It has been famously argued that Tom Paine was not much of an economic thinker. Indeed, in his published work, we see relatively scarce systematic commentary on the subject. But, as befitting his origins in a mercantile family, Paine as a young man had prepared for a career as an excise officer. He later fully participated in a broader Enlightenment conversation about the new world of credit, trade, commercial and monetary policies, among other fiscal issues of early globalization. In particular, Paine formulated a systematic critique of public debt as a compelling way to discuss political sovereignty, the social contract, and the true wealth of nations – among other issues. In 1796, in France, Paine published a critique of wartime funding of the British economy with the publication of The Decline and Fall of the English System of Finance inspired by the title of Gibbon’s The Decline and Fall of the Roman Empire (1776). Paine’s denunciation of the economic self-mutilation caused by British wartime expansionism focused on a reform by the Prime Minister, William Pitt the Younger, who partially privatized the public debt of Britain. The British pound sterling was henceforth sustained by mysterious private loans whose very terms were obscured from public opinion. This article argues that the pamphlet had many parallels to David Hume’s 1752 essay Of Public Debt which Hume revised after the Seven Years War with a radical critique of public debt. The Humean origins of many of Paine’s arguments are manifest in the corrupting nature of public debt tied to military expenditure. To Hume and Paine, gimmicky forms of state borrowing in times of war lead to the bankruptcy of expansionist absolutism and to the eventual “decline and fall” of belligerent empires.
Coordinating Public Debt Management With Fiscal And Monetary Policies : An Analytical Framework