An inquiry into the nature and causes of the wealth of

762

The Wealth of Nations

fraying all the extraordinary expenses which occur in time of peace.

When a nation is already overburdened with taxes, nothing but

the necessities of a new war, nothing but either the animosity of

national vengeance, or the anxiety for national security, can in-

duce the people to submit, with tolerable patience, to a new tax.

Hence the usual misapplication of the sinking fund.

In Great Britain, from the time that we had first recourse to the

ruinous expedient of perpetual funding, the reduction of the pub-

lic debt, in time of peace, has never borne any proportion to its

accumulation in time of war. It was in the war which began in

1668, and was concluded by the treaty of Ryswick, in 1697, that

the foundation of the present enormous debt of Great Britain was

first laid.

On the 31st of December 1697, the public debts of Great Brit-

ain, funded and unfunded, amounted to £21,515,742:13:8½. A

great part of those debts had been contracted upon short anticipa-

tions, and some part upon annuities for lives; so that, before the

31st of December 1701, in less than four years, there had partly

been paid off; and partly reverted to the public, the sum of

£5,121,041:12:0¾d; a greater reduction of the public debt than

has ever since been brought about in so short a period of time.

The remaining debt, therefore, amounted only to

£16,394,701:1:7¼d.

In the war which began in 1702, and which was concluded by

the treaty of Utrecht, the public debts were still more accumu-

lated. On the 31st of December 1714, they amounted to

£53,681,076:5:6½. The subscription into the South-sea fund, of

the short and long annuities, increased the capital of the public

debt; so that, on the 31st of December 1722, it amounted to

£55,282,978:1:3 5/6. The reduction of the debt began in 1723,

and went on so slowly, that, on the 31st of December 1739, dur-

ing seventeen years-of profound peace, the whole sum paid off

was no more than £8,328,554:17:11 3/12, the capital of the pub-

lic debt, at that time, amounting to £46,954,623:3:4 7/12.

The Spanish war, which began in 1739, and the French war which

soon followed it, occasioned a further increase of the debt, which,

on the 31st of December 1748, after the war had been concluded

by the treaty of Aix-la-Chapelle, amounted to £78,293,313:1:10¾.

The most profound peace, of 17 years continuance, had taken no

more than £8,328,354, 17:11¼ from it. A war, of less than nine

years continuance, added £31,338,689:18: 6 1/6 to it. {See James

Postlethwaite’s History of the Public Revenue.}

During the administration of Mr. Pelham, the interest of the

public debt was reduced, or at least measures were taken for re-

ducing it, from four to three per cent.; the sinking fund was in-

creased, and some part of the public debt was paid off. In 1755,

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763

Adam Smith

before the breaking out of the late war, the funded debt of Great

Britain amounted to £72,289,675. On the 5th of January 1763,

at the conclusion of the peace, the funded debt amounted debt to

£122,603,336:8:2¼. The unfunded debt has been stated at

£13,927,589:2:2. But the expense occasioned by the war did not

end with the conclusion of the peace; so that, though on the 5th

of January 1764, the funded debt was increased (partly by a new

loan, and partly by funding a part of the unfunded debt) to

£129,586,789:10:1¾, there still remained (according to the very

well informed author of Considerations on the Trade and Finances

of Great Britain) an unfunded debt, which was brought to ac-

count in that and the following year, of £9,975,017: 12:2 15/44d.

In 1764, therefore, the public debt of Great Britain, funded and

unfunded together, amounted, according to this author, to

£139,561,807:2:4. The annuities for lives, too, which had been

granted as premiums to the subscribers to the new loans in 1757,

estimated at fourteen years purchase, were valued at £472,500;

and the annuities for long terms of years, granted as premiums

likewise, in 1761 and 1762, estimated at twenty-seven and a-half

years purchase, were valued at £6,826,875. During a peace of about

seven years continuance, the prudent and truly patriotic adminis-

tration of Mr. Pelham was not able to pay off an old debt of six

millions. During a war of nearly the same continuance, a new

debt of more than seventy-five millions was contracted.

On the 5th of January 1775, the funded debt of Great Britain

amounted to £124,996,086, 1:6¼d. The unfunded, exclusive of

a large civil-list debt, to £4,150,236:3:11 7/8. Both together, to

£129,146,322:5:6. According to this account, the whole debt paid

off, during eleven years of profound peace, amounted only to

£10,415,476:16:9 7/8. Even this small reduction of debt, how-

ever, has not been all made from the savings out of the ordinary

revenue of the state. Several extraneous sums, altogether indepen-

dent of that ordinary revenue, have contributed towards it.

Amongst these we may reckon an additional shilling in the pound

land tax, for three years; the two millions received from the East-

India company, as indemnification for their territorial acquisitions;

and the one hundred and ten thousand pounds received from the

bank for the renewal of their charter. To these must be added sev-

eral other sums, which, as they arose out of the late war, ought

perhaps to be considered as deductions from the expenses of it.

The principal are,

The produce of French prizes ..............    £690,449: 18: 9 Com-

position for French prisoners ...............      670,000:  0: 0

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