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and to illustrate the happy effects which a general freedom of commerce and industry, in particular of landed property, produces on the moral and intellectual improvement of mankind. The field, however, is too extensive to be now entered on. I shall content myself, therefore, with remarking how widely the characters of men are diversified by the species of property to which they attach themselves, as well as by the proportions in which it is distributed among them. The various pursuits of private life are still more remarkable in the strongly contrasted manners of an agricultural and of a commercial nation. It is only in such a state of society as that in which we live, in which commerce, agriculture, and manufactures act and react upon each other, that the human character and genius can be completely developed. The inconveniences we labour under, which are comparatively few, arise chiefly from some legislative restraints, which might easily be removed, without injury to individuals, or damage to the state. Nor can there be a doubt, that the progress of human reason, which has already accomplished so much, will, gradually and slowly, correct these imperfections, and bring the established systems of Political Economy nearer and nearer to the order of nature. (End of Interpolation from Notes.)




It is evident that, in every political community, there are a variety of expenses which must be necessarily incurred by the sovereign for the public service. It is sufficient to mention the support of the Sovereign Dignity,—the Religious Establishment,—the Administration of Justice,—the National Defence, - besides Public Works, such as roads, ports, bridges, &c. These different objects of public expense (but, in a more especial manner, the exigencies of War) imply the necessity of a Public Revenue, to be at the disposal of the Sovereign, or of the Commonwealth. Something of this kind, therefore, may be considered as a necessary consequence of the Political Union; and the only difference among states, in this branch of their economy, consists, in the different sources from which the Public Revenue is drawn.

Among the nations of antiquity, the common practice appears to have been, to make provision for hostilities by hoarding up treasures during the intervals of peace which they enjoyed. Some good observations on this point of their policy may be found in the beginning of Mr. Hume's Essay on Public Credit.1 It is unnecessary to prosecute the subject here, as their example has not been copied by any of the great European princes since the death of Henry IV. of France, with the exception of some of the last sovereigns in Prussia. Frederick William, at his death in 1740, is said to have left seven millions sterling in his treasury; and his son, Frederick the Great, (as we are assured "(Essays, Vol. I.)-See Filangieri, (Riflessioni Politiche, &c.] Vol. II. p. 372,

by the Baron de Hertzberg,) accumulated twice the most considerable treasure that any prince ever possessed. It is, however, only by a very singular combination of circumstances that such a parsimonious spirit can exist for a length of time in a great monarchy in the present state of European manners. Nor is the case very different in our modern republics, of which many are in debt, and none are supposed to have amassed anything that deserves the name of a treasure but the Canton of Berne.

In great and civilized states, too, the progress of luxury and expense renders public stock and public lands altogether inadequate resources for supplying the necessary demands of Government. With respect to the former, a sufficient objection arises from the unstable and perishable nature of stock and credit, in consequence of which they cannot be trusted to with safety as the principal funds of a sure, steady, and permanent revenue; and as to the latter, it is asserted by Mr. Smith * that “in the present state of the greater part of the civilized monarchies of Europe, the rent of all the lands in the country, managed as they probably would be if they all belonged to one proprietor, would scarce amount to the ordinary revenue which they levy upon the people even in peaceable times."2

It follows from these observations, that in the present state of the great nations of Europe the greater part of the expenses of Government must be defrayed by taxes of one kind or another; or, in other words, by the contribution of private revenue for public purposes. As the sum which the state raises in this manner is the price of the protection which Government affords to the subject, there can be no limitation to the extent of what may be equitably levied, provided the value of the protection afforded is adequate to the amount of the contribution collected.

It is, however, the most important duty of a statesman to draw from the subject the necessary supply, in the manner the fairest and the least oppressive, –a task of which the difficulty appears to increase with the extent of the sum to be raised. To devise the most effectual means of accomplishing this end is the great object of the art of finance,—a branch of Political Economy which has long employed the speculations of the ablest and most enlightened men in Europe, without, however, as yet leading to any systematical result in which all parties are agreed. In England, more particularly, and in France, this science has exercised the ingenuity both of speculative and practical politicians in a singular degree, in consequence of the immense rerenue which the magnitude of the public debts rendered absolutely necessary. These debts were indeed contracted, in the first instance, with a view to relieve the subject from oppressive impositions ; but it is manifest that the relief which was thus procured to the existing generation was purchased by transferring the load to their posterity with an accumulated weight. It may be worth while to state, in a few words, (before entering on the subject of Taxation,) by what gradual steps the Funding System arose, as it may now be justly considered as the principal cause of the heavy burdens to which we are subjected.

1 Guthrie's Grammar, p. 471. Hertzberg's Two Discourses, &c. p. 3; p. 37 of the original. The translation is printed for Dilly, 1786.

* [Wealth of Nations, Book V. chap. i.; Vol. III. p. 250, tenth edition.]

? Filangieri, [Ibid.) Vol. II. p. 318.

The origin of Public Funds is to be traced from the peculiar manners and circumstances of modern Europe. In former times, princes had often borrowed money to supply their exigencies, and sometimes mortgaged their territories in security; but these loans were generally extorted, and their payment always precarious; for it depended on the good faith and success of the borrower, and never became a regular burden on posterity.

Since the invention of gunpowder and the progress of commerce, the military art has become a distinct employment in the hands of mercenaries; the apparatus of war is attended with more expense; and the decision of national quarrels has often been determined by command of money rather than by national bravery. Ambitious princes have therefore borrowed money, in order to carry on their projects with more vigour; weaker states have been compelled, in self-defence, to apply to the same resource; the wealth introduced by commerce has afforded the means; the regularity of administration, established in consequence of the progress of civilisation, has increased the confidence of individuals in the public security; the complicated system of modern policy has extended the scenes of war, and prolonged their duration ; and the colonies established by mercantile nations have rendered them vulnerable in more points, and increased the expense of defending them.

When a greater sum has been required for the annual expense than could easily be supplied by annual taxes, the Government have proposed terms to their own subjects, or foreigners, for obtaining an advance of money, by mortgaging the revenue of future years for their indemnification. The sums which have been thus lent to Government, and which constitute the national debt, form what are called the Public Funds. The practice was introduced by the Venetians and the Genoese in the sixteenth century, and has been adopted since by most of the nations of Europe."1

It is justly observed by Mr. Smith, that “the same commercial state of society which, by the operation of moral causes, brings Government into the necessity of borrowing, produces in the subjects both an ability and an inclination to lend."* Merchants have at all times a proportion of their capital, and of the average returns of trade within their reach. Their natural confidence in the state where their property is lodged, leads them (particularly under free governments) to trust to the public faith, or if they should apprehend any unusual risk, the alarm will only have the effect of enhancing their demands in settling the terms of their bargain. As the debts, however,

i Hamilton, [Introduction, &c.,7 pp. 548, 549. With respect to the particular use of the word Fund, (which in its common acceptation means a sum of money appropriated for any particular purpose,) it may be proper to observe, that according to strict analogy it ought to be applied to the Taxes or Revenues

upon which the interest of the public debts is secured. The former definition, however, (which applies it to the capitals or debts upon which the interest is payable,) has been long sanctioned by universal custom.-Fairman, On the Stocks.

*[Wealth of Nations, Book V. chap. ïïi.; Vol. III. p. 400, tepth edition.7

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