Natural Products Affecting National Credit. National Credit May Be Affected By Existing Indebtedness

On the other hand, the credit of a country and the price it has to pay on its loans may be mainly industrial in character, and depend on such causes as the natural productive powers of the country, whether in its soil, its mines, or its facilities of communication and transport, the number of natural monopolies it possesses, either in the quality of the foodstuffs or fruits, in its metals or precious stones, its furs or timber, its rubber or ivory, or what not; or, again, on the inventive or energising ability of the people, their scientific knowledge and its application to machinery and to all the arts that minister either to the necessities or luxuries of life. Or again, the credit of a country (as reflected in the rate of interest of its loans) may depend on the amount of the existing indebtedness of the country as a whole, and of its municipalities and corporations; the proportion of these loans which has been spent on reproductive works, and the proportion which has been either blown away in fruitless military expenditure or in paying off old debts, in political corruption, etc. Summing up, then, these various causes which in their combination determine the relative rates of interest which different Governments have to pay on their loans, and dividing them broadly into the relative amount of productive industrial power which they possess, on the one hand, and the relative amount of debt which these industrial powers have to carry, on the other, we may tarry for a moment on our way with the object of considering their modus operandi as preliminary to the maxims of Mr. Lowenfeld in regard to them, which are to follow.

National Debt May Prove Beneficial

The first point I would mention is, that the mere gross amount of a nation's debt will by itself give us no true or final indication of its credit, but only when taken in relation to its productive powers, present or prospective - to its present productive powers in the case of short-period investments, and to its prospective productive powers in the case of the long-period ones with which Mr. Lowenfeld's scheme deals. It is not every debt that benumbs or strangles either the individuals of a nation or the nation itself. Some debts are the sole means of opening up the hidden resources of a country or of developing them still further, and so are a blessing in disguise. It is only when the capital borrowed is sown on a stony, barren soil, productively speaking, that the debt becomes an incubus on production; if it falls on a rich soil, it waters and increases it like a fertilising rain. If the debt then, however great in itself, is light compared with the wealth-producing Powers of Nature which the capital of the debt can evoke, whether from the soil, as in the improvements of agriculture, or from the use of machinery in manufactures - it adds to wealth production; if, on the contrary, the weight of the floating balloon of debt, like a hydrocephalic head, is too heavy for the wealth-producing Powers of Nature which have to carry it as a going concern, when its products are put on the market at the existing market price, then it becomes top-heavy - "over-capitalised" as they say - and staggers and tumbles into bankruptcy, with the loss of all the stored-up human labour which the capital of the debt represented.

National Debt And The Path To Bankruptcy. Employment Of Borrowed Capital

It is precisely the same with National Debts as it is with the debts contracted by individual traders, Joint Stock Industrial Companies, or Corporations; but with this difference, that whereas the chances are that individual traders will employ the capital of their debt productively; and with Joint Stock Companies, as things at present go, it is perhaps about even chances as to whether it is productively or unproductively spent; and while Corporations, again, will spend their borrowed capital productively on the whole, even when they are paying more for the work on which they employ it than is necessary, or than would be paid for it were it in private hands; Governments, it is most probable (except, perhaps, in the case of a fight for their very existence), will spend most of their borrowed capital un-productively, in military establishments, in wars, etc.; while they are only beginning to learn the importance of spending it in industrial enterprises which are beyond the resources of any individual or Joint Stock Company.

Security For National Debt

Again, very few nations, as such, have any public property at all as security for their debts (except, perhaps, Germany, whose debts are secured on a network of railways and canals owned by the State), but have to depend almost entirely on the taxes which they can squeeze out of their subjects. And however equally these taxes may be laid on the different classes of a nation, it is evident that if they exceed a certain amount, and the capitalist class cannot shift their share on to the shoulders of the general public, the nation itself in its industrial rivalry with other nations must go under in the struggle for existence; so long, that is to say, as the present industrial organisation of society lasts.