Chapter Of the Funds, or Sources, of Revenue, which may peculiarly belong

PART I. Of the Funds, or Sources, of Revenue, which may peculiarly belong to the Sovereign or Commonwealth.

  The funds, or sources, of revenue, which may peculiarly belong to the
  sovereign or commonwealth, must consist, either in stock, or in land.

  The sovereign, like, any other owner of stock, may derive a revenue from
  it, either by employing it himself, or by lending it. His revenue is, in
  the one case, profit, in the other interest.

  The revenue of a Tartar or Arabian chief consists in profit. It arises
  principally from the milk and increase of his own herds and flocks, of
  which he himself superintends the management, and is the principal
  shepherd or herdsman of his own horde or tribe. It is, however, in this
  earliest and rudest state of civil government only, that profit has ever
  made the principal part of the public revenue of a monarchical state.

  Small republics have sometimes derived a considerable revenue from the
  profit of mercantile projects. The republic of Hamburgh is said to do so
  from the profits of a public wine-cellar and apothecary’s shop. {See
  Memoires concernant les Droits et Impositions en Europe, tome i. page 73.
  This work was compiled by the order of the court, for the use of a
  commission employed for some years past in considering the proper means
  for reforming the finances of France. The account of the French taxes,
  which takes up three volumes in quarto, may be regarded as perfectly
  authentic. That of those of other European nations was compiled from such
  information as the French ministers at the different courts could procure.
  It is much shorter, and probably not quite so exact as that of the French
  taxes.} That state cannot be very great, of which the sovereign has
  leisure to carry on the trade of a wine-merchant or an apothecary. The
  profit of a public bank has been a source of revenue to more considerable
  states. It has been so, not only to Hamburgh, but to Venice and Amsterdam.
  A revenue of this kind has even by some people been thought not below the
  attention of so great an empire as that of Great Britain. Reckoning the
  ordinary dividend of the bank of England at five and a-half per cent., and
  its capital at ten millions seven hundred and eighty thousand pounds, the
  neat annual profit, after paying the expense of management, must amount,
  it is said, to five hundred and ninety-two thousand nine hundred pounds.
  Government, it is pretended, could borrow this capital at three per cent.
  interest, and, by taking the management of the bank into its own hands,
  might make a clear profit of two hundred and sixty-nine thousand five
  hundred pounds a-year. The orderly, vigilant, and parsimonious
  administration of such aristocracies as those of Venice and Amsterdam, is
  extremely proper, it appears from experience, for the management of a
  mercantile project of this kind. But whether such a government as that of
  England, which, whatever may be its virtues, has never been famous for
  good economy; which, in time of peace, has generally conducted itself with
  the slothful and negligent profusion that is, perhaps, natural to
  monarchies; and, in time of war, has constantly acted with all the
  thoughtless extravagance that democracies are apt to fall into, could be
  safely trusted with the management of such a project, must at least be a
  good deal more doubtful.

  The post-office is properly a mercantile project. The government advances
  the expense of establishing the different offices, and of buying or hiring
  the necessary horses or carriages, and is repaid, with a large profit, by
  the duties upon what is carried. It is, perhaps, the only mercantile
  project which has been successfully managed by, I believe, every sort of
  government. The capital to be advanced is not very considerable. There is
  no mystery in the business. The returns are not only certain but
  immediate.

  Princes, however, have frequently engaged in many other mercantile
  projects, and have been willing, like private persons, to mend their
  fortunes, by becoming adventurers in the common branches of trade. They
  have scarce ever succeeded. The profusion with which the affairs of
  princes are always managed, renders it almost impossible that they should.
  The agents of a prince regard the wealth of their master as inexhaustible;
  are careless at what price they buy, are careless at what price they sell,
  are careless at what expense they transport his goods from one place to
  another. Those agents frequently live with the profusion of princes; and
  sometimes, too, in spite of that profusion, and by a proper method of
  making up their accounts, acquire the fortunes of princes. It was thus, as
  we are told by Machiavel, that the agents of Lorenzo of Medicis, not a
  prince of mean abilities, carried on his trade. The republic of Florence
  was several times obliged to pay the debt into which their extravagance
  had involved him. He found it convenient, accordingly to give up the
  business of merchant, the business to which his family had originally owed
  their fortune, and, in the latter part of his life, to employ both what
  remained of that fortune, and the revenue of the state, of which he had
  the disposal, in projects and expenses more suitable to his station.

  No two characters seem more inconsistent than those of trader and
  sovereign. If the trading spirit of the English East India company renders
  them very bad sovereigns, the spirit of sovereignty seems to have rendered
  them equally bad traders. While they were traders only, they managed their
  trade successfully, and were able to pay from their profits a moderate
  dividend to the proprietors of their stock. Since they became sovereigns,
  with a revenue which, it is said, was originally more than three millions
  sterling, they have been obliged to beg the ordinary assistance of
  government, in order to avoid immediate bankruptcy. In their former
  situation, their servants in India considered themselves as the clerks of
  merchants; in their present situation, those servants consider themselves
  as the ministers of sovereigns.

  A state may sometimes derive some part of its public revenue from the
  interest of money, as well as from the profits of stock. If it has amassed
  a treasure, it may lend a part of that treasure, either to foreign states,
  or to its own subjects.

  The canton of Berne derives a considerable revenue by lending a part of
  its treasure to foreign states, that is, by placing it in the public funds
  of the different indebted nations of Europe, chiefly in those of France
  and England. The security of this revenue must depend, first, upon the
  security of the funds in which it is placed, or upon the good faith of the
  government which has the management of them; and, secondly, upon the
  certainty or probability of the continuance of peace with the debtor
  nation. In the case of a war, the very first act of hostility on the part
  of the debtor nation might be the forfeiture of the funds of its credit.
  This policy of lending money to foreign states is, so far as I know
  peculiar to the canton of Berne.

  The city of Hamburgh {See Memoire concernant les Droites et Impositions en
  Europe tome i p. 73.}has established a sort of public pawn-shop, which
  lends money to the subjects of the state, upon pledges, at six per cent.
  interest. This pawn-shop, or lombard, as it is called, affords a revenue,
  it is pretended, to the state, of a hundred and fifty thousand crowns,
  which, at four and sixpence the crown, amounts to £33,750 sterling.

  The government of Pennsylvania, without amassing any treasure, invented a
  method of lending, not money, indeed, but what is equivalent to money, to
  its subjects. By advancing to private people, at interest, and upon land
  security to double the value, paper bills of credit, to be redeemed
  fifteen years after their date; and, in the mean time, made transferable
  from hand to hand, like banknotes, and declared by act of assembly to be a
  legal tender in all payments from one inhabitant of the province to
  another, it raised a moderate revenue, which went a considerable way
  towards defraying an annual expense of about £4,500, the whole ordinary
  expense of that frugal and orderly government. The success of an expedient
  of this kind must have depended upon three different circumstances: first,
  upon the demand for some other instrument of commerce, besides gold and
  silver money, or upon the demand for such a quantity of consumable stock
  as could not be had without sending abroad the greater part of their gold
  and silver money, in order to purchase it; secondly, upon the good credit
  of the government which made use of this expedient; and, thirdly, upon the
  moderation with which it was used, the whole value of the paper bills of
  credit never exceeding that of the gold and silver money which would have
  been necessary for carrying on their circulation, had there been no paper
  bills of credit. The same expedient was, upon different occasions, adopted
  by several other American colonies; but, from want of this moderation, it
  produced, in the greater part of them, much more disorder than
  conveniency.

  The unstable and perishable nature of stock and credit, however, renders
  them unfit to be trusted to as the principal funds of that sure, steady,
  and permanent revenue, which can alone give security and dignity to
  government. The government of no great nation, that was advanced beyond
  the shepherd state, seems ever to have derived the greater part of its
  public revenue from such sources.

  Land is a fund of more stable and permanent nature; and the rent of public
  lands, accordingly, has been the principal source of the public revenue of
  many a great nation that was much advanced beyond the shepherd state. From
  the produce or rent of the public lands, the ancient republics of Greece
  and Italy derived for a long time the greater part of that revenue which
  defrayed the necessary expenses of the commonwealth. The rent of the crown
  lands constituted for a long time the greater part of the revenue of the
  ancient sovereigns of Europe.

  War, and the preparation for war, are the two circumstances which, in
  modern times, occasion the greater part of the necessary expense or all
  great states. But in the ancient republics of Greece and Italy, every
  citizen was a soldier, and both served, and prepared himself for service,
  at his own expense. Neither of those two circumstances, therefore, could
  occasion any very considerable expense to the state. The rent of a very
  moderate landed estate might be fully sufficient for defraying all the
  other necessary expenses of government.

  In the ancient monarchies of Europe, the manners and customs of the time
  sufficiently prepared the great body of the people for war; and when they
  took the field, they were, by the condition of their feudal tenures, to be
  maintained either at their own expense, or at that of their immediate
  lords, without bringing any new charge upon the sovereign. The other
  expenses of government were, the greater part of them, very moderate. The
  administration of justice, it has been shewn, instead of being a cause of
  expense was a source of revenue. The labour of the country people, for
  three days before, and for three days after, harvest, was thought a fund
  sufficient for making and maintaining all the bridges, highways, and other
  public works, which the commerce of the country was supposed to require.
  In those days the principal expense of the sovereign seems to have
  consisted in the maintenance of his own family and household. The officers
  of his household, accordingly, were then the great officers of state. The
  lord treasurer received his rents. The lord steward and lord chamberlain
  looked after the expense of his family. The care of his stables was
  committed to the lord constable and the lord marshal. His houses were all
  built in the form of castles, and seem to have been the principal
  fortresses which he possessed. The keepers of those houses or castles
  might be considered as a sort of military governors. They seem to have
  been the only military officers whom it was necessary to maintain in time
  of peace. In these circumstances, the rent of a great landed estate might,
  upon ordinary occasions, very well defray all the necessary expenses of
  government.

  In the present state of the greater part of the civilized monarchies of
  Europe, the rent of all the lands in the country, managed as they probably
  would be, if they all belonged to one proprietor, would scarce, perhaps,
  amount to the ordinary revenue which they levy upon the people even in
  peaceable times. The ordinary revenue of Great Britain, for example,
  including not only what is necessary for defraying the current expense of
  the year, but for paying the interest of the public debts, and for sinking
  a part of the capital of those debts, amounts to upwards of ten millions
  a-year. But the land tax, at four shillings in the pound, falls short of
  two millions a-year. This land tax, as it is called however, is supposed
  to be one-fifth, not only of the rent of all the land, but of that of all
  the houses, and of the interest of all the capital stock of Great Britain,
  that part of it only excepted which is either lent to the public, or
  employed as farming stock in the cultivation of land. A very considerable
  part of the produce of this tax arises from the rent of houses and the
  interest of capital stock. The land tax of the city of London, for
  example, at four shillings in the pound, amounts to £123,399: 6: 7; that
  of the city of Westminster to £63,092: 1: 5; that of the palaces of
  Whitehall and St. James’s, to £30,754: 6: 3. A certain proportion of the
  land tax is, in the same manner, assessed upon all the other cities and
  towns corporate in the kingdom; and arises almost altogether, either from
  the rent of houses, or from what is supposed to be the interest of trading
  and capital stock. According to the estimation, therefore, by which Great
  Britain is rated to the land tax, the whole mass of revenue arising from
  the rent of all the lands, from that of all the houses, and from the
  interest of all the capital stock, that part of it only excepted which is
  either lent to the public, or employed in the cultivation of land, does
  not exceed ten millions sterling a-year, the ordinary revenue which
  government levies upon the people, even in peaceable times. The estimation
  by which Great Britain is rated to the land tax is, no doubt, taking the
  whole kingdom at an average, very much below the real value; though in
  several particular counties and districts it is said to be nearly equal to
  that value. The rent of the lands alone, exclusive of that of houses and
  of the interest of stock, has by many people been estimated at twenty
  millions; an estimation made in a great measure at random, and which, I
  apprehend, is as likely to be above as below the truth. But if the lands
  of Great Britain, in the present state of their cultivation, do not afford
  a rent of more than twenty millions a-year, they could not well afford the
  half, most probably not the fourth part of that rent, if they all belonged
  to a single proprietor, and were put under the negligent, expensive, and
  oppressive management of his factors and agents. The crown lands of Great
  Britain do not at present afford the fourth part of the rent which could
  probably be drawn from them if they were the property of private persons.
  If the crown lands were more extensive, it is probable, they would be
  still worse managed.

  The revenue which the great body of the people derives from land is, in
  proportion, not to the rent, but to the produce of the land. The whole
  annual produce of the land of every country, if we except what is reserved
  for seed, is either annually consumed by the great body of the people, or
  exchanged for something else that is consumed by them. Whatever keeps down
  the produce of the land below what it would otherwise rise to, keeps down
  the revenue of the great body of the people, still more than it does that
  of the proprietors of land. The rent of land, that portion of the produce
  which belongs to the proprietors, is scarce anywhere in Great Britain
  supposed to be more than a third part of the whole produce. If the land
  which, in one state of cultivation, affords a revenue of ten millions
  sterling a-year, would in another afford a rent of twenty millions; the
  rent being, in both cases, supposed a third part of the produce, the
  revenue of the proprietors would be less than it otherwise might be, by
  ten millions a-year only; but the revenue of the great body of the people
  would be less than it otherwise might be, by thirty millions a-year,
  deducting only what would be necessary for seed. The population of the
  country would be less by the number of people which thirty millions
  a-year, deducting always the seed, could maintain, according to the
  particular mode of living, and expense which might take place in the
  different ranks of men, among whom the remainder was distributed.

  Though there is not at present in Europe, any civilized state of any kind
  which derives the greater part of its public revenue from the rent of
  lands which are the property of the state; yet, in all the great
  monarchies of Europe, there are still many large tracts of land which
  belong to the crown. They are generally forest, and sometimes forests
  where, after travelling several miles, you will scarce find a single tree;
  a mere waste and loss of country, in respect both of produce and
  population. In every great monarchy of Europe, the sale of the crown lands
  would produce a very large sum of money, which, if applied to the payment
  of the public debts, would deliver from mortgage a much greater revenue
  than any which those lands have ever afforded to the crown. In countries
  where lands, improved and cultivated very highly, and yielding, at the
  time of sale, as great a rent as can easily be got from them, commonly
  sell at thirty years purchase; the unimproved, uncultivated, and
  low-rented crown lands, might well be expected to sell at forty, fifty, or
  sixty years purchase. The crown might immediately enjoy the revenue which
  this great price would redeem from mortgage. In the course of a few years,
  it would probably enjoy another revenue. When the crown lands had become
  private property, they would, in the course of a few years, become well
  improved and well cultivated. The increase of their produce would increase
  the population of the country, by augmenting the revenue and consumption
  of the people. But the revenue which the crown derives from the duties or
  custom and excise, would necessarily increase with the revenue and
  consumption of the people.

  The revenue which, in any civilized monarchy, the crown derives from the
  crown lands, though it appears to cost nothing to individuals, in reality
  costs more to the society than perhaps any other equal revenue which the
  crown enjoys. It would, in all cases, be for the interest of the society,
  to replace this revenue to the crown by some other equal revenue, and to
  divide the lands among the people, which could not well be done better,
  perhaps, than by exposing them to public sale.

  Lands, for the purposes of pleasure and magnificence, parks, gardens,
  public walks, etc. possessions which are everywhere considered as causes
  of expense, not as sources of revenue, seem to be the only lands which, in
  a great and civilized monarchy, ought to belong to the crown.

  Public stock and public lands, therefore, the two sources of revenue which
  may peculiarly belong to the sovereign or commonwealth, being both
  improper and insufficient funds for defraying the necessary expense of any
  great and civilized state; it remains that this expense must, the greater
  part of it, be defrayed by taxes of one kind or another; the people
  contributing a part of their own private revenue, in order to make up a
  public revenue to the sovereign or commonwealth.