That this is a practicable scheme, I prove by a matter of fact, and by an experiment made in France by a late minister; where, upon a certain occasion, the exchange having risen to a great height against France, he immediately brought it to par, by ordering bills upon Holland to be furnished at that rate, to those who should demand them; and by taking upon himself the expence of sending the money paid for such bills, to the place upon which they were drawn.
I observe, however, that such operations can only be recommended to statesmen who preside over the interests of flourishing trading nations; because in proportion as they are benefited by facilitating the payment of the casual balances due by them from time to time, in so far is a prodigal nation hurt, by facilitating the dissipation of their property, and by contriving a ready method of transferring it to foreigners.
Chap. V. When a nation owes a balance, after all the payments they have been able to make, either in coin, bullion, bills, or merchandize, it is evident, that what remains can only be satisfied by obtaining credit for it, at the expence of mortgaging the country and paying interest for the remaining balance. When this, however, happens to be the case, it involves the nation-debtor in a multitude of expensive operations conducted by exchangers, who constantly find a profit in carrying them on, though at a very great loss to individuals within the country. To prevent this inconvenience, I propose, that the statesman should take upon himself the obtaining of credit abroad, for the balance due by the country he governs; and that the expence incurred by this operation should be defrayed by the public, whereby every individual within the state will contribute his share towards maintaining an uniformity in the profits upon trade, and supporting the stability of commerce, from the regularity of the course of exchange at all times. This operation resembles very much another of which we have already spoken in treating of banks of circulation upon mortgage. There we recommended the payment of foreign balances as a proper branch of bank administration: here we recommend it to a statesman to interpose voluntarily between his subjects and their foreign creditors. This is the best method of supporting commerce, when it happens accidentally to fall under the discouragement of an unfavourable balance.
Part IV. Of Public Credit.
Chap. I. The credit of a state resembles, in most things, that of an individual: they differ however in this, that when a private man contracts a debt, he himself is answerable for it. When a state contracts a debt, those who contract the obligation in the name of the state are not responsible for it. Hence it happens, that private people are commonly more anxious about paying their debts than statesmen are who administer for the public. Another difference is, that public debts do not so much affect the prosperity of a state as private debts do that of the debtor. The interest of a private debtor is simple and uncompounded; that of a state is so complex, that the debts they owe, when due to citizens, are, on the whole, rather advantageous than burdensome: they produce a new branch of circulation among individuals, but take nothing from the general patrimony.
In deducing the principles of public credit, we must suppose it the established maxim in the state to adhere to the faith of their engagements; and that a permanent fund is appropriated for the payment of the interest of all the money borrowed: a liberty must be supposed, at the same time, to redeem the obligation by adequate payment; and also an easy transfer of the capital from hand to hand, to indemnify every creditor for the loss of his capital, which is not demandable from the state, as the case commonly is in private securities.
The consequence of the swelling of public debts, is, to occasion a proportional augmentation of contributions out of private property. The consequence of this again, is, to produce a vibration in the balance of domestic wealth. This creates a monied interest, which swells in proportion as public debts increase; and which may swell to so great a height as to transfer the income of a whole nation from the nominal proprietors to the public creditors.
A statesman, therefore, ought carefully to attend to the spirit of the nation he governs, before he gives way to a regular and systematical augmentation of public debts. In monarchies, the proprietors of lands may bear for a while the temporary diminutions of their annual income, though they will not easily be made to subscribe to a plan which evidently tends to deprive them of all they have, and to transfer their power and property to a set of men whom they have always considered as their inferiors.
In monarchies, therefore, a great increase of public debts will more probably bring on a national bankruptcy, than in governments which participate of the republican form.