‘Entranced by the mathematical operation of compound interest’

I have drawn attention to the work of the House of Commons (1766) in addressing the ‘wants’ of a very distinct type of consumer: the canal pro­moter as stakeholder in the legislative process.

The House of Commons took endowment of child-agents to another height when William Pitt applauded Richard Price’s Appeal to the Public on the Subject of the National Debt (1772).⁵ Price’s pamphlet is taken to be the driving force behind the National Debt Reduction Act, 26 Geo. 3 c. 31 (1786).⁶ The best-known feature of this Act of Parliament is the Sinking

‘This beautiful political order’ 149 Fund, previously mentioned.⁷ By virtue of this Act, Parliament vested com­missioners with life as a body corporate. Parliament tasked the Bank of England to serve as the commissioners’ minder. The Bank was accordingly required to disclose commissioners’ financial affairs as ‘carried in their books’ before ‘both houses of Parliament on or before the fifteenth day of February’. Section XVII.

Parliament committed itself to funding these commissioners via quarterly grants of £250,000.

The commissioners were licensed to go into the business of selling annui­ties on private lives. This was a popular financial derivative. Pitt’s commis­sioners hawked these investments to private investors. Section XIII. Pitt was also able to deliver tangible economic benefits to the investing class, whose appetite for government debt would come in handy during the six coalitions organised against France. Section XI commanded that ‘monies... shall be applied by the said commissioners in payments for the purchase of pub­lick annuities below par’. This bit of legislative voodoo supported prices in government’s securities. On this occasion (and others noted in this chapter) Pitt tended government bondholders as if every investor’s decision-making called for nanny-state cossetting. Despite the Iron Lady’s stern injunction, Pitt the Younger never ran out of other people’s money.

The details did not, however, support up to any serious claim that the Sink­ing Fund employed compound interest to bulk up its asset base. Transferring assets and assigning income streams to an agency offered a ‘psychological’ boost to investors that masked the economic value of the arrangement.

The Eleventh Report of the Commissioners for the Public Accounts (5 December 1783) lavished its eloquence on the subject of investor con­fidence. ‘The Right of the Public Creditor to his Debt, must be preserved inviolate: His Security rests upon the solid Foundation, never to be shaken, in Parliamentary National Faith’.¹¹ At the time, these commissioners were laying the groundwork for the ambitions of William Pitt, who would not take office as Treasury Lord for another two weeks.¹² This proposition, however, reduced to nothing more than Parliament’s converting govern­ment itself into a money-making enterprise: ‘This Fund’, Commons was informed, ‘must be the Surplus above the annual Expences of the State’.¹³

As brought forward in Chapter 2, this volume: a government with ‘full power to preserve the republic from harm’ - this is Alexander Hamilton let­tering James Duane (3 September 1780) - served a nation’s inhabitants as a government obliged to make money off its operations to preserve its exis­tence. Or at least to net income over expenses even if it beggared grandchil­dren in the process. Government held self-preservation to be the supreme goal, if not for its own sake, then for the sake of investors in the debt and other currencies (such as annuity certificates) that the government (or its endowed agencies) issued into the public marketplace.¹⁴ It was perception that mattered.

Hence, a vital link between the technical and the aspiration was forged, even if there were (and still are) plenty of doubts about the efficacy of these arrangements. I underline the transactional nature of this axiom. Once gov­ernment borrows, it promises its creditors that it will perform every act and deed necessary to repay its debts. By extension - and this is the story of the last quarter of the eighteenth century on both sides of the North Atlantic - if government must pave every pothole in every mews in the kingdom to make inhabitants happy, then government will borrow, spend and tax up to the limit of diminishing returns for that purpose.

The Sinking Fund legislation engaged members of the House of Commons in transactional analysis: that was where the fun was. Pitt confessed him­self, William Hague relates, to be ‘half mad’ when he imagined the ‘magic in the reduction of national debt’ to be gained by Price’s proposal, when his opportunity arose to push the program through Parliament.¹⁵ Henry Roseveare’s Treasury summed up public expectations through the 1780s in this passage: ‘Simplicity in public administration could only be achieved by sweeping away anomalies and anachronistic procedures, and replacing them with machinery that was uniform, impartial, speedy and cheap’. Ros- eveare was speaking of North’s reforms (1780). These grounded Commis­sioners for Auditing the Public Accounts via 20 Geo. 3. c. 54, mentioned in Chapter 5; their Eleventh Report was mentioned above.¹⁶ Speaking of their 15 reports to Parliament (1780-1787), Roseveare has observed that the commissioners’ ‘logic was remorseless’. As ‘they worked their way from

‘This beautiful political order’ 151 one abuse to another’, he continued, commissioners ‘gradually developed a comprehensive and quite radical philosophy of the public interest’.¹⁷

As Roseveare and Cone make clear, the skills that Parliament required to endow an entity to engage in new transactions were necessarily ‘utilitarian’ in nature. With these skills in hand, Roseveare concluded, speaking of the 1780s, ‘the possibilities of reform seemed limitless’.¹⁸ And no wonder. From imaginary canal stock-companies and on to imaginary Canadian assemblies followed by imaginary transactions in annuities, Congress and Commons had learned the science of breathing life into their virtual creations and ordering them to engage in transactions promoting the public interest. Lead­ers like North, Pitt, Washington and Hamilton were certain that posterity would commend them for their diligence in pursuing any proposal which offered a ‘logic’ so ‘remorseless’.