CHAPTER II. THE PUBLIC CREDIT OF THE PRESENT TIME. LITERATURE. Friedrich Nebenius, Ueber die Natur und die Ursachen des öffentlichen Kredits, Staatsanlehen, die Tilgung der öffentlichen Schulden, den Handel mit Staatspapieren und die Wechselwirkung zwischen den Kreditoperationen der Staaten und dem ökonomischen und politischen Zustande der Länder (2. Auflage. Erster, allgemeiner Theil, 1829). Lorenz von Stein, Lehrbuch der Finanzwissenschaft; Zweiter Theil: Die Finanzverwaltung Europas; Dritte Abtheilung: Das Staatsschuldenwesen (5. Auflage, 1886). Adolph Wagner, Ordnung des österreichischen Staatshaushalts (1863). The Same, "Staatsschulden," Bluntschli and Brater's Deutsches Staatswörterbuch (1867). The Same, "Die Ordnung der Finanzwirthschaft und der öffentliche Kredit," Schönberg's Handbuch der politischen Oekonomie, vol. iii. (2d ed. 1885). Paul LeroyBeaulieu, Traité de la science des finances (1877), vol. ii. G. RiccaSalerno, Teoria generale dei prestiti pubblici ( Milan, 1879). Henry C. Adams, Public Debts (New York, 1887). F. von Reitzenstein, "Das kommunale Finanzwesen," Schönberg's Handbuch der politischen Oekonomie (2d ed. 1885), vol. iii. pp. 649–657. For statistics on the present state of national and municipal debts, cf. Finanzarchiv, 1884-1889. Richard von Kaufmann, "Finanzstatistisches zu den Schulden der europäischen Grossmächte," Conrad's Jahrbücher für Nationalökonomie und Statistik, 1887 (N. F. vol. xv.). The Same, "Die öffentlichen Ausgaben der grösseren europäischen Länder nach ihrer Zweckbestimmung," ibid., 1889 (N. F. vol. xviii.) SPECIALLY ON PAPER MONEY. T. Tooke and W. Newmarch, History of Prices (German Translation by C. W. Asher, 1859). Adolph Wagner, "Papiergeld," Deutsches Staatswörterbuch (1862). The Same, "Zur Geschichte der österreichischen Bankozettelperiode," Zeitschrift für die gesammte Staatswissenschaft, 1861, 1863. The Same, Die russische Papierwährung, eine volkswirthschaftliche und finanzpolitische Studie nebst Vorschlägen zur Herstellung der Valuta (Riga, 1868). J. A. R. Helferich, "Die österreichische Valuta seit dem Jahre 1848," Zeitschrift für die ges. Staatsw., 1855, 1856. Carlo Ferraris, Moneta e corso forzoso (Milan, 1879). I. THE PRESENT STATE OF THE PUBLIC CREDIT. 518. What the far-seeing philosopher Berkeley said, a century and half ago, in speaking of England, that the discovery of public credit was the discovery of a new gold mine, and what James Steuart, and more particularly Sinclair, had to say of its efficiency as an instrument of political power, all this has been realized in actual fact during the course of a hundred years after their time. The debts of the nations of Europe, the magnitude of which at the close of the wars with which the nineteenth century began, filled the most sensible of our financial writers with astonishment and dismay, have gone on increasing during a further couple of generations in a degree to correspond with the progress in industrial productivity accomplished during the century. It is true that the wealthiest and most deeply involved of all the nations-Great Britain-was able not only to come to a halt in its career of national debts, but even to cancel a considerable portion of its old debts. But at the same time it is to be noted that the other states which have attained a similar abundance of credit and capital, have, as fast as the circumstances have permitted, also found occasion for the contraction of large national debts; so that we have today the following situation. While, according to computations given above (sec. 493), the interest payable on debts in 1820 by the various states of Europe amounted to 1,125 million marks, later computations show that by 1865-66 this sum had nearly doubled, and by 188586 had increased nearly fourfold.' From the principal of the debt (1885-86, 108,431 million francs) is to be deducted so 'The Société de Statistique computes that the payments for interest and redemption in 1865-66 amounted to 2438 million francs; for 1885-86 Paul Boiteau computes it at 4864 million francs (Conrad's Jahrbücher, 1887, p. 145). According to an official Italian document (Finanzarchiv, 1885, pp. 847 et seq.) the interest-charge on the public debt of the seven states (the individual states of the German Empire being included under Germany) France, England, Italy, Austria-Hungary, Spain, Russia and Germany, in 1882, amounted to 3957 million francs; that is to computed expenditure of all European states in 1820. 1887) finds that the civilized countries of today, with a an area of 37.4 million square miles, have an aggregate burden of debt amounting to 27,000 million dollars. This does not include municipal or communal debts. Converted into francs this would be 143,000 millions, as contrasted with an aggregate of 108,431 million francs for European public debts alone according to the French calculation cited above. say, three times as much as the Henry C. Adams (Public Debts, population of 1170 millions and much as is covered by productive investments, as, e. g., the Prussian railway loans. But as against this there is to be added the municipal and communal debts, of which but a very modest portion are so invested as to cover their own interest-charge. In Prussia alone the urban and rural communes together paid, in 1883-84, 34.50 million marks in interest and in discharge of the principal of their debts; in the kingdom of Italy the communes and provinces in 1880 paid 41.50 million francs as interest on their debt (on a principal of 745.40 million francs).1 The national debt of England, the interest-charge on which amounted to 32.50 million pounds in 1820, has been gradually redeemed, so that the interest-charge in 1852 amounted to only 28 millions, and in 1885-86 only 22 millions. Instead of amounting to three-fifths of the national expenditures, as in 1820, the interest-charge now amounted to only one-third or one-fourth of the total. But in most other countries (with the exception of the German states, especially Prussia) the public debt has increased with great rapidity. Austria-Hungary in 1820 paid only 31 million marks in interest, as compared with 395 millions in 1882; Russia 23 millions in 1820, and 640 millions in 1882; France 148 millions in 1820, and 790 millions in 1882. Italy paid 410 million marks in interest on its public debt in 1882, while in 1820 all the Italian states, together with Spain, Portugal, Sweden, Denmark and the minor German states paid only 225 million marks interest. It is especially in the case of states like Austria-Hungary and Russia, which had exhausted all their resources, including their credit, at the close of the great war, that the contrast between the relatively slight amount paid after the Napoleonic wars and the large interest-charge of today brings out the great advance that has taken place in the growth of the public credit and of the financial strength of the states. Even in the case 1 Finanzarchiv, 1884, pp. 760, 244-253. 2 Statistical Abstract for the United Kingdom, 1868, 1888. of France, which, it is true, was treated with leniency at the re-establishment of peace in Europe, but was still subjected to burdens that were very great for that time, even in France the increase of the interest-charge by more than sevenfold is evidence of a great development of industrial productivity and wealth during the nineteenth century. 519. Let us take up, somewhat in detail, the development of the public credit in Prussia and Germany. In so doing we shall (here as in the discussion of the tax system) avoid comparison of multifarious facts and figures taken from various systems of legislation and various nations, and will be able to confine our attention to definite facts regarding the community immediately under consideration. We shall in this way get a conception much truer to life than is attainable by the oldfashioned method of discussion." A survey of the Prussian public debts, and their development since the middle of this century, is calculated to impress us with the worthlessness of the customary arithmetical comparison of our state with other of the larger states. What everyone understands in speaking of the debts of any private person, viz., that the degree of indebtedness depends on the purpose for which the debts have been contracted and the assets to be set off against them, this important fact is left out of consideration in speaking of public debts. This is to some extent due to the influence of unsound theory. During the years 1848-1866 the Prussian national debt increased from 158.50 million thalers to 290 millions, that is to say, by 131.50 million thalers. The amount invested in the state railways built or bought during this period (inclusive of the stock held by the state in private roads) amounted to 124.33 million thalers. This leaves a remainder of only 7 million* Even Nebenius (Der öffentliche Kredit, 2d ed. vol. i. pp. 289 et seq.) made some acute and noteworthy remarks on the subject of the prevalent method of comparing figures taken from different countries. His remarks have seldom received due consideration. 2 E. Richter, Das preussische Staatsschuldenwesen, pp. 63 et seq. thalers not covered by the value of the railways. The national treasure at the end of 1865, moreover, amounted to 20 million thalers (1848, 19.40 millions). The interest-charge on the national debt in 1865 was 11 million thalers,. whereas the railroads turned in funds to meet this charge amounting to 9.6 million thalers. The latest changes in the national railway policy have appreciably altered this condition of things for the better. The national debt has greatly increased in aggregate amount, and, through productive investment, it has not only afforded the funds necessary for interest and redemption, but has even yielded a progressively increasing surplus above these requirements. The debt has increased as follows: But the net receipts of the state railway business have developed at such a rate that from 1878-79 they nearly equaled the interest-charge on the entire national debt, and since 1879-80 they have even exceeded the interest-charge. as follows: Interest-Charge The figures are Year 1881-82 1883-84 1886-87 1887-88 1889-90 Net Receipts (million marks) According to this showing the public debt of Prussia during the last forty years has been in a radically different situation from what we find in Austria, France, Russia, Italy and even the United States, and differs likewise from the debts contracted by 'Cf. Anlagen zum Staatshaushaltsetat for 1889-90, vol. ii. No. 1, Beilage B. Staatsschuldenverwaltung. 2 Finanzarchiv, 1887, pp. 294 et seq., and Anlagen zum Staatshaushaltsetat, for 1889-90, vol. i. |