Chapter 2a, Part 1: The sources of the public revenue
The revenue which pays for national defense and supporting the dignity of the chief magistrate may be drawn:
- from some fund of the commonwealth, independent of the revenue of the people; or
- from the revenue of the people
Part 1 The funds which belong to the sovereign or commonwealth
2 The funds which belong to the sovereign must consist in stock or land.
3 The sovereign, like any other owner of stock, may derive a revenue from it:
- by employing it himself as his profit or
- by lending it as his interest
4 The revenue of a Mongol or Arab chief consists in profit.
- It arises from the milk and increase of his own herds which he manages as the principal herdsman of his tribe.
- Profit makes the principal part of the public revenue of a monarchial state only in this earliest state of civil government.
5 Small republics sometimes derived a big revenue from the profit of mercantile projects.
- The republic of Hamburgh derived revenue from the profits of a public wine cellar and pharmacy.
- The state cannot be very great if the sovereign has leisure to be a wine merchant or pharmacist.
- The profit of a public bank was a source of revenue for bigger countries, as in Hamburg, Venice, and Amsterdam.
- This kind of revenue was even thought to be not below the attention of a great empire as Great Britain.
- The ordinary dividend of the Bank of England was 5.5%.
- Its capital was £10,780,000.
- Its net annual profit after paying management expences was £592,900.
- It is pretended that government could borrow this capital at 3% interest.
- It could make a clear profit of £269,500 a year by taking over the bank's management.
- Government management of mercantile projects like this requires orderly, vigilant, and parsimonious administration, like those in Venice and Amsterdam.
- But the government of England was never famous for good economy.
- In peacetime, she has been slothful and negligently profuse.
- This is perhaps natural to monarchies.
- In wartime, she has been thoughtlessly extravagant.
- This is common in democracies.
- It is doubtful that the English government could be safely trusted with bank management.
6 "The post office is properly a mercantile project."
- The government pays:
- to establish the different offices
- to buy or hire the necessary horses or carriages
- It is repaid with a large profit by its tax duties.
- It is perhaps the only mercantile project successfully managed by every government.
- Its capital is not very big.
- "There is no mystery in the business."
- The returns are certain and immediate.
7 Princes have frequently engaged in many other mercantile projects.
- Like private persons, they were willing to mend their fortunes by becoming adventurers in common trades.
- They have rarely succeeded because of the profusion in the affairs of princes.
- The agents of a prince regard his wealth as inexhaustible.
- They are careless at:
- what price they buy and sell
- the cost of transportation
- They frequently live with the profusion of princes and sometimes acquire the fortunes of princes.
- Machiavelli tells us that the agents of Lorenzo of Medicis carried on his trade.
- Florence was several times obliged to pay the debt caused by their extravagance.
- He found it convenient to give up being a merchant.
- It was the business in which his family originally made their fortune.
- He used what remained of his fortune and the state revenue in projects more suitable to his station.
8 The character of the trader is very incompatible with the character of a 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."
- They managed their trade successfully only when they were traders with an original revenue of more than £3 million.
- Since they became sovereigns, they became bankrupt.
- As traders, their servants in India considered themselves as the clerks of merchants.
- As sovereigns, those servants considered themselves as ministers.
9 A state may sometimes derive some of its public revenue from interest and profits.
- If it has amassed a treasure, it may lend some of that treasure to foreign states or to its own subjects.
10 Berne derives a big revenue by lending some of its treasure to foreign states.
- It places it in the public funds of the indebted European nations, chiefly of France and England.
- The security of this revenue must depend on:
- The security of those funds and the good faith of the government which manages them
- The certainty of peace with the debtor nation
- In the case of a war, the very first act of a hostile debtor nation might be to forfeit its creditor's funds.
- This policy of lending money to foreign states is peculiar to Berne.
11 Hamburgh established a public pawnshop which lends money on pledges at 6% interest.
- This pawnshop is called Lombard.
- It affords a revenue to the state, which is pretended at 150,000 crowns.
- At 54 pence the crown, it amounts to £33,750 sterling.
The government of Pennsylvania, without amassing any treasure, invented a method of lending something equivalent to money to its citizens.
- It advanced paper bills of credit to private people at interest on land security worth double the value.
- These bills were to be redeemed 15 years after their date.
- It was transferable like bank notes and declared legal tender within Pennsylvania.
- It raised a moderate revenue which could defray an annual expence of about £4,500.
- This was the whole ordinary expence of that frugal and orderly government.
- Its success depended on three circumstances:
- The demand for some other instrument of commerce besides gold and silver money or
- The demand for such consumable stock which did not require sending out gold and silver money in exchange.
- The good credit of the government of Pennsylvania
- The moderation of how this method was used
13 Stock and credit are naturally unstable and perishable.
- The whole value of the paper bills of credit never exceeded the value of gold and silver money necessary for circulation had there been no paper bills of credit.
- The same method was adopted by other American colonies.
- But those other colonies were not as moderate.
- It created much more disorder than convenience.
- They are unfit to be trusted to bring sure, steady, and permanent revenue to government.
- No government beyond the shepherd state ever derived most of its public revenue from stock and credit.
Next: Chapter 2b: Revenue from state lands