Our Money and the State (eBook)

Hartley Withers (Autor)

eBook Download: EPUB

2018
127 Seiten
Charles River Editors (Verlag)
978-1-5312-9462-5 (ISBN)

Infos

Our Money and the State is a classic work on public finances first published in 1917.

Textauszug

CHAPTER II

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MONEY TAKEN BY BORROWING

WHATEVER BE THE DUTIES THAT a Government is asked to fulfil, it can only perform them by taking to its own use such goods and services as are needed for them. To keep order at home it must have the services of policemen and the goods needed to feed, clothe, and equip them. To build a railway it must have steel rails, rolling stock, and land and the services of all the people who lay the railway out and get it ready for working. To carry on war it must have all the goods needed for the feeding and equipment of an army and the services of the fighters and of those who organize and manage the campaign, the transport service, and all the other items in the problem. These goods and services have to be supplied out of current production at home and abroad, and so current production has to be diverted, to the extent of the Government’s demand, to supplying those needs, unless (which is unlikely in time of war) it can be increased sufficiently to produce them without this diversion. In order to bring about this diversion, Government has to check the demand of individuals for goods and services so that labor and energy may be set free to work for it; and this it does by taking money from individuals in taxes, which it can only impose on its own citizens, or in loans, or by reducing the buying power of individuals through the process known as inflation, which consists of increasing the volume of the currency and thereby debasing its value and raising prices.

We will begin with the borrowing process. When a Government borrows, it invites people to lend it money, and, as a rule, promises to pay them a certain rate of interest for it, and sometimes promises to pay back the money to them or their heirs and assigns at some more or less distant date. Even when no such promise of repayment is given to the lenders, the fact that the holder of the security, or promise to pay interest, can always sell it at a price on the Stock Exchange, enables him to rely on getting back at least part of the money that he has lent, if he wishes to do so.

It was stated that when a Government borrows it promises, as a rule, to pay interest. This is now so usual that a loan without interest seems to a modern mind to be almost a contradiction in terms. But such things have happened. In the good old days impecunious sovereigns who could not get as much as they wanted out of their subjects by taxation, used to write to people of property and demand a sum from them on loan; the latest example, in England, of this form of finance occurred in the early years of the reign of James I. A large number of these letters—which were called Letters of Privy Seal—dated July 31st, 1604, were sent to the principal noblemen and gentlemen in all the counties of England, and excited great and general dissatisfaction. Their form was as follows:

“By the King:

“Trustie and well beloved we greete you well. Although there be nothing more against our minde than to be drawne into any course that may breed in our subjects the least doubt of our unwillingness to throw any burthen upon them, having already published both by our speeches and writings, our great desire to avoide it in the whole course of our Government: Yet such is our estate at this time in regarde of great and urgent occasions falne and growing daily upon us, (in no sort to be eschewed) as wee shall be forced presently to disburse greater summes of money than it is possible for us to provide by any ordinary means, or to want without great prejudice, in which consideration . . . we think it needless to use any more arguments from such a King to such subjects: But that as our necessitie is the only cause of our request, so your love and duety must be the chiefe motive of your ready performance of the same . . . That which we require, therefore, is that within twelve dayes after the receipt hereof, you will cause the summe of to be delivered to whom we have appointed to be our collector in our countie of

“The loan whereof we do desire to be untill the Foure and Twenty day of March which shall be in the yeere of our Lord God 1605, for assurance whereof we have directed these our letters of Privie Scale unto you, which, with the hand of our sayd collector testyfying the receipt of the same summe of shall bind us, our heirs, and successors for the repaiment thereof . . . upon the deliverie of this our Privie Scale unto our sayd receipt.”

Through all the rambling verbiage of this Letter of Privy Seal, a large part of which has been left out, there is no whisper or hint of any interest payment. The loan was for nearly eight months, and from its terms was evidently a requisition, leaving the receiver of the letter little or no choice about producing the sum required of him.

In modern times, however, these things do not happen. A rate of interest is universal, and a definite promise of repayment is very usual. It is notably absent, however, in the case of the British Government Consols. The holder of Consols has no right to repayment from the Government, only the right to a perpetual annuity of so much a year, originally 3%, converted in 1888 to 2¾ % and in 1903 to 2½ %. A very large part of the French 3% Rentes are also what is called a perpetual debt, with no obligation on the part of the debtor to repay.

When a Government raises money by borrowing it thus hires certain of its citizens, or those of any, other country who may like to subscribe to the loan, to find money for it, and it does so by promising them a rate of interest, varying according to the state of the money market, its own credit, and the circumstances under which the loan is made. Borrowing thus has this very tempting but always dangerous advantage over taxation, that it enables a Government to get money from the citizens of other countries. Let us leave this consideration on one side for the time and see what are the advantages and disadvantages of borrowing at home over taking money in taxes.

From the point of view of the practical and adroit politician, who wants money for the State and does not want to make himself or his policy unpopular by increasing the burden of taxation, the advantages of borrowing are obvious and overwhelming. To the public the advantages are equally clear and weighty, because the public thinks that by means of the borrowing system it is able to avoid being taxed, and to hand on to posterity the task of finding the money that is required for its present needs.

This view has been dinned into the public ear by economists, financial: writers (among whom I must plead guilty to having done my small share), and business men. But it is largely a delusion. Let us take the example of the present war. We cannot hand its burden on to posterity. It has to be paid for now by somebody, and all wars have always been paid for during the time in which they were fought and finished up. War cannot be carried on with goods produced or work done either by our ancestors or by our posterity. The goods consumed in war—shot, shells, rifles, food, clothes, horses, motor-lorries, wagons, ships, and everything else—have to be new and up to date, and, apart from the store of them with which the contending nations began, are made and produced as the war goes on. As they clearly have to be in existence before they can be used, it is obvious that they cannot be produced by posterity. The British army cannot eat the bread that is going to be sown in 1930, or wear boots made out of hides whose original owners are yet unborn. Whatever posterity produces will belong to posterity for its own use, and nothing that we do now can deprive posterity of a single ear of wheat that it sows and grows. It is true that when England sells part of her accumulated wealth, in the form of securities, to Americans, in order to pay for goods wanted for the war, or when she borrows in America and contracts to pay Americans interest in the meantime and their money back some day, she thereby arranges that a larger share of posterity’s wealth will go to America and a lesser share to her; but the sum of posterity’s wealth will not thereby be affected, and this only happens when a country borrows from, or sells’ securities to, other countries, and this side of war finance we are not at present considering. Confining ourselves to that portion—by far the greater—of our war borrowings that are raised at home, we see if we look at the matter steadily that the borrowing policy is only a gilding that makes us swallow a pill and believe that we are eating something good and nourishing. The British Government wants money and offers its citizens a beautiful security, with 5% interest, at 95, repayable in thirty years at par, and they calculate that these terms give them a net return of 5¼ % for their money. With the help of a tremendous advertising campaign, and a very real and patriotic effort on the part of a large number of good citizens, the nation hands over 1,000 million pounds to the Government, and the achievement is very justly hailed as the biggest financial success ever won. It is a perfectly magnificent success. But it does not mean that the citizens have thereby handed to posterity the business of paying for 1,000 million pounds’ worth of the war. They have paid now by handing over those 1,000 millions. In return for them they receive from the Government securities, that is, promises to pay interest and repay capital, and the Government can only meet these promises out of their pockets. These securities are assets that they hold, in return for their money, but they are also liabilities that they as taxpayers have to meet; they will only get...

Produkt-Details

• Erscheint lt. Verlag: 22.3.2018
• Sprache: englisch
• Themenwelt: Geschichte ► Teilgebiete der Geschichte ► Wirtschaftsgeschichte
• Themenwelt: Wirtschaft
• Schlagworte: Bastiat • Gold • Mises • Ron Paul
• ISBN-10: 1-5312-9462-6 / 1531294626
• ISBN-13: 978-1-5312-9462-5 / 9781531294625