Upon the whole we may determine, that the fatal consequences of a bankruptcy would be many; and that the good resulting from a total abolition of taxes, would be confined to two objects. 1. A relief to those who pay them upon their possessions, or persons. 2. A diminution of prices in favour of the idle at home, and of trade abroad: great objects, no doubt, could they be obtained at less expence than the consequences of a total failure of public credit and domestic industry. Perhaps when we come to examine the principles of taxation, we shall find that taxes do not raise prices so much as is generally believed; and those which influence the application of public money, will point out better expedients than a bankruptcy for comparing those great national purposes.
But let us suppose a case, which may possibly happen, as matters seem to go on. Suppose, I say, that by continuing to carry on long and expensive wars, the sum of interest paid to strangers should exceed all that the nation can gain by her trade. In this case, there must be a general balance of payments against her every year, which very soon would manifest itself by the most fatal consequences.
The bank of England would be the first to feel them, by the departure of all the coin and precious metals. Trade would feel them next, and then indeed they would become universal.
In such a situation, I fairly acknowlege, that I cannot discover any expedient to avoid a bankruptcy. Engaging the foreign creditors to become citizens, by the allurements of the greatest privileges, and bills of naturalization, are vain speculations. Unless some resource, hidden from me, should, upon such an occasion, open itself, in the deep recesses of future events, I believe the nation would soon be driven upon the fatal rock of bankruptcy. The idea of a nation’s becoming bankrupt to itself, I have always looked upon as a contradiction; but that it may become bankrupt to the rest of the world, is quite consistent with reason and common sense.
I shall not take upon me to suggest what mode of bankruptcy would in such a case be the best; a total, or a partial one. The partial, I am afraid, would, in England, work effects almost as hurtful as the other. But if ever the case should happen, the only way will be, to watch over every symptom of the approaching catastrophe, and to improve circumstances to the best advantage.
Of what infinite consequence is it then for a British statesman to inquire into the amount of debts owing to strangers, and into the state of the balance of trade? In speaking of exchange, I threw out many things concerning the idea of putting that branch of business into the hands of the bank, in conjunction with the exchequer. Were the state brought into the dilemma of either submitting to this gradual decline of trade, from a cause which could not be removed; or of being pushed to the necessity of leaping into the terrible gulph of a deliberate bankruptcy; in such a dilemma, I say, what infinite advantages might not be drawn from the management of exchange?
I have heard it said, that the debt owing to strangers was a great advantage to England; because it drew people to that market where their funds are settled. I allow all the force any one can give to this proposition: But alas! what would it avail, whenever England becomes incapable to furnish goods equivalent to all her imports from abroad, added to all she owes to her foreign creditors?
I am very far from supposing the present situation of England to forebode the approach of any such disaster; but it is good to represent to one’s self some determinate object, by which we may judge of our situation in times to come.
Debts have increased far beyond the imagination of every mortal. Great men have uttered prophecies, which have proved false, concerning the consequences of a debt of one hundred millions. From this most people conclude, that they will go on until some unforeseen accident shall dash the fabric to pieces. I have been pretending to shew how they may go on in a perpetual chain. But alas! one fatal combination was there omitted; and now that it has been taken in, I think it serves as a datum, to resolve the most important problem of this science, viz. How to determine the exact extent of public credit. The solution of which is, That it is not necessary that public credit should ever fail, from any augmentation of debts whatever, due to natives; and that it must fail, so soon as the nation becomes totally unable either to export commodities equal to all their imports and foreign debts, or to pay off a proportional part of their capital, sufficient to turn the balance to the right side.
From this proposition two corollaries may be drawn.