Soon after the Revolution, on account of the necessities of government, it was necessary to borrow money from subjects, generally at a higher rate than common interest, to be repaid in a few years. The funds allotted for pay ment of this interest were taxes on certain commodities. These taxes were at first laid on for a certain number of years, according to the term for which the money was borrowed; but when, by various arts of government, these loans came to be perpetual, the taxes came, of course, to be perpetual, and thus the funds were mortgaged. Though they l were made perpetual when money could no longer be borrowed upon them, yet they were still redeemable 1 I.e. the mortgaged taxes or funds. ' The funds' originally meant nothing but the aggregate produce of certain taxes.
248 PART III I REVENUE upon paying up the money borrowed on them l. When these taxes were laid on, nothing would have shocked people more, than to have thought that they were to be perpetual, but their progress was so insensible, that it was never murmured at. What shocks at first will soon become easy from custom, which sanctifies everything. Thus [the] taxes were first laid on, and thus they came to the situa tion in which they are at present. When a sum of money is lent to a private person, the creditor can come upon the debtor when he pleases for both capital and interest; but it is not on this footing that the government borrows money; they give you a right to a perpetual annuity of three or four per cent., but not to redemand your capital It seems very odd at first sight that the creditor should consent to such an inconvenience as that his money should never be paid up2, but this is really his advantage. If you lend to the government a thousand pounds in time of war, as they have immediate use for it, they will perhaps be obliged to give you five per cent, of interest, and when peace comes they continue your annuity. You have it in your power to dispose of your annuity, and as your money is perfectly secure, and interest is paid by no private person with so much punctuality as by the government, you may very often sell the annuity of your £1000 at.£1100 or more. The government, finding that these annuities sold above par, and for the same reason that people were much disposed to subscribe to the government funds, they resolved, as the funds were still redeemable, to take the advantage by paying up the sums borrowed at five per cent., and 1 I.e. the stockholder's claim to 2 Mortimer talks of the inconhis perpetual annuity from the veniencies that might arise to mortgaged funds could be extin- contributors from being obliged guished by repaying the capital to keep their money constantly borrowed from him. A detailed in the hands of the government.'
account of the early funds is Every Man his own Broker, 5th ed., given in W. of N. bk. v. ch. iii. 1762, p. 12.
STOCKS 249 borrowing money at a lower rate l. This made the con tractors with the government to be on their guard, and, as they saw their design, they would not lend them any more money, without at least some part of the interest should be irredeemable, perhaps two per cent, of the four they were to receive. In every fund therefore there was a part irre deemable 2, which made them continue to sell above par.
In the reigns of King William, Queen Anne, and in the beginning of that of King George I, the funds rose and fell, according to the credit of the government, as there was still some risk of a revolution. Of late, though there be no danger of a revolution, even in the times of peace stocks are sometimes at ten, twenty, or even fifty per cent, below par, and sometimes as much above it:!. Nobody can suspect any risk of losing that money by change of government. How then comes it that stocks are thus every day fluctuating without any visible cause? How comes it that good or bad news have such an influence on the rising and falling of stocks? The real cause is as follows: Every misfortune in war makes peace to be at a greater distance, and every fortunate occurrence seems to favour its approach. When war continues, the necessities of government must be supplied, more money levied and new subscriptions opened for these purposes. As in war the interest must necessarily rise, every one is eager to be in the new subscription, and they who have annuities find that it will be for their advantage to sell out of the old stocks in prospect of a higher interest. The number of sellers, therefore, increases with the prospect of a war, and 1 Details are given in W. of N, pp. 516, 517.
bk. v. ch. iii. vol. ii. pp. 515, 516. 3 On March 3, 1763, 3 per cent.
2 The ' irredeemables ' of this consols were quoted at 95 J. They period were terminable annuities, had steadily risen in thirteen They were never so largely used months from 62}. See the as the arithmetical example in London Chronicle for Feb. 3, 1762, the text suggests. Ibid. vol. ii. and March 3, 1763.
consequently stocks fall. On the other hand, whenever there is a prospect of peace, as there are no expectations that new subscriptions will be opened, they who have annuities are not fond of selling them; and therefore, the number of sellers decreasing, stocks must rise. In time of war, every one who has any stock runs to have it in the hands of the government, as it cannot be so advantageously employed anywhere else, as they get interest perhaps at seven or eight per cent., of which two or three perhaps is [irredeemable, and frequently a lottery ticket into the bargain. A person who has an annuity only at three per cent, will do all he can to sell it, that he may employ his stock to greater advantage, and for this reason will often sell it below par, and consequently stocks must necessarily fall. But in time of war, for the following reasons, even the new subscriptions come to sell below par.
As there are a great many stock-holders who are mer chants, and who keep their stocks in the hands of the government that they may be ready to sell out on any sudden demand, and take the advantage of a good bargain when it casts up1, and as these chances occur most frequently in time of war, they have often occasion to sell out, and thus more stock runs to the market, and the new subscriptions sink 2 below par. But further, in time of war, as was observed before, stock cannot be so advantageously employed, and everybody is tempted to subscribe. Even those whose circumstances are but very inconsiderable, subscribe for great sums in hopes that stocks will rise, and that they may sell out before the time of delivery, to great advantage; but when things do not answer their expecta tions, and they are forced to sell out one way or another to support their credit, they are often obliged to sell below par. In this manner the new subscriptions may fall. Stock-jobbers that are well acquainted with their business, observe particularly when a number of indigent persons 1 W. of N. bk. v. ch. iii. vol. ii. pp. 518, 519. - MS. reads 'sinks.'
STOCK-JOBBING 251 are in the subscriptions, and as they are soon obliged to sell out, and consequently stocks fall, it is their proper time to purchase them.
The practice of stock-jobbing, or the buying stocks by time has, too, on all occasions, a very considerable influence on the rise and fall of stocks. The method in which this practice is carried on is as follows. A man who has not perhaps £1000 in the world, subscribes for £100,000, which is to be delivered at several fixed times, and in certain portions. He therefore hopes to get these several portions sold out to great advantage by the rising of the stocks before they fall due, but as anything he is worth would go if the stocks should fall, he uses all means to make them rise, he spreads reports at Change Alley that victories are gained, that peace is to be concluded, ftc.1 On the other hand, they who want to purchase a stock, and want that it should fall, propagate such reports as will sink the stocks as low as possible, such as that war will continue, that new subscriptions are thought on, &c. It is owing to this that, in time of war, our newspapers are so filled with invasions and schemes that never were thought of. In the language of Change Alley the buyer is called the bull \ and the seller the bear:!, and as the bulls or bears predominate, 1 Mortimer, Every Man his own asked a civil question, he answers Broker, 5th ed., pp. 31, 37-40. with a surly look, and by his 3 Ibid. p. 45, note. ' A Bull is the dejected, gloomy aspect and moname by which the gentlemen of roseness he not badly represents 'Change Alley choose to call all the animal he is named after.' persons who contract to buy any 3 Ibid. p. 47, note. ' A Bear in quantity of government securities the language of 'Change Alley is without an intention or ability to a person who has agreed to sell pay for it, and who consequently any quantity of the public funds are obliged to sell it again either more than he is possessed of, and at a profit or a loss before the often without being possessed of time comes when they have con- any at all, but which nevertheless tracted to take it...If he is he is obliged to deliver against stocks rise or fall. This practice of buying stocks by time is prohibited by the government, and accordingly, though they should not deliver up the stocks they have engaged for, the law gives no redress l. There is no natural reason why £1000 in the stocks should not be delivered, or the delivery of it enforced, as well as £1000 worth of goods; but after the South Sea Scheme this was thought upon as an expedient to prevent such practices, though it proved ineffectual. In the same manner, all laws against gaming never hinder it, and though there is no redress for a sum above £$'2, yet all the great sums that are lost are punctually paid. Persons who game must keep their credit, else nobody will deal with them. It is quite the same in stock jobbing, they who do not keep their credit will soon be turned out, and in the language of Change Alley be called lame duck 3. It is unnecessary here to give any account of particular funds, as they are all of the same nature, and the security equal. If the interest of any sum of money be not paid by the funds allotted for that purpose, it is paid out of the sinking fund, which is the surplus of all the rest. There is perhaps some little difference in the facility of payment, but this is by no means considerable, and merits not our attention.
a certain time; before this time play were void, and if paid, such arrives he is continually going sums could be recovered from the up and down seeking...whose winner.
property he can devour.' But see 3 'A name given in 'Change Murray, New English Dictionary, Alley to those who refuse to 1 7 Geo. II, cap. 8. 'An act to ishment for non-payment is banprevent the infamous practice of ishment from Jonathan's, but stock-jobbing.' they can still act as brokers at 2 Under 9 Ann. cap. 14, secu- the offices.' Mortimer, Every Man rities for sums over £10 lost at Ins own Broker, 5th ed., p. 57, note.
[PART II: OF POLICE] [RESUMED] [§ 17. Of the Influence of Commerce on Manners.]
It1 remains now that \ve consider the last division of police, and show the influence of commerce on the manners of a people. Whenever commerce is introduced into any country probity and punctuality always accom pany it. These virtues in a rude and barbarous country are almost unknown. Of all the nations in Europe, the Dutch, the most commercial, are the most faithful to their word. The English are more so than the Scotch, but much inferior to the Dutch, and in the remote parts of this country they [are] far less so than in the commercial parts of it. This is not at all to be imputed to national character, as some pretend; there is no natural reason why an Englishman or a Scotchman should not be as punctual in performing agreements as a Dutchman. It is far more reducible to self-interest, that general prin ciple which regulates the actions of every man, and which leads men to act in a certain manner from views of advan tage, and is as deeply implanted in an Englishman as a Dutchman 2. A dealer is afraid of losing his character, 1 MS. reads ' In.' of other men's ignorance and 2 'They make use of their skill folly they deal with; are great and their wit to take advantage exacters where the law is in their 254 PART II: POLICE (RESUMED] and is scrupulous in observing every engagement. When a person makes perhaps twenty contracts in a day, he can not gain so much by endeavouring to impose on his neigh bours, as the very appearance of a cheat would make him lose. When people seldom deal with one another, we find that they are somewhat disposed to cheat, because they can gain more by a smart trick than they can lose by the injury which it does their character.
They whom we call politicians are not the most re markable men in the world for probity and punctuality l. Ambassadors from different nations are still less so; they are praised for any little advantage they can take, and pique themselves a good deal on this degree of refinement. The reason of this is that nations treat with one another not above twice or thrice in a century, and they may gain more by one piece of fraud, than [lose] by having a bad character. France has had this character with us ever since the reign of Lewis XIV, yet it has never in the least hurt either its interest or splendour. But if states were obliged to treat once or twice a day, as merchants do, it would be necessary to be more precise, in order to preserve their character. WTherever dealings are frequent, a man does not expect to gain so much by any one con tract, as by probity and punctuality in the whole, and own hands: in other points, break up, merchants would turn where they deal with men that pedlars, and soldiers thieves.'
understand like themselves, and Temple, Observations upon the are under the reach of justice United Provinces, in Works, 1757, and laws, they are the plainest vol. i. p. 154.
and best dealers in the world; 1 W. of N. bk. iv. ch. ii. vol. ii. which seems not to grow so much p. 41 contrasts a legislator govfrom a principle of conscience or erned by general principles with morality, as from a custom or ' that insidious and crafty animal, habit introduced by the necessity vulgarly called a statesman or of trade among them, which politician, whose councils are depends as much upon common directed by the momentary fluehonesty as war does upon disci- tuation of affairs.' pline, and without which all would a prudent dealer, who is sensible of his real interest, would rather choose to lose what he has a right to, than give any ground for suspicion. Everything of this kind is odious as it is rare. When the greater part of people are merchants, they always bring probity and punctuality into fashion, and these, therefore, are the principal virtues of a commercial nation.
There are some inconveniences, however, arising from a commercial spirit. The first we shall mention is that it confines the views of men. Where the division of labour is brought to perfection, every man has only a simple operation to perform; to this his whole atten tion is confined, and few ideas pass in his mind but what have an immediate connexion with it. When the mind is employed about a variety of objects, it is some how expanded and enlarged, and on this account a country artist is generally acknowledged to have a range of thoughts much above a city one l. The former is perhaps a joiner, a house carpenter, and a cabinet maker, all in one, and his attention must of course be employed about a number of objects of very different kinds. The latter is perhaps only a cabinet-maker; that particular kind of work employs all his thoughts, and as he had not an opportunity of comparing a number of objects, his views of things beyond his own trade are by no means so extensive as those of the former. This must be much more the case when a person's whole attention is bestowed on the seventeenth part of a pin 2 or the eightieth part of a button, so far divided are 1 In W. of N. bk. i. ch. x. pt. ii. z The eighteen operations menvol. i. p. 134, the superiority of tioned on p. 164 above include the countryman over the towns- putting the pins in paper. He man is not said to be ' generally who does this does not make acknowledged,' but only ' well part of a pin, so that the ' sevenknown to every man whom either teenth part ' here is consistent business or curiosity has led to with the eighteen operations, converse much with both.'
256 PART II I POLICE (RESUMED] these manufactures. It is remarkable that in every com mercial nation the low people are exceedingly stupid. The Dutch vulgar are eminently so, and the English are more so than the Scotch. The rule is general; in towns they are not so intelligent as in the country, nor in a rich country as in a poor one l.
Another inconvenience attending commerce is that education is greatly neglected. In rich and commercial nations the division of labour, having reduced all trades to very simple operations, affords an opportunity of employing children very young. In this country 2, indeed, where the division of labour is not far advanced, even the meanest porter can read and write, because the price of education is cheap;i, and a parent can employ his child no other way at six or seven years of age. This, how ever, is not the case in the commercial parts of England. A boy of six or seven years of age at Birmingham can gain his threepence or sixpence a day, and parents find it to be their interest to set them soon to work; thus their education is neglected. The education which low people's children receive is not, indeed, at any rate con siderable; however, it does them an immense deal of service, and the want of it is certainly one of their greatest misfortunes. By it they learn to read, and this gives them the benefit of religion, which is a great advantage, not only considered in a pious sense, but as it affords them subject for thought and speculation. From this we may observe the benefit of country schools, and, however much neglected, must acknowledge them to be an excellent institution. But, besides this want of education, there is another great loss which attends the putting boys too soon to work. The boy begins to find that his father is obliged to him, and therefore throws 1 W. of N. bk. v. ch. i. pt. iii. 3 W. of N. bk. v. ch. i. pt. iii. art. 2, vol. ii. pp. 365 -367 art. 2, vol ii. p. 369.
2 Scotland.
off his authority. When he is grown up he has no ideas with which he can amuse himself. When he is away from his work he must therefore betake himself to drunkenness and riot. Accordingly we find that in the commercial parts of England, the tradesmen are for the most part in this despicable condition; their work through half the week is sufficient to maintain them, and through want of education they have no amusement for the other, but riot and debauchery1. So it may very justly be said that the people who clothe the whole world are in rags themselves.
Another bad effect of commerce is that it sinks the courage of mankind, and tends to extinguish martial spirit. In all commercial countries the division of labour is infinite, and every one's thoughts are employed about one particular thing. In great trading towns, for example, the linen merchants are of several kinds, for the dealing in Hamburg and Irish linens are quite distinct professions. Some of the lawyers attend at King's Bench, some at the court of Common Pleas, and others at the Chancery. Each of them is, in a great measure, unacquainted with the business of his neighbour. In the same manner war comes to be a trade also. A man has then time to study only one branch of business, and it would be a great disadvantage to oblige every one to learn the military art and to keep himself in the practice of it. The defence of the country is therefore committed to a certain set of men who have nothing else ado, and among the bulk of the 1 ' Those who are concerned tions on Taxes as they are supposed in the manufactories of this king- to affect the Price of Labour in our dom know by experience that Manufactories: also some reflections the poor do not labour upon an on the general behaviour and dispoaverage above four days in a week, sition of the Manufacturing Popuunless provisions happen to be lace of this kingdom; showing by very dear...When wheat and arguments drawn from experience other provisions are at a low that nothing but necessity will price...idleness and debauchery enforce labour, &>c., 2nd ed.
generally take place.' Considera- 1765, pp. 12, 13.
258 PART II! POLICE (RESUMED] people military courage diminishes. By having their minds constantly employed on the arts of luxury, they grow effeminate and dastardly.
This is confirmed by universal experience.
In the year 1745 four or five thousand naked unarmed Highlanders took possession of the improved parts of this country without any opposition from the unwarlike inhabitants. They penetrated into England, and alarmed the whole nation, and had they not been opposed by a standing army, they would have seized the throne with little difficulty. Two hundred years ago such an attempt would have roused the spirit of the nation. Our ancestors were brave and warlike, their minds were not enervated by cultivating arts and commerce, and they were all ready with spirit and vigour to resist the most formidable foe. It is for the same reason, too, that an army of four or five hundred Europeans have often penetrated into the Mogul's country, and that the most numerous armies of the Chinese have always been overthrown by the Tartars. In those countries the division of labour and luxury have arrived at a very high pitch, they have no standing army, and the people are all intent on the arts of peace. Holland, were its barriers ' removed, would be an easy prey. In the beginning of this century the standing arm}' of the Dutch was beat in the field, and the rest of the inhabitants, instead of rising in arms to defend themselves, formed a design of deserting their country, and settling in the East Indies -. A com mercial country may be formidable abroad, and may defend itself by fleets and standing armies, but when they 1 Probably the Barrier fort- 1757, p. 226. It is perhaps not a resses. The removal of the mere coincidence that six pages dykes would not make Holland earlier Hume uses the words an easy prey. 'would prove an easy prey' in 2 In 1672, not at the beginning speaking of the northern pro of the eighteenth century. Hume, vinces of the Netherlands. HiktJty of Great Britain, vol. ii.
are overcome, and the enemy penetrates into the country, the conquest is easy. The same observation may be made with respect to Rome and Carthage. The Cartha ginians were often victorious abroad, but when the war was carried into their own country, they had no share with the Romans. These are the disadvantages of a commercial spirit. The minds of men are contracted, and rendered incapable of elevation. Education is despised, or at least neglected, and heroic spirit is almost utterly extinguished. To remedy these defects would be an object worthy of serious attention.
Thus we have finished the three first great objects of law, to wit, justice, police, and revenue. We proceed now to treat of arms, the fourth part of the general division of jurisprudence.
[PART IV:] OF ARMS [f i. Of Militias.} IN the beginning of society the defence of the state required no police, nor particular provision for it. The whole body of the people rose up to oppose any attempt that was made against them, and he who was chief in time of peace, naturally preserved his influence in time of war. But after the division of labour took place, it became necessary that some should stay at home, to be employed in agriculture and other arts, while the rest went out to war. After the appropriation of lands and the distinction of ranks were in some measure introduced, the cultivation of the ground would naturally fall to the meanest rank. The less laborious, but more honourable employment of military service, would be claimed by the highest order. Accordingly we find that this was the practice of all nations in their primitive state. The Roman equitcs or knights were originally horsemen in the army, and no slaves or those who did not pay taxes ever went out to war. In like manner among our ancestors only they who held by what was called knight's service were employed in the defence of the state, and the ancient villains were never considered as a part of the national force.
When the state was thus defended by men of honour MILITIAS 261 who would do their duty from this principle, there was no occasion for discipline. But when arts and manufactures increased, and were thought worthy of attention, and men found that they could rise in dignity by applying to them, and it became inconvenient for the rich to go out to war, from a principle of avarice, these arts, which were at first despised by the active and ambitious, soon came to claim their whole attention. The merchant who can make two or three thousand pounds at home will not incline to go out to war, but it was an amusement to an ancient knight who had nothing else ado. When the improvement of arts and manufactures was thought an object deserving the attention of the higher ranks, the defence of the state naturally became the province of the lower, because the rich can never be forced to do anything but what they please. In Rome, after the knights gave over serving in the army, the lowest of the people went in their stead, and in our own country, after the feudal militia went out, another of the lowest ranks succeeded. This therefore is the pro gress of military service in every country. Among a nation of hunters and shepherds, and even when a nation is ad vanced to agriculture, the whole body goes out together to make war. When arts and manufactures begin to advance, the whole cannot go out, and as these arts are laborious, and not very lucrative, for the reasons formerly adduced, the highest go out. After that, when arts and commerce are still farther advanced, and begin to be very lucrative, it falls to the meanest to defend the state '. This is our present condition in Great Britain.
1 'According to modern cus- are such a low, rascally set of torn, armies are made up of the people.' Hume, 'Of the Populousvery dregs of a people, fellows too ness of Ancient Nations,' Political dissolute and worthless for any Discourses, 1752, p. 188. Cp.with other occupation.' Hutcheson, the whole section, W. of N. bk. v. Introduction to Moral Philosophy, ch. i. pt. i. vol. ii. pp. 274-281; and p. 324. ' Our common soldiers see above, pp. 26-29.
262 PART IV I ARMS When the whole body went out together there could l)e no occasion for military discipline, they being all, as it were, upon the same level, and as their common cause was so well discerned, it was quite unnecessary. When the highest orders went out, a principle of honour would supply the place of discipline, but when this office fell upon the lowest order, the most severe and rigid discipline became necessary, and accordingly we find that it has been introduced into all standing armies. In general, it is necessary that they should be kept under such authority as to be more afraid of their general and officers than of the enemy. It is the fear of their officers and of the rigid penalties of the martial law, which is the chief cause of their good behaviour, and it is to this principle that W7e owe their valiant actions. In the late war eight hundred Prussians defended a pass a \vhole day against several thousands of Austrians, and at night in their retreat deserted almost to a man. What could be the foundation of this courage? It was not a principle of honour, nor love to their country, nor a regard to their officers, for these would still have detained them; it was nothing but the dread of their officers, who were hanging, as it were, over their heads, and whom they durst not disobey. This, by the by, shows the governableness of our nature, and may also show how much that manly courage we so much boast of depends upon external circumstances. We may further observe how far this principle of fear may be carried. If a bold, fierce, and tyrannic adjutant be succeeded by one of a mild and gentle disposition, the ideas of terror are conveyed with the coat, and it is some time before it be perceived that he is not so terrible as the other.
STANDING ARMIES 263 l§ 3- Of Standing Armies.']
In this manner standing armies came to be introduced, and where there are none, the country is an easy prey to its enemies. The only thing to be observed concerning them is that they should be raised in the most convenient way, and with as little hurt as possible to the country. However much standing armies may be exclaimed against, in a certain period of society they must be introduced. A militia commanded by landed gentlemen in possession of the public offices of the nation can never have any prospect of sacrificing the liberties of the country for any person whatever. Such a militia would no doubt be the best security against the standing army of another nation.