Much attention has been given by different authors to the economic effects of public borrowing. It is now pretty well agreed that public borrowing does not, as was once taught,2 create new wealth except indirectly, through the use made of the capital taken when it is used productively. Nor, on the other hand, does public borrowing in itself directly destroy wealth. The money borrowed may be devoted to some form of rapid consumption, as in war. In this case the destruction of wealth is determined by the line of expenditure decided upon, not by the borrowing merely. But the feasibility of obtaining large sums in this way is said to lead to more extravagant expenditure than would otherwise be indulged in, since taxation for such purposes would be difficult. The consumed wealth is replaced by claims upon future wealth which are not of such a character as to be available as productive capital. But the loss incurred is distributed over many years instead of being concentrated in a few.

1 P. 579.

2 " The public funds a mine of gold."

As in the case of a spendthrift who mortgages his patrimony for wasteful extravagance, so in the case of a nation which borrows for war, the evil that arises is from the waste, not from the borrowing. For the State to borrow for a productive purpose has no other economic effect than for a private corporation to do the same.