Volume IV Part 11 (1/2)

The land tax was fixed, for the year 1693, at four s.h.i.+llings in the pound, and consequently brought about two millions into the Treasury.

That sum, small as it may seem to a generation which has expended a hundred and twenty millions in twelve months, was such as had never before been raised here in one year by direct taxation. It seemed immense both to Englishmen and to foreigners. Lewis, who found it almost impossible to wring by cruel exactions from the beggared peasantry of France the means of supporting the greatest army and the most gorgeous court that had existed in Europe since the downfall of the Roman empire, broke out, it is said, into an exclamation of angry surprise when he learned that the Commons of England had, from dread and hatred of his power, unanimously determined to lay on themselves, in a year of scarcity and of commercial embarra.s.sment, a burden such as neither they nor their fathers had ever before borne. ”My little cousin of Orange,”

he said, ”seems to be firm in the saddle.” He afterwards added: ”No matter, the last piece of gold will win.” This however was a consideration from which, if he had been well informed touching the resources of England, he would not have derived much comfort. Kensington was certainly a mere hovel when compared to his superb Versailles. The display of jewels, plumes and lace, led horses and gilded coaches, which daily surrounded him, far outshone the splendour which, even on great public occasions, our princes were in the habit of displaying. But the condition of the majority of the people of England was, beyond all doubt, such as the majority of the people of France might well have envied. In truth what was called severe distress here would have been called unexampled prosperity there.

The land tax was not imposed without a quarrel between the Houses.

The Commons appointed commissioners to make the a.s.sessment. These commissioners were the princ.i.p.al gentlemen of every county, and were named in the bill. The Lords thought this arrangement inconsistent with the dignity of the peerage. They therefore inserted a clause providing that their estates should be valued by twenty of their own order. The Lower House indignantly rejected this amendment, and demanded an instant conference. After some delay, which increased the ill humour of the Commons, the conference took place. The bill was returned to the Peers with a very concise and haughty intimation that they must not presume to alter laws relating to money. A strong party among the Lords was obstinate. Mulgrave spoke at great length against the pretensions of the plebeians. He told his brethren that, if they gave way, they would abdicate that authority which had belonged to the baronage of England ever since the foundation of the monarchy, and that they would have nothing left of their old greatness except their coronets and ermines.

Burnet says that this speech was the finest that he ever heard in Parliament; and Burnet was undoubtedly a good judge of speaking, and was neither partial to Mulgrave nor zealous for the privileges of the aristocracy. The orator, however, though he charmed his hearers, did not succeed in convincing them. Most of them shrank from a conflict in which they would have had against them the Commons united as one man, and the King, who, in case of necessity, would undoubtedly have created fifty peers rather than have suffered the land tax bill to be lost. Two strong protests, however, signed, the first by twenty-seven, the second by twenty-one dissentients, show how obstinately many n.o.bles were prepared to contend at all hazards for the dignity of their caste. Another conference was held; and Rochester announced that the Lords, for the sake of the public interest, waived what they must nevertheless a.s.sert to be their clear right, and would not insist on their amendment. [366]

The bill pa.s.sed, and was followed by bills for laying additional duties on imports, and for taxing the dividends of joint stock companies.

Still, however, the estimated revenue was not equal to the estimated expenditure. The year 1692 had bequeathed a large deficit to the year 1693; and it seemed probable that the charge for 1693 would exceed by about five hundred thousand pounds the charge for 1692. More than two millions had been voted for the army and ordnance, near two millions for the navy. [367] Only eight years before fourteen hundred thousand pounds had defrayed the whole annual charge of government. More than four times that sum was now required. Taxation, both direct and indirect, had been carried to an unprecedented point; yet the income of the state still fell short of the outlay by about a million. It was necessary to devise something. Something was devised, something of which the effects are felt to this day in every part of the globe.

There was indeed nothing strange or mysterious in the expedient to which the government had recourse. It was an expedient familiar, during two centuries, to the financiers of the Continent, and could hardly fail to occur to any English statesman who compared the void in the Exchequer with the overflow in the money market.

During the interval between the Restoration and the Revolution the riches of the nation had been rapidly increasing. Thousands of busy men found every Christmas that, after the expenses of the year's housekeeping had been defrayed out of the year's income, a surplus remained; and how that surplus was to be employed was a question of some difficulty. In our time, to invest such a surplus, at something more than three per cent., on the best security that has ever been known in the world, is the work of a few minutes. But in the seventeenth century a lawyer, a physician, a retired merchant, who had saved some thousands and who wished to place them safely and profitably, was often greatly embarra.s.sed. Three generations earlier, a man who had acc.u.mulated wealth in a profession generally purchased real property or lent his savings on mortgage. But the number of acres in the kingdom had remained the same; and the value of those acres, though it had greatly increased, had by no means increased so fast as the quant.i.ty of capital which was seeking for employment. Many too wished to put their money where they could find it at an hour's notice, and looked about for some species of property which could be more readily transferred than a house or a field. A capitalist might lend on bottomry or on personal security; but, if he did so, he ran a great risk of losing interest and princ.i.p.al. There were a few joint stock companies, among which the East India Company held the foremost place; but the demand for the stock of such companies was far greater than the supply. Indeed the cry for a new East India Company was chiefly raised by persons who had found difficulty in placing their savings at interest on good security. So great was that difficulty that the practice of h.o.a.rding was common. We are told that the father of Pope the poet, who retired from business in the City about the time of the Revolution, carried to a retreat in the country a strong box containing near twenty thousand pounds, and took out from time to time what was required for household expenses; and it is highly probable that this was not a solitary case. At present the quant.i.ty of coin which is h.o.a.rded by private persons is so small that it would, if brought forth, make no perceptible addition to the circulation. But, in the earlier part of the reign of William the Third, all the greatest writers on currency were of opinion that a very considerable ma.s.s of gold and silver was hidden in secret drawers and behind wainscots.

The natural effect of this state of things was that a crowd of projectors, ingenious and absurd, honest and knavish, employed themselves in devising new schemes for the employment of redundant capital. It was about the year 1688 that the word stockjobber was first heard in London. In the short s.p.a.ce of four years a crowd of companies, every one of which confidently held out to subscribers the hope of immense gains, sprang into existence; the Insurance Company, the Paper Company, the Lutestring Company, the Pearl Fishery Company, the Gla.s.s Bottle Company, the Alum Company, the Blythe Coal Company, the Swordblade Company. There was a Tapestry Company which would soon furnish pretty hangings for all the parlours of the middle cla.s.s and for all the bedchambers of the higher. There was a Copper Company which proposed to explore the mines of England, and held out a hope that they would prove not less valuable than those of Potosi. There was a Diving Company which undertook to bring up precious effects from s.h.i.+pwrecked vessels, and which announced that it had laid in a stock of wonderful machines resembling complete suits of armour. In front of the helmet was a huge gla.s.s eye like that of a cyclop; and out of the crest went a pipe through which the air was to be admitted. The whole process was exhibited on the Thames. Fine gentlemen and fine ladies were invited to the show, were hospitably regaled, and were delighted by seeing the divers in their panoply descend into the river and return laden with old iron, and s.h.i.+p's tackle. There was a Greenland Fis.h.i.+ng Company which could not fail to drive the Dutch whalers and herring busses out of the Northern Ocean. There was a Tanning Company which promised to furnish leather superior to the best that was brought from Turkey or Russia.

There was a society which undertook the office of giving gentlemen a liberal education on low terms, and which a.s.sumed the sounding name of the Royal Academies Company. In a pompous advertis.e.m.e.nt it was announced that the directors of the Royal Academies Company had engaged the best masters in every branch of knowledge, and were about to issue twenty thousand tickets at twenty s.h.i.+llings each. There was to be a lottery; two thousand prizes were to be drawn; and the fortunate holders of the prizes were to be taught, at the charge of the Company, Latin, Greek, Hebrew, French, Spanish, conic sections, trigonometry, heraldry, j.a.panning, fortification, bookkeeping and the art of playing the theorbo. Some of these companies took large mansions and printed their advertis.e.m.e.nts in gilded letters. Others, less ostentatious, were content with ink, and met at coffeehouses in the neighbourhood of the Royal Exchange. Jonathan's and Garraway's were in a constant ferment with brokers, buyers, sellers, meetings of directors, meetings of proprietors. Time bargains soon came into fas.h.i.+on. Extensive combinations were formed, and monstrous fables were circulated, for the purpose of raising or depressing the price of shares. Our country witnessed for the first time those phenomena with which a long experience has made us familiar. A mania of which the symptoms were essentially the same with those of the mania of 1720, of the mania of 1825, of the mania of 1845, seized the public mind. An impatience to be rich, a contempt for those slow but sure gains which are the proper reward of industry, patience and thrift, spread through society. The spirit of the cogging dicers of Whitefriars took possession of the grave Senators of the City, Wardens of Trades, Deputies, Aldermen. It was much easier and much more lucrative to put forth a lying prospectus announcing a new stock, to persuade ignorant people that the dividends could not fall short of twenty per cent., and to part with five thousand pounds of this imaginary wealth for ten thousand solid guineas, than to load a s.h.i.+p with a well chosen cargo for Virginia or the Levant. Every day some new bubble was puffed into existence, rose buoyant, shone bright, burst, and was forgotten. [368]

The new form which covetousness had taken furnished the comic poets and satirists with an excellent subject; nor was that subject the less welcome to them because some of the most unscrupulous and most successful of the new race of gamesters were men in sad coloured clothes and lank hair, men who called cards the Devil's books, men who thought it a sin and a scandal to win or lose twopence over a backgammon board.

It was in the last drama of Shadwell that the hypocrisy and knavery of these speculators was, for the first time, exposed to public ridicule.

He died in November 1692, just before his Stockjobbers came on the stage; and the epilogue was spoken by an actor dressed in deep mourning.

The best scene is that in which four or five stern Nonconformists, clad in the full Puritan costume, after discussing the prospects of the Mousetrap Company and the Fleakilling Company, examine the question whether the G.o.dly may lawfully hold stock in a Company for bringing over Chinese ropedancers. ”Considerable men have shares,” says one austere person in cropped hair and bands; ”but verily I question whether it be lawful or not.” These doubts are removed by a stout old Roundhead colonel who had fought at Marston Moor, and who reminds his weaker brother that the saints need not themselves see the ropedancing, and that, in all probability, there will be no ropedancing to see. ”The thing,” he says, ”is like to take; the shares will sell well; and then we shall not care whether the dancers come over or no.” It is important to observe that this scene was exhibited and applauded before one farthing of the national debt had been contracted. So ill informed were the numerous writers who, at a later period, ascribed to the national debt the existence of stockjobbing and of all the immoralities connected with stockjobbing. The truth is that society had, in the natural course of its growth, reached a point at which it was inevitable that there should be stockjobbing whether there were a national debt or not, and inevitable also that, if there were a long and costly war, there should be a national debt.

How indeed was it possible that a debt should not have been contracted, when one party was impelled by the strongest motives to borrow, and another was impelled by equally strong motives to lend? A moment had arrived at which the government found it impossible, without exciting the most formidable discontents, to raise by taxation the supplies necessary to defend the liberty and independence of the nation; and, at that very moment, numerous capitalists were looking round them in vain for some good mode of investing their savings, and, for want of such a mode, were keeping their wealth locked up, or were lavis.h.i.+ng it on absurd projects. Riches sufficient to equip a navy which would sweep the German Ocean and the Atlantic of French privateers, riches sufficient to maintain an army which might retake Namur and avenge the disaster of Steinkirk, were lying idle, or were pa.s.sing away from the owners into the hands of sharpers. A statesman might well think that some part of the wealth which was daily buried or squandered might, with advantage to the proprietor, to the taxpayer and to the State, be attracted into the Treasury. Why meet the extraordinary charge of a year of war by seizing the chairs, the tables, the beds of hardworking families, by compelling one country gentleman to cut down his trees before they were ready for the axe, another to let the cottages on his land fall to ruin, a third to take away his hopeful son from the University, when Change Alley was swarming with people who did not know what to do with their money and who were pressing every body to borrow it?

It was often a.s.serted at a later period by Tories, who hated the national debt most of all things, and who hated Burnet most of all men, that Burnet was the person who first advised the government to contract a national debt. But this a.s.sertion is proved by no trustworthy evidence, and seems to be disproved by the Bishop's silence. Of all men he was the least likely to conceal the fact that an important fiscal revolution had been his work. Nor was the Board of Treasury at that time one which much needed, or was likely much to regard, the counsels of a divine. At that Board sate G.o.dolphin the most prudent and experienced, and Montague the most daring and inventive of financiers. Neither of these eminent men could be ignorant that it had long been the practice of the neighbouring states to spread over many years of peace the excessive taxation which was made necessary by one year of war. In Italy this practice had existed through many generations. France had, during the war which began in 1672 and ended in 1679, borrowed not less than thirty millions of our money. Sir William Temple, in his interesting work on the Batavian federation, had told his countrymen that, when he was amba.s.sador at the Hague, the single province of Holland, then ruled by the frugal and prudent De Witt, owed about five millions sterling, for which interest at four per cent. was always ready to the day, and that when any part of the princ.i.p.al was paid off the public creditor received his money with tears, well knowing that he could find no other investment equally secure. The wonder is not that England should have at length imitated the example both of her enemies and of her allies, but that the fourth year of her arduous and exhausting struggle against Lewis should have been drawing to a close before she resorted to an expedient so obvious.

On the fifteenth of December 1692 the House of Commons resolved itself into a Committee of Ways and Means. Somers took the chair. Montague proposed to raise a million by way of loan; the proposition was approved; and it was ordered that a bill should be brought in. The details of the scheme were much discussed and modified; but the principle appears to have been popular with all parties. The moneyed men were glad to have a good opportunity of investing what they had h.o.a.rded.

The landed men, hard pressed by the load of taxation, were ready to consent to any thing for the sake of present ease. No member ventured to divide the House. On the twentieth of January the bill was read a third time, carried up to the Lords by Somers, and pa.s.sed by them without any amendment. [369]

By this memorable law new duties were imposed on beer and other liquors.

These duties were to be kept in the Exchequer separate from all other receipts, and were to form a fund on the credit of which a million was to be raised by life annuities. As the annuitants dropped off, their annuities were to be divided among the survivors, till the number of survivors was reduced to seven. After that time, whatever fell in was to go to the public. It was therefore certain that the eighteenth century would be far advanced before the debt would be finally extinguished. The rate of interest was to be ten per cent. till the year 1700, and after that year seven per cent. The advantages offered to the public creditor by this scheme may seem great, but were not more than sufficient to compensate him for the risk which he ran. It was not impossible that there might be a counterrevolution; and it was certain that, if there were a counterrevolution, those who had lent money to William would lose both interest and princ.i.p.al.

Such was the origin of that debt which has since become the greatest prodigy that ever perplexed the sagacity and confounded the pride of statesmen and philosophers. At every stage in the growth of that debt the nation has set up the same cry of anguish and despair. At every stage in the growth of that debt it has been seriously a.s.serted by wise men that bankruptcy and ruin were at hand. Yet still the debt went on growing; and still bankruptcy and ruin were as remote as ever. When the great contest with Lewis the Fourteenth was finally terminated by the Peace of Utrecht, the nation owed about fifty millions; and that debt was considered, not merely by the rude mult.i.tude, not merely by foxhunting squires and coffeehouse orators, but by acute and profound thinkers, as an inc.u.mbrance which would permanently cripple the body politic; Nevertheless trade flourished; wealth increased; the nation became richer and richer. Then came the war of the Austrian Succession; and the debt rose to eighty millions. Pamphleteers, historians and orators p.r.o.nounced that now, at all events, our case was desperate.

Yet the signs of increasing prosperity, signs which could neither be counterfeited nor concealed, ought to have satisfied observant and reflecting men that a debt of eighty millions was less to the England which was governed by Pelham than a debt of fifty millions had been to the England which was governed by Oxford. Soon war again broke forth; and, under the energetic and prodigal administration of the first William Pitt, the debt rapidly swelled to a hundred and forty millions.

As soon as the first intoxication of victory was over, men of theory and men of business almost unanimously p.r.o.nounced that the fatal day had now really arrived. The only statesman, indeed, active or speculative, who did not share in the general delusion was Edmund Burke. David Hume, undoubtedly one of the most profound political economists of his time, declared that our madness had exceeded the madness of the Crusaders.

Richard Coeur de Lion and Saint Lewis had not gone in the face of arithmetical demonstration. It was impossible to prove by figures that the road to Paradise did not lie through the Holy Land; but it was possible to prove by figures that the road to national ruin was through the national debt. It was idle, however, now to talk about the road; we had done with the road; we had reached the goal; all was over; all the revenues of the island north of Trent and west of Reading were mortgaged. Better for us to have been conquered by Prussia or Austria than to be saddled with the interest of a hundred and forty millions.

[370] And yet this great philosopher--for such he was--had only to open his eyes, and to see improvement all around him, cities increasing, cultivation extending, marts too small for the crowd of buyers and sellers, harbours insufficient to contain the s.h.i.+pping, artificial rivers joining the chief inland seats of industry to the chief seaports, streets better lighted, houses better furnished, richer wares exposed to sale in statelier shops, swifter carriages rolling along smoother roads.

He had, indeed, only to compare the Edinburgh of his boyhood with the Edinburgh of his old age. His prediction remains to posterity, a memorable instance of the weakness from which the strongest minds are not exempt. Adam Smith saw a little and but a little further.

He admitted that, immense as the burden was, the nation did actually sustain it and thrive under it in a way which n.o.body could have foreseen. But he warned his countrymen not to repeat so hazardous an experiment. The limit had been reached. Even a small increase might be fatal. [371] Not less gloomy was the view which George Grenville, a minister eminently diligent and practical, took of our financial situation. The nation must, he conceived, sink under a debt of a hundred and forty millions, unless a portion of the load were borne by the American colonies. The attempt to lay a portion of the load on the American colonies produced another war. That war left us with an additional hundred millions of debt, and without the colonies whose help had been represented as indispensable. Again England was given over; and again the strange patient persisted in becoming stronger and more blooming in spite of all the diagnostics and prognostics of State physicians. As she had been visibly more prosperous with a debt of a hundred and forty millions than with a debt of fifty millions, so she, as visibly more prosperous with a debt of two hundred and forty millions than with a debt of a hundred and forty millions. Soon however the wars which sprang from the French Revolution, and which far exceeded in cost any that the world had ever seen, tasked the powers of public credit to the utmost. When the world was again at rest the funded debt of England amounted to eight hundred millions. If the most enlightened man had been told, in 1792, that, in 1815, the interest on eight hundred millions would be duly paid to the day at the Bank, he would have been as hard of belief as if he had been told that the government would be in possession of the lamp of Aladdin or of the purse of Fortunatus. It was in truth a gigantic, a fabulous debt; and we can hardly wonder that the cry of despair should have been louder than ever. But again that cry was found to have been as unreasonable as ever. After a few years of exhaustion, England recovered herself. Yet, like Addison's valetudinarian, who continued to whimper that he was dying of consumption till he became so fat that he was shamed into silence, she went on complaining that she was sunk in poverty till her wealth showed itself by tokens which made her complaints ridiculous. The beggared, the bankrupt society not only proved able to meet all its obligations, but, while meeting those obligations, grew richer and richer so fast that the growth could almost be discerned by the eye. In every county, we saw wastes recently turned into gardens; in every city, we saw new streets, and squares, and markets, more brilliant lamps, more abundant supplies of water; in the suburbs of every great seat of industry, we saw villas multiplying fast, each embosomed in its gay little paradise of lilacs and roses. While shallow politicians were repeating that the energies of the people were borne down by the weight of the public burdens, the first journey was performed by steam on a railway. Soon the island was intersected by railways. A sum exceeding the whole amount of the national debt at the end of the American war was, in a few years, voluntarily expended by this ruined people in viaducts, tunnels, embankments, bridges, stations, engines. Meanwhile taxation was almost constantly becoming lighter and lighter; yet still the Exchequer was full. It may be now affirmed without fear of contradiction that we find it as easy to pay the interest of eight hundred millions as our ancestors found it, a century ago, to pay the interest of eighty millions.

It can hardly be doubted that there must have been some great fallacy in the notions of those who uttered and of those who believed that long succession of confident predictions, so signally falsified by a long succession of indisputable facts. To point out that fallacy is the office rather of the political economist than of the historian. Here it is sufficient to say that the prophets of evil were under a double delusion. They erroneously imagined that there was an exact a.n.a.logy between the case of an individual who is in debt to another individual and the case of a society which is in debt to a part of itself; and this a.n.a.logy led them into endless mistakes about the effect of the system of funding. They were under an error not less serious touching the resources of the country. They made no allowance for the effect produced by the incessant progress of every experimental science, and by the incessant efforts of every man to get on in life. They saw that the debt grew; and they forgot that other things grew as well as the debt.

A long experience justifies us in believing that England may, in the twentieth century, be better able to bear a debt of sixteen hundred millions than she is at the present time to bear her present load. But be this as it may, those who so confidently predicted that she must sink, first under a debt of fifty millions, then under a debt of eighty millions then under a debt of a hundred and forty millions, then under a debt of two hundred and forty millions, and lastly under a debt of eight hundred millions, were beyond all doubt under a twofold mistake. They greatly overrated the pressure of the burden; they greatly underrated the strength by which the burden was to be borne.

It may be desirable to add a few words touching the way in which the system of funding has affected the interests of the great commonwealth of nations. If it be true that whatever gives to intelligence an advantage over brute force and to honesty an advantage over dishonesty has a tendency to promote the happiness and virtue of our race, it can scarcely be denied that, in the largest view, the effect of this system has been salutary. For it is manifest that all credit depends on two things, on the power of a debtor to pay debts, and on his inclination to pay them. The power of a society to pay debts is proportioned to the progress which that society has made in industry, in commerce, and in all the arts and sciences which flourish under the benignant influence of freedom and of equal law. The inclination of a society to pay debts is proportioned to the degree in which that society respects the obligations of plighted faith. Of the strength which consists in extent of territory and in number of fighting men, a rude despot who knows no law but his own childish fancies and headstrong pa.s.sions, or a convention of socialists which proclaims all property to be robbery, may have more than falls to the lot of the best and wisest government. But the strength which is derived from the confidence of capitalists such a despot, such a convention, never can possess. That strength,--and it is a strength which has decided the event of more than one great conflict,--flies, by the law of its nature, from barbarism and fraud, from tyranny and anarchy, to follow civilisation and virtue, liberty and order.

While the bill which first created the funded debt of England was pa.s.sing, with general approbation, through the regular stages, the two Houses discussed, for the first time, the great question of Parliamentary Reform.