On the Debt
Henry George
[Reprinted from The Standard, 11 February,
1888]
An interesting paper upon the credit system was read at the recent
meeting of the National Board of Trade at Cincinnati by J. A. Price,
president of the Board of Trade of Scranton, PA. The ever-increasing
national debts of Europe he estimates at $22,500,000,000, imposing
upon its people an annual interest charge of some $800,000,000, and in
addition to this there are railway, municipal and commercial debts and
mortgages to an amount that can hardly be estimated. Of the volume of
indebtedness in this country he makes the following estimate:
Present national debt, Dec. 1, 1887: |
$1,675,816,680 |
State: |
$226,597,594 |
County and municipal: |
$821,186,447 |
Railway: |
$4,163,640,141 |
Banking: |
$4,581,706,208 |
Private banking: |
$1,500,000,000 |
Record: |
$6,000,000,000 |
Mercantile: |
$3,000,000,000 |
Individual, otherwise than above: |
$6,000,000,000 |
Aggregate: |
$27,969,247,048 |
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Estimating our population at 60,000,000, this would be some $465 for
every man, woman, and child in the United States, or over $2,000 for
every head of a family. Some of the items in this estimate are of
course mere guesses, and some of the debts included are of course
offset and cancelled by others; but whatever deductions can be made on
these accounts, the result is sufficiently startling. The civilized
world -- and our own country not last in the race -- is rushing
forward into a sea of indebtedness that must finally submerge itself
into general bankruptcy and repudiation.
Colonel Price advocates the abolition of all laws for the collection
of private debts, and he is unquestionably right. There is no more
reason why the state should lend its machinery of constables,
sheriffs, courts, and . . . its prisons to the collection of the debts
of the individual, than that it should undertake to black his boots in
the morning or tuck him into bed at night. The abolition of all laws
for the collection of private debts would not only free our judicial
machinery from a clogging mass of business which to a large degree
prevents its performance of proper functions, but it would
unquestionably lead to a far higher standard of personal and
commercial morality, since character would then be the prime element
in credit. If it lessened, as it undoubtedly would, the use of credit
in commercial transactions, the result would be to put business upon a
far more sound and stable foundation and to lessen the intensity of
those commercial fluctuations in which periods of stagnation follow
periods of speculation. The curse of credit as a flux of exchanges is
that it expands when there is a tendency to speculation, and sharply
contracts just when most needed to assure confidence and prevent
industrial waste.
The enormous figures that Colonel Price presents are also extremely
suggestive in other ways. For instance, they [should be called to the
attention of those] who incline to the belief that it is capital that
oppresses labor, and that before labor can get its fair reward
interest must in some way be abolished. The greater part of this vast
volume of indebtedness passes as capital, and on nearly all its
payments having the semblance of true interest.... Yet the worldwide
proclamation of a Jewish jubilee would at the blast of a trumpet sweep
away this whole vast mass of indebtedness without lessening the wealth
of the world by a single iota. Nor, for the most part, does this
volume of debt represent any ownership of real and existing capital.
The mortgages, for instance, in greater part, do not represent capital
loaned to the users of land, but mere rent charges -- payments which
the users of land have been compelled to agree to make to landowners
as a condition to use land. An Eastern speculator or a foreign
investor gets hold of a tract of Western land, cuts it up into farms
and sells it out to settlers on mortgage, or a tract of land near a
city is cut up and sold in the same way. The seller gets obligations
which are counted as capital and receives payments which are termed
interest. But in reality there has been no production or transfer of
capital, and the payments are not interest for the use of capital, but
blackmail for the use of land. So railway indebtedness really
represents to a large degree, not capital invested in making railways,
but what is suggestively termed "water," and the interest
they bear is not payment for the use of capital, but is a monopolistic
blackmail upon the public.
As for the gigantic public debts, they represent capital only insofar
as there are public improvements to show for them. What they do, for
the most part represent, is either sheer public plunder, or capital
and labor destroyed and wasted in war or preparations for war. Our own
national debt, incurred during the war for the maintenance of the
Union, is unquestionably the best and fairest of them all. But it does
not represent, as is often assumed, wealth borrowed from foreign
nations or for the carrying on of a future war. As a matter of fact,
during the war we did not increase our obligations much, if any, to
foreign nations, and it is as clearly a physical impossibility to
borrow wealth from the future to carry on a war, as it is to get men
still unborn to fight in it. The wealth that was used and destroyed
during our Civil War was from what then existed. The carrying on of
war by means of public debts, which is probably the most injurious and
anticivilizing of all modern inventions, is not a device for spreading
the cost of present expenditures over future time, but one by which
governments may obtain wealth from the classes who have wealth to
spare, without exciting their opposition -- since in return it gives
them a mortgage upon the labor of the future. The United States might
have come through the war without a penny of public debt if the
government had taken wealth from its possessors as ruthlessly as it
took men. Whether the wealthy classes would have submitted to this is
quite another question.
But it is instructive to consider how different would have been the
existing distribution of wealth if we had done so. And ever since the
war, our whole financial policy seems to have been steadily directed
to making the taxation for the fulfillment of the obligations then
given as onerous as possible. Where we borrow forty, fifty, and sixty
cents, we have paid one hundred and even one hundred and twenty cents,
with money wrung from the people by the most onerous system of
taxation -- systems of taxation purposely devised to fatten monopoly
and make the rich richer. We have paid off noninterest bearing debt,
and by means of the national banking system we have permitted the
holders of a large part of the public debt to enjoy the principle
while they draw the interest. Through the national banking system the
banker was allowed to draw from the government $80,000 in money for
every $100,000 in bonds he deposited, and then to draw interest on the
whole $100,000. This proportion was subsequently increased to ninety
per cent, and now a bill is pending in Congress to allow the national
banks a dollar in money for every dollar in bonds they deposit, while
paying them full interest on the dollar. And not content with this, as
though from the mere desire of paying as much interest as possible,
and making the redemption of our public debt as slow as possible, we
are actually buying up enormous amounts of silver, for which we have
no more use than for so many tons of cobblestones, and storing them
away in vaults. Secretary Fairchild sees the absurdity of coining
silver and proposes instead that it shall be stowed away in bars. But
why not leave the silver in the ore and the ore in the ground? That
would be a far greater economy. As for the silver notes, that would be
just as useful and just as readily taken if they promised to pay
silver yet to be mined and refined, or if instead of promising to pay
anything at all, they were simply made receivable for public dues.
But it is only when we come to think of the public debts of Europe
that we realize the full importance of Thomas Jefferson's idea that no
generation should have the right to bind a future generation, and that
every nineteenth year ought to be a year of jubilee, in which all
public debts should be declared void. If mankind would agree on this,
the enormous armaments of Europe would be impossible, and there is not
a throne in Europe that would not crumble into dust. Colonel Price has
opened a fruitful subject by calling the attention of the National
Board of Trade to this matter of growing indebtedness....
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