An Inquiry into the Principles of Political Oeconomy (Vol. 1 of 2) / Being an essay on the science of domestic policy in free nations. In which are particularly considered population, agriculture, trade, industry, money, coin, interest, circulation, banks, exchange, public credit, and taxes

by Sir James Steuart

III. A statesman ought carefully to distinguish between those branches of circulation which operate a vibration in the balance of wealth, and those which do not, in order to regulate the taxes which he may think proper to lay upon his people.

In treating of this third object of a statesman’s attention, I shall confine myself to the application of those principles which point out the necessity of taxation among a luxurious people, become wealthy by the means of trade, where the industrious can no longer be made to subsist but by means of a great domestic circulation, which is the object of our present inquiry.

In every case where the balance of wealth is made to vibrate by circulation, there is an opportunity of imposing a tax upon consumptions, perfectly proportioned to the quantity of the circulation. Now by the imposition of taxes, and the right employment of the amount of them, a statesman has it in his power to retard or to promote the consumption of any branch of industry. By the imposition of duties he may either check luxury when he finds it calling off too many hands from other more necessary occupations; or by granting premiums, he may promote consumption or exportation upon branches where it is expedient to increase the hands employed, which last is the reverse of taxation; or in the third place, when foreign trade begins to bear a small proportion to domestic consumption, he may profit of luxury, and draw a part of the wealth of the luxurious into the public treasure, by gently augmenting the impositions upon it; for when taxes are gently increased, consumption is not checked; consequently, this is the proper method to be followed, when luxury does no harm. But when it proves hurtful, the rise in the impositions should be sudden, that they may operate the effects of violent revolutions which are always accompanied with inconveniencies, and on such occasions every inconvenience will mark the success of the operation. An example will make this plain.

If you want to check the drinking of spirituous liquors, let every alteration of your oeconomy concerning them, either as to the impositions upon the consumption, or regulations in the retailing them, proceed by jerks as it were; if you want to increase the revenue, from the propensity people have to poison themselves with spirits, your augmentations and alterations may be gentle and progressive.

Here let me observe by the way, that the best method for a statesman to curb any sort of vice among his people, is to set out by facilitating the gratification of it, in order to bring it once upon a regular and systematical footing, and then by sudden and violent revolutions in the administration of the oeconomy of it, to destroy it and root it out.

Were all the strumpets in London received into a large and convenient building, whither the dissolute might repair for a while with secrecy and security, in a short time, no loose women would be found in the streets. And it cannot be doubted, but that by having them all together under certain regulations, which might render their lives more easy than they are at present, the progress of debauchery, and its hurtful consequences, might in a great measure be prevented. At Paris, they are to be found in their houses, because the police never troubles them there while they commit no riot or disturbance. But when they are persecuted in their habitations, they break forth into the streets, and by the open exercise of their profession, the delicacy of modesty is universally hurt and but too frequently blunted, and the example that those prostitutes openly set to their own sex, debauches more women than all the rakes in town do.

I hope this digression will not be misconstructed into an apology for public stews, where, in place of following good regulations for suppressing the vices with which they are filled, the principal object is frequently to encourage the abuses for the sake of making them turn to account as a branch of revenue. Such a plan of administration represents a statesman who turns against his people, those arms which he had provided for their defence. My intention is very different, it is to curb vice as much as possible, and to shut up what cannot be rooted out within the bounds of order, and to remove it as a nusance from the eyes of the public, and from the contagious imitation of the innocent. I now come to the object of a statesman’s attention, relative to that branch of circulation which implies no vibration of the balance of wealth between the parties concerned.

The more perfect and the more extended any statesman’s knowledge is of the circumstances and situation of every individual in the state which he governs, the more he has it in his power to do them good or harm. I always suppose his inclinations to be virtuous and benevolent.

The circulation of large sums of money brings riches to light for a moment, which before and after are commonly hid from the eyes of the public. Those branches of property therefore, which have once made their appearance in this species of circulation, should not be lost sight of until they come naturally to melt away, by returning into the other branch of which we have been speaking; that is, until they are fairly spent, and the balance be made to turn against the former proprietors of them. After this revolution, they will circulate for a while in small sums, and remain imperceptible, but in time they will come to form new stagnations; then they will be lent out again, or employed in the purchase of lands; and falling once more under the eyes of the state, they will again become an object of the same attention as formerly.

Nothing is more reasonable, than that all property which produces an annual determined income, should be made to contribute to the common burthens of a state. But those taxes which are intended to operate upon so moveable a property as ready money, ought to be imposed with a most gentle hand, and even so as not to appear directly to affect it. The statesman here must load his wealthy citizens with duties, as Horace loads his sovereign with adulation, never addressing his compliments directly to the emperor, but conveying them to him in the most elegant manner, through the channel of an interposed person. Thus people possessing large capitals of ready money, which in a moment they can transport beyond the reach of the most extended jurisdiction, may have certain privileges granted them which may attach them to the country (in England, for example, a vote in a county or burrow) and then in consequence of their rank, not because of their money, be made to come under a sort of capitation, or other similar imposition bearing another name. Might not the creditors of that nation be represented in parliament, and in consequence of so great a privilege, and the additional security thereby granted to the funds, be made afterwards to come under taxations as well as other proprietors of a determined revenue. An admirable hint for the imposition of such taxes, is to be met with in a certain great European monarchy, where the highest order of knighthood is distinguished with a ribband, a star, and a pension of about an hundred and thirty pounds sterling a year. But so soon as any one is raised to that dignity, he pays exactly that very sum in lieu of capitation. The pension was given by the prince who instituted the order; the capitation followed in a subsequent reign, and now appears rather a mark of distinction than a burthen.