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ANGELL (NORMAN). The Pea'c Treaty and the Economic Chars of Europe

By H. S. FURNISS BRENTANO (L.). Die Anfänge des modernen Kapitalismus.

By J. HI. CLATHAM CANNAN (EDWIN). The Paper Pound of 1797-1821. By R. G. IIAWTREY DOUGLASS (H. P.). The Little Town

By Prof. A. L. BOWLEY GORDON (L. SMITH) AND O'BRIEN (C.) Co-operation in Many Lands

By H. W. WOLFF HAMILTON (C. J.). Trade Relations between England and In lia (1603-1896)


By Prof. A. L. BOWLEY KEYNES (J. M.). Economic Consequences of the Peace. By 1). H. ROBERTSON LAUGHLIN (J. L.). Money and Prices

By Prof. E. CANNAN NICHOLSON (J. S.). Inflation

By Prof. E. CANNAN OVERLACH (T. W.). Foreign Financial Control in China.

By Sir CHARLES Addis The Equipment of the Workers

. By Prof. A. L. BOWLEY WITHERS (UARTLEY). War: Time Financial Problems.

By Prof. C. F. BASTABLE WOOD (E. E.). The Housing of the Unskilled Wage-earner.

By Prof. A. L. BOWLEY










MARCH, 1920


IN olden times there lived a man whose body had the peculiar quality, however much it was cut to pieces, of coming together again as strong as ever. All the paladins of the time made trial of this unconquerable wonder, and all in vain. One of them cut off the head and hurled it into the middle of a river ; another divided the trunk longways, another sideways, and others other ways; they cut off limbs and dug out organs at their pleasure—but still the bits ran together again like drops of quicksilver, and the man was unconquerable. Of such quality is the author of the Wealth of Nations. For nearly a century and a half he has been cut to pieces, and still the pieces have come together again, and the old Adam is as strong as ever.

To carry the fable further would be tedious. The moral will be obvious to any who will read in extenso the chapter on “Public Debts"—the last in the Wealth of Nations and the fitting crown of the whole work.


The chapter begins as usual with a vigorous sketch of the historical development. As usual, also, the history makes the past live in the present. "The parsimony which leads to accumulation [i.e., of treasure in war chests] has become almost as rare in republican as in monarchical governments. The Italian republics, the United Provinces of the Netherlands are all in debt. The canton of Berne is the single republic in Europe which has amassed any considerable treasure. The other Swiss republics have not."

In time of war-even in the pre-Adamite world—it was necessary to resort to debt. “The want of parsimony in time of peace imposes the necessity of contracting debt in time of war. In war an establishment of three or four times the ordinary expense becomes necessary for the defence of the State; and No. 117–VOL. XXX.


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consequently a revenue three or four times greater than the peace revenue.

Such an increase of revenue is in general impossible, and, even if possible, is not possible in the time available. "The moment the war begins, or, rather, the moment in which it appears likely to begin, the army must be augmented, the feet must be fitted out, the garrisoned towns must be put in a posture of defence; that army, that fleet, those garrisoned towns must be furnished with arms, ammunition and provisions. An immediate and great expense must be incurred, in that moment of immediate danger, which will not wait for the gradual and slow return of the new taxes. In this exigency the Government can have no other resource but in borrowing."

In the light of this passage, it is strange to find Adam Smith cited by Professor W. R. Scott as a supporter of the “all-tax” method, with the further implication that the tax revenue ought to be augmented three- or four-fold.

The next step in the argument is to show that the necessity of borrowing brings with it, i.e., in a commercial state of society, the facility of doing so. "A country abounding with merchants and manufacturers necessarily abounds with a set of people who have it at all times in their power to advance, if they choose to do so, a very large sum to Government. Hence the ability in the subjects of a commercial State to lend."

“Commerce and manufactures, however, can seldom flourish long in any State which does not enjoy a regular administration of justice; in which the people do not feel themselves secure in the possession of their property. ... Commerce and manufactures, in short, can seldom flourish in any State in which there is not a certain degree of confidence in the justice of the Government." This confidence necessary for commerce under ordinary conditions makes the merchants trust the Government on extraordinary occasions. They are willing to lend for defence. Also, they find the lending profitable. By lending to the State they increase rather than diminish their own credit. Their Government securities are transferable often at a premium. This readiness to borrow and willingness to lend make the accumulation of treasure hard and that of debt easy. Then follows a sentence by way of introduction to the further historical development which has often been quoted as if it were the prophetic conclusion. “The progress of the enormous debts which at present oppress, and will in the long run probably ruin, Europe-has been pretty uniform." The last clause has been left out, and ridicule has


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ic Problems of Peace after War. Second Series, p. 54.

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