Part I: Observations on the Declaration of Rights, 4

The funding system is not money; strictly speaking, it is not even credit. In effect, it creates on paper the sum it appears to borrow, imposes a tax to keep this imaginary capital alive by paying interest, and sends the annuity to market to be sold for paper already in circulation. If anyone's credit is involved, it is the people's willingness to pay the tax, not the government's credit in imposing it. When that willingness expires, what is taken for the government's credit expires with it. France under its former government shows that taxes cannot be collected by force when an entire nation is determined to refuse them.

Mr. Burke, reviewing the finances of France, puts the amount of gold and silver there at about eighty-eight millions sterling. I presume that in calculating this he used the exchange rate instead of the standard of twenty-four livres to the pound sterling. For M. Neckar's figure, from which Mr. Burke's is drawn, is two thousand two hundred millions of livres, or upwards of ninety-one millions and a half sterling.

M. Neckar in France and Mr. George Chalmers at England's Office of Trade and Plantation, presided over by Lord Hawkesbury, published at nearly the same time (1786) accounts of the quantity of money in their respective nations, based on each nation's Mint returns. Mr. Chalmers, using the returns of the English Mint at the Tower of London, puts the quantity of money in England, including Scotland and Ireland, at twenty millions sterling.*12

M. Neckar*13 says the money recoined in France from recalled old coin amounted to two thousand five hundred millions of livres (upwards of one hundred and four millions sterling). After allowing for wear, for what may be in the West Indies, and for other possible circumstances, he puts the quantity circulating at home at ninety-one millions and a half sterling. But even taking Mr. Burke's figure, that is sixty-eight millions more than the quantity held nationally in England.

That the quantity of money in France cannot be less than this is apparent from the French revenue alone, without recourse to the French Mint's records. Before the Revolution, France's revenue was nearly twenty-four millions sterling. Since paper money did not then exist in France, all that revenue was collected in gold and silver; such a sum could not have been collected from a national stock smaller than M. Neckar's estimate. Before paper money was introduced in England, its revenue amounted to about a fourth of the nation's gold and silver, as one may establish by consulting the revenue before King William and the quantity of money then reported in the nation, which was nearly as great as it is now.

No nation gains by deceiving itself or allowing itself to be deceived. But prejudice on one side and deception on the other have always portrayed France as a country with little money, whereas its quantity is not only more than four times England's, but considerably greater in proportion to population. To explain England's deficiency, we should look to its funding system. It multiplies paper in various forms and substitutes it for money. The more paper multiplies, the greater the opportunities to export gold and silver. By extending paper to small notes, it would even be possible to increase it until no money remained.

I know this subject will not please English readers. Yet what I am about to discuss is important enough to demand the attention of those engaged in public financial transactions. M. Neckar states a fact in his treatise on the administration of finances that has gone unnoticed in England, though it supplies the only basis for estimating how much money—gold and silver—each European nation ought to hold in proportion to the others.

Lisbon and Cadiz are the two ports through which gold and silver from South America enter Europe. From there they spread through commerce across Europe, increasing the quantity of money everywhere. Thus if we know the annual amount imported into Europe and can establish the relative share of foreign commerce carried on by each nation, through which the money is distributed, we have a sufficiently sound rule for estimating how much money should be found in a given nation at a given time.

M. Neckar shows from the registers of Lisbon and Cadiz that Europe imports five millions sterling in gold and silver each year. He does not rely on a single year, but averages fifteen successive years, from 1763 to 1777 inclusive. Over that period the amount was one thousand eight hundred million livres, or seventy-five millions sterling.*14

From the beginning of the Hanover succession in 1714 to the publication of Mr. Chalmers's account is seventy-two years. In that time the quantity imported into Europe would have been three hundred and sixty millions sterling.

If Great Britain's foreign commerce is reckoned at a sixth of all Europe's foreign commerce—and the gentlemen at the Exchange would probably consider that an underestimate—Britain's share of this sum, acquired through commerce to keep pace with the rest of Europe, would likewise be a sixth, or sixty millions sterling. Allow England the same deductions for waste and accident that M. Neckar allows France, and fifty-two millions would remain. This sum ought to have been in the nation when Mr. Chalmers published, in addition to what was there at the start of the Hanover succession, making a total of at least sixty-six millions sterling. Instead there were only twenty millions, a shortfall of forty-six millions against its proportional share.

The quantity of gold and silver imported into Lisbon and Cadiz is known more precisely than the quantity of any commodity imported into England, and the quantity coined at the Tower of London is known with even greater certainty. The principal facts, then, are beyond dispute. Either England's commerce produces no profit, or the gold and silver it brings in continually leak away by unseen channels at an average rate of about three-quarters of a million a year. Over seventy-two years this accounts for the deficiency, and paper makes up for the missing money.*15

The Revolution of France has brought novel circumstances not only in politics but in finance. Among other things, it shows that a government can be insolvent while a nation is rich. The former government of France was indeed insolvent: the nation would no longer support its extravagance, so it could no longer support itself. But the nation retained all its resources. A government may be called insolvent whenever it asks the nation to settle its arrears. The only difference between the former French government's insolvency and that of England's present government lies in the people's willingness to help. The people of France refused to assist the old government; the people of England submit to taxation without inquiry. What is called the Crown in England has been insolvent several times, most recently, as publicly known, in May, 1777, when it asked the nation to settle upwards of L600,000 in private debts that it could not otherwise pay.

Mr. Pitt, Mr. Burke, and everyone else unfamiliar with French affairs erred in confusing the French nation with the French government. In effect, the French nation sought to make the former government insolvent so that it could take government into its own hands, keeping its resources to support the new government. In a country as large and populous as France, natural resources cannot be lacking, and political resources appear the moment the nation chooses to make them available. When Mr. Burke, in a speech to the British Parliament last winter, “cast his eyes over the map of Europe, and saw a chasm that once was France,” he spoke like a man dreaming. The same physical France existed as before, with all its natural resources. The only chasm was the one left by the destruction of despotism, soon to be filled by the Constitution, whose resources would be more formidable than the power that had fallen.

Although the French nation made the former government insolvent, it did not let that insolvency fall on the creditors. The creditors regarded the nation as the true payer and the government merely as its agent, and placed their trust in the nation rather than the government. This evidently disturbs Mr. Burke greatly, since the precedent destroys the policy on which governments have counted for security. They have incurred debts in the hope of binding what is called the nation's moneyed interest to their cause. But the French example shows that the creditor's lasting security lies in the nation, not in the government: whatever revolutions governments may undergo, the resources remain with the nation, and the nation always remains. Mr. Burke argues that creditors should have shared the fate of the government they trusted. The National Assembly, however, considered them creditors of the nation, not of the government—creditors of the master, not the steward.

Though the former government could not meet its current expenses, the present government has paid off a large portion of the principal. It has done so in two ways: by reducing government expenses and by selling monastic and ecclesiastical landed estates. Devotees and repentant libertines, extortioners and misers of former times, hoping to secure themselves a better world than the one they were leaving, had bequeathed immense properties in trust to the priesthood for pious purposes; and the priests kept them for themselves. The National Assembly has ordered those properties sold for the whole nation's benefit and the priests provided for decently.

As a result of the revolution, the annual interest on France's debt will be reduced by at least six millions sterling through paying off upwards of one hundred millions of the principal. Together with a reduction of at least three millions in the former expenses of government, this will put France in a position worthy of Europe's imitation.

Consider the whole matter: how immense the contrast! While Mr. Burke has talked of general bankruptcy in France, the National Assembly has been paying off the principal of its debt. And while taxes in England have risen by nearly a million a year, in France they have fallen by several millions a year. Neither Mr. Burke nor Mr. Pitt has said a word about French affairs or the state of French finances during the present Session of Parliament. The subject is becoming too well understood for deception to work any longer.

An enigma runs through the whole of Mr. Burke's book. He writes in a rage against the National Assembly; but what enrages him? If his unfounded assertions were true, and France had destroyed her power through her Revolution and become what he calls a chasm, a Frenchman who cared for his nation might grieve and be enraged at the National Assembly. But why should Mr. Burke be enraged? Alas! He is thinking not of France as a nation but of the Court; and every Court in Europe, fearing the same fate, is in mourning. He writes neither as a Frenchman nor as an Englishman, but in the fawning character of a creature found in every country and a friend to none—a courtier. Whether it is the Court of Versailles, the Court of St. James, Carlton-House, or a Court still waiting to be formed makes no difference: all Courts and Courtiers share the same caterpillar nature. Throughout Europe they pursue a common policy, detached from the interests of nations. And while they appear to quarrel, they agree in plundering. Nothing terrifies a Court or courtier more than the Revolution of France. What is a blessing to nations is bitterness to them. Because their existence depends on a country's divided loyalties, they tremble at the approach of principles and dread the precedent that threatens to overthrow them.

Rights of Man. Part Second, Combining Principle and Practice.

Conclusion

Reason and ignorance, opposing forces, influence the great mass of humanity. If either becomes sufficiently widespread in a country, the machinery of government runs smoothly. Reason obeys itself; ignorance submits to whatever it is told.

The two forms of government prevailing in the world are:

First, government by election and representation.

Secondly, government by hereditary succession.

The former is generally known as a republic; the latter as monarchy and aristocracy.

The funding system is not money, nor is it really credit. In effect, it creates on paper the amount it claims to borrow. It then imposes a tax to keep that imaginary capital going by paying interest. The resulting right to an annual payment is sold in the market for paper already in circulation. If anyone deserves credit, it is the people for being willing to pay the tax, not the government for imposing it. When people are no longer willing to pay, the government's supposed credit disappears too. France under its former government shows that force cannot make a whole nation pay taxes when the nation has decided to refuse.

In his review of France's finances, Mr. Burke puts the amount of gold and silver there at about eighty-eight millions sterling. I assume he used the exchange rate to convert the figure rather than the standard rate of twenty-four livres to a pound sterling. M. Neckar, whose figures Mr. Burke uses, gives the amount as two thousand two hundred millions of livres. That is upwards of ninety-one millions and a half sterling.

Around the same time (1786), M. Neckar in France and Mr. George Chalmers in England published accounts of the amount of money in their countries, based on their national mints' records. Mr. Chalmers worked at the Office of Trade and Plantation, whose president was Lord Hawkesbury. Using the records of the English Mint at the Tower of London, he put the amount of money in England, including Scotland and Ireland, at twenty millions sterling.*12

M. Neckar*13 says that France recoined two thousand five hundred millions of livres from old coins that had been called in. That is upwards of one hundred and four millions sterling. After allowing for loss, money that might be in the West Indies, and other possible factors, he estimates that ninety-one millions and a half sterling remained in circulation at home. Even using Mr. Burke's lower figure, France had sixty-eight millions more in circulation than England had nationally.

We can see that France's money could not have amounted to less than this just by looking at its revenue. We do not need the French Mint's records as proof. Before the Revolution, France's revenue was nearly twenty-four millions sterling. France had no paper money then, so it collected all that revenue in gold and silver. That much revenue could not have been collected from a national supply of money smaller than the amount M. Neckar gives. Before paper money was established in England, its revenue was about a fourth of its national supply of gold and silver. We can verify this by comparing the revenue before King William with the amount of money said to be in the nation then. That amount was nearly as much as it is now.

A nation gains nothing by deceiving itself or allowing others to deceive it. Yet some people's prejudices and other people's dishonesty have always made France out to have little money. In fact, it has not only more than four times as much as England, but also considerably more in proportion to its population. To explain why England has so little, we should look at its funding system. The system multiplies paper and uses it in various forms in place of money. The more paper there is, the more chances there are to send gold and silver coins abroad. If extended to small notes, paper could even increase until no coins remained.

I know English readers will not enjoy this subject. But what follows matters enough to demand the attention of people involved in public financial transactions. In his treatise on the administration of finances, M. Neckar points out a fact that England has ignored. It provides the only basis for estimating how much gold and silver money any European nation ought to have to keep its proper share in relation to other nations.

Lisbon and Cadiz are the two ports where gold and silver money from South America enters Europe. Trade then divides and spreads it across Europe, increasing the supply of money everywhere. If we know how much enters Europe each year and can determine what share of European foreign trade belongs to each nation, we have a reasonably sound rule for estimating how much money a nation ought to have at any given time.

M. Neckar shows from the registers of Lisbon and Cadiz that five millions sterling in gold and silver enters Europe each year. He does not base this on one year. He uses the average of fifteen consecutive years, from 1763 to 1777, both inclusive. Over that period the total was one thousand eight hundred million livres, or seventy-five millions sterling.*14

From the start of the Hanover succession in 1714 until Mr. Chalmers published his account was seventy-two years. During that time, Europe would have received three hundred and sixty millions sterling.

Suppose Great Britain's foreign trade is a sixth of all Europe's foreign trade. That is probably lower than the gentlemen at the Exchange would estimate. Britain should therefore receive a sixth of the total through trade to maintain its share of Europe's money. That comes to sixty millions sterling. If we make the same allowance for loss and accidents that M. Neckar makes for France, fifty-two millions remain. That much ought to have been in Britain when Mr. Chalmers published, in addition to what it already had when the Hanover succession began. The whole amount should have been at least sixty-six millions sterling. Instead, there were only twenty millions, leaving Britain forty-six millions below its proper share.

We know the amount of gold and silver brought into Lisbon and Cadiz more accurately than we know the amount of any goods imported into England. We know the amount of money coined at the Tower of London even more certainly. So the main facts cannot reasonably be disputed. Either England's commerce makes no profit, or the gold and silver it brings in steadily leaks away through unseen channels. At an average of about three-quarters of a million a year, those losses over seventy-two years explain the shortfall. Paper fills the gap.*15

The Revolution of France has brought many new developments, in financial affairs as well as politics. Among other things, it shows that a government can be unable to pay its debts while its nation is rich. The former French Government was insolvent because the nation stopped paying for its extravagance. Without the nation's support, it could not support itself. But the nation still had all its resources. A government can be called insolvent whenever it asks the nation to pay what it owes in arrears. The former French Government and the present English government differ on this point only because their peoples behave differently. The French people refused to help their old government; the English accept taxation without questioning it. What England calls the Crown has been insolvent several times. The last publicly known instance was in May, 1777, when it asked the nation to pay upwards of L600,000 in private debts it could not otherwise pay.

Mr. Pitt, Mr. Burke, and everyone else who did not know France's affairs made the mistake of confusing the French nation with the French Government. In effect, the French nation tried to make the old government insolvent so that it could take control of government itself. It kept its resources to support the new government. A country as large and populous as France cannot lack natural resources. The means to put them to political use appear as soon as the nation chooses to allow it. Last winter, in a speech in the British Parliament, Mr. Burke "cast his eyes over the map of Europe, and saw a chasm that once was France." He sounded like someone dreaming. The same physical France was still there, with all its natural resources. The only gap was the one left by the end of despotism. A Constitution would fill it, giving the nation more resources than the fallen power had commanded.

The French nation made the old government insolvent, but it did not let creditors bear the loss. The creditors saw the nation as the real payer and the government as merely its agent. They put their trust in the nation rather than the government. This seems to trouble Mr. Burke greatly, because it undermines the policy that governments have thought kept them safe. Governments have borrowed money to attach the nation's financial interests to their survival. But France's example shows that the creditor's lasting security lies with the nation, not the government. Whatever changes may happen to governments, the nation always exists and always has the resources. Mr. Burke argues that creditors should have shared the fate of the government they trusted. The National Assembly, however, regarded them as creditors of the nation, not of the government: creditors of the employer, not the steward.

The old government could not pay its ongoing expenses. Yet the present government has paid off a large part of the principal of the debt. It has done this in two ways: by cutting government expenses and by selling the landed estates of monasteries and the church. In former times, devout people, repentant people who had lived immoral lives, extortioners, and misers left huge amounts of property in trust to the priesthood for religious purposes. They hoped to secure a better world than the one they were leaving. The priests kept the property for themselves. The National Assembly has ordered it sold for the benefit of the whole nation and has arranged for the priests to be provided for decently.

Because of the revolution, France will cut the annual interest on its debt by at least six millions sterling by paying off upwards of one hundred millions of the principal. It will also cut at least three millions from its former government expenses. That will put France in a position worth copying across Europe.

Looking at the whole matter, what a striking contrast! Mr. Burke has been talking about France's general bankruptcy while the National Assembly has been paying off the principal of its debt. Taxes have risen by near a million a year in England while they have fallen by several millions a year in France. Neither Mr. Burke nor Mr. Pitt has said a word about French affairs or French finances in the present Session of Parliament. People now understand the subject too well to be deceived any longer.

A puzzle runs throughout Mr. Burke's book. He writes furiously against the National Assembly. But what makes him so angry? Suppose his claims were true rather than groundless. Suppose the Revolution had destroyed France's power and made it the gap he describes. That might grieve a Frenchman who cared about his nation and make him angry with the National Assembly. But why should it make Mr. Burke angry? The answer is that he cares not about the French nation but about the Court. Every European Court fears the same fate and is in mourning. He writes neither as a Frenchman nor as an Englishman. He writes as the flattering creature found in every country and loyal to none: a courtier. It makes no difference whether the court is at Versailles, St. James, Carlton-House, or a court still waiting to take power. All courts and courtiers share the same parasitic habits. Across Europe they follow a common policy separate from the interests of nations. They may seem to quarrel, but they agree on plundering people. Nothing is more frightening to a court or courtier than the Revolution of France. What benefits nations is painful to them. They survive by keeping a country divided against itself, so they tremble at new principles and fear an example that threatens to bring them down.

RIGHTS OF MAN. PART SECOND, COMBINING PRINCIPLE AND PRACTICE.

CONCLUSION

Reason and ignorance are opposites, and each influences a great many people. If either spreads far enough in a country, the machinery of government runs easily. Reason follows its own judgment. Ignorance does whatever it is told.

Two forms of government prevail in the world:

First, government by election and representation.

Second, government by hereditary succession.

The first is generally called a republic; the second, monarchy and aristocracy.