On Public Credit by David Hume (26 April 1711 25 August 1776)

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On Public Credit

by David Hume (26 April 1711 – 25 August 1776)

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 Ptolemis, and other successors of

Alexander; we learn from Plato, that the frugal Lacemonians 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


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


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


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


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


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


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


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.

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