productively employed. And the economical evil of this dissipation of capital is greatly aggravated by moral causes. Many forms of lavish unproductive expenditure, and especially the splendours and the excitements of war, are naturally so popular that any minister or sovereign whose position is insecure or whose character is ambitious is almost irresistibly tempted to resort to them if there is no strong counteracting influence. The natural restraint upon these extravagances is the necessity of raising by taxation the whole sum that is required. The sacrifice and disturbance caused by such an increase of taxation arouse a feeling which at once checks the progress of the evil. But by the funding system this invaluable restraint is almost wholly removed. The money that is required is borrowed. The increase of taxation that is necessary to pay the mere interest appears trifling and almost imperceptible. The process, which should be resorted to only in extreme emergencies of the State, is found so easy and popular that it is constantly repeated. The nation, losing all habit of financial sacrifice, borrows in every moment of difficulty, contents itself in time of prosperity with simply paying the interest of the debt, and makes no serious effort to reduce the principal. Thus by stealthy and insidious steps the evil creeps on till the national prosperity and industry are heavily mortgaged, and the consequences of the crimes and blunders of one generation are entailed upon the remotest posterity. In ancient times, the traces of the most horrible war were soon effaced. a few years the misery and desolation that followed it were forgotten. The waste of national wealth which might appear a more permanent calamity was so immediately and acutely felt that it at once produced an increase of energy and self-sacrifice to replace it, and thus the effects of political errors usually disappeared almost with those who perpetrated them. In modern

In

times the chief expenditure of a war is raised by a loan, which is often drawn from the capital that would otherwise have given employment to the poor, which rarely or never produces in the community any considerable increase of economy, and which always perpetuates the calamity of war by throwing its accumulated burdens upon a distant posterity. Every English household is now suffering from the American policy of North and the French policy of Pitt, and the political errors of the Second Empire will be felt by Frenchmen as a present evil long after the children and grandchildren of those who perpetrated them are in their graves.

Nor is it true that the sinister predictions of such economists as Hume and Adam Smith, though they have been falsified by the result, rested upon any fundamental error of principle. If the National Debt before the American war did not arrest, though it undoubtedly retarded, the material progress of England, this was merely because the resources of the country were so large and its circumstances and situation so favourable that the normal increase of wealth was considerably greater than the increase of the burden. If the debts. that were contracted during the great American and French wars did not ruin the country, it was owing to a series of events which no human sagacity could have predicted. The great mechanical inventions of Hargreaves, Arkwright, Crompton, Watt, and Stephenson, followed by a peace of almost unexampled duration, and by a policy of free trade, have produced an increase of wealth that is wholly unparalleled in the history of mankind; while Californian and Australian gold, by depreciating the value of money, has considerably lightened the burden of the debt, at the cost of great loss and injury to the fundholder. It remains, however, as true as ever that European nations have never in time of peace paid off their debts with a rapidity at all corre

sponding to that with which they accumulated them in time of war; that the increased taxation necessitated by national debts has led, and may easily lead, to national bankruptcy; and that long before it reaches this point, it produces distress, difficulty, and privation, and seriously endangers the security of the State. It is one of the worst features of national debts that they deprive nations of the power of regulating their expenditure by their resources. A permanent taxation, which may be easily borne in time of great commercial prosperity, may become crushing if the course of commerce takes another channel, and if the income of the nation is proportionately reduced. History shows how easily this may happen. A war, a new invention, the exhaustion of some essential element of national industry, the progress of a rival, or a change in the value or conditions of labour, may speedily turn the stream of wealth, while the burden of debt remains. And, indeed, this burden itself is one of the most likely causes of such a change. When other things are equal, the least indebted nation will always have the advantage in industrial competition; for the heavy taxation necessitated by debts at once raises prices and reduces profits, and thus causes the emigration both of capital and labour.

These considerations may serve in some degree to justify the great dread with which the National Debt was regarded by the wisest political observers in the eighteenth century. Their judgments were not formed merely by theory. France actually proclaimed herself bankrupt in 1715 and 1769. Holland had already entered into a period of commercial decadence, which was largely due to the emigration of capital resulting from the excessive taxation rendered necessary by her debt. The whole sum raised by taxation in England at the time of the Revolution but slightly exceeded two millions, and it was raised with difficulty, and in the

hard years that followed that event the produce of the taxes considerably diminished. It is not surprising, therefore, that the growth of the debt should have appeared bewildering in its rapidity, and that very erroneous estimates should have been formed of the capabilities of the nation. Thus Davenant, the chief commercial writer under William and Anne, predicted in 1699 that England could never flourish in trade and manufactures till the greater part of the National Debt was liquidated, and the annual taxation of the country reduced to about 2,300,000l. Unless this can be compassed,' he added, 'we shall languish and decay every year. Our gold and silver will be carried off by degrees; rents will fall, the purchase of land will decrease; wool will sink in its price; our stock of shipping will be diminished; farmhouses will go to ruin; industry will decay, and we shall have upon us all the visible marks of a declining people.' These figures, however, were speedily passed. Carteret complained bitterly in 1738 that the estimates had now risen to no less than six millions. Smollett considered the sum of ten millions which was raised in 1743 enormous.' Bolingbroke noted that the Parliamentary aids from the year 1740 exclusively, to the year 1748 inclusively, amounted to about 55 millions, 'a sum,' he added, that will appear incredible to future generations.'5 The most acute observers imagined that the nation had now all but touched the extreme limits of her resources. As early as 1735 Lord Hervey wrote: 'I do not see how it would be possible on any exigence, or for the support of the most necessary war, for England to raise above one million

3

See Sinclair's Hist. of the Revenue, i. 406, 407.

2 Davenant's Works (1771), ii. 283.

3 Smollett's Hist. of England,

iii. 11.

4

Hist. of England, iii. 120. Reflections on the Present State of the Nation.

a year more than it now raises.' 1 The Craftsman,' the great organ of Bolingbroke and Pulteney, describing the condition of the country in 1736, says: 'The vast load of debt under which the nation still groans is the true source of all these calamities and gloomy prospects of which we have so much reason to complain. To this has been owing that multiplicity of burthensome taxes which have more than doubled the price of the common necessaries of life within a few years past, and thereby distressed the poor labourer and manufacturer, disabled the farmer to pay his rent, and put even gentlemen of plentiful estates under the greatest difficulties to make a tolerable provision for their families.'2 Walpole himself declared that the country could not stand under a debt exceeding a hundred millions.3 Hume maintained that the ruinous effect of the debt already threatened the very existence of the nation, and Chesterfield, only a few months before the great ministry of Pitt, predicted that in the next year the army must be unpaid or reduced, as it would be impossible for the country a second time to raise twelve millions.5

By far the larger part of the existing National Debt was created by Tory Governments, and in pursuance of a Tory policy. In the time of Walpole, however, the debt was looked upon as distinctively Whig, the special creation of the Revolution. And this view, though not rigidly accurate, contained a very large measure of truth. The events of the Revolution drew England into a series of great land wars upon the Continent, which made an unprecedented military expenditure inevitable, while the position of the new Govern

'Hervey's Memoirs, i. 487. 2 No. 502.

Horace Walpole's Memoirs of George III. i. 103.

Hist. of England, c. xxi. See,

too, his essay on Public Credit, and the curious note appended to it.

5 June 1756. Works, iv. 185.

Miscellaneous