'Certain it is, therefore,' says the doctor, in a general survey of his arithmetical salvation of the country, 'that if our affairs are to be relieved, it must be by a fund increasing itself in the manner I have explained. The smallest fund of this kind is indeed omnipotent, if it is allowed time to operate.' And again: 'It might be easily shewn that the faithful application from the beginning of the year 1700, of only L.200,000 annually, would long before 1790, notwithstanding the reductions of interest, have paid off above L.100,000,000 of the public debts. The nation might therefore some years ago have been eased of a great part of the taxes with which it is loaded. The most important relief might have been given to its trade and manufactures; and it might now have been in better circumstances than at the beginning of last war: its credit firm; respected by foreign nations, and dreaded by its enemies.'
That such a tone should be assumed by an enthusiastic speculator is not wonderful. The payment of the national debt has been one of the staple dreams of enthusiasts. It would be difficult to believe the wild nonsense that has been written on it; and Hogarth, in his dreadful picture of a madhouse, appropriately represents one of his principal figures hard at work on it. But the remarkable thing—and what shews the perilous nature of such speculations—is, that these theories were worked out by chancellors of the exchequer, and adopted by parliament. There was a faint sinking-fund so early as 1716; but Walpole one day swept it up and spent it, having probably just discovered that it was a fallacy. It was in the days of the younger Pitt, however, that it came out in full bloom. After it had been for several years in operation, a retired and absent-minded mathematical student, Robert Hamilton, shewed its falsity in a book printed in 1813. The exposure was conclusive, and no one since that time has ventured to support a sinking-fund.
As already stated, it is a very good thing to save something out of the revenue and pay off part of the debt. But no good is done by keeping it to accumulate at interest, because the debt it would pay off is just accumulating against it. Apply this to private transactions. You are in debt L.110. You have L.10, and the question is: Are you to pay it at once, and reduce your debt to L.100, or are you to keep it accumulating at interest? It is much the same which you do, only the latter is the more troublesome mode. If you pay it at once, you will just have so much less interest to hand over to your creditor. If you put it out at interest, you will have to pay over to him what you receive for it, in addition to the interest of the L.100. There is an incidental purpose for which it has been deemed right that the government should, however, have a fund at its disposal—that is for buying into the funds when they fall very low, and thus accomplishing two services—the one the paying a portion of the debt at a cheap rate, the other stopping the depreciation of the funds. This is in itself we doubt not a very just practical object, but we believe the sums that can be applied to it are very small in comparison with the reserves which formed the old sinking-fund.
But another and a very different argument has been adduced, not certainly for the re-establishment and support of a sinking-fund, since its fallacy has been exposed, but against the policy of having exposed it. It is said that the belief in the potency of a sinking-fund for clearing off the debt inspired public confidence in the stability of the funds, and that it was wrong to shake this confidence even by the promulgation of truth. It has often been supposed, indeed, that the statesmen who mainly carried out the system were in secret conscious of its fallacy, but were content to carry it out so long as they saw that it inspired confidence in the public. It is in allusion to this that we have spoken of the sinking-fund as a great hoax. We cannot sanction the morality of governments acting on conscious fallacies; and in this instance the natural confidence in the funds rather enlarged than decreased when the fallacy was exposed and the system abandoned.
Keeping in view Dr Price's views of the potentiality of compound interest, we now give a brief account of a singular attempt made in France to put them in practice, and by their omnipotence pay our national debt and that of other nations too, out of a small private fortune. In the year 1794, a will was registered in France by one Fortuné Ricard, disposing of a sum of 500 livres, a little more than L.20 sterling. Fortuné stated that this sum was the result of a present of twenty-four livres which he had received when he was a boy, and had kept accumulating at compound interest to a period of advanced age. By his will he left it in the hands of trustees, making arrangements for a perpetual succession, as the purposes of the trust were not to be all accomplished for a period of several centuries. The money was to be divided into five portions, each of 100 livres, and so to be put out at compound interest.
The first portion was to be withdrawn at the end of a century: it would then amount to 13,000 livres, or about L.550. It is scarcely worth while mentioning the purposes to which this trifle was to be applied, but for the credit of M. Ricard it may be mentioned that they were all unexceptionable. In two centuries the second sum would be released, amounting to 1,700,000 livres. At the end of the third century, the third instalment was to be released, when it would consist of 226,000,000 livres. The destination of these magnificent sums was also unexceptionable—it was for national education, the erecting of public libraries, and the like. The instalment to be released at the end of the fourth century would amount to about 30,000,000,000 livres: it was to be employed partly in the building of 100 towns, each containing 150,000 inhabitants, in the most agreeable parts of France. 'In a short time,' says the benevolent founder, 'there will result from hence an addition of 15,000,000 of inhabitants to the kingdom, and its consumption will be doubled—for which service I hope the economists will think themselves obliged to me.' Malthus had not then published his principles of population.
We must draw breath as we approach the destination of the fifth and last instalment. It was to amount to four millions of millions of livres—about a hundred and seventy thousand millions of pounds. We take for granted that Fortuné's calculations are correct, and have certainly not taken the trouble of verifying them. Among other truly benevolent and cosmopolitan destinations of this very handsome sum, it may be sufficient to mention these:—
'Six thousand millions shall be appropriated towards paying the national debt of France, upon condition that the kings, our good lords and masters, shall be entreated to order the comptrollers-general of the finances to undergo in future an examination in arithmetic before they enter on the duties of their office.
'Twelve thousand millions shall likewise be employed in paying the public debts of England. It may be seen that I reckon that both these national debts will be doubled in this period—not that I have any doubt of the talents of certain ministers to increase them much more, but their operations in this way are opposed by an infinity of circumstances, which lead me to presume that these debts cannot be more than doubled. Besides, if they amount to a few thousands of millions more, I declare that it is my intention that they should be entirely paid off, and that a project so laudable should not remain unexecuted for a trifle more or less.'[1]
M. Ricard, it will be observed, must have drawn his will while royalty was in the ascendant; it was registered during the Reign of Terror, and one would be curious to know how many weeks, instead of centuries, his 500 livres remained sacred. Money in the most steadily-governed states—in our own, for instance—is subject to continual casualties. The most acute men of business cannot command perfectly certain investments for their own money—they are often miserably deceived, and suffer heavy losses. M. Ricard, however, supposed that a set of irresponsible trustees would for centuries always discover perfectly sure investments, and act with consummate watchfulness and honesty. If it were possible to leave behind one money with the qualification of always being securely invested, while the rest of the property in the world remained insecure, it would gradually suck all the wealth of the world into its vortex. But it would require supernatural agency to make it thus absolutely secure.