An inquiry into the nature and causes of the wealth of

760

The Wealth of Nations

ment it is granted, and continues to do so, more and more, as long

as it subsists. It can never, therefore, make so convenient a trans-

ferable stock as a perpetual annuity, of which the real value may

be supposed always the same, or very nearly the same.

In France, the seat of government not being in a great mercan-

tile city, merchants do not make so great a proportion of the people

who advance money to government. The people concerned in the

finances, the farmers-general, the receivers of the taxes which are

not in farm, the court-bankers, etc. make the greater part of those

who advance their money in all public exigencies. Such people are

commonly men of mean birth, but of great wealth, and frequently

of great pride. They are too proud to marry their equals, and women

of quality disdain to marry them. They frequently resolve, there-

fore, to live bachelors; and having neither any families of their

own, nor much regard for those of their relations, whom they are

not always very fond of acknowledging, they desire only to live in

splendour during their own time, and are not unwilling that their

fortune should end with themselves. The number of rich people,

besides, who are either averse to marry, or whose condition of life

renders it either improper or inconvenient for them to do so, is

much greater in France than in England. To such people, who

have little or no care for posterity, nothing can be more conve-

nient than to exchange their capital for a revenue, which is to last

just as long, and no longer, than they wish it to do.

The ordinary expense of the greater part of modern govern-

ments, in time of peace, being equal, or nearly equal, to their ordi-

nary revenue, when war comes, they are both unwilling and un-

able to increase their revenue in proportion to the increase of their

expense. They are unwilling, for fear of offending the people, who,

by so great and so sudden an increase of taxes, would soon be

disgusted with the war; and they are unable, from not well know-

ing what taxes would be sufficient to produce the revenue wanted.

The facility of borrowing delivers them from the embarrassment

which this fear and inability would otherwise occasion. By means

of borrowing, they are enabled, with a very moderate increase of

taxes, to raise, from year to year, money sufficient for carrying on

the war; and by the practice of perpetual funding, they are en-

abled, with the smallest possible increase of taxes, to raise annu-

ally the largest possible sum of money. In great empires, the people

who live in the capital, and in the provinces remote from the scene

of action, feel, many of them, scarce any inconveniency from the

war, but enjoy, at their ease, the amusement of reading in the news-

papers the exploits of their own fleets and armies. To them this

amusement compensates the small difference between the taxes

which they pay on account of the war, and those which they had

been accustomed to pay in time of peace. They are commonly

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761

Adam Smith

dissatisfied with the return of peace, which puts an end to their

amusement, and to a thousand visionary hopes of conquest and

national glory, from a longer continuance of the war.

The return of peace, indeed, seldom relieves them from the

greater part of the taxes imposed during the war. These are mort-

gaged for the interest of the debt contracted, in order to carry it

on. If, over and above paying the interest of this debt, and defray-

ing the ordinary expense of government, the old revenue, together

with the new taxes, produce some surplus revenue, it may, per-

haps, 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 reason-

ably be expected that peace should continue, the whole debt con-

tracted during the war; and, in the second place, this fund is al-

most 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 re-

duction of that interest; that of Holland in 1655, and that of the

ecclesiastical state in 1685, were both formed in this manner. 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 sink-

ing fund, than by imposing a new tax. Every new tax is immedi-

ately 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 sink-

ing 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 de-

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