Eric Hobsbawm - Age Of Revolution 1789 -1848

WARthey had been transformed into currency, and each successive financialcrisis caused them to be printed in greater quantity, and to depreciatemore steeply, aided by the increasing lack of confidence of the public.By the outbreak of war they had depreciated about 40 per cent, byJune 1793 about two-thirds. The Jacobin regime maintained themfairly well, but the orgy of economic decontrol after Thermidor reducedthem progressively to about one three-hundredth of their face value,until official state bankruptcy in 1797 put an end to a monetaryepisode which prejudiced the French against any kind of banknote forthe better part of a century. The paper currencies of other countrieshad less catastrophic careers, though by 1810 the Russian had fallento 20 per cent of face value and the Austrian (twice devalued, in 1810and 1815) to 10 per cent. The British avoided this particular form offinancing war and were familiar enough with banknotes not to shyaway from them, but even so the Bank of England could not resist thedouble pressure of the vast government demand—largely sent abroadas loans and subsidies—the private run on its bullion and the specialstrain of a famine year. In 1797 gold payments to private clients weresuspended and the inconvertible banknote became, de facto, the effectivecurrency: the £1 note was one result. The 'paper pound' never depreciatedas seriously as continental currencies—its lowest mark was 71 percent of face value and by 1817 it was back to 98 per cent—but it didlast very much longer than had been anticipated. Not until 1821 werecash payments fully resumed.The other alternative to taxation was loans, but the dizzying rise inthe public debt produced by the unexpectedly heavy and prolongedexpenditure of war frightened even the most prosperous, wealthy andfinancially sophisticated countries. After five years of financing thewar essentially by loans, the British Government was forced into theunprecedented and portentous step of paying for the war out of directtaxation, introducing an income tax for this purpose (1799-1816). Therapidly increasing wealth of the country made this perfectly feasible,and the cost of the war henceforth was essentially met out of currentincome. Had adequate taxation been imposed from the beginning, theNational Debt would not have risen from £228 millions in 1793 to£876 millions in 1816, and the annual debt charge from £10 millionsin 1792 to £30 millions in 1815, which was greater than the total governmentoutlay in the last pre-waryear. The social consequences of such indebtednesswere very great, for in effect it acted as a funnel for divertingincreasingly large amounts of the tax revenue paid by the populationat large into the pockets of the small class of rich 'fund-holders' againstwhom spokesmen of the poor and the small businessmen and farmers,95