A Free Nation Deep in Debt
W. J. Rayment / Conservative Bookstore -- The crucible of war ultimately determines the survival or destruction of governments. It has long been understood that the nation commanding the greatest resources wins wars. The sinews of war are procured by money, and he who can lay his hands on the most money will be the victor. It is a remarkable fact of history that republican and constitutional governments have emerged victorious in their wars. Why? Because they have a heightened ability to borrow.
This is the thesis of James Macdonald's "A Free Nation Deep in Debt". Mr. Macdonald is an investment banker turned historian. As evidenced by his writing style he has a superb command of both fields. His book is a distillation of Western History seen through the prism of public finance. And what a fascinating way to look at history it is. In analyzing modern politics, we have often been told, "follow the money". This is precisely what Mr. Macdonald does. We see how in ancient times it was the biggest treasury that often determined the victor in war. But nations that found ways to circulate their wealth in peacetime and then galvanize it for war had an advantage. Thus, a kind of evolutionary process began which Mr. Macdonald describes with flair and panache.
Modern finance basically began in the Italian city states. The key to the success of Venice and Genoa was their ability to tap the wealth of their citizens via loans to the state. These loans were often forced, but they implied repayment and were often given freely for patriotic reasons. The system worked because the governments were run by the same people who were making the loans. They were unlikely to default. When kings and other autocratic rulers attempted to access this source of funds, they had some initial success, but because they had a tendency to default on their loans their credit was not as good. Thus, it cost them far more in interest to access money.
So it was that the Netherlands, a small country just north of France could fight for and win its independence from the Hapsburg empire. The Dutch were a prosperous, representative nation. They borrowed and outspent a foe that was far larger in population and military resources. Their form of finance was adopted in Great Britain just as Parliament came into its own in the early 1700s. Just in time to ensure that Britain would have the "last ecu" in any struggle with her continental rival, France.
James Macdonald describes this process in intimate detail, with interesting side-bars and a wealth of statistics (revealing considerable, thoughtful research). The statistics do not get in the way of the story, rather they augment it, revealing the true status of nations as they hacked and slashed their way through history. It is easy to see how successive totalitarian regimes fell to republican and constitutional rivals, with the result that eventually the western world would come to be dominated by "democracies".
What is most astounding about this book is not the presentation of a theory that debt management is good and that it has protected and even furthered the cause of individual freedom. The astounding thing is that this is not a new theory. Quotes from ancient Greece and Rome, from Renaissance Italy and Revolutionary France all lead to the conclusion that this was a well-known precept that has been more or less forgotten in the modern age.
Even so, Macdonald carries the history of public debt into modern times and in doing so, he comes to some surprising conclusions about its nature and the role it has to play in modern society.
Reading "A Free Nation Deep in Debt", by James Macdonald is like reading history bereft of its clothes. We are allowed to see nations and people in their true light. A book about finance allows us to compare national performances through history in an objective light. This is a fascinating book and an incredible read. It is not just for those interested in bonds and public debt, but anyone who claims to be a student of history.
This book is available at Amazon.com |
