Hume and Smith’s debt skepticism was shaped by witnessed financial collapses

Evidence

Long before Locke’s time, states piled up debt and went bust with monotonous regularity, impoverishing their lenders in the process. In their own lifetimes both Hume and Smith saw examples of debt financing going awry. Smith lived though the trauma of the collapse of Ayr Bank, a debt-financed Scottish bank that threatened the solvency of Smith’s main benefactor, the Earl of Buccleuch. In his writings Hume reflected on the earlier attempt by John Law, another Scot, to discharge the national debt of France by issuing shares in a giant trading company that used the bank of France as its fiscal agent. By 1721, when the resulting bubble popped, France went bankrupt—again. — Mark Blyth, Austerity, 306

Categorization

• XREF: The John Law Mississippi Bubble and Ayr Bank collapse are precursors to the financial-crisis episodes in Mattei and broader austerity history. — connects to: Hume predicted foreign-held debt would eventually undo political liberty. — Mark Blyth, Austerity: The History of a Dangerous…, 288; Hume argued governments abuse debt because its costs are hidden and intergenerational. — Mark Blyth, Austerity: The History of a Dangerous…, 287; Smith’s personal stakes shaped his debt skepticism — Mark Blyth, Austerity: The History of a Dangerous…, 306

Broader Connections

• Smith’s personal stakes shaped his debt skepticism #expands (0.85) — Mark Blyth, Austerity, 306