Thread by @adamsmithworks

Can it really be...the last chapter of #AdamSmith's #WealthOfNations?

Were we geographically proximate, we'd pinch each other. We must be dreaming! (V.iii.) #WealthOfTweets #SmithTweets

This chapter is on government financing through debt. That sounds like a bit of a slog, but it's not so bad if you think of it as 40 pages of low-key (sometimes not so low-key) #SmithSnark. (V.iii.) #WealthOfTweets #SmithTweets

It's been so long since Smith explained that in pre-commercial society the rich had no way to spend their 💰 but on dependents—commerce gave them somewhere to spend 💰 and thus freed their dependents, that he has to explain it again. (V.iii.1) #WealthOfTweets #SmithTweets

Without peace, order, and good government, there was also an incentive to hoard treasure for a rainy day.
Or, like, a war. (V.iii.1) #WealthOfTweets #SmithTweets

Once you have peace and security, you can have commerce. Commerce doesn't just give rich folk somewhere to spend their 💰, it also creates the sort of people who can lend to the government. (V.iii.2–9) #WealthOfTweets #SmithTweets

Having a bunch of ready lenders really puts a dent in the argument for a treasure hoard. Plus you can buy pretty pretty things with all that 💰💰💰. Sovereigns, just like anyone else would, buy the pretties and give up hoarding. (V.iii.2–9) #WealthOfTweets #SmithTweets

Unfortunately, knowing that they can borrow means governments don't just give up hoarding. They give up saving in time of peace, too. They spend what revenue is available to them. (V.iii.2–9) #WealthOfTweets #SmithTweets

If you don't save up money and then you go and start a war anyway, you need a lotta cash. Raising money through taxes takes time. And, like, there's a war on.
Luckily, governments are not frugal borrowers—lenders are happy to oblige. (V.iii.2–9) #WealthOfTweets #SmithTweets

(Smith also says that lenders will lend to the government because they trust it and understand that it's the real source of the stability that lets them accumulate wealth...somehow we think it's more to do with the favourable terms.) (V.iii.2–9) #WealthOfTweets #SmithTweets

Smith thinks the oppressive debts that all the nations of Europe have accumulated will probably eventually ruin them. (V.iii.10) #WealthOfTweets #SmithTweets

For a while, governments issue debt, some that pays interest, some that doesn't. But eventually they have to start mortgaging revenue streams, like taxes. (V.iii.11–12) #WealthOfTweets #SmithTweets

Britain hasn't mortgaged the land or malt tax, but anticipates and spends them before they come in. All other revenue streams, says Smith, have been mortgaged. (V.iii.13) #WealthOfTweets #SmithTweets

At first, the mortgaging of taxes was meant to be temporary. Smith lists times the temporary mortgages were prolonged.
There were many times.
Then they just went ahead and made the mortgages permanent. (V.iii.14–25) #WealthOfTweets #SmithTweets

(Now we wish Bob Higgs was on Twitter.) en.wikipedia.org/wiki/Robert_Hi…

Governments can keep borrowing (and Britain's does) because new taxes are unpopular. "To relieve the present exigency is always the object which principally interests those immediately concerned with the administration of publick affairs." (V.iii.26) #WealthOfTweets #SmithTweets

Sometimes governments legislate a lower interest rate, making debt cheaper to service. In this case, they start a "sinking fund" for the money they save on interest to pay off their debt. But then they normally mortgage or spend it. (V.iii.27–28) #WealthOfTweets #SmithTweets

Governments also borrowed on annuities (set annual payments) that came in terms of years, terms of lives, and the perpetual sort. And also tontines. (V.iii.29–36) #WealthOfTweets #SmithTweets

Smith vs. the French: til the very end of this book. Here, a detailed explanation (involving women refusing to marry French men) of why the French have no cares that extend past the end of their own lives. Oof. (V.iii.34–36) #WealthOfTweets #SmithTweets

Government spending is set by its revenue, not concern for its proper role. Even in time of peace. Rather than make this explicit by instituting an unpopular and embarrassing new tax, they just borrow to fund wars. (V.iii.37) #WealthOfTweets #SmithTweets

The lack of an unpopular and embarassing new tax means that citizens not directly affected by the fighting see wars as entertainment. They don't even have to feel the burden of its cost. They may even be sad when peace returns. 😬 (V.iii.37) #WealthOfTweets #SmithTweets

Even if a government institutes a new tax to pay for a war, the end of the war doesn't bring with it relief from the tax. (V.iii.38) #WealthOfTweets #SmithTweets

You don't need a war to cause this problem, though. Because governments spend whatever revenue comes in, extraordinary expenses in peacetime create the same problem. (V.iii.39–40) #WealthOfTweets #SmithTweets

Britain's debt. Smith thought it was a lot.
*laughs in 21st century debt burden* (V.iii.41–46) #WealthOfTweets #SmithTweets

We're about halfway through V.iii and Smith is about to pivot from facts about debt to debt myths and solutions, so we're gonna leave you with one more cliffhanger. Tomorrow we will conclude (OMG) #WealthOfNations🥳 AND #WealthOfTweets🥳!