British National Debt

But the belief in the instability of the position of Great Britain arose not only from general economic conceptions of this nature, but also from numerous actual conditions and developments which could not but denote the beginnings of economic decay. It cannot be sufficiently emphasized how long people had believed they had seen signs of this. One of the most important of these signs was the rapid increase in the British national debt during the time with which we are concerned—especially when considered in the light of the generally current notion that such a development must inevitably lead to national bankruptcy. The economic literature of England herself during the eighteenth century is full of Kassandra-like prophecies as to the impending ruin of the state owing to the augmentation of its liabilities. In fact, Lord Macaulay says in a well-known passage that, with the exception of Burke, no author since the founding of the English debt had perceived the security which the general economic development of the country provided against these dangers. Especially interesting in this connexion is Adam Smith's gloomy representation of the state of affairs, the view of the European national debts presented in the Wealth of Nations being throughout remarkably pessimistic for so optimistic a writer. In Adam Smith's opinion, the funded debts 'will in the long run probably ruin all the great nations of Europe', as they had already steadily weakened them. And even though he believes that England, owing to her better system of taxation, is in a better position than most countries to stand the strain, he warns his readers 'not even to be too confident that she could support, without great distress, a burden a little greater than what has already been laid upon her'.

When this was written, in 1775, the funded British debt was £124,000,000, and the war with the American colonies, which intervened between the first and third editions of the Wealth of Nations, served nearly to double that amount. When Great Britain plunged into the revolutionary wars at the beginning of 1793, in fact, her national debt amounted to £230,000,000. Afterwards the war was financed to such an extent by means of loans that the funded debt for Great Britain and Ireland at the time of the Peace of Amiens, in 1802, had risen to what was, for the conditions of that time, the truly astounding sum of £507,000,000—a figure the significance of which is perhaps best made clear when one reflects that the funded debt of England at the outbreak of the World War in 1914 amounted to no more than £587,000,000. Under these circumstances Adam Smith's warning could not fail to make an impression; and indeed we find it employed as a main weapon against Great Britain in a pamphlet published in 1796 with the significant title, The Decline and Fall of the English System of Finance. The author was the well-known republican and free-thinker, Thomas Paine, who had some years previously fled to France and become a member of the National Convention. In the French journalism of the period dealing with this subject, which has been sketched by an English woman historian, Miss Audrey Cunningham, an impending British state bankruptcy figures as a fairly self-evident prospect in the future. This is especially the case in a very measured paper, Des finances de l'Angleterre, written in 1803 by the French littérateur, Henri Lasalle, and reproduced by Miss Cunningham in extenso.

It is true that we must beware of overestimating the importance of these views. It would be hard to discover, as a matter of fact, anything more hopelessly shattered than the finances of France herself during the Revolution; and her capacity to develop a great military power, despite the most thorough-going national bankruptcy, might rather be expected to have implanted doubts as to far-reaching political consequences arising from financial difficulties. But the thoughts of leading French statesmen did not move in that direction. Whether because of sincere conviction or because of the effect on public opinion, therefore, it became in due time an axiom of Napoleon that his finances both in war and in peace must be managed as much as possible without loans; and his ministers of finance, greatly against their will, had consequently to resort to the most dubious means of raising funds—not only increasing the annual deficits in the national budget, but also sanctioning measures of downright dishonesty against the purveyors to the state—rather than negotiate public loans. Thus the accumulation of debt represented to Napoleon, at least officially, the one great danger to a state's existence. From the pedestal of public financial virtue he could then condemn the heavily indebted Great Britain; and he naturally did not neglect the opportunity to do so.

But the belief in the dangers of piling up debt were scarcely due to this contrast alone, the deceptiveness of which can hardly have escaped Napoleon's notice. It was also rooted, we may be sure, in a deeper conviction, namely, in the notion of the artificiality, the unnaturalness, of the economic system of Great Britain, in comparison with the well-grounded prosperity of France. Especially typical of the French view is a passage in Brissot's previously cited speech, in which he says that England had no security—'not a single hypothec'—to offer for her loans, while France, to begin with, had three milliards in properties recovered by the Crown, as well as in the riches of the land and of industry, 'the enormous resources which have long since been consumed by the claims of British ministers'. The fact that these 'hypothecs', which formed the guaranty of the French paper currency (assignats), had already, at the time of Brissot's speech, allowed the currency to decline to one-half of its nominal value, and did not prevent it from sinking to less than one three-hundredth thereof, did not serve to destroy the belief in their importance for the national credit. The intangibility of a credit system like that of Great Britain caused French observers quite honestly to doubt its staying power; and, as usual, this held good of Napoleon quite as much as of the revolutionary politicians. As a matter of fact, Napoleon's amateurishness in dealing with matters of credit is revealed in practically every line he wrote on that subject and is also confirmed by the evidence of the people around him.