NATIONAL INDEBTEDNESS.
AWRITER with the requisite knowledge of the pamphlets of the eighteenth and the early nineteenth centuries might make an interesting com- parison between the views taken formerly and now of the burden of national indebtedness. Borrowing is as universal an instinct as gambling, and in one form or another States have contracted. loans as soon as they were able to give any kind of security for their repayment. But the estimate formed by politicians of the position of the borrowing nation has varied a good deal. There was a time when an amount of indebtedness that would now be thought too trivial to mention was regarded as the fore- runner' of national ruin. The vast interests that would come into being and prosper by reason of the public Debt were not then foreseen. The whole conception of a com- munity in which lending to the State should be a recog- nised and ordinary mode of making an income is of late growth. It has displaced an earlier view which saw in a National Debt simply an obligation to be got rid of as opportunity offered, and measured national prosperity by the greater or less distance to which this opportunity seemed to be removed. Now the National Debt gives few of us any concern. We do, indeed, recognise the propriety of having a Sinking Fund, but we suspend its operation for very slight cause. Sometimes we even set ourselves to maintain that debt is the normal state of a healthy com- munity, and that to shrink from borrowing when borrow- ing is convenient, or to be punctilious about repayment when we have other uses for the money, are marks of political timidity unworthy of a Chancellor of the Exchequer.
The number of the North American Review for August 15th has an interesting article on " National Indebtedness," by Mr. 0. P. Austin, the chief of the United States Bureau of Statistics. From the point of view Of amount the picture is sufficiently formidable. The National Debts of the world have increased tenfold during the nineteenth century, and the rate of increase during the second half of the century has been "fully four times as great " as that which prevailed during the first half. The United. Kingdom and the United States are the only exceptions to this steady progress in national indebted- ness. The latter Power indeed was a borrower on an enormous scale in the early " sixties," but it has set itself with rare persistence to the task of paying off the Debt thus suddenly incurred. The " debt habits " of the various races are curiously different, though in some cases the distinction is rather one of circumstance than of nationality. In the last thirty years of the century "the Debts of the Latin-American nations have increased 50 per cent. ; those of Europe, exclusive of the United Kingdom, 100 per cent. ; those of the Asiatic nations, whose Debt statistics are available, 200 per cent. ; those of the British Colonies, exclusive of India, from 300 to 400 per cent." It is only England and the United States that could show at the end of the century, instead of greater indebtedness, a reduction of Debt, amounting in the first case to 25, and in the other to 50 per cent. The Latin nations have the worst record in this respect. They borrow more cheerfully than other nations. In Italy and Spain the public Debt has doubled since 1870 ; " the Debt of France in 1900 was five times as much as in 1852 ; " while that of Portugal is larger in proportion to the population than that of any other European country. The comparison is equally unfavourable if we look at the uses to which the money borrowed has been put. The Germanic nations have not only not greatly increased their indebtedness, but " have accumulated, in most cases; definite revenue-producing assets as an equivalent." The Slav nations have borrowed largely, but they too have something to show in the way of railways and other pro- ductive expenditure. The British Colonies, which, judged simply by figures, stand at the head of the list in point of extravagance, have for the most part spent the money in rail. ways, roads, canals, and harbours. But " the Latin nations have increased their indebtedness with a rapidity which might almost be characterised as reckless, and with less definite assets as an equivalent than in the case of the other groups mentioned." We see the consequence in Italy in immense and burdensome taxation, and if France has escaped this it is only due to the fertility of her soil and the industry of her people.
The real difference between one case of national indebted. ness and another turns, therefore, on two points,--the war in which the money has been spent, and the evidence of au intention of paying it back. If we look only to the first point, we ourselves and the United States come poorly of We have nothing in the way of revenue-producing assets to show for the money we have borrowed. It has gone on ships and soldiers, and so has simply provided material for the guns of our enemies. Still, national life is the most important of all revenue-producing assets, and it is to preserve national life that England and the United States have become borrowers. If they had not borrowed they would have been destroyed. But if they have nothing to show by way of assets except the fact that they are alive, they can at least plead that they have no real love for the state of indebtedness. They have not borrowed with a light heart, because their statesmen have steadily kept before the people they have governed that Debt is a thing to be repaid. Here, therefore, we have the best of all reasons for borrowing money coupled with the best of all ways of regarding the process of borrowing it.. When we turn to the countries which can show the best record as regards the use to which loans have been put, the problem takes on a new difficulty. There can be no question as to the economy of a loan contracted to provide the means of self-defence. Supposing the need to exist, borrowing must go on until all the money that is wanted-has been got together. But is it wise—is it good economy—to borrow money to make railways or canals ? That must always be a question of degree. Like any other form of productive outlay, it will be prudent or imprudent according to the means [of the borrower. When we see a fanner sinking money in manures or agricultural machinery, we say, according to what we know of his financial position, that he is making a judicious investment, or that he is certain to land him- self in difficulties. It is much the same with such ex- penditure as that of the British Colonies. In itself it is undoubtedly wise to make roads and railways, harbours and canals. But inasmuch as the only way in which the money for doing this in a young community is by State or municipal borrowing, a Colony has also to take into account the probability that it will be continuously able to pay the promised interest on the money it has raised. Repudiation is seldom an avenue to national well-being.
In England, however, as in the United States, practi- cally nothing is known of this 'kind of borrowing. The form in which the prOblem of national indebtedness presents itself in this country is how far it is expedient to carry the principle of a Sinking Fund,—how far, that is, the country will be the richer if it has made sacrifices in order to pay off its Debt. There are always plausible reasons against such a course. To pay off Debt means to maintain taxes which would otherwise be remitted, and taxes are a present burden of which we are all glad to be rid. For the fundholder, moreover, to tax himself toy off Debt is to give himself the trouble of finding other investments which can hardly give him the same sense of security. And yet, inconvenient as the exchange may be, it is good. for the nation that it should be made. The capital which is locked up in Consols would minister to the national prosperity in a far greater degree if it were returned to the owners. They would then be compelled to seek new ways of earning interest on it, and, except in the few cases where they might reinvest in foreign loans— a kind of security which has ordinarily only a very moderate attraction for the class which holds Consols— they would of necessity find these ways in various kinds of industrial enterprise. The dividends which they new draw from dead-and-gone ironclads they would then draw from new railways, new applications of electricity, neW methods of making science the handmaid of industry This is part, at all events, of the philosophy of a Sinking Fund.
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