An inquiry into the nature and causes of the wealth of

766

The Wealth of Nations

it, at the same time, hinders less the accumulation or acquisition

of new capital, than that of defraying the public expense by a

revenue raised within the year. Under the system of funding, the

frugality and industry of private people can more easily repair the

breaches which the waste and extravagance of government may

occasionally make in the general capital of the society.

It is only during the continuance of war, however, that the sys-

tem of funding has this advantage over the other system. Were the

expense of war to be defrayed always by a revenue raised within

the year, the taxes from which that extraordinary revenue was drawn

would last no longer than the war. The ability of private people to

accumulate, though less during the war, would have been greater

during the peace, than under the system of funding. War would

not necessarily have occasioned the destruction of any old capi-

tals, and peace would have occasioned the accumulation of many

more new. Wars would, in general, be more speedily concluded,

and less wantonly undertaken. The people feeling, during con-

tinuance of war, the complete burden of it, would soon grow weary

of it; and government, in order to humour them, would not be

under the necessity of carrying it on longer than it was necessary

to do so. The foresight of the heavy and unavoidable burdens of

war would hinder the people from wantonly calling for it when

there was no real or solid interest to fight for. The seasons during

which the ability of private people to accumulate was somewhat

impaired, would occur more rarely, and be of shorter continu-

ance. Those, on the contrary, during which that ability was in the

highest vigour would be of much longer duration than they can

well be under the system of funding.

When funding, besides, has made a certain progress, the multi-

plication of taxes which it brings along with it, sometimes impairs

as much the ability of private people to accumulate, even in time

of peace, as the other system would in time of war. The peace

revenue of Great Britain amounts at present to more than ten

millions a-year. If free and unmortgaged, it might be sufficient,

with proper management, and without contracting a shilling of

new debt, to carry on the most vigorous war. The private revenue

of the inhabitants of Great Britain is at present as much incum-

bered in time of peace, their ability to accumulate is as much im-

paired, as it would have been in the time of the most expensive

war, had the pernicious system of funding never been adopted.

In the payment of the interest of the public debt, it has been

said, it is the right hand which pays the left. The money does not

go out of the country. It is only a part of the revenue of one set of

the inhabitants which is transferred to another; and the nation is

not a farthing the poorer. This apology is founded altogether in

the sophistry of the mercantile system; and, after the long exami-

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767

Adam Smith

nation which I have already bestowed upon that system, it may,

perhaps, be unnecessary to say anything further about it. It sup-

poses, besides, that the whole public debt is owing to the inhabit-

ants of the country, which happens not to be true; the Dutch, as

well as several other foreign nations, having a very considerable

share in our public funds. But though the whole debt were owing

to the inhabitants of the country, it would not, upon that ac-

count, be less pernicious.

Land and capital stock are the two original sources of all rev-

enue, both private and public. Capital stock pays the wages of

productive labour, whether employed in agriculture, manufactures,

or commerce. The management of those two original sources of

revenue belongs to two different sets of people; the proprietors of

land, and the owners or employers of capital stock.

The proprietor of land is interested, for the sake of his own

revenue, to keep his estate in as good condition as he can, by

building and repairing his tenants houses, by making and main-

taining the necessary drains and inclosures, and all those other

expensive improvements which it properly belongs to the land-

lord to make and maintain. But, by different land taxes, the rev-

enue of the landlord may be so much diminished, and, by differ-

ent duties upon the necessaries and conveniencies of life, that di-

minished revenue may be rendered of so little real value, that he

may find himself altogether unable to make or maintain those

expensive improvements. When the landlord, however, ceases to

do his part, it is altogether impossible that the tenant should con-

tinue to do his. As the distress of the landlord increases, the agri-

culture of the country must necessarily decline.

When, by different taxes upon the necessaries and conveniencies

of life, the owners and employers of capital stock find, that what-

ever revenue they derive from it, will not, in a particular country,

purchase the same quantity of those necessaries and conveniencies

which an equal revenue would in almost any other, they will be

disposed to remove to some other. And when, in order to raise

those taxes, all or the greater part of merchants and manufactur-

ers, that is, all or the greater part of the employers of great capitals,

come to be continually exposed to the mortifying and vexatious

visits of the tax-gatherers, this disposition to remove will soon be

changed into an actual removing. The industry of the country

will necessarily fall with the removal of the capital which sup-

ported it, and the ruin of trade and manufactures will follow the

declension of agriculture.

To transfer from the owners of those two great sources of rev-

enue, land, and capital stock, from the persons immediately inter-

ested in the good condition of every particular portion of land,

and in the good management of every particular portion of capi-

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