Friday, February 28, 2014

TONTINES & GUILLOTINES



In a recent statement Arnaud Montebourg, the French socialist government’s industry minister, announced France’s intention to create a state-owned mining company with a world-wide remit by saying,

Colbertism is coming back and that is good.


Jean-Babtiste Colbert


Jean-Babtiste Colbert (1619-1683) was the Controller-General of Finances and Minister of the Maison du Roi during the reign of Louis XIV, the Sun-King of France having being recommended to Louis by the former Chief Minister Cardinal Mazarin. Louis has an insatiable and extravagant need for money and Colbert spent a great deal of his energies in trying to reform the French tax system, to ensure equitable taxation of the non-tax paying nobility at its core, but with the ultimate objective of directing much of this newly acquired gains in the direction of his King.

Taxation and money-raising schemes were the flavour of the times (the Thirty-Years War and the Fronde taxation rebellions at home had exhausted much of France’s wealth) as Cardinal Mazarin tried to balance the books. Into this heady mix of need and greed around 1648 strode Lorenzo de Tonti, a Neapolitan banker who had sought exile in France after a failed revolt against the Spanish viceroy in Naples.

Tonti first proposed an annuity-based life-insurance money-raising scheme (a scheme for which ever after would be known as a Tontine) for the State to Cardinal Mazarin, which the Cardinal quickly adopted and attempted to establish.

A Tontine schema as John Houghton, a London apothecary, pointed out as early as February 1683, in an analysis of such a proposal by the East India Company and its bankers, was a scheme that provided for an,

“a yearly increase in wealth, by subscriptions, to advance money at interest, for lives of whatsoever age or sex, under ten several ranks or classes; which subscriptions will produce great advantage to the survivors…”

A Tontine was an all or nothing scheme in which the subscribers or their nominees earn a fixed annuity based on the interest earned by the combined initial capital of the age cohort into which their subscription is invested, but in addition the surviving subscribers of the scheme would divide up the interest owed to any deceased member of the scheme amongst themselves. The attraction of Tontines over life-annuity schemes was that income rose rapidly with advancing age ( and the death of other subscribers) whereas life-annuity income was constant.  That said Tontines were a gamble on the mortality risks of the subscribers and the last man or woman standing potentially derived the maximum benefit by accumulating all the interest owed to every original subscriber while the original capital devolved to the State.

As Tonti himself wrote in a letter to Colbert in 1665,

"the great advantage to His Majesty would be, that, without opening his purse, he would inherit the revenues of each class by the death of the last survivor in it, and would thereby find himself relieved from payment of the interest..."

Tonti’s original 1649 French proposal never got off the ground as it was blocked by the Parlement of Paris in 1653 on the grounds that the cost to the State could not be accurately estimated and that the interest proposed of 5% at all ages was much lower than existing annuity rates. A second Tonti proposal in 1656 dressed up as a Royal Bank scheme and which also included an innovative lottery component also failed to materialise and it was not until 1689 that the first successful French tontine was introduced by one of Colbert’s successors as Controller-General of Finances, Louis Phélypeaux, the comte de Pontchartrain.


Comte de Pontchartain


The first successful operative Tontine scheme was in the Dutch municipality of Kampen in 1670 and throughout Europe and further afield they soon established as well utilised tool in generating private, local government and State capital finance. 


Tontines were also the impetus to start gathering and publishing accurate mortality data, the basis of all actuarial life insurance business today.

There were obvious drawbacks of course. As a basis for murder if other surviving subscribers could be isolated and eliminated is one but more commonly in a time of ledgers and accounts clerks, and poor communication facilities generally, the documentation of identity and death of subscribers to a Tontine scheme, particularly in times of strife where many of those subscribers resided in different countries was extremely difficult, in addition to the forgery of documentation intended to maintain a flow of income to an already dead subscriber.

In France after 1689 Tontines for the next 120 years successfully became the basis of a huge amount of the French-government and private cash generation schemes until the catastrophic failure of the private Caisse Lafarge scheme in 1809 after which the State of France declared Tontine schemes illegal.


Tontine Coffee House,
New York


In England all three State tontine schemes up from the first in 1693 to the last in 1776 failed and by the following year Tontines to all intents and purposes were banned. In 1777 the English Parliament because,

"it hath been found by experience that the making insurances on the lives or other events wherein the assured shall have no interest hath introduced a mischievous kind of gaming”,

enacted the Life Assurance Act of 1777 (also known as the Gambling Act :14 Geo. 3 c.48) an act

"for regulating Insurances upon Lives, and for prohibiting all such Insurances except in cases where the persons insuring shall have an interest in the Life or Death of the Persons insured.”

Not so in Ireland where the 1777 Life Assurance (Gambling) Act was not incorporated until 1866 (and still in force!). There were three Irish State Tontines, fully subscribed to, particularly by the burgers of Geneva, in 1773, 1775 and in 1777. 


Marie Antoinette
Queen of France
1775


The 1775 Tontine scheme subscriber list makes interesting reading. At the top of the second class of subscribers was Her Majesty Marie Antoinette, Aged 20, the “Present Queen of France” who had subscribed £100.



1775 Irish Tontine Subscriber List
(the D next to name indicate Death on a later accounting)



Marie Antoinette (by then called Madame Capet by the French Revolutionary Council) was guillotined on the 16 October 1793 at the age of 38 years. All future interest on her Irish Tontine 1775 subscription would be divided out amongst the other surviving subscribers.

From Tontine to Guillotine!

The originator of the Tontine schemes was not to be all that lucky himself. Sanctioned by Mazarin Tonti was to have received a pension of 6,000 livres per annum from 1649 for his proposal and there is a plaintiff letter to Jean-Babtiste Colbert in October 1663 where he complains that,

“I have submitted a petition to the King, humbly begging him to consider, that for three years I have only received 3,000 livres of the pension of 6,000 livres a year which His Majesty had caused to be paid to me from the year 1649 down to 1660, in consideration of my services: and as I am pursued by my creditors, am bound to give honourable subsistence to my family of seventeen persons, according to my position. I have had recourse to His Majesty to receive of his goodness the wherewithal to remedy my present necessities. I very humbly entreat you to support it with your protection, and to continue to me your favours, which will secure my lasting obligation.”

Tonti’s pleas fell on deaf ears and eventually either Louis XIV but more likely Colbert got fed-up with him and had him imprisoned in the Bastille from 1668-75. He died in obscurity around 1684 although one of his “seventeen” dependents, his son Pierre was to be the co-founder of the great US city of Detroit with Cadillac by establishing the fort of Fort Pontchartrain du Detroit in 1701. It is ironic to note that the fort was called after the French Controller-General who finally put his father’s ‘great’ scheme into operation and not Jean-Babtiste Colbert who had put Tonti into prison.

Reference:

Mc Keever, K. A Short History of Tontines. 2010 Fordham Journal of Corporate & Financial Law, 15;2:491-521
Weir, DW. Tontines, Public Finance, and Revolution in France and England, 1688-1789. 1989 Journal of Economic History, 49, 1: 95-124 

Friday, February 14, 2014

WHITE SHEETS IN THE WINDOW (Witte lakens in het venster)


White Sheets in the Window 
(Witte lakens in het venster)

High above the Atlantic abyss,
A vortex of anger with centrifugal spite,
Streams pitiless mayhem eastwards,
Shorebound rendered plight.

Two friends, twee wandelaars stride out,
Buttoned down against the ferocity,
Along a cliff-side path to the lighthouse,
To be backwashed into an uncaring sea.

One found, on dark harbour rocks;
The other held in a kelp web far below,
The storm-churned crested waves,
And a spider-crab’s predatory hoe.

At home the Urker vroem stares out into that oblivion,
Beyond the mothering rock; pleading,
And behind her, White sheets in the window,
Waiting for the tears to wring.


© R. Derham 2014

Note: In memory of two Dutch friends lost to the sea off Sheep's Head, West Cork, in the storms of 10 February 2014. R.I.P.

White sheets tied up in the windows of houses are a traditional solemn notice of a death on the former fishing island (now part of mainland) of Urk, in the Netherlands.

I am attaching a Google Translate version of the poem. My Dutch language ability is negligible but many people from the Netherlands have brilliant command of English and if any Dutch-speaking readers of the blog would like to suggest a better translation, more in tune with the sense of what I am trying to convey in english, please feel free to contact me at wynkindeworde@gmail.com.


Witte lakens in het venster

Hoog boven de Atlantische Oceaan afgrond,
Een draaikolk van woede met centrifugaal wrok,
Gooit meedogenloze chaos oostwaarts,
Shorebound gesmolten toestand.

Twee vrienden, two Wandelaars schrijden uit,
Knoopte omlaag tegen de wreedheid,
Langs een klif pad naar de vuurtoren,
Te worden gespoeld in een onverschillige zee.

Een gevonden, op een donkere haven rotsen;
De andere die in een kelp web ver onder,
De storm gekarnd schuimkoppen,
En roofzuchtig schoffel een spin-krab.

Thuis de Urker vroem staart uit in die vergetelheid,
Voorbij het baren van gesteente; pleiten,
En achter haar, witte lakens in het venster,

Wachten op de tranen uit te wringen.



Thursday, February 13, 2014

HAPPY VALENTINE'S DAY 2014 – THORN FREE ROSES & BROADBAND


Love Is In The CLOUD©

Love is in the CLOUD© everywhere I look around
Love is in the CLOUD© every sight and every sound 
And I don't know if I'm being foolish
I don't know if I'm being wise
But it's something that I must believe in
And it's there when I look in your eyes.

Love is in the CLOUD©, in the whisper of the trees,
Love is in the CLOUD© in the thunder of the sea,
And I don't know if I'm just dreaming,
I don't know if I feel safe,
But it's something that I must believe in 
And it's there when I call out your name.

Love is in the CLOUD©, love is in the CLOUD©, oh, oh, oh, oh, uh, 
Uh, uh, uh. 

With apologies to Tom Jones. The times they are a changing. Broadband speeds and the storage of emotions, pictures, and fantasies in the CLOUD means that distinguishing between virtual and real love in the future will require the return of real roses, unadulterated by removal of their thorns or propagation of thorn-free varieties. Love in the real world is never thorn-free.

Wednesday, February 05, 2014

PATRIOTISM, PENSIONS and PARSIMONY



Let us strive on to finish the work we are in; to bind up
the nation’s wounds; to care for him who shall have
borne the battle, and for his widow, and his orphan—to
do all which may achieve and cherish a just, and a lasting
peace, among ourselves, and with all nations.

Abraham Lincoln, Second Inaugural Address 
(Mar. 4, 1865)

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

14th Amendment of US Constitution; Section 4. 
(July 9, 1869)


Puck Magazine Cover 1882 lambasting
veterans entitlements


What is the price of patriotism?

In March 2009, while travelling throughout Iran, I was often struck, on driving into a new city or town particularly in the north and north-western part of the country, by the rows and rows of lamp-post placard portraits of the martyrs of the Revolution, who had died in the service of the Iranian Islamic Revolution during the Iran-Iraq war of 1980-88. It has been estimated that Iranian losses in the immediate war period amounted to 125,000 killed in action, 63,000 missing in action and about 15,000 civilians. After the war it was estimated that there were about 400,000 Iranians with significant disabilities as a consequence of the war, about 200,000 of whom died as a result of those injuries by 2012.


Bonyad-e Mostazafan Headquaters

After the war the Bonyad-e Mostazafan (Foundation of the Oppressed), a charitable foundation closely tied to the Revolutionary Guard with almost $20 billion in assets, including factories, agrobuisnesses, construction firms and commercial companies, was renamed the Bonyad-e Mostazafan va Janbazan (Foundation of the Oppresses and Disabled) to provide pensions and low cost-loans to the disabled survivors and dependents of martyrs from the war. It allocated 50% of its income for this purpose but by 1996 however the cost base of this function was soaring and the Bonyad began directly drawing down government funds to cover the welfare commitments. In 2005 it exited the remit entirely and transferred the responsibility of veteran associated welfare payments to the newly created Government Bonyad Shayid va Omur-e Janbazan (Foundation of Martyrs and Veterans Affairs).

Patriotism, even the most extreme such as that of the Basji volunteer militia who deliberately walked out onto minefields to clear them, comes at an enormous continuing cost to society long after the fury of the Revolution has faded. Indeed it often also associated with huge resentment amongst those who do not qualify for such ongoing preferential endowment.

But Iran is not alone in this historical reality.


French Revolution Pension Certificate

That some claims are fraudulent is certain, but the great body of them are legitimate, binding on the Nation, and sacred. These no-one begrudges, and no soldier or sailor loses his self-respect or respect of his fellow-citizens in accepting these pensions. But the half million of dependent pensioners would not only stand in a different light, they would discredit the others. They would be taking money that they would pay for in loss of self-respect.

New York Times, February 1887.
Editorial on Civil War pension entitlements.

In a crusading editorial, quoted above, in The New York Times in February 1887, against a planned law granting pensions to the possible 1,000,000 survivors and dependents of veterans of the American Civil War, the paper reminded its readers that when the Service Pension Act of 1818 was enacted putting in place a fixed benefit for life ($20/month for officers and $8 /month for enlisted men) for all the surviving veterans of the Revolutionary War of Independence (1775-1783) and not just for those who had been disabled (Continental Congress Act of 1776) it was estimated by the promoters that about only about 374 persons would apply for the benefit and the cost to the US Treasury would only be $40,800 per year. By 1822 however 12,331 veterans had applied and were in receipt of pensions and the cost was an estimated $2,750,000 a year. The paper calculated that if the same miscalculation of estimates was applied to the proposed 1887 bill then the cost would be about $72,000,000 to the US Treasury.

Even the NY Times got their estimates wrong! The Dependent and Disability Pension Act was eventually signed into law by President Benjamin Harrison in June 1890 and by 1893 the cost to the US Treasury was almost $159,000,000 a year or about 37% of the entire US government budget.


General Post Office, Dublin 
in aftermath of 1916 Rising

I was drawn to this economic cost of revolutionary patriotism when looking at the pension application of my grandfather Joseph Derham for his service in Ireland’s own revolutionary war of 1916. I downloaded and read, the recently made available military pension archives concerning his trials and tribulations of the pension application under the Military Pensions Act 1934 for service in the 1916 Rising.



For some reason all revolutions appear to have a focal point in their mythology where participation on a certain day or in a certain place grants the veteran (if not already dead or disabled) a generally unsought or unplanned place in the upper realms of that mythology, and a somewhat warped post-revolutionary societal enhancement of credibility or entitlement thereafter.  For Ireland that Valhalla of mythology in 1916 was the action at the General Post Office, Sackville St. (now O’Connell St.) Dublin.

My grandfather Joseph, a stern man I remember as a child with half his face missing following the removal of a malignant tumour, was a member of F Company, No. 1 Batt., Dublin Brigade and an Irish Volunteer since 1913. He served in the GPO from the evening of the 24th April 1916 as Garrison Timekeeper until the surrender on the 29th April. Brought initially to the Rotunda Gardens he was then arraigned and interrogated in Richmond Barracks before being transported firstly to Wandsworth Prison, London and then in June 1916 to internment in Frongoch Detention Camp in Wales where he remained until the general release at Christmas 1916.


Joseph Derham's Certificate of Military Service

My grandfather applied for and was granted a certificate of Military Service (in the Revolution) in 1939 and a pension of £23, six shillings and six pence granted, backdated to the 1st Oct 1934. For some reason not documented he then subsequently declined the pension and the reasons for this are not exactly clear. Perhaps he was afraid of being the man the New York Times of 1887 had accused of ‘ by taking the money’ he would be a man that ‘would pay for it in loss of self-respect’ but more likely he knew that as a public servant his military pension would have forced an abatement of his public service pension, a provision originally introduced to deter flooding the new civil service with recently demobilised volunteer soldiers. This ‘abatement provision’ would have irritated my grandfather enormously, and its implied denial of his patriotism.

Taking umbrage at official doctrinal sleight-of-hand is somewhat of a genetic trait in our family!

I suspect also that my grandfather, who chose, in the very divisive Irish Civil War, that followed the ‘Revolution’, deliberately not to become involved-in, felt that he needed to make the point that there were many more former volunteers like him who had fought for the notion of an independent Ireland but who did not wish to participate in the internecine butchery that followed. Indeed the first pensions act, the Military Service Pensions Act of 1924, excluded anybody who remained neutral in the Civil War, anybody who was an employed civil servant, anybody who was a member of the anti-Treaty IRA and indeed most women veterans as Cumann na mBan was not included.  The Military Service Act of 1934 reversed these exclusions thereby making the pension provisions available to my grandfather. By applying for and being granted the Certificate of (Revolutionary) Military Service, which was necessary for the pension entitlement he had made that point, even if he then declined to exercise his entitlement.


Joseph Derham's Decline of Pension

By 1953 almost 80,000 people had applied for Irish ‘revolutionary’ Military Service Pensions of which 18,186 were adjudged to qualify. The annual cost to the state in 1953 of these pensions was approximately £500,000.

In 1957 on retirement however my grandfather must have had second thoughts about the pension and asked his local parliamentary TD, Gerry Boland to make representations on his behalf to try and get the pension re-instated. This decision at that stage would have been pragmatic rather than bound up in any revolutionary entitlement. Times were hard and he had a large family of 11 sons and daughters to support. The downloaded files from the Military Archives document with stark beurocratic precision the enormous efforts that he, and others acting on his behalf, had to go to get re-instatement. Ultimately he was successful and a pension of £34, 19 shillings and 9 pence was granted on 31 December 1957, 41 years almost to the day after his release from Frongoch.

My grandfather was always enormously reticent about his revolutionary Military Service (his Gebr, Mauser Oberndorf single bore-non-automatic rifle; one of those landed off the Asgard in Howth, is now in the Cork Public Museum) and indeed when he first applied for his military pension he specifically stated he did not want his time in ‘goal’ in Frongoch counted towards that pension. While in Frongoch he served as one of the two postmen in the Detention Centre and perhaps thought he was still being a ‘civil servant’ and did not want that time counted. He also had originally applied as an ordinary volunteer for an E schedule pension, and not for an officer’s pension to which he was also entitled as a Captain in C Coy 5th Batt, Dublin Brigade.

All revolutions are won with enormous sacrifice, and there is often an immediate responsive and pragmatic determination in the first flush of victory to reward or to compensate for that sacrifice and to consolidate support for the revolution particularly amongst armed militia and soldiers. In time revolutionary ideals and expediency fade into memory and mythology, but the price and costs of maintaining the reality continue to place a huge burden on the new society. It is a well-worn path from patriotism to parsimony. The generations following resent both the cost, as an imposed burden, and the imposed mythology, that drives those entitlements.

Writing a very spirited defence of the pension entitlements of veterans in 1891, Green B. Raum, the United States Commissioner of Pensions, stated bluntly that ‘the noblest duty a man can perform is to risk his life for his country’ and that the ‘paltry’ pensions they receive ‘cannot be considered a suitable equivalent’ for those patriotic services.  The obligation to pay pensions did not rest in contract but upon ‘principles and sentiments quite as binding upon the heart and conscience of the nation’. He concluded by stating that the veterans of the Revolution and Civil War (and Mexico War) had ‘solved the mooted question of man’s capacity for self-government.’

Far better I think this pragmatism of ‘capacity’ rather than an imposed or implied mythology and entitlement of martyrdom, whether it be in in Teheran, Yorktown or Dublin, as a basis for an entry to paradise.

I know now that my grandfather would agree!

References:

Military Service Pension Archives at: www.militaryarchieves.ie

Marie Coleman. Military service pensions for civil and public servants in independent Ireland. Administration, vol. 60, no. 2 (2012), pp. 51–61

Green B. Raum. Pensions and Patriotism. The North American Review, Vol 153, No. 417 (1891), pp. 205-214