DEBT, NATIONAL. 



countries, the subordinate governors, to 

 whom is generally consigned the task of 

 providing for the public expences, being 

 desirous of popularity, have shown a 

 great predilection for this mode of obtain- 

 ing money, as it enables them to support 

 a profuse expenditure, without appearing 

 to oppress the people in so great a de- 

 gree as they otherwise must : the system 

 of getting into debt, or the funding sys- 

 tem, as it is generally called, from parti- 

 cular funds being usually appropriated 

 for payment of interest on the debts 

 contracted, has therefore been adopted 

 by most of the states of Europe, by many 

 of the colonies, and by the American re- 

 public. 



The persons who lend the money which 

 a government has occasion to boi'row 

 generally make a profit by it, but nothing 

 is brought into the country, nor the least 

 addition made to its total wealth, by a 

 transaction of this kind ; whatever there- 

 fore is gained by any individual concern- 

 ed in it must be taken from others, and 

 as those who lend the money are persons 

 already possessing considerable property, 

 and those from whom the sums requisite 

 for paying the interest or repaying any 

 part of the principal is to be drawn, are 

 the public at large, it is evident that all 

 transactions of this nature contribute to 

 increase the existing disparity in the con- 

 dition of the different classes of the com- 

 munity, and consequently that the natu- 

 ral tendency of the funding system, when 

 made a constant resource, is, to destroy 

 the intermediate ranks, and divide a na- 

 tion into the two classes only, as unequal 

 in number as in circumstances, of very 

 rich and very poor. It may however be 

 carried to a very great extent, without 

 fully producing this effect, if counteract- 

 ing circumstances exist, sufficiently pow- 

 erful to dissipate the gains of the rich 

 nearly as fast as they are acquired, and 

 thus prevent ' a rapid accumulation of 

 wealth. This has been the case in Great 

 Britain ; but although the great increase 

 of necessary and fashionable expense has 

 prevented the wealthy from becoming so 

 enormously rich as they otherwise would 

 have been, there can be little doubt, that, 

 taken collectively, they are possessed of 

 more property and income than the weal- 

 thy members of the community at any 

 former period, and that the number of 

 the poor is considerably augmented. In 

 a state where taxation is general, the ef- 

 fects of the borrowing system are some- 

 what retarded, by the lenders themselves 

 sontributing to the taxes levied to pay 



them interest, and therefore the practice 

 may be carried to a greater extent than 

 in those states, where particular classes, 

 as the nobility or priesthood, are ex- 

 empt from taxation, and under whose 

 privileges the money lenders may shelter 

 themselves from contributing their just 

 proportion. 



Most governments have begun to bor- 

 row upon their general credit, without as- 

 signing any particular fund for the pay- 

 ment of the debt ; and when this resource 

 has failed them, they have gone on to 

 borrow upon assignments or mortgages 

 of particular funds. What is called the 

 unfunded debt of Great Britain, is con- 

 tracted in the former of those ways ; but 

 this is a mode which never can be car- 

 ried to a great extent without bringing 

 the finances of a country into disorder ; 

 the other mode is subject to no limitation, 

 while efficient funds can be found for 

 securing the regular payments stipulated 

 with the lenders. Borrowing on the se- 

 curity of particular funds is done in two 

 ways ; sometimes the assignment or mort- 

 gage is made for a short period of time 

 only, a year or a few years, for example ; 

 and sometimes for perpetuity. In the for- 

 mer case, the fund is supposed sufficient 

 to pay, within the limited time, both prin- 

 cipal and interest of the money borrowed ; 

 in the other, it is supposed sufficient to 

 pay the interest only, which is either an 

 annuity terminable at the end of a certain 

 number of years, or a perpetual annuity, 

 which the government retains the liberty 

 of redeeming at any time upon paying 

 back the principal sum borrowed. When 

 money is raised in the one way, it is said 

 to be raised by anticipation ; when in the 

 other, by funding. 



The great expense attending the mo- 

 dern system of warfare appears to have 

 created the necessity of contracting na- 

 tional debts : the practice originated in 

 Italy, and was soon adopted in other 

 countries, but it has been brought into a 

 more regular system, and carried to a 

 much greater extent in Great Britain than 

 in any other nation. 



In the reign of King William, and du- 

 ring a great part of that of Queen Anne, 

 before the practice of funding on perpetu- 

 al annuities had become familiar, the 

 greater part of the new taxes were im- 

 posed for a short period of time (for four, 

 five, six, or seven years only) and the 

 principal part of the grants of each year 

 consisted of loans in anticipation of the 

 produce of those taxes. The produce 

 being frequently insufficient for paying. 



