portions of the annual produce, instead of one, employed in maintaining productive labour.
When, for defraying the expense of government, a revenue is raised within the year, from the produce of free or unmortgaged taxes, a certain portion of the revenue of private people is only turned away from maintaining one species of unproductive labour, towards maintaining another. Some part of what they pay in those taxes, might, no doubt, have been accumulated into capital, and consequently employed in maintaining productive labour; but the greater part would probably have been spent, and consequently employed in maintaining unproductive labour. The public expense, however, when defrayed in this manner, no doubt hinders, more or less, the further accumulation of new capital; but it does not necessarily occasion the destruction of any actually-existing capital.
When the public expense is defrayed by funding, it is defrayed by the annual destruction of some capital which had before existed in the country; by the perversion of some portion of the annual produce which had before been destined for the maintenance of productive labour, towards that of unproductive labour. As in this case, however, the taxes are lighter than they would have been, had a revenue sufficient for defraying the same expense been raised within the year; the private revenue of individuals is necessarily less burdened, and consequently their ability to save and accumulate some part of that revenue into capital, is a good deal less impaired. If the method of funding destroys more old capital, it, at the same time, hinders less the accumulation or acquisition of new capital, than that of defraying the public expense by a revenue raised within the year. Under the system of funding, the frugality and industry of private people can more easily repair the breaches which the waste and extravagance of government may occasionally make in the general capital of the society.