Government was in constant war with creditors: when ready money failed in England, it had nothing to pay with but exchequer tallies, upon the taxes imposed; these were much more easily issued than acquitted. When the first year’s amount of a tax was engaged, people considered the security of what was to follow as very precarious; consequently, the value of it diminished.
This method, however, succeeded far better in paying off debts already contracted, than in contracting new ones; and the hardships put upon those who had advanced money to government, and who were paid by assignments upon taxes previously engaged, made people afterwards very diffident, except upon proper security. The limited form of the English government, prevented the violent proceedings between ministers and public creditors, which were common in France; and this circumstance contributed, no doubt, to establish the credit of the former upon the better footing. But still the long expectation of payment of the capital and interest, upon a distant fund, made Davenant acknowledge that 700,000l. in ready money, would at any time go farther than a million in tallies; and yet he thought it was better for the state to borrow the million upon a plan of discharging the debt in three or four years, than to obtain the 700,000l. at the expence of a perpetual interest of 8 per cent.
There were many more considerations which moved Davenant to prefer what he calls short funds to perpetual interest.
It was the general opinion in his time (not his own indeed, for he endeavoured to shew the fallacy of it) that money borrowed upon the anticipation of a fund, raised and appropriated for the discharge of it, was not a debt upon the state; because it did not diminish the former revenue. We have a remarkable instance of the prevalence of this opinion, in the famous memorial presented by M. Desmaretz to Philip Duke of Orleans, after the death of the late King of France; wherein he advances, that during seven campaigns, from 1708 to the peace of Rastad, while he had been at the head of the King’s finances, he had not increased the public debts by more than nine millions of livres capital: and yet when he came into the administration, in 1708, the King’s debts did not amount to 700 millions; and we have seen, that at the time of his death, they were upwards of 2000 millions. But Desmaretz did not reckon the difference of about 1300 millions; because he had settled them upon funds of his own creation. This was so much the language of the times, that no criticism was made upon it.
It is remarkable, that Davenant, in giving an account of the debts of England, during the period of which he writes, that is, from the revolution down to the peace of Ryswick, hardly ever takes notice of the sums paid for interest upon them. The minds of men at that time were totally taken up with the payment of capitals; and providing these could be discharged in a few years, it was no matter, they thought, what they cost in the mean time.
As long as nations at war observe the same policy in their methods of raising money, the ways in which they proceed are of the less importance: but when any one state makes an alteration, by which more money is thrown into their hands than they could formerly obtain; this circumstance obliges every other state to adopt the same method. Thus while Princes made war with the amount of their treasures and annual income, the balance of their power depended on the balance of such resources: when they anticipated their income on both sides, for a few years, the balance was in proportion still: when, afterwards, they adopted long funds and perpetual interest, the supplies increased; but still the balance was determined as formerly.
The usefulness, therefore, of an inquiry into the principles of public credit, has not so much for its object to discover the interest of states in adopting one mode of credit preferably to another, as to discover the consequences of every one; and to point out the methods of making them severally turn out to the best account for the state, considered as a body politic by itself, and for the individuals which compose it.
When so many different relations are taken in, the subject becomes much more complex, and therefore the consequences which can only be guessed at must be less determinate: but on the other hand, it opens the mind, and suggests many hints which with time may be improved for the good of society.
People who barely relate political facts, only afford an exercise to the memory: those who deduce principles, and trace a chain of reasoning from them, give exercise to the understanding; and as a small spark may raise a mighty flame, so a hint thrown out by a slender genius may set all the great men of a nation on a plan of general reformation and improvement.
Let us now take a view of the state of public credit in England, at the peace of Ryswick; in order to shew how Davenant came to be so great an enemy to long funds, and more especially to perpetual interest. We shall at the same time point out from what causes the great change of sentiments at present proceeds.