An Inquiry into the Principles of Political Oeconomy (Vol. 2 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

The Cardinal, upon the supposition of an approaching peace, enters into the plan of paying off what had been contracted. He was resolved to preserve credit; for even at that time, the consequence of that great engine was sufficiently felt by this great man, to relieve the people, and to get rid of the debts.

After a long detail of all the branches of the revenue, and after shewing how they might be improved, he draws out a general state of them, and of the debts affecting them; and then adds, “The total revenue of the kingdom amounts to near 80 millions;” (the silver was then at 27 livres 10 sols the marc fine, which, valued at 2l. 4s. sterling, makes the 80 millions worth above 6 millions sterling) “of which there is above 45 millions engaged for the debts. By good management I pretend that this immense load of debts, which seems to be the ruin of the King, shall turn out to his ease and opulence. Some imagine it would be a right measure to free the state entirely of her burthen, (a general spunge) but as she cannot, certainly, support all the burthen, so neither does reason dictate that she should be entirely set free.” No modern statesman could form a better judgment of things. The Cardinal’s ideas are just and profound; and it is astonishing how a man uninstructed by our experience should see so far into remote consequences.

He next lays down different schemes for paying the debts, upon the return of peace and tranquillity. They are all arbitrary, more or less, according to the standard of English ideas of credit. But if we abstract from one expedient lately discovered, to wit, the diminishing the interest, and allowing the capitals to remain, I doubt if any modern statesman could discover any other than those which the Cardinal has proposed.

A preliminary step to all his schemes was, by an act of power, to reduce the debts which bore a higher interest, to that of the 16 penny, or to a little more than 6 per cent. This method of reduction has constantly been and is still practised in France.

Then he proposes to enter into an account with the creditors for the sums they had received; and to consider whatever they had obtained above the legal interest, as payments in part of the capital.

This scheme however he rejects, upon examination. He says it is agreeable to equity; but that it would have the effect of totally destroying all credit for the future.

The second expedient was, to reimburse the creditors the sums which they really paid for the annuities assigned to them: but that he found impossible to verify; because they had had the address to specify, in their contracts, sums far exceeding what they really paid. For this reason he rejects the second expedient also; and adopts a third, as the best plan of any for paying off the debts. This was, to value the capitals at what they then sold for in the market, before the peace was concluded.

This method appeared to the Cardinal the most equitable, at least he says so, and the only one practicable; but in my opinion it was the most arbitrary of the three; the most liable to abuse, and the most opposite to the principles of public credit, as at present established: and yet it is a thought, which, when conducted with justice, may upon some occasions answer excellent purposes, as I shall observe in a proper place.

Had he adopted the first expedient, of ascertaining the value of the real advance, there was an appearance of justice; because the creditors were thereby represented as usurers; and by repaying them what they had advanced, by the enjoyment of an income above the legal interest, he treated them with more indulgence than the laws allow between private persons: but when money was borrowed in time of war, a higher interest should have been allowed for it than in time of peace, when it was to be paid off; and therefore to take the standard of peace, in reckoning with the creditors who had lent in time of war, was an evident injustice.

Could he, according to the second scheme, have discovered exactly the sums which had been paid for the annuities given, and offered reimbursements upon that footing, less could have been said against it; because the mentioning more in the contract than what had been paid, was a palpable fraud against the King.