An inquiry into the nature and causes of the wealth of

764

The Wealth of Nations

What has been received from the sale of the ceded islands

....................................................   95,500:  0: 0

Total,  .....................................£1,455,949: 18: 9

If we add to this sum the balance of the earl of Chatham’s and

Mr. Calcraft’s accounts, and other army savings of the same kind,

together with what has been received from the bank, the East-

India company, and the additional shilling in the pound land tax,

the whole must be a good deal more than five millions. The debt,

therefore, which, since the peace, has been paid out of the savings

from the ordinary revenue of the state, has not, one year with

another, amounted to half a million a-year. The sinking fund has,

no doubt, been considerably augmented since the peace, by the

debt which had been paid off, by the reduction of the redeemable

four per cents to three per cents, and by the annuities for lives

which have fallen in; and, if peace were to continue, a million,

perhaps, might now be annually spared out of it towards the dis-

charge of the debt. Another million, accordingly, was paid in the

course of last year; but at the same time, a large civil-list debt was

left unpaid, and we are now involved in a new war, which, in its

progress, may prove as expensive as any of our former wars. {It has

proved more expensive than any one of our former wars, and has

involved us in an additional debt of more than one hundred mil-

lions. During a profound peace of eleven years, little more than

ten millions of debt was paid; during a war of seven years, more

than one hundred millions was contracted.} The new debt which

will probably be contracted before the end of the next campaign,

may, perhaps, be nearly equal to all the old debt which has been

paid off from the savings out of the ordinary revenue of the state.

It would be altogether chimerical, therefore, to expect that the

public debt should ever be completely discharged, by any savings

which are likely to be made from that ordinary revenue as it stands

at present.

The public funds of the different indebted nations of Europe,

particularly those of England, have, by one author, been repre-

sented as the accumulation of a great capital, superadded to the

other capital of the country, by means of which its trade is ex-

tended, its manufactures are multiplied, and its lands cultivated

and improved, much beyond what they could have been by means

of that other capital only. He does not consider that the capital

which the first creditors of the public advanced to government,

was, from the moment in which he advanced it, a certain portion

of the annual produce, turned away from serving in the function

of a capital, to serve in that of a revenue; from maintaining pro-

ductive labourers, to maintain unproductive ones, and to be spent

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765

Adam Smith

and wasted, generally in the course of the year, without even the

hope of any future reproduction. In return for the capital which

they advanced, they obtained, indeed, an annuity of the public

funds, in most cases, of more than equal value. This annuity, no

doubt, replaced to them their capital, and enabled them to carry

on their trade and business to the same, or, perhaps, to a greater

extent than before; that is, they were enabled, either to borrow of

other people a new capital, upon the credit of this annuity or, by

selling it, to get from other people a new capital of their own,

equal, or superior, to that which they had advanced to govern-

ment. This new capital, however, which they in this manner ei-

ther bought or borrowed of other people, must have existed in the

country before, and must have been employed, as all capitals are,

in maintaining productive labour. When it came into the hands

of those who had advanced their money to government, though it

was, in some respects, a new capital to them, it was not so to the

country, but was only a capital withdrawn from certain employ-

ments, in order to be turned towards others. Though it replaced

to them what they had advanced to government, it did not replace

it to the country. Had they not advanced this capital to govern-

ment, there would have been in the country two capitals, two

portions of the annual produce, instead of one, employed in main-

taining productive labour.

When, for defraying the expense of government, a revenue is raised

within the year, from the produce of free or unmortgaged taxes, a

certain portion of the revenue of private people is only turned away

from maintaining one species of unproductive labour, towards main-

taining another. Some part of what they pay in those taxes, might,

no doubt, have been accumulated into capital, and consequently

employed in maintaining productive labour; but the greater part

would probably have been spent, and consequently employed in

maintaining unproductive labour. The public expense, however,

when defrayed in this manner, no doubt hinders, more or less, the

further accumulation of new capital; but it does not necessarily oc-

casion the destruction of any actually-existing capital.

When the public expense is defrayed by funding, it is defrayed

by the annual destruction of some capital which had before ex-

isted in the country; by the perversion of some portion of the

annual produce which had before been destined for the mainte-

nance of productive labour, towards that of unproductive labour.

As in this case, however, the taxes are lighter than they would have

been, had a revenue sufficient for defraying the same expense been

raised within the year; the private revenue of individuals is neces-

sarily less burdened, and consequently their ability to save and

accumulate some part of that revenue into capital, is a good deal

less impaired. If the method of funding destroys more old capital,

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