Cyclopædia of Political Science, Political Economy, and the Political History of the United States
By John J. Lalor
NEITHER American nor English literature has hitherto possessed a Cyclopædia of Political Science and Political Economy. The want of a work of reference on these important branches of knowledge has long been felt, especially by lawyers, journalists, members of our state and national legislatures, and the large and intelligent class of capitalists and business men who give serious thought to the political and social questions of the day. The present work, which will be completed in three volumes, is the first to supply that want. It is also the first Political History of the United States in encyclopædic form—the first to which the reader can refer for an account of the important events or facts in our political history, as he would to a dictionary for the precise meaning of a word. The French, the Germans and even the Italians are richer in works of reference on political science and political economy than the Americans or the English. The Germans have Rotteck and Welcker’s
Staatslexikon, and Bluntschli and Brater’s
Staatswörterbuch; the French, Block’s
Dictionnaire Général de la Politique, and the celebrated
Dictionnaire de l’Economie Politique, edited by Guillaumin and Coquelin.The “Cyclopædia of Political Science, Political Economy, and of the Political History of the United States” is intended to be to the American and English reader what the above-named works are to French and German students of political science and political economy. The articles by foreigners in our work are largely translations from the
Dictionnaire de l’Economie Politique, the
Dictionnaire Général de la Politique, the
Staatswörterbuch, and original articles by Mr. T. E. Cliffe Leslie, the eminent English economist; while the American articles are by the best American and Canadian writers on political economy and political science. The task of writing the articles on the political history of the United States was confided to one person, Mr. Alexander Johnston, of Norwalk, Connecticut, thoroughness, conciseness and the absence of repetition and of redundancy being thus secured…. [From the Preface]
First Pub. Date
New York: Maynard, Merrill, and Co.
Originally printed in 3 volumes. Includes articles by Frédéric Bastiat, Gustave de Molinari, Henry George, J. B. Say, Francis A. Walker, and more.
The text of this edition is in the public domain.
- V.1, Entry 1, ABDICATION
- V.1, Entry 2, ABOLITION AND ABOLITIONISTS
- V.1, Entry 3, ABSENTEEISM
- V.1, Entry 4, ABSOLUTE POWER
- V.1, Entry 5, ABSOLUTISM
- V.1, Entry 6, ABSTENTION
- V.1, Entry 7, ABUSES IN POLITICS
- V.1, Entry 8, ABYSSINIA
- V.1, Entry 9, ACADEMIES
- V.1, Entry 10, ACADEMIES
- V.1, Entry 11, ACCLAMATION
- V.1, Entry 12, ACCUMULATION OF WEALTH
- V.1, Entry 13, ACT
- V.1, Entry 14, ADAMS
- V.1, Entry 15, ADAMS
- V.1, Entry 16, ADAMS
- V.1, Entry 17, ADAMS
- V.1, Entry 18, ADJOURNMENT
- V.1, Entry 19, ADMINISTRATION
- V.1, Entry 20, ADMINISTRATIONS
- V.1, Entry 21, AFRICA
- V.1, Entry 22, AGE
- V.1, Entry 23, AGENT
- V.1, Entry 24, AGENTS
- V.1, Entry 25, AGIO
- V.1, Entry 26, AGIOTAGE
- V.1, Entry 27, AGRICULTURE
- V.1, Entry 28, ALABAMA
- V.1, Entry 29, ALABAMA CLAIMS
- V.1, Entry 30, ALASKA
- V.1, Entry 31, ALBANY PLAN OF UNION
- V.1, Entry 32, ALBANY REGENCY
- V.1, Entry 33, ALCALDE
- V.1, Entry 34, ALCOHOL
- V.1, Entry 35, ALGERIA
- V.1, Entry 36, ALGERINE WAR
- V.1, Entry 37, ALIEN AND SEDITION LAWS
- V.1, Entry 38, ALIENS
- V.1, Entry 39, ALLEGIANCE
- V.1, Entry 40, ALLEGIANCE
- V.1, Entry 41, ALLIANCE
- V.1, Entry 42, ALLIANCE
- V.1, Entry 43, ALLOYAGE
- V.1, Entry 44, ALMANACH DE GOTHA
- V.1, Entry 45, ALSACE-LORRAINE
- V.1, Entry 46, AMBASSADOR
- V.1, Entry 47, AMBITION
- V.1, Entry 48, AMENDMENTS TO THE CONSTITUTION
- V.1, Entry 49, AMERICA
- V.1, Entry 50, AMERICAN MERCHANT MARINE
- V.1, Entry 51, AMERICAN PARTY
- V.1, Entry 52, AMERICAN WHIGS
- V.1, Entry 53, AMES
- V.1, Entry 54, AMISTAD CASE
- V.1, Entry 55, AMNESTY
- V.1, Entry 56, AMNESTY
- V.1, Entry 57, ANAM
- V.1, Entry 58, ANARCHY
- V.1, Entry 59, ANCIEN RÉGIME
- V.1, Entry 60, ANDORRA
- V.1, Entry 61, ANHALT
- V.1, Entry 62, ANNEXATION
- V.1, Entry 63, ANNEXATIONS
- V.1, Entry 64, ANTI-FEDERAL PARTY
- V.1, Entry 65, ANTI-MASONRY
- V.1, Entry 66, ANTI-NEBRASKA MEN
- V.1, Entry 67, ANTI-RENTERS
- V.1, Entry 68, ANTI-SLAVERY.
- V.1, Entry 69, APPORTIONMENT
- V.1, Entry 70, APPROPRIATION.
- V.1, Entry 71, APPROPRIATIONS
- V.1, Entry 72, ARBITRAGE
- V.1, Entry 73, ARBITRARY ARRESTS
- V.1, Entry 74, ARBITRARY POWER
- V.1, Entry 75, ARBITRATION
- V.1, Entry 76, ARCHONS
- V.1, Entry 77, AREOPAGUS.
- V.1, Entry 78, ARGENTINE CONFEDERATION
- V.1, Entry 79, ARISTOCRACY.
- V.1, Entry 80, ARISTOCRATIC AND DEMOCRATIC IDEAS.
- V.1, Entry 81, ARITHMETIC
- V.1, Entry 82, ARIZONA
- V.1, Entry 83, ARKANSAS
- V.1, Entry 84, ARMISTICE
- V.1, Entry 85, ARMIES
- V.1, Entry 86, ARMY
- V.1, Entry 87, ARTHUR
- V.1, Entry 88, ARTISANS
- V.1, Entry 89, ARYAN RACES.
- V.1, Entry 90, ASIA
- V.1, Entry 91, ASSEMBLY (IN U. S. HISTORY)
- V.1, Entry 92, ASSESSMENTS
- V.1, Entry 93, ASSIGNATS
- V.1, Entry 94, ASSOCIATION AND ASSOCIATIONS
- V.1, Entry 95, ASYLUM
- V.1, Entry 96, ATELIERS NATIONAUX
- V.1, Entry 97, ATTAINDER
- V.1, Entry 98, ATTORNEYS GENERAL
- V.1, Entry 99, AUSTRALIA
- V.1, Entry 100, AUSTRIA-HUNGARY
- V.1, Entry 101, AUTHORITY
- V.1, Entry 102, AUTHORS
- V.1, Entry 103, AUTOCRAT
- V.1, Entry 104, AUTONOMY.
- V.1, Entry 105, AYES AND NOES
- V.1, Entry 106, BADEN
- V.1, Entry 107, BALANCE OF POWER
- V.1, Entry 108, BALANCE OF TRADE
- V.1, Entry 109, BALLOT
- V.1, Entry 110, BANK CONTROVERSIES
- V.1, Entry 111, BANKING
- V.1, Entry 112, BANK NOTES.
- V.1, Entry 113, BANKRUPTCY.
- V.1, Entry 114, BANKRUPTCY, National.
- V.1, Entry 115, BANKS.
- V.1, Entry 116, BANKS, Functions of.
- V.1, Entry 117, BANKS OF ISSUE
- V.1, Entry 118, BANKS, Advantages of Savings.
- V.1, Entry 119, BANKS, History and Management of Savings,
- V.1, Entry 120, BAR
- V.1, Entry 121, BARNBURNERS
- V.1, Entry 122, BARRICADE
- V.1, Entry 123, BARTER.
- V.1, Entry 124, BASTILLE
- V.1, Entry 125, BAVARIA
- V.1, Entry 126, BELGIUM
- V.1, Entry 127, BELL
- V.1, Entry 128, BELLIGERENTS
- V.1, Entry 129, BENTON
- V.1, Entry 130, BERLIN DECREE
- V.1, Entry 131, BILL
- V.1, Entry 132, BILL OF EXCHANGE
- V.1, Entry 133, BILL OF RIGHTS
- V.1, Entry 134, BILLION
- V.1, Entry 135, BILLS
- V.1, Entry 136, BI-METALLISM.
- V.1, Entry 137, BIRNEY
- V.1, Entry 138, BLACK COCKADE
- V.1, Entry 139, BLACK CODE.
- V.1, Entry 140, BLACK REPUBLICAN.
- V.1, Entry 141, BLAINE
- V.1, Entry 142, BLAIR
- V.1, Entry 143, BLOCKADE
- V.1, Entry 144, BLOODY BILL
- V.1, Entry 145, BLUE LAWS
- V.1, Entry 146, BLUE LIGHT
- V.1, Entry 147, BOARD OF TRADE.
- V.1, Entry 148, BOLIVIA
- V.1, Entry 149, BOOTY
- V.1, Entry 150, BORDER RUFFIANS
- V.1, Entry 151, BORDER STATES
- V.1, Entry 152, BOURGEOISIE
- V.1, Entry 153, BOUTWELL
- V.1, Entry 154, BRAHMANISM.
- V.1, Entry 155, BRAZIL
- V.1, Entry 156, BRECKENRIDGE
- V.1, Entry 157, BROAD SEAL WAR
- V.1, Entry 158, BROKERS
- V.1, Entry 159, BROOKS
- V.1, Entry 160, BROWN
- V.1, Entry 161, BUCHANAN
- V.1, Entry 162, BUCKSHOT WAR
- V.1, Entry 163, BUCKTAILS
- V.1, Entry 164, BUDDHISM
- V.1, Entry 165, BUDGET
- V.1, Entry 166, BULL
- V.1, Entry 167, BUNDESRATH
- V.1, Entry 168, BUREAUCRACY
- V.1, Entry 169, BURGESSES
- V.1, Entry 170, BURLINGAME
- V.1, Entry 171, BURR
- V.1, Entry 172, BUTLER, Benj. F.
- V.1, Entry 173, BUTLER, William Orlando
- V.1, Entry 174, CACHET
- V.1, Entry 175, CÆSARISM
- V.1, Entry 176, CALENDAR
- V.1, Entry 177, CALHOUN
- V.1, Entry 178, CALIFORNIA
- V.1, Entry 179, CANADA
- V.1, Entry 180, CANALS
- V.1, Entry 181, CANON LAW
- V.1, Entry 182, CAPITAL
- V.1, Entry 183, CAPITAL
- V.1, Entry 184, CAPITULATION
- V.1, Entry 185, CARICATURE
- V.1, Entry 186, CARPET BAGGERS
- V.1, Entry 187, CARTEL
- V.1, Entry 188, CASS
- V.1, Entry 189, CASUS BELLI
- V.1, Entry 190, CAUCUS
- V.1, Entry 191, CAUCUS SYSTEM
- V.1, Entry 192, CAUSE AND EFFECT IN POLITICS.
- V.1, Entry 193, CELIBACY, Clerical
- V.1, Entry 194, CELIBACY, Political Aspects of.
- V.1, Entry 195, CELTS.
- V.1, Entry 196, CENSURE.
- V.1, Entry 197, CENSURE OF MORALS.
- V.1, Entry 198, CENSURES
- V.1, Entry 199, CENSUS.
- V.1, Entry 200, CENTRALIZATION and DECENTRALIZATION.
- V.1, Entry 201, CEREMONIAL
- V.1, Entry 202, CHAMBER OF COMMERCE.
- V.1, Entry 203, CHARGÉ D'AFFAIRES.
- V.1, Entry 204, CHARITY, Private.
- V.1, Entry 205, CHARITY, Public.
- V.1, Entry 206, CHARITY, State.
- V.1, Entry 207, CHASE
- V.1, Entry 208, CHECKS AND BALANCES.
- V.1, Entry 209, CHEROKEE CASE
- V.1, Entry 210, CHESAPEAKE CASE.
- V.1, Entry 211, CHILI.
- V.1, Entry 212, CHINA
- V.1, Entry 213, CHINESE IMMIGRATION.
- V.1, Entry 214, CHIVALRY.
- V.1, Entry 215, CHRISTIANITY.
- V.1, Entry 216, CHURCH AND STATE
- V.1, Entry 217, CHURCH
- V.1, Entry 218, CHURCH
- V.1, Entry 219, CHURCH
- V.1, Entry 220, CHURCHES AND RELIGIONS
- V.1, Entry 221, CHURCHES
- V.1, Entry 222, CINCINNATI
- V.1, Entry 223, CIPHER DISPATCHES AND DECIPHERMENT
- V.1, Entry 224, CIRCULATION OF WEALTH.
- V.1, Entry 225, CITIES
- V.1, Entry 226, CITIES AND TOWNS.
- V.1, Entry 227, CIVIL ADMINISTRATION
- V.1, Entry 228, CIVIL LIST.
- V.1, Entry 229, CIVIL RIGHTS BILL
- V.1, Entry 230, CIVIL SERVICE REFORM
- V.1, Entry 231, CIVILIZATION
- V.1, Entry 232, CLAY
- V.1, Entry 233, CLEARING, AND CLEARING HOUSES
- V.1, Entry 234, CLERICALISM
- V.1, Entry 235, CLIENTÈLE AND CUSTOM
- V.1, Entry 236, CLIMATE
- V.1, Entry 237, CLIMATE
- V.1, Entry 238, CLINTON
- V.1, Entry 239, CLINTON, George
- V.1, Entry 240, CL�TURE
- V.1, Entry 241, COASTING TRADE
- V.1, Entry 242, COCHIN CHINA
- V.1, Entry 243, COINAGE
- V.1, Entry 244, COLFAX
- V.1, Entry 245, COLONIZATION SOCIETY
- V.1, Entry 246, COLORADO
- V.1, Entry 247, COLOMBIA
- V.1, Entry 248, COMMERCE.
- V.1, Entry 249, COMMERCIAL CRISES
- V.1, Entry 250, COMMISSION
- V.1, Entry 251, COMMITTEES
- V.1, Entry 252, COMMON LAW
- V.1, Entry 253, COMMONS
- V.1, Entry 254, COMMUNE
- V.1, Entry 255, COMMUNISM
- V.1, Entry 256, COMPETITION.
- V.1, Entry 257, COMPROMISES
- V.1, Entry 258, COMPULSORY CIRCULATION
- V.1, Entry 259, COMPULSORY EDUCATION
- V.1, Entry 260, CONCESSION
- V.1, Entry 261, CONCLAVE.
- V.1, Entry 262, CONCLUSUM
- V.1, Entry 284, CONSTITUTION OF THE UNITED STATES
- V.1, Entry 301, CONVENTION
- V.1, Entry 375, DISTILLED SPIRITS
- V.1, Entry 384, DOMINION OF CANADA
- V.2, Entry 7, EDUCATION
- V.2, Entry 18, EMBARGO
- V.2, Entry 33, EXCHANGE
- V.2, Entry 35, EXCHANGE OF PRISONERS
- V.2, Entry 37, EXCHANGE OF WEALTH
- V.2, Entry 121, GREAT BRITAIN
- V.2, Entry 130, HABEAS CORPUS
- V.2, Entry 180, INDUSTRIAL ARBITRATION AND CONCILIATION
- V.2, Entry 225, JUSTICE, Department of
- V.2, Entry 246, LAW
- V.2, Entry 364, NEW GRANADA
- V.2, Entry 379, NULLIFICATION
- V.3, Entry 4, OCEANICA
- V.3, Entry 29, PARIS MONETARY CONFERENCE
- V.3, Entry 32, PARLIAMENTARY LAW.
- V.3, Entry 116, RACES OF MANKIND
- V.3, Entry 137, REPUBLICAN PARTY
- V.3, Entry 155, ROMAN CATHOLIC CHURCH.
- V.3, Entry 195, SLAVERY
- V.3, Entry 278, UNITED STATES OF AMERICA
- V. 2, List of Writers
- V. 3, List of Writers
- V. 3, List of American Writers
BANKRUPTCY, National. The private individual who borrows money, generally for productive purposes, is not always in a position to discharge his obligations to his creditors. Unforeseen circumstances may have interfered with his business operations; imprudence and bad faith may have diverted the loan from its rightful destination, and prevented the subsequent restoration of the capital he owed to the lender. What wonder is it then, that states which borrow nearly always for unproductive purposes, or even with destructive objects in view, have so often been placed in such a condition that it was impossible for them to meet their liabilities? The state has this poor advantage over the private citizen: no action at law lies against it, especially when its refusal to pay becomes general, and extends to all its obligations. In former times the state had, besides, the privilege of robbing its creditors without seeming to do so. To accomplish this, all it had to do was to debase the coinage Shortly after the first Punic war, the government of Rome reduced the
as from twelve ounces of copper, which it contained, to two ounces only. With the sixth part of the sum which the government really owed, it thus paid the debts incurred during the war. This kind of legerdemain has been frequently practiced since the beginning of the Christian era. We can hardly mention a country that has not resorted to this sort of trickery at one time or another. It is still, to this day, a mode of liquidation or redemption which obtains in eastern countries. Sometimes governments made use of artifice in the matter. They debased the coinage, not by the manifest and tangible reduction of its weight, but by misrepresentation on its face. Sometimes, for instance, the government paid in silver crowns with a copper alloy of 40 per cent., a loan which had been contracted on the basis of crowns with an alloy of only 10 per cent. For some time this ruse prevented the inexperienced from detecting the fraud.
—The adulteration of the currency had the serious drawback of causing an endless series of dishonest acts by the inhabitants of the country. The adulterated money being used to settle private accounts, the national treasury was not the only defrauder; every creditor was robbed by his debtor. It was almost a step for the better when governments took the resolution to repudiate their debts more openly and heartlessly. They had the lamentable effrontery to carry this resolution into effect in the middle ages, and up to the eighteenth century. They borrowed as much as possible from the Lombards and the Jews, the great bankers and money lenders of that period, and then drove them out of the country as criminals, and confiscated their property. The compulsory conversion of the Jews to Christianity sometimes exempted them from expulsion. Their conversion, of course, saved their souls, but it saved neither the outstanding debts due to them nor their hoarded treasure. When the Lombards and the Jews had made room for native Christians in the financial marts, the national treasury met the claims of its creditors by periodical “blood-lettings,” or forced levies on the property of the citizens. The most honest and upright ministers of the French monarchy, such men as Sully and Colbert, were not the least violent in the measures taken by them to reduce or cancel the indebtedness of the government; to pay its creditors in
lettres de cachet by seizing their property and by sending them to work in the galleys The regency was inaugurated by the revival of the so-called chamber of justice, whose province it was to cause contractors, purveyors and other persons to disgorge the money they had received or were to receive from the national treasury. The restoration of this tribunal by the duke of Noailles, was preceded by the establishment of the
visa-bureau, or auditor’s office, whose “examination” of accounts reduced the floating debt from 600,000,000 francs to 250,000,000. It had been preceded, likewise, by the pretended monetary reform which debased, by one-fifth, the intrinsic value of the silver coin of the realm. Thus were different kinds of national bankruptcy introduced. Recourse was had to the same measures after the disastrous results of John
Law’s enterprise Subsequently the celebrated abbé Terrai, minister of finance, a man in every respect worthy the reign of Louis XV., proclaimed to the world the necessity and the legitimateness of a nation’s going into bankruptcy at least once in every century. Before him, Richelieu had urged the expediency of a decennial re-examination of claims upon the national treasury. These claims, certainly, were not always genuine. Sometimes they were not very authentic, and emanated from suspicious sources; at other times they were burdened with exorbitant usurious interest. But, we may ask, was the lender here more guilty than the borrower? These shameful transactions could produce upon the public credit only one effect, namely, that of raising the premium charged for risk, which the lender then added to the price of money. The states which, like Great Britain and the United Provinces where the principles of liberty and equity prevailed, put an end to these perfidious practices, were the only ones that enjoyed good credit.
—But these bankruptcies, under the ancient régime, affected directly only a rather limited number of persons. They affected the contractors, large and small, to whom the treasury was indebted, the parties to whom these contractors had transferred the treasury’s promises to pay, and other evidences of national indebtedness, together with the capitalists who had consented to make direct advances to the national treasury. In order that the bankruptcy of the treasury might become a really national calamity, and affect all citizens to a greater or less extent, a wider circulation of government paper was necessary, and it was necessary, above all, to discover a means of borrowing from the people generally without their consent. Paper money furnished this means. Modern history affords us several instances of this kind of public bankruptcy. There is the case of France, Austria, Spain, Mexico, and
some of the states of the American Union. That of France and of Austria was the consequence of the events which followed the great French revolution. In both those countries the national bankruptcy affected the fundholders—the direct, voluntary creditors of the government, and also the holders of paper money—the indirect, involuntary creditors of the government.
—In France, the nation’s bankruptcy grew out of the excessive issue of assignats. When, at last, the law of the 29th Messidor, year IV., did away with the compulsory circulation of the assignats, that is to say, with their circulation itself, since nobody accepted them voluntarily, the amount issued had reached the almost incredible figure of 45,578,810,040 livres—about $8,432,079,857. We can easily divine what was the value of this mass of waste-paper. The extent to which the assignats had depreciated was officially fixed by the law of the 5th Messidor, year V., proposed by the
Conseil des Anciens “to devise rules to govern in the case of business transactions entered into while the depreciation of the currency lasted” According to the tabulated statement of the value of the assignats, drawn up for that purpose and which, be it remarked, rather extenuated than exaggerated their falling off in value, it appears that when the assignats were done away with at the beginning of the year 1796, 24 livres in specie brought from 5,000 to 7,000 livres in paper money. The law which authorized the issue of the
mandats, of which 2,400,000,000 livres were issued between March and September, 1796, fixed their value at 30 times that of the assignats. In other words, 1,000 livres of the
mandats represented 30,000 livres of the assignats, while the same thousand livres of
mandats, as soon as they appeared in open market, were worth only from 100 to 120 livres in metallic money! This general bankruptcy was soon followed by another, less extensive in its character, and which involved the holders of government securities. It was called the
Liquidation Ramel, after the cabinet minister who was the author of the law of the 24th Frimaire, year VI. This law provided that all perpetual and life annuities owed by the state, as well as all other state debts, old and new, should be redeemed to the extent of two-thirds, in vouchers payable to the bearer, with the superscription:
Dotte publique mobilisée. As these vouchers, from the moment they were issued, lost from 70 to 80 per cent. of their value, it soon became impossible to keep them in circulation at all; and hence fundholders, pensioners, contractors and other creditors of the state lost two-thirds of their claims. Nor was the remaining third paid them. It was called the “consolidated debt,” and bore 5 per cent. interest. This last third, known as the consolidated third, was the origin of the national debt of France.
—While France, recovered from the violent shocks caused by the revolution, was placing her own finances on a sound basis, the wars of the empire and the immense sacrifices which they entailed on all Europe, produced the greatest disturbance in the financial condition of other states. In England, where the sacrifices had attained fabulous proportions, these losses were borne with comparative ease, thanks to the inexhaustible resources of the country, and to its solid, well-established credit at home and abroad. It was otherwise in Austria, whose national wealth was not so fully developed, and whose finances were in an embarrassed state, even before the outbreak of the wars of the empire. When Joseph II ascended the throne the national debt amounted to 283,000,000 florins, and there were upward of 7,500,000 in
bankozettel, or bank notes of a low denomination, in circulation. The war with Turkey swelled the debt to 372,000,000 florins, while the paper money circulation (
circulation fiduciaire) rose to 28,000,000. The enormous expenses and the crushing reverses which attended the wars with Napoleon were Austria’s total financial ruin, and obliged the government to have recourse to every possible expedient to raise money. At the beginning
of the year 1811 the actual national debt had reached over 700,000,000 florins, and the paper money in circulation was largely in excess of 1,000,000,000 florins. This had so shrunk in value that 1,500 florins in paper were given in exchange for 1 florin in silver. After the peace of Vienna, which deprived the state of its finest provinces, Austria was less than ever in a condition to pay its debts. On Feb. 20, 1811, the imperial decree was issued to legalize, so to speak,
de facto bankruptcy. The decree reduced the paper money (1,060,000,000 florins) and the baser coin (330,000,000 florins) to one fifth of their nominal value, and also lowered by one-half the interest on the consolidated debt. The paper money was withdrawn from circulation, and new vouchers were issued in its place (at the rate of 1 to 5 florins in
bankozettel, bank notes,) the issue of which was never to exceed, in the aggregate, one-fifth of the
bankozettel withdrawn from circulation. But this limit was soon exceeded in consequence of the wars of the years 1812 to 1815. In 1816 the amount issued had risen again to 639,000,000, while the paper money had depreciated to 28 or 29 per cent. of its nominal value. One hundred florins in
bankozettel, replaced in 1811 by 20 florins in vouchers, were, therefore, worth in 1816 only 5 or 6 florins in specie. Advantage was taken of the creation of the national bank to bring order out of this state of chaos. The bank was authorized gradually to call in the paper money, and to substitute for it its own notes, convertible on presentation into specie. It was provided that 250 florins in paper money should be equivalent to 100 florins in specie. The holders of the evidences of the public debt were paid at the same rate.
—Is it necessary to call attention to the prodigious losses which such a catastrophe involved, and from which no class, we may say no individual, was exempt? There are writers who have striven to extenuate the gravity of national bankruptcy, and almost to give it the sanction of law. They argue that as the declaration of the fact of insolvency comes only as a consequence of the state’s want of credit during a long period of time, and after a gradual depreciation of paper money, the loss in the end is really less heavy than it seems to be. The holder of the government paper at the fatal moment of the national bankruptcy, acquired it at a price quite as low as, perhaps even lower than the rate at which the insolvent treasury now holds it. Partial loss has long since been suffered by those through whose hands this paper has successively passed, while its holders, at the time of the bankruptcy, lose little or nothing. Even admitting this to be a fact, does it in any way extenuate the perfidy of bankruptcy in itself? Take the case of a merchant who fails with liabilities of a million. His financial condition or his bad faith has been suspected for two months, say, by his creditors; and they have sold his paper without indorsement, at a loss, let us suppose, of 50 per cent. Is his bankruptcy to be condemned any the less in law or morals, because, in this way, the loss of a million of which he has defrauded others is distributed among his original creditors and the buyers of his paper at a discount? The declaration of insolvency on the part of the state is not the only thing to be blamed and regretted; quite as deplorable and blamable is the loss caused by the gradual depreciation which precedes national bankruptcy itself.
—Fortunately the terrible evils which we have just mentioned are hardly possible in our day. Revolutions are less frightful and wars less protracted in our generation, than they were during the exceptional period from 1798 to 1816. Now, national resources are, as a rule, better developed, national finances are better managed, taxation and credit are better able to meet even exceptional demands. At the present time public opinion has more power to prevent unwise and ruinous outlays on the part of states. Barefaced national bankruptcy is left to such countries as Peru, Venezuela and Mexico. Still, cases of national bankruptcy, sometimes protracted in duration, occasionally occur in Europe. With the present system of public debts, when the principal is not paid and the interest alone represents to the capitalist the money he has loaned, the failure to pay accrued interest is an act of bankruptcy. When, for example, Spain refuses to pay the interest, or pays only a ridiculously small interest to a part of her creditors; or when Austria discharges in depreciated paper money the debts contracted on a metallic basis, they, in fact, repudiate the whole or a portion of the principal debt. The destruction of the debtor’s credit is, and always will be, the first and inevitable consequence of such dishonesty. It is with the state as with the private individual: dishonest management is the costliest management. Hence, open or covert bankruptcy, be it total or only partial, is an abominable piece of speculation, and a wicked act as well. It is so in a higher degree in public affairs than in private transactions. With good laws, one might in some cases give credit even to a dishonest man. The law and the courts of justice will enable him to triumph over the bad faith of the latter. But it is not so in the case of the state. For the very reason that states have the power to be bad creditors, their desire to be honest should be above suspicion. Otherwise there could hardly be any national credit.
J. E. HORN.