The Sun.
London, England, 1870-10-31 00:00:00

CUR COTIZIPORARIZS—This MorLin,

M. GAMBETTA AND MARSHAL BAZAINE.
The Times discusses M. Gambetta's condemnation of
Marshal Bazain e, and asks : Cduld Bazaine break
_ _

through the Prussians at Metz, and can Trochu do so at

Paris? The answer should not be given incon-

giderately.

An army shuts itself
_up in a. fortress,

or seeks-the shelter of its guns, when it is no longer

sufficiently strong to keep the field. The three great
efforts of Bazaihe on the 14th, 16th and 18th of

August were in reality sorties. The Marshal tried then
to cut his way through the enemy's ranks, and, having
failed, it was hopeless for him to renew the Attempt.
Henceforth the beleagueied army might indeed be

able, and was bound, in self-preservation, to make
frequent sorties ; but these could only be meant to harass
the besiegers, to meet his advances, destroy his works,
spike or dismount his cannon, thus preventing the invest-
ment becoming a close siege and putting off a bombard-
ment or an assault. But, in order that a garrison, no

matter how large, which has been driven in because it was
not a match for the besieger may be able to break through
his lines, it is necessary that something should happen
during the siege to alter their mutual relations. The be-
sieged army may, indeed, be numerically as strong as
that of the besieger ; it may be numerically stronger,
but the question is whether the causes which originally
shut it in have ceased to be effective. Had, for instance,
the German armies under Steinmetz and Prince Frederick
Charles been so exhausted by famine or thinned by
disease as to lose their efficiency, a new appeal to arms
might have been successful. But there is hardly
any doubt that, while all the losses of the German armies
could be promptly repaired, the distress within the forts
of Metz daily increased, and became at last intoler-
able. By enduring to the last, and giving full employ-
ment to 250,000 Germans, Bazaine did his country a more
important service then he would have done by constantly
renewing a contest in which life would have ag..p.in and
again been overpowered ; but in that very service ho
reduced his army to such a state of exhaustion that it was
at last incapable of anything but surrender.
M. Gambetta has surpassed himself, remarks the Daily
News, in publishing a proclamation which is worse than
mendacious. We may look upon his sinister references to
criminal capitulations as prophetic of a wide-spread clamour
against Marshal Bazaine. If there is one fact in all her re-
cent experiences of which France may be proud, it is that,
at the beginning of the war, her soldiers fought bravely
against superior numbers ; and that she has since had
more than one General who has done his best to retrieve
her misfortunes, and shown himself a courageous and
able officer in these efforts. Is it prudent, is it humane,
is it honourable .to turn upon those men whenever
they have succumbed to circumstances, and hound them
with a cry of perfidy ? There are ignorant persons
all ever the world who imagLe that a man who
differs from them is a fool, that a general who does not
work miracles for them is a traitor. But is it not deplor-
able that one of the handful of politicians who now hold
the honour of France in their keeping—one of the

leaders to whom France, in her distress and need, is com-
pelled to look for guidance—should betray the gross and
unreasonable projudice, the angry and savage suspicion
which fire the brain of the uninstructed peasant? M.
Gambetta, in his proclamation of the 29th, treats the
capitulation of Metz as a rumour, but seems even in that
case anxious to be beforehand with popular judgment.
In the same breath in which he acknowledges he has
no information about the fall of Metz, he declares
that such an event can only be the result of crime.
We are glad to believe that the accusations brought
against Ulrich were not supported by the great mass of
the people, and that the spirited reply of that General
touched responsive chords in the better h6art of France.
But with the Chief Minister outside Paris openly lead-
ing the chorus, we need not be surprised if the whole
nation begins to charge Bazaine with being a traitor.
The Standard thinks M. Gambetta's circular leaves
very little room for the fond belief expressed in many
quarters that the capitulation of Metz will convince the
French of the hopelessness of further resistance, and, con-
sequently, of the wickedness of making it. The
Minister of the Interior not only declares that
this disaster will nut overcome the resolution of
the Government to resist to the last, but even
denounces the surrender, although quite ignorant
of the circumstances under which it was made, as a
crime, the authors of which should be put out of the pale
of the law. This denunciation is very childish as well as
unjust, but there is no reason to doubt that it correctly
expresses the feeling, we will not say of France,
but of that party which is now predominant in
the country. For the extreme Republican faction
every defeat sustained by France is the work
traitors, whilst the resolution to continue the struggle
the last rather than cede territory is common at present
to all parties, and is likely to continue so until after
peace has been made, for the good reason that the party
which should profess other opinions would court its own
destruction as a party, and the exile or imprisonment of
its leading members. M. Gambetta could, of course, have
had no communication with his colleagues in Paris before
he wrote this circular, but they are not likely to disown
it. The fall of Metz may have a very important influence
on the fate of Paris, but it is a great mistake to suppose
that peace must precede or immediately follow the sur-
render of the capital. General Trochu may come to the
conclusion that Metz in the hands of the Germans,
and the hundred and fifty thousand men watching it free
to be employed against the armies forming on the Loire
and in the south, all chance of relief is over, whilst
it may appear to him to be equally vain to hope,
now that the communications of the besiegers
with Germany are so fully secured, that
they may first become tired of starvation
rations and wintry weather. Having come to that reso-
lution, he may treat with the King of Prussia for the
surrender of the capital. But that he would treat for
peace at the same time is very improbable, anxious as
the Prussians would be for him to do so.
ENGLISH NEUTRALITY.

The Telegraph, in commenting upon Earl Granville's
reply to Count Bernstorff relative to English neutrality,
says international law has laid down certain rules which
may occasionally bear hard on a belligerent, but
which do nevertheless embody an intelligible prin-
ciple, dealing equality in the long run to all alike.
At a particular stage one of the belligerents
requires one of the neutrals to suspend the law
in its favour. If the demand were yielded, in what
position would the other belligerent and all the other neu-
trals stand? Would not all be entitled to complain—the
neutrals that unsettlement had been introduced into all
their relations, the belligerent that an accepted law had
been infringed to his injury ? Would such a result
be beneficial to the relations between independent
States, or tend to harmonise the policies of
those directly affected by the change ? It may
be convenient for Prussia that we should
instantaneously alter our traditional customs for her ad-
vantage and for the injury of her foe; but what of France?
Would she not have a real grievance, and could we give a
plausible answer to her accusations ? These are points
which, for our own sake, we must bear closely in view,
and they carry us irresistibly to one conclusion. If the
duties of neutrals to belligerents are to be altered, it
must be by general consent, and through a delibe-
rate remodelling of the whole system of interna-
tional law, not by haphazard innovations which
destroy the very character of neutrality. Such
an alteration must take place during peace, not
amid the play of the passions evoked by war ; and, when
accepted, the new law must be honestly observed by each
State; not rejected when anger, or caprice, or the for-
tune of war may tempt to a disavowal of the great prin-
ciples involved.

CONTAGIOUS DISEASES (ANIMALS) ACT.—The
Gazette of Friday evening publishes Orders in Council,
defining the parts of Plymouth and Shoreham within
which foreign cattle may be landed for slaughter.
The North Devon Herald reports that considerable
progress has been made in the construction of the Devon
and Sdmerset Railway, which is now almost completed
between Wiveliscombe and Taunton, and that a portion
will be opened for traffic in a few weeks. The promoters
also announce their intention of proceeding vigorously
with the remainder of the line, the second section of
which, from Barnstaple to Southmolton, must be ready
according to the contractors' agreement, by February,
1870, and the third and last division by the following
June.

LONDON SCHOOL BOARD.—Yesterday evening Mr.
Hepworth Dixon received a deputation from the Maryle-
bone Electoral Association, who came to offer him their
undivided support in the pending election for the School
Board. The deputation, which was received by Dr.
Richardson and other members of Mr. Dixon's executive
committee, consisted of Mr. Henry Spencer, secretary ;
Mr. Groves, and Mr. Morgan. After a lengthy discus-
sion, measures were decided on by the association to
secure the return of Mr. Hepworth Dixon. The general
committee numbers already over 300 ratepayers, including
many Fellows of the Royal Society, Fellows of the
Society of Antiquaries, Justices of the Peace, Royal
Academecians, &c., &c. Mr. Hepworth Dixon has issued
an address, in which he takes his stand on compulsory
education, Bible reading, and a thorough use of all the
powers provided in the Act.

111, THE PAYMENT OF THE NATIONAL

DEBT.

(BY THOMAS DE MESCHIN, LL.D.)

The Government has lately converted large amounts of
the consolidated bank or perpetual annuities into termi-
nable annuities. Thus, in 1861 the estimated capital of
the terminable annuities was under 19 millions ; in 1868
it was nearly 57 millions ; shewing an increase of about
33 millions. If this conversion be wrong in principle, this
is a very serious matter ; and that it is wrong, and utterly
indefensible, I propose to shew in this article.
That part of the National Debt upon which a perpetual
annuity is payable is called the redeemable debt, because
it may be redeemed by Parliament upon payment of the
capital ; thus no matter how high the price of consols may
be, Parliament can always pay the holder off by giving
him £lOO, but under no circumstances whatever can the
stockholder insist on being paid off. To the Government
belongs the option.
That part of the debt which is invested in annuities for
lives, or years, is called the irredeemable debt, for such
cannot be redeemed during the term without the co-unlit
of the holder.
The first attempt to raise money on annuities for lives
was in 1692, when it was proposed to raise one million
sterling, the contributors getting 10 per cent. for ten
years, and afterwards 7 per cent., on the lives of their
nominees, with the benefit of survivorship, till the number
was reduced to seven. Advantageous as these terms were,
the Government could only raise £lOB,lOO. An alterna-
tive was allowed of an annuity for a single life, at 14 per
cent., the sum raised on which was £773,393.
Considerable sums in early periods of the debt were
raised on annuities for lives, but since the accession of
George 111. they have alwayslbeen created as bonuses for
the purchasers of new stock. Annuities have been re.
peatedly converted into stock by the holders, on terms
offered by the Government. The motive that actuated
former governments thus to convert terminable annuities
into perpetual annuities was not a desire to relieve the
Exchequer. It was not that the annual amount paid in
respect of perpetual annuities would be smaller than
that paid in respect of terminable annuities, but such
schemes of conversion—at least when they occurred in
time of peace—sprung from a desire, and I may add a
resolution, to pay off quickly the whole debt. It also
arose, when the conversion was into five per cent, stock,
from an expectation—which was subsequently realised—
that it &would be ultimately possible to reduce the

interest on such stock to four per cent. or to three per
cent. The Chancellor of the Exchequer is just doing the
converse of this. He is converting perpetual annuities
into terminable annuities with precisely the same object,
the extinction of the debt.
Borrowing on terminable annuities is apparently be-
coming popular. There is an air of patriotism thrown
around it. It makes some pretension to the discharge of
present duty, it negatives an utter disregard to the
interest of posterity. Yet a very slight consideration will
serve to show that annuities are either in time of peace or
in time of war, the most expensive, the very worst method
of borrowing that could be adopted.
There are four modes of borrowing on terminable an-
nuities :-1. For a term of years. 2. On a single life.
3. On the longest of two or more lives. 4. On tontines.
Tontines, so called from an Italian banker, named Tonti,
who invented them. The subscribers to a loan raised by
way of tontines usually appoint nominees, who are divided
into classes according to their ages, and a proportionate
annuity is assigned to each class. When any of the nomi-
nees die, the amount of the annuity disengaged by such
death is divided among the survivors of that class to which
the deceased annuitant belonged, so long as any nominees
remain, or until the annuity payable to each survivor
amounts to a fixed sum, usually very large, according to
the terms ofthe particular scheme.

Tontines appear to be well adapted to the desires
of mankind.lMost men entertain hopes of longevity. All
desire ease and affluence in old age. Moreover, men have
naturally great confidence in their own good fortune. For
which reason tontines usually sell for more than they are
worth.

Tontines have been adopted to a considerable extent in
France and other countries, but only on three occasions in
England, viz., in the beginning of the reign of William
111., in 1766 and in 1789.
Tho terms of the tontine of 1789 were, that the sub-
scribers of 2100 ss. Od., being distributed into six classes,
according to their ages, should receive the undermentioned
annuities, with the benefit of survivorship in their re-
spective classes, till the annuity on the original shares
amounted to £l,OOO, after which the surplus fell to the
Government.

Ist Class, under 20 years of age £4 3 0
2nd Class, from 20 to 30
3rd Class, from 30 to 40
4th Class, from 40 to 50
sth Class, from 56 to 60
6th Class, above 60

Thus, if the first class consisted of 10,000 individuals
who had each paid over a sum of £lOO ss, to the Govern-
ment ; when the number was reduced to 5,000 each
survivor received £8 6s. a-year ; when reduced to 2,500
each received £l6 12s. When the number of survivors
was reduced to 42, each got £l,OOO a-year for the rest of
his life, or £l,OOO a-year for every ,ClOO ss. Od. that he had
subscribed.

If the Government are determined to grant annui-
ties for lives there does not seem to be any
reason why they should not try tontines. In 1773, 1775,
and 1776 they were tried in Ireland ; one reason why
tontines have never succeeded very well in England is,
that when Government wants money it always goes, not
directly to the people, but invariably to the grert bankers
or money-lenders, who. in advancing money to the
Government, do not intend to invest their own capital in
the loan, but merely intend to sell with a profit their
share in the subscription to the loan. This system has
the advantage of " cockering up the Bank of England"
in particular, and the bankers in general. But, then, the
loss entailed on the country is measured exactly by the
profits secured by the go-between bankers. If the
Government went directly to the people, as the French
Government does, and tapped the spring at the fountain-
head, it would always procure the money that it wanted
on easier terms. Another evil resulting from the system
is that it has been thought necessary " to cocker up," and
to confer a monopoly on the stockbroking interest. Why
should we not has e free trade in stocks and shares ? Why
should not everyone have a right to deal in stocks ? Why
should I not be able to sell my stock, as I sell my corn, to
anyone? I believe in Germany, France, and Italy, any.
one can deal in stocks and shares.

Perhaps I may remark that the substance of this article
was read as a paper at the British Association, at Liver-
pool, on the 15th September last, and that in the lengthened
and animated discussion that ensued upon the reading of
that paper there was an overwhelming weight of opinion
and authority in favour of the views here stated. Per.
haps I may also mention that as Mr. Lambert was aware
of my strong and decided opinion respecting the conver-
version of stock into terminable annuities, he requested
me to state my objections and send them to him, which I
did in a memorandum which contained the substance of
this article.

We will, first, investigate the effect of borrowing in ter-
minable annuities during war, and afterwards the effect of
converting stock into terminable annuities in time of
peace. First. In borrowing in terminable annuities : The
ratio that the annuity bears to the sum advanced to the
Government is always determined by the rate of interest
current in the money market at the time of effecting the
loan. It is notorious that the rate of interest during war
is always higher than during peace, at least when the
Government is in the market as a borrower. Now, as
those annuities so borrowed at a high rate of interest are
irredeemable, the country derives no advantage from the
fall in the rate of interest, which ever accompanies the re-
turn of peace. In point of fact, upon the return of peace
these annuities generally sell for a higher price than the
sum originally advanced, although part of the term for
they were grantedhas elapsed. This was heavily felt in the
reign of George 1., when a large proportion of the debt
was advanced on these annuities, and upon a general re-
duction of the rate of interest on the other portions of the
debt. In order to effect the conversion of terminable
annuities into perpetual annuities (a crochet of that day
just as the converse, viz., conversion of perpetual annui-
ties is a crochet of this day). It became necessary to give
a capital stock in perpetual annuities one-fifth larger than
the sum originally received by the Government for the
grant of such terminable annuities. Thus all the pay-
ments that had been made previous to the conversion,
were made in pure unmitigated loss. Had a loan been
effected exclusively on terminable annuities during the
late French war, this would, on the return of peace, have
been palpably apparent, but latterly terminable annuities
have only been granted as bonuses to lenders.
Dr. Hamilton thus describes the matter :—" The long
annuities (created during the previous war) in consequence
of the reduction of interest (caused by the peace) now
sold at a higher price than the sum originally advanced,
notwithstanding the part of the term elapsed. These
annuities had been granted at different rates, most of them
about 16 years purchase. The South Sea Company, by
purchasing £lOO annuity, for which £1,600 had been
originally paid, became entitled to a capital of 22'
000
.
i
Thus the public, nstead.of an annuity which terminated
by the course of time without repayment, became bur-
dened at present with an equal One, which could only be

extitaguished by the payment of a sum greater by one-
fourth than what had been advanced (the permanent
debt created exceeded the sum originally advanced by
23,034,769). But in return for this the debt was ren-
dered redeemable, and a reduction of interest to four per
cent. in 1727 was agreed on ; and in consequence of the
option of redemption Government was enabled afterwards
to reduce the interest to three per cent., along with that
of the other debts. These measures have been much com-
mended, but their advantage seems equivocal." [p. 81.]
Second. This method of borrowing (during war) in-
creases the amount of debt, which it is necessary to incur.
Supposing the amount of taxes laid on during war to have
no reference whatever to the method'of borrowing adopted
but to be regulated exclusively by the amount of taxation
the country was able to bear. In this case the amount of
the loan each year will be measured by tho excess of ex-
penditure over income. Now, for equal amounts, bor-
rowed on perpetual annuities, and on terminable
annuities, the annual payments in respect of terminable
annuities, it is obvious, will be much the larger. That is,
the gross annual expenditure of the country will be larger
by borrowing on terminable annuities, and, of necessity,
this larger expenditure will necessitate alarger loan. But
the next year the amount of the loan will be
augmented from two causes —first, by the in-
creased annual charge, as in the former year, due
borrowing on terminable annuities, and second, it will be
augmented by the annual charge on that portion of the
loan of the former year, which constituted the increment
due to borrowing on terminable annuities over that which
would have been incurred by borrowing 'on perpetual
annuities.

If any one will take the trouble to consider, they must
see to what a large extent the capital of the debt would
be increased in a few years of war should this method be
adopted. And, moreover, all this would be incurred at
the high rate of interest which is usually current during
war.

In the second place we will state the ground upon which
it is undesirable to convert perpetual annuities or consols
into terminable annuities during peace.

First. It is in the highest degree impolitic ; sound
policy requires that the debt should ,be paid . off
during peace, that is by causing revenue to exceed income.
The excess of revenue above expenditure is the only means
by which the public debt can be discharged. The increase of
revenue and the diminution of expense is the only mode
by which the liquidation of the debt can be accelerated.
During war, expenditure invariably rises above income,
and it is an axiom in finance, that at such periods all pay-
ment of debt ought to be suspended.
In 1792 Mr. Pitt established his second sinking fund of
one per cent. on the nominal capital of each loan to
which the dividends on the capital redeemed by
this fund were to be added. This fund was ap-
pointed to be kept separate, and applied for the
redemption of all debts contracted subsequent
to its institution, by which means it was esti-
mated that every loan would be redeemed in forty-
five years at the furthest, from its contraction. If such
a sinking-fund of one per cent on the capital of each loan
be annexed to, and bound up with an annually aug-
menting debt in the event of the loans being obtained on
the same terms as the debts are redeemed, and the oper-
ations which it involves conducted without expenses, it is
obvious that such a sinking-fund has ultimately no effect
either in increasing or diminishing the amount of the
debt

But in every loan the contractors have a profit, the re-
sult is that the nation sustains a loss equal to the bonus
given in respect of the additional capital, which the oper-
ation of the sinking-fund renders it necessary to fund ; and
the cost incidental to the management of the sinking-fund,
and of the increased capital of the debt. Dr. Hamilton cal-
culates that the loss accruing to the nation from the
operation of these causes from 1793 to 1817, amounted to
about £30,000,000.—[p. 199.1 This seems a good round
sum to pay for one's whistle.
The annual dividend payable in respect of Consols or
Stock represents the bare interest on the capital sum, but
the annual amount paid in respect of a terminable
annuity represents not only the interest but also a portion
of the capital; the payment of the capital is in fact
spread over a given number of years. The amount of
capital paid off each year will vary with the length of
the term for which the annuity has been granted ; if the
term be short the amount of capital annually paid will be
large. When the Government converts a portion of the
debt into terminable annuities the annual charge upon the
revenue is augmented, in place of having to pay the in-
terest as upon Consols, the nation has annually to pay
the interest and part of the capital. In short, conversion
means this—an undertaking to payi off certain specific
portions of the debt every year.
Therefore, by converting Stock into terminable an-
nuities, the Government is saddling the nation with the
obligation to pay large amounts of capital every year, and
this obligation will subsist in war as well as in peace.
If we should get involved in a long war, what was true
of Mr. Pitt's sinking fund of 1 per cent. added on to each
loan, will also be true of that obligation to pay large
amounts of capital annually with which the improvidence
of the Government is saddling us.
The expenses of war are now so enormous and gigantic
that it is exceedingly probable that we shall be compelled
to raise a considerable portion of war revenue by means of
loans.

If so we should be borrowing with one hand and paying
off our debt with the other, but while we might be com-
pelled to borrow at five or six per cent, or even at a higher
rate, we should be paying off portions of the debt which
we held at 3or 3 per cent. What should wo think of a
private mortgagor who borrowed money at,s or six per
cent, to pay off a mortgage at 3 per cent., yet this is what
the wisdom of the Government is probably accomplishing
for this country.
It is therefore to the last degree impolitic to saddle the
country with the obligation to, pay these annuities. All
payment of the debt ought to be suspended during war,
but deliberately to incur the obligation to pay off money
held at a low rate of interest, with money obtained
at a high rate of interest, seems the summit of finan-
cial folly, and yet this is precisely what the present
Government is doing.
Second. During war lam in favour of raising, if possible,
the'whole supplies within the year (for loans for the most
part are really taxes upon wages raised within the year).
Well, then, to saddle the nation with the necessity of pay.
ing during war large amounts of the capital of the Debt is
deliberately throwing the utmost difficulties in the way of
raising the supplies during war within the year. This is
clearly a working man's question. If the working men of
England allow the Government thus to take steps that
must result in placing upon their shoulders the financial
weight of any struggle in which the nation may hereafter
engage, they do themselves and their children a great
wrong, and this, too, without any real benefit to anyone.
For if these annual amounts of capital, the payment of
which are wrapped up in the terminable annuities, were
applied directly to the liquidation of the Debt, the result
would be a reduction of the Debt, at least as large, and I
firmly believe, larger.
Thus, to single out the interests of the working class for
the purpose of inflicting on them a great and gratuitous
loss does not seem to be very wise or grateful in a Govern.
ment that owes so much to the goodwill of that class.
Third. The next objection is that itis unconstitutional. It
deprives future Parliaments of theirlegitimate control over
portions of the revenue, compelling them to vote supplies
for the annual payment of such portions of the capital of
the Debt as are comprised in the annuities, whether they
will or no, although at the moment it may be impolitic
or inconvenient to votesuch supplies. To tie up the hands
of future Parliaments in this manner, for the bare sake
of doing so, as is the sole object of much of the late con-
version of stock into annuities, is a most gross and unpar-
donable violation of the constitution. The House of Com-
mons ought to be swift to mark and slow to forgive
any violation of the Constitution. Such wise jealousy
is and has always been one of the great mainstays of its
power, as it is the surest guarantee of the permanence and
stability of its existence to all generations.
Anxious as I am to see the Debt paid off, I am far
more anxious to see her Majesty's Government pay the
most scrupulous regard to the Constitution— a regard that
will be just as necessary and just as salutary in demo-
cratic as in despotic times. Indeed, I for one have ob-
served with profound alarm that this, the first Govern-
ment after a sweeping Reform Bill, does not hesitate to
act in an unconstitutional manner in small things upon
very slight temptation. This is a tendency that should
be vigilantly watched, and uncompromisingly'opposed. If
a Government allows itself to violate the Constitution in
small things, as the descent to Avernus is easy, it will
soon come to attempt its violation in greater things.
Fourth. It is by far the most expensive mode of paying off
the Debt. A terminable annuity is constantly diminishingin
value. No one cares to buy it. It can rarely be made
the subject of settlement, and the great bulk and body of
Government stock is purchased and held for settlement.
When, therefore, the Government forces these annuities
upon the market, it must do so at a heavy loss.
Adam Smith says:—" The real value of an annuity
begins to diminish from the moment it is granted, and
continues to do so more and more as long as it subsists.
It can never, therefore, make so convenient a transferable
stock as a perpetual annuity, of which the real value
may be "supposed always the same, or very nearly the
same."—[" Wealth of Nations," B. v., ch. 3.].
Fifth. The direct application of surplus revenue is the