"wealth would have been extinguished before this "accumulating fund, with all its boasted activity, "could have, in all probability, converted one hun"dred millions of the revenue into capital.

"Dismal as the consequences of this experiment "must have been in diminishing the re-production "and revenue, there appear, on the other hand, no

good effects likely to have resulted from it in rela"tion to the capital of the country, to counteract its "evil effects on the revenue.

"The stockholders, who would have been tempted "to sell by the offer of the commissioners of this sinking fund, would, it is evident, have had in their 'possession fifteen millions of capital, upon the "employment of which, in such a manner as to return a profit, their income, that is, their subsistence, must have depended. To acquire a profit, વેદ we know that capital must be applied to supplant or perform a portion of labour in producing or giving form to commodities; and it is hardly pos"sible to suppose, that there could have existed any "new channels of so employing a capital, at a mo"ment when there was forcibly created a diminution "of demand for commodities to the extent of fifteen "millions.

"So far from its being reasonable to suppose there "could have existed, under such circumstances, any opportunity of employing an additional quantity "of capital, it is certain, that so great a diminution "of demand must have thrown out of employ some "of that capital which was useful in supplanting labour, in the progress of bringing to market those

"commodities for which there could no longer have "subsisted a demand.

"The only means, therefore, those stock-holders "could have had of forcing the capital in their hands "into employment, must have been by offering to "supplant labour at a cheaper rate than that at which "it was antecedently performed. A competition "would thus have arisen; the profit of capital must "have been diminished; the interest paid for stock "or money must have fallen; and, of course, the "value of fixed annuities, or government securities, "must have risen; and this must have continued progressively till capital became so abundant and "its profits so diminished, that the proprietors would "have been induced to remove it to other countries, "where higher profits might be made: and France "would inevitably have been amply supplied with capital, the want of which is the great drawback "on her industry.

"Neither is it theory alone which points out these "evils as the necessary result of such a measure; for, as far as practice gives us an opportunity of judging, the accuracy of the inference is uniformly con"firmed by experience.

"When Pope Innocent XI. reduced the interest "of his debt from four to three per cent, and "employed the sum saved to accumulate, but a "short time elapsed till the new three per cent fund "sold at 112. In like manner, when the interest "of the national debt of England was reduced, in "1717, from six to five per cent, and the saving "devoted to accumulation; the consequence was,

that, in 1727, from the rise of public securities, "there was an opportunity of again reducing the "interest from four to three per cent, and of apply"ing an additional sum to accumulate. This of course produced another rise, and to such a degree, that "the sinking fund was now grown to a great ma"turity, and produced annually about 1,200,000%.

and was become almost a terror to all the individual "proprietors of the public debt. The high state of "credit, the low rate of interest of money, and the "advanced price of all public stocks and funds above par, made the great monied companies apprehend nothing more than being obliged to receive their principal too fast; and it became almost the uni"versal consent of mankind, that one million a year "was as much as the creditors of the public could "bear to receive in discharge of part of their princi"pal.

Such are the arguments on which Lord Lauderdale rests his opposition to the system of paying off public debts by means of a sinking fund.

The first reflection to which the noble earl's arguments give rise is, that they triumphantly refute the principal objection of Adam Smith against public loans. He considered the re-payment of national debts by savings from the ordinary revenue, as fanciful and impossible; while Lord Lauderdale proves not only that these savings may discharge the whole

*The Earl of Lauderdale's Inquiry into the Nature and Origin of Public Wealth, chap. iv. p. 244, and following.

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 revenue. On the contrary, it is evident that this object is completely accomplished by a sinking fund; and, in this respect it is entitled to the praises bestowed upon it by all who know its nature and appreciate its results.

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 dimin ished 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