they are awakened from their trance, and made acquainted with their actual condition, their property and industry are probably encumbered with a much larger permanent payment, on account of the interest of the public debt, than what, had they submitted to it at once, might have been required to defray the whole of the war.

expenses

It may perhaps be said, that supposing we are engaged in a war which costs twenty millions a year, it is really the same thing, provided the rate of interest be 5 per cent., whe ther we pay the twenty millions at once by a proportional increase of taxation, or borrow them, and pay the lenders an interminable annuity of one million a year; for, when interest is at 5 per cent., twenty millions in one payment, and an interminable annuity of one million, are of precisely the same value. But it is just because they never have been, and never will be, so considered by the public, that the funding system is injuri ous. Suppose, for example, that the supplies are raised within the year, and that the share falling to a particular individual is 1000l. The wish to maintain himself in his former station, and to preserve his fortune unimpaired-' a wish which comes with us from the womb, and never leaves us till we go into the grave' *-would most certainly stimulate him, on being called upon for this sum, to endeavour to discharge it, partly by an increase of exertion, and partly by a saving from expenditure, without suffering it to continue an encumbrance on his property. But, by the system of loans, he is called upon to pay only the interest of this 1000l., or 50l. a year; and instead of endeavouring to save the whole 1000l., he is satisfied if he saves the interest. The whole nation, acting in the same way, save only the interest of the loan, or one million, and allow the principal sum of twenty millions, which they would have either wholly or partly saved had they been called upon to pay it immediately, to remain as a mortgage on their property, or the produce of their industry. Men act thus, because they invariably reckon a war burdensome, only in proportion to what they are at the moment called upon to pay for it in taxes, without reflecting on the probable duration of these taxes. It would be an exceedingly hopeless undertaking to attempt to convince any one that a perpetual payment of 50l. a year is as burdensome as a single payment of 1000l. We are apt to entertain an idea that some future accident or revolution may occur to relieve our properties from the burden of the perpetual payment; and, at all events,

* Wealth of Nations, II. p. 19.

we consider it as certain, that the greater portion of it will have to be defrayed by posterity. Indeed, this very circumstance of its throwing a portion of the expense of every contest on posterity, or, which is in effect the same thing, its distributing its expense equally over a lengthened period, is one of the arguments principally relied on by the advocates of the funding system. But it is easy to see that this argument is wholly and completely fallacious;-and that the more the interests of posterity can be protected, without injuring those of the existing generation, so much the better. Now, this is what the plan for raising the supplies within the year would really do. Supposing, however, that it did not generate an additional spirit of economy, still its adoption could do no possible harm to the present generation, but would have the very same effect with respect to them and posterity as the system of loans: For, it must obviously be a matter of perfect indifference to the heir of an individual whose share of the expenses of a war amounts to 1000l., whether he pays it at once, and leaves him 10007. less, or does not pay it, and leaves him 1000l. more, subject to a constant charge of 50l. a year. But it is the peculiar advantage of this plan, that while it entails no greater burden on any individual than the system of borrowing, and while it gives full liberty to every one who is so disposed, to remove a part of that burden from his own shoulders on to those of his successors, it has a powerful tendency to render the public less inclined to avail themselves of this power, and more disposed to make immediate sacrifices, and to become more industrious, frugal, and parsimonious, than they would otherwise have been. It is a gross error to suppose that it protects the interests of posterity, by laying any heavier burden on the existing generation; it does no such thing; it protects them only because it gives additional force to the accumulating principle, and because it stimulates every individual to maintain himself in his station, and to preserve his capital undiminished,

*

Here, then, is the distinguishing criterion of the two systems. The funding system occasions only such a small additional degree of exertion and economy as may be required to produce and save the interest of the capital that has been spent in warlike operations; but the system of raising the supplies

* This distinction was first clearly pointed out by Mr Ricardo, in his Principles of Political Economy and Taxation, 1st Ed. p. 337; and in his article Funding System,' in the Supplement to the Encyclopædia Britannica,

within the year, gives infinitely greater force and activity to the spirit of exertion and economy, and stimulates the public to exert themselves to produce and save a sum equivalent, not to the interest only, but to the entire CAPITAL that has been spent. If, therefore, the question with respect to the merits of the two systems is to be decided by a comparison of their respective influence on national wealth,-and this is admitted by M. Gentz to be la premiere consideration, et celle qui doit toujours l'empor ter sur toutes les autres, there can be no manner of doubt that the preference must be given to the plan for raising the supplies within the year,

But there are other considerations, and those, too, of perhaps still greater importance, which equally show the superior advantages of the plan for raising the supplies within the year. It would teach the Government, as well as the people, to be more frugal and economical, and to conduct the public business on a less extravagant and prodigal scale. The facility with which money is raised by the funding system, has been one of the principal causes of those innumerable wars that have continued to desolate the world since the revival of arts and literature in Europe. It has tempted governments rashly to engage in the most ruinous enterprises; while, by deceiving the people with regard to their inevitable consequences, it has rendered them but too ready to second and applaud the ambitious projects of their rulers. The lottery of war is the most expensive and destructive of all lotteries. Its great prizes-its triumphs and its conquests-however attractive and magnificent they may appear, are but a miserable compensation for the treasure and blood that must be spent in obtaining them. True national prudence is chiefly manifested in avoiding all unnecessary wars, and in terminating those that are necessary, as soon as they can be terminated with safety and honour. There is, however, but one way of teaching either nations or individuals this prudence, or of impressing them with a due sense of the inestimable blessing of peace; and that is, by making them feel that war is universally a losing game, and that it is impossible to engage in it without experiencing an instant diminution of comforts and enjoyments. But it is the bane of the funding system, that it conceals these unavoidable consequences for a while; and, by making the people believe that they will never overtake them, it prompts them to set up the most extravagant pretensions, and to manifest a fierce and unaccommodating spirit on occasion of any petty quarrel. The result is a result not deduced from theory only, but from the most comprehensive experience--that

every country which has acted on this system for any considerable period, is inextricably involved in debt and difficulties; that her taxes continue nearly as high in peace as in war; and that, while the weight of her burdens unfits her for engaging in those contests in which she ought perhaps to take a share, they become the source of perpetually recurring convulsions, which have often ended, as they will most probably end again, either in bankruptcy or revolution.

Not only, therefore, would the plan of raising the supplies for a war within the year, by means of additional taxes, be a means of adding increased efficacy to the parsimonious principle, and of stimulating individuals to defray their share of the public expenditure, by increased exertion, and by making a proportional deduction from their own expenditure; but it would also, by making us feel the whole pressure of it at once, render us less disposed wantonly to engage in any expensive contest, and more disposed to embrace the earliest opportunity of making peace on fair and liberal terms. To a nation who defrayed all her extraordinary expenses by a corresponding increase of taxation, peace might be emphatically said to bring healing under her wings. As soon as the period of extraordinary exertion had ceased, the taxes that had been imposed to meet it would also cease. Prices would immediately fall back to their natural level; and industry, relieved from the burdens of the war, would spring forward with redoubled energy. Had we always acted on this system, our taxes could not at this moment have exceeded five or six millions, or little more than the sum it now takes to collect the revenue, while we should at the same time have possessed several hundred millions of additional capital. We should thus have been rendered infinitely more powerful and populous; and would, in consequence, have been better enabled to resist whatever attacks may be made on our own freedom and independence, and to interpose with more decisive effect in defence of the liberties of others.

The objections to the plan for raising the supplies within the year, though sufficiently plausible, seem to us to be of no real weight. It is said, in the first place, that the immediate payment of the expenses of a war would, in many cases, be altogether impracticable-and that, on the modern scale of expense, loans, by which the pressure is divided with posterity, are not only convenient but absolutely necessary. Now, the best answer to this plea of impossibility, is to show that the thing has been actually done,-and before we conclude we undertake to satisfy our readers, that the sums actually raised by taxation

during the enormous and wasteful war outlay from 1793 to 1816, really fell very little short of that vast expenditure; and that we have added upwards of Six Hundred Millions to our funded debt, in order to avoid raising little more than one hundred additional millions in the course of those twenty-three years!

The impossibility, therefore, of raising the year's expenses within the year, cannot be plausibly maintained-and the objection therefore merely resolves into this, that it would be extremely inconvenient to manufacturers and landholders who are not generally possessed of large sums of ready money. Suppose, for example, that a manufacturer's share of the expense of a war amounts to 1000l., and suppose farther, that he can neither save this sum from his expenditure, nor withdraw it without great loss from his business, the advantage of the funding system consists, we are told, in relieving him from the necessity of making this payment, and in enabling him to carry on his business as before, subject only to a deduction of 50l. a year, which he can easily spare from his profits! But the slightest consideration must suffice to satisfy any one, that this is merely a nominal and apparent advantage. How does the practice of funding relieve the manufacturer from the necessity of making an immediate payment of 1000l.?-by Government or its agents going into the moneymarket and borrowing 1000l. on his account, with the interest of which he is charged! And had this practice been abolished, the manufacturer would have done that directly which he has done by deputy; he would have gone into the market himself, and borrowed the same sum. 6 That there are per'sons disposed to lend to individuals is certain, from the facility with which Government raises its loans. Withdraw this great borrower from the market, and private borrowers will be readily accommodated. By wise regulations and good laws, the greatest facilities might be afforded to individuals in such transactions. In the case of a loan, A advances the money, and B pays the interest, and every thing else remains before. In the case of war taxes, A would still advance the money, and B and B pay the interest, only with this difference, he • would pay it directly to A; now he pays it to Government, and Government pays it to A.'-(Art. Funding System, Supp. to Encyc. Britannica, Vol. IV. p. 422.)

as

But this is not all. When an individual goes into the market to borrow money on his own account, he will borrow it on much more advantageous terms than the agents employed by Government. The getting of money-quocunque modo rem-is the exclusive object of the latter; whereas the object of the former is