The indebtedness of the principal nations of the world has become so large as to be almost incomprehensible. The Great War was responsible to a large extent, of course, for this situation. The following table of the approximate indebtedness of a few nations, before and after the war, will indicate to what extent this was responsible for the present situation.
Approximate Indebtedness of Important Nations Before and After the Great War1
The real meaning of such an immense indebtedness can be understood only when the burden upon the citizenship is considered. The indebtedness of the United States was contracted through the four Liberty Loans, the Victory Loan, and by issuing thrift stamps and war saving certificates. The interest rate, conditions of payment, and other items, varied with the different loans, the details of which will be discussed in the chapter on Financing an Emergency. The figures in the above table are so large as to be beyond comprehension. A debt is important and burdensome to a nation, however, only as it affects particular factors. Some of the important items to be considered are the burdens placed upon each individual, as well as upon the national wealth or the national income of a country. The real significance of the present vast indebtedness can best be appreciated by attempting an estimate of some of these classes of burdens.
It is estimated that the national wealth of the United States is between $275,000,000,000 and $300,000,000,000. If this be correct, the indebtedness amounts to between 5 and 8 per cent of the national wealth, and is a per capita burden of about $225. An item exists, however, which should be deducted from this. About $10,000,000,000 was loaned to foreign countries under the stipulation that its liquidation should be used to cancel an equal amount of the national debt. This amount of the debt, then,
1 These figures are taken from a booklet, The World's War Debt, published by the Mechanics and Metals National Bank,
Debt, August 1, 1914 $1,000,000,000
Debt, January 1, 1920 $26,000,000,000
should entail no burden upon the citizenship of the United States.
The burden of the annual charge upon the national income is no less significant. It has been estimated that the annual social income of the United States is approximately $60,000,000,000. The interest charge alone amounts annually to about $1,000,000,000. To meet this a little more than $1.60 must be taken from each $100 of the national income. In addition to this the burden of providing for the sinking fund must be added. This entails nearly another half billion dollars. This, added to the interest charge, would take a little less than $2.50 from each $100 income, or about $15 per capita. Here, again, the loan to foreign countries has a significant effect. When the interest and sinking fund burden of the $10,-000,000,000 is deducted, it leaves an annual per capita burden of something less than $10, or approximately $2 from every $100 income. In other words, the actual annual burden of indebtedness on the people of the United States amounts to a little less than 2 per cent of the national income.
This charge may appear large to a people that has been accustomed to practically no debt burden, but it sinks into insignificance when it is compared with the burden that the debt of other countries is placing upon their citizenship. The debt of Great Britain is about $36,-000,000,000, or a per capita burden of about $780. Her national wealth is somewhere around $120,000,000,000, with a national income of about $15,000,000,000. This means an annual interest charge of about $10 out of every $100 income, or what would be equivalent to a 10 per cent income tax on the entire national income. Great Britain, however, has loaned about $5,000,000,000 to her allies, the payment of which would lower proportionately her burden.
The burden upon France and Germany is still more startling, while that upon Italy is somewhat less. France has a debt about the size of that of Great Britain, but with a national wealth only about three fourths as large, and an annual income about four fifths as large. This makes her per capita debt between $900 and $1,000, with about $15 out of every $100 of her income needed to meet the interest charge. Germany's debt is something less than $40,000,000,000, her wealth between $75,000,000,000 and $80,000,000,000, and her income something over $10,-000,000,000. This makes her per capita indebtedness about $600, while the annual charge requires nearly $20 out of every $100 income. Italy's per capita debt is approximately $350, and the annual burden about $7.50 out of every $100 income.
These figures will hold as approximately correct for the middle of 1919, when the indebtedness of most countries had reached its maximum. The relative status of the various countries under consideration may be gained readily from a glance at the computations in the following tabulated form. A few other calculations have been added because they show interesting comparisons.
Indebtedness Condition of Important Countries 1
Wealth in Billions
Income in Billions
Burden on $100
Per Capita Interest Charge
A moment's reflection upon these figures causes one to realize the pressing burden of indebtedness which rests upon these countries, especially the European nations. It must be remembered, too, that only the national indebtedness has been considered, and that the minor polit1 These figures are taken, very largely, from a booklet published in 1919 by the Bankers Trust Company.
ical divisions generally have a heavy debt charge of their own. This, added to the enormous interest charge, makes the total burden of public indebtedness so large that it can be materially lessened only after a considerable lapse of time.
Adams, Public Debts.
Bankers Trust Company, Our Public Debt.