in being less extended and improved. Perhaps it might even be asserted, that labour and re-production do not suffer any injury at all, and that they are extended and improved by other causes not less powerful than the impulse of capital.

1

The interest of the loan and the fund set apart for its re-payment, require a small increase of taxes; which necessarily proves a stimulus to more labour and greater economy; so that in this instance it may truly be affirmed, that public loans, far from injuring labour and re-production, contribute to the increase of both.

On the other hand, as public loans afford an opportunity of employing even the smallest capitals, and create as it were an income without labour, they stimulate every one to economy, and contribute indirectly to the progress of wealth.

It will no doubt be objected, and with some appearance of truth, that these private savings and increased productions being consumed fruitlessly and without any re-production, there is not a single shilling added to the wealth of the nation, and only a change of consumers effected.

But on studying the results of public loans with more attention, the futility of the objection is soon discovered.

Were the extraordinary wants which occasion public loans, permanent; and were no fund for the extinguishing of such loans in a given time, provided, along with the interest; public loans would undoubtedly consume all the productions which they cause to be produced or economized, and matters

would ultimately be in the same state as if there had been no loans.

But if the wants which such loans supply, are merely temporary; if the productions which they caused to be produced or economized, are sufficient to provide for the interest and for a surplus to extinguish the debt; it must be acknowledged, that after the re-payment of the capital, the contributors to the public expences are richer by all the productions produced to pay their contributions, the state-creditors, by all the savings which they have converted into shares in the public funds, and national wealth increased by both the productions produced by the contributors to the public expences, and the capitals accumulated by the state-creditors.

These results are incontestable, when public loans absorb only unemployed capitals and when the public contributions provide both for the interest of the debt and for its extinction in a given time.

The case is not exactly the same, when the capitals absorbed by public loans are abstracted from those which would have served to maintain labours productive of a revenue. The application of such capitals to an unproductive consumption must be acknowledged to be prejudicial, perhaps even fatal to the branches of labour which they supported: but this evil, considerable as it is, cannot be compared to that occasioned by excessive contributions to the public expences, which impair capitals employed in labour, restrain or paralyse its faculties, weaken the sources of re-production, and carry desolation and despair into all labouring classes. There is even this difference between the

two evils; one is both remediless and hopeless; the other is at least a certain resource, and affords means to abridge its own duration.

It may however be supposed, that the capitals absorbed by public loans are only abstracted from labours the least productive, the least profitable, and the loss of which is most easily borne. In the case of equal profits, capitals are preferably employed in the most productive labours, because their benefit is the safest and most lasting. Hence it necessarily follows, that public loans affect only the least valuable and least productive capitals.

Moreover, the loss resulting from the disappearance of these capitals may in some degree be repaired by a greater consumption of the produce of other branches of labour, by a greater activity, energy, and diligence, on the part of the labourers, and a greater economy in their consumption. The necessity of paying the tax imposed upon them to provide for the interest and the extinction of the public debt, must induce them to redouble their efforts for the purpose of raising the produce of their labour to the level of their new burthens.

Thus every thing induces the belief that public loans have a contrary effect to extraordinary contributions; the latter necessarily tend to diminish the produce of labour, because they deprive labour of its means; the former tend to increase it, by invigorating its energy consequently, the loss which results from public loans is the least considerable and the soonest repaired.

Adam Smith has attentively weighed most of these

considerations; and yet they have not obtained his assent but it may easily be perceived, that the motives of his hostility are but indirect attacks upon public loans, and do not prove that there exists a better mode of providing for the extraordinary expences of the state.

66

He asserts, that if extraordinary expences

66 were

always defrayed by a revenue raised within the year, wars would in general be more speedily con"cluded and less wantonly undertaken. The people, feeling during the continuance of war the complete "burden of it, would soon grow weary of it."*

But this assertion is not supported by experience; war was never and no-where subordinate to the means of carrying it on; the passions which cause it to be pursued, regard neither its cost nor the calamities it inflicts. When the ordinary and extraordinary resources are exhausted, war is carried on by devastating other countries, and its calamities, far from hastening its termination, prolong its duration. It is only since public loans have provided for their expences, that wars have lost something of their intensity and asperity, that they have been shorter, and, if I may be allowed to say so, less fatal to nations. Each additional year of warfare renders every new loan more expensive, more difficult, and more ruinous. The belligerents are thus every year warned of the exhausted state of their finances; and this periodical warning forces them, though reluctantly, to think of peace, and to put an end to a war, the expences of which are ruinous, and which almost

* Adam Smith's Wealth of Nations, London, 1805. Vol. iii. book v. p. 446.

always disappoints the hopes of those by whom it is carried on.

Adam Smith objects also, that "it is absolutely "chimerical to suppose that national debts could "ever be fairly and completely paid by any savings "of the ordinary revenue."

This objection might have had some weight in the mind of Adam Smith, because sinking funds had made little progress in his time; their nature had not been thoroughly investigated, nor their effects appreciated; and it was difficult to foresee the wonders they have since acomplished. It may fairly be supposed, that Adam Smith would have altered his opinion, had he known that, if after providing for the interest of a public loan, one per cent of the capital is placed at compound interest, the debt is extinguished in thirty-seven years.

This measure, the advantages of which I have set forth in another work *, had just then been represented by the Earl of Lauderdale as pregnant with the most fatal and most disastrous effects. Unacquainted with the noble Lord's publication, I could neither weigh the arguments on which his opinion is built, nor develope the motives which induced me to adopt a contrary opinion. I must therefore now perform the task which I could not attempt at that time; and, if I am not mistaken, the system of sinking funds will derive new lights from a controversy

* Essai Politique sur le Revenue Public des Peuples de l'An tiquité, du Moyen Agc, et des Siècles Modernes; par Charles Ganilh: in two volumes. Paris, 1806.