An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader with highlighter txt) 📖

of supporting the dignity of the chief magistrate,

must make up for the deficiency of many particular branches of

revenue. The sources of this general or public revenue, I shall

endeavour to explain in the following chapter.

 

CHAPTER II.

 

OF THE SOURCES OF THE GENERAL OR PUBLIC REVENUE OF THE SOCIETY.

 

The revenue which must defray, not only the expense of defending

the society and of supporting the dignity of the chief

magistrate, but all the other necessary expenses of government,

for which the constitution of the state has not provided any

particular revenue may be drawn, either, first, from some fund

which peculiarly belongs to the sovereign or commonwealth, and

which is independent of the revenue of the people ; or, secondly,

from the revenue of the people.

 

PART I.

 

Of the Funds, or Sources, of Revenue, which may peculiarly belong

to the Sovereign or Commowealth.

 

The funds, or sources, of revenue, which may peculiarly belong to

the sovereign or commonwealth, must consist, either in stock, or

in land.

 

The sovereign, like, any other owner of stock, may derive a

revenue from it, either by employing it himself, or by lending

it. His revenue is, in the one case, profit, in the other

interest.

 

The revenue of a Tartar or Arabian chief consists in profit. It

arises principally from the milk and increase of his own herds

and flocks, of which he himself superintends the management, and

is the principal shepherd or herdsman of his own horde or tribe.

It is, however, in this earliest and rudest state of civil

government only, that profit has ever made the principal part of

the public revenue of a monarchical state.

 

Small republics have sometimes derived a considerable revenue

from the profit of mercantile projects. The republic of Hamburgh

is said to do so from the profits of a public wine-cellar and

apothecary’s shop.{See Memoires concernant les Droits et

Impositions en Europe, tome i. page 73. This work was compiled by

the order of the court, for the use of a commision employed for

some years past in considering the proper means for reforming the

finances of France. The account of the French taxes, which takes

up three volumes in quarto, may be regarded as perfectly

authentic. That of those of other European nations was compiled

from such information as the French ministers at the different

courts could procure. It is much shorter, and probably not quite

so exact as that of the French taxes.} That state cannot be very

great, of which the sovereign has leisure to carry on the trade

of a wine-merchant or an apothecary. The profit of a public bank

has been a source of revenue to more considerable states. It

has been so, not only to Hamhurgh, but to Venice and Amsterdam. A

revenue of this kind has even by some people been thought not

below the attention of so great an empire as that of Great

Britain. Reckoning the ordinary dividend of the bank of England

at five and a-half per cent., and its capital at ten millions

seven hundred and eighty thousand pounds, the neat annual profit,

after paying the expense of management, must amount, it is said,

to five hundred and ninety-two thousand nine hundred pounds.

Government, it is pretended, could borrow this capital at three

per cent. interest, and, by taking the management of the bank

into its own hands, might make a clear profit of two hundred and

sixty-nine thousand five hundred pounds a-year. The orderly,

vigilant, and parsimonious administration of such aristocracies

as those of Venice and Amsterdam, is extremely proper, it appears

from experience, for the management of a mercantile project of

this kind. But whether such a government us that of England,

which, whatever may be its virtues, has never been famous for

good economy; which, in time of peace, has generally conducted

itself with the slothful and negligent profusion that is,

perhaps, natural to monarchies ; and, in time of war, has

constantly acted with all the thoughtless extravagance that

democracies are apt to fall into, could be safely trusted with

the management of such a project, must at least be a good deal

more doubtful.

 

The post-office is properly a mercantile project. The government

advances the expense of establishing the different offices, and

of buying or hiring the necessary horses or carriages, and is

repaid, with a large profit, by the duties upon what is carried.

It is, perhaps, the only mercantile project which has been

successfully managed by, I believe, every sort of government. The

capital to be advanced is not very considerable. There is no

mystery in the business. The returns are not only certain but

immediate.

 

Princes, however, have frequently engaged in many other

mercantile projects, and have been willing, like private persons,

to mend their fortunes, by becoming adventurers in the common

branches of trade. They have scarce ever succeeded. The profusion

with which the affairs of princes are always managed, renders it

almost impossible that they should. The agents of a prince regard

the wealth of their master as inexhaustible; are careless at what

price they buy, are careless at what price they sell, are

careless at what expense they transport his goods from one place

to another. Those agents frequently live with the profusion of

princes ; and sometimes, too, in spite of that profusion, and by

a proper method of making up their accounts, acquire the fortunes

of princes. It was thus, as we are told by Machiavel, that

the agents of Lorenzo of Medicis, not a prince of mean abilities,

carried on his trade. The republic of Florence was several

times obliged to pay the debt into which their extravagance had

involved him. He found it convenient, accordingly to give up the

business of merchant, the business to which his family had

originally owed their fortune, and, in the latter part of his

life, to employ both what remained of that fortune, and the

revenue of the state, of which he had the disposal, in projects

and expenses more suitable to his station.

 

No two characters seem more inconsistent than those of trader and

sovereign. If the trading spirit of the English East India

company renders them very bad sovereigns, the spirit of

sovereignty seems to have rendered them equally bad traders.

While they were traders only, they managed their trade

successfully, and were able to pay from their profits a moderate

dividend to the proprietors of their stock. Since they became

sovereigns, with a revenue which, it is said, was originally more

than three millions sterling, they have been obliged to beg the

ordinary assistance of government, in order to avoid immediate

bankruptcy. In their former situation, their servants in India

considered themselves as the clerks of merchants ; in their

present situation, those servants consider themselves as the

ministers of sovereigns.

 

A state may sometimes derive some part of its public revenue from

the interest of money, as well as from the profits of stock. If

it has amassed a treasure, it may lend a part of that treasure,

either to foreign states, or to its own subjects.

 

The canton of Berne derives a considerable revenue by lending a

part of its treasure to foreign states, that is, by placing it in

the public funds of the different indebted nations of Europe,

chiefly in those of France and England. The security of this

revenue must depend, first, upon the security of the funds in

which it is placed, or upon the good faith of the government

which has the management of them; and, secondly, upon the

certainty or probability of the continuance of peace with the

debtor nation. In the case of a war, the very first act of

hostility on the part of the debtor nation might be the

forfeiture of the funds of its credit or. This policy of lending

money to foreign states is, so far as I know peculiar to the

canton of Berne.

 

The city of Hamburgh {See Memoire concernant les Droites et

Impositions en Europe tome i p. 73.}has established a sort of

public pawn-shop, which lends money to the subjects of the state,

upon pledges, at six per cent. interest. This pawn-shop, or

lombard, as it is called, affords a revenue, it is pretended, to

the state, of a hundred and fifty thousand crowns, which, at four

and sixpence the crown, amounts to �33,750 sterling.

 

The government of Pennsylvania, without amassing any treasure,

invented a method of lending, not money, indeed, but what is

equivalent to money, to its subjects. By advancing to private

people, at interest, and upon land security to double the value,

paper bills of credit, to be redeemed fifteen years after their

date ; and, in the mean time, made transferable from hand to

hand, like banknotes, and declared by act of assembly to be a

legal tender in all payments from one inhabitant of the province

to another, it raised a moderate revenue, which went a

considerable way towards defraying an annual expense of about

�4,500, the whole ordinary expense of that frugal and orderly

government. The success of an expedient of this kind must

have depended upon three different circumstances: first, upon the

demand for some other instrument of commerce, besides gold and

silver money, or upon the demand for such a quantity of

consumable stock as could not be had without sending abroad the

greater part of their gold and silver money, in order to purchase

it; secondly, upon the good credit of the government which made

use of this expedient ; and, thirdly, upon the moderation with

which it was used, the whole value of the paper bills of credit

never exceeding that of the gold and silver money which would

have been necessary for carrying on their circulation, had there

been no paper bills of credit. The same expedient was, upon

different occations, adopted by several other American colonies;

but, from want of this moderation, it produced, in the greater

part of them, much more disorder than conveniency.

 

The unstable and perishable nature of stock and credit, however,

renders them unfit to be trusted to as the principal funds of

that sure, steady, and permanent revenue, which can alone give

security and dignity to government. The government of no great

nation, that was advanced beyond the shepherd state, seems ever

to have derived the greater part of its public revenue from such

sources.

 

Land is a fund of more stable and permanent nature ; and the rent

of public lands, accordingly, has been the principal source of

the public revenue of many a great nation that was much advanced

beyond the shepherd state. From the produce or rent of the public

lands, the ancient republics of Greece and Italy derived for a

long the the greater part of that revenue which defrayed the

necessary expenses of the commonwealth. The rent of the crown

lands constituted for a long time the greater part of the revenue

of the ancient sovereigns of Europe.

 

War, and the preparation for war, are the two circumstances

which, in modern times, occasion the greater part of the

necessary expense or all great states. But in the ancient

republics of Greece and Italy, every citizen was a soldier, and

both served, and prepared himself for service, at his own

expense. Neither of those two circumstances, therefore, cou1d

occasion any very considerable expense to the state. The rent of

a very moderate landed estate might be fully sufficient for

defraying all the other necessary expenses of government.

 

In the ancient monarchies of Europe, the manners and customs of

the time sufficiently prepared the great body of the people for

war; and when they took the field, they were, by the condition of

their feudal tenures, to be maintained either at their own

expense, or at that of their immediate