradual and slow returns of the new taxes in this exigency government can have no other resource but in borrowing the same commercial state of society which by the operation of moral causes brings government in this manner into the necessity of borrowing produces in the subjects both an ability and an inclination to lend if it commonly brings along with it the necessity of borrowing it likewise brings with it the facility of doing so a country abounding with merchants and manufacturers necessarily abounds with a set of people through whose hands not only their own capitals but the capitals of all those who either lend them money or trust them with goods pass as frequently or more frequently than the revenue of a private man who without trade or business lives upon his income passes through his hands the revenue of such a man can regularly pass through his hands only once in a year but the whole amount of the capital and credit of a merchant who deals in a trade of which the returns are very quick may sometimes pass through his hands two, three or four times in a year a country abounding with merchants and manufacturers therefore necessarily abounds with a set of people who have it at all times in their power and in their profits if they choose to do so a very large sum of money to government hence the ability in the subjects of a commercial state to lend commerce and manufacturers can seldom flourish long in any state which does not enjoy a regular administration of justice in which the people do not feel themselves secure in the possession of their property in which the faith of contracts is not supported by law and in which the authority in enforcing the payment of debts from all those who are able to pay commerce and manufacturers in short can seldom flourish in any state in which there is not a certain degree of confidence in the justice of government the same confidence which disposes great merchants and manufacturers upon ordinary occasions to trust their property to the protection of a particular government disposes them upon extraordinary occasions to trust that government with the use of their property and spending money to government they do not even for a moment diminish their ability to carry on their trade and manufacturers on the contrary they commonly augmented the necessities of the state render government upon most occasions willing to borrow upon terms extremely advantageous to the lender the security which it grants to the original creditor is made transferable to any other creditor and from the universal confidence in the justice was originally paid for it the merchant or moneyed man makes money by lending money to government and instead of diminishing increases his trading capital he generally considers it as a favor therefore when the administration admits him to a share in the first subscription for a new loan hence the inclination or willingness in the subjects of a commercial state to lend the government of such a state is very apt to repose itself upon this ability and willingness of its subjects to lend it their money on extraordinary occasions it foresees the facility of borrowing and therefore dispenses itself from the duty of saving in a rude state of society there are no great mercantile or manufacturing capitals the individuals who hoard whatever money they can save and who conceal their hoard do so from a distrust of the justice of government from a fear that if it was known that hoard was to be found they would quickly be plundered in such a state of things few people would be able and nobody would be willing to lend their money to government on extraordinary exigencies the sovereign feels that he must provide for such exigencies by saving because he foresees the absolute impossibility of borrowing this foresight increases still further his natural disposition to save the progress of the enormous debts which at present oppress and will in the long run probably ruin all the great nations of Europe has been pretty uniform nations like private men have generally begun to borrow upon what may be called personal credit without assigning or mortgaging any particular fund for the payment of the debt and when this resource has failed them they have gone on to borrow upon assignments or mortgages of particular funds what is called the unfunded debt of Great Britain is contracted in the former of those two ways it consists partly in a debt which bears or is supposed to bear no interest and which resembles the debts that a private man contracts upon account and partly in a debt which bears interest and which resembles what a private man contracts upon his bill or promissory note the debts which are due either for extraordinary services or for services either not provided for or not paid at the time when they are performed part of the army navy and ordinance the arrears of subsidies to foreign princes those of seamen's wages etc. usually constitute a debt of the first kind navy and exchequer bills which are issued sometimes in payment of a part of such debts and sometimes for other purposes constitute a debt of the second kind exchequer bills bearing interest from the day on which they are issued and navy bills six months temporarily discounting those bills at their current value or by agreeing with government for certain considerations to circulate exchequer bills that is to receive them at par paying the interest which happens to be due upon them keeps up their value and facilitates their circulation and thereby frequently enables government to contract a very large debt of this kind in France where there is no bank the state bills have sometimes sold at and 70% discount during the great re-coinage in King William's time when the Bank of England thought proper to put a stop to its usual transactions exchequer bills and tallies are said to have sold from 25 to 60% discount owing partly no doubt to the supposed instability of the new government established by the revolution but partly too to the want of the support of the Bank of England when this resource is exhausted and it becomes in order to raise money to assign or mortgage some particular branch of the public revenue for the payment of the debt government has upon different occasions done this in two different ways sometimes it has made this assignment or mortgage for a short period of time only a year or a few years for example and sometimes for perpetuity in the one case the fund was supposed sufficient to pay within the limited time both principal in the other it was supposed sufficient to pay the interest only or a perpetual annuity equivalent to the interest government being at liberty to redeem at any time this annuity upon paying back the principal some borrowed when money was raised in the one way it was said to be raised by anticipation when in the other by perpetual funding or more shortly by funding in Great Britain the annual land is anticipated every year by virtue of a borrowing clause constantly inserted into the acts which impose them the Bank of England generally advances at an interest which since the revolution has varied from 8 to 3% the sums of which those taxes are granted and receives payment as their produce gradually comes in if there is a deficiency which there always is it is provided for in the supplies of the ensuing year the only considerable branch revenue which yet remains un-mortgaged is thus regularly spent before it comes in like an improvident spin-thrift whose pressing occasions will not allow him to wait for the regular payment of his revenue the state is in the constant practice of borrowing of its own factors and agents and of paying interest for the use of its own money in the reign of King William and during a great part of that of Queen Anne before we had become so familiar as we are now with the practice the greater part of the new taxes were imposed but for a short period of time for four five six or seven years only and a great part of the grants of every year consisted in loans upon anticipation of the produce of those taxes the produce being frequently insufficient for paying within the limited term the principal and interest of the money borrowed deficiencies arose to make good which it became necessary to prolong the term in 1697 by the eighth of William the third C-20 the deficiencies of several taxes were charged upon what was then called the first general mortgage or fund consisting of a prolongation to the first of August 1706 of several different taxes which would have expired within a short term and of which the produce was accumulated into one general fund the deficiencies charged upon this prolonged term amounted to five million four hundred and fifty nine pounds fourteen shillings nine and a half pence in 1701 those duties with some others were still further prolonged for the like purposes till the first of August 1710 and were called the second general mortgage or fund the deficiencies charged upon it amounted to two million fifty five thousand nine hundred and ninety nine pounds seven shillings eleven and a half pence in 1707 those duties were still further prolonged as a fund for new loans to the first of August 1712 and were called the third general mortgage or fund the sum borrowed upon it was nine hundred and eighty-three thousand two hundred and fifty four pounds eleven shillings nine and a quarter pence in 1708 those duties were all except the old subsidy of tonnage and poundage of which one moiety only was made a part of the operation of scotch linen which had been taken off by the articles of union still further continued as a fund for new loans to the first of August 1714 and were called the fourth general mortgage or fund the sum borrowed upon it was nine hundred and twenty five thousand one hundred and seventy-six pounds nine shillings two and a quarter pence in 1709 those duties were all together still further continued for the same purpose to the first of August 1716 and were called the fifth general mortgage or fund the sum borrowed upon it was nine hundred and twenty two thousand twenty nine pounds six shillings in 1710 those duties were again prolonged to the first of August 1720 and were called the sixth general mortgage or fund the sum of six thousand five hundred and fifty-two pounds nine shillings eleven and three quarter pence in 1711 the same duties which at this time were thus subject to four different anticipations together with several others were continued forever and made a fund for paying the interest of the capital of the south sea company which had that year advanced to government for paying debts and making one nine hundred and sixty-seven pounds fifteen shillings four pence the greatest loan which at that time had ever been made before this period the principle so far as I have been able to observe the only taxes which in order to pay the interest of a debt had been imposed for perpetuity were those for paying the interest of the money which had been advanced to the government by the bank and east India company the bank fund at this time amounted to three million three hundred and seventy-five thousand twenty-seven pounds seventeen shillings ten and a half pence for which was paid an annuity or interest of two hundred and six thousand five hundred and one pounds fifteen shillings five pence the east India amounted to three million two hundred thousand pounds for which was paid an annuity or interest of one hundred and sixty thousand pounds percent the east India fund at five percent interest in seventeen fifteen by the first of george the first c twelve the different taxes which had been mortgaged for paying the bank annuity together with several others which by this act were likewise rendered perpetual were accumulated into one common fund called the aggregate fund which was charged not only with the payment of the bank annuity but the fund was afterwards augmented by the third of george the first c eight and by the fifth of george the first c three and the different duties which were then added to it were likewise rendered perpetual in seventeen seventeen by the third of george the first c seven several other taxes were rendered perpetual and accumulated into another common fund called the general fund for the payment eight hundred and forty nine pounds six shillings ten and a half pens in consequence of those different acts the greater part of the taxes which before had been anticipated only for a short term of years were rendered perpetual as a fund for paying not the capital but the interest only of the money which had been borrowed upon them by different successive anticipations had money never been raised but by anticipation of this revenue without any other attention of government besides that of not overloading the fund by charging it with more debt than it could pay within the limited term and not of anticipating a second time before the expiration of the first anticipation but the greater part of European governments have been incapable of those attentions they have frequently overloaded the fund even upon anticipating a second and a third time before the expiration of the first anticipation the fund becoming in this manner altogether insufficient for paying both principal and interest of the money borrowed upon it it became necessary to charge it with the interest only or a perpetual annuity equal to the interest and such improvident anticipations necessarily gave birth to the more ruinous practice of perpetual funding but though public revenue from a fixed period to one so indefinite that it is not very likely ever to arrive yet as a greater sum can in all cases be raised by this new practice than by the old one of anticipation the former when men have once become familiar with it has in the great exigencies of the state been universally preferred to the latter to relieve the present exigencies is always the object which principally interests those immediately concerned of public affairs the future liberation of the public revenue they leave to the care of posterity during the reign of queen an the market rate of interest had fallen from six to five percent and in the twelfth year of her reign five percent was declared to be the highest rate which could lawfully be taken for money borrowed upon private security soon after the greater part of the temporary taxes of great Britain had been rendered perpetual the creditors of the public like those of private persons were induced to accept of five percent for the interest of their money which occasioned a saving of one percent upon the capital of the greater part of the debts which had been thus funded for perpetuity or of one sixth of the greater part of the annuities which were paid out of the three great funds above mentioned the saving left a considerable surplus of what was necessary for paying the annuities which were now charged upon them and laid the foundation of what has since been called the Sinking Fund in 1717 it amounted to five hundred and twenty three thousand four hundred and fifty four pounds seven shillings seven and a half pence in 1727 the interest of the greater part of the public debts was still further reduced to four percent half and three percent which reductions still further augmented the Sinking Fund a Sinking Fund though instituted for the payment of old facilitates very much the contracting of new debts it is a subsidiary fund always at hand to be mortgaged in aid of any other doubtful fund upon which money is proposed to be raised in any exigency of the state whether the Sinking Fund of Great Britain or to the other of those two purposes will sufficiently appear by and by besides those two methods of borrowing by anticipations and by a perpetual funding there are two other methods which hold a sort of middle place between them these are that of borrowing upon annuities for terms of years and that of borrowing upon annuities for lives during the reigns of King William and Queen Anne large sums were frequently borrowed which were sometimes longer and sometimes shorter in 1695 an act was passed for borrowing one million upon an annuity of 14% or 140,000 pounds a year for 16 years in 1691 an act was passed for borrowing a million upon annuities for lives upon terms which in the present times would appear very advantageous but the subscription was not filled up and the currency was made good by borrowing upon annuities for lives at 14% or a little more than seven years purchase in 1695 the persons who had purchased those annuities were allowed to exchange them for others of 96 years upon paying into the Exchequer 63 pounds in the 100 that is the difference between 14% for life and 14% for 96 years such was the supposed instability of government that even these terms procured few purchasers in the reign of Queen Anne money was upon different occasions borrowed both upon annuities for lives and upon annuities for terms of 32 of 89 of 98 and of 99 years in 1719 the proprietors of the annuities for 32 years were induced to accept and lieu of them South Sea stock for 11 and a half years purchase of the annuities together with an additional quantity of stock equal to the arrears which happened then to be due upon them in 1720 the greater part of the other annuities for terms of years both long and short were subscribed into the same fund the long annuities at that time amounted to 666 821 pounds 8 shillings 3 and a half pence a year on the 5th of January 1775 the remainder of them or what was not subscribed at that time amounted only to 136 453 pounds 12 shillings 8 pence during the two wars which began in 1739 and in 1755 little money was borrowed either upon annuities for terms of years or upon those for lives an annuity for 98 or 99 years however is worth nearly as much as a perpetuity and therefore one might think be a fund for borrowing nearly as much but those who in order to make family settlements and to provide for remote futurity buy into the public stocks would not care to purchase into one of which the value was continually diminishing and such people make a very considerable proportion both of the proprietors and purchasers of stock an annuity for a long term of years of a perpetual annuity will not find nearly the same number of purchasers the subscribers to a new loan who mean generally to sell their subscription as soon as possible prefer greatly a perpetual annuity redeemable by parliament to an irredeemable annuity for a long term of years of only equal amount the value of the former may be supposed always the same or very nearly the same and it makes therefore then the latter during the last two mentioned wars annuities either for terms of years or for lives were seldom granted but as premiums to the subscribers of a new loan over and above the redeemable annuity or interest upon the credit of which the loan was supposed to be made they were granted not as the proper fund upon which the money was borrowed but as an additional encouragement to the lender annuities for lives have occasionally been granted in different ways either upon separate lives or upon lots of lives which in French are called tontines from the name of their inventor when annuities are granted upon separate lives the death of every individual annuitant disperses the public revenue so far as it was affected by his annuity when annuities are granted upon tontines the liberation of the public revenue does not commence to the death those consist of 20 or 30 persons of whom the survivors succeed to the annuities of all those who die before them the last survivor succeeding to the annuities of the whole lot upon the same revenue more money can always be raised by tontines than by annuities for separate lives an annuity with a right of survivorship is really worth more than an equal annuity for a separate life and from the confidence which every man naturally has in his own good will upon which is founded the success of all lotteries such an annuity generally sells for something more than it is worth in countries where it is usual for government to raise money by granting annuities tontines are upon this account generally preferred to annuities for separate lives the expedient which will raise most money is almost always preferred to that which is likely to bring about in the speediest manner the liberation of the public revenue in France the greatest proportion of the public debts consists in annuities for lives than in England according to a memoir presented by the parliament of Bordeaux to the king in 1764 the whole public debt of France is estimated at 2400 millions of leavers of which the capital for which annuities for lives had been granted is supposed to amount to 300 millions the eighth part of the whole public debt the annuities the fourth part of 120 millions the supposed interest of that whole debt these estimations I know very well are not exact but having been presented by so very respectable a body as approximations to the truth they may I apprehend be considered as such it is not the different degrees of anxiety and the two governments of France and England for the liberation of the public revenue which occasions this difference in their respective modes of borrowing it arises altogether of the lenders in England the seat of government being in the greatest mercantile city in the world the merchants are generally the people who advance money to government by advancing it they do not mean to diminish but on the contrary to increase their mercantile capitals and unless they expected to sell with some profit their share in the subscription for a new loan they never would subscribe but if by advancing annuities annuities for lives only whether their own or those of other people they would not always be so likely to sell them with a profit annuities upon their own lives they would always sell with loss because no man will give for an annuity upon the life of another whose age and state of health are nearly the same with his own the same price which he would give for one upon his own an annuity upon the life of a third person indeed is no doubt of equal value but its real value begins to diminish from the moment it is granted and continues to do so more and more as long as it subsists it can never therefore make so convenient a transferable stock as a perpetual annuity of which the real value may be supposed always the same or very nearly the same in France the seat of government not being in a great mercantile city merchants do not make so great a proportion of the people who advance money to government the people concerned in the finances the farmers general the receivers of the taxes which are not in farm the court bankers etc make the greater part of those who advance their money in all public exigencies such people are commonly men of mean birth but of great wealth and frequently of great pride they are too proud to marry their equals and women of quality disdain to marry them they frequently resolve therefore to live bachelors and having neither any families even nor much regard for those of their relations whom they are not always very fond of acknowledging they desire only to live in splendor during their own time and are not unwilling that their fortune should end with themselves the number of rich people besides who are either averse to marry or whose condition of life renders it either improper or inconvenient for them to do so is much greater in France than in England to such people who have little or no care for posterity more convenient than to exchange their capital for a revenue which is to last just as long and no longer than they wish it to do the ordinary expense of the greater part of modern governments in time of peace being equal or nearly equal to their ordinary revenue when war comes they are both unwilling and unable to increase their revenue in proportion to the increase of their expense they are unwilling for fear of offending the people of great and so sudden an increase of taxes would soon be disgusted with the war and they are unable from not well knowing what taxes would be sufficient to produce the revenue wanted the facility of borrowing delivers them from this embarrassment which this fear and inability would otherwise occasion by means of borrowing they are enabled with a very moderate increase of taxes to raise from year to year money sufficient for carrying on the war and by the practice they are enabled with the smallest possible increase of taxes to raise annually the largest possible sum of money in great empires the people who live in the capital and in the provinces remote from the scene of action feel many of them scarce any inconvenience from the war but enjoy at their ease the amusement of reading in the newspapers the exploits of their own fleets and armies to them this amusement compensates the account of the war and those which they had been accustomed to pay in time of peace they are commonly dissatisfied with the return of peace which puts an end to their amusement and to a thousand visionary hopes of conquest and national glory from a longer continuance of the war the return of peace indeed seldom relieves them from the greater part of the taxes imposed during the war these are mortgage for the interest of the debt contracted if over and above paying the interest of this debt and deferring the ordinary expensive government the old revenue together with the new taxes produce some surplus revenue it may perhaps be converted into a sinking fund for paying off the debt but in the first place this sinking fund even supposing it should be applied to no other purpose is generally altogether inadequate for paying in the course to continue the whole debt contracted during the war and in the second place this fund is almost always applied to other purposes the new taxes were imposed for the sole purpose of paying the interest of the money borrowed upon them if they produce more it is generally something which was neither intended nor expected and is therefore seldom very considerable sinking funds have generally arisen not so much from any surplus over and above what was necessary for paying the interest or annuity originally charged upon them as from a subsequent reduction of that interest that of Holland in 1655 and that of the ecclesiastical state in 1685 were both formed in this manner hence the usual insufficiency of such funds during the most profound peace various events occur which require an extraordinary expense and government finds it always convenient to defray this expense by misapplying the sinking fund than by imposing a new tax every new tax is immediately felt more or less by the people it occasions always some murmur and meets with some opposition the more taxes may have been multiplied the higher they may have been raised upon every different subject of taxation the more loudly the people complain of every new tax the more difficult it becomes to either to find out new subjects of taxation or to raise much higher the taxes already imposed upon the old a momentary suspension of the payment of debt is not immediately felt by the people and occasions neither murmur nor complaint to borrow of the sinking fund is always an obvious and easy expedient for getting out of the present difficulty the more the public debts may have been accumulated the more necessary it may have become to study any part of the sinking fund the less likely is the public debt to be reduced to any considerable degree the more likely the more certainly is the sinking fund to be misapplied towards defraying all the extraordinary expenses which occur in time of peace when a nation is already overburdened with taxes nothing but the necessities of a new war nothing but either the animosity of national vengeance to a new tax hence the usual misapplication of the sinking fund end of book 5 chapter 3 part a