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

When, in the early times of public credit, the repayment of the capital was the chief object of the lender, a much more extensive fund was necessary than at present, when no more is required than the payment of the interest. As such funds never can be formed but from taxes, or general contributions from the people, the greater they are, the larger must the contribution be. Whenever therefore there is occasion to contract debt, the chief object of a statesman’s care should be, to model the spirit of his people so as to dispose them to concur in the proper resolutions to render the plan proposed as easy as possible in the execution.

In the first place, the body of the people must be made sensible that the consequence of contracting debts must imply a diminution upon the income of some individuals; but that the fewer the obstacles thrown in the way of the loan are, the less will that diminution be.

In the second place, he must gain the confidence of his people, so far as to impress them with a firm belief that he will consult their good, and nothing else, in what he undertakes.

And in the last place, he must gain the confidence of those from whom he is to borrow; and convince them that all covenants between the public and them will be religiously performed.

In a limited and free government, these three requisites are essential to the firm establishment of public credit.

Where the power of the statesman is unlimited, he may substitute his authority over the people, in the place of confidence; but with respect to those who are to lend, he will find no room for any such substitution: confidence here is the only expedient.

All therefore that is required as to the people, is to enable them to do what he requires of them.

For that purpose he must establish credit with them, for finding the contributions he is to exact of them; because they will have as much occasion for it, in paying what is demanded of them by authority, as he himself has in paying what he is obliged to in consequence of his engagements.

If this general plan be not followed, the consequence will be, that taxes will fail on one hand, and public credit on the other.

If all this operation cannot be previously concerted, the plan of borrowing must be circumscribed to funds previously established.