In the second case, where the transaction is no longer voluntary on the part of the proprietors, the effect of a great sinking fund would soon become more striking; would be, in many instances, a hardship; and probably in its consequences, while creating an inflated appearance of national prosperity, would be working in disguise a sure way to great private and public poverty and misery. The reason why the stocks at a low rate of interest always bear a greater price than those at a higher rate is, their greater security against a forced redemption. If the four and five per cent. stocks could only be redeemed at the market price, however much exceeding their nominal value, there would be no cause remaining why they should not rise and fall in the same proportion as the three per cent. stocks.

The interest of money is at this time much lower in England than in any neighbouring country on the continent; we have already explained the cause why that of the national debt hardly exceeded three per cent. in the middle of the last century; but if from any other cause the domestic profit of money should become equally low without a corresponding reduction of it abroad, the temptation to transport it, or, which is eventually the same, to invest it in manufactures which may be exported without a sufficient certainty of payment, would become great even while the sale of stock to the commissioners for reducing the national debt might continue to be a voluntary act of the proprietors; and if it should be repaid to them against their will, or they should be reduced to the alternative of accepting a very low rate of interest to avoid being repaid, the temptation would soon become excessive.

In such a case no country abounds in specie to such an extent that remittances to invest in foreign countries capital which cannot be employed with profit enough at home could be made in the precious metals. The eventual losses which may attend such a forced export; the frequent ruin of our manufactures and merchants; the alternate prodigality and want which the excess of occupation at one time, and the stagnation of it at another, may occasion among the labouring classes, are by no means the only evils which such a state of things could produce. The emigration of the most industrious and valuable part of our population, and the nursing up foreign factions in the state, by connecting many of our wealthy families with foreign interests in consequence of the property which they had invested abroad, are effects which have been severely felt in Swisserland, Geneva, and Holland, and from which even our own experience has not taught us to hope for exemption.

This circumstance alone may make it impossible to employ

a constantly increasing sinking fund with advantage, and must at some point or other limit its amount, although it may not be easy to form any correct theory by which the place of this limit may be previously calculated with precision.

We are not fond of giving to speculations the importance of theories, but, perhaps, the following conjectures on the causes by which the profitable employment of a sinking fund must necessarily be limited, may not be altogether unfounded.

The power of redeeming a national debt without diminishing the intrinsic national wealth does not merely depend on raising by taxes an adequate revenue, but very much on the means of finding profitable employment at home for the money which is repaid.

Those means depend on adequate materials for employing the money repaid, adequate instruments for improving their value, and adequate consumption of the produce.

Although we are persuaded that too rapid a redemption of the national debt would create impediments to its own progress, and conceive it almost demonstrable that this would be the ultimate effect of a sinking fund, strictly employed according to the plans of 1802 and 1807, yet, we are equally persuaded, that the British islands have within them abundant means of finding profitable employment for a great annual redemption of the national debt. But although the capacity of ultimate improvement is probably exceedingly great, yet the progress of that improvement may be limited by various causes.

Some of these limitations may easily be apprehended to result from the manner in which many employments of human industry, and of capital, necessarily require preparatory and progressive applications of both. Others result from the impossibility of selling, and therefore producing at all profit, any thing be yond the demand for it: but a still more important limitation, as bearing on the present question, depends on the quantity of disposable labour. By this circumstance the power of increasing the real capital of any country must necessarily be limited.

We are aware that the question is intricate, and its analysis difficult; but we do not doubt that the means of employing the money repaid to the national creditors, with national profit, very much depend on the possibility of making a corresponding addition to the quantity of labour. While we borrow more, or even only as much as we pay off, the redemption is merely nominal; but whenever it shall become real, we venture to conjecture that, within limits proportioned to the value of the ad

VOL. V. NO. X.

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ditional labour of that large part of the population which is now employed in military service, &c. &c. &c. which a peace would restore to productive industry, the redemption of the national debt would materially contribute to the national prosperity; and if pushed much beyond those limits, we believe it would retard it.

Beyond those limits, indeed, any increase of capital, if seeking for employment of any kind, would directly or indirectly create an increasing competition for labourers, raising wages in an undue proportion to the value of their produce, and reducing the surplus of profit till it becomes too insignificant to be worth desiring by those who have any other permanent means of subsistence. And for this reason it may, perhaps, be imagined on a cursory view of the subject, that the whole question turns on increase of capital simply in any shape. For example, whether a million in value was left in the hands of its possessors by taking off that amount of taxes, or transferred to others through the medium of those taxes, the sum being neither more nor less on that account, would be equally dead stock unless employed, and would therefore produce nearly, if not exactly, the same effects in either case.

But there is an essential difference between the relative situations of those who derive their subsistence from the profit of money which they lend, and the profit of employing intrinsic capital. The whole subsistence of very many proprietors of national and other debts depends on their annual produce; and very many of them are incapable of employing their money advantageously in any other way but by lending it at interest.

Suppose that, from any causes, great part of an annual increase of intrinsic capital is employed in the first instance in paying off national or other debts, instead of being at once added to the productive capital of its first owners. The creditors receiving their money have no resource but to lend it again at a rate of interest diminished by the double effect of a superabundance of capital seeking employment at interest, and a decreasing demand for it, for the very cause which has enabled their debtors to pay them. The nation no longer borrows, and private persons have less need to borrow, unless new sources of profit can be opened.

We have before observed that abundant means exist of increasing the national intrinsic capital. So long as new sources of profit can be found, new adventurers will readily borrow at an interest calculated by their expectations of gain; but here the limitation according to the quantity of applicable labour interferes, beyond which no now employments can be made profitable without diminishing those that previously existed.

Thus we perceive that debt repaid beyond a convenient pro-` portion to this limitation can rarely, if ever, be employed with sufficient profit at home; but its transfer to foreign countries, in any case, diminishes its value as a national resource, and if the transfer is great and sudden, a mischievous rapidity of movement and subsequent stagnation of domestic employment must be an almost necessary consequence.

We do not presume to define the precise extent in which an annual sinking fund may conveniently be employed in the present state of this country, because we are aware that it may be greatly varied by collateral and temporary circumstances; but we doubt whether it could long together be employed beyond the amount of ten or twelve millions a year without producing consequences which would plainly shew the necessity of checking its progress.

If the tendency of these remarks is to diminish extravagant éxpectations that an immense sinking fund may be so profitably employed as to pay off in a few years a prodigious load of national debt, for the same reason they ought to operate as a serious warning against unbounded expence. Our situation has become such, that few, if any, can calculate the consequences which, without great good management, may result from it, and while we go on prosperously, fewer still are willing to believe them. The system is so artificial, that (we again repeat it) its duration altogether depends on good government, good morals, and well employed industry:

But though we may have proved that it must be impossible to keep pace with the arithmetical fancies which have been pictured in such vivid colours; yet this by no means diminishes the necessity of employing all means consistent with the general welfare for reducing the present public debt within a measurable extent; within such an extent as may be less exposed to the consequences of a great diminution of the profit of money, and also to others which may, perhaps, be still more mischievous, and which would result from too rapid a change in its commercial value. We are convinced that a powerful sinking fund honestly and steadily employed is become essential to public and private prosperity, and that, until the national debt has been reduced within more moderate limits, the country cannot be altogether safe. The present question is not whether we may be indifferent as to its magnitude, but in what manner it may be diminished with the least collateral inconvenience.

In the remarks which we have made in the course of this Re view we have endeavoured to explain the principles of the present British funding system as including a compound plan for

extinguishing, as well as creating, national debt. We have explained the defects of other ways of providing for extraordinary expences, and have stated the reasons why a regular plan of borrowing and redeeming debt by means of a permanent national revenue created for those purposes, and securely appropriated to them, is far better than any other way of obtaining the same objects.

We have not attempted to define the precise limits within which this system either evidently contributes to animate industry and increase wealth, or becomes in those respects precarious, or, when still more extended, dangerous, and, in many possible cases, impracticable; but we have attempted to shew the causes from which these effects may originate, and to lay a foundation for an approach at least to an estimate of the moral and political consequences which may result from them; as well as to point out the principles by which such a system should be regulated; and we have particularly attended to the inconvenience of trusting to the operation of a sinking fund, calculated to operate with increasing power to a great ultimate, but remote extent, by the effect of compound interest.

The inference is, that the best way of providing for national expences is, first of all, to take due care to establish a free revenue great enough to provide for all the usual cost of government and defence, and including any moderate and transitory deviations from an average expenditure, so that in any such unimportant cases it may not be necessary to have recourse to an increase of permanent debt.

But over and above the full amount of such a free revenue as we have stated, it is also prudent to provide a separated national revenue of such magnitude that, on a reasonable calculation of the excess of expence during wars, and the savings which may be made during intervening periods of peace, the national estate so separated and appropriated to this one purpose may be not ouly sufficient to pay the interest of all debts incurred on its credit, but also productive enough to furnish an annual surplus beyond that interest, capable of reducing any debt contracted during a war, before any occasion may again arise to borrow money for national purposes. The system should be such that the separated and appropriated revenue being protected by all possible means from any alienation or diminution, may prevent any necessity of burthening the people with new taxes, by providing out of those already imposed, a nutional estate redeemed by its own produce from former debt, so as to be a fund for alternately borrowing and redeeming any future debt; a fund more likely to create confidence in its stability, when its utility has