Sir James Steuart

“ Permitting the exportation of coin where you have a mint, for paper to supply its place, and a favourable balance on your trade to bring it back, is like establishing two shops for the course of exchange. If the exchanger will not serve trade at the price of transportation and insurance, the coin will do it for him.
In such a country, a bank, properly established, will find great profit upon the interest of their notes, notwithstanding of the obligation to provide, at all times, the quantity of coin necessary for circulation. All the great objects of trade will then be fulfilled ”

“ The greatest of all the inconveniencies proceeding from a bankruptcy, is the ruin of industry, and the stop put to circulation. Can it then be supposed, that a country might execute so glaring a scheme of treachery to all her neighbours, and still continue her correspondence with them in the open way of trade? Certainly not. Were all foreign trade to be stopt at once, what a revolution would it occasion! The circulation of foreign trade, in the city of London only, exceeds perhaps the amount of all the taxes. ”

“ Why is there so little coin in England, in proportion to what there is in France? Does any man imagine that this is a mark of poverty? By no means. Let the state proscribe the currency of paper money, the coin will quickly return; because then it will be demanded. But at present the paper supplies its place, and so it goes abroad in order to gain more; whereas in France it remains at home, and produces nothing. The wealth of a nation can no more be estimated by the quantity of its coin, than the wealth of private people by the weight of their purse. ”

“ What interest a nation, which is not in an actual state of bankruptcy, can have in concealing its affairs, I cannot find out. How much more then is it not the interest of a mighty kingdom, which possesses such amazing resources, to expose its situation in a fair light to the world, to which it must, upon all occasions, have recourse for assistance in point of credit? ”

“ Consumption then went on as now, in many respects, in proportion to the number of inhabitants; but circulation, that is, alienation by sale, bore no proportion to it.
The effect of every increase in circulation is to swell the amount of taxes; and when they are extensively imposed in a country of industry, the whole currency is thereby made to flow through the coffers of the public, as the blood of the human body flows through the heart, and is by that diffused through every member. ”

“ The loss a bank may be at, in providing coin, is susceptible of estimation, let it be brought from ever so distant a country; because we know that the quantity to be provided, never can exceed the value of the grand balance. But who can estimate the loss a nation sustains, when an interruption is put to carrying on trade and manufactures? When the industrious classes of inhabitants are forced to be idle for a short time, the consequences are hardly to be repaired: they starve, they desert; the spirit of industry is extinguished ”

“ In a word, riches flowed in from every quarter. Gold, silver, precious stones, ornaments of all kinds, which contribute to luxury and magnificence, came to us from every country in Europe. Whether these prodigies, or marvellous effects, were produced by art, by confidence, by fear, or by whim if you please, one must agree, that that art, that confidence, that fear, or that whim, had operated all these realities which the antient administration never could have produced. ”

“ Now if the rate of market prices be high, relatively to the income of certain individuals, it can only be because the supply of the things they want to consume is not above the proportion of the demand of those who are richer.
If, therefore, the rate of the market affords such profits to manufacturers as to render them idle and luxurious, how can the augmentation of these profits, by the abolition of taxes, and consequent diminution of the price of subsistence, ever diminish the competition of the rich, unless the supply be augmented? ”

“ I have said that the object of taxes was income, and not stock. I have shewn how those of the proportional kind affect the income of stock already made, and persons who enjoy large profits upon their daily industry. I have pointed out the impropriety of cumulative taxes, when imposed upon such as draw nothing more from their industry than an easy subsistence; and I have given a general preference to those of the proportional kind; because they constantly imply both alienation and consumption: alienation in those who advance the taxes, consumption in those who pay them. ”

“ Is there an industrious farmer any where to be met with, who does not borrow money, which he can so profitably turn to account upon his farm, even though he receives it at the highest legal interest? These and many more inconveniences might manifest themselves, were government to force down the value of money, contrary to the ordinary operations of demand and competition: and to what purpose have recourse to authority, when it is most certain, that without any such expedient the same end may be compassed? ”

“ In my inquiries, I have constantly in my eye, how man may be governed, and never how he is governed. How a righteous and intelligent statesman may restrain the liberty of individuals, in order to promote the common good; never how an ignorant and unrighteous statesman may destroy public liberty, for the sake of individuals.
Raising money by taxes must always be burdensome, less or more, to those who pay it; and the advantages resulting from taxes can only proceed from the right application of the money when raised. ”

“ If the banks of Edinburgh enter into a fair coalition, as they ought to do, I think, in order to form really a national bank, totally independent of that of England; may they not open a subscription at London, and establish a regular fund of their own, as well as any other company, such as the India, or South Sea? By borrowing in the beginning at a small advance of interest above the funds, and paying as regularly as government does, will not all those who make a trade of buying and selling stock fill their loan, rather than invest it in any other carrying a less interest? ”

“ Has liberty any other meaning, but an entire permission to do whatever is not forbid by general and wholesome laws, calculated for the universal good of the society; and shall this class of men, who are enriching themselves as much by the profits they have in advancing the taxes, as by their industry, be considered in as favourable a light as another who is paying a cumulative tax out of his income, one farthing of which he never can draw back? ”

“ Upon the whole, it is an unspeakable advantage to a nation to have her foreign debts paid by her bank, rather than to remain exposed to the demands of private foreign creditors; because, when a bank pays them, I suppose her to do it upon a loan in the funding way, where the capital is not demandable by the creditor; whereas when private citizens are debtors to strangers, the capitals are always demandable; and when a call comes suddenly and unexpectedly, the country is distressed. What would become of Great Britain, if all her debts to strangers were demandable at any time? ”

“ I am very far from supposing the present situation of England to forebode the approach of any such disaster; but it is good to represent to one’s self some determinate object, by which we may judge of our situation in times to come.
Debts have increased far beyond the imagination of every mortal. Great men have uttered prophecies, which have proved false, concerning the consequences of a debt of one hundred millions. ”

“ When it is not established, credit will appear like a meteor: intelligent and crafty men will avail themselves of it, and thereby dazzle the eyes of the public, with gilded schemes of opulence and prosperity: mankind will fly to industry, confidence will be established; but as there will be no method of determining the bounds of that confidence, the promoters of the scheme will profit of the delusion: confidence will vanish ”

“ Banks may indeed complain, that men of property are sometimes sending their money out of the country, at a time when it is already drained of its coin; that this raises exchange, and hurts the trading interest.
Exchange must rise, no doubt, in proportion as the grand balance is great, and difficult to be paid: But where does the blame lie? Who ought to provide the coin, or the bills for paying this grand balance? Have we not shewn that it is the bank alone who ought to provide coin for the ready answering of their notes? ”

“ We must always carefully avoid confounding the grand balance of payments with the balance between importation and exportation, which I consider as the balance of trade.
This circumstance implies no loss to the nation which is creditor in the balance of trade, and debtor upon the capitals; because we have proved that the price of exchange never affects a nation, but only certain individuals, who pay it to others. ”

“ Let me first suppose a general reform of all unnecessary expence to take place at once, and a proportional abolition of taxes to go hand in hand with it. Would not all those who at present subsist by the superfluous expences of government, be reduced to misery? Would not all those who supply unnecessary wants, equal to the whole amount of the taxes suppressed, be forced to be idle in proportion? The millions who contribute in paying those sums would be differently affected. Those who pay out of a fixed and certain income, would feel an immediate benefit from it ”

“ When individuals only make a profit of the inconvenience of taxes, the public loses, no doubt; because they are paid for the advantage of the public, not for that of private people. If the money raised be more beneficially employed by the state, than it would have been by those who have contributed it, then I say the public has gained, in consequence of the burden laid upon individuals; consequently, the statesman has done his duty, both in imposing the taxes, and in rightly expending them. ”

“ Now if the mass of money in circulation is brought so low, that the higher classes of the people, who consume foreign productions, cannot find money to buy with, what are we to suppose will be the case with manufacturers, and with the merchants who buy up their work? Could this operation of the bank affect the higher classes only, by curbing their anti-patriot expences, without affecting the lower classes, by curbing their industry, I should think it an admirable discovery. ”

“ Every interest in a state must influence the government of it, in proportion to its consequence and weight; and every government must influence the spirit of the people who live under it.
Now, as we have seen how industry creates wealth; how wealth and confidence create credit; how credit creates debts and taxes; how these again occasion an augmentation of money, by the melting down of property; and how this property is transferred to a new set of men, who were once the monied interest, and who afterwards acquire the lands, and consolidate this additional circulation ”

“ We shall find the most sagacious people in the world, with regard to trade and money, struggling with all the inconveniencies of an ill regulated coinage, and an old worn out silver currency; carrying on their reckonings by the help of agio; weighing their specie; giving allowance for light weight; buying silver with silver, and gold with gold; as if it were impossible to bring the value of these metals to an equation ”

“ Another difference is, that public debts do not so much affect the prosperity of a state as private debts do that of the debtor. The interest of a private debtor is simple and uncompounded; that of a state is so complex, that the debts they owe, when due to citizens, are, on the whole, rather advantageous than burdensome: they produce a new branch of circulation among individuals, but take nothing from the general patrimony.
In deducing the principles of public credit, we must suppose it the established maxim in the state to adhere to the faith of their engagements ”

“ Whatever part is consumed without alienation, ought, I think, to be out of the reach of proportional taxes, unless, by some circumstance or other, it can be made to fall under the eye of the public, in a manner resembling its coming to market. Thus a tax upon malt is levied at the malt-house, as if it were sold to the maltster, although it be made for the consumption of the grower of the barley. ”

“ If the rate of interest be high, from a taste of dissipation, let foreign trade throw in what loads of money it may, interest will still stand high, until manners change. Every class of a people has their peculiar spirit. The frugal merchant will accumulate wealth, and the prodigal lord will borrow it. In this situation, internal circulation will be rapid, and lands will shift hands. If this revolution should prove a corrective to dissipation, by vesting property in those who have contracted a firm habit of frugality, then an augmentation of wealth may sink the rate of interest. ”