Foreign Debt Reduction Discussion

Introduction

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Benjamin Franklin writes to John Adams in May 1781, who was in the Netherlands at the time. In this passage, Franklin casts doubt on reducing the debt in America by taxing exportsexport (verb) to ship commodities to other countries or places for sale, exchange, etc.. He reasons that due to the difficulties associated with taxing exports, it may be best not to tax trade at all.

Original Text

I have, with you, no Doubt that America will be easily able to pay off not only the Interest but the Principal of all the Debts she may contract this War. But whether Duties upon her Exports will be the best Method of doing it, is a Question I am not so clear in. England raised indeed a great Revenue by Duties on Tobacco. But it was by Virtue of a Prohibition of Foreign Tobaccoes, and thereby obliging the internal Consumer to pay those Duties. If America were to lay a like Duty of 5 Pence Sterling per lb on the Exportation of her Tobacco, would any European Nation buy it? Would not the Colonies of Spain and Portugal and the Ukraine of Russia furnish it much cheaper? Was not England herself obliged for such Reasons to drop the Duty on Tobacco she furnish’d to France? Would it not cost an immense Sum in Officer to guard our long Coast against the smuggling of Tobacco, & running it out to avoid the Duty? And would not many even of those Officers be corrupted and connive at it? It is possibly an erroneous Opinion, but I find myself rather inclined to adopt that modern one, which supposes it best for every Country to leave its Trade entirely free from all Incumbrances. Perhaps no Country does this at present: Holland comes the nearest to it; and her Commercial Wealth seems to have increased in Proportion.

Summary

The colonies had a substantial amount of debt that was owed to both domestic and foreign contributors of the war effort. Due to their new independence and limited resources, it was difficult to repay all the loans that the colonies received. The colonists had to figure out a way to increase economic development, maintain the value of their currency, and pay back their foreign partners. Franklin eliminates taxing exports to gain revenue, but acknowledges that taxation would be useful to collect revenue. With their international reputation at stake, colonists had to come up with a solution and fast.

Benjamin Franklin's Whole Letter

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