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Considerations on Public Debts.

1. It may be said that money, if borrowed at a moderate interest and spent upon productive works by a cautious government, gives productive employment for capital, which might, if the people are not uncommonly thrifty, have been spent by them unproductively, or possibly destructively to themselves. They might have spent their time in idleness, or their money in drink.

But this is only likely in a thickly-populated and wealthy country, where capital is abundant and the returns from it small. The Government can only, therefore, invest at a low rate of remuneration. The more the Government invest, and the more capital increases by these means, the lower this rate will become. It would be better in such a case for the people to lend their money to other countries where the openings for the industrious are wider and their wages higher.

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2. It may be said that no country in modern times, could raise on an emergency sufficient funds in any way but by a public loan. Few nations now follow war as a profession. Robbery under arms is not generally a national element in the foundation of modern society, and hence a country when suddenly called upon to act offensively or defensively, finds that taxation alone cannot supply the money required. This seems true, and it is perhaps the only case in which a loan is undoubtedly necessary.

The single city of Rome conquered the world, however, and was scarcely ever a sixpence in debt, but the spoils of the conquered filled her coffers. Napoleon I. carried on his wars and paid for them with the results of his victories. Nations when once engaged in successful wars are difficult to restrain. They lose population, but not capital. At the end of every battle the people are richer, and unless restrained by sorrow for the loss of their friends, they are dangerous indeed.

3. It may be urged that in a new country or colony, for the formation of roads or useful public works, money may be borrowed, because the future inhabitants should pay for what will benefit them.

But, financially speaking, man has no descendants. Population in this respect surrounds the globe just as page 123 the atmosphere or the grass, a particle replacing and replaced. Every moment dies a man, every moment one is born. Again, many public works thought needful now may be discarded in the time to come-If in a colony the price of the public lands is not equal to the opening of them up by communications, it shews that they are sold too cheaply, or that they are not worth much. It is a mistake to sell them cheap and tax afterwards for the interest on a public debt. Land should be husbanded, for when it is all sold the inducement to immigration is in a great measure gone.

4. Public debts have usually been followed by recklessness in the public expenditure, and have been the cause of wars. Man was to earn his bread by the sweat of his brow, and this is the only honest way of earning it. But loans, by upsetting the even tenor of this good way, demoralise the people; for they, no matter how expended, inflate and raise too greatly, either some or all industries in the country, to be followed by an unhealthy fall.

5. In borrowing, a great skill and high morality is needed in the magistrate, lest the loan be got too disadvantageously, and this skill is not easily acquired. In expending a loan in works of utility it is very difficult to tell how to expend the money to page 124 the best advantage, even if one had always the power of so expending it and were not hampered by political motives. Political economy is not an exact science. The question might be put, did it benefit Otago to borrow at over 12 per cent, for roads? Roads then cost £2000 a mile, and this gives a rental paid for them of £240 per annum. A community on the goldfields, both which are uncertain and transitory demand a road. Who can say where for such, there is an economical index?

6. A public debt may, however, give stability to a dynasty or a government for a time. The peace and prosperity which France enjoyed for a time during the reign of Napoleon III., was due to the loans contracted, the demand for labour, and the high wages paid. This debt, too, is owed by the nation to far more of its people than, perhaps, by that of any other. The fund-holder dreads disturbances which lower the price of the funds, and he resists change.

7. Public debts almost necessarily produce heavy taxation. The public must be taxed to pay the interest of the debt so long as they owe it. Taxation is demoralisation. Perjury and lies abound. Interest must be paid; but in this world of losses and crosses, of ups and downs, revenues are not so certain of being received.

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8. It might be urged that in a colony a block of land might be set apart, the rents from which could mitigate the evils of taxation. But other evils not less great would result. The money would be wasted. The people Would not be brought face to face with the expense. Corruption would also prevail more extensively than where the money is drawn directly from the people.

9. Government accounts are thrown into a very complicated state by loan transactions. This is a greater fault than appears at first sight; for the more intelligible these are, the more interest would be taken in them by the people.

10. A country heavily indebted is always within the circle of bankruptcy, and bankruptcy is a national calamity not easily got over. When a country's credit is broken, to mend it requires the work of ages.

11. Nearly all statesmen and political economists of note have been against public loans. Napoleon I, Adam Smith, John S. Mill, &c.

12. It seems safe to reason thus in a new country with respect to public debts. If it be not expedient for the owner of land to borrow, it will not be so for the public to borrow for improvements. In a colony such as New Zealand, lightly populated and page 126 distant from markets, improvements may be conducted faster than the country requires. But then it may be said a colonial government can borrow cheaper than an individual. In the early times of a colony, this is chiefly true. The tendency of time is to cheapen money, and the colony thus soon looses this advantage. In a country under-peopled, profits and interest on money rule high, and they cannot be lowered till the field of enterprise is occupied. But there is this drawback to the public loan of a colony, that the money is owed out of the country, and money has to leave it for interest under every economical condition. When a colony borrows from the mother country, and also buys its goods there, the mother country gets its money back again. Her labourers are employed, and she gains the same end as Napoleon III. gained when he borrowed from the rich to spend among the poor.

13. Mr. John S. Mill gives a mode in his "Principles of Political Economy" of determining when a government is borrowing too much, viz., if it by so doing, raises the interest on money beyond the probable normal and natural rate. This mode, however, can only apply when the money is borrowed within the country. Adam Smith also notices the danger of this raising of interest on money which may induce the people to vest their money in the funds, and not in productive employments.

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14. We have the danger of dull times to a nation which borrows. The population will clamour for borrowed money when labour becomes scarce, and the unprincipled magistrate will listen. This is perhaps, England's greatest danger if the colonies do not act as a safety value. To borrow for the poor to give him work, and tax property and the rich to pay the interest, is a most tempting policy, and could be done under any form of government where wealth has not an absolute veto.

15. Public debts seem to belong to a civilisation not of the highest. We can conceive of a day, not very near, perhaps, when their imposition will be resisted, and their evils understood.