A Century of the National Debt

Historical surveys and parallels are notoriously risky, particularly where the conditions have no precedent. They ought, however, to be made, provided that we keep our generalisations from them under careful control. Now, after the Napoleonic wars we had a national debt somewhat comparable in magnitude in its relation to the national wealth and income with the present debt. What happened to that as a burden during the 100 years just gone by? If it was alleviated, to what was the alleviation due? I would not burden you with a mass of figures, but I would just give you one or two selected periods. You can find more details in my recent book on Wealth and Taxable Capacity. We had a total debt of—

850millionpoundsin1817
841"""1842
836"""1857
659"""1895
800"""1903

and before this last war it had been reduced to 707 million pounds. In 1920, of course, it was over 8000 million pounds. Such incidents as the Crimean and the Boer wars added materially to the debt, but apart therefrom you will see that there is no tremendous relief by way of capital repayment to the original debt. Similarly, in a hundred years, even if we have no big wars, it is quite possible we may have additions to the national debt from smaller causes. Yet the volume of the debt per head fell from £50 to £15.7, so you will see that the increasing population made an enormous difference. The real burden of the debt is of course felt mainly in its annual charge. I will take this, therefore, rather than the capital:—

In1817thechargewas32millionpounds
"1842"""28""
"1857"""28.8""

In1895thechargewas25millionpounds
"1903"""27""
"1914"""24""

Here you will see that the reduction from 32 to 24 was 25 per cent. or a much greater reduction than the reduction of the total capital debt, and this, of course, was contributed to by the lower rates of interest which had been brought about from time to time. When we take the annual charge per head the fall is much more striking. In the hundred years it decreased from 37s. to 10s. This, however, was a money reduction, and the real burden per head can only be judged after we have considered what the purchasing power of that money was. Now, the charge per head, reduced to a common basis of purchasing power, fell as follows:—

Index figure
1817260
1842242
1857191
1895210
1914118

In the year 1920 the charge per head was £7.16 and my purchasing power index figure 629. You will see that the real burden in commodities moved down much less violently than the money burden, and the relief was not actually so great as it looks, because prices were far lower in 1914 than they were early in the nineteenth century.

In view of the fact that our debt is approximately ten times that of the last century, let us ask ourselves the broad question: “Can we look forward to nothing better than the reduction of our debt by 450 millions in thirty-seven years?”

The nineteenth century was one long contest between two opposing forces. The increase in the population, together with the power to make wealth, were together enormously effective in decreasing the burden. Against them was the ultimate tendency to lower prices, and the former of these two forces slowly won the day.

I hesitate to say that we can expect anything at all comparable with the wonderful leap forward in productive power during the early Victorian era. I hope that in this I may prove to be wrong. Anyway I do not think that in our lifetime we can expect these islands to double their population.