over the different kinds of profit, on rent, stock and labor, which constitute the whole national revenue. The transfer of this sum to the sinking funds sets freea stock equal to the sum drawn from the people, after deducting the expenses of management. This stock will be employed in the cultivation, manufactures, and commerce of the country; and so far from being afraid lest the sinking funds should pay the national debt too slowly, a prudent statesman in time of peace would rather incline to check the velocity of so powerful an engine; lest it should acquire a momentum fatal to the stability of commerce. Our alarm however may be diminished by reflecting upon the gradual increase of action in the sinking funds; upon its being entirely under the control of the government; and more particularly upon its never being able to set free at once, more than the interest of the original incumbrances. The income of the sinking fund can never exceed the net amount of the taxes; and during the last year of its operation when it has reached its maximum, it sets free exactly that amount of stock and no more. If instead of being raised in taxes, this money had remained in the pockets of the people, together with the expenses of collection and management, it would have found employment as easily as the other accumulations of profits, wages, and rents. In like manner, had the whole revenue of the funds from the beginning remained in the possession of the nation,a real capital would have been accumulated, much greater than the whole debt, which would have found an easy vent in the augmentation of commerce, the extension of manufactures, and the improvement of agriculture, both domestic and colonial.

Nevertheless, say the enemies of the funding system,it is unjust to burden posterity with a load of debt. But strictly speaking, a nution has no posterity. It is a great unit from the beginning to the end of its career: and therefore, although individuals shift and continu

ally succeed each other from age to age and from generation to generation, yet the great interests of the nation always remain the same; they are always one and in divisible. It is equally the interest of those individuals of a nation who shall come into existence fifty or a hundred years hence, that large sums of money should now be spent in securing the national honor or the national safety, and in promoting the national prosperity and the national aggrandizement, as it is the interest of the now-existing individuals of that nation. For if it be necessary that such sums be expended, either to repel the aggressions of a foreign foe or to prevent the too great accumulation of power in a foreign country, it is evident that without this present expenditure the individuals who are to live fifty or a hundred years hence, instead of standing high in the scale of national elevation and character, will be born to no other inheritance than that of the most humiliating bondage to a stranger-tyrant and his minions. If then it be equally for the benefit of posterity as of the existing generation that large portions of capital be now expended, it is just and right that posterity should also bear its share of the burdens occasioned by such an expenditure. And it is surely more wise to spread a given burden of debt over a space of one hundred years, and over a population of one hundred millions, than to contine the pressure of its weight to twenty years and to twenty millions of people; taking the existing population of a given country to be twenty millions, and the time allotted for each succeeding generation of men to be twenty years. For the annual surplus produce of the land and labor of every community, the fund which is yearly added to the capital, and destined to increase the income of the people, is the fund from which all taxes ought to be taken. And as this fund cannot be suddenly augmented in proportion to the public demands upon extraordinary occasions; the system of

borrowing, that is, the funding system, has been inven ted; and this system, when kept within proper bounds and combined with the establishment of a sinking fund, equalizes the burdens of the state among the different successions of men for all of whose benefit they are imposed; and defers the actual levying of the supplies until the national stock or capital shall have accumulated to the requisite point.

Doctor Smith, in his "Wealth of Nations," reprobates the funding system as needlessly annihilating national capital without reproducing any equivalent for its loss. The objection is founded on this great writer's division of the people of every community into two classes of laborers, the productive and the unproductive. He allows no one to be a productive laborer unless he reproduces the capital which he employs in any giv en operation, together with the gradual accumulation of profit, or revenue, arising from the employment of that capital. This definition of productive labor manifestedly confines the application of the term to merchants, to manufacturers and to farmers; since they alone reproduce the capital which they employ in their respective occupations, together with a profit upon it. All other classes of the community are considered as unproductive laborers. If this definition be correct, no doubt all the capital which is borrowed by a government and which constitutes the national debt of any given country, never reproduces itself together with a profit during the course of its employments or expenditure. For the money which is consumed in paying the army and navy, the civil and ecclesiastical officers of government, and all the various expenses incident to a nation, offers no more return in the actual profits of stock than does the capital which a man consumes in eating and drinking and wearing apparel. In all these cases the capital employed is consumed, worn out, annihilated; producing no return of interest or revenue. In this very limited

sense of the term the capital of every public debt may be said to be annihilated; that is to say, it does not reproduce itself with a profit in the form of revenue or interest, as it would do if employed in the occupations of agriculture, manufactures, or commerce.

But it does not therefore follow that all the debtcapital of a nation is needlessly annihilated without reproducing any equivalent; although Doctor Smith actually ranks it in the same class with the property consumed by fire and the labor destroyed by pestilence. For the public debts of a country are always contracted and its wars entered into for some purpose either of security or aggrandizement, and stock thus employed must have produced an equivalent; which cannot be asserted of property or population absolutely destroyed. This equivalent is all the success gained by foreign warfare and foreign policy; the security and aggrandizement of the state; and the power of carrying on that commerce without which there would be neither exports nor imports to calculate and compare. This equivalent may have been greater or less; that is to say, the money spent for useful purposes may have been applied with more or less prudence and frugality. Those purposes too may have been more or less useful; and a certain degree of waste and extravagance always attends the operations of funding and of war. But this is only an addition to the necessary price at which the benefits in view must be bought. So the food of a country may be used with different degrees of economy; and the necessity of eating supplied at more or less cost. As long as wars exist, it is absurd to denominate those expenses unproductive which are incurred by defending a country, or in preventing an invasion by a judicious attack of an enemy, or in avoiding the necessity of a war by a prudent system of foreign policy. And he who holds the labor of soldiers, and sailors, and diplomatic agents, to be unproductive,

commits the same error as by maintaining the labor of the hedger to be unproductive because he only protects and does not rear the crop. All these kinds of labor and employment of stock are parts of the same system; and all are equally productive of national wealth. Yet Dr. Smith gravely remarks how much richer England would now be if she had never waged any wars. With equal justice we might calculate how many more coats, waistcoats, and breeches, we should now have if we had always gone naked.

One of the first effects of accumulated national capital is the division of labor; and taxation is introduced, by which money or revenue is raised to meet the ordinary, and still more the extraordinary expenses of the state. By degrees wars become more expensive, in the same manner as all other articles of expenditure public and private increase in costliness; as subsistence, luxuries, education, government, judicatures, embassies, &c. &c. and the ordinary revenue of the state becomes less and less adequate to defray the extraordinary expenses suddenly occasioned by the breaking out of hostilities. Thus a nation which expends £10,000,000 a year in its government and public works during peace, will be forced at once to spend perhaps £30,000,000 in a single year of war. This sudden augmentation of expense can be provided for only by saving so much out of the ordinary articles of expenditure, or by levying three times the ordinary taxes; or by borrowing money to the amount of the additional sums required.

If any great saving out of the ordinary expenses of the community were practicable it would be highly impolitic; it would instantly diminish the revenue of the nation and of the government, and injure the wealth as well as the happiness of the country for many succeeding generations. For by diminishing the ordinary expenses of a nation we lessen the