Blackwood's Edinburgh Magazine, Volume 66, No. 410, December 1849

These remarks we have felt ourselves compelled to make, because it is necessary that, before touching upon the institution of the national debt, we should clearly understand what was the true condition of the people. We believe it possible to condense the leading features within the compass of a single sentence. There were few colossal fortunes, because there was no stock gambling; there was little poverty, because taxation was extremely light, the means of labour within the reach of all, prices moderate, and provisions plentiful: there was less luxury, but more comfort, and that comfort was far more equally distributed than now. It is quite true, that if a man breaks his arm at the present day, he can have it better set; but rags and an empty belly are worse evils than indifferent surgical treatment.

We are very far from wishing to attribute this state of national comfort – for we think that is the fittest word – to the personal exertions of James. We give him no credit for it whatever. His bigotry was far greater than his prudence; and he forfeited his throne, and lost the allegiance of the gentlemen of England, in consequence of his insane attempt to thrust Popery upon the nation. But if we regard him simply as a financial monarch, we must admit that he taxed his subjects lightly, used the taxes which he drew judiciously for the public service and establishment, and imposed no burden upon posterity.

The peculiar, and, to them, fatal policy of the Stuart family was this, that they sought to reign as much as possible independent of the control of parliaments. Had they not been blinded by old traditions, they must have seen that, in attempting to do so, they were grasping at the shadow without the possibility of attaining the substance. They came to the English throne too late to command the public purse, and at a period of time when voluntary subsidies were visionary. They looked upon parliaments with an eye of extreme jealousy; and parliaments, in return, were exceedingly chary of voting them the necessary supplies. Corruption, as it afterwards crept into the senate, was never used by the Stuarts as a direct engine of power. The sales of dignities by the first James, detrimental as they proved to the dignity of the crown, were in substitution of direct taxation from the people. When supplies were withheld, or only granted with a niggardly hand, it was but natural in the monarch to attempt to recruit his exchequer by means of extraordinary and often most questionable expedients. The second James, had he chosen to bribe the Commons, might have been utterly too strong for any combination of the nobles. William III. was troubled with no scruples on the score of prerogative. He saw clearly the intimate and indissoluble connexion between power and money: he secured both by acquiescing in a violent change of the constitution as it had hitherto existed; held them during his life, and used them for the furtherance of his own designs; and left us as his legacy, the nucleus of a debt constructed on such a scheme that its influence must be felt to the remotest range of posterity.

That the exigencies of every state must be met by loans, is a proposition which it would be useless to question. Such loans are, however, strictly speaking, merely an anticipation of taxes to be raised from the country and generation which reaps the benefit of the expenditure. Such was the old principle, founded upon law, equity, and reason; and it signifies nothing how many instances of forced loans, and breach of repayment, may be called from our earlier history. Mr Macaulay says, "From a period of immemorial antiquity, it had been the practice of every English government to contract debts. What the Revolution introduced was the practise of honestly paying them." This is epigrammatic, but not sound. From the time when the Commons had the power of granting or withholding supplies, they became the arbiters of what was and what was not properly a state obligation. In order to ascertain the actual value of a debt, and the measure of the creditor's claim, we must necessarily look to the nature of the security granted at the time of borrowing. Forced extortions by kings are not properly debts of the state. The sanction of the people, through its representatives, is required to make repayment binding upon the people. The practice which the Revolution introduced was the contraction of debt, not intended to be liquidated by the borrowing generation, but to be carried over so as to affect the industry of generations unborn; not to make the debtor pay, but to leave the payment to his posterity.

When William and Mary were proclaimed, there was no such thing as a national debt. We may indeed except a comparatively small sum, amounting to above half a million, which had been detained in exchequer by the profligate Charles II., and applied to his own uses. But this was not properly a state debt, nor was it acknowledged as such till a later period.

To those who are capable of appreciating that genius which is never so strongly shown as in connexion with political affairs, the conduct of William is a most interesting study. It would be impossible to exaggerate his qualities of clear-sightedness and decision; or to select a more forcible instance of that ascendency which a man of consummate discernment and forethought may attain, in spite of every opposition. He had, in truth, very difficult cards to play. The different parties, both religious and political, throughout the nation, were so strongly opposed to each other, that it seemed impossible to adopt any line of conduct, which should not, by favouring one, give mortal umbrage to the others. It was reserved for William, by a master-stroke of policy, to create a new party by new means, which in time should absorb the others; and to strengthen his government by attaching to it the commercial classes, by a tie which is ever the strongest – that of deep pecuniary interest in the stability of existing affairs. At the same time he was most desirous, without materially increasing the taxation of England, to raise such sums of money as might enable him to prosecute his darling object of striking a death-blow at the ascendency of France. The scheme answered well – possibly beyond his most sanguine expectation. Nor was it altogether without a precedent.

"In Holland," says Mr Doubleday, "the country of his birth, the Dutch king and his advisers found both a precedent to quote, and an example to follow. By its position and circumstances, this country, inconsiderable in size and population, and not naturally defensible, had been compelled to act the part, for a series of years, of a leading power in Europe; and this it had only been enabled to do, by that novel arm which a very extensive foreign trade is sure to create, and by the money drawn together by successful trading. Venice had at an earlier period played a similar part; but a series of struggles at last led the huckstering genius of the Dutch into a system at which the Venetian public had not arrived: and this was the fabrication of paper money, the erection of a bank to issue it, and the systematic borrowing of that money, and the creation of debt on the part of government, for only the interest of which taxes were demanded of the people. Here was machinery set up and at work; and, in the opinion of interested and superficial observers, working successfully. It was, accordingly, soon proposed to set up a copy of this machinery in England, and in 1694, the blow was struck which was destined to have effects so monstrous, so long continued, and so marvellous, on the fortunes of England and her people; and the establishment, since known as the Bank of England, was erected under the sanction of the government."

The worst and most dangerous feature of a permanent national debt is, that, during the earlier stages of its existence, an appearance of factitious prosperity is generated, and the nation consequently blinded to its remote but necessary results. The tendency to such a delusion is inherent in human nature. Après nous le deluge! is a sorry maxim, which has been often acted on, if not quoted by statesmen, who, like a certain notable Scottish provost, being unable to discover anything that posterity has done for them, have thought themselves entitled to deal as they pleased with posterity. The proceeds of the earlier loans enabled William to carry on his wars; and the nation, puffed up with pride, looked upon the new discovery as something far more important and valuable than the opening of another Indies. Nor did William confine himself merely to loans. Lotteries, tontines, long and short annuities, and every species of device for raising money, were patronised and urged on by the former Stadtholder, and the rage for public gambling became uncontrollable and universal. As we have just emerged from one of those periodical fits of speculation which seem epidemical in Great Britain, and which, in fact, have been so ever since the Revolution, it may be interesting to the reader to know, that the introduction of the new system was marked by precisely the same social phenomena which were observable four years ago, when the shares in every bubble railway scheme commanded a ridiculous premium. We quote from the work of Mr Francis: —

"The moneyed interest – a title familiar to the reader of the present day – was unknown until 1692. It was then arrogated by those who saw the great advantage of entering into transactions in the funds for the aid of government. The title claimed by them in pride was employed by others in derision; and the purse-proud importance of men grown suddenly rich was a common source of ridicule. Wealth rapidly acquired has been invariably detrimental to the manners and the morals of the nation, and in 1692 the rule was as absolute as now. The moneyed interest, intoxicated by the possession of wealth, which their wildest dreams had never imagined, and incensed by the cold contempt with which the landed interest treated them, endeavoured to rival the latter in that magnificence which was one characteristic of the landed families. Their carriages were radiant with gold; their persons were radiant with gems; they married the poorer branches of the nobility; they eagerly purchased the princely mansions of the old aristocracy. The brush of Sir Godfrey Kneller, and the chisel of Caius Cibber, were employed in perpetuating their features. Their wealth was rarely grudged to humble the pride of a Howard or a Cavendish; and the money gained by the father was spent by the son in acquiring a distinction at the expense of decency."

It is curious to remark that the Stock Exchange cannot be said to have had any period of minority. It leaped out at once full-armed, like Minerva from the brain of Jupiter. All the arts of bulling and bearing, of false rumours, of expresses, combinations, squeezings – all that constitute the mystery of Mammon, were known as well to the fathers of the Alley, as they are to their remote representatives. Nay, it would almost appear that the patriarchal jobber had more genius than has since been inherited. William's retinue did not consist only of mercenaries and refugees. Hovering on the skirts of his army came the sons of Israel, with beaks whetted for the prey, and appetites which never can be sated. Vixere fortes ante Agamemnona– there were earlier vultures than Nathan Rothschild. The principal negotiators of the first British loan were Jews. They assisted the Stadtholder with their counsel, and a Mephistopheles of the money-making race attached himself even to the side of Marlborough. According to Mr Francis: – "The wealthy Hebrew, Medina, accompanied Marlborough in all his campaigns; administered to the avarice of the great captain by an annuity of six thousand pounds per annum; repaid himself by expresses containing intelligence of those great battles which fire the English blood to hear them named; and Ramilies, Oudenarde, and Blenheim, administered as much to the purse of the Hebrew as they did to the glory of England."

It has been estimated, upon good authority, that from fifteen to twenty per cent of every loan raised in England, has, directly or indirectly, found its way to the coffers of those unconscionable Shylocks; so that it is small wonder if we hear of colossal fortunes coexisting with extreme national depreciation and distress. We might, indeed, estimate their profits at a much higher rate. Dr Charles Davenant, in his essay on the Balance of Trade, written in the earlier part of the last century, remarked – "While these immense debts remain, the necessities of the government will continue, interest must be high, and large premiums will be given. And what encouragement is there for men to think of foreign traffic (whose returns for those commodities that enrich England must bring no great profit to the private adventurers) when they can sit at home, and, without any care or hazard, get from the state, by dealing with the exchequer, fifteen, and sometimes twenty, thirty, forty, and fifty per cent? Is there any commerce abroad so constantly advantageous?" We apprehend not. Capital is defined by the economists as the accumulation of the savings of industry. Such men as Rothschild have no doubt been industrious, but not according to the ordinary acceptation of the term. Their industry is of a wholesale kind. It is confined to a resolute and systematic endeavour to avail themselves of the savings of others; and we need hardly state that, in this pursuit, they have shown themselves most eminently successful.

The remarkable change which took place in the monetary system of England, under the auspices of William, could not, of course, have been effected without the concurrence of parliament. That body had certainly no reason to charge him with neglect of their interests. The representatives of the people for the first time began to understand, that there might be certain perquisites arising from their situation as men of trust, which could be made available to them, provided they were not too scrupulous as to the requirements of the crown. The mastiff which had bayed so formidably at James and his predecessors, because none of them would deign to cajole him, became at once amenable to a sop. Mr Macaulay should have written: "The revolution of 1688 did not introduce the practice of regularly summoning parliaments; what it introduced was the practice of regularly bribing them." Mr Francis, though an apologist of King William, who, as he thinks, was compelled to act thus from imperious necessity, is not blind to this stigma on his memory. He also believes that the settled animosity between England and France, which has caused so many wars, and led to such an extravagant expenditure of blood and treasure, is mainly to be attributed to the persevering efforts of William of Orange. The following summary is of much interest: —

"The parliamentary records of William's reign are curious. The demands which he made for money, the hatred to France which he encouraged, and the frequent supplies he received, are remarkable features in his history. Every art was employed; at one time a mild remonstrance, at another a haughty menace, at a third the reproach that he had ventured his life for the benefit of the country. The bribery, during this reign, was the commencement of a system which has been very injurious to the credit and character of England. The support of the members was purchased with places, with contracts, with titles, with promises, with portions of the loans, and with tickets in the lottery. The famous axiom of Sir Robert Walpole was a practice and a principle with William; he found that custom could not stale the infinite variety of its effect, and that, so long as bribes continued, so long would supplies be free. Exorbitant premiums were given for money; and so low was public credit, that of five millions granted to carry on the war, only two and a half millions reach the Exchequer. Long annuities and short annuities, lottery tickets and irredeemable debts, made their frequent appearance; and the duties, which principally date from this period, were most pernicious."

These things are elements of importance in considering the political history of the country. They explain the reason why the great bulk of the nation never cordially supported the new succession; and why, for the first time in English history, their own representative house lost caste and credit with the commons. Fifty years later, when Charles Edward penetrated into the heart of England, he met with no opposition. If the inhabitants of the counties through which he passed did not join his standard, they thought as little of making tiny active opposition to his advance; thereby exhibiting an apathy totally at variance with the high national and independent spirit which in all times has characterised the English, and to be accounted for on no other ground than their disgust with the new system which, even then, had swollen the amount of taxation to an extent seriously felt by the commonalty, and which had so corrupted parliament that redress seemed hopeless within the peaceful limits of the constitution. The proclamation issued by the prince, from Edinburgh, bore direct reference to the funded debt, and to the notorious ministerial bribery; and it must have found an echo in the hearts of many, who began to perceive that the cry of civil and religious liberty is the standard stalking-horse for every revolution, but that the result of revolutions is too commonly an imperative demand upon the people for a large augmentation of their burdens, backed too by the very demagogues who were the instigators of the violent change. In this crisis, the moneyed interest, which William had so dexterously created, saved the new dynasty – less, certainly, from patriotism, than from the fear of personal ruin.

It is a memorable fact that, from the very first, the Tory party opposed themselves strenuously to the creation and progress of the national debt. It is well that those who, in our own times, bitterly denounce the system which has landed us in such inextricable difficulties, and which has had the effect of rearing up class interests, irreconcilably opposed to each other, in once-united England, should remember that for all this legacy we are specially indebted to the Whigs. Except by Tory ministers, and in one case by Walpole, no attempt has been made to stem the progress of the current; and this consideration is doubly valuable at this moment, when it is proposed, by a vigorous effort, to make head against the monster grievance, and, by the establishment of an inviolable sinking-fund, to commence that work which liberal and juggling politicians have hitherto shamefully evaded. It is more than probable that "the moneyed interest" will throw the whole weight of their influence in opposition to any such movement; unless, indeed, they should begin already to perceive that there may be worse evils in store for them than a just liquidation of their claims. Matters have now gone so far as to be perilous, if no practicable mode of ultimate extrication can be shown. Real property cannot be taxed any higher – indeed, the landowners have claims for relief from peculiar burdens imposed upon them, which in equity can hardly be gainsaid. The property and income-tax, admittedly an impolitic impost in the time of peace, cannot remain long on its present footing. To tax professional earnings at the same rate as the profits of accumulated capital, is a manifest and gross injustice against which people are beginning to rebel. There is no choice left, except between direct taxation and a recurrence to the system which we have abandoned, of raising the greater part of our revenue by duties upon foreign imports. The former method, now openly advocated by the financial reformers, is, in our opinion, a direct step towards repudiation. Let the fundholders look to it in time, and judge for themselves what results are likely to accrue from such a policy. One thing is clear, that if no effort should be made to redeem any portion of the debt – but if, on the contrary, circumstances should arise, the probability of which is before us even now, to call for its augmentation, and for a corresponding increase of the public revenue – the financial reformers will not be slow to discover that the only interest hitherto unassailed must submit to suffer in its turn. The Whigs are now brought to such a pass, that they cannot hope to see their way to a surplus. We shall have no more of those annual remissions of duties, which for years past have been made the boast of every budget, but to which, in reality, the greater part of our present difficulties is owing. Had a sinking fund been established long ago, and rigidly maintained, and at the same time the revenue kept full, the nation would ere now have been reaping the benefit of such a policy. We should have had the satisfaction of seeing our debt annually diminishing, and the interest of it becoming less; whereas, by the wretched system of fiddling popularity which has been pursued, the debt has augmented in time of peace, the annual burdens absolutely increased, ruinous competition been fostered, and internal jealousies excited. The Whigs, who arrogate for themselves, not only now but in former times, the guardianship of the liberties of Britain, have taken especial pains to conceal the fact that they were, in reality, the authors of our funding system, and the bitterest opponents of those who early descried its remote and ruinous consequences. Their motives cannot be concealed, however it may be their interest at the present time to gloss them over. Lord Bolingbroke thus exposes their occult designs, in his "Letters on the Use of History."

"Few men, at the time (1688), looked forward enough to foresee the necessary consequences of the new constitution of the revenue that was soon afterwards formed, nor of the method of funding that immediately took place; which, absurd as they are, have continued ever since, till it is become scarce possible to alter them. Few people, I say, saw how the creation of funds, and the multiplication of taxes, would increase yearly the power of the Crown, and bring our liberties, by a natural and necessary progression, into more real though less apparent danger than they were in before the Revolution! The excessive ill husbandry practised from the very beginning of King William's reign, and which laid the foundation of all we feel and fear, was not the effect of ignorance, mistake, or what we call chance, but of design and scheme in those who had the sway at the time. I am not so uncharitable, however, as to believe that they intended to bring upon their country all the mischiefs that we who came after them experience and apprehend. No: they saw the measures they took singly and unrelatively, or relatively alone to some immediate object. The notion of attaching men to the new government, by tempting them to embark their fortunes on the same bottom, was a reason of state to some; the notion of creating a new, that is, a moneyed interest, in opposition to the landed interest, or as a balance to it, and of acquiring a superior interest in the city of London at least, by the establishment of great corporations, was a reason of party to others: and I make no doubt that the opportunity of amassing immense estates, by the management of funds, by trafficking in paper, and by all the arts of jobbing, was a reason of private interest to those who supported and improved that scheme of iniquity, if not to those who devised it. They looked no further. Nay, we who came after them, and have long tasted the bitter fruits of the corruption they planted, were far from taking such alarm at our distress and our dangers as they deserved."

In like manner wrote Swift, and Hume, and Smith; nor need we wonder at their vehemence, when we direct our attention to the rapid increase of the charge. William's legacy was £16,400,000 of debt, at an annual charge to the nation of about £1,311,000. At the death of Queen Anne, the debt amounted to fifty-four millions, and the interest to three millions, three hundred and fifty thousand – being nearly double the whole revenue raised by King James! The total amount of the annual revenue under Queen Anne, was more than five millions and a half. Under George I., singular to relate, there was no increase of the debt. At the close of the reign of George II., it amounted to about a hundred and forty millions; and, in 1793, just one hundred years after the introduction of the funding system in Britain, we find it at two hundred and fifty-two millions, with an interest approaching to ten. Twenty-two years later, that amount was more than trebled. These figures may well awaken grave consideration in the bosoms of all of us. The past is irremediable; and it would be a gross and unpardonable error to conclude, that a large portion of the sum thus raised and expended was uselessly thrown away; or that the corruption employed by the founders of the system, to secure the acquiescence of parliament, was of long continuance. On the contrary, it is undeniable that the result of many of the wars in which Britain engaged has been her commercial, territorial, and political aggrandisement; and that bribery, in a direct form, is now most happily unknown. The days have gone by since the parliamentary guests of Walpole could calculate on finding a note for £500, folded up in their dinner napkins – since great companies, applying for a charter, were compelled to purchase support – or when peace could only be obtained, as in the following instance, by means of purchased votes: – "The peace of 1763," said John Ross Mackay, private secretary to the Earl of Bute, and afterwards Treasurer to the Ordnance, "was carried through, and approved, by a pecuniary distribution. Nothing else could have surmounted the difficulty. I was myself the channel through which the money passed. With my own hand I secured above one hundred and twenty votes on that vital question. Eighty thousand pounds was set apart for the purpose. Forty members of the House of Commons received from me a thousand pounds each. To eighty others I paid five hundred pounds a-piece." Still we cannot disguise the fact, that a vast amount of the treasure so levied, and for every shilling of which the industry of the nation was mortgaged, never reached the coffers of the state, but passed in the shape of bonuses, premiums, and exorbitant contracts, to rear up those fortunes which have been the wonder and admiration of the world. Nor is it less palpable that the fortunes so constructed could not have had existence, unless abstracted from the regular industry of the country, to the inevitable detriment of the labourer, whose condition has at all times received by far too little consideration. Add to this the spirit of public gambling, which, since the Revolution, has manifested itself periodically in this country – the sudden fever-fits which seem to possess the middle classes of the community, and, by conjuring up visions of unbounded and unbased wealth, without the necessary preliminary of labour, to extinguish their wonted prudence – and we must conclude that the funding system has been pregnant with social and moral evils which have extended to the whole community. Before we pass from this subject – which we have dwelt upon at considerable length, believing it of deep interest at the present point of our financial history – we would request the attention of our readers to the following extract from the work of Mr Francis, as condemnatory of the policy pursued by recent governments, and as tending to throw light on the ultimate designs of the Financial Reform Associations. It is quite possible that, in matters of detail, we might not agree with the writer – at least, he has given us no means of ascertaining upon what principles he would base an "efficient revision of our taxation;" but we cordially agree with him in thinking that, as we presently stand, the right arm of Great Britain is tied up, and the Bank of England, under its present restrictions, in extreme jeopardy at the first announcement of a war.