Threaten to Repudiate the Government Debt

You can withdraw funding from a government by discouraging other institutions from loaning the government money. One way to do this, if you can credibly do so, is to insist that you will repudiate any such debts if you are able to assume control of the government.

Example South Carolina

One concrete example that came to my notice comes from Reconstruction-era South Carolina. An opposition movement there was upset that politically disempowered white property owners were being taxed by a black & carpetbagger Reconstruction government that was spending the tax money in wasteful and corrupt ways. On 31 March 1871, the Charleston Board of Trade met, and unanimously adopted a set of resolutions, including the following:

Resolved, That we, the property-holders and taxpayers of the State, residing in the City of Charleston, do hereby deem it our duty to declare that the bonds heretofore issued without legal sanction; and the so-called sterling loan, or any other bonds or obligations hereafter issued purporting to be under, and by virtue of, the authority of this State, will not be held binding on us, and that we shall, in every manner and at all times, resist the payment thereof, or the enforcement of any tax to pay the same, by all legitimate means within our power.

Resolved, That we deem it our duty to warn all persons not to receive, by way of purchase, loan, or otherwise, any bond or obligation hereafter issued, purporting to bind the property or pledge the credit of the State; and that all such bonds or obligations will be held by us to be null and void, as having been issued corruptly, improvidently, and for fraudulent purposes, and in derogation of the rights of that portion of the people of this State upon whom the public burdens are made to rest.

George A. Trenholm, who had been the Confederate government’s Treasury Secretary, explained the theory behind these resolutions:

I do not believe that it is of the deliberate purpose of the American people, of whom we are flesh of their flesh and bone of their bone, that we should suffer the evils we endure. On the contrary, I am sure of their sympathy and support, in every manly, open and straightforward effort we make for our relief. Such, I think, is the one embraced in these resolutions.… [But] As long as capitalists continue to supply money in exchange for or upon the hypothecation of the bonds of the State, no limit can be perceived to the debt for which the property of its citizens shall be pledged.… I have a well established confidence in the justice and magnanimity of the American people. I am persuaded that they will sustain us in the attitude we propose to assume; that all further credit will be refused to those whose wasteful administration threatens the ruin of the State. I believe, too, that they will sustain us in the effort to relieve ourselves from the enormous taxes that threaten our property with confiscation.

Example Hungary

In 1861, the Hungarian parliament, which was encouraging a nationwide tax strike against “unconstitutional” taxes imposed by Austria, also declared that “we cannot recognize as binding any state burden or obligation founded by the Reichsrath [Austrian parliament], any loan contracted by its authority, or the sale of any royal demesne sanctioned by it.”

Notes and Citations

Lathers, Richard Reminiscences of Richard Lathers (1907) pp. 298–301
Lathers, Richard Proceedings of the Tax-Payers’ Convention of South Carolina (1871) p. 86
“The Debt and Taxation” The Charleston Daily News 1 April 1871, p. 1
“The Hungarian Diet…” The Spectator 17 August 1861, p. 2