On Public Credit
by David Hume


    It appears to have been the common practice of antiquity,
make provision, during peace, for the necessities of war, and to
hoard up treasures before-hand, as the instruments either of
conquest or defence; without trusting to extraordinary
impositions, much less to borrowing, in times of disorder and
confusion. Besides the immense sums above mentioned, which were
amassed by ATHENS, and by the PTOLEMIES, and other successors of
ALEXANDER; we learn from PLATO, that the frugal LACEDEMONIANS had
also collected a great treasure; and ARRIAN and PLUTARCH take
notice of the riches which ALEXANDER got possession of on the
conquest of SUSA and ECBATANA, and which were reserved, some of
them, from the time of CYRUS. If I remember right, the scripture
also mentions the treasure of HEZEKIAH and the JEWISH princes; as
profane history does that of PHILIP and PERSEUS, kings of
MACEDON. The ancient republics of GAUL had commonly large sums in
reserve. Every one knows the treasure seized in ROME by JULIUS
CAESAR, during the civil wars: and we find afterwards, that the
wiser emperors, AUGUSTUS, TIBERIUS, VESPASIAN, SEVERUS, etc.
always discovered the prudent foresight, of saving great sums
against any public exigency.
    On the contrary, our modern expedient, which has become very
general, is to mortgage the public revenues, and to trust that
posterity will pay off the incumbrances contracted by their
ancestors: And they, having before their eyes, so good an example
of their wise fathers, have the same prudent reliance on their
posterity; who, at last, from necessity more than choice, are
obliged to place the same confidence in a new posterity. But not
to waste time in declaiming against a practice which appears
ruinous, beyond all controversy; it seems pretty apparent, that
the ancient maxims are, in this respect, more prudent than the
modern; even though the latter had been confined within some
reasonable bounds, and had ever, in any instance, been attended
with such frugality, in time of peace, as to discharge the debts
incurred by an expensive war. For why should the case be so
different between the public and an individual, as to make us
establish different maxims of conduct for each? If the funds of
the former be greater, its necessary expences are proportionably
larger; if its resources be more numerous, they are not infinite;
and as its frame should be calculated for a much longer duration
than the date of a single life, or even of a family, it should
embrace maxims, large, durable, and generous, agreeably to the
supposed extent of its existence. To trust to chances and
temporary expedients, is, indeed, what the necessity of human
affairs frequently renders unavoidable; but whoever voluntarily
depend on such resources, have not necessity, but their own
folly, to accuse for their misfortunes, when any such befal them.
    If the abuses of treasures be dangerous, either by engaging
the state in rash enterprizes, or making it neglect military
discipline, in confidence of its riches; the abuses of mortgaging
are more certain and inevitable; poverty, impotence, and
subjection to foreign powers.
    According to modern policy war is attended with every
destructive circumstance; loss of men, encrease of taxes, decay
of commerce, dissipation of money, devastation by sea and land.
According to ancient maxims, the opening of the public treasure,
as it produced an uncommon affluence of gold and silver, served
as a temporary encouragement to industry, and atoned, in some
degree, for the inevitable calamities of war.
    It is very tempting to a minister to employ such an
expedient, as enables him to make a great figure during his
administration, without overburthening the people with taxes, or
exciting any immediate clamours against himself. The practice,
therefore, of contracting debt will almost infallibly be abused,
in every government. It would scarcely be more imprudent to give
a prodigal son a credit in every banker's shop in London, than to
impower a statesman to draw bills, in this manner, upon
posterity.
    What then shall we say to the new paradox, that public
incumbrances, are, of themselves, advantageous, independent of
the necessity of contracting them; and that any state, even
though it were not pressed by a foreign enemy, could not possibly
have embraced a wiser expedient for promoting commerce and
riches, than to create funds, and debts, and taxes, without
limitation? Reasonings, such as these, might naturally have
passed for trials of wit among rhetoricians, like the panegyrics
on folly and a fever, on BISIRIS and NERO, had we not seen such
absurd maxims patronized by great ministers, and by a whole party
among us.
    Let us examine the consequences of public debts, both in our
domestic management, by their influence on commerce and industry;
and in our foreign transactions, by their effect on wars and
negociations.
    Public securities are with us become a kind of money, and
pass as readily at the current price as gold or silver. Wherever
any profitable undertaking offers itself, how expensive soever,
there are never wanting hands enow to embrace it; nor need a
trader, who has sums in the public stocks, fear to launch out
into the most extensive trade; since he is possessed of funds,
which will answer the most sudden demand that can be made upon
him. No merchant thinks it necessary to keep by him any
considerable cash. Bank-stock, or India-bonds, especially the
latter, serve all the same purposes; because he can dispose of
them, or pledge them to a banker, in a quarter of an hour; and at
the same time they are not idle, even when in his scritoire, but
bring him in a constant revenue. In short, our national debts
furnish merchants with a species of money, that is continually
multiplying in their hands, and produces sure gain, besides the
profits of their commerce. This must enable them to trade upon
less profit. The small profit of the merchant renders the
commodity cheaper, causes a greater consumption, quickens the
labour of the common people, and helps to spread arts and
industry throughout the whole society.
    There are also, we may observe, in ENGLAND and in all states,
which have both commerce and public debts, a set of men, who are
half merchants, half stock-holders, and may be supposed willing
to trade for small profits; because commerce is not their
principal or sole support, and their revenues in the funds are a
sure resource for themselves and their families. Were there no
funds, great merchants would have no expedient for realizing or
securing any part of their profit, but by making purchases of
land; and land has many disadvantages in comparison of funds.
Requiring more care and inspection, it divides the time and
attention of the merchant; upon any tempting offer or
extraordinary accident in trade, it is not so easily converted
into money. and as it attracts too much, both by the many natural
pleasures it affords, and the authority it gives, it soon
converts the citizen into the country gentleman. More men,
therefore, with large stocks and incomes, may naturally be
supposed to continue in trade, where there are public debts; and
this, it must be owned, is of some advantage to commerce, by
diminishing its profits, promoting circulation, and encouraging
industry.
    But, in opposition to these two favourable circumstances,
perhaps of no very great importance, weigh the many disadvantages
which attend our public debts, in the whole interior oeconomy of
the state: You will find no comparison between the ill and the
good which result from them.
    First, It is certain, that national debts cause a mighty
confluence of people and riches to the capital, by the great
sums, levied in the provinces to pay the interest; and perhaps,
too, by the advantages in trade above mentioned, which they give
the merchants in the capital above the rest of the kingdom. The
question is, whether, in our case, it be for the public interest,
that so many privileges should be conferred on LONDON, which has
already arrived at such an enormous size, and seems still
encreasing? Some men are apprehensive of the consequences. For my
own part, I cannot forbear thinking, that, though the head is
undoubtedly too large for the body, yet that great city is so
happily situated, that its excessive bulk causes less
inconvenience than even a smaller capital to a greater kingdom.
There is more difference between the prices of all provisions in
PARIS and LANGUEDOC, than between those in LONDON and YORKSHIRE.
The immense greatness, indeed, of LONDON, under a government
which admits not of discretionary power, renders the people
factious, mutinous, seditious, and even perhaps rebellious. But
to this evil the national debts themselves tend to provide a
remedy. The first visible eruption, or even immediate danger, of
public disorders must alarm all the stockholders, whose property
is the most precarious of any. and will make them fly to the
support of government, whether menaced by Jacobitish violence or
democratical frenzy.
    Secondly, Public stocks, being a kind of paper-credit, have
all the disadvantages attending that species of money. They
banish gold and silver from the most considerable commerce of the
state, reduce them to common circulation, and by that means
render all provisions and labour dearer than otherwise they would
be.
    Thirdly, The taxes, which are levied to pay the interests of
these debts, are apt either to heighten the price of labour, or
be an oppression on the poorer sort.
    Fourthly, As foreigners possess a great share of our national
funds, they render the public, in a manner, tributary to them,
and may in time occasion the transport of our people and our
industry.
    Fifthly, The greater part of the public stock being always in
the hands of idle people, who live on their revenue, our funds,
in that view, give great encouragement to an useless and unactive
life.
    But though the injury, that arises to commerce and industry
from our public funds, will appear, upon balancing the whole, not
inconsiderable, it is trivial, in comparison of the prejudice
that results to the state considered as a body politic, which
must support itself in the society of nations, and have various
transactions with other states in wars and negociations. The ill,
there, is pure and unmixed, without any favourable circumstance
to atone for it; and it is an ill too of a nature the highest and
most important.
    We have, indeed, been told, that the public is no weaker upon
account of its debts; since they are mostly due among ourselves,
and bring as much property to one as they take from another. It
is like transferring money from the right hand to the left; which
leaves the person neither richer nor poorer than before. Such
loose reasonings and specious comparisons will always pass, where
we judge not upon principles. I ask, Is it possible, in the
nature of things, to overburthen a nation with taxes, even where
the sovereign resides among them? The very doubt seems
extravagant; since it is requisite, in every community, that
there be a certain proportion observed between the laborious and
the idle part of it. But if all our present taxes be mortgaged,
must we not invent new ones? And may not this matter be carried
to a length that is ruinous and destructive?
    In every nation, there are always some methods of levying
money more easy than others, agreeably to the way of living of
the people, and the commodities they make use of. In GREAT
BRITAIN, the excises upon malt and beer afford a large revenue;
because the operations of malting and brewing are tedious, and
are impossible to be concealed; and at the same time, these
commodities are not so absolutely necessary to life, as that the
raising of their price would very much affect the poorer sort.
These taxes being all mortgaged, what difficulty to find new
ones! what vexation and ruin of the poor!
    Duties upon consumptions are more equal and easy than those
upon possessions. What a loss to the public, that the former are
all exhausted, and that we must have recourse to the more
grievous method of levying taxes!
    Were all the proprietors of land only stewards to the public,
must not necessity force them to practise all the arts of
oppression used by stewards; where the absence or negligence of
the proprietor render them secure against enquiry?
    It will scarcely be asserted, that no bounds ought ever to be
set to national debts; and that the public would be no weaker,
were twelve or fifteen shillings in the pound, land-tax,
mortgaged, with all the present customs and excises. There is
something, therefore, in the case, beside the mere transferring
of property from the one hand to another. In 500 years, the
posterity of those now in the coaches, and of those upon the
boxes, will probably have changed places, without affecting the
public by these revolutions.
    Suppose the public once fairly brought to that condition, to
which it is hastening with such amazing rapidity; suppose the
land to be taxed eighteen or nineteen shillings in the pound; for
it can never bear the whole twenty; suppose all the excises and
customs to be screwed up to the utmost which the nation can bear,
without entirely losing its commerce and industry; and suppose
that all those funds are mortgaged to perpetuity, and that the
invention and wit of all our projectors can find no new
imposition, which may serve as the foundation of a new loan; and
let us consider the necessary consequences of this situation.
Though the imperfect state of our political knowledge, and the
narrow capacities of men, make it difficult to fortel the effects
which will result from any untried measure, the seeds of ruin are
here scattered with such profusion as not to escape the eye of
the most careless observer.
    In this unnatural state of society, the only persons, who
possess any revenue beyond the immediate effects of their
industry, are the stock-holders, who draw almost all the rent of
the land and houses, besides the produce of all the customs and
excises. These are men, who have no connexions with the state,
who can enjoy their revenue in any part of the globe in which
they chuse to reside, who will naturally bury themselves in the
capital or in great cities, and who will sink into the lethargy
of a stupid and pampered luxury, without spirit, ambition, or
enjoyment. Adieu to all ideas of nobility, gentry, and family.
The stocks can be transferred in an instant, and being in such a
fluctuating state, will seldom be transmitted during three
generations from father to son. Or were they to remain ever so
long in one family, they convey no hereditary authority or credit
to the possessor; and by this means, the several ranks of men,
which form a kind of independent magistracy in a state,
instituted by the hand of nature, are entirely lost; and every
man in authority derives his influence from the commission alone
of the sovereign. No expedient remains for preventing or
suppressing insurrections, but mercenary armies: No expedient at
all remains for resisting tyranny. Elections are swayed by
bribery and corruption alone: And the middle power between king
and people being totally removed, a grievous despotism must
infallibly prevail. The landholders, despised for their poverty,
and hated for their oppressions, will be utterly unable to make
any opposition to it.
    Though a resolution should be formed by the legislature never
to impose any tax which hurts commerce and discourages industry,
it will be impossible for men, in subjects of such extreme
delicacy, to reason so justly as never to be mistaken, or amidst
difficulties so urgent, never to be seduced from their
resolution. The continual fluctuations in commerce require
continual alterations in the nature of the taxes; which exposes
the legislature every moment to the danger both of wilful and
involuntary error. And any great blow given to trade, whether by
injudicious taxes or by other accidents, throws the whole system
of government into confusion.
    But what expedient can the public now employ, even supposing
trade to continue in the most flourishing condition, in order to
support its foreign wars and enterprizes, and to defend its own
honour and interests, or those of its allies? I do not ask how
the public is to exert such a prodigious power as it has
maintained during our late wars; where we have so much exceeded,
not only our own natural strength, but even that of the greatest
empires. This extravagance is the abuse complained of, as the
source of all the dangers, to which we are at present exposed.
But since we must still suppose great commerce and opulence to
remain, even after every fund is mortgaged; these riches must be
defended by proportional power; and whence is the public to
derive the revenue which supports it? It must plainly be from a
continual taxation of the annuitants, or, which is the same
thing, from mortgaging anew, on every exigency, a certain part of
their annuities; and thus making them contribute to their own
defence, and to that of the nation. But the difficulties,
attending this system of policy, will easily appear, whether we
suppose the king to have become absolute master, or to be still
controuled by national councils, in which the annuitants
themselves must necessarily bear the principal sway.
    If the prince has become absolute, as may naturally be
expected from this situation of affairs, it is so easy for him to
encrease his exactions upon the annuitants, which amount only to
the retaining money in his own hands, that this species of
property would soon lose all its credit, and the whole income of
every individual in the state must lie entirely at the mercy of
the sovereign: A degree of despotism, which no oriental monarchy
has ever yet attained. If, on the contrary, the consent of the
annuitants be requisite for every taxation, they will never be
persuaded to contribute sufficiently even to the support of
government; as the diminution of their revenue must in that case
be very sensible, would not be disguised under the appearance of
a branch of excise or customs, and would not be shared by any
other order of the state, who are already supposed to be taxed to
the utmost. There are instances, in some republics, of a
hundredth penny, and sometimes of the fiftieth, being given to
the support of the state; but this is always an extraordinary
exertion of power, and can never become the foundation of a
constant national defence. We have always found, where a
government has mortgaged all its revenues, that it necessarily
sinks into a state of languor, inactivity, and impotence.
    Such are the inconveniencies, which may reasonably be
foreseen, of this situation, to which GREAT BRITAIN is visibly
tending. Not to mention, the numberless inconveniencies, which
cannot be foreseen, and which must result from so monstrous a
situation as that of making the public the chief or sole
proprietor of land, besides investing it with every branch of
customs and excise, which the fertile imagination of ministers
and projectors have been able to invent.
    I must confess, that there is a strange supineness, from long
custom, creeped into all ranks of men, with regard to public
debts, not unlike what divines so vehemently complain of with
regard to their religious doctrines. We all own, that the most
sanguine imagination cannot hope, either that this or any future
ministry will be possessed of such rigid and steady frugality, as
to make a considerable progress in the payment of our debts; or
that the situation of foreign affairs will, for any long time,
allow them leisure and tranquillity for such an undertaking. What
then is to become of us? Were we ever so good Christians, and
ever so resigned to Providence; this, methinks, were a curious
question, even considered as a speculative one, and what it might
not be altogether impossible to form some conjectural solution
of. The events here will depend little upon the contingencies of
battles, negociations, intrigues, and factions. There seems to be
a natural progress of things, which may guide our reasoning. As
it would have required but a moderate share of prudence, when we
first began this practice of mortgaging, to have foretold, from
the nature of men and of ministers, that things would necessarily
be carried to the length we see; so now, that they have at last
happily reached it, it may not be difficult to guess at the
consequences. It must, indeed, be one of these two events; either
the nation must destroy public credit, or public credit will
destroy the nation. It is impossible that they can both subsist,
after the manner they have been hitherto managed, in this, as
well as in some other countries.
    There was, indeed, a scheme for the payment of our debts,
which was proposed by an excellent citizen, Mr HUTCHINSON, above
thirty years ago, and which was much approved of by some men of
sense, but never was likely to take effect. He asserted, that
there was a fallacy in imagining that the public owed this debt;
for that really every individual owed a proportional share of it,
and paid, in his taxes, a proportional share of the interest,
beside the expence of levying these taxes. Had we not better,
then, says he, make a distribution of the debt among ourselves,
and each of us contribute a sum suitable to his property, and by
that means discharge at once all our funds and public mortgages?
He seems not to have considered, that the laborious poor pay a
considerable part of the taxes by their annual consumptions,
though they could not advance, at once, a proportional part of
the sum required. Not to mention, that property in money and
stock in trade might easily be concealed or disguised; and that
visible property in lands and houses would really at last answer
for the whole: An inequality and oppression, which never would be
submitted to. But though this project is not likely to take
place; it is not altogether improbable, that, when the nation
becomes heartily sick of their debts, and is cruelly oppressed by
them, some daring projector may arise with visionary schemes for
their discharge. And as public credit will begin, by that time,
to be a little frail, the least touch will destroy it, as
happened in FRANCE during the regency. and in this manner it will
die of the doctor.
    But it is more probable, that the breach of national faith
will be the necessary effect of wars, defeats, misfortunes, and
public calamities, or even perhaps of victories and conquests. I
must confess, when I see princes and states fighting and
quarrelling, amidst their debts, funds, and public mortgages, it
always brings to my mind a match of cudgel-playing fought in a
China shop. How can it be expected, that sovereigns will spare a
species of property, which is pernicious to themselves and to the
public, when they have so little compassion on lives and
properties, that are useful to both? Let the time come (and
surely it will come) when the new funds, created for the
exigencies of the year, are not subscribed to, and raise not the
money projected. Suppose, either that the cash of the nation is
exhausted; or that our faith, which has hitherto been so ample,
begins to fail us. Suppose, that, in this distress, the nation is
threatened with an invasion; a rebellion is suspected or broken
out at home; a squadron cannot be equipped for want of pay,
victuals, or repairs; or even a foreign subsidy cannot be
advanced. What must a prince or minister do in such an emergence?
The right of self-preservation is unalienable in every
individual, much more in every community. And the folly of our
statesmen must then be greater than the folly of those who first
contracted debt, or, what is more, than that of those who
trusted, or continue to trust this security, if these statesmen
have the means of safety in their hands, and do not employ them.
The funds, created and mortgaged, will, by that time, bring in a
large yearly revenue, sufficient for the defence and security of
the nation: Money is perhaps lying in the exchequer, ready for
the discharge of the quarterly interest: Necessity calls, fear
urges, reason exhorts, compassion alone exclaims: The money will
immediately be seized for the current service, under the most
solemn protestations, perhaps, of being immediately replaced. But
no more is requisite. The whole fabric, already tottering, falls
to the ground, and buries thousands in its ruins. And this, I
think, may be called the natural death of public credit: For to
this period it tends as naturally as an animal body to its
dissolution and destruction.
    So great dupes are the generality of mankind, that,
notwithstanding such a violent shock to public credit, as a
voluntary bankruptcy in ENGLAND would occasion, it would not
probably be long ere credit would again revive in as flourishing
a condition as before. The present king of FRANCE, during the
late war, borrowed money at lower interest than ever his
grandfather did; and as low as the BRITISH parliament, comparing
the natural rate of interest in both kingdoms. And though men are
commonly more governed by what they have seen, than by what they
foresee, with whatever certainty; yet promises, protestations,
fair appearances, with the allurements of present interest, have
such powerful influence as few are able to resist. Mankind are,
in all ages, caught by the same baits: The same tricks, played
over and over again, still trepan them. The heights of popularity
and patriotism are still the beaten road to power and tyranny;
flattery to treachery; standing armies to arbitrary government;
and the glory of God to the temporal interest of the clergy. The
fear of an everlasting destruction of credit, allowing it to be
an evil, is a needless bugbear. A prudent man, in reality, would
rather lend to the public immediately after we had taken a spunge
to our debts, than at present; as much as an opulent knave, even
though one could not force him to pay, is a preferable debtor to
an honest bankrupt: For the former, in order to carry on
business, may find it his interest to discharge his debts, where
they are not exorbitant: The latter has it not in his power. The
reasoning of TACITUS, as it is eternally true, is very applicable
to our present case. Sed vulgus ad magnitudinem beneficiorum
aderat: Stultissimus quisque pecuniis mercabatur: Apud sapientes
cassa habebantur, quoe neque dari neque accipi, salva republica,
Poterant. The public is a debtor, whom no man can oblige to pay.
The only check which the creditors have upon her, is the interest
of preserving credit; an interest, which may easily be
overbalanced by a great debt, and by a difficult and
extraordinary emergence, even supposing that credit
irrecoverable. Not to mention, that a present necessity often
forces states into measures, which are, strictly speaking,
against their interest.
    These two events, supposed above, are calamitous, but not the
most calamitous. Thousands are thereby sacrificed to the safety
of millions. But we are not without danger, that the contrary
event may take place, and that millions may be sacrificed for
ever to the temporary safety of thousands. Our popular
government, perhaps, will render it difficult or dangerous for a
minister to venture on so desperate an expedient, as that of a
voluntary bankruptcy. And though the house of Lords be altogether
composed of proprietors of land, and the house of Commons
chiefly; and consequently neither of them can be supposed to have
great property in the funds. Yet the connections of the members
may be so great with the proprietors, as to render them more
tenacious of public faith, than prudence, policy, or even
justice, strictly speaking, requires. And perhaps too, our
foreign enemies may be so politic as to discover, that our safety
lies in despair, and may not, therefore, show the danger, open
and barefaced, till it be inevitable. The balance of power in
EUROPE, our grandfathers, our fathers, and we, have all deemed
too unequal to be preserved without our attention and assistance.
But our children, weary of the struggle, and fettered with
incumbrances, may sit down secure, and see their neighbours
oppressed and conquered; till, at last, they themselves and their
creditors lie both at the mercy of the conqueror. And this may
properly enough be denominated the violent death of our public
credit.
    These seem to be the events, which are not very remote, and
which reason foresees as clearly almost as she can do any thing
that lies in the womb of time. And though the ancients
maintained, that in order to reach the gift of prophecy, a
certain divine fury or madness was requisite, one may safely
affirm, that, in order to deliver such prophecies as these, no
more is necessary, than merely to be in one's senses, free from
the influence of popular madness and delusion.