on the revenue of its subjects by taxation, is very likely to go on throwing good money after bad, long after an undertaking it has committed itself to is proved a failure. The facilities for borrowing enjoyed by governments have been too great for many years past. There is something dangerously seductive both to lender and borrower in the power possessed by governments of mortgaging the future revenue of the countries they administer. The government of a new country is especially prone to take a sanguine view of its prospects; the people are at least equally certain of their capacity to provide the interest required; the finance houses, which stand as sponsors for the loans, may be credited with a belief that at any rate their particular issues are safe, and the public here too often blindly follow the finance houses. In the majority of cases all the parties concerned are actuated by perfect good faith, and the evils which follow from excessive issues are the results of being oversanguine, and sometimes, as regards the finance houses, of neglect to look sufficiently carefully into all matters connected with such issues, especially the amounts of those already in existence. Now, this too ready belief on the part of the borrower in his future ability to pay, and the tendency on the part of issuing houses to shirk examining carefully the troublesome details of a loan operation, are examples of ordinary failings of human nature, which must be reckoned with at all times. They are constant elements in the situation, and their effects are certain to make their appearance sooner or later in cases where governments habitually raise loans outside their own country. Of course it is true that any country may without danger have a small foreign debt; but the interpretation of the word small must be strict—that is, the debt incurred must be compared with the right quantities, and not with quantities whose relative dimensions have no real bearing on the question at issue. Occasionally, it is to be regretted, figures are introduced into prospectuses of loans which suggest quite irrelevant comparisons, of course tending to show that the proposed issue is 'small' and the resources available for meeting it 'great,' whereas comparison with the proper quantities would have brought out a very different result. These are matters in which finance houses allow themselves to be 'caught napping' more often than is good for their reputations or for the pockets of those who place confidence in their judgement. But it is necessary to emphasize the fact that the investing public, in demanding infallibility from finance houses, as they practically do, are asking for too much. Every investor will admit this obvious truth individually, and yet readily forms one of a drove of similar persons who collectively act as if Messrs. X, Y, Z & Co. were both omniscient and exempt from all human failings, whether moral or mental. Is it surprising under these conditions that the said public sometimes finds that its money is lost, in whole or in part? If all finance houses had taken as much trouble as they ought, the number of foreign government loans would be about half what it is; but the same result would have been attained if the public had not foolishly accepted the belief that the promise of a government is always a good guarantee for payment. The economic objections to the principle of allowing governments to raise big loans abroad for public works are equally strong as regards similar loans made at home. It is interesting to observe, however, that, except in the case of naval and military expenditure, where it can be defended on other than economic grounds, few countries ever attempt to raise money for public works except abroad. In most countries there is none to be got; and in those where it has been tried the plan has by no means proved to be a success economically. Even in France it broke down. The gigantic railway scheme elaborated by M. de Freycinet in 1879 could not be carried out, the State having, some years later, to beg the great railway companies to take over the lines it had partly constructed and was unable to complete, and to transfer to them most of the remainder of the mileage originally intended to be built as part of the addition to the réseau d'État. Whether the possession of the Prussian railway system by the State will eventually turn out well remains to be seen; but it can be plausibly justified by considerations connected with the military safety of the country. It is doubtful if the Belgian railways are as efficient as they would have been if made by private enterprise. The acquisition of the telegraph system of the United Kingdom by the State is defended, even by those who are no friends to State Socialism, as a necessary corollary of the administration of the Post Office by a Government department. It can also be justified, with some plausibility, on political-military grounds. But, although it has long been an accomplished fact, and must be tolerated, it is economically bad-first, because the actual service rendered is less good than would have been furnished by private enterprise; and, secondly, because the ordinary defects of a bureaucracy, namely, morbid hostility to change and dislike of criticism, are formidable obstacles to the adoption of improved methods in a business which depends largely on adequate recognition of the progress of science. The delay in the extension of the telephone system in this country was entirely due to the fact that the Telegraphs are managed by one of the Revenue departments of the United Kingdom, and that the Treasury is an octopus, which insists that there shall be surplus revenues for it to throw its tentacles around-in the interest of economy, no doubt, but in disregard of efficiency. In conclusion, the opinion of the present writer is that, to employ a well-known formula, the sphere of action of governments in matters affecting trade and commerce 'has increased, is increasing, and ought to be diminished.' The more strongly the current of general opinion, which necessarily means ill-instructed opinion, runs in favour of more government interference, the stronger should be the efforts of those who see the evils it produces to make them plain. And if we cannot easily begin at home' in this case, it is comparatively easy to begin abroad. For the evil results of entrusting large amounts of money to foreign governments, ostensibly for the construction of productive works, can be made patent to every one. WYNNARD HOOPER. M |