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Introduction To Stock Theory
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Of The Sources Of The General Or Public Revenue Of The Society








The revenue which must defray, not only the expense of defending the
society and of supporting the dignity of the chief magistrate, but all
the other necessary expenses of government, for which the constitution
of the state has not provided any particular revenue may be drawn,
either, first, from some fund which peculiarly belongs to the sovereign
or commonwealth, and which is independent of the revenue of the people;
or, secondly, from the revenue of the people.


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 us 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 the 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 hotly 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 even 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.





Next: Of Taxes

Previous: Of The Expenses Of The Sovereign Or Commonwealth



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