The Wealth of Nations Adam Smith (best novels to read for beginners txt) 📖

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 of any period during which it can reasonably be expected that peace should 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 of the taxes which was 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.1595 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 more 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 too 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 to reduce them, the more dangerous, the more ruinous it may be to misapply 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, or the anxiety for national security, can induce the people to submit, with tolerable patience, to a new tax. Hence the usual misapplication of the sinking fund.

In Great Britain, from the time that we had first recourse to the ruinous expedient of perpetual funding, the reduction of the public debt in time of peace, has never borne any proportion to its accumulation in time of war. It was in the war which began in 1688, and was concluded by the treaty of Ryswick in 1697, that the foundation of the present enormous debt of Great Britain was first laid.

On the 31st of December 1697, the public debts of Great Britain, funded and unfunded, amounted to £21,515,742 13s. 8½d. A great part of those debts had been contracted upon short anticipations, and some part upon annuities for lives; so that before the 31st of December 1701, in less than four years, there had partly been paid off, and partly reverted to the public, the sum of £5,121,041 12s. 0¾d.; a greater reduction of the public debt than has ever since been brought about in so short a period of time. The remaining debt, therefore, amounted only to £16,394,701 1s. 7¼d.

In the war which began in 1702, and which was concluded by the treaty of Utrecht, the public debts were still more accumulated. On the 31st of December 1714, they amounted to £53,681,076 5s. ⁶¹⁄₁₂d. The subscription into the South Sea fund of the short and long1596 annuities increased the capital of the public debts, so that on the 31st of December 1722, it amounted to £55,282,978 1s. 3⅚d. The reduction of the debt began in 1723, and went on so slowly that, on the 31st of December 1739, during seventeen years of profound peace, the whole sum paid off was no more than £8,328,354 17s. ¹¹³⁄₁₂d. the capital of the public debt at that time amounting to £46,954,623 3s. ⁴⁷⁄₁₂d.

The Spanish war, which began in 1739, and the French war which soon followed it, occasioned a further increase of the debt, which, on the 31st of December 1748, after the war had been concluded by the treaty of Aix la Chapelle, amounted to £78,293,313 1s. 10¾d. The most profound peace of seventeen years continuance had taken no more than £8,328,354 17s. ¹¹³⁄₁₂d. from it. A war of less than nine years continuance added £31,338,689 18s. 6⅙d. to it.1597

During the administration of Mr. Pelham, the interest of the public debt was reduced, or at least measures were taken for reducing it, from four to three percent;1598 the sinking fund was increased, and some part of the public debt was paid off. In 1755, before the breaking out of the late war, the funded debt of Great Britain amounted to £72,289,6731599 On the 5th of January 1763, at the conclusion of the peace, the funded debt amounted to £122,603,336 8s. 2¼d.1600 The unfunded debt has been stated at £13,927,589 2s. 2d. But the expense occasioned by the war did not end with the conclusion of the peace;1601 so that though, on the 5th of January 1764, the funded debt was increased (partly by a new loan, and partly by funding a part of the unfunded debt)1602 to £129,586,789 10s. 1¾d.