1 Paine may have had in mind the five senses, with referenceto the proposed five members of the Directory.—Editor..
But mankind have conceived an idea thatsome kind of authorityis necessary tosuperintendthe execution of the laws and to see that they are faithfully performed; and it is by confounding this superintending authority with the official execution that we get embarrassed about the termexecutive power. All the parts in the governments of the United States of America that are called THE EXECUTIVE, are no other than authorities to superintend the execution of the laws; and they are so far independent of the legislative, that they know the legislative only thro' the laws, and cannot be controuled or directed by it through any other medium.
In what manner this superintending authority shall be appointed, or composed, is a matter that falls within the province of opinion. Some may prefer one method and some another; and in all cases, where opinion only and not principle is concerned, the majority of opinions forms the rule for all. There are however some things deducible from reason, and evidenced by experience, that serve to guide our decision upon the case. The one is, never to invest any individual with extraordinary power; for besides his being tempted to misuse it, it will excite contention and commotion in the nation for the office. Secondly, never to invest power long in the hands of any number of individuals. The inconveniences that may be supposed to accompany frequent changes are less to be feared than the danger that arises from long continuance.
I shall conclude this discourse with offering some observations on the means ofpreserving liberty; for it is not only necessary that we establish it, but that we preserve it.
It is, in the first place, necessary that we distinguish between the means made use of to overthrow despotism, in order to prepare the way for the establishment of liberty, and the means to be used after the despotism is overthrown.
The means made use of in the first case are justified by necessity. Those means are, in general, insurrections; for whilst the established government of despotism continues in any country it is scarcely possible that any other means can be used. It is also certain that in the commencement of a revolution, the revolutionary party permit to themselves adiscretionary exercise of powerregulated more by circumstances than by principle, which, were the practice to continue, liberty would never be established, or if established would soon be overthrown. It is never to be expected in a revolution that every man is to change his opinion at the same moment. There never yet was any truth or any principle so irresistibly obvious, that all men believed it at once. Time and reason must co-operate with each other to the final establishment of any principle; and therefore those who may happen to be first convinced have not a right to persecute others, on whom conviction operates more slowly. The moral principle of revolutions is to instruct, not to destroy.
Had a constitution been established two years ago, (as ought to have been done,) the violences that have since desolated France and injured the character of the revolution, would, in my opinion, have been prevented.(1) The nation would then have had a bond of union, and every individual would have known the line of conduct he was to follow. But, instead of this, a revolutionary government, a thing without either principle or authority, was substituted in its place; virtue and crime depended upon accident; and that which was patriotism one day, became treason the next. All these things have followed from the want of a constitution; for it is the nature and intention of a constitution toprevent governing by party, by establishing a common principle that shall limit and control the power and impulse of party, and that says to all parties,thus far shalt thou go and no further. But in the absence of a constitution, men look entirely to party; and instead of principle governing party, party governs principle.
1 The Constitution adopted August 10, 1793, was by thedetermination of "The Mountain," suspended during the waragainst France. The revolutionary government was thus madechronic—Editor.
An avidity to punish is always dangerous to liberty. It leads men to stretch, to misinterpret, and to misapply even the best of laws. He that would make his own liberty secure, must guard even his enemy from oppression; for if he violates this duty, he establishes a precedent that will reach to himself. Thomas Paine.
Paris, July, 1795.
SPEECH IN THE FRENCH NATIONAL CONVENTION, JULY 7, 1795.
On the motion of Lanthenas, "That permission be granted to Thomas Paine, to deliver his sentiments on the declaration of rights and the constitution," Thomas Paine ascended the Tribune; and no opposition being made to the motion, one of the Secretaries, who stood by Mr. Paine, read his speech, of which the following is a literal translation:
Citizens:
The effects of a malignant fever, with which I was afflicted during a rigorous confinement in the Luxembourg, have thus long prevented me from attending at my post in the bosom of the Convention, and the magnitude of the subject under discussion, and no other consideration on earth, could induce me now to repair to my station.
A recurrence to the vicissitudes I have experienced, and the critical situations in which I have been placed in consequence of the French Revolution, will throw upon what I now propose to submit to the Convention the most unequivocal proofs of my integrity, and the rectitude of those principles which have uniformly influenced my conduct.
In England I was proscribed for having vindicated the French Revolution, and I have suffered a rigorous imprisonment in France for having pursued a similar mode of conduct. During the reign of terrorism, I was a close prisoner for eight long months, and remained so above three months after the era of the 10th Thermidor.(1) I ought, however, to state, that I was not persecuted by thepeopleeither of England or France. The proceedings in both countries were the effects of the despotism existing in their respective governments. But, even if my persecution had originated in the people at large, my principles and conduct would still have remained the same. Principles which are influenced and subject to the controul of tyranny, have not their foundation in the heart.
1 By the French republican calendar this was nearly thetime. Paine's imprisonment lasted from December 28, 1793, toNovember 4, 1794. He was by a unanimous vote recalled to theConvention, Dec 7, 1794, but his first appearance there wason July 7, 1795.—Editor.,
A few days ago, I transmitted to you by the ordinary mode of distribution, a short Treatise, entitled "Dissertation on the First Principles of Government." This little work I did intend to have dedicated to the people of Holland, who, about the time I began to write it, were determined to accomplish a Revolution in their Government, rather than to the people of France, who had long before effected that glorious object. But there are, in the Constitution which is about to be ratified by the Convention certain articles, and in the report which preceded it certain points, so repugnant to reason, and incompatible with the true principles of liberty, as to render this Treatise, drawn up for another purpose, applicable to the present occasion, and under this impression I presumed to submit it to your consideration.
If there be faults in the Constitution, it were better to expunge them now, than to abide the event of their mischievous tendency; for certain it is, that the plan of the Constitution which has been presented to you is not consistent with the grand object of the Revolution, nor congenial to the sentiments of the individuals who accomplished it.
To deprive half the people in a nation of their rights as citizens, is an easy matter in theory or on paper: but it is a most dangerous experiment, and rarely practicable in the execution.
I shall now proceed to the observations I have to offer on this important subject; and I pledge myself that they shall be neither numerous nor diffusive.
In my apprehension, a constitution embraces two distinct parts or objects, thePrincipleand thePractice; and it is not only an essential but an indispensable provision that the practice should emanate from, and accord with, the principle. Now I maintain, that the reverse of this proposition is the case in the plan of the Constitution under discussion. The first article, for instance, of thepolitical stateof citizens, (v. Title ii. of the Constitution,) says:
"Every man born and resident in France, who, being twenty-one years of age, has inscribed his name on the Civic Register of his Canton, and who has lived afterwards one year on the territory of the Republic, and who pays any direct contribution whatever, real or personal, is a French citizen." (1)
1 The article as ultimately adopted substituted "person" for"man," and for "has inscribed his name" (a slighteducational test) inserted "whose name is inscribed."—Editor.
I might here ask, if those only who come under the above description are to be considered as citizens, what designation do you mean to give the rest of the people? I allude to that portion of the people on whom the principal part of the labour falls, and on whom the weight of indirect taxation will in the event chiefly press. In the structure of the social fabric, this class of people are infinitely superior to that privileged order whose only qualification is their wealth or territorial possessions. For what is trade without merchants? What is land without cultivation? And what is the produce of the land without manufactures? But to return to the subject.
In the first place, this article is incompatible with the three first articles of the Declaration of Rights, which precede the Constitutional Act.
The first article of the Declaration of Rights says:
"The end of society is the public good; and the institution of government is to secure to every individual the enjoyment of his rights."
But the article of the Constitution to which I have just adverted proposes as the object of society, not the public good, or in other words, the good ofall, but a partial good; or the good only of afew; and the Constitution provides solely for the rights of this few, to the exclusion of the many.
The second article of the Declaration of Rights says:
"The Rights of Man in society are Liberty, Equality, Security of his person and property."
But the article alluded to in the Constitution has a direct tendency to establish the reverse of this position, inasmuch as the persons excluded by thisinequalitycan neither be said to possess liberty, nor security against oppression. They are consigned totally to the caprice and tyranny of the rest.
The third article of the Declaration of Rights says:
"Liberty consists in such acts of volition as are not injurious to others."
But the article of the Constitution, on which I have observed, breaks down this barrier. It enables the liberty of one part of society to destroy the freedom of the other.
Having thus pointed out the inconsistency of this article to the Declaration of Rights, I shall proceed to comment on that of the same article which makes a direct contribution a necessary qualification to the right of citizenship.
A modern refinement on the object of public revenue has divided the taxes, or contributions, into two classes, thedirectand theindirect, without being able to define precisely the distinction or difference between them, because the effect of both is the same.
Those are designated indirect taxes which fall upon the consumers of certain articles, on which the tax is imposed, because, the tax being included in the price, the consumer pays it without taking notice of it.
The same observation is applicable to the territorial tax. The land proprietors, in order to reimburse themselves, will rack-rent their tenants: the farmer, of course, will transfer the obligation to the miller, by enhancing the price of grain; the miller to the baker, by increasing the price of flour; and the baker to the consumer, by raising the price of bread. The territorial tax, therefore, though calleddirect, is, in its consequences,indirect.
To this tax the land proprietor contributes only in proportion to the quantity of bread and other provisions that are consumed in his own family. The deficit is furnished by the great mass of the community, which comprehends every individual of the nation.
From the logical distinction between the direct and in-direct taxation, some emolument may result, I allow, to auditors of public accounts, &c., but to the people at large I deny that such a distinction (which by the by is without a difference) can be productive of any practical benefit. It ought not, therefore, to be admitted as a principle in the constitution.
Besides this objection, the provision in question does not affect to define, secure, or establish the right of citizenship. It consigns to the caprice or discretion of the legislature the power of pronouncing who shall, or shall not, exercise the functions of a citizen; and this may be done effectually, either by the imposition of adirect or indirecttax, according to the selfish views of the legislators, or by the mode of collecting the taxes so imposed.
Neither a tenant who occupies an extensive farm, nor a merchant or manufacturer who may have embarked a large capital in their respective pursuits, can ever, according to this system, attain the preemption of a citizen. On the other hand, any upstart, who has, by succession or management, got possession of a few acres of land or a miserable tenement, may exultingly exercise the functions of a citizen, although perhaps neither possesses a hundredth part of the worth or property of a simple mechanic, nor contributes in any proportion to the exigencies of the State.
The contempt in which the old government held mercantile pursuits, and the obloquy that attached on merchants and manufacturers, contributed not a little to its embarrassments, and its eventual subversion; and, strange to tell, though the mischiefs arising from this mode of conduct are so obvious, yet an article is proposed for your adoption which has a manifest tendency to restore a defect inherent in the monarchy.
I shall now proceed to the second article of the same Title, with which I shall conclude my remarks.
The second article says, "Every French soldier, who shall have served one or more campaigns in the cause of liberty, is deemed a citizen of the republic, without any respect or reference to other qualifications."(1)
It would seem, that in this Article the Committee were desirous of extricating themselves from a dilemma into which they had been plunged by the preceding article. When men depart from an established principle they are compelled to resort to trick and subterfuge, always shifting their means to preserve the unity of their objects; and as it rarely happens that the first expedient makes amends for the prostitution of principle, they must call in aid a second, of a more flagrant nature, to supply the deficiency of the former. In this manner legislators go on accumulating error upon error, and artifice upon artifice, until the mass becomes so bulky and incongruous, and their embarrassment so desperate, that they are compelled, as their last expedient, to resort to the very principle they had violated. The Committee were precisely in this predicament when they framed this article; and to me, I confess, their conduct appears specious rather than efficacious.(2)
1 This article eventually stood: "All Frenchmen who shallhave made one or more campaigns for the establishment of theRepublic, are citizens, without condition as to taxes."—Editor.2 The head of the Committee (eleven) was the Abbi Sieves,whose political treachery was well known to Paine before itbecame known to the world by his services to Napoleon inoverthrowing the Republic.—Editor.
It was not for himself alone, but for his family, that the French citizen, at the dawn of the revolution, (for then indeed every man was considered a citizen) marched soldier-like to the frontiers, and repelled a foreign invasion. He had it not in his contemplation, that he should enjoy liberty for the residue of his earthly career, and by his own act preclude his offspring from that inestimable blessing. No! He wished to leave it as an inheritance to his children, and that they might hand it down to their latest posterity. If a Frenchman, who united in his person the character of a Soldier and a Citizen, was now to return from the army to his peaceful habitation, he must address his small family in this manner: "Sorry I am, that I cannot leave to you a small portion of what I have acquired by exposing my person to the ferocity of our enemies and defeating their machinations. I have established the republic, and, painful the reflection, all the laurels which I have won in the field are blasted, and all the privileges to which my exertions have entitled me extend not beyond the period of my own existence!" Thus the measure that has been adopted by way of subterfuge falls short of what the framers of it speculated upon; for in conciliating the affections of theSoldier, they have subjected theFatherto the most pungent sensations, by obliging him to adopt a generation of Slaves.
Citizens, a great deal has been urged respecting insurrections. I am confident that no man has a greater abhorrence of them than myself, and I am sorry that any insinuations should have been thrown out upon me as a promoter of violence of any kind. The whole tenor of my life and conversation gives the lie to those calumnies, and proves me to be a friend to order, truth and justice.
I hope you will attribute this effusion of my sentiments to my anxiety for the honor and success of the revolution. I have no interest distinct from that which has a tendency to meliorate the situation of mankind. The revolution, as far as it respects myself, has been productive of more loss and persecution than it is possible for me to describe, or for you to indemnify. But with respect to the subject under consideration, I could not refrain from declaring my sentiments.
In my opinion, if you subvert the basis of the revolution, if you dispense with principles, and substitute expedients, you will extinguish that enthusiasm and energy which have hitherto been the life and soul of the revolution; and you will substitute in its place nothing but a cold indifference and self-interest, which will again degenerate into intrigue, cunning, and effeminacy.
But to discard all considerations of a personal and subordinate nature, it is essential to the well-being of the republic that the practical or organic part of the constitution should correspond with its principles; and as this does not appear to be the case in the plan that has been presented to you, it is absolutely necessary that it should be submitted to the revision of a committee, who should be instructed to compare it with the Declaration of Rights, in order to ascertain the difference between the two, and to make such alterations as shall render them perfectly consistent and compatible with each other.
"On the verge, nay even in the gulph of bankruptcy."1 This pamphlet, as Paine predicts at its close (no doubt ongood grounds), was translated into all languages of Europe,and probably hastened the gold suspension of the Bank ofEngland (1797), which it predicted. The British Governmententrusted its reply to Ralph Broome and George Chalmers, whowrote pamphlets. There is in the French Archives an orderfor 1000 copies, April 27, 1796, nineteen days after Paine'spamphlet appeared. "Mr. Cobbett has made this littlepamphlet a text-book for most of his elaborate treatises onour finances.... On the authority of a late Register of Mr.Cobbett's I learn that the profits arising from the sale ofthis pamphlet were devoted [by Paine] to the relief of theprisoners confined in Newgate for debt."—"Life of Paine,"by Richard Carlile, 1819.—Editor..
Debates in Parliament.
Nothing, they say, is more certain than death, and nothing more uncertain than the time of dying; yet we can always fix a period beyond which man cannot live, and within some moment of which he will die. We are enabled to do this, not by any spirit of prophecy, or foresight into the event, but by observation of what has happened in all cases of human or animal existence. If then any other subject, such, for instance, as a system of finance, exhibits in its progress a series of symptoms indicating decay, its final dissolution is certain, and the period of it can be calculated from the symptoms it exhibits.
Those who have hitherto written on the English system of finance, (the funding system,) have been uniformly impressed with the idea that its downfall would happensome time or other. They took, however, no data for their opinion, but expressed it predictively,—or merely as opinion, from a conviction that the perpetual duration of such a system was a natural impossibility. It is in this manner that Dr. Price has spoken of it; and Smith, in his Wealth of Nations, has spoken in the same manner; that is, merely as opinion without data. "The progress," says Smith, "of the enormous debts, which at present oppress, and will in the long runmost probably ruin, all the great nations of Europe [he should have saidgovernments] has been pretty uniform." But this general manner of speaking, though it might make some impression, carried with it no conviction.
It is not my intention to predict any thing; but I will show from data already known, from symptoms and facts which the English funding system has already exhibited publicly, that it will not continue to the end of Mr. Pitt's life, supposing him to live the usual age of a man. How much sooner it may fall, I leave to others to predict.
Let financiers diversify systems of credit as they will, itisnevertheless true, that every system of credit is a system of paper money. Two experiments have already been had upon paper money; the one in America, the other in France. In both those cases the whole capital was emitted, and that whole capital, which in America was called continental money, and in France assignats, appeared in circulation; the consequence of which was, that the quantity became so enormous, and so disproportioned to the quantity of population, and to the quantity' of objects upon which it could be employed, that the market, if I may so express it, was glutted with it, and the value of it fell. Between five and six years determined the fate of those experiments. The same fate would have happened to gold and silver, could gold and silver have been issued in the same abundant manner that paper had been, and confined within the country as paper money always is, by having no circulation out of it; or, to speak on a larger scale, the same thing would happen in the world, could the world be glutted with gold and silver, as America and France have been with paper.
The English system differs from that of America and France in this one particular, that its capital is kept out of sight; that is, it does not appear in circulation. Were the whole capital of the national debt, which at the time I write this is almost one hundred million pounds sterling, to be emitted in assignats or bills, and that whole quantity put into circulation, as was done in America and in France, those English assignats, or bills, would soon sink in value as those of America and France have done; and that in a greater degree, because the quantity of them would be more disproportioned to the quantity of population in England, than was the case in either of the other two countries. A nominal pound sterling in such bills would not be worth one penny.
But though the English system, by thus keeping the capital out of sight, is preserved from hasty destruction, as in the case of America and France, it nevertheless approaches the same fate, and will arrive at it with the same certainty, though by a slower progress. The difference is altogether in the degree of speed by which the two systems approach their fate, which, to speak in round numbers, is as twenty is to one; that is, the English system, that of funding the capital instead of issuing it, contained within itself a capacity of enduring twenty times longer than the systems adopted by America and France; and at the end of that time it would arrive at the same common grave, the Potter's Field of paper money.
The datum, I take for this proportion of twenty to one, is the difference between a capital and the interest at five per cent. Twenty times the interest is equal to the capital. The accumulation of paper money in England is in proportion to the accumulation of the interest upon every new loan; and therefore the progress to the dissolution is twenty times slower than if the capital were to be emitted and put into circulation immediately. Every twenty years in the English system is equal to one year in the French and American systems.
Having thus stated the duration of the two systems, that of funding upon interest, and that of emitting the whole capital without funding, to be as twenty to one, I come to examine the symptoms of decay, approaching to dissolution, that the English system has already exhibited, and to compare them with similar systems in the French and American systems.
The English funding system began one hundred years ago; in which time there have been six wars, including the war that ended in 1697.
1. The war that ended, as I have just said, in 1697.
2. The war that began in 1702.
3. The war that began in 1739.
4. The war that began in 1756.
5. The American war, that began in 1775.
6. The present war, that began in 1793.
The national debt, at the conclusion of the war which ended in 1697, was twenty-one millions and an half. (See Smith's Wealth of Nations, chapter on Public Debts.) We now see it approaching fast to four hundred millions. If between these two extremes of twenty-one millions and four hundred millions, embracing the several expenses of all the including wars, there exist some common ratio that will ascertain arithmetically the amount of the debts at the end of each war, as certainly as the fact is known to be, that ratio will in like manner determine what the amount of the debt will be in all future wars, and will ascertain the period within which the funding system will expire in a bankruptcy of the government; for the ratio I allude to, is the ratio which the nature of the thing has established for itself.
Hitherto no idea has been entertained that any such ratio existed, or could exist, that would determine a problem of this kind; that is, that would ascertain, without having any knowledge of the fact, what the expense of any former war had been, or what the expense of any future war would be; but it is nevertheless true that such a ratio does exist, as I shall show, and also the mode of applying it.
The ratio I allude to is not in arithmetical progression like the numbers 2, 3, 4, 5, 6, 7, 8, 9; nor yet in geometrical progression, like the numbers 2, 4, 8, 16, 32, 64, 128, 256; but it is in the series of one half upon each preceding number; like the numbers 8, 12, 18, 27, 40, 60, 90, 135.
Any person can perceive that the second number, 12, is produced by the preceding number, 8, and half 8; and that the third number, 18, is in like manner produced by the preceding number, 12, and half 12; and so on for the rest. They can also see how rapidly the sums increase as the ratio proceeds. The difference between the two first numbers is but four; but the difference between the two last is forty-five; and from thence they may see with what immense rapidity the national debt has increased, and will continue to increase, till it exceeds the ordinary powers of calculation, and loses itself in ciphers.
I come now to apply the ratio as a rule to determine in all cases.
I began with the war that ended in 1697, which was the war in which the funding system began. The expense of that war was twenty-one millions and an half. In order to ascertain the expense of the next war, I add to twenty-one millions and an half, the half thereof (ten millions and three quarters) which makes thirty-two millions and a quarter for the expense of that war. This thirty-two millions and a quarter, added to the former debt of twenty-one millions and an half, carries the national debt to fifty-three millions and three quarters. Smith, in his chapter on Public Debts, says, that the national debt was at this time fifty-three millions.
I proceed to ascertain the expense of the next war, that of 1739, by adding, as in the former case, one half to the expense of the preceding war. The expense of the preceding war was thirty-two millions and a quarter; for the sake of even numbers, say, thirty-two millions; the half of which (16) makes forty-eight millions for the expense of that war.
I proceed to ascertain the expense of the war of 1756, by adding, according to the ratio, one half to the expense of the preceding war. The expense of the preceding was taken at 48 millions, the half of which (24) makes 72 millions for the expense of that war. Smith, (chapter on Public Debts,) says, the expense of the war of 1756, was 72 millions and a quarter.
I proceed to ascertain the expense of the American war, of 1775, by adding, as in the former cases, one half to the expense of the preceding war. The expense of the preceding war was 72 millions, the half of which (36) makes 108 millions for the expense of that war. In the last edition of Smith, (chapter on Public Debts,) he says, the expense of the American war wasmore than an hundred millions.
I come now to ascertain the expense of the present war, supposing it to continue as long as former wars have done, and the funding system not to break up before that period. The expense of the preceding war was 108 millions, the half of which (54) makes 162 millions for the expense of the present war. It gives symptoms of going beyond this sum, supposing the funding system not to break up; for the loans of the last year and of the present year are twenty-two millions each, which exceeds the ratio compared with the loans of the preceding war. It will not be from the inability of procuring loans that the system will break up. On the contrary, it is the facility with which loans can be procured that hastens that event. The loans are altogether paper transactions; and it is the excess of them that brings on, with accelerating speed, that progressive depreciation of funded paper money that will dissolve the funding system.
I proceed to ascertain the expense of future wars, and I do this merely to show the impossibility of the continuance of the funding system, and the certainty of its dissolution.
The expense of the next war after the present war, according to the ratio that has ascertained the preceding cases, will be 243 millions.
Expense of the second war 364
———————— third war 546
———————— fourth war 819
———— fifth war 1228
3200 millions;
which, at only four per cent. will require taxes to the nominal amount of one hundred and twenty-eight millions to pay the annual interest, besides the interest of the present debt, and the expenses of government, which are not included in this account. Is there a man so mad, so stupid, as to sup-pose this system can continue?
When I first conceived the idea of seeking for some common ratio that should apply as a rule of measurement to all the cases of the funding system, so far as to ascertain the several stages of its approach to dissolution, I had no expectation that any ratio could be found that would apply with so much exactness as this does. I was led to the idea merely by observing that the funding system was a thing in continual progression, and that whatever was in a state of progression might be supposed to admit of, at least, some general ratio of measurement, that would apply without any very great variation. But who could have supposed that falling systems, or falling opinions, admitted of a ratio apparently as true as the descent of falling bodies? I have not made the ratio any more than Newton made the ratio of gravitation. I have only discovered it, and explained the mode of applying it.
To shew at one view the rapid progression of the funding system to destruction, and to expose the folly of those who blindly believe in its continuance, and who artfully endeavour to impose that belief upon others, I exhibit in the annexed table, the expense of each of the six wars since the funding system began, as ascertained by ratio, and the expense of the six wars yet to come, ascertained by the same ratio.
Table318
* The actual expense of the war of 1739 did not come up tothe sum ascertained by the ratio. But as that which is thenatural disposition of a thing, as it is the naturaldisposition of a stream of water to descend, will, ifimpeded in its course, overcome by a new effort what it hadlost by that impediment, so it was with respect to this warand the next (1756) taken collectively; for the expense ofthe war of 1756 restored the equilibrium of the ratio, asfully as if it had not been impeded. A circumstance thatserves to prove the truth of the ratio more folly than ifthe interruption had not taken place. The war of 1739 ***languid; the efforts were below the value of money et thattime; for the ratio is the measure of the depreciation ofmoney in consequence of the funding system; or what comesto the same end, it is the measure of the increase of paper.Every additional quantity of it, whether in bank notes orotherwise, diminishes the real, though not the nominal valueof the former quantity.—Author
Those who are acquainted with the power with which even a small ratio, acting in progression, multiplies in a long series, will see nothing to wonder at in this table. Those who are not acquainted with that subject, and not knowing what else to say, may be inclined to deny it. But it is not their opinion one way, nor mine the other, that can influence the event. The table exhibits the natural march of the funding system to its irredeemable dissolution. Supposing the present government of England to continue, and to go on as it has gone on since the funding system began, I would not give twenty shillings for one hundred pounds in the funds to be paid twenty years hence. I do not speak this predictively; I produce the data upon which that belief is founded; and which data it is every body's interest to know, who have any thing to do with the funds, or who are going to bequeath property to their descendants to be paid at a future day.
Perhaps it may be asked, that as governments or ministers proceeded by no ratio in making loans or incurring debts, and nobody intended any ratio, or thought of any, how does it happen that there is one? I answer, that the ratio is founded in necessity; and I now go to explain what that necessity is.
It will always happen, that the price of labour, or of the produce of labour, be that produce what it may, will be in proportion to the quantity of money in a country, admitting things to take their natural course. Before the invention of the funding system, there was no other money than gold and silver; and as nature gives out those metals with a sparing hand, and in regular annual quantities from the mines, the several prices of things were proportioned to the quantity of money at that time, and so nearly stationary as to vary but little in any fifty or sixty years of that period.
When the funding system began, a substitute for gold and silver began also. That substitute was paper; and the quantity increased as the quantity of interest increased upon accumulated loans. This appearance of a new and additional species of money in the nation soon began to break the relative value which money and the things it will purchase bore to each other before. Every thing rose in price; but the rise at first was little and slow, like the difference in units between two first numbers, 8 and 12, compared with the two last numbers 90 and 135, in the table. It was however sufficient to make itself considerably felt in a large transaction. When therefore government, by engaging in a new war, required a new loan, it was obliged to make a higher loan than the former loan, to balance the increased price to which things had risen; and as that new loan increased the quantity of paper in proportion to the new quantity of interest, it carried the price of things still higher than before. The next loan was again higher, to balance that further increased price; and all this in the same manner, though not in the same degree, that every new emission of continental money in America, or of assignats in France, was greater than the preceding emission, to make head against the advance of prices, till the combat could be maintained no longer. Herein is founded the necessity of which I have just spoken. That necessity proceeds with accelerating velocity, and the ratio I have laid down is the measure of that acceleration; or, to speak the technical language of the subject, it is the measure of the increasing depreciation of funded paper money, which it is impossible to prevent while the quantity of that money and of bank notes continues to multiply. What else but this can account for the difference between one war costing 21 millions, and another war costing 160 millions?
The difference cannot be accounted for on the score of extraordinary efforts or extraordinary achievements. The war that cost twenty-one millions was the war of the con-federates, historically called the grand alliance, consisting of England, Austria, and Holland in the time of William III. against Louis XIV. and in which the confederates were victorious. The present is a war of a much greater confederacy—a confederacy of England, Austria, Prussia, the German Empire, Spain, Holland, Naples, and Sardinia, eight powers, against the French Republic singly, and the Republic has beaten the whole confederacy.—But to return to my subject.
It is said in England, that the value of paper keeps equal with the value of gold and silver. But the case is not rightly stated; for the fact is, that the paper haspulled downthe value of gold and silver to a level with itself. Gold and silver will not purchase so much of any purchasable article at this day as if no paper had appeared, nor so much as it will in any country in Europe where there is no paper. How long this hanging together of money and paper will continue, makes a new case; because it daily exposes the system to sudden death, independent of the natural death it would otherwise suffer.
I consider the funding system as being now advanced into the last twenty years of its existence. The single circumstance, were there no other, that a war should now cost nominally one hundred and sixty millions, which when the system began cost but twenty-one millions, or that the loan for one year only (including the loan to the Emperor) should now be nominally greater than the whole expense of that war, shows the state of depreciation to which the funding system has arrived. Its depreciation is in the proportion of eight for one, compared with the value of its money when the system began; which is the state the French assignats stood a year ago (March 1795) compared with gold and silver. It is therefore that I say, that the English funding system has entered on the last twenty years of its existence, comparing each twenty years of the English system with every single year of the American and French systems, as before stated.
Again, supposing the present war to close as former wars have done, and without producing either revolution or reform in England, another war at least must be looked for in the space of the twenty years I allude to; for it has never yet happened that twenty years have passed off without a war, and that more especially since the English government has dabbled in German politics, and shown a disposition to insult the world, and the world of commerce, with her navy. The next war will carry the national debt to very nearly seven hundred millions, the interest of which, at four per cent, will be twenty-eight millions besides the taxes for the (then) expenses of government, which will increase in the same proportion, and which will carry the taxes to at least forty millions; and if another war only begins, it will quickly carry them to above fifty; for it is in the last twenty years of the funding system, as in the last year of the American and French systems without funding, that all the great shocks begin to operate.
I have just mentioned that, paper in England haspulled downthe value of gold and silver to a level with itself; and thatthis pulling dawnof gold and silver money has created the appearance of paper money keeping up. The same thing, and the same mistake, took place in America and in France, and continued for a considerable time after the commencement of their system of paper; and the actual depreciation of money was hidden under that mistake.
It was said in America, at that time, that everything was becomingdear; but gold and silver could then buy those dear articles no cheaper than paper could; and therefore it was not called depreciation. The idea ofdearnessestablished itself for the idea of depreciation. The same was the case in France. Though every thing rose in price soon after assignats appeared, yet those dear articles could be purchased no cheaper with gold and silver, than with paper, and it was only said that things weredear. The same is still the language in England. They call itdeariness. But they will soon find that it is an actual depreciation, and that this depreciation is the effect of the funding system; which, by crowding such a continually increasing mass of paper into circulation, carries down the value of gold and silver with it. But gold and silver, will, in the long run, revolt against depreciation, and separate from the value of paper; for the progress of all such systems appears to be, that the paper will take the command in the beginning, and gold and silver in the end.
But this succession in the command of gold and silver over paper, makes a crisis far more eventful to the funding system than to any other system upon which paper can be issued; for, strictly speaking, it is not a crisis of danger but a symptom of death. It is a death-stroke to the funding system. It is a revolution in the whole of its affairs.
If paper be issued without being funded upon interest, emissions of it can be continued after the value of it separates from gold and silver, as we have seen in the two cases of America and France. But the funding system rests altogether upon the value of paper being equal to gold and silver; which will be as long as the paper can continue carrying down the value of gold and silver to the same level to which itself descends, and no longer. But even in this state, that of descending equally together, the minister, whoever he may be, will find himself beset with accumulating difficulties; because the loans and taxes voted for the service of each ensuing year will wither in his hands before the year expires, or before they can be applied. This will force him to have recourse to emissions of what are called exchequer and navy bills, which, by still increasing the mass of paper in circulation, will drive on the depreciation still more rapidly.
It ought to be known that taxes in England are not paid in gold and silver, but in paper (bank notes). Every person who pays any considerable quantity of taxes, such as maltsters, brewers, distillers, (I appeal for the truth of it, to any of the collectors of excise in England, or to Mr. White-bread,)(1) knows this to be the case. There is not gold and silver enough in the nation to pay the taxes in coin, as I shall show; and consequently there is not money enough in the bank to pay the notes. The interest of the national funded debt is paid at the bank in the same kind of paper in which the taxes are collected. When people find, as they will find, a reservedness among each other in giving gold and silver for bank notes, or the least preference for the former over the latter, they will go for payment to the bank, where they have a right to go. They will do this as a measure of prudence, each one for himself, and the truth or delusion of the funding system will then be proved.