Hume's Political Discourses

by David Hume

OF PUBLIC CREDIT.

It appears to have been the common practice of antiquity to make provision in times of peace for the necessities of war, and to hoard up treasures beforehand as the instruments either of conquest or defence, without trusting to {p84} extraordinary imposts, much less to borrowing, in times of disorder and confusion. Besides the immense sums above mentioned​[27] which were amassed by Athens, and by the Ptolemies and other successors of Alexander, we learn from Plato that the frugal Lacedemonians had also collected a great treasure; and Arrian and Plutarch​[28] specify the riches which Alexander got possession of on the conquest of Susa and Ecbatana, and which were reserved, some of them, from the time of Cyrus. If I remember right, the Scripture also mentions the treasure of Hezekiah and the Jewish princes, as profane history does that of Philip and Perseus, kings of Macedon. The ancient republics of Gaul had commonly large sums in reserve. Every one knows the treasure seized in Rome by Julius Cæsar during the civil wars, and we find afterwards that the wiser emperors, Augustus, Tiberius, Vespasian, Severus, etc., always discovered the prudent foresight of saving great sums against any public exigency.

On the contrary, our modern expedient, which has become very general, is to mortgage the public revenues, and to trust that posterity during peace will pay off the encumbrances contracted during the preceding war; and they, having before their eyes so good an example of their wise fathers, have the same prudent reliance on their posterity, who at last, from necessity more than choice, are obliged to place the same confidence in a new posterity. But not to waste time in declaiming against a practice which appears ruinous beyond the evidence of a hundred demonstrations, it seems pretty apparent that the ancient maxims are in this respect much more prudent than the modern; even though the latter had been confined within some reasonable bounds, and had ever, in any one instance, been attended with such frugality in time of peace as to discharge the debts incurred by an expensive war. For why should the case be so very different between the public and an individual as to make {p85} us establish such different maxims of conduct for each? If the funds of the former be greater, its necessary expenses are proportionably larger; if its resources be more numerous, they are not infinite; and as its frame should be calculated for a much longer duration than the date of a single life, or even of a family, it should embrace maxims, large, durable, and generous, agreeable to the supposed extent of its existence. To trust to chances and temporary expedients is indeed what the necessity of human affairs frequently reduces it to, but whoever voluntarily depend on such resources have not necessity but their own folly to accuse for their misfortunes when any such befall them.

If the abuses of treasures be dangerous, either by engaging the state in rash enterprises or making it neglect military discipline in confidence of its riches, the abuses of mortgaging are more certain and inevitable—poverty, impotence, and subjection to foreign powers.

According to modern policy, war is attended with every destructive circumstance: loss of men, increase of taxes, decay of commerce, dissipation of money, devastation by sea and land. According to ancient maxims, the opening of the public treasure, as it produced an uncommon affluence of gold and silver, served as a temporary encouragement to industry, and atoned in some degree for the inevitable calamities of war.

What then shall we say to the new paradox, that public encumbrances are, of themselves, advantageous, independent of the necessity of contracting them; and that any state, even though it were not pressed by a foreign enemy, could not possibly have embraced a wiser expedient for promoting commerce and riches than to create funds, and debts, and taxes without limitation? Discourses such as these might naturally have passed for trials of wit among rhetoricians, like the panegyrics on folly and a fever, on Busiris and Nero, had we not seen such absurd maxims patronized by great ministers and by a whole party among us; and these puzzling arguments (for they deserve not the name of specious), though they could not be the foundation of Lord {p86} Orford’s conduct, for he had more sense, served at least to keep his partisans in countenance and perplex the understanding of the nation.

Let us examine the consequences of public debts, both in our domestic management by their influence on commerce and industry, and in our foreign transactions by their effect on wars and negotiations.

There is a word which is here in the mouth of everybody, and which I find has also got abroad and is much employed by foreign writers​[29] in imitation of the English—and this is “circulation.” This word serves as an account of everything, and though I confess that I have sought for its meaning in the present subject ever since I was a schoolboy, I have never yet been able to discover it. What possible advantage is there which the nation can reap by the easy transference of stock from hand to hand? Or is there any parallel to be drawn from the circulation of other commodities to that of chequer notes and India bonds? Where a manufacturer has a quick sale of his goods to the merchant, the merchant to the shopkeeper, the shopkeeper to his customers, this enlivens industry and gives new encouragement to the first dealer or the manufacturer and all his tradesmen, and makes them produce more and better commodities of the same species. A stagnation is here pernicious, wherever it happens, because it operates backwards, and stops or benumbs the industrious hand in its production of what is useful to human life. But what production we owe to Change-alley, or even what consumption, except that of coffee, and pen, ink, and paper, I have not yet learned; nor can one foresee the loss or decay of any one beneficial commerce or commodity, though that place and all its inhabitants were for ever buried in the ocean.

But though this term has never been explained by those who insist so much on the advantages that result from a circulation, there seems, however, to be some benefit of a similar kind arising from our encumbrances—as, indeed, {p87} what human evil is there which is not attended with some advantage? This we shall endeavour to explain, that we may estimate the weight which we ought to allow it.

Public securities are with us become a kind of money, and pass as readily at the current price as gold or silver. Wherever any profitable undertaking offers itself, however expensive, there are never wanting hands enough to embrace it; nor need a trader who has sums in the public stocks fear to launch out into the most extensive trade, since he is possessed of funds which will answer the most sudden demand that can be made upon him. No merchant thinks it necessary to keep by him any considerable cash. Bank-notes or India bonds, especially the latter, serve all the same purposes; because he can dispose of them or pledge them to a banker in a quarter of an hour; and at the same time they are not idle, even when in his escritoire, but bring him in a constant revenue. In short, our national debts furnish merchants with a species of money that is continually multiplying in their hands, and produces sure gain besides the profits of their commerce. This must enable them to trade upon less profit. The small profit of the merchant renders the commodity cheaper, causes a greater consumption, quickens the labour of the common people, and helps to spread arts and industry through the whole society.