THE FUTILITY OF SOUND FINANCE.
THE Pall Mall's teachings on finance are a study in them- selves. Not many months ago we were instructed on the truth of the Egyptian situation, and in relation to
Egyptian finance our contemporary had no doubt at all as to what our duty and the duty of France was. The talk about the severity of the pressure on the Egyptian taxpayer was treated with profound contempt, as absolutely irrelevant. It was insisted that the only interest we had in the Egyptian crisis was to secure the due payment of the coupons on Egyptian Bonds. To protect the private creditors of Egypt,—even at the cost of the Egyptian people,—was the be-all and the end- all of English policy in relation to Egypt. We read those frank remarks of our contemporary's at the time with extreme surprise, and understood them as a very slightly disguised form of the sentiment,—" Perish Egypt, so long as the foreign creditors of Egypt get paid !" But we have re-perused that article with even still greater amazement, after reading the article this week in which our contemporary casts such profound contempt on the teaching that any European Government is bound to be anxious about the soundness of its own financial position. This was the teaching of our contemporary on the 10th April, in relation to Egypt :—
"We observe that more than one commentator insists that the Government have nothing to do with the financial condition of Egypt; that whether it does or does not succeed in satisfying its creditors and securing its end% is a question for individual bondholders alone; that with all this, in short, the Government have nothing to do. If this argument is put forth as a temporary excuse for doing nothing, as such we can understand it. But the fact remains that the financial situation is the whole situation. What else is there in Egypt to in- terest abybedy 'lint the resilth of the Khedive's financial misgovern- ment ? What is:there to repair in Egypt but the disturbances, foreign and domestic, oonsequent upon the Khedive'S financial blanderings, opprefisions,:asd trickeries ?. And since there.cau be no doubt, we sup- pose;that the Governments ot England and France have for a long time,
and by more than one formal act of interference, imposed] certain pretensions of control over the Khedive (which he has as often ac- knowledged and accepted), for what purpose, with what end, have they so interfered, outside the region of financial administration ?
None whatever Whatever may be the new-born scruples of onr own Government against interfering any further with the finan- cial affairs of Egypt (not that we believe in their existence), whatever the indifference of the English Cabinet to the fate of Egypt's creditors, there are no such scruples in France and no such indifference : on that we may rely. And in this ease, we believe and are prepared to contend that the French are right."
That is pretty plain-speaking, and expresses our contem- porary's enthusiasm, we can hardly say for a sound Egyptian finance,—for a sound finance does not ex- haust the sources of revenue, even to keep faith for a few months or years longer with the foreign creditors, as the Egyptian finance is exhausting the resources of Egyptian revenue,—but for bolstering up the temporary credit of Egypt, so long, at least, as French and English Bondholders may be liable to suffer by the collapse of that credit. But, of course, one naturally infers that a paper which advocates violent inter- vention to secure the soundness of Egyptian finance in a sense satisfactory to the foreign creditors of Egypt, will not be indifferent to the soundness of British or other European nations' finance, in a sense satisfactory ta the foreign creditors of this country and of the other countries of Europe. That inference, however, would be a great mistake. In a remarkable article, published on Tuesday, the Pall Mall argues elaborately that national greatness has little or nothing to do with sound finance ; that from a patriotic point of view, it is a ruinous blunder to think much about the matter ; that the countries which have lately increased their influence most are the nearest to bankruptcy ; that Russia, and France under the Empire, both gained by their complete indifference to financial considerations ; that it is the mark of a poor spirit to be fritter- ing away one's money on paying one's debts, when we might be spending it on acquiring fresh territorial greatness ; and that if the condition of bankruptcy be not absolutely "enviable,"—which the Pall Mall, as a great concession, is willing even to deny,—yet that at all events "the British exaltation of regular annual surpluses, low estimates, and remissions of taxation, has degenerated into a superstition." But lest we should be involuntarily exaggerating the drift of this instructive paper, let us quote our contemporary's exact words :— " We do not, indeed, argue that public bankruptcy is enviable, or that the way of managing the finances which, on strict commercial principles, ought to lead to it, is the way of sound statesmanship. But is it not possible that there may be weakness in the exactly opposite doctrine ? Is it not possible that the British exaltation of regular annual surpluses, low estimates, and remissions of taxation has degenerated into a superstition ? We are in one sense very dis- tinctly a nation of shopkeepers. We are perpetually considering how our affairs would look if we were wound up in bankruptcy. We tremble at a coming Day of Financial Judgment. We are always looking forward to the sentence of some unknown International Tribunal, or of a vaguely conceived Posterity, on the nation which should be shown not to have kept its books regularly, or to have spent too much in any one year on a luxurious Imperialism. But, unhappily, the only Court which does adjudicate on the conduct of nations manifests singularly little respect for regularity of book-keeping. We doubt whether any instance can be given in which History has praised a community for the number and amount of its surpluses. In a spirit which to .a modern English financier must seem utterly perverse, it looks to quite other indications of goodness and greatness. The one black spot which mars the soundness of British finance is, as we are all agreed, the Indian Budget ; yet it is possible that, with a perversity which cannot be too strongly condemned, the Historians studied by our great-grandchildren will dwell on the British government of India as the most interesting thing about us in the present half. century."
And here is the conclusion of the whole matter :—" It would be discreditable to the richest country in the world, if the cries now being raised obtained a hearing ; but besides being insulting, they are superannuated."
Now, if this article had been written to show that, England, though a very poor and financially exhausted country, could, nevertheless, afford better to plunge deeper into debt than to give up some essential struggle with other countries for national existence, we could have understood, though we might have strongly condemned it. But so far as we gather its drift at all, that is not in the least its motive. If we understand it at all, it is written to show that, being so rich as we are, and a few millions more or less of expenditure being absolutely indifferent to us,.we have yet no occasion at all to be scrupulous in keeping our taxation on a proper level with our expenditure, and may well follow the excellent example of Russia, of France under the Empire, of Italy during the first six or seven years of her emancipation, and of Austria for a long time back, of being totally indifferent to the principles of sound finance. Because we are rich enough to spend what we please, we are told not to make a fuss about paying for what we spend, out of hand. Now, combined with the Pall Mall's teaching as to Egypt in April, the lesson comes to much the same as the practical wisdom of the worst usurer. That is to say, a poor country which cannot pay its debts without ruin should be squeezed till it does ; but a rich country which can pay its annual debts easily, and do a good deal towards paying off its permanent debts, if it likes, may safely be encouraged to run deeper into debt. The financial moralist could hardly teach, we think, a more exalted doctrine than this.
In truth, however, no more astounding nonsense than the doctrine of the Pall Mall as to the irrelevance of finance to power, was ever preached. If it were true, Turkey should be as flourishing as ever, and Austria as great and solid as a Power as Prussia itself ; the Northern States of the Union, instead of crushing the South by their vast financial resources, should have been none the better for those resources ; and instead of paying off so rapidly as they have done the debt con- tracted in the course of that great struggle, they would, on the teaching of our contemporary, have done wisely calmly to ignore it, and to use every surplus in the con- quest of Mexican provinces. Republican France, in raising her enormous revenue above the point of her liabilities, has, according to this teaching, been committing a blunder, as well as incurring the risk of unpopularity; while Italy, who has, after many years' severe struggle, at last succeeded in obtaining a financial equilibrum, deserves only a fool's-cap for her pains. Prince Bismarck, instead of fighting for a tobacco-tax, for Pro- tection,—for anything and everything which might give him a good balance to spend on the military administration of Germany,—would have done far better to borrow freely ; and Russia has in fact been the only thoroughly wise nation among the fraternity of European States. It is hard to imagine a more profoundly absurd position. The truth is that the financial incapacity, and the corruptness which is quite sure to follow incapacity, of the French Empire were at the very heart of the degeneracy which led to the easy German con- quest ; while the stern thrift of Prussia was at the very heart of the discipline which led to that conquest. Russia, no doubt, bankrupt as she is, has succeeded in winning great accessions of territory from her foe, but from what foe ? From a foe whose corruptness in all financial matters, is to the thriftlessness of Russia, what the great dismal swamp is to a sloppy, ill-paved street. Had the collision been between Russia and any other State than Turkey,—between Russia and Germany, for in- stance,—we should soon have seen the effects which sound and unsound finance produce on the progress of a campaign. Lord Beaconsfield was quite right in the principle of his boast, when he said that if England were ever compelled to take the field, her great wealth and good credit,—and what is more important than either, the rigid business-sense and honesty which brings wealth and credit,—would have given her a vast advantage over a rival even as powerful in territory and population as Russia.
And the Pall Mall has not only preached a lesson which, both morally and rationally, is thoroughly rotten, but it has missed the true point after which we may charitably suppose that it was, in some dim way, groping. That point is this,—that no doubt, countries which devote a great deal of deep, not to say even passionate, interest to the soundness of their finance, are sometimes apt to forget the end in the means, and to care so much for having in their hands the means of greatness, that, having them, they cannot endure to lavish them, even when the right moment comes, to secure the end. Of that temper we con- fess we do sometimes think the British people in serious danger. But the very last mode we could have imagined to save them from that temper, would have been to encourage them, while abounding in resources, not to fear minute emergencies, but to take refuge in petty loans for liabilities far smaller in amount than many which, in times of serious war, we have been glad to defray out of the pockets of the taxpayer. And as the only conceivable motive for so shabby a course is that it may lessen the unpopularity of the Government which in- curred these liabilities, during a general election, we should have supposed that the discreditableness of the motive would be at least as obvious, as the financial cowardice itself would be mischievous.
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