national debt, but even that this payment, from being over-quick, becomes burthensome and prejudicial to the creditors of the state. If this effect of a sinking fund be correct, (and it would be difficult to contest its correctness,) Adam Smith has evidently laboured under a mistake in thinking that national debts could not be paid by means of savings from the ordinary On the contrary, it is evident that this object is completely accomplished by a sinking fund; and, in this respect, it is intitled to the praises bestowed upon it by all who know its nature and appreciate its results.

revenue.

But is not this advantage of a sinking fund, which cannot be denied, counterbalanced by the most serious inconveniencies? Does it not abstract a portion of the public revenue from consumption; and does not this diminution occasion a proportionally diminished production? Does it not depreciate capitals, and force them abroad to find a better employment? Let us examine how far these doubts, raised by Lord Lauderdale, are founded.

When a country borrows one hundred millions at five per cent; and one per cent of the capital is placed at compound interest to repay it in thirty-seven years, the loan costs that country six millions a year.

One hundred millions lent by the owners of circulating capital diminish this capital by the sum which is exported and consumed abroad. With regard to that portion of the capital which is consumed by government in the country, the circulating capital suffers no diminution from this consumption. Let us therefore suppose, that the portion exported consists

of fifty millions, and that consumed at home also fifty millions; in that case the country is liable to experience a diminution of fifty millions in its circulating capital, and has no hope of recovering this sum, or part of it, but by a profitable balance of foreign trade.

The fifty millions, consumed in the country, forming an accidental and transitory increase of expence, occasion a rise in the price of all commodities; and as this rise is a clear benefit to the producers, it is probably mostly economized; and this economy helps to repair the loss experienced by the circulating capital.

There is, therefore, nothing lost, in fact, to the country, but the fifty millions consumed abroad.

The six millions, which the country has to pay for thirty-seven years, are assessed upon the whole nation; and every contributing individual pays his share either by performing more labour, or by using more economy in his consumption.

If the tax be paid by additional labour, the country not only experiences no loss, but is even enriched; because the tax is temporary, and the produce derived from more labour is durable and permanent.

If the tax be paid by more economy in the use of the existing produce, individuals suffer a temporary privation, which is more or less painful according as it falls upon comforts or necessaries: but in that case, labour and its produce remain the same, and undergo no alteration.

Of the six millions, amount of interest and sinking fund, the creditors probably consume five, or the

amount of the interest of their capital. As for the sixth million, which forms a part of their capital, they probably seek a new employment for it, which restores the interest of which the sinking fund deprived them. Such new employment is easily found, since the hundred millions, consumed by the loan, have diminished the circulating capital by that sum, and left a void in circulation. The gradual return of the extinguished debt into circulation covers part of the loss or privations suffered through the abstraction of the borrowed hundred millions, and insensibly restores the natural course of circulation.

Thus it is evident that the sinking fund, both in its principle and in its results, produces none of the fatal effects which are ascribed to it by the Earl of Lauderdale.

1. It does not abstract a part of the general revenue from consumption; neither does it diminish re-production in the same degree.

The economy which it occasions, is in proportion to the extraordinary consumption effected by the loan, as one to an hundred, or at the utmost as one to fifty: it, therefore, can neither impede nor diminish production, since it feels already a void of ninety-nine, or at least, of forty-nine millions. When the necessity to produce is as one hundred, the sinking fund, which diminishes it one hundredth part, is neither felt nor perceived.

Lord Lauderdale, and many other estimable writers, have been misled by the supposition that production in England is on a level with consumption, that the fixed capital in England is as considerable as

it ought to be, and the circulating capital proportioned to the wants of consumption and labour; and that the sums repaid by means of the sinking fund are a surplus which cannot find any employment in the country without deranging its general economy.

But I think they may be easily undeceived. Although the sinking fund is considerable in England, it is but a fifty-second, or thereabouts, of the national debt, and, consequently, returns to the circulating capital but a fifty-second part of the funds which had been abstracted from it. To render this return of a fifty-second part of the national debt to the circulating capital burthensome to the nation, the loss of the five hundred eighty millions sterling borrowed by the English government, and consequently abstracted from the circulating capital, must be supposed to have been recovered by more labour and economy; the national debt of England at this present day must be supposed to be a clear gain to the capitalists to whom it belongs, and the revenue which serves to pay its interest and to accumulate for the extinction of the debt, must be supposed to become absolutely free or unnecessary when the national debt is paid. Such an increase of wealth in the short space of less than a century, would be an inconceivable phenomenon and beyond all belief. In vain it is urged that, in spite of the loans and the enormous capitals which they have abstracted from the circulation of the country, the circulating capital is adequate to all the branches of labour and to all the wants of circulation; which would not be the case, if the capitals consumed by the loans had not been re-produced by labour and

economy. This fact, which appears conclusive and decisive, is however but specious and delusive.

When England opened her first loans, she gave to those who lent her their money a credit in the great book, which guaranteed their claims as creditors. This credit in the book certainly did not re-pay the money that had been lent; England always continued debtor to its amount. She never began to pay her creditors but when she created a sinking fund, and she has liberated herself only as far as she has been allowed to do so by this fund.

Had things continued in this state, it would be obvious to any one, that having by her loans consumed five-hundred eighty millions sterling of the circulating capital, and re-imbursed only as much as the sinking fund has allowed her to re-pay, there must be in the circulating capital a deficiency paramount to the national debt: excepting however the ameliorations which that capital has gained from labour and economy.

How then can it be supposed, that there is no void in the circulating capital, that the consumption of the five-hundred eighty millions sterling which constituted part of it has been repaired, and that an auginentation of this circulating capital would be burthensome to the country? This is one of the greatest mysteries of political economy and of the science of circulation.

The written acknowledgment given by the state to every one of its creditors has replaced the circulating capital absorbed by the loans. Every bearer of such an acknowledgment offered it in case of need, as he would have offered that part of the circulating capital