Henry George on Public and Private Debt





In favor of public debt jubilee and against state enforcement of private
debt.


THE STANDARD

VOL. 3
FEBRUARY 11, 1888

PAGE 1

HENRY GEORGE

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:

[table showing various sources of debt]

Aggregate $27,969,247,048 [public and private debt combined]

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
canceled by others; but whatever deductions can on these accounts be
made, 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 in general bankruptcy and
repudiation.

Colonel Price advocates the abolition of all laws for the collection of
private debts, and in this he is unquestionably right . There is no more
reason why the state should lend its machinery of constables, sheriffs
and courts—still less as is to a certain extent yet the case in New
York, 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 are worthy of the attention
of those who incline to the belief that it is capital that opposes
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 of it payments having
the semblance of true interest are regularly made.
Yet the world-wide proclamation of a Jewish jubilee would at the blast of a trumpet sweep away this whole vast mass of indebtedness without the lessening by a single iota the wealth of the world. 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 land owners as a condition of being permitted 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 there
has been in reality no production or transfer of capital , and the
payments are in reality not interest for the use of capital , but
blackmail for the use of land. So railway indebtednesses really
represents in 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 so far as
there are public improvements to show for them. What they do, for the
most part , as a matter of fact, 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 of foreign nations or of the future for the carrying on of the
war . As a matter of fact we did not during the war increase our
obligations to foreign nations much, if any, 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 in our civil war was that then and there existed.
The carrying on of war by means of public debts, which is probably the
most injurious and anti-civilizing of all injurious modern inventions,
is not a device for spreading the cost of present expenditures over
future time, but a device by which governments may obtain wealth from
the classes who have wealth to spare, without exciting their
opposition—since it gives them in return 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 at least 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 borrowed 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 systems of
taxation—systems of taxation purposely devised to fatten monopoly and
make the rich richer. We have paid off non-interest bearing debt in
preference to interest 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 principal while they draw the interest . By 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 contented with this, and 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 cobble stones, and storing it away in vaults. Secretary Fairchild
sees the absurdity of coining silver thus to stow it away, 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 can have the right to bind a future generation, and that
every nineteenth year ought to be a year of jubilee, in which all public
debt should be declared off. Were mankind agreed upon 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 in calling the attention of the national board of trade
to this matter of growing indebtedness.

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