Adam Smith observes that the true costs of war remain hidden from the taxpayers because they are sheltered in the metropole far from the fighting and instead of increasing taxes the government pays for the war by increasing the national debt (1776)
About this Quotation:
In this quotation Adam Smith makes a number of important points. Firstly, he correctly observes that the citizens in the metropole, far removed from the front, have no direct experience of the fighting but instead are “amused” and entertained by reports of the glorious successes of the nation. Secondly, they are shielded from the true costs of the war because the government finds it politically difficult to raise taxes too much, so it just adds the cost to the national debt thereby only having to increase taxes to cover the increased interest on the debt.
Other quotes from this week:
- 2010: Wollaston on crimes against person or property as contradictions of fundamental truths (1722)
- 2007: J.B. Say on the self-evident nature of property rights which is nevertheless violated by the state in taxation and slavery (1817)
- 2007: Jean-Baptiste Say argues that home-consumers bear the brunt of the cost of maintaining overseas colonies and that they also help support the lavish lifestyles of the planter and merchant classes (1817)
- 2007: J.B. Say argues that colonial slave labor is really quite profitable for the slave owners at the expense of the slaves and the home consumers (1817)
- 2007: George Washington warns the nation in his Farewell Address, that love of power will tend to create a real despotism in America unless proper checks and balances are maintained to limit government power (1796)
- 2007: Franz Oppenheimer argues that there are two fundamentally opposed ways of acquiring wealth: the “political means” through coercion, and the “economic means” through peaceful trade (1922)
- 2006: J.S. Mill in a speech before parliament denounced the suspension of Habeas Corpus and the use of flogging in Ireland, saying that those who ordered this “deserved flogging as much as any of those who were flogged by his orders” (1866)
- 2005: Andrew Fletcher believed that too many people were deceived by the “ancient terms and outwards forms” of their government but had in fact lost their ancient liberties (1698)
Other quotes about War & Peace:
- 2009: Madison argued that war is the major way by which the executive office increases its power, patronage, and taxing power (1793)
- 2009: Thomas Jefferson on the Draft as "the last of all oppressions" (1777)
- 2009: Daniel Webster thunders that the introduction of conscription would be a violation of the constitution, an affront to individual liberty, and an act of unrivaled despotism (1814)
- 2008: Alexander Hamilton warns of the danger to civil society and liberty from a standing army since “the military state becomes elevated above the civil” (1787)
- 2008: John Trenchard identifies who will benefit from any new war “got up” in Italy: princes, courtiers, jobbers, and pensioners, but definitely not the ordinary taxpayer (1722)
- 2007: James Madison on the need for the people to declare war and for each generation, not future generations, to bear the costs of the wars they fight (1792)
- 2007: Thomas Gordon on standing armies as a power which is inconsistent with liberty (1722)
- 2007: James Madison argues that the constitution places war-making powers squarely with the legislative branch; for the president to have these powers is the “the true nurse of executive aggrandizement” (1793)
- 2007: St. Thomas Aquinas discusses the three conditions for a just war (1265-74)
- 2006: A.V. Dicey noted that a key change in public thinking during the 19thC was the move away from the early close association between “peace and retrenchment” in the size of the government (1905)
- 2006: J.M. Keynes reflected on that “happy age” of international commerce and freedom of travel that was destroyed by the cataclysm of the First World War (1920)
- 2006: John Jay in the Federalist Papers discussed why nations go to war and concluded that it was not for justice but “whenever they have a prospect of getting any thing by it” (1787)
- 2005: Thomas Gordon gives a long list of ridiculous and frivolous reasons why kings and tyrants have started wars which have led only to the enslavement and destruction of their own people (1737)
- 2005: Hugo Grotius states that in an unjust war any acts of hostility done in that war are “unjust in themselves” (1625)
- 2005: Hugo Grotius discusses the just causes of going to war, especially the idea that the capacity to wage war must be matched by the intent to do so (1625)
- 2005: William Graham Sumner denounced America’s war against Spain and thought that “war, debt, taxation, diplomacy, a grand governmental system, pomp, glory, a big army and navy, lavish expenditures, political jobbery” would result in imperialsm (1898)
- 2005: Erasmus has the personification of Peace come down to earth to see with dismay how war ravages human societies (1521)
- 2004: Ludwig von Mises laments the passing of the Age of Limited Warfare and the coming of Mass Destruction in the Age of Statism and Conquest (1949)
- 2004: Thomas Hodgskin on the Suffering of those who had been Impressed or Conscripted into the despotism of the British Navy (1813)
- 2004: Robert Nisbet on the Shock the Founding Fathers would feel if they could see the current size of the Military Establishment and the National Government (1988)
- 2004: Adam Smith on the Sympathy one feels for those Vanquished in a battle rather than for the Victors (1762)
- 2004: Hugo Grotius on sparing Civilian Property from Destruction in Time of War (1625)
- 2004: Bernard Mandeville on how the Hardships and Fatigues of War bear most heavily on the “working slaving People” (1732)
18 February, 2008
 | Adam Smith observes that the true costs of war remain hidden from the taxpayers because they are sheltered in the metropole far from the fighting and instead of increasing taxes the government pays for the war by increasing the national debt (1776) |
In Chapter III: Of Publick Debts in The Wealth of Nations, Adam Smith notes that most people put up with slightly higher taxes in wartime in exchange for the "amusement" of reading about imperial exploits, little realizing that the true cost of war has been added to the natonal debt:
In great empires the people who live in the capital, and in the provinces remote from the scene of action, feel, many of them scarce any inconveniency from the war; but enjoy, at their ease, the amusement of reading in the newspapers the exploits of their own fleets and armies. To them this amusement compensates the small difference between the taxes which they pay on account of the war, and those which they had been accustomed to pay in time of peace. They are commonly dissatisfied with the return of peace, which puts an end to their amusement, and to a thousand visionary hopes of conquest and national glory, from a longer continuance of the war.
The full passage from which this quotation was taken can be be viewed below (front page quote in bold):
The ordinary expence of the greater part of modern governments in time of peace being equal or nearly equal to their ordinary revenue, when war comes they are both unwilling and unable to increase their revenue in proportion to the increase of their expence. They are unwilling, for fear of offending the people, who, by so great and so sudden an increase of taxes, would soon be disgusted with the war; and they are unable, from not well knowing what taxes would be sufficient to produce the revenue wanted. The facility of borrowing delivers them from the embarrassment which this fear and inability would otherwise occasion. By means of borrowing they are enabled, with a very moderate increase of taxes, to raise, from year to year, money sufficient for carrying on the war, and by the practice of perpetual funding they are enabled, with the smallest possible increase of taxes, to raise annually the largest possible sum of money. In great empires the people who live in the capital, and in the provinces remote from the scene of action, feel, many of them scarce any inconveniency from the war; but enjoy, at their ease, the amusement of reading in the newspapers the exploits of their own fleets and armies. To them this amusement compensates the small difference between the taxes which they pay on account of the war, and those which they had been accustomed to pay in time of peace. They are commonly dissatisfied with the return of peace, which puts an end to their amusement, and to a thousand visionary hopes of conquest and national glory, from a longer continuance of the war.
The return of peace, indeed, seldom relieves them from the greater part of the taxes imposed during the war. These are mortgaged for the interest of the debt, contracted in order to carry it on. If, over and above paying the interest of this debt, and defraying the ordinary expence of government, the old revenue, together with the new taxes, produce some surplus revenue, it may perhaps be converted into a sinking fund for paying off the debt. But, in the first place, this sinking fund, even supposing it should be applied to no other purpose, is generally altogether inadequate for paying, in the course of any period during which it can reasonably be expected that peace should continue, the whole debt contracted during the war; and, in the second place, this fund is almost always applied to other purposes.
The new taxes were imposed for the sole purpose of paying the interest of the money borrowed upon them. If they produce more, it is generally something which was neither intended nor expected, and is therefore seldom very considerable. Sinking funds have generally arisen, not so much from any surplus of the taxes which was over and above what was necessary for paying the interest or annuity originally charged upon them, as from a subsequent reduction of that interest. That of Holland in 1655, and that of the ecclesiastical state in 1685, were both formed in this manner. Hence the usual insufficiency of such funds.
During the most profound peace, various events occur which require an extraordinary expence, and government finds it always more convenient to defray this expence by misapplying the sinking fund than by imposing a new tax. Every new tax is immediately felt more or less by the people. It occasions always some murmur, and meets with some opposition. The more taxes may have been multiplied, the higher they may have been raised upon every different subject of taxation; the more loudly the people complain of every new tax, the more difficult it becomes too either to find out new subjects of taxation, or to raise much higher the taxes already imposed upon the old. A momentary suspension of the payment of debt is not immediately felt by the people, and occasions neither murmur nor complaint. To borrow of the sinking fund is always an obvious and easy expedient for getting out of the present difficulty. The more the publick debts may have been accumulated, the more necessary it may have become to study to reduce them, the more dangerous, the more ruinous it may be to misapply any part of the sinking fund; the less likely is the publick debt to be reduced to any considerable degree, the more likely, the more certainly is the sinking fund to be misapplied towards defraying all the extraordinary expences which occur in time of peace. When a nation is already over burdened with taxes, nothing but the necessities of a new war, nothing but either the animosity of national vengeance, or the anxiety for national security, can induce the people to submit, with tolerable patience, to a new tax. Hence the usual misapplication of the sinking fund.